Training and Convention Division University of the Philippines College of Law SUGGESTED ANSWERS TO THE 2022 MOCK BAR EXAMINATIONS IN. COMMERCIAL LAW (Cycle 2) 1 Sandy applied for a life insurance policy with Sunnyside Insurance Company on October 1, 2021. ‘Sandy submitted the application to the branch manager of Sunnyside and paid the required premium. The branch manager then forwarded the application to the head office for approval. On November 4, 2021, Sunnyside’s head office sent a notice of acceptance to Sandy. Unbeknownst to Sunnyside, Sandy died of a cardiac arrest two days ago. Can Sandy’s heirs recover the premium that was paid? (6 points) ANSWER: Yes, the heirs may recover the premium because no contract of insurance was perfected. Article 1319 of the Civil Code provides that acceptance of an offer by letter does not bind the offeror except from the time it came to his knowledge. In this case, Sandy did not receive the letter of acceptance due to her untimely death, hence, the contract was never perfected and the obligation of Sunnyside, which was supposed to be covered by the premium, did not materialize, Thus, Sunnyside is bound to return the consideration that it received from Sandy. [Enriquez v. Sun Life Assurance Co. of Canada, 41 Phil. 269; See also Sec. 79(a)] r Patrick and Patricia were high school sweethearts who got married in 2017 after ten blissful years together. Sometime in 2018, Patrick met an insurance agent from AX Insurance Company in a popular colfee chain and decided to take out an insurance policy on the life of his loving wife. Sadly, Patrick and Patricia were legally separated pursuant to a judgment of a court a year later. a. Unfortunately, Patricia died in a freak accident in 2021. Can Patrick recover from AX Insurance Company? Explain. (2.5 points) b. Will your answer be the same if Patrick insured the life of Patricia when they were already legally separated? Explain. (2.5 points) ANSWER: a. Yes, Patrick can recover from the insurance policy because at the time he obtained the insurance, he had insurable interest over the life of Patricia. One has insurable interest over the life of one's wife. (Sec. 10, ICP) b, Yes, my answer would be the same. A decree of legal separation does not remove the insurable interest of a spouse over the other, Section 10 of the Insurance Code of the Philippines does not distinguish, UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 10f9m1 Morgana owns a house valued at PAP600,000.00. She insured the same against fire with three insurance companies as follows: A ~ PhP400,000.00, B - PhP200,000.00, C - PhP600,000.00. a. In the absence of any stipulation in the policies, from which insurance company/ies may she recover in case of total loss of her house due to fire? (2.5 points) b, What is the extent of the liability of the insurance companies among themselves? (2.5 points) ANSWER: a. Morgana may recover from any, any two or all of the insurers provided that the total amount that she will recover does not exceed her loss. (Sec. 94, ICP). Morgana may demand indemnity from C alone for PhP600,000.00. In the alternative, Morgana may recover from all insurers PhP200,000,00 each. Morgana may also opt to recover PhP400,000.00 from A and recover the balance from any or both Bor C. b. Each insurer is bound to contribute ratably to the loss in proportion to the amount for which he is liable under his contract, [Sec. 96(e), ICP] The ratable contribution of each insurer will be determined based on the following formula: (Amount of policy / total insurance taken) * loss = liability of insurer. Thus, the extent of liability of each insurer is as follows: A ~- PhP200,000.00, B - PhP100,000.00, and C — PhP300,000.00. IV A life insurance policy was issued in favor of Miguel on November 6, 2021 with Gina, a law student, as his beneficiary. On April 25, 2022, Miguel passed away. The insurer rescinded the contract on the ground of material concealment and returned the premium on September 11, 2022. Gina claims that the insurance policy may no longer be rescinded under the incontestability clause because Miguel died within the two-year period without the insurer having rescinded the same. Is Gina's argument tenable? (5 points) ANSWER: No, Gina’s argument is not tenable. The insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the policy, whether or not the insured still lives within such period. The phrase “during the lifetime” found in Section 48 of the Insurance Code simply means that the policy is no longer considered in force after the insured has died. Gina's interpretation would give rise to the absurd situation where the beneficiary of an insured who dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if the insured fraudulently concealed material facts. (Tan v. CA, 174 SCRA 403) UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 20f9M/V Amihan sank due to a fire which resulted from a crack in the auxiliary engine fuel oil service tank, Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing the ship to ‘burst into flames. The crack was located on the side of the fuel oil tank, which had a mere two-inch gap from the engine room walling, thus precluding constant inspection by the crew. The vessel sank a8 a consequence. Was the sinking of the vessel due to fortuitous event? Explain. (5 points) ANSWER: No. Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure, Broadly speaking, force majeure generally applies to a natural accident, such as that caused by lightning, earthquake, a tempest or a public enemy. Hence, fire is not considered a natural disaster or calamity. (Edgar Cokailong Shipping Lines, Inc. v. UCPB General Insurance Company, G.R. No. 146018) VI Abigail returned to the Philippines from her bachelorette party abroad and discovered that her luggage was badly damaged and eventually misplaced by the airline. Fortunately, she remembered you were enthusiastically talking about the Warsaw Convention during one of your meals and asks where she, as plaintiff, may bring an action for damages. Resolve. (5 points) ANSWER: Under Article 28(1) of the Warsaw Convention, Abigail may bring the action for damages before the competent court at any one of the following four places: a. where the carrier is domiciled; b. where the carrier has its principal place of business, usually the operational headquarters; ¢. where the carrier has an establishment by which the contract has been made, usually where the air waybill is issued; or . the place of destination, usually designated in the air waybill vol A and B were owners of a minibus that was being used principally in connection with a bus service for school children, which they operated in the City of Pasig. On August 25, 2022, MLM Corporation, anon stock and non-profit corporation arranged with A for the transportation of 35 of its employees, fom Pasig to La Union and back for a consideration. Are A and B operating as a common carrier? Explain. (6 points) ANSWER: Yes, A and B did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. Article 1732 of the Civil Code makes no distinction between one whose principal business activity is the carrying of persons or goods or both and one who does such carrying only as an ancillary activity. Neither does it distinguish between a carrier offering its services to the general population and one who offers services or solicits business only from a narrow segment of the general population. (Fabre, Jr. v. CA, 259 SCRA 426) UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 3 of 9VIL What are the effects of double insurance and overinsurance? (5 points) ANSWER: The following are the effects under Section 96 of the Insurance Code of the Philippines: (@) The insured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may select, up to the amount for which the insurers are severally liable under their respective contracts; (b) Where the policy under which the insured claims is a valued policy, any sum received by him under any other policy shall be deducted from the value of the policy without regard to the actual value of the subject matter insured; (©) Where the policy under which the insured claims is an unvalued policy, any sum received by him under any policy shall be deducted against the full insurable value, for any sum received by him under any policy; (@) Where the insured receives any sum in excess of the valuation in the case of valued policies, or of the insurable value in the case of unvalued policies, he must hold such sum in trust for the insurers, according to their right of contribution among themselves; (c) Fach insurer is bound, as between himself and the other insurers, to contribute ratably to the loss in proportion to the amount for which he is liable under his contract. x Briefly explain why a merger or consolidation is considered a voluntary mode of dissolution. (5 points) ANSWER: Merger or consolidation is a voluntary mode of dissolution because, after the approval of the merger or consolidation by the Securities and Exchange Commission, the constituent corporations shall become a single corporation, which, in case of merger, shall be the surviving corporation, designated in the plan of merger and, in case of consolidation, shall be the consolidated corporation designated therein. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation. (ection 79, Revised Corporation Code) x Distinguish a merger from asset sale between corporations and briefly discuss the costs associated ‘with each structure. (5 points) ANSWER: In a merger, the constituent corporations cease to exist except the surviving corporation which retains its corporate identity but acquires all the rights and liabilities of the acquired corporation. On the other hand, in an asset sale, both the seller corporation and buyer corporation continue to exist. The seller corporation is not dissolved even though it may not have any assets left. In an asset sale, the conveyance of real property to the buyer is subject to capital gains tax and documentary stamp tax, and registration fees, whereas in merger, the transfer of properties by the absorbed corporation is not subject to capital gains tax, value-added tax, and documentary stamp tax. UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 4 0f 9XI Atty. Kwon is a director of Xtraordinary Corporation, a domestic company engaged in the distribution of electronic tablets. In recognition of his excellent marketing skills, Xtraordinary Corporation sent him to South Korea to negotiate with Hanbada Corporation, a manufacturer of newly-launched state-of the-art tablets, to be the exclusive distributor in the Philippines. However, instead of entering into a contract with Xtraordinary Corporation, Atty. Kwon established a One Person Corporation which eventually became the sole distributor of the tablet in the Philippines and raked in huge profits as a result. What, if any, is Atty. Kwon’s liability to Xtraordinary Corporation? 6 points) ANSWER: Atty. Kwon must account for and refund to Xtraordinary Corporation all such profits obtained arising from the distributorship agreement, unless his act has been ratified by a vote of the stockholders owning or representing at least two thirds of the outstanding capital stock of the corporation. It is clear that Atty. Kwon seized an opportunity that belonged to the corporation and obtained profits to the prejudice of the corporation, thereby breaching his fiduciary duty of loyalty. XL What are the voting requirements of the Board of Directors and stockholders for the following corporate acts? (5 points) a, Amendment of Articles of Incorporation ‘b, Appointment of Corporate Officers c. Entering into a Management Contract 4d. Voluntary Dissolution Where No Creditors are Affected ANSWER: The following are the voting requirements: a. Majority of the board and at least two-thirds of the outstanding capital stock (Sec. 15, RCC) , Affirmative vote of at least majority of the board (ec. 24, RCC) ¢. Majority of the quorum for both managed and managing, corporation and at least majority of the outstanding capital stock of each managed and managing corporation (Sec. 43, RCC) d. At least majority of the board and at least majority of the outstanding capital stock (ec. 134, RCC) Xm Distinguish a Proxy from a Voting Trust Agreement as to the rights conferred and term. (5 points) ANSWER: As to the rights conferred, a proxy can vote but cannot be voted nor can the proxy qualify as director of a corporation unless s/he is a stockholder in her/his own right. On the other hand, a trustee is vested legal title to the shares and as such, may exercise all the rights of a stockholder such as the right of inspection and the right to be elected as director. However, a trustee may not exercise UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 5 of 9proprietary rights and thus, does not have the right to dividends and to receive assets upon dissolution/liquidation. As to term, a proxy is valid only for the meeting intended unless a general and continuing proxy is executed, which nevertheless must not exceed five years. A voting trust agreement is valid for a period not exceeding five years but may be longer if executed pursuant to a loan agreement whose term exceads five years. XIV Pinky subscribed to 1,000,000 shares of stock of 3L Corporation with a par value of PhP1.00 per share. The subscription amount is PhP1,000,000.00. She paid PhP250,000.00. When should she pay the balance of the subscription and may she be elected as a director pending full payment? (5 points) ANSWER: Pinky should pay on the date specified in the contract of subscription. If the contract is silent on the due date, the balance should be paid upon call or demand made by the board of directors. Pending full payment, Pinky remains to be a stockholder on the election date and is qualified to be elected as a director. However, once the shares become delinquent, she should be deemed to have forfeited her position because share ownership is a continuing requirement. (Sec. 71, RCC) xv State whether Dr. Noni may apply for a patent for the following and provide your legal basis: (5 points) a. Amethod of improving the tenderness of meat by injecting an enzyme solution into the liver of the animal shortly before slaughter. b. A bogus coin detector dubbed “WEST” that can be used exclusively on self-operating gambling devices. ©. A new method for water purification involving granular activated-carbon filtering called “HEINING.” ANSWER: a. The invention is patentable. Section 21 of the IPC provides that “any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable shall be patentable.” The process of improving the tenderness of meat appears to be a new technical solution. b. The invention is non-patentable. Section 22.6 of the IPC provides that anything that is contrary to public order or morality shall be excluded from protection. The machine involved in this case appears tobe a tool used to cheat in gambling. Alternative answer: The invention is patentable if the machine can be used in legalized gambling such as in cases of exclusive use of casinos established by the government. UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 6 of 9¢. The invention is patentable. A new method for water purification is a new technical solution as. prescribed under Section 21 of the IPC. XVI Briefly define and distinguish trademark infringement from unfair competition. (5 points) ANSWER: Trademark infringement is the unauthorized use of a trademark, whereas unfair competition is the passing off of one’s goods as those of another. As to intent, fraudulent intent is unnecessary in trademark infringement whereas in unfair competition, fraudulent intent is essential. As regards registration, prior registration of trademark is a prerequisite to the action whereas in unfair competition, registration is unnecessary. (Del Monte Corp. v. CA, GR. No. L-78325) XVIL Melody's “WE CANDY IT" candies are bestsellers in the Philippines. Its logo, which bears the color pink, was registered with the Intellectual Property Office of the Philippines since 2010. Kitty, a competitor of Melody, has her own candy which she named “WE CANDY BETTER” and her logo is Printed in pinkish red. When Melody sued Kitty for trademark infringement, the trial court ruled in favor of Melody by applying the Holistic Test. The court held that Kitty infringed on Melody’s mark since the dissimilarities between the two marks are too trilling such that Kitty’s mark, when compared to Melody’s, will likely cause confusion among consumers. Comment on the application of the Holistic Test. ( points) ANSWER: The application of the Holistic Test is incorrect. The trial court should have applied the Dominancy Test which focuses on the similarity of the prevalent features of the competing marks. In a recent case, the Supreme Court categorically stated that it is abandoning the Holistic Test in determining the resemblance of similar marks. It noted that only the Dominancy Testis incorporated in the Intellectual Property Code. (Kolin Electronics Co. Inc. v. Kolin Philippines International Inc., GR. No. 228165) Applying the Dominancy Test to the present facts, the "WE CANDY BETTER" trademark is confusingly similar with the “WE CANDY IT” trademark. (McDonald’s Corporation v. LC Big Mak Burger, Inc., G.R. No. 43993) XVIII Ais a Fine Arts student in the University of the Philippines. She stays in a boarding house with B. During her free time, A would paint and leave her finished works lying around the boarding house. One day, A saw one of her works on display at the university cafeteria, The cafeteria owner said he purchased the painting from B who represented himself as its painter and owner. When confronted, UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 7 of 9B claimed ownership of ils copyright since he already registered the same with the National Library as provided under the law. Rule on B’s claim. (5 points) ANSWER: A owns the copyright to the painting because she was the one who actually created it. Copyright exists from the moment of creation and the registration of the painting by B with the National Library did not confer copyright on him. (Sec. 172.1, IP Code) The registration is merely for the purpose of completing the records of the National Library. (Sec. 191, IP Code) XIX Jessica invented a device that can convert rainwater to automobile fuel. She asked Steve, a lawyer, to assist in getting her invention patented. Steve suggested that they form a corporation with other friends and have the corporation apply for the patent, 80% of the shares of stock thereof to be subscribed by Jessica and 5% by Steve. TUN Corporation was formed and the patent application was filed. However, Jessica died one month later of a heart attack. Matt, the estranged husband of Jessica, contested the application of TUN Corporation and filed his ‘own patent application as the sole surviving heir of Jessica. Decide the issue with reasons. (5 points) ANSWER; The case should be decided in favor of Matt, Section 28 of the Intellectual Property Code provides that the right to a patent belongs to the inventor, his heirs or assigns. Since Jessica, the inventor, passed away, her heirs, including Matt, can file the application. Further, Section 32.2 of the same Code provides that if the applicant is not the inventor, the Intellectual Property Office shall require the applicant to submit the inventor's authority. Thus, absent any proof that the corporation was duly authorized by Jessica to file the application, the right to file the patent application belongs to any of [essica’s heirs or assigns. Alternative answer: The case should be decided in favor of TUN Corporation. Section 28 of the Intellectual Property Code (IPC) provides that the right to a patent belongs to the inventor, his heirs or assigns. In this case, itis clear that Jessica intended to confer all the rights arising, from the patent to TUN Corporation. In order to prove TUN Corporation's entitlement to the patent, Steve, or any of the corporate officers may submit Jessica's authority as required under Section 32.2 of the IPC, XX State the presumptions relating to electronic signatures under the E-Commerce Act. (5 points) ANSWER: Under Section 9 of Republic Act No. 8792 or the Electronic Commerce Act, in any proceedings involving an electronic signature, it shall be presumed that: a. the electronic signature is the signature of the person to whom it correlates; and UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 8 of 9b. the electronic signature was alfixed by that person with the intention of signing or approving the electronic document unless the person relying on the electronically signed electronic document knows or has notice of defects in or unreliability of the signature or reliance on the electronic signature is not reasonable under the circumstances. -NOTHING FOLLOWS- UP LAW TRAINING AND CONVENTION DIVISION | REVIEWEE COPY Page 9 of 9