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Thursday, October 11, 2012

In California, the equitable doctrine of successor liability may be applied to a corporation ...

Equitable doctrine of successor liability may be applied to a corporation that succeeds to the assets of an unincorporated but clearly separate line of business of another corporation. Imposition of successor liability was proper--under traditional rule that a corporation that purchases the assets of another assumes the first corporation’s liabilities when "the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller’s debts"--where evidence supported conclusion that defendants transferred assets from one corporation to another and hid the formation of the second corporation from plaintiff for the purpose of avoiding liability under defendants’ contract with plaintiff. Defendants owed a fiduciary duty to plaintiff as a pre-incorporation investor in the business that defendants transferred from one corporation to another. Plaintiff’s investment, which gave him rights to a specified percentage of the enterprise’s gross profits ad infinitum, was akin to the ownership interest of a shareholder, not to a "debtor/creditor relationship."
Cleveland v. Johnson - filed October 11, 2012, Second District, Div. Eight

Source & full text http://www.metnews.com/sos.cgi?1012//B233762

Mauricio Leon de la Barra is an international law attorney licensed to practice law in Mexico and California, and has more than 15 years of experience representing clients in cross-border business and real estate transactions and litigation involving international, U.S. and Mexican laws.