Craig borrowed P500,000 from Jason.

As security for the payment of debt, a security

interest over the Toyota Altis of Craig was created and perfected under the Personal
Property Security Act. In their Security Agreement, it was expressly stipulated that if
Craig cannot pay when his obligation falls due, Jason can take possession of the said
vehicle. Upon default of Craig, can Jason lawfully take possession of the said
motor vehicle and retain the same as full payment of Jason’s obligation? Explain
your answer briefly

*Jason can legitimately take possession of the aforementioned motor vehicle upon default as it
was expressly stated. For the retention of the motor vehicle Jason may send a proposal to the
debtor/grantor to take all of the collateral in total satisfaction of the secured obligation.
Furthermore, he may only legitimately take ownership if Craig or any of the other persons
authorized to receive the proposal do not object to the proposal within 20 days of him sending it.

Probst Inc. obtained a loan worth P10,000,000.00 from Survivor Bank, which was
secured by a real estate mortgage executed by Jeff, who happens to be the president of
Probst Inc. The property covered by the real estate mortgage is personally owned by
Jeff. Despite numerous demands, Probst Inc. was not able to pay its obligation to
Survivor Bank despite the obligation being due. As such, Probst Inc. foreclosed the
property owned by Jeff. The properties were sold in a foreclosure sale, but there was
still a deficiency amounting to P3,000,000.00. Can Survivor Bank demand the
deficiency from Probst Inc. and Jeff? Explain your answer briefly

*Survivor Bank can seek the deficiency from Probst Inc. since the sale was conducted at a
public auction and is entitled to be auctioned at the highest possible price regardless of whether
that price would fully cover the debtor's or Probst Inc. obligation. However, he cannot redeem
the deficiency from Jeff the owner himself, as the owner is not liable for the debts of the
business unless other conditions exist.

Nick borrowed money from Wilson. To secure Nick’s obligation, a Real Estate Mortgage
was executed between the parties involving Nick’s parcel of land. The said document
was notarized. However, it was not registered with the Registry of Deeds. Is the Real
Estate Mortgage valid? Explain your answer briefly

*Yes, it is still a valid contract because it has the essential elements that are the same with the
principal contract, but the only effect is it will not bind third persons as Wilson only has personal
rights against the parcel of land. If it is not registered, the mortgage is still valid between parties,
however, if they choose to bind with 3rd persons, it must be annotated and registered to ROD.

Isabela obtained a loan for P5,000,000 from Jacaranda Bank. To secure the said loan,
Mariano executed a Deed of Real Estate Mortgage involving his vacation house in
Davao Oriental. The said Deed states that “the mortgagor also agrees that this
mortgage will secure the payment of additional loans or credit accommodations that
may be granted by the mortgagee”. Subsequently, Isabela obtained another
P2,000,000 loan, secured by a Real Estate Mortgage on her own agricultural land in
Calinan, Davao City. Should Isabela fail to pay her P2,000,000 loan, can the bank
foreclose the mortgage covering property owned by Mariano? Explain your
answer briefly.

If Isabela failed to pay her two million loan the bank can foreclose the mortgage
covering property owned by Mariano because even if another security is given for the
two million subsequent loan, that alone will not necessarily exclude such loan from the
scope of operation of the Dragnet Clause in the preceding real estate mortgage
contract.