When a corporation purchases the principal assets of another corporation, does the purchaser assume the other's liabilities?

California, United States of America


The following excerpt is from Rumbeck v. Premier Valley, Inc., C/w Case No. F072523, F072262 (Cal. App. 2017):

"Successor liability is almost always couched in terms of liability flowing from one corporation to another corporation. Thus, legal discussion begins with 'the rule ordinarily applied to the determination of whether a corporation purchasing the principal assets of another corporation assumes the other's liabilities.' [Citation.] 'As typically formulated the rule states that the purchaser does not assume the seller's liabilities unless (1) there is an express or implied agreement of assumption, (2) the transaction amounts to a consolidation or merger of the two corporations, (3) the purchasing corporation is a mere continuation of the seller, or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts.' " (Cleveland v. Johnson (2012) 209 Cal.App.4th 1315, 1326-1327 (Cleveland).)

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