One acquiring subject to an obligation acquires a property interest burdened with the obligation but incurs no personal liability. See, e.g., H.E.P. Development Corporation v. Mouton, 256 So.2d 744 (La.App. 1971), cert. denied, 258 La. 1126, 260 So.2d 377 (1972). Furthermore, we reject the suggestion that by exercising its rights under the security agreement that MBank automatically became a co-owner of the property.
However, the February 25, 1980 assignment only provides that it is "subject to" the prior assignment from Dow. Under Louisiana law, one who assumes a mortgage becomes personally bound thereon, but one who purchases "subject to" a mortgage incurs no personal liability. HEP DevelopmentCorp. v. Mouton, 256 So.2d 744, 745 (La.Ct.App. 1971). In the same way, Mrs. Bennett was not personally liable for half of Emerald's share of the drilling costs because she took "subject to" the prior assignment, and thus no obligation exists that might constitute reasonably equivalent value.
It is well settled that the purchaser of property from the mortgagor who assumes the mortgage thereon is bound by the terms of the mortgage. Ellickson v. Dull, 34 Colo. App. 25, 521 P.2d 1282 (1974); HEP Development Corp. v. Mouton, 256 So.2d 744 (La.App. 1971); Brice v. Griffin, 269 Md. 558, 307 A.2d 660 (1973). He becomes the principal obligor or mortgagor on the debt being personally liable thereon while the grantor becomes a surety.
In the case at bar, appellees have the choice of two alternatives: They can pay the mortgage indebtedness as it becomes due out of their assets or refuse to pay the mortgage indebtedness and the mortgagee can resort to the assets of the corporation, (the mortgaged property) to satisfy the indebtedness. In Hep Development Corporation v. Mouton (1971), La., 256 So.2d 744, the court considered a statute that provided that a franchise tax shall be paid on the amount of its capital, stock, surplus, profits and borrowed money. Capital was defined as "all indebtedness of the corporation * * * maturing more than one year from the date incurred.
In view of the testimony and evidence, and the intent of the legislature in creating the industrial inducement program, this Court cannot accept the Collector's argument. The Collector relies heavily on HEP Development Corporation v. Mouton, 256 So.2d 744 (La.App., 1st Cir., 1971), wherein the Court held that the corporate franchise tax "must be interpreted to accord it full legislative intent, and that indulgence in technicalities will not be permitted to defeat the purpose of the law." The financing arrangement between GCA and the Parish, however, can hardly be characterized as a "technicality."
But, one who purchases property subject to a mortgage incurs no personal liability. See Balfour v. Chew, 4 Mart. (n.s.) 154, 165 (1826); HEP Dev. Corp. v. Mouton, 256 So.2d 744, 745 (La.App. 1st Cir.), writ refused, 260 La. 1126, 258 So.2d 377 (1972). In the present case, there is no genuine issue of material fact.
To the contrary, one who purchases property subject to a mortgage incurs no personal liability. See Balfour v. Chew, 4 Mart. (n.s.) 154, 165 (1826); HEP Dev. Corp. v. Mouton, 256 So.2d 744, 745 (La.App. 1st Cir.), writ refused, 260 La. 1126, 258 So.2d 377 (1972). Seven Gables contends, relying upon Kaplan v. University Lake Corp., 381 So.2d 385 (La. 1979), on reh'g, 381 So.2d 389 (La. 1980), that one who purchases property which secures a collateral mortgage, and who assumes all obligations in a collateral mortgage and collateral mortgage note, assumes only an in rem obligation, that is, an obligation only up to the value of the property.
In view of the testimony and evidence, and the intent of the legislature in creating the industrial inducement program, this Court cannot accept the Collector's argument. The Collector relies heavily on HEP Development Corporation v. Mouton, 256 So.2d 744 (La.App., 1st Cir., 1971), wherein the Court held that the corporate franchise tax "must be interpreted to accord it full legislative intent, and that indulgence in technicalities will not be permitted to defeat the purpose of the law." The financing arrangement between GCA and the Parish, however, can hardly be characterized as a "technicality."
The sum total is the amount of "capital used or invested in the business or enterprise of such corporation," and forms the basis for "computing the franchise tax." Recently, in HEP Development Corporation v. Mouton, 256 So.2d 744, this court applied the rule announced in State v. Union Bldg. Corporation, above, and noted that: "We understand the foregoing language in Union Building, above, to mean that for purposes of the tax in question that if a corporation makes use in its business of any borrowed or additional capital, aside from that which was contributed by its stockholders in the purchase of stock, and corporate earnings, such borrowed or additional capital must be considered in computing the tax in question."