Dear PAO,
Henry obtained a loan from me and furnished his house and lot as security for his debt. We also agreed that if he cannot pay his debt, we will execute a deed of absolute sale where he will sell his property to me, with his outstanding debt and interest forming part of the price. I would then pay him the difference if the fair market value of the property exceeded his debt. Henry defaulted on payment, and I have already demanded payment in writing. I told him that if he wanted to pay, he could sell me his property, as this was clear in our previous agreement. He, however, refused and told me that the said term in our agreement cannot be given effect because the sale of the mortgaged property to me is prohibited by law. According to him, such an agreement is pactum commissorium.
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