COMMERCIAL LAW

2021 MOCK BAR QUESTIONS

I
The Bureau of Copyright and Other Related Rights (Bureau) of the Intellectual
Property Office of the Philippines (IPOPHL) plans to publish a list of copyright
registrations received and processed by the Bureau. The list will contain copyright
registrations by category of copyrighted work and four data elements: (1)
registration number, (2) name of copyright owner, (3) title of the work, and (4)
date of registration.

The new form of the Bureau contains the standard data privacy notification and
consent adopted by IPOPHL. The purposes of publication are as follows:

1. To operate as notice to the public of the fact of registration of a

copyrighted work;
2. To allow aggrieved and/or contesting parties to put forward a challenge to
erroneously registered works because the registrant is not the true owner, or
the work is not an original creative expression of the registrant; and
3. To encourage the registration of more works.

The IPOPHL relies on Section 182 of RA No. 8293, also known as the Intellectual
Property Code of the Philippines, mandating the publication in the IPOPHL
Gazette of the fact of assignment, transfer, and exclusive licensing of copyright,
which mandate extends to copyright registration by way of necessary implication.

Mr. Sam Gamgee now seeks your advice as to whether or not the
publication of copyright registrations is allowed under the Data Privacy
Act of 2012. Why or why not? (10%)

SUGGESTED ANSWER

Yes. The publication of the copyright registrations is

allowed under the Data Privacy Act.

Section 12 (c) of the Data Privacy Act (DPA) recognizes

the processing that is necessary for compliance with a legal

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obligation. Moreover, Section 12 (e) of the DPA allows the processing
for the fulfillment of the functions of a public authority which
necessarily includes the processing of personal data for the fulfillment
of its mandate.

IPOPHL's basis for the publication of copyright

registration is by virtue of Section 182 of the Intellectual Property
Code of the Philippines. The publication of copyright registration to
inform the public of such fact may be considered as lawful processing
under the DPA as authorized by virtue of law or regulation.

Thus, the proposed publication may be allowed under the

DPA. Nevertheless, the same must still adhere to the other general
data privacy principles, specifically in this case, the principle of
transparency. (NPC Advisory Opinion No. 2021-030, 30 July 2021)

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 II
Mr. Dorian Gray is a party-in-interest and the counsel of the family of a victim in a
murder case in 2019. The accused in the criminal case are allegedly members of
the Philippine National Police (PNP) who were charged for two counts of murder.
A warrant of arrest had been issued in October 2020 against twenty (20) accused
police officers.

Despite the issuance of the warrant of arrest, Mr. Dorian Gray has not seen nor felt
an earnest effort on the part of the police to locate, arrest and detain the remaining
sixteen (16) accused who are still at large. Mr. Gray is now constrained to actively
pursue the remaining accused and bring them to justice using other lawful means.
Mr. Gray requested from the PNP the high-resolution photographs of the accused,
but the PNP refused to grant the request on the ground that photographs are
protected under the Data Privacy Act of 2012 (DPA).

Mr. Gray now seeks your legal advice on the following:

a. Whether or not the photographs submitted by the accused police

officers to the PNP (pursuant to their application for admission or
employment) constitute personal information and/or sensitive
personal information as to come within the coverage and protection
of the DPA considering the particular circumstances of the accused
police officers in relation to the commission of the crimes and their
current status as fugitives from the law. (10%)

SUGGESTED ANSWER
The photographs of the police officers may fall under the category of
sensitive personal information as defined under the Data Privacy Act.

The Data Privacy Act provides for an exclusive list of information

that are considered as sensitive personal information which includes,
among others, information about any proceeding for any offense
committed or alleged to have been committed by the individual.
Images of an individual generally fall under this category as they may
reasonably or directly ascertain the identity of the data subject.

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 Considering the circumstances of this case where the photographs
sought are connected to the crime alleged to have been committed,
then the photographs of the accused may be considered as sensitive
personal information.

b. Whether or not the PNP’s refusal to grant Mr. Gray’s request is

justified under the Data Privacy Act. (5%)

SUGGESTED ANSWER

No. The PNP’s refusal is not justified.

Under Sec. 13 of the DPA, the processing of sensitive personal

information may be allowed if such information is necessary for
the protection of lawful rights and interests of natural or legal
persons in court proceedings, or the establishment, exercise or
defense of legal claims.

Since the images may be considered as sensitive personal

information, such processing under the DPA may be allowed.
PNP’s refusal to grant Mr. Gray’s request is unjustified. (NPC
Advisory Opinion No. 2021-032, 9 August 2021)

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 III
What is “watered stock” and what is the legal consequence of the issuance of
such stock? (5%)

SUGGESTED ANSWER

Section 64 of the Revised Corporation Code defines watered

stocks as stocks issued for a consideration less than its par or issued
value or for a consideration in any form other than cash, valued in
excess of its fair value.

The legal consequence for the issuance of watered stocks is

found in the same provision. It provides that any director or officer of
a corporation who: (a) consents to the issuance of stocks for a
consideration less than its par or issued value; (b) consents to the
issuance of stocks for a consideration other than cash, valued in
excess of its fair value; or (c) having knowledge of the insufficient
consideration, does not file a written objection with the corporate
secretary, shall be liable to the corporation or its creditors, solidarily
with the stockholder concerned for the difference between the value
received at the time of issuance of the stock and the par or issued
value of the same.

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 IV
Starfall Insurance Company offered to insure Cassian’s brand new car against all
risks in the sum of 1 Million Pesos for 1 year. The policy was issued with the
premium fixed at Php160,000.00 payable in 6 months. Cassian only paid the first
two months installments. Despite demands, he failed to pay the subsequent
installments. Five months after the issuance of the policy, the vehicle was
carnapped. Cassian filed with the insurance company a claim for its value.
However, the company denied his claim on the ground that he failed to pay the
premium resulting in the cancellation of the policy.

Can Cassian recover from Starfall Insurance Company? (5%)

SUGGESTED ANSWER

Yes. Cassian may recover from Starfall Insurance

Company.

The Supreme Court in the case of Makati Tuscany

Condominium Corp. vs. Court of Appeals, 215 SCRA 463, ruled that
when the insured and insurer agreed that the payment of premium
shall be made by installments and partial payment has been made at
the time of loss, the policy is valid and binding. Further, the insurer
must be held liable to pay the proceeds.

In the present case, the insurance policy has been issued,

with premiums to be paid on installments. Cassian has also paid the
first two months installments.

The policy being already effective, Cassian may recover

from Starfall Insurance Company, but the latter has the right to deduct
the amount of unpaid premium from the insurance proceeds.

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 V

On January 17, 2015, Rachel took out a life insurance policy from Young
Life Insurance Corp., (Young Life). She designated her daughter, Araminta, as the
beneficiary. Young Life issued the policy after Rachel passed the required medical
examination and after payment of the required insurance premiums. On November
29, 2017, Rachel died of natural illness. A month thereafter, Araminta claimed her
insurance proceeds. Young Life denied the claim and instead offered to refund the
premiums paid on the following grounds: (1) Rachel, an illiterate, was not the one
who signed the application form; (2) Rachel was financially incapacitated to pay
the life insurance policy; and (3) Araminta was the one who truly applied for the
life insurance since she signed the application form and designated herself as the
sole beneficiary. Araminta sued Young Life to compel it to pay the proceeds of the
insurance contract. Young Life, in defense, alleged that it is not liable as there had
been fraudulent concealment.

If you are the judge confronted with the conflicting claims of the parties,
how would you resolve the case? (10%)

SUGGESTED ANSWER

I will rule in favor of Araminta.

Under the incontestability clause, an insurer is given two

years—from the effectivity of a life insurance contract and while the
insured is alive—to discover or prove that the policy is void ab initio
or is rescindable by reason of the fraudulent concealment or
misrepresentation of the insured or his agent. After the two-year
period lapses, or when the insured dies within the period, the insurer
must make good on the policy, even though the policy was obtained
by fraud, concealment, or misrepresentation. Life insurance policies
that pass the statutory two-year period are essentially treated as
legitimate and beyond question, and the individuals who wield them
are made secure by the thought that they will be paid promptly upon
claim.

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 In the present case, Young Life’s claim of fraudulent
concealment is no longer feasible in view of the fact that the policy
has been in force for more than two years from 17 January 2015 to 29
November 2017.

Thus, if I were the judge, I will rule in favor of Araminta.

Reference: (Manila Bankers Life Insurance Corporation v. Aban, 702

SCRA 417)

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 VI
What does "doing business in the Philippines" under the Foreign Investments
Act of 1991, as amended mean? (5%)

SUGGESTED ANSWER

The phrase “doing business in the Philippines “ under the

Foreign Investments Act of 1991 include soliciting orders,
service contracts; opening offices whether called liaison
officers or branches' appointing representatives or distributors
domiciled in the Philippines or who in any calendar year stay in
the country for a period or periods totaling 180 days or more;
participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the
Philippines; and any other act or acts that imply continuity of
commercial dealings or arrangements, and contemplate to that
extent the performance of acts or works; or the exercise of some
of the functions normally incident to and in progressive
prosecution of, commercial gain or of the purpose or object of
the business organization; provided that passive equity
investment shall not be construed as doing business.

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 VII
Securities issued by the Philippine government are “exempt securities” and,
therefore, need not be registered with the Securities and Exchange Commission
prior to their sale or offering to the public in the Philippines.

What is the rationale behind this exemption? (5%)

SUGGESTED ANSWER

The rationale for the exemption is that the public is amply

protected even without the registration of the securities to be
issued by the government since the government is presumed to
be always solvent.

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 VIII
Atty. Baltasar Gracian has a Toyota Innova among other cars. Every other week
during the pandemic, he goes to his office in Quezon City using his Toyota Innova
and picks up friends as passengers at designated points along the way.

His passengers pay him a flat fee for the ride, usually Php50 per person, one way.
Although a lawyer, he never bothered to obtain a license to engage in this type of
income-generating activity. He believes that he is not a common carrier within the
purview of the law.

Do you agree with him? Explain. (5%)

SUGGESTED ANSWER

No. I do not agree with Atty. Baltasar Gracian.

Article 1732 of the Civil Code defines a common carrier as “a

person, corporation or firm, or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air,
for compensation, offering their services to the public." The Supreme
Court, in the case of De Guzman vs. Court of Appeals, ruled that the
above article 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, in local idiom, as a "sideline.”

In the instant case, Mr. Gracian has been transporting his

friends as passengers for compensation, although merely as “sideline.”
The fact that he has a limited clientele does not exclude him from the
definition of a common carrier.

Therefore, I do not agree with Atty. Baltasar Gracian.

Reference: Estrellita M. Bascos v. Court of Appeals, G.R. No. 101089.

April 7, 1993

IX
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Terrasen Transportation Co., Inc. (TTC) owned and operated an inter-island deluxe
bus service plying the Manila-Batangas-Mindoro route. Three friends, namely:
Christian, Azriel, and Cassian rode on the same TTC bus from Manila bound for
Mindoro. Christian purchased a ticket for himself. Azriel, being a boyhood friend
of the bus driver, was allowed a free ride by agreeing to sit during the trip on a
stool placed in the aisle. Cassian, already penniless after spending all of his money
on beer the night before, just stole a ride in the bus by hiding in the on-board toilet
of the bus. During the trip, the bus collided with another bus coming from the
opposite direction. The three friends all suffered serious physical injuries.

What are TTC’s liabilities, if any, in favor of Christian, Azriel, and

Cassian? Explain your answer. (10%)

SUGGESTED ANSWER

Insofar as Christian is concerned, TTC is liable for breach of

contract of carriage. Article 1756 of the Civil Code provides, in case of
death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, while Art. 1759 provides that
common carriers are liable for the death of or injuries to passengers
through negligence or willful acts of the former’s employees. Here, the
collision which caused injuries to Christian is presumed to be due to the
fault of TTC. Therefore, TTC is liable for Christian’s injuries arising from
the breach of its duty to exercise extraordinary diligence under the
contract of carriage.

As to Azriel, TTC is also liable for breach of contract of

carriage, but such liability may be limited. Art. 1758 of the Civil Code
states that when a passenger is carried gratuitously, a stipulation limiting
the common carrier’s liability for negligence is valid, but not for willful
acts or gross negligence. Here, Azriel was allowed a free ride by the bus
driver. Therefore, in the absence of stipulation, TTC’s liability to Azriel is
the same as owed to Christian.

As to Cassian, TTC may be held liable for quasi-delict. Art.

2176 provides that whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done.
Here, there was no contract of carriage since Cassian is not a passenger as
he secretly boarded the bus. However, TTC may be held liable if the

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driver was negligent. Therefore, TTC may be held liable to Cassian for
quasi-delict if the driver acted negligently.

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 X
Define the following terms:

a) Trust fund doctrine (5%)

SUGGESTED ANSWER

The trust fund doctrine provides that subscriptions to the

capital stock of a corporation constitute a fund to which the creditors
have a right to look for the satisfaction of their claims [Ong v. Tiu,
401 SCRA 1 (2003)]. The scope of the doctrine when the corporation
is insolvent encompasses not only the capital stock, but also other
property and assets generally regarded in equity as a trust fund for the
payment of corporate debts [Halley v. Printwell, Inc., G.R. No.
157549, May 30, 2011].

(b) Unfair competition (5%)

SUGGESTED ANSWER

Unfair competition is the passing off or attempting to

pass off upon the public of the goods or business of one person as the
goods or business of another with the end and probable effect of
deceiving the public. Passing off takes place where a person, by
imitative devices on the general appearance of the goods, misleads
prospective purchasers into buying his merchandise under the
impression that they are buying that of his competitors [Republic Gas
Corporation v. Petron Corporation, G.R. No. 194062, June 17,
2013].

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 XI
Mr. Rowan Whitethorn filed a case captioned as "Injunction with Prayer for Status
Quo Order, Temporary Restraining Order and Damages" against Adarlan
Corporation to prohibit the latter from selling shares which Mr. Rowan Whitethorn
purportedly bought from Adarlan Corporation. Mr. Rowan Whitethorn alleged that
the subscription for the said shares was already partly paid by him, but the subject
shares were nonetheless being offered for sale by Adarlan Corporation to the
corporation's other stockholders.

Is the case filed by Mr. Rowan Whitethorn against Adarlan

Corporation considered an intra-corporate dispute? Explain. (10%)

SUGGESTED ANSWER
No. The case is not considered an intra-corporate dispute.

To determine if a case involves an intra-corporate controversy,

the Supreme Court has consistently applied two tests: the
relationship test and the nature of the controversy test. Under the
relationship test, an intra-corporate controversy arises when the
conflict is "between the corporation, partnership or association and
its stockholders, partners, members or officers". The nature of the
controversy test examines the controversy in relation to the
"enforcement of the parties' correlative rights and obligations under
the Revised Corporation Code and the internal and intra-corporate
regulatory rules of the corporation.”

In the present case, it is not yet certain that Mr. Y is a

stockholder of San Miguel Corporation. Thus, the first test is not
present. Even assuming that the parties are stockholders of the
corporation and as such, satisfy the relationship test, the dispute is
not rooted in the existence of intra-corporate relationship. The
action for injunction to stop the sale of shares does not pertain to
the enforcement of the parties’ rights and obligations under the
Revised Corporation Code.

Considering that it cannot be determined that a conflict arose

"between the corporation, partnership or association and its

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stockholders, partners, members or officers," then the case cannot
be considered as an intra-corporate dispute.

(Roberto San Jose, et. al. vs. Jose Ma. Ozamiz, G.R. No. 190590,
July 12, 2017)

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 XII
Sybil Vane is from Indonesia. She studies nursing at the University of San Jose-
Recoletos (USJ-R). She learned that the same foreign books prescribed in USJ-R
are 40-50% cheaper in Indonesia. So she ordered 50 copies of each book for
herself and her classmates and sold the books at 20% less than the price in the
Philippines. Vikas Publishing House Pvt. Ltd., the exclusive licensed publisher of
the books in the Philippines, sued Sybil Vane for copyright infringement.

Decide. (10%)

SUGGESTED ANSWER

Sybil Vane may be held liable for infringement of

copyright.

Section 180 of the Intellectual Property Code (IPC)

provides that the assignee of the copyright is entitled to all the rights
and remedies which the assignor had with respect to the copyright.

Vikas Publishing House Pvt. Ltd., the exclusive licensed

publisher, as the assignee, is entitled, within the scope of the license,
to all the rights and remedies that the licensor has with respect to the
copyright.

Moreover, the importation by Sybil Vane of 50 copies of

each foreign book prescribed in USJ-R and selling them locally at 20
less than their respective prices in the Philippines is subject to the
doctrine of fair use set out in Sec. 185.1 of the IPC. The factors to be
considered in determining whether the use made of a work is fair use
shall include:

a. The purpose and character of the use, including whether such

use is of a commercial nature or is for non-profit educational
purposes;
b. The nature of the copyrighted work;
c. The amount and substantiality of the portion used in relation to
the copyrighted work as a whole;

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 d. The effect of the use upon the potential market for or value of
the copyrighted work.

Applying the above-listed factors to the problem, Sybil

Vane’s importation of the books and their sale local clearly show the
unfairness of her use of the books, particularly the adverse effect of
her price discounting on the business of Vikas Publishing House.

Thus, Sybil Vane may be held liable for infringement of

copyright.

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