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com JayArhSals
A Compilation of the
In the
In
MERCANTILE
LAW
Compiled and Arranged By:
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FOREWORD
This work is a compilation of the ANSWERS TO BAR
EXAMINATION QUESTIONS by the UP LAW COMPLEX ,
Philippine Association of Law Schools from 2007-2010 and
local law students and lawyers forum sites from 2011-2013
and not an original creation or formulation of the author.
The Author.
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TABLE OF CONTENTS
(Titles are based on Sillimans Compilation [Arranged by Topic])
General Principles
Banking Law
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Corporation Law
Credit Transaction
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Insurance Law
Intellectual Property
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Copyright (2013)...........................................................................................................54
Letters of Credit
Maritime Commerce
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Securities Regulation
Transportation Law
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amended, otherwise known as the (11) Violations under Republic Act No.
Dangerous Drugs Act of 1972; 8792, otherwise known as the Electronic
Commerce Act of 2000
(3) Section 3 paragraphs B,C,E,G,H and I
of Republic Act No. 3019, as amended; (12) Hijacking and other violations under
otherwise known as the Anti-graft and Republic Act No 6235;destructive arson
Corrupt Practices Act; and murder, as defined under the
Revised Penal Code, as amended,
(4) Plunder under Republic Act No. 7080, including those perpetrated by terrorist
as amended; against non-combatant persons and
(5) Robbery and extortion under Articles similar targets;
294,295,296,299,300,301 and 302 of the
Revised Penal Code, as amended; (13) Fraudulent practices and other
violations under Republic Act No. 8799,
(6) Jueteng and Masiao punished as otherwise known as the securities
illegal gambling under Presidential Regulation Code of 2000
Decree No. 1602;
(14) Felonies or offenses of a similar
nature those are punishable under the
(7) Piracy on the high seas under the
penal laws of other countries. (Sec 3,
Revised Penal Code, as amended and
Anti-Money Laundering Act of 2001).
Presidential Decree No. 532;
(9) Swindling under 315 of the Revised Corporation executed a real estate mortgage
(10) Smuggling under Republic Act Nos. Consequently, on June 4, 2004, BLUE
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issued a Certificate of Sale which was (SED) of the Monetary Board prepared a
registered on August 4, 2004. detailed report (SED Report) specifying the
facts and the chronology of events relative
Does RED Corporation still have the right
to the problems that beset MPBC rural
to redeem the property as of September 14,
bank branches. The report concluded that
2007? Reason briefly. (5%)
the bank branches were unable to pay their
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such authority being reposed in the False. During the receivership, the
receiver (Abacus Real Estate assets and properties of the corporation
Development Center, Inc. v. Manila are being gathered for conversion into
Banking Corporation, 455 SCRA 97 cash in preparation for distribution to
(2005)). creditors. Granting new loans and
accepting new deposits would constitute
(B) Will a suit to enforce the exclusive right
doing business for the bank in the
of the investors to purchase the property
ordinary course of business which is
prosper? Reason briefly.
contrary to the purpose and nature of a
No.I. (E) A bank under receivership can still of the commissions he generated into US
grant new loans and accept new deposits. dollars, and deposited these in a foreign
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Banks; Single Borrowers Limit; not release any part of the collateral by
Collateral Security (2008) the amount of reduction.
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True. This contrary to the duty of the Manila outlet constitutes only one-third
creditor to disclose in detail the of its total business and, therefore, it
interests, charges and other figures would not conducted by Venezia.
indicating in detail the cost of the credit Moreover, the requirements of the Bulk
granted to the debtor (United Coconut Sales Law reflected in Sections 3,4,5,
Planters Bank v. Beluso, 530 SCRA 567 and 9, by the express language of said
(2007)). provisions, apply only to the first type of
bulk sales, i.e., to any sale, transfer,
mortgage or assignment of a stock of
goods, wares, merchandise, provisions or
Bulk Sales Law
materials otherwise than in the ordinary
Bulk Sales Law; Covered Transactions course of trade and the regular
(2010) prosecution of business of the vendor,
mortgagor, transferor, or assignor, and
No.V. Venezia is a famous international
not to the second type (as in the sale
fashion chain with outlets in Makati,
described in the problem) or the third
Ortigas, and Manila. It has complied with
type (i.e., sale, etc. of all or substantially
the minimum capitalization required under
all of the fixtures and equipment used in
the Retail Trade Nationalization Act and
and about the business). As the Bulk
carries on retail business worth more than
Sales Law is penal in nature, it should be
S3 million for each of its outlets. As its
interpreted strictly against the State
Manila outlet is not doing very well, it
(People v. Wong Szu Tung, CA G.R. No.
decides to sell all of its business there
9776-R, March 26, 1954;50 O.G. 4867;
consisting of remaining inventory, furniture
Section 2 of the Bulk Sales Law).
and fixtures and other assets to its
competitor.
(B) If instead of selling its Manila outlet,
Venezia merely mortgages its assets there,
(A) Venezias Manila outlet constitutes one-
would it need to comply with the
third of its total business. Should it comply
requirements of the Bulk Sales Law? (2%)
with the requirements of the Bulk Sales
Law? Why or why not? (2%)
SUGGESTED ANSWERS:
For the same reasons stated in the
SUGGESTED ANSWER:
answer to A above, Venezia need not
Venezia need not comply with the
comply with the requirements of the
requirements of the Bulk Sales Law as its
Bulk Sales Law. The second type of bulk
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sales also includes the mortgage of all or The receiver seeks your advice on whether
substantially all of the business of the the Bulk Sales law will apply to either, or
mortgagor (Section 2, Bulk Sales Law). both, options. What will your advice be?
Explain (4%)
(C) What are the legal consequences of a SUGGESTED ANSWER:
failure to comply with the requirements of I will advice the receiver that the Bulk
the Bulk Sales law? (2%) Sales law does not apply to both options.
Sect. 8 of the Bulk Sales Law expressly
SUGGESTED ANSWER: provides that it will not apply executors,
Failure to comply with the requirements administrators, receivers, and assignees
of the Bulk Sales Law renders the Sale, in insolvency, or public officers, acting
transfer, mortgage, or assignment under judicial process. In this case, the
fraudulent and void (Section 4, Bulk receiver is acting under judicial process.
Sales Law), and makes any person found
guilty of violating any provision of the
Bulk Sales Law punishable by 5 years, or
a fine in an amount not exceeding P5,
Bulk Sales Law; Covered Transactions
000, or both such imprisonment and fine
(2007)
in the discretion of the court (Section
11, Bulk Sales Law). No.XII. Seeking to Streamline its operations
and to ball out its losing ventures, the
stockholders of X corporation unanimously
Bulk Sales Law; Covered Transactions adopted a proposal to sell substantially all
(2009) of the machineries and equipment used in
and about its manufacturing business and
No.XIV. XXX Corporation (XXX) and its
to sink the proceeds of the sale for the
sister company, YYY Corporation (YYY), are
expansion of its cargo transport
both under judicial receivership. The
services.(5%)
receiver has the option to sell or
substantially all of the properties of YYY to (A) Would the transaction be covered by the
XX, or simply merges the two Corporations. provisions of eh Bulk Sales Law?
Under either option, the requirements
SUGGESTED ANSWER:
under the Corporation Code have to be
complied with. No. the transaction is not covered by the
provisions of the Bulk sales law, Bulk
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sales law applies only to retail Bulk Sales Law; Validity (2009)
merchants, traders and dealers. It does
No.I. (C) Even if the seller and the buyer in
not apply to manufacturers. X
a sale in bulk violate the Bulk Sales Law,
Corporation is engaged in the
the sale would still be valid.
manufacturing business (Development
SUGGESTED ANSWER:
bank of the Phil. V. Judge of the
False. When the Bulk Sales Law is
Regional Trial Court of manial86 O.G.
violated, the sale is null and void. When
1137 (1987)).
the provisions of the said law have not
ALTERNATIVE ANSWER: been complied with, the sale is
considered as being fraudulent and
YES, the transaction is covered by the
void and even when coupled with
Bulk Sales Law because it involves the
delivery, the title over the goods does
sale of substantially all the equipment
not transfer to the buyer. However, the
used in the business of X corporation
civil liabilities arising from the
(Sec. 2 Bulk sales law)
transaction remain enforceable between
the parties thereto.
addresses, the amount of their credits capital stock of a company which owns an
and their maturities. X Corporation office building. Paolo and Juan own the
should give the affidavit to the buyer remaining stock equally between them.
who , in turn, should furnish a copy to Paolo also owns a security agency, a
each creditor and notify the creditors of janitorial company and a catering business.
the proposed bulk sale to enable them to In behalf of the office building company,
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The contracts of Paolo, who owns 15% of full disclosure of the adverse interest of
the Outstanding Capital Stock of the Paolo to Pedro.
office building company is concerned if
they were not approved by the Board of
Directors and Paolo was not designated BOD; Qualifications (2012)
to execute them on behalf of said
company. No.VI. X is a Filipino immigrant residing in
Sacramento, California. Y is a Filipino
On the other hand, if the contracts were
residing in Quezon City, Philippines. Z is a
duly approved by the Board of Directors
resident alien residing in Makati City. GGG
of the office building company with
Corporation is a domestic corporation -
Paolo duly designated as company
40% owned by foreigners and 60% owned
representative, they would nevertheless
by Filipinos, with T as authorized
be voided at the option of the company.
representative. CCC Corporation is a
Under Sec. 32 of the Corporation Code.
foreign corporation registered with the
A contract of the corporation with one
Philippine Securities and Exchange
or more of its directors or trustees or
Commission. KKK Corporation is a
officers is voidable at the option of such
domestic corporation (100%) Filipino
corporation, unless all the following
owned. S is a Filipino, 16 years of age, arid
conditions are present, (a) if Paolo as a
the daughter of Y.
director in the board meeting in which
the contracts were approved was not (A) Who can be incorporators? Who can be
necessary to constitute a quorum for subscribers? (2%)
such meeting; (b) Paolos vote at such
meeting was not necessary for the SUGGESTED ANSWER:
approval of the contracts; (c) Each of the
contract are fair and reasonable under X,Y,Z and T could all be incorporators
If condition (a) or (b) is absent, Sec, 32 that there must be at least five but not
requires that the contracts must be more than fifteen incorporators (who
ratified by the shareholders representing must all be natural persons) and that a
capital stock, provided that there was residents of the Philippines. S, being a
minor, could neither be an incorporator
nor a subscriber. GGG Corporation, CCC
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Corporation, and KKK Corporation, CCC requirement under the law governing the
Corporation, and KKK Corporation could business of the corporation) but not GGG
not be incorporators as they are not Corporation, CCC Corporation, and KKK
natural persons. However, they could be Corporation as they are not natural
subscribers. persons. However, the aforementioned
corporations could have their respective
(B) What are the differences between an representatives nominated and possibly
incorporator and a subscriber, if there are elected as directors by the stockholders.
any? (2%) Each director must own at least one
share of the capital stock of the
SUGGESTED ANSWER:
corporation (Sec.23, Corporation Code).
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Corporation; Dissolution (2012) (B) What are the legal requirements in order
that a corporation may be dissolved? (5%)
No.X. AAA Corporation is a bank. The
operations of AAA Corporation as a bank SUGGESTED ANSWERS:
(A) Will the sale of all assets and liabilities and 120 require the same corporate
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Note that the SEC also has the authority (B) May the composition of the board of
under Section 6 of PD 902-A to revoke directors of the National Power Corporation
the certificate of registration of a (NPC) be validly reduced to three (3)?
corporation upon any of the grounds Explain your answer fully. (2%)
provided by law, including the SUGGESTED ANSWER:
aforementioned Section 6-A
The NPC Board may be reduced to only
three (3) members, but this would have
to be affected by legislative amendment
of its charter. The National Power
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also considering the alternative of simply capital than if she were to form a
setting up the restaurant as a branch office separate corporation. However, all the
of the existing corporation. assets of the existing corporation will be
liable for the debts and losses of the
(A) Briefly explain to your client what you restaurant business.
see as the legal advantages and
disadvantages of using a separate (B) If you advise your client to use a
corporation, a single proprietorship, or a corporation, what officer positions must the
branch of an existing corporation for the corporation at least have?(2%)
proposed restaurant business. (3%) SUGGESTED ANSWER:
SUGGESTED ANSWER: The corporation must have at least five
If Dianne will set up a separate directors (Section 14 of the Corporation
corporation, her liability for its Code). It Must also have a president, a
obligations and losses will be limited to treasure, and secretary (Section 25 of
the amount of her subscription in the the Corporation Code).
absence of showing that there is a
ground to disregard its separate juridical (C) What particular qualifications, if any,
personality. If she were to operate a are these officers legally required to possess
single proprietorship, her liability for its under the Corporation Code? (2%)
debts and losses will be unlimited. SUGGESTED ANSWER:
Every director must own at least one
The formation and the operation of a share of the capital stock of the
corporation require a great deal of paper corporation, which must be recorded in
work and record-keeping. This is not the his name on the books of the
situation in the case of a single corporation, and a majority of the
proprietorship. directors must be residents of the
Philippines (Section 25 of the
If Dianne will form a separate Corporation Code).
corporation, it can raise more funds for
the business than if she were to set up a The president must also be a director.
single proprietorship. The secretary must be a resident and
citizen of the Philippines (Section 25 of
If she were to set up the restaurant as a the Corporation Code).
branch office an existing corporation,
the corporation will have more funds as
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assetsa three-hectare land valued at why and where would such a suit be filed?
about P100-million. For this purpose, the If not, why not? (2%)
board of directors of ARC unanimously SUGGESTED ANSWER:
passed a resolution approving the sale of Yes, such suit would constitute an entra-
the property for P75-million to Shangrila corporate dispute as it is a suit initiated
Real Estate Ventures (SREV) a rival realty by a stockholder against other
firm. The resolution also called for a special stockholders who are officers and
stockholders meeting at which the proposed directors of the same corporation (P.D.
sale would be up for ratification. No. 902-A, Sec. 5(b)). Such suit should be
filed in the Regional Trial Court
Atty. Edric, a stockholder who owns only designated by the Supreme Court as a
one (1) share in ARC, wants to stop the corporate or commercial court.
sale. He then commences a derivative suit
for and in behalf of the corporation, to (C) Will the suit prosper? Why or why not?
enjoin the board of directors and the (3%)
stockholders from approving the sale. SUGGESTED ANSWER:
No. The suit will not prosper. There is no
(A) Can Atty. Edric, who owns only one requisite demand on the officers and
share in the company, initiate a derivative directors concerned. There is, therefore,
suit? Why or why not? (2%) no exhaustion of administrative
SUGGESTED ANSWER remedies.
Yes, Atty. Edric can initiate a derivative
suit, otherwise known as the minority
stockholders suit. It is allowed by law to
enable the minority stockholder/s to
Dividends; Declaration of Dividends
protect the interest of the corporation
(2009)
against illegal or disadvantageous act/s
of its officers or directors, the people No.I. (D) Dividends on shares of stocks can
who are supposed to protect the only be declared out of unrestricted
corporation (Pascual v. Del Zaz Orozco, retained earnings of the corporation.
19 Phil. 82 (1991)). SUGGESTED ANSWER:
True. Dividends on shares of stock of a
(B) If such a suit is commenced, would it corporation, whether cash dividend or
constitute an intra-corporate dispute? If so, stock dividend, can be validly declared
only out of unrestricted retained
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earnings (Sec. 43, Corporation Code). It No. the suit will not prosper. Paterno
cannot be declared out of the capital. cannot compel XYZ Corporation to pay
Otherwise, such declaration of dividend dividends, which have to be declared by
will violate the trust fund doctrine. the Board of Directors and the latter
cannot do so, unless there are sufficient
unrestricted retained earnings.
Otherwise, the corporation will be forced
to use its capital to make said payments
Dividends; Declaration of Dividends
in violation of the trust fund doctrine.
(2009)
Likewise, redemption of shares cannot
No.XVI. On September 15, 2007, XYZ be compelled. While the certificate allws
hundred preferred shares with the ff. terms: discretion to do so are clearly vested in
the corporation (Republic Planters Bank
The Preferred Shares shall have the v. Agana, 269 SCRA 1 [1997]).
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Piercing the Corporate Veil (2008) personally liable for the corporate tort or
wrong committed.
No.X. Nelson owned and controlled Sonnel
Construction Company. Acting for the
The contractor should also be held liable,
company, Nelson contracted the
since being an independent contractor it
construction of a building. Without first
is liable for the fault or negligence of its
installing a protective net atop the
people.
sidewalks adjoining the construction site,
the company proceeded with the
(B) If you were the counsel for Sonnel
construction work. One day a heavy piece
Construction, how would you defend your
of lumber fell from the building. It smashed
client? What would be your theory? (2%)
a taxicab which at that time had gone
SUGGESTED ANSWER:
offroad and onto the sidewalk in order to
I would use the theory that the company
avoid traffic. The taxicab passenger died as
cannot be held liable for damages
a result.
because there was no fraud or negligence
(A) Assume that the company had no more
by its officers in undertaking the project
account and property in its name. As
for the construction of the building or
counsel for the heirs of the victim, whom
the selection of a construction company.
will you sue for damages, and what theory
Since a contractor is not an agent of
will you adopt? (3%)
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Sonnel Construction, the latter cannot Stock and Transfer Book (2009)
be held liable for the contractors
No.XVIII. (C) What is a stock and transfer
negligence. I would also argue that
book? (1%)
piercing the veil of corporate fiction is a
SUGGESTED ANSWER:
remedy of last resort and cannot be
A Stock and transfer book is a book
availed of without clear evidence
which records all stocks in the name of
showing fraud or disrespect of the
the stockholders alphabetically
separate juridical personality of the
arranged; the installments paid or
corporation. Mere control of equity has
unpaid on all stocks for which
not been considered as sufficient basis
subscription has been made and the date
for piercing the veil.
of payment of any installment, a
statement of every alienation, sale or
(C) Could the heirs hold the taxicab owner transfer of stock made, the date thereof,
and driver liable? Explain. (2%) and by and to whom made; and such
SUGGESTED ANSWER: other entries as the by-laws may
prescribe (Section 74, Corporation Code).
Yes, the taxicab company can be liable
for damages because it failed to comply
with its obligation as a common carrier
to use extraordinary diligence in
transporting the passenger, and because Stockholders; Appraisal Right (2007)
at the time of death of the passenger,
No.VII. In a stockholders meeting, S
the cab driver was violating a traffic
dissented from the corporate act converting
regulation. Under Art. 2185 of Civil
preferred voting shares to non-voting
Code, it is presumed that a person
shares. Thereafter, S submitted his
driving a motor vehicle has been
certificates of stock for notation that his
negligent if at time of mishap he was
shares are dissenting. The next day, S
violating a traffic regulation, such as
transferred his shares are dissenting. The
when he was driving on the wrong side of
next day, S transferred his shares to T to
the road (Mallari, Sr. v. CA, G.R. No.
whom new certificates were issued. Now, T
128607, 31 January 2000).
demands from the corporation the payment
of the value of his shares. (10%)
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No.X. Bell Philippines, Inc. (BelPhil) is a of the corporation, it should also apply
public utility company, duly incorporated to the preferred shares. Preferred shares
and registered with the Securities and are also entitled to vote in certain
capital stock consists of voting common 682 SCRA 397, 2012) The state shall
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national economy effectively controlled directors; and (c) the corporate officers?
by Filipinos. (Articles II, Sec. 19, 1987 (3%)
Constitution) The effective control here
should be mirrored across the board on (A) the corporation;
all kinds of shares. SUGGESTED ANSWER:
Under Section 45 of the Corporation
Code, no corporation shall possess or
exercise any corporate power except
those conferred by the Code or by its
Trust Fund Doctrine (2007)
articles of incorporation and except such
No.VI. Discuss the trust fund doctrine. (5%) as are necessary or incidental to the
The trust fund doctrine means that the When a corporation does an act or
equity in trust for the payment of powers set out in its articles of
Under such doctrine, no fund shall be enters into a contract without the
used to buy back the issued shares of ratificatory vote of the stockholders in
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mortgage in the stock and transfer book February 1, 2008, Al obtained another loan
is not required to make the chattel of P10,000 from Bob to be paid on February
mortgage valid. Registration of dealings 15, 2008. He secured this by executing a
in the stock and transfer book under chattel mortgage on a Honda motorcycle.
Section 63 of the Corporation Code On the due date of the first loan Al failed to
applies only to sale or disposition of pay. Bob foreclosed the chattel mortgage
shares, and has no application to but the car was bidded for P6,000 only. Al
mortgages and other forms of also failed to pay the second loan due on
encumbrances (Monserrat v. Ceron, 58 February 15, 2008. Bob filed an action for
Phil. 469 (1933)). collection of sum of money. Al filed a
motion to dismiss claiming that Bob should
(C) Assume that Bernardo extrajudicially first foreclose the mortgage on The Honda
foreclosed on the mortgages, and both the motorcycle before he can file the action for
car and the shares of stocks were sold at sum of money. Decide with reasons. (4%)
public auction. If the proceeds from such SUGGESTED ANSWER:
public sale should be 1-million short of
Bob has the legal right to file a collection
Armandos total obligation, can Bernardo
suit for a sum of money in lieu of
recover the deficiency? Why or why not?
foreclosing on the chattel mortgage. It
(2%)
has been ruled that a c chattel mortgage
is a security arrangement to support a
SUGGESTED ANSWER:
primary contract (Serra v. Rodriguez,
Yes. Bernardo can recover the
G.R. no. L-25546, 22 April 1974). Since
deficiency. Chattels are given as mere
the chattel mortgage is only a collateral
security, and not as payment or pledge
contract prerogative to choose which of
(CuH ada v. Drilon, 432 SCRA 618
the remedies available to pursue.
(2004)).
However, the filing of the collection suit
constitutes a waiver of the chattel
mortgage (Land Settlement and Dev.
Corp. v. Carlos, 22 SCRA 202, 1968). And
Chattel Mortgage; Foreclosure (2008) even if the collection suit included the
recovery of the P6,000 deficiency on the
No.XVII. On January 1, 2008, Al obtained a
first loan, the same is valid because
loan of P10,000 from Bob to be paid on
unlike in a pledge the lender has the
January 30, 2008, secured by a chattel
legal right to recover the deficiency
mortgage on a Toyota motor car. On
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makes available additional funds to him from SSS Bank. The collateral is his
without his having to execute additional vacation house in Baguio City under a real
security documents, thereby saving estate mortgage. X needed more funds for
time, travel, cost of extra legal services, his business so he again borrowed another
recording fees, etc. (Prudential Bank v. Php10Million, this time from BBB Bank,
securities were given. In the case of mortgage, what rights, if any, are left with
Prudential Bank v. Alviar, the Supreme 888 Bank as mo1igagee also? (2%)
such loan was made in reliance solely on in interest, any judicial or judgement
the original security with the dragnet creditor of X, or any other person or
clause, but, rather, on the new security entity having a lien on the vacation
given. This means that the existence of house subsequent to the real estate
the new security must be respected and mortgage in favour of SSS Bank (i.e.,
the foreclosure of the old security should other junior mortgagees, if any)(Sec. 6,
only be for the other loans not Act 3135)
SUGGESTED ANSWER:
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In case of a deficiency, SSS bank could If X defaulted in respect of his loan from
file suit to claim for the deficiency. BBB BBB Bank but fully paid his loan from
Bank could file an ordinary action to SSS Bank, BBB Bank could now foreclose
collect its loan from X. if it does so, it the mortgaged property as it would be
would be deemed to have waived its the only remaining mortgagee of the
mortgage lien. If the judgement in the same.
action to collect is favorable to BBB
Bank, and it becomes final and (E) Does X have any legal remedy after the
executory , BBB Bank could enforce the foreclosure in the event that later on he has
said judgement by execution. It could the money to pay for the loan? (1%)
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Rehabilitation; Proceeding;
(3) Legal expenses, and expenses Rehabilitation & Insolvency (2012)
incurred in the administration of the
No.XVIII. (A) Can be distressed corporation
insolvents estate for the common
file a petition for corporation rehabilitation
interest of the creditors, when properly
after the dismissal of its earlier petition for
authorized and approved by the court;
insolvency? Why? (2%)
SUGGESTED ANSWER:
(4) Debts, taxes, and assessments due
the Insular Government; Yes, when a distressed corporations
petition for insolvency has been
(5) Debts, taxes, and assessments due to dismissed, it can only mean that it still
any province or provinces of the possesses more than enough assets to
Philippine Islands; cover all its liabilities, and consequently,
it can still be rehabilitated (PAL v.
(6) Debts, taxes, and assessments due to Zamora, G.R. No. 166996, 06 February
any municipality or municipalities of the 2007, and Sec. 5[d], Securities
Regulation Act).
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creditors should stand on equal footing. (A) Can XYC Company still be able to draw
Not anyone of them should be given any on their irrevocable Standby Letter of Credit
preference by paying one or some of when due? Explain your answer. (5%)
them ahead of the others. This is
SUGGESTED ANSWER:
precisely the reason for the suspension
of all pending claims against the Yes, As an exception to a Stay or
(Sobrejuanite v. ASB Dev. Corp., G.R. No. Commencement Order issued pursuant
Industrial v. Lim, G.R. Nos. 124185-87, 18(c) if the said law provides that a Stay
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SUGGESTED ANSWER:
Yes, X and CCC Bank can both insure the Insurance; Perfection of Insurance
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motor vehicle insurance to cover his top of Yes. The insurer is liable. The insurance
the line Aston martin. The policy was policy was issued. In effect, there was a
issued on March 31, 2010 and, on even grant of credit for the payment of the
date, Enrique paid the premium with a premium. The insurer can deduct the
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amount of the check from the proceeds (B) Would your answer in (a) be the same if
of the insurance. it was found that the proximate cause of
the fire was an explosion and that fire was
but the immediate cause of loss and there
is no excepted peril under the policy?
SUGGESTED ANSWER:
Insurance; Property Insurance; Payment
Yes, recovery under the insurance
of Premiums by Check (2007)
contract is allowed if the cause of the
No.IV. Alfredo took out a policy to insure loss was either the proximate or the
this commercial building fire. The broker immediate cause as long as an excepted
for the insurance company agreed to give a peril, if any was not the proximate cause
15-day credit within which pay the of the loss (Section 86, Insurance Code
On May 28, 2006, a fire broke out and caused by Alfredos own negligence, can he
(10%)
Reason briefly in (a), (b) and (c).
Yes, Alfredo may recover on the policy. the insurance policy. The law merely
It is valid to stipulate that the insured prevents recovery when the cause of loss
will be granted credit term for payment is the willful act of the insured, alone or
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ALTERNATIVE ANSWER:
It is entirely possible for an article of
(3) Those that establish a full or partial
commerce to bear a registered
purchase option in favor of the licensor
trademark, be protected by a patent and
(Subsections 87.3, 87.4 and 87.5 of the
have most, or some part of it
Intellectual Property Code).
copyrighted. A book is a good example.
The name of the publisher or the
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colophon used in the book may be Intellectual Property Code) His rights
registered trademarks, the ink used in existed from the moment of its creation
producing the book may be covered by a (Section 172 of the Intellectual Property
patent, and the text and design of the Code; Unilever Philippines (PRC) v. Court
book may be covered by copyrighted. of Appeals, 498 SCRA 334, 2006). The
registration of the painting by Bernie
with the National Library did not confer
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over Warm Warm Honey to Galactic In the case of Mocha Warm and Majesty,
Records for $10,000. who are the attributed co-authors, and in
spite of the sale of the economic right to
In 2008, Planet Films, a Filipino movie Galactic Records, they retain their moral
producing company, commissioned DJ Chef rights to the copyrighted rap, which
Jean, a Filipino musician, to produce an include the right to demand attribution
original re-mix of Warm Warm Honey for to them of the authorship (Sec. 193,
use in one of its latest films, Astig!. DJ Chef IPC).
Jean remixed Warm Warm Honey with a
salsa beat, and interspersed as well a Which respect to DJ Chef Jean, in spite
recital of poetic stanza by John Blake, 1 of his death, and although he was
17th century Scottish poet. DJ Chef Jean commissioned by Planet Films for the
died shortly after submitting the remixed remix, the rule is that the person who so
Warm Warm Honey to Planet Films. commissioned work shall have
ownership of the work, but copyright
Prior to the release of Astig!. Mocha Warm thereto shall remain with creator, unless
learns of the remixed Warm Warm Honey there is a written stipulation to the
and demands that he be publicly identified contrary.
as the author of the remixed song is all the
CD covers and publicity releases of Planet Even if no copyright exist in favor of
Films. poet John Blake, intellectual integrity
requires that the authors of creative
(A) Who are the parties or entities entitled work should properly be credited.
to be credited as author of the remixed
Warm Warm Honey? Reason out your (B) Who are the particular parties or
answers. (3%) entities who exercise copyright over the
SUGGESTED ANSWER: remixed Warm Warm Honey? Explain. (3%)
SUGGESTED ANSWER:
The parties entitled to be credited as
authors of the remixed Warm Warm The parties who exercise copyright or
Honey are Mocha Warm, Majesty, DJ economic rights over the remixed Warm
Chef Jean and John Blake, for the Warm Honey would be Galactic Records
segments that was the product of their and Planet Films. In the case of Galactic
respective intellectual efforts. Records, it bought the economic rights
of Mocha Warm. In the case of Planet
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Films, it commissioned the remixed Eloise may publish the columns without
work. securing authorization from New Media
Enterprises. Under Sec. 172 of the
Intellectual Property Code, original
intellectual creations in the literary and
artistic domain are protected from the
Copyright; Commissioned Work (2008)
moment of their creation and shall
newspaper column for Diario de Manila, a ownership shall belong to the author. In
Petong was the editor-in-chief. Eloise was to who so commissioned work shall have
be paid P1,000 for each column that was ownership of work, but copyright shall
published. In the course of two months, remain with creator, unless there is a
proved unprofitable and closed only after plans to publish Eloises columns in its own
two months. Due to the minimal amounts anthology entitled, The Best of Diario de
involved, Eloise chose not to pursue any Manila Eloise wants to prevent the
claim for payment from the newspaper, publication of her columns in that
which was owned by New Media anthology since she was never paid by the
Three years later, Eloise was planning to Media Enterprises from including her
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Yes, as the author of the photographs, Lacoste International, the French firm that
Valentino has exclusive economic rights manufactures lacoste apparel and owns the
thereto, which include the rights to Lacoste trademark, decided to cash in on
reproduce, to distribute, to perform, to the universal popularity of the boxing icon.
display, and to prepare derivative works It reprinted the photographs, with the
based upon the copyrighted work. He permission of the newspaper publishers,
sold only the photographs to the and went on a world-wide blitz of print
magazine; however, he still retained commercials in which Sonny is shown
some economic rights thereto. Thus, he wearing a Lacoste shirt alongside the
has a cause of action against phrase Sonny Bachao just loves Lacoste.
infringement against Francesco.
When Sonny sees the Lacoste
(C) Does Monaliza have any cause of action advertisements, he hires you as lawyer and
against Francesco? Explain. (2%) asks you to sue Lacoste International
SUGGESTED ANSWER: before a Philippine court:
Monaliza can also sue Francesco for
violation of her right to privacy. (A) For trademark Infringement in the
Philippines because Lacoste International
used his image without his permission:
(2%)
SUGGESTED ANSWER:
Infringement; Trademark, Copyright
Sonny Bachao cannot sue for
(2009)
infringement of trademark. The
No.XV. After disposing of his last opponent photographs showing him wearing a
in only two rounds in Las Vegas, the Lacoste shirt were not registered as a
renowned Filipino boxer Sonny Bachao trademark (Pearl & Dean (Phil.), Inc. v.
arrived at the Ninoy Aquino International Shoemart, Inc., 409 SCRA 231 (2003)).
photographers. The following day, a colored the unauthorized use of the published
Crocodile logo appearedon the front page of Sonny Bachao cannot sue for
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(C) For injunction in order to stop Lacoste No.XIX. Dr. Nobel discovered a new method
International from featuring him in their of treating Alzheimers involving a special
commercials. (2%) method of diagnosing the disease, treating
it with a new medicine that has been
Will these actions prosper? Explain. discovered after long experimentation and
SUGGESTED ANSWER: field testing, and novel mental isometric
The complaint for injunction to stop exercises. He comes to you for advice on
Lacoste International from featuring him how he can have his discoveries protected.
in its advertisements will prosper. This Can he legally protect his new method of
is a violation of subsection 123, 4(c) of diagnosis, the new medicine, and the new
the IPC and Art.169 in relation to method of treatment? If no, why? If yes,
Art.170 of the IPC. how? (4%)
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No.XVIII. For years, Y has been engaged in (B) Suppose the shoes are covered by a
the parallel importation of famous brands, Philippine patent issued to the owner, what
including shoes carrying the foreign brand would your answer be? Explain. (2%)
MAGIC. Exclusive distributor X demands SUGGESTED ANSWER:
that Y cease importation because of his A patent for a product confers upon its
not registered with the Intellectual Property without the authorization of the owner
Office as a trademark and therefore no one of the patent constitutes infringement of
has the right to prevent its parallel the patent (Subsection 76.1 of the
SUGGESTED ANSWER:
X is correct. His rights under his
exclusive distributorship agreement are
property rights entitled to protection. Letters of Credit
The importation and sale by Y of MAGIC
shoes constitute unfair competition (Yu Independence Principle (2010)
v. Court of Appeals, 217 SCRA 328
No.XVII. The Supreme Court has held that
(1993)). Registration of the trademark is
fraud is an exception to the independence
not necessary in case of an action for
principle governing letters of credit.
unfair competition (Del Monte
Explain this principle and give an example
Corporation v. Court of Appeals, 181
of how fraud can be an exception. (3%)
SCRA 410 (1990)).
SUGGESTED ANSWER:
The independence principle posits that
ALTERNATIVE ANSWER:
the obligations of the parties to a letter
Y is correct. The rights in a trademark
of credit are independent of the
are acquired through registration made
obligations of the parties to the
validly in accordance with the
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Appeals, G.R. No.94209, 30 April 1991, The types of average are particular and
the Court held that an irrevocable letter general (Article 808 of the Code of
of credit is independent of the contract Commerce). Particular averages include
between the buyer-applicant and the all expenses and damages caused to the
seller-beneficiary. vessel or to the cargo which did not
inure to the common benefit and profit
(B) Can X Corporation claim directly from of all the persons interested in the
PT Construction Corp.? Explain. (3%) vessel and the cargo (Article 809 of the
SUGGESTED ANSWER: Code of Commerce). General averages
include all damages and expenses which
Yes, X Corporation can claim directly
are deliberately caused to save the
from PT Construction Corp. The
vessel, its cargo, or both at the same
irrevocable letter of credit was merely a
time, from a real and known risk (Article
security arrangement that did not
811 of the Code of Commerce).
replace the main contract between the
two companies. In FEATI Bank c. CA,
G.R. No. 94209, 30 April 1991, opening a
letter of credit does not involve a
specific appropriation of money in favor Barratry (2010)
of the beneficiary. It only signifies that
No.XIII. (B) What is barratry in marine
the beneficiary may draw funds up to the
insurance? (2%)
designated amount. It does not mean
SUGGESTED ANSWER:
that a particular sum of money has been
Barratry is any willfull misconduct in the
specifically reserved of held in trust.
part of the master or crew in pursuance
of some unlawful or fraudulent purpose
without the consent of the owner and to
the prejudice of the interest of the
owner (Roque v. Intermediate Appellate
Court, supra).
Maritime Commerce
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minimize the attendant damage before, the full extent of the claims of the cargo
during and after the typhoon (See owners (Aboitiz Shipping v. New India
Fortune Express v. CA, Caorong. G.R. No. Assurance Company, G.R. No. 156978,
119756, 18 March 1999; Yobido v. CA, 02 May 2006).
G.R. No. 113003, 17 October 1997;
Gathalian v. Delim, G.R. No. L-56487, 21 (C) Assume the facts in question (b). Can
October 1991). the heirs of the three (3) crew members who
perished recover from CSC? Explain fully.
Under Art. 587 of Code of Commerce, in (3%)
case of maritime transactions, the SUGGESTED ANSWER:
liability of the owner of the vessel is
Yes, because the crew members died
limited to the vessel itself. Since the
while performing their assigned duties,
vessel of CSC was seaworthy at the time
aggravated by the failure of the ship
it sank, the CSC is not liable to Empire
owner to ensure that the vessel is
under the maritime principle that the
seaworthy. Workmens compensation has
obligations of the owner of a vessel are
been classified by jurisprudence as an
hypothecary in nature.
exception to the hypothecary nature of
maritime commerce, Abueg v. San Diego,
(B) Assume the vessel was not seaworthy as
77 Phil. 730 (1948), especially in this
in fact its hull had leaked, causing flooding
case where the vessel was not seaworthy
in the vessel. Will you answer be the same?
at the time it sank.
Explain. (2%)
SUGGESTED ANSWER:
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check. Gerard received nothing from the Checks; Liability; Drawer and Drawee
payment. Bank (2010)
No.VIII. Marlon deposited with LYRIC Bank
(A) Pancho asked the payor bank to recredit
a money market placement of P1 million for
his account. Should the bank comply?
tern of 31 days. On Maturity date, one
Explain fully. (3%)
claiming to be Marlon called up the LYRIC
SUGGESTED ANSWER:
Bank account officer and instructed him to
Yes, Sec. 41 of the NIL provides that all give the managers check representing the
payees or indorsees who are not partners proceeds of the money market placement to
is under strict liability to pay to the Bank stamped a guaranty on the check
order of payee. Payment under a forged reading: All prior endorsements and/or
drawer (Associated Bank v. CA, G.R. Nos. Bank funds the check. Days later, Marlon
107382 and 107612, 31 January 1996). goes to LYRIC Bank to collect his money
market placement and discovers the
(B) Based on the facts, was Pancho as
foregoing transactions.
drawer discharged on the instrument?
Why? (2%)
Marlon thereupon sues LYRIC Bank which
SUGGESTED ANSWER:
in turn files a third-party complaint against
No. The payee Gerard can recover as he YAMAHA Bank. Discuss the respective
still retains his claim on the debt of rights and liabilities of the banks. (5%)
Pancho.
SUGGESTED ANSWER:
Since the money market placement of
Marlon is in the nature of a loan to Lyric
Bank, and since he did not authorize the
release of the money market placement
to Ingrid, the obligation of Lyric Bank to
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him has not been paid. Lyric Bank still the ASSIGNOR unconditionally and
has the obligation to pay him. irrevocably agrees to pay the same,
assuming the liability to pay by way of
Since Yamaha Bank indorsed the check penalty, three percent of the total amount
bearing the forged indorsement of unpaid, for the period of delay until the
Marlon and guaranteed all indorsements, same is fully paid.
including the forged indorsement, when
it presented the check to Lyric Bank, it When the checks became due, BFC
should be held liable to it. deposited them for collection, but the
drawee banks dishonored all the checks for
However, since the issuance of the check one of the ff. reasons: account closed,
was attended with the negligence of payment stopped, account under
Lyric Bank, it should share the loss with garnishment, or insufficiency of funds.
Yamaha Bank on a fifty percent basis BFC wrote Gaudencio notifying him of the
(Allied Banking Corporation v. Lim Sio dishonored checks, and demanding
Wan, 549 SCRA 504 (2008)). payment of the loan. Because Gaudencio
did not pay, BFC filed a collection suit.
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Gaudencio undertook to pay for the the east the following morning to welcome
receivables if for any reason they cannot the day.
be paid by the obligors (Velasquez v. (Sgd.) Antonio Reyes
Solidbank Corporation, 550 SCRA 119
(2008)). Explain each requirement of negotiability
present or absent in the instrument. (8%)
SUGGESTED ANSWER:
The instrument contains a promise to
Forgery; Liabilities; Drawee Bank (2009) pay and was signed by the maker,
No.XI. (E) A bank is bound to know its Antonio Reyes (Section 1(a) of Negotiable
depositors signature is an inflexible rule in Instruments Law).
determining the liability of a bank in forgery
cases. The promise to pay is unconditional
SUGGESTED ANSWER: insofar as the reference to the setting of
False. In cases of forgery, the forger the sun in the west in the evening and
may not necessarily be a depositor of the its rising in the east in the morning are
bank, especially in the case of a drawee concerned. These are certain to happen
bank. Yet in many cases of forgery, it is (Section 4(c) of Negotiable Instruments
the drawee that is held liable for the Law). The promise to pay is conditional,
loss. because the money will be taken from a
particular fund, BPI Account No. 1234
(Section 3 of Negotiable Instruments
Law).
Negotiability (2013)
No.I. Antonio issued the following The Instrument contains a promise to
instrument: pay a sum certain in money,
August 10, 2013 P100,000.00 (Section (b) of Negotiable
Makati City Instruments Law).
P1OO,OOO,OO
Sixty days after date, I promise to pay The money is payable at a determinable
Bobby or his designated representative the future time, sixty days after August 10,
sum of ONE HUNDRED THOUSAND PESOS 2013 (Section 4(a) of Negotiable
(P100,000.00) from my BPI Acct. No. 1234 Instruments Law).
if, by this due date, the sun still sets in the
west to usher in the evening and rises in
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The instrument is not payable to order there are no 90-day treasury bills
or to bearer (Section 1(d) of Negotiable (although there are 91-day, 182-day, and
Instruments Law). 364-days bills); second the promise does
not specify whether the so-called
interest rate is that established at the
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Negotiable. It conforms fully with the constitute a defect of title (Section 55,
requirements of negotiability under Negotiable Instruments Law).
Section 1, NIL.
(B) Does S have a cause of action against R
(E) I promise to pay A or bearer the sum of in case of dishonor by the drawee bank?
Php100,000. (2%)
SUGGESTED ANSWER:
SUGGESTED ANSWER:
No, s does not have a cause of action
against R in case of dishonor of the
Negotiable. It conforms fully with the
check by the drawee bank. S is not a
requirements of negotiability under
holder in due course, thus, R can raise
Section 1,NIL. It is payable on demand
the defense that the check was issued
because the note does not express a time
for an illegal consideration (Section 58,
for its payment(Sec.7[b], NIL).
Negotiable Instruments Law).
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SUGGESTED ANSWER:
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(A) If you were the judge, what issues would 5,000.00 five days after his pet dog, Sparky,
you consider relevant to resolve the case? dies. Signed Y. is a negotiable instrument.
Explain. (3%) SUGGESTED ANSWER:
SUGGESTED ANSWER: True. The document is subject to a term
and not a condition. The dying of the
The filling up by the officer of his name
dog is a day which is certain to come.
as payee does not constitute forgery, and
Therefore, the order to pay is
contemplates a mechanically incomplete
unconditional, in compliance with
but delivered instrument. Under Sec. 14
Section 1 of the Negotiable Instruments
of the NIL, in order to enforce an
Law (NIL).
incomplete but delivered instrument
against a prior party, it must be filled-up
(Note: This answers presumes that there
strictly in accordance with the authority
is a drawee)
given. The doctrine of comparative
negligence provides that AB Corp. is
deemed negligent for having issued the
check with a blank payee section that
facilitated the fraud; it should be AB
Parties; Holder in Due Course (2012)
Corp. that must bear the loss, and not
XY Bank.
No.III. X borrowed money from Y in the
(B) How would you decide the case? amount of Php1Million and as payment,
SUGGESTED ANSWER:
Negotiable Instruments: Subject to a
Term (2009) Z is not a holder in due course. She did
not give any valuable consideration for
No.XI. (D) A document, dated July 15, 2009
the check. To be a holder in due course,
that reads: Pay to X or order the sum of
the holder must have taken the check in
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good faith and for value (Sec. 52[c], Give two (2) instances where a prior party
Negotiable Instruments Law). may hold a subsequent party liable. (2%)
SUGGESTED ANSWER:
(B) Who is liable on the check. The drawer
or the indorser? Explain your answer. (5%) In the following cases, a prior party may
hold a subsequent party liable: (1) where
SUGGESTED ANSWER: an instrument is negotiated back to a
prior party, and he reissues and further
X, the drawer, will be liable. As the
negotiates the same, he is entitled to en
drawer, X engaged that on due
force payment against a subsequent
presentment the check would be paid
party who qualifies as an intervening
according to its tenor and that if it is
party to whom the prior party is not
dishonored and he is given notice of
personally liable; and (2) in the case of
dishonor, he will pay the amount to the
an accommodation party arrangement,
holder (Sec. 61, NIL). No notice of
where the accommodation party may
dishonor need be given to X if he is
recover from the party accommodated,
aware that he has insufficient funds in
even when the latter is a subsequent
his account. Under Section 114(d) of the
party (Sec. 29, NIL).
Negotiable Instruments Law, notice of
dishonor is not required to be given to (B) How does the shelter principle
the drawer where he has no right to embodied in the Negotiable Instruments
expect that the drawee will honor the Law operate to give the rights of a holder-
instrument. Z cannot hold Y, the in-dine course to a holder who does not
endorser, liable as the latter can raise have the status of a holder-in-due course?
the defense that there was no valuable Briefly explain. (2%)
consideration for the endorsement of the SUGGESTED ANSWER:
check(Sec. 58, NIL).
The shelter principle provides that a
holder who is not himself a holder in due
course but is not a party to any fraud or
illegality affecting the instrument, and
Parties; Instances a Subsequent Party is who derives his title from a holder in due
Liable (2008) course, acquires the rights of a holder in
due course (Sec. 58, NIL).
No.III. (A) As a rule under the Negotiable
Instruments Law, a subsequent party may
hold a prior party liable but not vice versa.
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It would be unethical to sell the shares. (A) What provision of the Securities
Rule 1.01 of the Code of Professional Regulation Code (SRC) did they violate, if
Responsibility provide, A lawyer shall any ? Explain. (4%)
not engage in unlawful, dishonest, SUGGESTED ANSWER:
immoral or deceitful conduct.
The directors and key officers of the
company violated the prohibition against
A lawyer should not only refrain from
insider trading under Sec. 27 of the
performing unlawful acts. He should also
Securities Regulation Code, which
desist from engaging in unfair deceitful
declares it unlawful for an insider
conduct to conceal from the buyer of the
(which includes directors and officers of
shares the planned corporate
a publicly listed company) to sell or buy
rehabilitation.
its securities, if they know of a fact of
special significance with respect to the
company or the security, that is not
Insider Trading (2008)
generally available to the public, before
No.XIII. Grand Gas Corporation, a publicly such material information made public
drilling a rich deposit of natural gas along directors and key officers are liable to
the coast of Antique. For five (5%) months, disgorge the profits earned and to pay
disclosure of the information to the Grand Gas Corporation saw the exploration
Securities and Exchange Commission, all reports which were mistakenly sent to their
the directors and key officers of the establishment together with other materials
company bought shares in the company at to be printed. They too bought shares in the
very low prices. After the disclosure, the company at low prices and later sold them
price of the shares went up. The directors at huge profits. Will they be liable for
and officers sold their shares at huge violation of the SRC? Why? (3%)
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No.IV. Andante Really, a marketing the sale or offer for sale or distribution of
Business Center Owner (BCO) by paying an Before the investment contract is sold or
enrollment fee of S250. The BCO is then offered for sale or distribution to the
entitled to recruit two other investors who public in the Philippines, it should be
pay S250 each. The BCO receives S90 from registered with the Securities and
the S250 paid by each of his recruits and is Exchange Commission in accordance
made by investors through the initial efforts Regulation Code (Power Homes
accumulated amount reaches S5, 000, the Exchange Commission, 546 SCRA 567
(A) Does this multi-level marketing scheme failure to follow this procedure? (2%)
the Securities Regulation Code? Define an The failure to follow the procedure has
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that the purchaser can recover from the market price (Section 48, Securities
seller (i) the consideration paid with Regulation Code).
interest thereon, less the amount of any
income received on the purchased The purpose of the Margin Trading Rule
securities, upon the tender of such is to prevent excessive use of credit for
securities, or (ii) damages if the the purchase of securities. It is a counter
purchaser no longer owns such securities to a brokers desire to generate more
(Sections 57 and 73, Securities sales by encouraging clients to but
Regulation Code). Furthermore, the securities on credit (Carolina Industries,
Securities and Exchange Commission Inc. vs. CMS STock Brokerage, Inc. 97
(SEC) may issue a cease and desist order SCRA 734 [1980]).
(Subsection 64.1, Securities Regulation
Code).
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require compliance with the form and authorized to sell securities, including
content of disclosures; timeshares.
(C) Those issued by the receiver or by On March 30, 1998, Leon and Carina wrote
the trustee in a bankruptcy duly PPR rescinding their purchase agreement
approved by the proper adjudicatory and demanding the refund of the amount
board; they paid because the Palacio Del Boracay
timeshare was sold to them by PPR without
(D) Those involving the sale or transfer the requisite license or authority from the
which is bylaw, under the regulation of SEC. PPR contended that the grant of the
the OIC, HLURB, BIR; and SEC authority had the effect of ratifying the
purchase agreement (with Leon and Carina)
(E) Those issued by banks, except its of Oct.6, 1996.
own shares.
Is the contention of PPR correct? Explain
(Note: It is suggested that any two of the (3%)
above exempt securities should be SUGGESTED ANSWER:
considered as enough answer to the The contention of PPR is not correct. It
question.) is settled that no securities shall be sold
or offered for sale or distribution in the
Philippines without a registration duly
filed and approved by the Commission.
Corporate registration is one of the
Securities; Selling of Securities (2009)
requirements under Sec. 8of batas
No.XVII. Philippine Palaces Realty (PPR) pambansa Blg. 178 (timeshare Realty
had been representing itself as a registered Corporation v. Lao, 544 SCRA 254
spouses Leon and Carina one timeshare of No. Such contention is not correct. Sale
Palacio del Boracay for US S7, 500.00. or offer to sell securities which are not
However, its Registration Statement became exempt securities or which do not arise
effective only on Feb.11, 1998 after the SEC out of exempt transactions, and,
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Securities Regulation Cod. Subsequent any scheme that dilutes the share value
grant of authority by the SEC does not of their investments. It gives them the
retroact to past sales or offers to sell. chance to exit the company under the
same terms offered to the majority
stockholders.
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trips for free; and Uriel, holder of a free (B) Do Romeo, Samuel, Teresita, and Uriel
riding pass he won in a raffle held by CTC. have a cause of action for damages against
(A) Will a suit for breach of contract of UTI? Explain. (3%)
carriage filed by Romeo, Samuel, Teresita, SUGGESTED ANSWER:
and Uriel against CTC prosper? Explain. Romeo, Samuel, Teresita and Uriel may
(3%) sue UtI on the basis of quasi-delict since
they have no pre-existing contractual
SUGGESTED ANSWER: relationship with UTI. They may allege
Romeo cannot sue for breach of contract that the collision was due to the
of carriage. A stowaway like Romeo, Who negligence of driver of UTI and UTI was
secures passage by fraud, is not a negligent in the selection and
passenger (Vda. De nueca v. Manial supervision of its driver (Articles 2176
Railroad Company, 13 C.A. R. 49(1968)). and 2180, New Civil Code).
Samuel and Teresita cannot sue for (C) What, if any, are the valid defenses that
breach of contract of carriage. The CTC and UTI can raise in the respective
Elements in the definition of a passenger actions against them? Explain. (3%)
are: an undertaking of a person to travel SUGGESTED ANSWER:
in the conveyance provided by the With respect to Romeo, Samuel and
carrier and an acceptance by the carrier Teresita, since there was no pre-existing
of the person as a passenger. (14 Am Jur contractual relationship between them
2d, Carriers, So. 714,p. 164). Samuel did and CTC, CTC can raise the defense that
not board the bus to be transported but it exercised the due diligence of a good
to commit robbery. Teresita did not father of a family in the selection and
board the bus to be transported but to supervision of its driver (Article 2180,
accompany the driver while he was New Civil Code).
performing his work.
Uriel can sue for breach of contract. He It can raise the same defense against
was a passenger although he was being Uriel if there is a stipulation that
transported gratuitously, because he won exempts it from liability for simple
a free riding pass in a raffle held by CTC negligence, but not for willful acts or
(Article 1753, New Civil Code). gross negligence (Article 1758, New Civil
Code).
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CTC can also raise against all the de Oro airport; the pilot miscalculated the
plaintiffs the defense that the collision planes approach and undershot the
was due exclusively to the negligence of runway. Of the 150 people on board, ten
the driver of UTI, and this constitutes a (10) passengers died at the crash scene.
fortuitous event, because there was no
concurrent negligence on the part of its Of the ten who died, one was a passenger
own driver (Ampang v.Guinoo who managed to leave the plane but was
Transportation Company, G.R. No. L- run over by an ambulance coming to the
5044, April 30, 1953). rescue. Another was an airline employee
who hitched a free ride to Cagayan de Oro
CTC can also raise against Samuel the and who was not in the passenger manifest.
defense that he was engaged in a
seriously illegal act at the time of the It appears from the Civil Aeronautics
collision, which can render him liable for Authority investigation that the co-pilot
damages on the basis of quasi-delict who had control of the planes landing had
(Dobbs, the Law of Torts, pp.524-525). less than the required flying and landing
time experience, and should not have been
Since UTI had no pre-existing in control of the plane at the time. He was
contractual relationship with any of the allowed to fly as a co-pilot because of the
plaintiffs, it can raise the defense that it scarcity of pilots Philippine pilots have
exercised due diligence in the selection been recruited by foreign airlines under
and supervision of its driver that the vastly improved flying terms and wages so
collision was due exclusively to the that newer and less trained pilots are being
negligence of the driver of CTC, and that locally deployed. The main pilot, on the
Samuel was committing a serious illegal other hand, had a very high level of blood
act at the time of the collision. alcohol at the time of the crash.
No.IX. Fil-Asia Flight 916 was on a (A) Explain the causes of action legally
scheduled passenger flight from Manila possible under the given facts against the
when it crashed as it landed at the Cagayan airline and the Pilots; whom will you
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(B) How will you handle the cases of the (A) What is a maritime protest?
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No, the case against C will not prosper, No, Tom Cruzs obligation to pay the
Since C received the Construction loan covered by the trust receipts to XYZ
material from E Before the trust receipt Bank remains, A Trust receipt is
transaction was a simple loan, with the merely a collateral agreement which
trust receipt merely as a collateral or serves as security for a loan, with the
security for the loan. This is Bank appearing as the owner of the
inconsistent with a trust receipt goods. The Bank cannot dispose of the
transaction where the title to the goods goods in any manner it chooses, because
remains with the bank and the goods are it is not the true owner thereof (Rosario
released to the entrustee before the loan Textile Miss v. Home Bankers, G.R. No.
is granted (Consolidated Bank and Trust 137232, 29 June 2005, citing Sia v.
Corporation v. Court of Appeals, 356 People, G.R. No. 30896, 28 April 1983,
SCRA 671 [2001]. Abad v. CA, G.R. No. 42735, 22 January
1990, and PNB v. Pineda, G.R. No.
46658, 13 May 1991). The loss of the
goods covered by the trust receipts
cannot extinguish the principal
Trust Receipt; Security for a Loan (2008)
obligation of the borrower to pay the
No.II. Tom Cruz obtained a loan of P1 bank (Landl & Company [Phil.] v.
Million from XYZ Bank to finance his Metropolitan Bank, G.R. 159622, 30 July
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(A) Is the action of CCC Car, Inc. legally [Note:The problem does not state that BBB
justified? Explain your answer. (5%) bank issued a letter of credit upon
application of CCC Car, Inc, to enable the
SUGGESTED ANSWER:
latter to pay for its importation. In the
No. It is the obligation of CCC Car, Inc., suggested answers above, we assume this
as entrustee, to receive the proceeds of to be the case because the trust receipt,
the sale of the Mercedes Benz S class being an accessory contract, cannot validly
vehicles intrust for BBB Bank, as exist without a principal contract, i.e., the
entruster, and turn over the same to application for the letter of credit.]
BBB Bank to the extent of the amount
owing to the latter or as appears in the
trust receipt (Sec. 9(2), Trust Receipt
Warehouse Receipts Law
Law).
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SUGGESTED ANSWER:
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(C) All of the above, because the law (D) Exports consistently at least 60% of its
considers the juridical personality, whether goods or services produced, and can sell
domestic or foreign, as a mere medium; the goods or services to the domestic market
test of nationally is on the individual who (E) None of the above.
control the medium
(D) None of the above, because the term SUGGESTED ANSWER:
Philippine national can only cover (E) None of the above.
individuals and not juridical entities. (Section 3(e) of Foreign Investments Act)
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subscription or P250,000.00 No call has (D) ABC Corp. may redeem the shares at
been made on the unpaid subscription. the end of 10 years without need for
unrestricted earnings provided that, after
How many shares in Dennis entitled to the redemption, there are sufficient assets
vote at the annual meeting of the to cover its debts.
stockholders of XYZ? (1%) (E) All of the above are incorrect.
IV. ABC Corp, issued redeemable shares, V. Arnold, representing himself as an agent
Under the terms of the issuance, the shares of Brian for the sale of Brians car,
shall be redeemed at the end of 10 years approached Dennis who appeared
from date of issuance, at par value plus a interested in buying the car. At Arnolds
premium of 10% prodding, Dennis issued a crossed check
would only be shown to Brian as evidence
Choose the correct statement relating to of Dennis good faith and interest in buying
these redeemable shares. (1%) the car. Instead, Arnold used the check to
pay for the medical expenses of his wife in
(A) ABC Corp. would need unrestricted Brians clinic after Brian, a doctor, treated
retained earnings to be able to redeem the her.
shares.
(B) Corporations are not allowed to issue Is Brian a holder in due course (HIDC)?
redeemable shares; thus, the issuance by (1%)
ABC Corp. is ultra vires.
(C) Holders of redeemable shares enjoy a (A) Yes, Brian is a HIDC because he was the
preference over creditors. payee of the check and he received it for
services rendered.
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(B) Yes, Brian is a HIDC because he did not (A) Gawsengsit Corp. is doing business in
need to go behind the check that was the Philippines and requires a license from
payable to him. the Securities and Exchange Commission
(C) No, Brian is not a HIDC because Dennis (SEC).
issued the check only as evidence of good (B) Gawsengsit Corp. is not doing business
faith and interest in buying the car. in the Philippines by its mere investment in
(D) No, Brian is not a HIDC because Brian a Philippine corporation and does not need
should have been placed on notice: the a license from the SEC
check was crossed in his favor and Arnold (C) Gawsengsit Corp. has to appoint a
was not the drawer. resident agent in the Philippines.
(E) No, Brian is not a HIDC because the (D) Gawsengsit Corp. cannot elect directors
requisite consideration to Dennis was not in Bumblebee Corp.
present. (E) All the above choices are incorrect.
VI. Gawsengsit Corp. is a corporation VII. The BIR assessed ABC Corp. for
incorporated in Singapore. It invested in deficiency income tax for taxable year 2010
Bumblebee Corp., a Philippine corporation, in the amount of P26,731,208.00, inclusive
by acquiring 30% of its shares. As a result, of surcharge and penalties.
Gawsengsit Corp. nominated 30% of the The BIR Can . (1%)
directors of Bumblebee Corp., all of whom
are Singaporeans and officers of (A) Run after the directors and officers of
Gawsengsit Corp. ABC Corp. to collect the deficiency tax and
their liability will be solidary.
Choose the correct statement relating to (B) Run after the stockholders of ABC Corp.
Gawsengsit Corp. (1%) and their liability will be joint
(C) Run after the stockholders of ABC Corp.
and their liability will be solidary
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(D) Run after the unpaid subscriptions still (Rosario Textile Mills Corporation v.
due to ABC Corp., if any Home Bankers Savings and Trust
(E) None of the above choices is correct. Company, 462 SCRA 88, 2005)
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(A) By the bank when the account is the Auto Mo, Ayos Ko is a . (1%)
subject of a suspicious or covered
transaction report (A) De jure corporation
(B) By the Anti-Money Laundering Council (B) De facto corporation
(AMLC) when the account belongs to a (C) Corporation by estoppels
person already convicted of money (D) General partnership
laundering (E) None of the above.
(C) By the Regional Trial Court, upon ex
parte motion by the AMLC, in a criminal SUGGESTED ANSWER:
prosecution for money laundering pending NOTE: The last sentence of the given
before it. problem is unclear as to whether the
(D) By the Court of Appeals motu proprio in term latter refers to Enrico or to the
an appeal from a judgment of conviction of incorporators. As such, it is necessary to
a criminal charge for money laundering. qualify the answer depending on the
(E) In none of the above. meaning given to the term latter
(C) Corporation by estoppels
SUGGESTED ANSWER:
(E) In none of the above. If the term latter refers to the
(Section 10 of the Anti-Money incorporators, the correct answer is C
Laundering Act) (Section 20 and 21 of the Corporation
Code).
XI. Unknown to the other four proponents,
Enrico (who had been given the task of (E) None of the above.
attending to the Articles of Incorporation of If the term latter refers to Enrico, the
the proposed corporation, Auto Mo, Ayos correct answer is E (Sections 20 and 21
Ko) misappropriated the filing fees and of the Corporation Code).
never filed the Articles of Incorporation with
the Securities and Exchange Commission XII. Preferred shares cannot vote on the
(SEC). Instead, he prepared and presented proposal . (1%)
to the proposed incorporators a falsified
SEC certificate approving the Articles. (A) To include other corporate officers in the
Relying on the falsifies SEC certificate, the corporations by-laws
latter began assuming and discharging (B) To issue corporate bonds
corporate powers. (C) To shorten the corporate term
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(D) All of the above Is the policy valid and binding? (1%)
(E) None of the above.
(A) Yes, the policy is valid and binding
SUGGESTED ANSWER: because Aurelia has an insurable interest
(E) None of the above. on the life of Kaddafy Benjelani.
(B) No, the policy is not valid and binding
Under letter (A), to include other because Kaddafy Benjelani has been
corporate officers in the corporations officially declared a public enemy.
by-laws. This will require the (C) Yes, the policy is valid and binding
amendment of the by-laws, and as such, because it has been in force for more than
preferred shares shall be allowed to two years.
vote. (D) No, the policy is not valid and binding
Under letter (B), to issue corporate bonds since the spouses estrangement removed
Such corporate bonds are construed as Aurelias insurable interest in Benjelanis
bonded indebtedness, then preferred life.
shares shall be allowed to vote. (E) None of the above.
Under letter (C), to shorten the corporate
term, - Under Section 6 of the SUGGESTED ANSWER
Corporation Code, preferred shares shall (A) Yes the policy is valid and binding
be allowed to vote. because Aurelia has an insurable interest
on the life of Kaddafy Benjelani.
XIII. In 2010, the Philippine National Police
declared Kaddafy Benjelani Public Enemy The policy is valid. Aurelia had insurable
No. 1 because of his terrorist activities in interest in the life of Kaddafy Benjelani,
the country that have resulted in the death because he is her husband even if they
of thousands of Filipino. A ransom of P15 are estranged (Section 10 (a) of the
million was placed on Kaddafy Benjelanis Insurance Code). Kaddafy Benjelani is
head. not a public enemy, because he is not a
national of an enemy country (Filipinas
Worried about the future of their family, Compaia de Sejunos v. Christern,
Kaddafy Benjelanis estranged wife, Aurelia, Huefeld & Company, Inc., 89 Phil. 54,
secured in December 2010 a life insurance 1951).
policy on his life and designated herself as
the beneficiary.
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XIV. Muebles Classico, Inc. (MC), a Manila- (B) Deny STIs claim. The Stay Order covers
based furniture shop, purchased hardwood all claims against the debtor and binds all
lumber from Surigao Timber, Inc. (STI), a its creditors. The letter of credit is a claim
Mindanao-based logging company. MC was against the debtor that is covered by the
pay STI the amount of P5.0 million for 50 Stay Order.
tons of lumber. To pay STI, MC opened a (C) Grant STIs claim. The letter of credit is
letter of credit with Baco de Plata (BDP). not a claim against the debtor under
BDP duly informed STI of the opening of a rehabilitation, but against the bank which
letter of credit in its favor. has assumed a solidary obligation.
(D) Deny STIs claim. If the bank disregards
In The meantime, MC- which had been the Stay Order, it may be subject to
undergoing financial reverses = filed a contempt by the rehabilitation court. STI
petition for corporate rehabilitation. The should file its claim with the rehabilitation
rehabilitation court issued a Stay Order to court.
stay the enforcement of all claims against (E) File an action for interpleader to resolve
MC. the parties competing claims
BDP comes to you for advice. Your best XV. Akiro of Tokyo, Japan sent various
advice is to . (1%) goods to his friend Juan in Cebu City,
Philippines , through one of the vessels of
(A) Grant STIs claim, Under the Worthsell Shippers, Inc., an American
Independence Principle, the bank deals corporation. En route to Cebu City, the
only with the documents and not the vessel had two stops, first in Hong Kong,
underlying circumstances; hence, the and second, in Manila.
presentation of the letter of credit is
sufficient. XV.(1) While traveling from Tokyo to Hong
Kong, the goods were damaged.
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SUGGESTED ANSWER:
What law will govern? (1%) (D) Yes, provided he files the complaint
within 1 year from delivery.
(A) Japanese law (Section 3 (6) of Carriage of Goods by Sea
(B) Hong Kong law Act; Belgian Overseas Chartering
(C) Chinese law &Shipping N.V. v. Philippine First
(D) Philippine law Insurance Company, Inc., 383 SCRA 23,
(E) American law 2002)
SUGGESTED ANSWER:
(A) Philippine law
(Article 1753, Civil Code)
(Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court, G.R. No. L-
69044, May 29, 1987).
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SUGGESTED ANSWER:
9. X secured a loan from BBB Bank to
pay for the importation of some
c. X can be held criminally liable
dried fruits. Upon arrival of the
under the Trust Receipts Law
goods consisting of dried fruits
regardless of the purpose or
imported by X but before delivery to
intention for the use of the
him, a trust receipt was executed by
proceeds.
X to cover the transfer of the dried
fruits to his possession. The dried
fruits were so saleable but instead of
turning over the proceeds of the 10. X is the President of AAA Products
sale, X used the funds to pay for the Corporation. X signs all the Trust
medical expenses of his mother who Receipts documents for certain
was sick of cancer of the bone. importations of the company. In the
Which statement is most accurate? event of failure to deliver the
a. X cannot be held criminally proceeds of the sale of the goods to
liable because although he the bank, which statement is most
did not pay the bank he used accurate?
the proceeds for a good a. The criminal liability will not
reason. attach to X as President
b. Fraud or deceit is a because of separate juridical
necessary element to hold X personality.
criminally liable for non - b. For violation of Trust
Receipts Law, the law
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11. Who is the Entrustee in a Trust d. get good title to the goods.
Receipt arrangement?
SUGGESTED ANSWER:
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SUGGESTED ANSWER:
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21. Negotiable instruments are used as b. The drawee bank can recover
substitutes for money, which means from X, because he is the
- drawer even though his
a. that they can be considered signature was forged.
legal tender. c. The drawee bank is
b. that when negotiated, they estopped from denying the
can be used to pay genuineness of the
indebtedness. signature of the X, the
c. that at all times the delivery drawer of the check.
of the instrument is d. The drawee bank can recover
equivalent to delivery of the from Y because as endorser
cash. he warrants the genuineness
d. that at all times negotiation of the signature.
of the instruments requires
proper indorsement. SUGGESTED ANSWER:
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33. X, in January 30, 2009, or two (2) d. The life insurance is valid
years before reaching the age of 65, provided the disposition of
insured his life for Php20Million. the proceeds will be subject
For reason unknown to his family, to the approval of the legal
he took his own life two (2) days guardian of the minor.
after his 65th birthday. The policy
contains no excepted risk. Which SUGGESTED ANSWER:
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SUGGESTED ANSWER:
SUGGESTED ANSWER:
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a. No, insurance policy must be 39. X insured the building she owns
expressly endorsed to the bank so that with two (2) insurance companies
the bank will have a right in the for the same amount. In case of
proceeds of such insurance in the event damage, -
of loss. a. X can not claim from any of
the two (2) insurers because
38. X is a passenger of a jeepney for hire with the double insurance,
being driven by Y. The jeepney the insurance coverage
collided with another passenger becomes automatically void.
jeepney being driven by Z who was b. the two (2) insurers will be
driving recklessly. As a result of the solidarily liable to the extent
collision, X suffered injuries. Both of the loss.
passenger jeepneys are covered by c. the two (2) insurers will be
Comprehensive Motor Vehicular proportionately liable.
Insurance Coverage. If X wants to d. X can choose who he wants
claim under the "no fault indemnity to claim against.
clause", his claim will lie -
a. against the insurer of the SUGGESTED ANSWER:
jeepney being driven by Z
who was the one at fault. d. X can choose who he wants to
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d. The insurance policy is fixed over the house and lot was
regardless of the change in already transferred.
the use. d. Y will be the one entitled to
the proceeds because he now
Recommendation in respect of MCQ #40: owns the partially burnt
house and lot.
It is recommended that examinees be given
full credit for whatever answer they gave as SUGGESTED ANSWER:
the question is unclear. What is clear is that
there was misrepresentation on the part of X b. X is still entitled to the
when he indication in his application that proceeds of the insurance policy because
the building is residential when it was what is material is that at the time of
actually being used as a warehouse. The the loss, X is the owner of the house and
problem does not indicate that the change in lot.
the use of the house was carried out by X
and that it was done without the permission 42. X, while driving his Toyota Altis,
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Because there were so many When X reached Los Angeles one (1)
passengers, the two (2) boxes of of the two (2) checked in luggage
school supplies were loaded but the could not be found. Which
shipping company was not able to statement is most accurate?
issue the Bill of Lading. So, on a. PAL is liable for the loss of
board, the Ship Captain issued the checked- in luggage
instead a "shipping receipt" to X under the provisions of the
indicating the two (2) boxes of Warsaw Convention on Air
school supplies being part of the Transport.
cargo of the vessel. Which phrase b. PAL is liable for the loss only
therefore, is the most accurate? if the baggage check
a. the owner of the vessel is not expressly states that the
liable because no bill of airline shall be liable in case
lading was issued to X of loss.
hence, no contract of c. PAL cannot be held liable
carriage was perfected. because that is the risk that
b. it is possible to have a a passenger takes when she
contract of carriage of checks- in her baggage.
cargo even without a bill of d. PAL can only be held liable if
lading, and the "shipping it can be proven that PAL
receipt" would be was negligent.
sufficient.
c. the only acceptable SUGGESTED ANSWER:
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(Kabit System) under the name of X. amount of Php1 ,000 daily under
The passenger jeepney met an the boundary system. This means
accident. Who will be liable? that anything above Php1 ,000
a. Y, the one actually operating would be the earnings of Y. Y,
the jeepney, will be liable to driving recklessly, hit an old lady
the injured party. crossing the street. Which statement
b. X will be the one liable to is most accurate?
the injured party despite a. X as the owner is exempt
the fact that it is Y who is from liability because he was
actually operating the not the one driving.
jeepney, because while the b. X as the owner is exempt
Kabit System is tolerated, from liability because
the public should not be precisely the arrangement is
inconvenienced by the one under the "boundary
arrangement. system".
c. X will not be held liable if he c. X will not be exempt from
can prove that he is not the liability because he
owner anymore. remains to be the
d. Public Policy dictates that registered owner and the
the real owner, even not the boundary system will not
registered one, will be held allow the circumvention of
liable. the law to avoid liability.
d. Y is the only one liable
SUGGESTED ANSWER: because he drove recklessly.
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(5), for as long as it is not less than five cannot refuse because it is
(5) and no more than fifteen (15) his legal duty to issue a
stock certificate
54. X subscribed 10,000 shares in the corresponding to the number
capital stocks of AAA Corporation. of shares actually subscribed
He paid 50% of the 10,000 shares. X regardless of the actual
asked the Corporate Secretary to payment.
issue him the corresponding stock
certificate representing the 50% of SUGGESTED ANSWER:
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55. XXX Corporation and YYY of the Articles of Merger by the SEC.
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existing employees and the hiring of Airlines tickets are sold in the
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SUGGESTED ANSWER:
Recommendation in respect of MCQ #62:
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the question is vague. It does not state that extended. What will happen to the
the increase of the authorized capital stock corporation?
also requires the approval of the SEC. a. The corporation is
dissolved ipso facto.
63. X is a minority stockholder of CCC b. There is a need to pass a
Corporation. Y is a member of the board resolution to formally
Board of Directors of CCC dissolve the corporation.
Corporation and at the same time c. The Board of Directors must
he is the President. X believes that Y pass a resolution for the
is mismanaging CCC Corporation corporation to formally go
hence, as a stockholder and in into liquidation.
behalf of the other stockholders, he d. The stockholders must pass
wanted to sue Y. Which statement is a resolution to dissolve the
most accurate? corporation.
a. X can institute a derivative
suit in behalf of himself as a SUGGESTED ANSWER:
stockholder.
b. A derivative suit must be a. The corporation is dissolved
corporation.
65. The term of one (1) year of the Board
c. Derivative suit is an
of Directors of AAA Corporation
exclusive remedy that X can
expired last February 15, 2012. No
institute.
new election of the Board of
d. Derivative suit is not the
Directors was called, hence, the
remedy in this situation.
existing members of Board continue
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alone.
d. All of the above.
d. None of the above.
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c. 21
74. XYZ Corporation is engaged in
lending funds to small vendors in
76. All senior officers of ABC Bank are
various public markets. To fund the
entitled to obtain a housing loan. X
lending, XYZ Corporation raised
is an Executive Vice President for
funds through borrowings from
Operations of ABC Bank. She
friends and investors. Which
obtained a housing loan with the
statement is most accurate?
a. XYZ Corporation is a bank.
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must be specific as to which account. has three (3) deposit accounts all
under her name. One, in checking
79. X, a private individual, maintains a account, one in saving account and
dollar deposit with ABC Bank. X is another one in time deposit account.
suspected to be the leader of a Each account has a balance of
Kidnap for Ransom Gang and he is Php250,000. AAA Bank became
suspected of depositing all ransom insolvent. Philippine Deposit
money in said deposit account Insurance Corporation closed the
which are all in US Dollars. The Bank. X therefore is unable to
police want to open said account to withdraw from all of the accounts.
know if there are really deposits in She then filed her claims with the
Philippine Deposit Insurance
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SUGGESTED ANSWER:
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87. Which phrase best completes the 89. Which phrase best completes the
statement - A chattel mortgage can statement - The Deed of Chattel
be constituted to secure: mortgage, if not registered with the
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mortgagor and the mortgagee but will specified and that the
SUGGESTED ANSWER:
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specified and that the obligation is just be interrupted by the filing of the action.
and valid.
93. What is the effect if the. proceeds in
b. The one (1) year period will the debtor because its an
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by the redemption period and the the interest rates and the due dates.
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SUGGESTED ANSWER:
97. Which of the following is an
exception to the secrecy of bank
c. Upon inquiry in cases of
deposits which are in Philippine
impeachment.
Pesos, but NOT an exception to the
secrecy of foreign currency deposits? 98. The Anti-Money Laundering Law is a
law that seeks to prevent money
a. Upon
laundering activities by providing for
BangkoSentralngPilipinas
more transparency in the Philippine
(SSP) inquiry into or
Financial System, hence the
examination of deposits or
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following institutions are covered by 100. The main feature of the Foreign
the law, except: Investment Act of 1991 is to introduce
a. bank and any financial the concept of "Negative Lists". Under
institutions; the said law, what is a "Negative List"?
b. pawnshops;
c. casino operators; a. It is a list of business
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(A) Yes, since the carrier's crew (C) Yes, since the extent of the ships
did nothing to protect a damage was greater than that of the
passenger who remained in the value of the lost cargo.
bus during the stop-over.
(D) No, since X Shipping neither
(B) No, since the carrier's crew could incurred a total loss nor
not have foreseen the attack. abandoned its ship.
(C) Yes, since the bus is liable for (3) A writes a promissory note in favor of his
anything that goes wrong in the creditor, B. It says: "Subject to my option, I
course of a trip. promise to pay B Php1 Million or his order
or give Php1 Million worth of cement or to
(D) No, since the attack on P took authorize him to sell my house worth Php1
place when the bus was at a stop- Million. Signed, A." Is the note negotiable?
over.
(A) No, because the exercise of the
(2) A cargo ship of X Shipping, Co. ran option to pay lies with A, the
aground off the coast of Cebu during a maker and debtor.
storm and lost all its cargo amounting to
Php50 Million. The ship itself suffered
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(B) No, because it authorizes the (D) No, since pre-emptive rights are
sale of collateral securities in case governed by the articles of
the note is not paid at maturity. incorporation.
(C) Yes, because the note is really (5) M makes a promissory note that states:
payable to B or his order, the other "I, M, promise to pay Php5,000.00 to B or
provisions being merely optional. bearer. Signed, M." M negotiated the note
by delivery to B, B to N, and N to O. B had
(D) Yes, because an election to known that M was bankrupt when M
require something to be done in lieu issued the note. Who would be liable to O?
of payment of money does not affect
negotiability. (A) M and N since they may be
assumed to know of M's bankruptcy
(4) ABC Corp. increased its capital stocks
from Php10 Million to Php15 Million and, in (B) N, being O's immediate
the process, issued 1,000 new shares negotiator of a bearer note
divided into Common Shares "B" and
Common Shares "C." T, a stockholder (C) B, M, and N, being indorsers by
(B) Yes, but the denial of his pre- night, however, a robber broke into the
emptive right extends only to 500 bodega and stole Ss boxes. S sues Trek
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(A) The bus liner since the goods serving as an arm for receiving its
were not lost while being outside orders for pizzas.
transported.
(C) Yes, it is not shown that one
(B) S since the goods were company completely dominates
unconditionally placed with T for the finances, policies, and
transportation. business practices of the other.
(C) S since the freightage for the (D) Yes, since the two companies
goods had been paid. perform two distinct businesses.
(D) The bus liner since the loss was (8) A negotiable instrument can be indorsed
due to a fortuitous event. by way of a restrictive indorsement, which
prohibits further negotiation and
(7) X Corp. operates a call center that constitutes the indorsee as agent of the
received orders for pizzas on behalf of Y indorser. As agent, the indorsee has the
Corp. which operates a chain of pizza right, among others, to
restaurants. The two companies have the
same set of corporate officers. After 2 years, (A) demand payment of the
X Corp. dismissed its call agents for no instrument only.
apparent reason. The agents filed a
collective suit for illegal dismissal against (B) notify the drawer of the payment
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(B) examining the bill to (12) On Xs failure to pay his loan to ABC
determine the extent of such Bank, the latter foreclosed the Real Estate
authority. Mortgage he executed in its favor. The
auction sale was set for Dec. 1, 2010 with
(C) asking the agent about the the notices of sale published as the law
extent of such authority. required. The sale was, however, cancelled
when Dec. 1, 2010 was declared a holiday
(D) asking the principal about the
and re-scheduled to Jan. 10, 2011 without
extent of such authority.
republication of notice. The auction sale
then proceeded on the new date. Under the
(10) Under the Negotiable Instruments Law,
circumstances, the auction sale is
if the holder has a lien on the instrument
which arises either from a contract or by
(A) rescissible.
implication of law, he would be a holder for
value to the extent of (B) unenforceable.
(C) the lien in his favor. (13) X executed a promissory note with a
face value of Php50,000.00, payable to the
(D) the amount indicated on the
order of Y. Y indorsed the note to Z, to
instrument's face.
whom Y owed Php30,000.00. If X has no
defense at all against Y, for how much may
(11) The liability of a common carrier for the
Z collect from X?
goods it transports begins from the time of
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(C) Php50,000.00, but with the (16) P sold to M 10 grams of shabu worth
obligation to hold Php20,000.00 Php5,000.00. As he had no money at the
for Y's benefit. time of the sale, M wrote a promissory note
promising to pay P or his order Php5,000. P
(D) None, as Z's remedy is to run then indorsed the note to X (who did not
after his debtor, Y. know about the shabu), and X to Y. Unable
to collect from P, Y then sued X on the note.
(14) Under the Anti-Money Laundering Law,
X set up the defense of illegality of
a covered institution is required to maintain
consideration. Is he correct?
a system of verifying the true identity of
their clients as well as persons purporting (A) No, since X, being a subsequent
to act on behalf of indorser, warrants that the note is
valid and subsisting.
(A) those doing business with such
clients. (B) No, since X, a general indorser,
warrants that the note is valid
(B) unknown principals.
and subsisting.
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(B) rule that the carrier has an (D) in every case even if the majority
express duty to transport the of the members decide otherwise
passenger safely during the elections.
(C) Doctrine of Respondeat Superior. (20) The rule is that the valuation of the
shares of a stockholder who exercises his
(D) rule in culpa aquiliana. appraisal rights is determined as of the day
prior to the date on which the vote was
(18) A holder in due course holds the
taken. This is true -
instrument free from any defect of title of
prior parties and free from defenses (A) regardless of any depreciation
available to prior parties among themselves. or appreciation in the share's fair
An example of such a defense is - value.
(D) alteration.
(D) only if there is no appreciation or
depreciation in the share's fair
(19) In elections for the Board of Trustees of
value.
non-stock corporations, members may cast
as many votes as there are trustees to be
(21) T Shipping, Co. insured all of its
elected but may not cast more than one
vessels with R Insurance, Co. The
vote for one candidate. This is true -
insurance policies stated that the insurer
shall answer for all damages due to perils of
(A) unless set aside by the members
the sea. One of the insured's ship, the MV
in plenary session.
Dona Priscilla, ran aground in the Panama
(B) in every case even if the Board of Canal when its engine pipes leaked and the
Trustees resolves otherwise. oil seeped into the cargo compartment. The
leakage was caused by the extensive
(C) unless otherwise provided in mileage that the ship had accumulated.
the Articles of Incorporation or in May the insurer be made to answer for the
the By-laws. damage to the cargo and the ship?
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(A) Yes, because the insurance (D) Yes, since X and Y are Zs
policy covered any or all damage employees.
arising from perils of the sea.
(23) X, Co., a partnership, is composed of A
(B) Yes, since there appears to have (capitalist partner), B (capitalist partner)
been no fault on the part of the and C (industrial partner). If you were
shipowner and shipcaptain. partner A, who between B and C would you
have an insurable interest on, such that
(C) No, since the proximate cause of you may then insure him?
the damage was the breach of
warranty of seaworthiness of the (A) No one, as there is merely a
ship. partnership contract among A, B
and C.
(D) No, since the proximate cause
of the damage was due to (B) Both B and C, as they are your
ordinary usage of the ship, and partners.
thus not due to a peril of the sea.
(C) Only C, as he is an industrial
(22) X has been a long-time household partner.
helper of Z. X's husband, Y, has also been
Z's long-time driver. May Z insure the lives (D) Only B, as he is a capitalist
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(B) Yes, because X, as a qualified divulge it. The reason for this is that the
indorser, warrants that the note test of concealment of material fact is
is genuine. determined
(C) No, because X made a qualified (A) at the time of the issuance of the
indorsement. policy.
(D) No, because a qualified (B) at any time before the payment
indorsement does not include the of premium.
warranty of genuineness.
(C) at the time of the payment of the
(25) A bill of exchange has T for its drawee, premium.
U as drawer, and F as holder. When F went
to T for presentment, F learned that T is (D) at any time before the policy
(A) Yes, since a notice of dishonor is to return to port. True enough, the
essential to charging the drawer. earthquake and tsunami struck three days
later and his ship was saved. Was the
(B) No, since T can waive the deviation proper?
requirement of notice of dishonor.
(A) Yes, because the deviation was
(C) No, since F can treat U as made in good faith and on a
maker due to the minority of T, reasonable ground for believing that
the drawee. it was necessary to avoid a peril.
(26) An insured, who gains knowledge of a (C) No, because T relied merely on
material fact already after the effectivity of his supposed gift of prophecy.
the insurance policy, is not obliged to
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(D) Yes, because the deviation took (B) Yes, because it is an original
place based on a reasonable belief of creation.
the captain.
(C) Yes, because it entailed the
(28) X, drawee of a bill of exchange, wrote application of X's intellect.
the words: "Accepted, with promise to make
payment within two days. Signed, X." The (D) No, because it did not entail any
(A) Yes, because the acceptance is payable to the order of C. C's brother, M,
order of the drawer to pay. obtained the note from D, then negotiated it
to N after forging C's signature. N indorsed
(B) Yes, because the form of the it to E, who indorsed it to F, a holder in due
acceptance is really immaterial. course. May F recover from E?
(C) No, because the acceptance (A) No, since the forgery of C's
must be a clear assent to the order signature results in the discharge of
of the drawer to pay. E.
(D) No, because the document must (B) Yes, since only the forged
not express that the drawee will signature is inoperative and E is
perform his promise within two bound as indorser.
days.
(C) No, since the signature of C, the
(29) X came up with a new way of payee, was forged.
presenting a telephone directory in a mobile
phone, which he dubbed as the "iTel" and (D) Yes, since the signature of C is
which uses lesser time for locating names immaterial, he being the payee.
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(B) subsequent acceptor. (C) No, since the promise to just pay
a sum of money is unclear.
(C) subsequent indorser.
(D) No, since it contains a promise
(D) prior acceptor. to do an act in addition to the
payment of money.
(32) X constituted a chattel mortgage on a
car (valued at Php1 Million pesos) to secure (34) A bank can be placed under
a P500,000.00 loan. For the mortgage to be receivership when, if allowed to continue in
valid, X should have business, its depositors or creditors would
incur
(A) the right to mortgage the car to
the extent of half its value. (A) probable losses
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(D) check.
(C) The law office since T was an
employee and he wrote it on the
(37) D draws a bill of exchange that states:
firms letterhead.
"One month from date, pay to B or his order
Php100,000.00. Signed, D." The drawee
(D) The publisher to whom the letter
named in the bill is E. B negotiated the bill
was sent.
to M, M to N, N to O, and O to P. Due to
non-acceptance and after proceedings for (39) E received goods from T for display and
dishonor were made, P asked O to pay, sale in E's store. E was to turn over to T the
which O did. From whom may O recover? proceeds of any sale and return the ones
unsold. To document their agreement, E
(A) B, being the payee
executed a trust receipt in Ts favor
covering the goods. When E failed to turn
(B) N, as indorser to O
over the proceeds from his sale of the goods
(C) E, being the drawee or return the ones unsold despite demand,
he was charged in court for estafa. E moved
(D) D, being the drawer to dismiss on the ground that his liability is
only civil. Is he correct?
(38) T, an associate attorney in XYZ Law
Office, wrote a newspaper publisher a letter (A) No, since he committed fraud
disputing a columnists claim about an when he promised to pay for the
incident in the attorneys family. T used the goods and did not.
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(D) Yes, since it was merely a interest on those goods, is called the
(B) shipper.
(40) The authorized alteration of a
warehouse receipt which does not change
(C) entrustee.
its tenor renders the warehouseman liable
according to the terms of the receipt (D) entrustor.
(A) in its original tenor if the (43) X, warehouseman, sent a text message
alteration is material. to Y, to whom X had issued a warehouse
receipt for Y's 500 sacks of corn, notifying
(B) in its original tenor.
him of the due date and time to settle the
storage fees. The message stated also that if
(C) as altered if there is fraud.
Y does not settle the warehouse charges
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(B) No, since there is no privity of (46) Due to his debt to C, D wrote a
contract between the insurer and promissory note which is payable to the
(D) Yes, since under the (A) Yes, since D is the principal
Manifestation Theory, the insurance debtor.
contract was perfected upon
acceptance of the insurer of X's (B) No, since the signature of C
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(C) No, since it is C who can enforce earlier than 5 years prior to the
it, the note being payable to the corporations expiration date.
order of C.
(C) No, since a corporation can in
(D) Yes, since D, as maker, is fact have a corporate life of 50 years.
primarily liable on the note.
(D) Yes, the amendment to shorten
(47) T Corp. has a corporate term of 20 corporate term cannot be made
years under its Articles of Incorporation or earlier than 5 years prior to the
from June 1, 1980 to June 1, 2000. On corporations expiration date.
June 1, 1991 it amended its Articles of
Incorporation to extend its life by 15 years (48) B, while drunk, accepted a passenger
from June 1, 1980 to June 1, 2015. The in his taxicab. B then drove the taxi
SEC approved this amendment. On June 1, recklessly, and inevitably, it crashed into
its term by 1 year or until June 1, 2014. physical injuries to the passengers. The
Both the 1991 and 2011 amendments were latter then filed a suit for tort against B's
approved by majority vote of its Board of operator, A, but A raised the defense of
by its stockholders representing at least the safety of the passenger. Is his defense
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(D) Yes, as a common carrier can (B) Php1 Million since he warrants
invoke extraordinary diligence in the that the note is genuine and in all
safety of passengers in tort cases. respects what it purports to be.
(49)X is a director in T Corp. who was (C) Php12 Million since he warrants
elected to a 1-year term on Feb. 1, 2010. his solvency and that he has a good
On April 11, 2010, X resigned and was title to the note.
replaced by R, who assumed as director on
May 17, 2010. On Nov. 21, 2010, R died. S (D) Php12 Million since he
was then elected in his place. Until which warrants that the note is genuine
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(D) Yes, it is an ultra vires act of the (B) Yes, since both companies use
corporation itself and, consequently, water in conducting their business.
void.
(C) No, since the companies are
(52) Notice of dishonor is not required to be not engaged in the same line of
made in all cases. One instance where such business.
notice is not necessary is when the indorser
is the one to whom the instrument is (D) No, since the root word "Eagle" is
(A) already knows of the dishonor (54) For a constructive total loss to exist in
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(B) exceeds 25% of the outstanding (D) Yes, since Ys article failed to
capital stock. make any attribution to X.
(C) exceeds 20% of the outstanding (57) In case of disagreement between the
capital stock. corporation and a withdrawing stockholder
who exercises his appraisal right regarding
(D) does not exceed 20% of the the fair value of his shares, a three-member
outstanding capital stock. group shall by majority vote resolve the
issue with finality. May the wife of the
(56) X, an amateur astronomer, stumbled
withdrawing stockholder be named to the
upon what appeared to be a massive
threemember group?
volcanic eruption in Jupiter while peering
at the planet through his telescope. The (A) No, the wife of the
following week, X, without notes, presented withdrawing shareholder is not a
a lecture on his findings before the disinterested person.
Association of Astronomers of the
Philippines. To his dismay, he later read an (B) Yes, since she could best protect
article in a science journal written by Y, a her husband's shareholdings.
professional astronomer, repeating exactly
what X discovered without any attribution (C) Yes, since the rules do not
any?
(D) No, since the stockholder himself
(A) No, since X did not reduce his should sit in the three-member
form.
(58) Apart from economic rights, the author
(B) Yes, since the lecture is of a copyright also has moral rights which
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(59) Which of the following indorsers (61) X invented a device which, through the
expressly warrants in negotiating an use of noise, can recharge a cellphone
instrument that 1) it is genuine and true; 2) battery. He applied for and was granted a
he has a good title to it; 3) all prior parties patent on his device, effective within the
have capacity to negotiate; and 4) it is valid Philippines. As it turns out, a year before
and subsisting at the time of his the grant of X's patent, Y, also an inventor,
indorsement? invented a similar device which he used in
his cellphone business in Manila. But X
(A) The irregular indorser.
files an injunctive suit against Y to stop him
from using the device on the ground of
(B) The regular indorser.
patent infringement. Will the suit prosper?
(60) Where the insurer was made to pay the (B) No, since Y is a prior user in
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home. She got to her flower shop where she (B) without acceptance but the bill is
usually worked from 8 a.m. to 5 p.m. At paid by the drawer.
about 3 p.m., while P was attending to her
duties at the flower shop, two crews of the (C) without acceptance but the
MRT got into a fight near the flower shop, bill is paid by the drawee.
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(B) No, since Ys remedy is to run (A) Yes, but solidarily with Y.
after the forger, X.
(B) Yes, since Xs is deemed to
(C) Yes, since forgery is only a warrant that his land would cover
personal defense. the whole obligation.
(D) Yes, since ABC Bank is bound (C) No, since it is the buyer at the
to know the signature of Y, its auction sale who should answer for
client. the deficiency.
(66) The rule is that no stock dividend shall (D) No, because X is not Zs
be issued without the approval of debtor.
stockholders representing at least 2/3 of
the outstanding capital stock at a regular or (68) May a publicly listed universal bank
special meeting called for the purpose. As to own 100% of the voting stocks in another
(A) a mere majority of the entire (A) Yes, if with the permission of the
(B) a mere majority of the quorum (B) No, since it has no power to
(D) the same rule of 2/3 votes 100% ownership on voting stocks
(67) X, at Ys request, executed a Real (69) Perils of the ship, under marine
Estate Mortgage (REM) on his (Xs) land to insurance law, refer to loss which in the
secure Y's loan from Z. Z successfully ordinary course of events results from
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(B) natural and ordinary actions of results in the discharge of the latter. With
the sea. respect to an indorser, the holder's right to
cancel his signature is:
(C) unnatural and inevitable actions
of the sea. (A) without limitation.
(D) unnatural and ordinary actions (B) not limited to the case where the
of the sea. indorsement is necessary to his title.
(70) Under the Intellectual Property Code, (C) limited to the case where the
lectures, sermons, addresses or indorsement is not necessary to
dissertations prepared for oral delivery, his title.
whether or not reduced in writing or other
material forms, are regarded as (D) limited to the case where the
indorsement is necessary to his title.
(A) non-original works.
(73) X, in the hospital for kidney
(B) original works. dysfunction, was about to be discharged
when he met his friend Y. X told Y the
(C) derivative works. reason for his hospitalization. A month
later, X applied for an insurance covering
(D) not subject to protection.
serious illnesses from ABC Insurance, Co.,
where Y was working as Corporate
(71) Can a drawee who accepts a materially
Secretary. Since X had already told Y about
altered check recover from the holder and
his hospitalization, he no longer answered a
the drawer?
question regarding it in the application
(A) No, he cannot recover from form. Would this constitute concealment?
either of them.
(A) Yes, since the previous
(D) Yes but only from the holder. (B) No, since Y may be regarded as
ABCs agent and he already knew of
(72) The rule is that the intentional Xs previous hospitalization.
cancellation of a person secondarily liable
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(75) X executed a promissory note in favor directors invoked the defense that they
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(C) Yes, since the directors officially (D) No, since unlike T, he did not
and collectively performed acts that register his own "CROCOS" mark for
are imputable only to the his product.
corporation.
(78) A, the proprietor of a fleet of ten
(D) No, since the law makes taxicabs, decides to adopt, as his business
directors of the corporation name, "A Transport Co., Inc." May this be
solidarily liable for gross allowed?
negligence and bad faith in the
discharge of their duties. (A) No, it would be deceptive since
he is a proprietor, not a
(77) T is the registered trademark owner of corporation.
"CROCOS" which he uses on his ready-to-
wear clothes. Banking on the popularity of (B) No, since "A" is a generic name,
T's trade mark, B came up with his own not suitable for registration.
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(C) B, since T entrusted the receipt (C) No, because the voting in the
to him. Board should have been by majority
of a quorum.
(D) W, since he has as a
warehouseman a lien on the goods. (D) Yes since the votes of 2/3 of the
stockholders and majority of the
(80) The Articles of Incorporation must be Board were secured.
accompanied by a Treasurer's Affidavit
certifying under oath, among others, that (82) A group of Malaysians wanted to invest
the total subscription paid is: in the Philippines insurance business.
After negotiations, they agreed to organize
(A) not less than P25,000.00. "FIMA Insurance Corp." with a group of
Filipino businessmen. FIMA would have a
(B) not more than P5,000.00.
PhP50 Million paid up capital, PhP40
Million of which would come from the
(C) not less than P5,000.00.
Filipino group. All corporate officers would
(D) not more than P25,000.00. be Filipinos and 8 out of its 10-member
Board of Directors would be Filipinos. Can
(81) In a special meeting called for the FIMA operate an insurance business in the
purpose, 2/3 of the stockholders Philippines?
representing the outstanding capital stock
in X. Co. authorized the company's Board (A) No, since an insurance
majority vote, the Board then approved the PhP75 Million paid-up capital.
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(D) No, since an insurance company (85) A promissory note states, on its face: "I,
should be 100% owned by Filipinos. X, promise to pay Y the amount of Php
5,000.00 five days after completion of the
(83) Under the Public Service Act, an on-going construction of my house. Signed,
administrative agency has the power to X." Is the note negotiable?
approve provisionally the rates of public
utilities without a hearing in case of urgent (A) Yes, since it is payable at a fixed
public needs. The exercise of this power is period after the occurrence of a
specified event.
(A) supervisory.
(B) No, since it is payable at a
(B) absolute. fixed period after the occurrence
of an event which may not
(C) discretionary.
happen.
(D) mandatory.
(C) Yes, since it is payable at a fixed
period or determinable future time.
(84) X, creditor of Y, obtained a judgment in
his favor in connection with Y's unpaid loan
(D) No, since it should be payable at
to him. The court's sheriff then levied on
a fixed period before the occurrence
the goods that Y stored in T's warehouse,
of a specified event.
for which the latter issued a warehouse
receipt. A month before the levy, however, Z (86) P sold to M a pair of gecko (tuko) for
bought the warehouse receipt for value. Php50,000.00. M then issued a promissory
Who has a better right over the goods? note to P promising to pay the money
within 90 days. Unknown to P and M, a law
(A) T, being the warehouseman with
was passed a month before the sale that
a lien on the goods
prohibits and declares void any agreement
to sell gecko in the country. If X acquired
(B) Z, being a purchaser for value
the note in good faith and for value, may he
of the warehouse receipt
enforce payment on it?
(D) Y, being the owner of the goods the contract on which the
promissory note was founded.
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(B) No, since it was not X who his creditor, Y, to whom he owed Php1
bought the gecko. million. Y now wants to collect and satisfy
X's debt through the Php1 million on the
(C) Yes, since he is a holder in due check. May he validly do so?
course of a note which is distinct
from the sale of gecko. (A) Yes, since the indorsement to Y
is for Php1 Million.
(D) Yes, since he is a holder in due
course and P and M were not aware (B) No, since Z is not a party to the
of the law that prohibited the sale of loan between X and Y.
gecko.
(C) No, since X is merely an agent
(87) P authorized A to sign a bill of of Z, his only right being to
exchange in his (Ps) name. The bill reads: collect.
"Pay to B or order the sum of Php1 million.
Signed, A (for and in behalf of P)." The bill (D) Yes, since X owed Y Php1
payable to order and has been Shipping. During a voyage, the vessel
(D) Yes, because A was only an (A) Yes, since X Shipping should
agent of P. have ratified its agents action.
(88) Z wrote out an instrument that states: (B) No, since T, as agent of X
"Pay to X the amount of Php1 Million for Shipping who procured the
collection only. Signed, Z." X indorsed it to
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(C) Yes, since only the agent of X (C) Yes, since the provisions of the
Shipping relayed the fact of Corporation Code applies as well to
abandonment. government-owned and controlled
corporations.
(D) No, since in the first place, the
damage was more than of the (D) No, since the board has the
ship's value. power to oust him even without the
new law.
(90) A law was passed disqualifying former
members of Congress from sitting in the (91) 002-38-0001 G, a grocery goods
Board of Directors of government-owned or supplier, sold 100 sacks of rice to H who
controlled corporations. Because of this, promised to pay once he has sold all the
the Board of Directors of ABC Corp., a rice. H meantime delivered the goods to W,
government-owned and controlled a warehouseman, who issued a warehouse
corporation, disqualified C, a former receipt. Without the knowledge of G and W,
Congressman, from continuing to sit as one H negotiated the receipt to P who acquired
of its members. C objected, however, it in good faith and for value. P then
insisting that under the Corporation Code claimed the goods from W, who released
members of the board of directors of them. After the rice was loaded on a ship
corporations may only be removed by vote bound for Manila, G invokes his right to
of stockholders holding 2/3 of its stop the goods in transit due to his unpaid
outstanding capital stock in a regular or lien. Who has a better right to the rice?
special meeting called for that purpose. Is C
correct? (A) P, since he has superior rights
as a purchaser for value and in
(A) Yes, since the new law cannot be good faith.
applied to members of the board of
directors already elected prior to its (B) P, regardless of whether or not
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(D) W, since it appears that the (94) A bill of exchange states on its face:
warehouse charges have not been "One (1) month after sight, pay to the order
paid. of Mr. R the amount of Php50,000.00,
chargeable to the account of Mr. S. Signed,
(92) In a signature by procuration, the Mr. T." Mr. S, the drawee, accepted the bill
principal is bound only in case the agent upon presentment by writing on it the
acted within the actual limits of his words "I shall pay Php30,000.00 three (3)
authority. The signature of the agent in months after sight." May he accept under
such a case operates as notice that he has such terms, which varies the command in
the bill of exchange?
(A) a qualified authority to sign.
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(B) Yes, as long as the indorser (A) Yes, because there was breach of
received value for the conditional implied warranty.
indorsement.
(B) No, because there was no intent
(C) Yes, whether or not the indorser to breach an implied warranty.
received value for the conditional
indorsement. (C) Yes, because it relates to a
material representation.
(D) Yes, whether or not the indorser
received value for the restrictive (D) No, because there was only
(96) X issued a check in favor of his (98) The Articles of Incorporation of ABC
creditor, Y. It reads: " Pay to Y the amount Transport Co., a public utility, provides for
of Seven Thousand Hundred Pesos ten (10) members in its Board of Directors.
(Php700,000.00). Signed, X". What amount What is the prescribed minimum number of
case?
(A) 10
(A) Php700,000.00.
(B) 6
(B) Php700.00.
(C) 7
(C) Php7,000.00.
(D) 5
(D) Php700,100.00.
(99) P authorized A to sign a negotiable
(97) Shipowner X, in applying for a marine instrument in his (Ps) name. It reads: "Pay
insurance policy from ABC, Co., stated that to B or order the sum of Php1 million.
his vessel usually sails middle of August Signed, A (for and in behalf of P)." The
and with normally 100 tons of cargo. It instrument shows that it was drawn on P.
turned out later that the vessel departed on B then indorsed to C, C to D, and D to E. E
the first week of September and with only then treated it as a bill of exchange. Is
10 tons of cargo. Will this avoid the policy presentment for acceptance necessary in
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UP LAW REVIEW
(C) Yes, since the bill is payable to
order, presentment is required for
PHILIPPINE ASSOCIATION OF LAW
acceptance.
SCHOOLS (2008)
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