MERCANTILE LAW Yolanda executed and signed a promissory note with all the requisites for

negotiability being present, except for the amount which was left blank. She
kept the promissory note in her desk and decided to place the amount at a
BAR EXAM QUESTIONNAIRES later date. The indicated payee, Yohann, managed to obtain the promissory
note from Yolanda's desk and filled out the amount for the sum of PhP 10
YEAR 2019 million, which was the amount actually lent by him to Yolanda, but excluding
the agreed interest. Yohann later endorsed and delivered the check to Yvette,
under circumstances that would constitute the latter to be a holder in due
course.
I
(a) May Yvette hold Yolanda liable on the note? (2.5%)
Yeti Export Corporation (YEC), thru its President, negotiated for Yahoo Bank
of Manila {YBM) to issue a letter of credit to course the importation of electronic (b) Would your answer be the same if the promissory note was actually
parts from China to be sold and distributed to various electronic manufacturing completed by Yolanda (including the amount of PhP 10 million), but
companies in Manila. YBM issued the letter of credit and forwarded it to its stolen from her desk by Yohann? Can Yvette enforce the note against
correspondent bank, Yunan Bank (YB) of Beijing, to notify the Chinese Yolanda? (2.5%)
exporters to submit the bill of lading in the name of YBM covering the goods
to be exported to Manila and to pay the Chinese exporters the purchase price III
upon verification of the authenticity of the shipping documents.
On November 23, 2017, Yas Ysmael (Ysmael) loaned the amount of PhP 5
The electronic parts arrived in the Port of Manila, and YBM released them to million to Yarn & Thread Corporation (YTC), through its President, Ylmas
the custody of YEC as an entrustee under a trust receipt. When YEC unpacked Yektas (Yektas), which loan was evidenced by a Promissory Note (PN), which
the imported parts in its warehouse, it found that they were not only of inferior reads as follows:
quality but also did not fit the descriptions contained in the bill of lading. YEC
refused to pay YBM the amount owed under the trust receipt. YBM thereafter
commenced the following: Date: _______

Within one year from date hereof, I promise to pay to the order of YAS
(a) Civil suit to hold YB liable for failure to ensure that the electronic
YSMAEL, the sum of PhP 5 million with interest at 120% per annum.
parts loaded for exportation in China corresponded with those
described in the bill of lading. Is there any merit in the case against
YARN & THREAD Corporation
YB? (2.5%)
By:
(b) Criminal suit against YEC and its President for estafa, and sought
the payment of the amount covered in the trust receipt. The defense (Sgd.)
of the YEC President is that he cannot be held liable for a transaction Ylmas Yektas
of the corporation, of which he only acted as an officer, and that it is
YEC as the principal that should be held liable under the trust receipt,
which was entered into in the name of YEC and pursuant to YEC's Yektas was the controlling stockholder of YTC at the time the PN was issued.
corporate purposes. He cited as his legal ground the "Doctrine of As security for the payment of the PN, Yektas issued and delivered to Ysmael
Separate Juridical Personality." Is the President's contention a postdated personal check covering the face value of the PN drawn from his
meritorious? (2.5%) account with Yellow Bell Bank and Trust Company. The proceeds of the loan
under the PN were used by YTC as working capital.
II
A year later, Ysmael inserted the date of "November 23, 2017" on the date
section of the PN, and made a formal demand upon YTC, through Yektas, to
pay the note, but which was refused on the ground that Yektas was no longer
the President and controlling shareholder of YTC. By this time, all the shares of injuries and/or death on the part of any of its passengers, the common
of YTC had already been sold to a new group of investors. Ysmael deposited carrier is presumed to be at fault. In its defense, Yatco alleged that it is not an
the personal check issued by Yektas which was dishonored. He then filed a absolute insurer of its passengers and that Ysidro's death was not due to any
collection suit against YTC and Yektas including the accrued interest. defect in the means of transport or method of transporting passengers, or the
negligent acts of its employees. Since the accident was due to the fault of a
The defendants raised the following defenses in the collection suit. Rule on the stranger over whom the common carrier had no control, or of which it did not
merits of each defense. (2% each) have any prior knowledge to be able to prevent it, the cause of Ysidro's death
should be considered a fortuitous event and not the liability of the common
(a) A PN issued with a blank date is one that is not payable on demand carrier.
or on a fixed or determinable future time, and therefore the insertion
of the date constituted material alteration that nullified it, so that no (a) Is a common carrier presumed to be at fault whenever there is
cause of action arose. death or injury to its passengers, regardless of the cause of death or
injury? (2.5%)
(b) Yektas cannot be made liable on the PN since he signed in his
capacity as President of YTC, which fact was known to Ysmael (b) What kind of diligence is required of common carriers like Yatco for
although not indicated on the PN. the protection of its passengers? (2.5%)

(c) Yektas signed the PN merely as an accommodation to YTC. As he (c) Will your answer be the same as your answer in (b) above, if the
received no consideration for the PN, it is void for lack of consideration. assailant was another paying passenger who boarded the bus and
deliberately stabbed Ysidro to death? (2.5%)
(d) YTC, now owned by new owners, cannot be held liable on the PN
since it was entered into by its former owner and President, which act V
the new Board of Directors did not ratify.
Yellow Fin Tuna Corporation (Yellow Fin), a domestic corporation, applied for
(e) The PN .is void for being in violation of the Usury Law seeking a credit facility in the amount of PhP 50 million with Yengzi Financial
interest at an unconscionable rate of 120% p.a. Corporation (YFC). The application was approved and the Credit Agreement
was signed and took effect. Ysko and Yuan, Yellow Fin Chairman and
President, respectively, executed a Continuing Suretyship Agreement in favor
IV
of YFC wherein they guaranteed the due and full payment and performance of
Yellow Fin's guarantee obligations under the credit facility. YFC soon
Ysidro, a paying passenger, was on board Bus No. 904 owned and operated discovered material inconsistencies in the financial statements given by Yellow
by Yatco Transportation Company (Yatco). He boarded the bus at Munoz, Fin, drawing YFC to conclude that Yellow Fin committed misrepresentation.
Nueva Ecija with Manila as his final destination. He was seated on the first Under the Credit Agreement, any misrepresentation by Yellow Fin or its
row, window seat on the left side of the bus. As the bus was negotiating the sureties will constitute an event of default. YFC thus called an event of default
national highway in front of the public market of Gerona, Tarlac, the bus came and filed a complaint for sum of money against Yellow Fin, Ysko, and Yuan.
to a full stop because of the traffic. The driver of the bus took this opportunity Immediately thereafter, Yellow Fin filed a petition for rehabilitation. The court
to check on the tires of the bus and to relieve himself. As he was alighting from suspended the proceedings in YFC's complaint until the rehabilitation court
the bus to do these, an unidentified man standing along the highway hurled a disposed of the petition for rehabilitation. YFC posits that the suspension of
huge rock at the left side of the bus and hit Ysidro between his eyes. He lost the proceedings should only be with respect to Yellow Fin but not with respect
consciousness and immediately the driver, with the conductor, drove the bus to Ysko and Yuan.
to bring him to the nearest hospital. He expired before the bus could reach the
hospital.
Is YFC correct? (2.5%)
Ysidro's wife and children brought a civil action to collect damages from Yatco,
alleging that as a common carrier, it was required to exercise extraordinary
diligence in ensuring the safety of its passengers. They contended that, in case
 VI Simultaneously with the execution of the film distribution agreement, Yehey
Movies also granted Yelp Pictures an option to acquire up to 40% of the total
Shortly after Yin and Yang were wed, they each took out separate life outstanding capital stock in Yehey Movies post-exercise of the option, at the
insurance policies on their lives, and mutually designated one another as sole option price of PhP .01 per number of shares covered by the option,
beneficiary. Both life insurance policies provided for a double indemnity clause, exercisable within a period of one (1) year from the date of the grant, at the
the cost for which was added to the premium rate. During the last 10 years of exercise price of PhP 100 per share. Once exercised, Yelp Pictures was
their marriage, the spouses had faithfully paid for the annual premiums over granted the right to nominate two (2) directors to the Board of Yehey Movies,
the life policies from both their salaries. Unfortunately, Yin fell in love with his and Yavic Yamson agreed to vote all his shares for the election of directors to
officemate, Vessel, and they carried on an affair. After two years, their be nominated by Yelp Pictures.
relationship bore them a daughter named Vinsel. Without the knowledge of
Yang, Yin changed the designation of the beneficiary to an "irrevocable (a) May the acts of entering into the film distribution contract, the
designation" of Vinsel and Vessel jointly. When Yang learned of the affair, she subsequent execution and performance of the terms of the contract in
was so despondent that, having chanced upon Yin and Vessel on a date, she the Philippines, and the appointment of Atty. Yson, be considered as
rammed them down with the car she was driving, resulting in Vin's death and act of "doing business" in the Philippines that will require Yelp Pictures
Vessel's complete loss of mobilization. Yang was sued for parricide, and while to register as a foreign corporation and obtain a license to do business
the case was pending, she filed a claim on the proceeds of the life insurance in the Philippines? (2.5%)
of Yin as irrevocable beneficiary, or at least his legal heir, and opposed the
claims on behalf of Vessel and her daughter Vinsel. Yang claimed that her (b) Will your answer in (a) be the same if Yelp Pictures exercises the
designation as beneficiary in Vin's life insurance policy was irrevocable, in the option, becomes a substantial shareholder, and is able to elect two (2)
nature of one "coupled with interest," since it was made in accordance with directors in the Board of Yehey Movies? (2.5%)
their mutual agreement to designate one another as sole beneficiary in their
respective life policies. She also claimed that the beneficiary designation of
(c) Must the option granted to Yelp Pictures be registered under the
Vessel and the illegitimate minor child Vinsel was void being the product of an
SRC? (2.5%)
illicit relationship, and therefore without "insurable interest."
VIII
(a) Is Yang correct in saying that her designation as beneficiary was
irrevocable? (2.5%)
Yenkell Cement Corporation (YCC) is a public corporation whose shares are
listed at the PSE. It is 60% owned by Yenkell Holdings Corporation (YHC) and
(b) Do Vessel and Vinsel have "insurable interest" on the life of Yin? 20% by Yengco Exploration Inc. (YEI). The remaining 20% is held by the
(2.5%)
public. YHC is a private non-listed corporation which, in turn, is 60% owned by
Yatlas Mines Inc. (YMI), and 40% by Yacnotan Consolidated Inc. (YCI). On
VII August 8, 2008, the Board of Directors of YEI passed a resolution approving
the acquisition of 50% and 25% of the shares held by YMI and YCI,
Yelp Pictures Inc. (Yelp Pictures), a movie production company based in respectively, in the authorized capital stock of YHC.
California, USA, entered into a contract with Yehey Movies Inc., a Filipino
movie production and distribution company which is registered in the Yolly, one of the staff members in the office of the Corporate Secretary of YEI,
Philippines under the Securities Regulation Code (SRC) and listed in the was immediately asked to type the resolution and file the disclosure with the
Philippine Stock Exchange Inc. (PSE), for the exclusive distribution in the PSE and the Securities and Exchange Commission (SEC). Before doing that,
Philippines of movies produced in the USA by Yelp Pictures. Yehey Movies is she secretly called her brother who works with a stock brokerage company, to
currently owned 85% by Yavic Yamson, and the balance, by the public in the purchase, in the name of Yolly's husband, 5,000 shares in YCC. After the
Philippines. For purposes of entering into the contract, suing for breach of such acquisition was disclosed to the SEC and the PSE, the market price of YCC
contract, and prosecuting unauthorized showing of movies produced by Yelp increased by 50%.
Pictures, it appointed Atty. Yson, a local lawyer, as its attorney-in-fact.
(a) In acquiring 75% of the total capital stock of YHC, should YEI be
required to do a mandatory tender offer? (2.5%)
 (b) Can Yolly be held liable for insider trading? (2.5%)

IX

Yangchou lnc.'s (YI) Articles of Incorporation (AOI) provides for two (2) types XI
of shares of stock: common and preferred shares. Its AOI further provides that
"the preferred shares shall have a guaranteed annual dividend of 3% of the Yenetic Corporation wants to increase its Authorized Capital Stock (which is
par value." Its By-Laws also specifically provides that "preferred shareholdings currently fully subscribed and issued) to be able to increase its working capital
shall be cumulative and participating." No other terms of preference are to undertake business expansions.
provided for preferred shares in either the AOI or By-Laws of YI.
The Board of Directors consults with you as legal counsel on the proper
For the first five years of operations, the company was operating at a loss. At answers to the following issues: (2.5% each)
the end of the sixth year, YI realized a net profit of PhP 100 million, and
unrestricted retained earnings of PhP 30 million. The YI Board of Directors
(a) Can Yenetic's AOI be formally amended to remove the right of
declared and paid out dividends of 1 % on common shares, and 5% on
appraisal on all dissenting stockholders in all matters under the law
preferred shares, which amounted to a total of PhP 30 million.
which requires a ratification vote of the stockholders?

However, the preferred shareholders made a formal demand that they be

(b) If the increase in Authorized Capital Stock is formally submitted to
given an additional 3% dividend for each of the five (5) years based on the
the stockholders in a meeting duly called for the purpose, what is the
preferred shares features of "cumulative and participating," and an additional
vote necessary for the stockholders' ratification, and may the
1 % given to the common shareholders, which could all be accommodated
dissenting stockholders exercise their appraisal right?
within the remaining balance of the net profits.
(c) Once the increase in the Authorized Capital Stock of Yenetic has
Should Yi's Board heed the demand of its preferred shareholders? (2.5%)
been legally effected with the SEC, can the new shares from the
unissued shares be offered to a new limited group of investors without
X having to offer them to the shareholders of record since no pre-
emptive right is provided for in the AOI and By-laws of Yenetic?
Ybarra is the registered shareholder of 500 shares in Yakal Inc., of which only
50% has been paid up, but for which the corporation had erroneously issued XII
a covering certificate of stock for the entire 500 shares. Ybarra sells the entire
500 shares for cash pursuant to a notarized Deed of Sale in favor of Ynchon, Yashtag Holdings, lnc.'s (Yashtag Holdings) AOI states that its primary
and which certificate was duly endorsed and delivered. When Ynchon
purpose is "to invest in real and personal properties of every kind or otherwise
presented the Deed of Sale and the endorsed certificate of stock, as well as
acquire and deal with stocks, bonds, and other securities or evidence of
proof of payment to the Bureau of Internal Revenue (BIR) of the tax due on the
indebtedness of any other corporation, and to hold or to own, use, sell, deal in,
sale of shares, the Corporate Secretary of Yakal Inc. refused to register the
and dispose of, any such stock." It further states that it has an authorized
sale on the ground of lack of written authority from Ybarra to cancel the capital stock of PhP 1 million, all of which have been fully subscribed and paid
certificate and have the shares registered in the name of Ynchon. up.

(a) Does Ynchon have a cause of action to file a petition

Yashtag Holdings' President, Mr. Yokada, convinced Yeh, Yah, and Yo to
for mandamus to compel the corporation to register the 500 shares in
lend/invest money with Yashtag, which money will be invested in a sister
his name in the corporation books? (2.5%) company, Yashtag Realty, Inc. (Yashtag Realty), a corporation that develops
premium real estate projects in the Philippines. For the amount
(b) Who is liable to pay the remaining unpaid 50% balance - Ybarra or loaned/invested, Yashtag Holdings issued two (2) postdated checks to each
Ynchon? (2.5%) lenderflnvestor, one representing the principal amount, and the other covering
the guaranteed interest that ranged between 18-32% p.a. On the maturity public auction sale. It was only then that the bank determined that there were
dates of the checks, the individual lender/investor can review the actually two separate TCTs issued for the property and one of which was in
loans/investment, and may either collect only the interest or roll over the same the name of Mr. Yamsuan who occupied the property after having bought it
with the principal amounts. Eventually, the bursting of the real estate bubble earlier from Mr. Yamato.
brought about a serious financial crisis around the world, including the
Philippines. Yashtag Realty collapsed and with it Yashtag Holdings defaulted (a) Can YBC Bank unilaterally increase the interest rates on the loan?
in the payment of its loans/investments, as well as the dishonor of the tens of (2.5%)
thousands of postdated checks issued to its various lenders/investors.
(b) Is YBC Bank a mortgagee buyer in good faith? Is it preferred over
Yeh, Yah, and Yo filed several charges against Yashtag Holdings and its Mr. Yamsuan? (2.5%)
President, making them solidarily liable for the investments they failed to
recover. Yeh, Yah, and Yo proved that Yashtag Holdings, acting through Mr.
XIV
Yokada, was able to get a total of PhP 800 million of loans/investments from
the public under the scheme, and from which Mr. Yokada, as the controlling
stockholder, was able to withdraw a total amount of PhP 300 million for his On June 21, 2008, Yate took out a life insurance policy on her life in the amount
personal account and entered into the books of Yashtag Holdings as of PhP 10 million and named her husband Vandy and daughter as joint
"Advances to Stockholders." Mr. Yokada pleads as a defense that he cannot irrevocable beneficiaries. Before the policy was issued and the premiums were
be made personally liable on the claim of the group under the doctrines of paid, Yate underwent a medical checkup with a physician accredited by the
"Separate Juridical Personality" and "Limited Liability." insurer, and the only result found was that she was suffering from high blood
pressure. Yate was previously diagnosed by a private physician of having
breast cancer which she did not disclose to the insurer in her application, nor
(a) What are the doctrines of "Separate Juridical Personality" and
to the insurer's accredited physician because by then, she was told that she
"Limited Liability"? (2.5%)
was already cancer-free after undergoing surgery which removed both her
breasts. She was later diagnosed with psychotic tendency that graduated into
(b) Decide on the merits of Mr. Yokada's defense against being made extreme despondency. She was found dead hanging in her closet 36 months
liable for Yashtag Holdings' obligations. (2.5%) after the issuance of the policy. The police authorities declared it to be a case
of suicide. The policy did not include suicide as an excepted risk.
XIII
(a) Can the insurer raise the issue of failure to disclose that she had
YBC Bank extended a loan of PhP 50 million to Mr. Yamato secured by a real cancer as a cause for denying the claim of the beneficiaries? (2.5%)
estate mortgage (REM) on a large tract of land. The covering Transfer
Certificate of Title (TCT) of the property mortgaged did not indicate any (b) Are the beneficiaries entitled to receive the proceeds of the life
encumbrance or lien on it, and the bank was able to obtain a certified true copy insurance notwithstanding the fact that the cause of death was
of the TCT from the Register of Deeds showing that the owner's copy suicide? (2.5%)
submitted to the bank was a genuine title. The Loan Agreement provided an
escalation clause which stated that, at the anniversary date of the loan, YBC
XV
Bank was granted the option to increase the interest rate whenever there
would be an increase in the Bangko Sentral ng Pilipinas' prevailing rates.
Three years later, Mr. Yamato received a formal notice from YBC Bank raising A distinctive-tasting pastillas is well-known throughout the country as having
the interest rate of the loan based on the escalation clause provided for in the been developed within a close-knit women's group in Barangay San Ysmael
Loan Agreement. Mr. Yamato refused to pay based on the increased interest which is located along a very busy national highway. Its popularity has
rate that was effected without his consent. YBC Bank insists on the binding encouraged the setting up of several shops selling similar delicacies, with the
effect of the escalation clause appearing on their Loan Agreement. most famous product being the pastillas of "Barangay San Ysmael."
Eventually, the pastillas of Aling Voling under the brand name "Ysmaellas"
began to attract national distinction. Aling Voling therefore registered it as a
Mr. Yamato subsequently defaulted on the loan and vanished. Thus, YBC copyright with the National Library. Her neighbor, Aling Yasmin, realizing the
Bank extrajudicially foreclosed on the REM, and was the highest bidder at the
commercial value of the brand, started using the term "Ysmaellas" for her
pastillas but used different colors. Aling Yasmin registered the brand name dismissed by PAGCOR. After receiving his copy of the order for dismissal, he
"Ysmaellas" with the Intellectual Property Office (IPO). claimed to have sent to the Board of PAGCOR his motion for reconsideration
through facsimile transmission. After a considerable time, when his motion for
(a) Can Aling Voling successfully obtain court relief to prohibit Aling reconsideration was unacted upon, he filed an action with the Civil Service
Yasmin from using the brand name "Ysmaellas" in her products on the Commission (CSC) for illegal dismissal. PAGCOR claimed that his action has
basis of her (Aling Yoling's) copyright? What is the difference between prescribed because it was filed more than 15 days after his dismissal became
registration as a copyright and registration as a trade or brand name? final. Yvan claimed that there was no final decision yet because the Board of
(2.5%) PAGCOR has not yet acted on his motion for reconsideration. He presented a
copy of his facsimile transmission addressed to the Board of PAGCOR seeking
reconsideration of his dismissal, and the fact that there has been no action
(b) Can Aling Yasmin seek injunctive relief against Aling Voling from
taken. He claimed that based on the Electronic Commerce Act of 2000, his
using the brand name "Ysmaellas," the latter relying on the doctrine of
facsimile transmission should be considered like any genuine and authentic
"prior use" as evidenced by her prior copyright registration? (2.5%)
paper pleading. PAGCOR denied having received it and was able to prove that
the telephone number of PAGCOR used in the facsimile transmission was
(c) Can Aling Voling seek the cancellation of Aling Yasmin's trademark wrong. CSC denied his complaint on account of prescription. He appealed
registration of the brand name "Ysmaellas" on the ground of "Well CSC's dismissal in court.
Known Brand" clearly evidenced by her (Aling Yoling's) prior copyright
registration, actual use of the brand, and several magazine articles?
(a) Was CSC correct in dismissing the case? (2.5%)
(2.5%)

(b) Can Yvan's bank be ordered by the court to disclose if there were
XVI
unreasonable increases in his bank deposit when the alleged acts
were committed? (2.5%)
Yosha was able to put together a mechanical water pump in his garage
consisting of suction systems capable of drawing water from the earth using
less human effort than what was then required by existing models. The water XVIII
pump system provides for a new system which has the elements of novelty
and inventive steps. Yosha, while preparing to have his invention registered Through various acts of graft and bribery, Mayor Ycasiano accumulated a
with the IPO, had several models of his new system fabricated and sold in his large amount of wealth which he converted into U.S. dollars and deposited in
province. a Foreign Currency Deposit Unit (FCDU) account with the Yuen Bank (YB).
On a tip given by the secretary of the mayor, the Anti-Money Laundering
Council (AMLC) sent an order to YB to confirm the amount of U.S. dollars that
(a) Is Yosha's invention no longer patentable by virtue of the fact that
Mayor Ycasiano had in his FCDU account. YB claims that, under the Foreign
he had sold several models to the public before the formal application
Currency Deposit Act (R.A. No. 6426, as amended), a written permission from
for registration of patent was filed with the IPO? (2.5%)
the depositor is the only instance allowed for the examination of FCDU
accounts. YB alleges that AMLC on its own cannot order a banking institution
(b) If Yosha is able to properly register his patent with the IPO, can he to reveal matters relating to bank accounts.
prevent anyone who has possession of the earlier models from using
them? (2.5%)
(a) Is the legal position of YB, in requiring written permission from the
depositor, correct? (2.5%)
XVII
(b) Does AMLC have the power to order a banking institution to reveal
Yvan was a slot machine operator supervisor in a casino operated by the matters relating to bank accounts? (2.5%)
Philippine Amusement and Gaming Corporation (PAGCOR). On the basis of
an intelligence report, he was found, in connivance with some slot machine
customers, to have padded the credit meter readings of slot machines in the
casino where he was employed. After being served with notice and opportunity
to contest the findings, he was found guilty of the charges and ordered
 YEAR 2017 (b) Do Seth and Sean have separate insurable interests? Explain
Briefly your answer(3%)

II.

I. A.

A. Morgan, a lawyer, received a lot of diving and other water sports equipment
as payment of his professional fees by Dennis, his client in a child custody
Absolute Timber Co. (ATC) has been engaged in the logging business in case. Dennis owned a diving and water sports dealership in Anilao,
lsabela. To secure one of its shipments of logs to be transported by Andok Batangas. Morgan decided to name Dennis as entrustee because he did
Shipping Co., ATC purchased a marine policy with an "all risks" provision. not have any experience in selling such specialized sports equipment.
Because of a strong typhoon then hitting Northern Luzon, the vessel sank They executed a trust receipt agreement, with Morgan as entruster and
and the shipment of logs was totally lost. ATC filed its claim, but the insurer Dennis as entrustee.
denied the claim on several grounds, namely: (1) the vessel had not been
seaworthy; (2) the vessel's crew had lacked sufficient training; (3) the Before the sports equipment could be sold, a strong typhoon hit Batangas.
improper loading of the logs on only one side of the vessel had led to the Anilao and other parts of Batangas experienced power outage. Taking
tilting of the ship to that side during the stormy voyage; and (4) the advantage of the total darkness, unidentified thieves destroyed the
extremely bad weather had been a fortuitous event. padlocks of the establishment of Dennis, and carted off the equipment
inside.
ATC now seeks your legal advice to know if its claim was sustainable. What
is your advice? Explain your answer. (3%) Morgan demanded that Dennis pay the value of the stolen equipment, but
the latter refused on the ground that he also had suffered from the effects
B. of the typhoon, and insisted that the cause of the loss was a fortuitous
event or force majeure.
The newly restored Ford Mustang muscle car was just released from the
car restoration shop to its owner, Seth, an avid sportsman. Given his Is the justification of Dennis warranted? Explain your answer. (4%)
passion for sailing, he needed to go to a round-the-world voyage with his
crew on his brand-new 180-meter yacht. Hearing about his coming voyage, B.
Sean, his bosom friend, asked Seth if he could borrow the car for his next
roadshow. Sean, who had been in the business of holding motor shows Safe Warehouse, Inc. (Safe) issued on various dates negotiable
and promotions, proposed to display the restored car of Seth in major cities warehouse receipts to Peter, Paul and Mary covering certain goods
of the country. Seth agreed and lent the Ford Mustang to Sean. Seth deposited by the latter with the former. Peter, Paul and Mary then
further expressly allowed Sean to use the car even for his own purposes negotiated and endorsed the warehouse receipts to Cyrus, Magnus and
on special occasions during his absence from the country. Seth and Sean Charles upon payment by the latter of valuable consideration for the
then went together to Bayad Agad Insurance Co. (BAIC) to get separate warehouse receipts. Cyrus, Magnus and Charles were not aware of, nor
policies for the car in their respective names. were they parties to any irregularity or infirmity affecting the title or the face
of the warehouse receipts.
SAIC consults you as its lawyer on whether separate policies could be
issued to Seth and Sean in respect of the same car. On due dates of the warehouse receipts, Cyrus, Magnus and Charles
demanded that Safe surrender the goods to them. Safe refused because
(a) What is insurable interest? (2%) its warehouseman's claim must first be paid. Cyrus, Magnus and Charles
refused to pay, and insisted that such claim was the liability of Peter, Paul Meridian's own beverage business was merged with Excellent's, thereby
and Mary. making Excellent virtually the only beverage manufacturer in the country.

(a) What is a warehouseman's claim? (3%) Left out and ignored by the management, Sid became a fiscalizer of sorts,
questioning during the Board meetings the direction being pursued by
(b) Is Safe's refusal to surrender the goods to Cyrus, Magnus and Excellent's officers.
Charles legally justified? Explain your answer. (3%)
Ultimately, Sid demanded the inspection of the books and other corporate
III. records of Excellent. The management refused to comply, saying that his
right as a minority stockholder has been much reduced.
A.
State under what conditions may Sid properly assert his right to inspect the
Data Realty, Inc. (DRI) was engaged in realty development. The family of books and other corporate records of Excellent. Explain your answer. (3%)
Matteo owned 100°/o of the capital stock of ORI. Matteo was also the
President and Chairman of the Board of Directors. Other members of IV.
Matteo's family held the major positions in ORI. Because of a nasty
takeover fight with D&E Realty Co., Inc. (D&E), another realty developer, Procopio, a Director and the CEO of Parisian Hotel Co., Inc. (Parisian),
for the control of a smaller realty company with vast landholdings, ORI and was charged along with other company officials with several counts
D&E engaged in an expensive litigation that eventually led to a money of estafa in connection with the non-remittance of SSS premiums the
judgment being rendered in favor of D&E. company had collected from its employees. During the pendency of the
cases, Parisian filed a petition for rehabilitation. The court, finding the
Meantime, DRI, facing inability to pay its liabilities as they fall due but still petition to be sufficient in form and substance, issued a commencement
holding substantial assets, filed a petition for voluntary rehabilitation. order together with a stay or suspension order.
Trying to beat the consequences of rehabilitation proceedings, D&E moved
in the trial court for the issuance of a writ of execution. The trial court also Citing the commencement order, Procopio and the other officers facing the
happened to be the rehabilitation court. The writ of execution was issued. criminal charges moved to suspend the proceedings in the estafa cases.

Serving the writ of execution, Merto, the court sheriff who had just passed (a) What is a commencement order, and what is the effect of its
his Credit Transactions subject in law school, garnished Matteo's bank issuance? Explain your answer. (4%)
accounts, and levied his real properties, including his house and lot in
Makati. (b) Suppose you are the trial judge, will you grant the motion to
suspend of Procopio, et al.? Explain your answer. (4%)
Are the garnishment and levy of Matteo's assets lawful and proper?
Explain your answer. (4%) V.

B. A.

Sid used to be the majority stockholder and President of Excellent Under the Nell Doctrine, so called because it was first pronounced by the
Corporation (Excellent). When Meridian Co., Inc. (Meridian), a local Supreme Court in the 1965 ruling in Nell v. Pacific Farms, Inc. (15 SCRA
conglomerate, took over control and ownership of Excellent, it brought 415), the general rule is that where one corporation sells or otherwise
along its team of officers. Sid thus became a minority stockholder and a transfers all of its assets to another corporation, the latter is not liable for
minority member of the Board of Directors. Excellent, being the leading the debts and liabilities of the transferor.
beverage manufacturer in the country, became the monopoly when
State the exceptions to the Nell Doctrine. (4%) (b) Is BG Company's opposition based on conflict of interest and
violation of the restrictions on DOSRI transactions legally and
B. factually correct? Explain your answer. (4%)

Santorini Corporation (Santorini) was in dire straits. In order to firm up its VI.
financial standing, it agreed to entertain the merger and takeover offer of
Proficient Corporation (Proficient), the leading company in their line of A.
business. Erica, the major stockholder of Santorini, strongly opposed the
merger and takeover. The matter of the merger and takeover by Proficient Hortencio owned a modest grocery business in Laguna. Because of the
was included in the agenda of the next meeting of Santorini's Board of economic downturn, he incurred huge financial liabilities. He remained
Directors. However, owing to Erica's serious illness that required her to afloat only because of the properties inherited from his parents who had
seek urgent medical treatment and care in Singapore, she failed to attend both come from landed families in Laguna. His main creditor was
the meeting and was consequently unable to cast her vote. The Board of Puresilver Company (Puresilver), the principal supplier of the merchandise
Directors approved the merger and takeover. At the time of the meeting, sold in his store. To secure his credit with Puresilver, he executed a real
Santorini had been in the red for a number of years owing to its recurring estate mortgage with a dragnet clause involving his family's assets worth
business losses and reverses. several millions of pesos.

Erica seeks your legal advice regarding her right as a stockholder opposed Nonetheless, Hortencio, while generally in the black, now faces a situation
to the corporate action. Explain your answer. (4%) where he is unable to pay his liabilities as they fall due in the ordinary
course of business. What will you advise him to do to resolve his dire
C. financial condition? Explain your answer. (5%)

Samito is the President and a Director of Lucky Bank (Lucky}, a B.

commercial bank holding its main office in Makati. His brother, Othello,
owned a big fishing business based in Malabon. Othello applied for a loan Wyatt, an internet entrepreneur, engaged in a sideline business of creating
of PSO Million with Lucky. Othello followed the ordinary banking computer programs for selected clients on a per project basis and for
procedures in all the stages of the processing of his application. When servicing basic computer problems of his friends and family members. His
required, he made the necessary arrangements to guarantee the loan. main job was being an IT consultant at Futurex Co., a local computer
Thus, in addition to the real estate mortgage, Othello executed a joint and company.
solidary suretyship, issued postdated checks, and submitted all other
requirements prescribed by Lucky. Because of his ill-advised investments in the stock market and the fraud
perpetrated against him by his trusted confidante, Wyatt was already
When the loan application was about to be approved and the proceeds drowning in debt, that is, he had far more liabilities than his entire assets.
released, BG Company, a keen competitor of Othello in the fishing
industry, wrote to the Board of Directors and the management of Lucky What legal recourse remained available to Wyatt? Explain your answer.
questioning the loan on the ground of conflict of interest due to Samito and (5%)
Othello being brothers, citing the legal restriction against bank exposure of
directors, officers, stockholders or their related interests (DOSRI).

(a) What are the three restrictions imposed by law on DOSRI

transactions? (4%)
 VII. Given that her appropriation of the necklace was theft, may Flora be
successfully prosecuted for money laundering? Explain briefly your
A. answer. (4%)

Virtucio was a composer of llocano songs who has been quite popular in B.
the llocos Region. Pascuala is a professor of music in a local university
with special focus on indigenous music. When she heard the musical works Prosperous Bank is a domestic bank with head office in Makati. It handles
of Virtucio, she purchased a CD of his works. She copied the CD and sent the banking requirements of thousands of clients.
the second copy to her Music instructions for the class to listen to the CD
and analyze the works of Virtucio. The AMLC initiated a discreet investigation of the financial transactions of
Lorenzo, a suspected drug trafficker based in Naga City. The intelligence
Did Pascuala thereby infringe Virtucio's copyright? Explain your answer. group of the AMLC, in coordination with the counterpart group from the
(4%) PDEA and the NBI, gathered ample evidence establishing Lorenzo's
unlawful drug activities. The AMLC had probable cause that his deposits
B. and investments in various banks, including Prosperous Bank, were
related to money laundering.
Super Biology Corporation (Super Biology) invented and patented a
miracle medicine for the cure of AIDS. Being the sole manufacturer, Super Accordingly, the AMLC now transmits to Prosperous Bank a formal
Biology sold the medicine at an exorbitant price. Because of the sudden demand to allow its agents to examine the banking transactions of
prevalence of AIDS cases in Metro Manila and other urban areas, the Lorenzo, but Prosperous Bank refuses the demand.
Department of Health (DOH) asked Super Biology for a license to produce
and sell the AIDS medicine to the public at a substantially lower price. Is Prosperous Bank's refusal justified? Explain your answer. (4%)
Super Biology, citing the huge costs and expenses incurred for research
and development, refused. IX.

Assuming you are asked your opinion as the legal consultant of the DOH, A.
discuss how you will resolve the matter. (4%)
Alfred issued a check for ₱1,000.00 to Benjamin, his friend, as payment
VIII. for an electronic gadget. The check was drawn against Alfred's account
with Good Bank. Benjamin then indorsed the check specially in favor of
A. Cesar. However, Cesar misplaced the check. Dexter, a dormmate of
Cesar, found the check, altered its amount to ₱91,000.00, and forged
Flora, a frequent traveller, found a purse concealed between the cushions Cesar's indorsement by way of a blank indorsement in favor of Felix, a
of a large sofa inside the VIP lounge in NAIA while she was waiting for her known jeweler. Felix then caused the deposit of the check in his account
flight to be called. Inside the purse was a very valuable diamond-studded with Solar Bank. As collecting bank, Solar Bank stamped "all previous
necklace. She decided not to turn over the purse to the airport indorsements guaranteed" on the check. Seeing such stamp of the
management, and instead to keep it. On her return from her travels, she collecting bank, Good Bank paid the amount of ₱91,000.00 on the check.
had a dependable jeweller appraise the necklace, and the latter told her
that the necklace was easily worth at least ₱5,000,000.00 in the open May Good Bank claim reimbursement from Alfred? Explain your answer.
market. To test the appraisal, she pawned the necklace for ₱2,000,000.00. (4%)
She then deposited the entire amount in her checking account with Metro
Bank. Promptly, Metro Bank reported the transaction to the Anti-Money
Laundering Council (AMLC).
 B. (c) Forgery is a real defense but may only be raised against a
holder not in due course. (2%)
In 2006, Donald, an American temporarily residing in Cebu City, issued to
Rhodora a check for $50,000.00 drawn against Wells Fargo Bank with (d) News reports are not copyrightable. (2%)
offices in San Francisco, California. Rhodora negotiated the check and
delivered it to Yaasmin, a Filipina socialite who frequently travelled locally (e) The law on life insurance prohibits double insurance. (2%)
and internationally. Because of her frequent travels, Yaasmin misplaced
the check. It was only 11 years later on, in 2017, when she found the check XII.
inside a diary kept in her vault in her Hollywood, California house.
Onassis Shipping, Inc. (Onassis) operated passenger vessels and cargo
Discuss and explain the rights of Yaasmin on the check. (4%) trucks, and offered its services to the general public. In line with its vision
and mission to protect the environment, Go-Green Asia (Go-Green), an
X. NGO affiliated with Greenpeace, entered into a contract with Onassis
whereby Go-Green would operate with its own crew the MN Dolphin, an
Wisconsin Transportation Co., Inc. (WTC) owned and operated an inter- ocean-going passenger vessel of Onassis.
island de luxe bus service plying the Manila-Batangas-Mindoro route.
Three friends, namely: Aurelio, Jerome and Florencio rode on the same While on its way to Palawan carrying Go-Green's invited guests who were
WTC bus from Manila bound for Mindoro. Aurelio purchased a ticket for international and local observers desirous of checking certain
himself. Jerome, being a boyhood friend of the bus driver, was allowed a environmental concerns in the area, the MN Dolphin encountered high
free ride by agreeing to sit during the trip on a stool placed in the aisle. waves and strong winds caused by a typhoon in the West Philippine Sea.
Florencio, already penniless after spending all of his money on beer the The rough seas led to serious physical injuries to some of the guests.
night before, just stole a ride in the bus by hiding in the on-board toilet of
the bus. Discuss the liabilities of Onassis and Go-Green to the passengers of the
M/V Dolphin. Explain briefly your answer. (3%)
During the trip, the bus collided with another bus coming from the opposite
direction. The three friends all suffered serious physical injuries.

What are WTC's liabilities, if any, in favor of Aurelio, Jerome and Florencio?
Explain your answer. (4%)

XI.

TRUE or FALSE - Explain briefly your answer.

(a) A conviction under the Trust Receipts Law shall bar a

prosecution for estafa under the Revised Penal Code. (2%)

(b) The term capital in relation to public utilities under Sec. 11, Art.
XII of the 1987 Constitution refers to the total outstanding capital
stock comprising both common and non-voting preferred shares.
(2%)
 YEAR 2016 [b] Does the prior registration also mean a conclusive assumption
that YYY Engineers is in fact the owner of the trademark "TTubes?"
Briefly explain your answer. (2.5%)

IV
I
X's "MINI-ME" burgers are bestsellers in the country. Its "MINI-ME" logo,
What does "doing business in the Philippines" under the Foreign which bears the color blue, is a registered mark and has been so since the
Investments Act of 1991 mean? (5%) year 2010. Y, a competitor ofX, has her own burger which she named "ME-
TOO" and her logo thereon is printed in bluish-green. When X sued Y for
II trademark infringement, the trial court ruled in favor of the plaintiff by
applying the Holistic Test. The court held that Y infringed on X's mark since
Jason is the proud owner of a newly-built house worth PS million. As a the dissimilarities between the two marks are too trifling and frivolous such
protection against any possible loss or damage to his house, Jason applied that Y's "ME-TOO," when compared to X's "MINI-ME," will likely cause
for a fire insurance policy thereon with Shure Insurance Corporation confusion among consumers.
(Shure) on October 11, 2016 and paid the premium in cash. It took the
company a week to approve Jason's application. On October 18, 2016, Is the application of the Holistic Test correct? (5%)
Shure mailed the approved policy to Jason which the latter received five
(5) days later. However, Jason's house had been razed by fire which V
transpired a day before his receipt of the approved policy. Jason filed a
written claim with Shure under the insurance policy. Shure prays for the MS Brewery Corporation (MS) is a manufacturer and distributor of the
denial of the claim on the ground that the theory of cognition applies to popular beer "MS Lite." It faces stiff competition from BA Brewery
contracts of insurance. Corporation (BA) whose sales of its own beer product, "BA Lighter," has
soared to new heights. Meanwhile, sales of the "MS Lite" decreased
Decide Jason's claim with reasons. (5%) considerably. The distribution and marketing personnel of MS later
discovered that BA has stored thousands of empty bottles of "MS Lite"
III manufactured by MS in one of its warehouses. MS filed a suit for unfair
competition against BA before the Regional Trial Court (RTC). Finding a
ABC Appliances Corporation (ABC) is a domestic corporation engaged in connection between the dwindling sales of MS and the increased sales of
the production and sale of televisions and other appliances. YYY BA, the RTC ruled that BA resorted to acts of unfair competition to the
Engineers, a Taiwanese company, is the manufacturer of televisions and detriment of MS. Is the RTC correct? Explain. (5%)
other appliances from whom ABC actually purchases appliances. From
2000, when ABC started doing business with YYY, it has been using the VI
mark "TTubes" in the Philippines for the television units that were bought
from YYY. In 2015, YYY filed a trademark application for "TTubes." Later, Nautica Shipping Lines (Nautica) bought a second hand passenger ship
ABC also filed its application. Both claim the right over the trademark from Japan. It modified the design of the bulkhead of the deck of the ship
"TTubes" for television products. YYY relies on the principle of "first to file" to accommodate more passengers. The ship sunk with its passengers in
while ABC involves the "doctrine of prior use." Tablas Strait due to heavy rains brought by the monsoon. The heirs of the
passengers sued Nautica for its liability as a common carrier based on the
[a] Does the fact that YYY filed its application ahead of ABC mean reconfiguration of the bulkhead which may have compromised the stability
that YYY has the prior right over the trademark? Explain briefly. of the ship. Nautica raised the defense that the monsoon is a fortuitous
(2.5%) event and, at most, its liability is prescribed by the Limited Liability Rule.
Decide with reasons. (5%)
 VII his application form for a life insurance for himself, he did not put a check
to the question if he is suffering from hypertension, believing that because
A railroad track of the Philippine National Railway (PNR) is located near a of his active lifestyle, being hypertensive is a remote possibility. While
busy intersection of Puyat Avenue and Osmefia Highway. One afternoon, playing golf one day, X collapsed at the fairway and was declared dead on
the intersection was heavily congested, as usual. Juan, the driver of a arrival at the hospital. His death certificate stated that X suffered a massive
public utility jeepney (PUJ), drove onto the railroad tracks but could go no heart attack.
farther because of the heavy traffic at the intersection. After the jeepney
stopped right on the railroad track, it was hit and overturned by a PNR train, [a] Will the beneficiary of X be entitled to the proceeds of the life
resulting in the death of Kim, a passenger of the PUJ, and injuries to Juan insurance under the circumstances, despite the non-disclosure
and his other passengers. Juan, the injured passengers and Kim's family that he is hypertensive at the time of application? (2.5%)
sued the PNR for damages for its negligence. It was established that the
steel pole barrier before the track was broken, and that the PNR had the [b] IfX died in an accident instead of a heart attack, would the fact
last clear chance of avoiding the accident. On the other hand, the PNR of X's failure to disclose that he is hypertensive be considered as
raised the defense that the track is for the exclusive use of the train and material information? (2.5%)
that motorists are aware that it is negligence per se to stop their vehicles
on the tracks. Decide the case and explain. (5%) X

VIII After securing a Pl million loan from B, A drew in B's favor a bill of exchange
with C as drawee. The bill reads: "October 1, 2016. Pay to the order of B
In 2015, Total Bank (Total) proposed to sell to Royal Bank (Royal) its the sum of P1 million. To: C (drawee). Signed, A." A then delivered the bill
banking business for P 10 billion consisting of specified assets and to B who, however, lost it. It turned out that it was stolen by D, B's brother.
liabilities. The parties reached an eventual agreement, which they termed D lost no time in forging B's signature and negotiated it to E who acquired
as "Purchase and Assumption (P & A) Agreement," in which Royal would it for value and in good faith.
acquire Total's specified assets and liabilities, excluding contingent claims,
with the further stipulation that it should be approved by the Bangko Sentral May E recover on the bill from C, the drawee? Explain. (5%)
ng Pilipinas (BSP). BSP imposed the condition that Total should place in
escrow Pl billion to cover for contingent claims against it. Total complied.
XI
After securing the approval of the BSP, the two banks signed the
agreement. BSP thereafter issued a circular advising all bank and non-
bank intermediaries that effective January 1, 2016, "the banking activities Royal Links Golf Club obtained a loan from a bank which is secured by a
of Total Bank and Royal Bank have been consolidated and the latter has mortgage on a titled lot where holes 1, 2, 3 and 4 are located. The bank
carried out their operations since then." informed the Board of Directors (Board) that if the arrearages are not paid
within thirty (30) days, it will extra-judicially foreclose the mortgage. The
Board decided to offer to the members 200 proprietary membership
[a] Was there a merger and consolidation of the two banks in point
shares, which are treasury shares, at the price of P175,000.00 per share
of the Corporation Code? Explain. (2.5%)
even when the current market value is P200,000.00.
[b] What is meant by a de facto merger? Discuss. (2.5%)
In behalf and for the benefit of the corporation, Peter, a stockholder, filed
a derivative suit against the members of the Board for breach of trust for
IX selling the shares at P25,000.00, lower than its market value, and asked
for the nullification of the sales and the removal of the board members.
X insured his life for P20 million. X, plays golf and regularly exercises Peter claims the Club incurred a loss of PS million. The Board presented
everyday, hence is considered in good health. He did not know, however, the defense that in its honest belief any delay in the payment of the
that his frequent headache is really caused by his being hypertensive. In arrearages will be prejudicial to the Club as the mortgage on its assets will
be foreclosed and the sale at a lower price is the best solution to the accounts are not "deposits" under the Law on Secrecy of Bank Deposits
problem. Decide the suit and explain. (5%) (Rep. Act No. 1405). Is the contention of X correct? Explain. (5%)

XII XV

X owns 10,000 shares in Z Telecoms Corp. As he is in immediate need of ABC Corp. is engaged in the pawnshop business involving cellphones,
money, he offered to sell all his shares to his friend, Y, at a bargain price. laptops and other gadgets of value. In order to expand its business and
Upon receipt of the purchase price from Y, X proceeded to indorse in blank attract investors, it offered to any person who invests at least Pl 00,000.00
the certificates of shares and delivered these to Y. The latter then went to a "Promissory Note" where it obligated itself to pay the holder a 50% return
the corporate secretary of Z Telecoms Corp. and requested the transfer of on investment within one month. Due to the attractive offer, many
the shares in his name. The corporate secretary refused since X merely individuals invested in the company but not one of them was able to realize
indorsed the certificates in blank to Y. According to the corporate secretary, any profit after one month.
the certificates should have been specifically indorsed to the purchaser, Y.
Was the corporate secretary justified in declining Y's request? Discuss. Has ABC Corp. violated any law with its scheme? Explain. (5%)
(5%)
XVI
XIII
Henry is a board director in XYZ Corporation. For being the "fiscalizer" in
C Corp. is the direct holder of 10% of the shareholdings in U Corp., a the Board, the majority of the board directors want him removed and his
nonlisted (not public) firm, which in turn owns 62% of the shareholdings in shares sold at auction, so he can no longer participate even in the
H Corp., a publicly listed company. The other principal stockholder in H stockholders' meetings. Henry approaches you for advice on whether he
Corp. is C Corp. which owns 18% of its shares. Meanwhile, the majority can be removed as board director and stockholder even without cause.
stocks in U Corp. are owned by B Corp. and V Corp. at 22% and 30%, What is your advice? Explain "amotion" and the procedure in removing a
respectively. B Corp. and V Corp. later sold their respective shares in U director. (5%)
Corp. to C Corp., thereby resulting in the increase of C Corp.'s interest in
U Corp., whether direct or indirect, to more than 50%. XVII

[a] Explain the Tender Offer Rule under the Securities Regulation PJ Corporation (PJ) obtained a loan from ABC Bank (ABC) in the amount
Code. (2.5%) of P10 million for the purchase of 100 pieces of ecodoors. Thereafter, a
Letter of Credit was obtained by PJ against such loan. The beneficiary of
[b] Does the Tender Offer Rule apply in this case where there has the Letter of Credit is Scrap Metal Corp. (Scrap Metal) in Beijing, China.
been an indirect acquisition of the shareholdings in H Corp. by C Upon arrival of 100 pieces of ecodoors, PJ executed a Trust Receipt in
Corp.? Discuss. (2.5%) favor of ABC to cover for the value of the ecodoors for its release to PJ.
The terms of the Trust Receipt is that any proceeds from the sale of the
XIV ecodoors will be delivered to ABC as payment. After the ecodoors were
sold, PJ, instead of paying ABC, used the proceeds of the sale to order
X, a government official, has a number of bank accounts in T Bank from Scrap Metal another 100 pieces of ecodoors but using another bank
containing millions of pesos. He also opened several trust accounts in the to issue a new Letter of Credit fully covered by such proceeds.
same bank which specifically covered the placement and/or investment of
funds. X was later charged with graft and corruption before the PJ refused to pay the proceeds of the sale of the first set of ecodoors to
Sandiganbayan (SB) by the Ombudsman. The Special Prosecutor filed a ABC, claiming that the ecodoors that were delivered were defective. It then
motion praying for a court order authorizing it to look into the savings and instructed ABC not to negotiate the Letter of Credit that was issued in favor
trust accounts of X in T Bank. X opposed the motion arguing that the trust of Scrap Metal.
 [a] Explain what is a "Letter of Credit" as a financial device and a The Summary of Significant Accounting Policies statement of B Corp.
"Trust Receipt" as a security to the Letter of Credit. (2.5%) reveals that the joint venture agreements of B Corp. with Sigma Corp. and
Delta Corp. involve the 0 Corp., P Corp., and Q Corp. The ownership of
[b] As counsel of ABC, you are asked for advice on whether or not the layered corporations and joint venture agreements show that B Corp.
to grant the instruction of PJ. What will be your advice? (2.5%) practically exercises control over the 0, P and Q corporations. 0, P and Q
corporations contend that the control test should be applied and its MPSA
XVIII applications granted. On the other hand, R Corp. argues that the
"grandfather rule" should be applied. Decide with reasons. (5%)
B Bank, a large universal bank, regularly extends revolving credit lines to
business establishments under what it terms as socially responsible XX
banking and private business partnership relations. All loans that are
extended to clients have a common "Escalation Clause," to wit: "B Bank Company X issued a Bank A Check No. 12345 in the amount of
hereby reserves its right to make successive increases in interest rates in P500,000.00 payable to the Bureau of Internal Revenue (BIR) for the
accordance with the bank's adopted policies as approved by the Monetary company's taxes for the third quarter of 1997. The check was deposited
Board; Provided that each successive increase shall be with the written with Bank B, the collecting bank with which the BIR has an account. The
assent of the depositor." check was subsequently cleared and the amount of P500,000.00 was
deducted from the company's balance. Thereafter, Company X was
[a] X, a regular client of the bank, contends that the "Escalation notified by the BIR of its non-payment of its unpaid taxes despite the
Clause" is unfair, unconscionable and contrary to law, morals, P500,000.00 debit from its account. This prompted the company to seek
public policy and customs. Rule on the issue and explain. (2.5%) assistance from the proper authorities to investigate on the matter.

[b] Suppose that the "Escalation Clause" instead reads: "B Bank The results of the investigation disclosed that unknown then to Company
hereby reserves the right to make reasonable increases in interest X, its chief accountant Bonifacio Santos is part of a syndicate that devised
rates in accordance with bank policies as approved by the a scheme to syphon its funds. It was discovered that though deposited, the
Monetary Board; Provided, there shall be corresponding check was never paid to the BIR but was passed on by Santos to Winston
reasonable decreases in interest rates as approved by the Reyes, Bank B's branch manager and Santos' co-conspirator. Instead of
Monetary Board." Would this be valid? Explain. (2.5%) bringing the check to the clearing house, Reyes replaced Check No. 12345
with a worthless check bearing the same amount, and tampered
documents to cover his tracks. No amount was then credited to the BIR.
XIX
Meanwhile, Check No. 12345 was subsequently cleared and the amount
therein credited into the accounts of fictitious persons, to be later withdrawn
In 2015, R Corp., a domestic company that is wholly owned by Filipinos, by Santos and Reyes.
filed its opposition to the applications for Mineral Production Sharing
Agreements (MPSA) of O Corp., P Corp., and Q Corp. which were pending
Company X then sued Bank B for the amount of P500,000.00 representing
before the Panel of Arbitrators (POA) of the Department of Environment
the amount deducted from its account. Bank B interposed the defense that
and Natural Resources (DENR). The three corporations wanted to
Company X was guilty of contributory negligence since its confidential
undertake exploration and mining activities in the province of Isabela. The
employee Santos was an integral part of the scheme to divert the proceeds
oppositor alleged that at least 60% of the capital shareholdings of the
of Check No. 12345. Is Company X entitled to reimbursement from Bank
applicants are owned by B Corp., a 100% Chinese corporation, in violation
B, the collecting bank? Explain. (5%)
of Sec. 2, Art. XII of the Constitution. The applicants countered that they
are qualified corporations as defined under the Philippine Mining Act of
1995 and the Foreign Investments Act of 1991 since B Corp. holds only
40% of the capital stocks in each of them and not 60% as alleged by R
Corp.
 YEAR 2015 pay its obligation under the trust receipt, Fair Bank sued Maine Den, Inc.
for estafa under the Trust Receipts Law. The court, however, dismissed
the suit. Was the dismissal justified? Why or why not? (3%)

B. Does the rule "res perit domino" apply in trust receipt transactions?
I. Explain. (2%)

A. Nadine has a checking account with Fair & Square Bank. One day, she V.
lost her checkbook and the finder was able to forge her signature and
encash the forged check. Will Nadine be able to recover the amount A. A standby letter of credit was issued by ABC Bank to secure the
debited from her checking account from Fair & Square Bank? Justify your obligation of X Company to Y Company. Under the standby letter of credit,
answer. (3%) if there is failure on the part of X Company to perform its obligation, then Y
Company will submit to ABC Bank a certificate of default (in the form
B. Is a manager's check as good as cash? Why or why not? (2%) prescribed under the standby letter of credit) and ABC Bank will have to
pay Y Company the defaulted amount. Subsequently, Y Company
C. When can you treat a bill of exchange as a promissory note? (3%) submitted to ABC Bank a certificate of default notwithstanding the fact that
X Company was not in default. Can ABC Bank refuse to honor the
II. certificate of default? Explain. (3%)

A. Novette entered into a contract for the purchase of certain office B. Is the Uniform Customs and Practice for Documentary Credits of the
supplies. The goods were shipped. While in transit, the goods were insured International Chamber of Commerce applicable to commercial letters of
by Novette. Does she have an insurable interest over the goods even credit issued by a domestic bank even if not expressly mentioned in such
before delivery of the same to her? Explain. (2%) letters of credit? What is the basis for your answer? (3%)

B. Will an insurance policy be binding even if the premium is unpaid? What VI.
if it were partially paid? (3%)
A. DEF Corporation has retained surplus profits in excess of 100% of its
III. paid-in capital stock. However, it is unable to declare dividends, because
it had entered into a loan agreement with a certain creditor wherein the
declaration of dividends is not allowed without the consent of such creditor.
A. Discuss the three-fold character of a bill of lading. (3%)
If DEF Corporation cannot obtain this consent, will it be justified in not
declaring dividends to its stockholders? Explain. (3%)
B. What is a "Jason clause" in a charter party? (2%)
B. What is "watered stock" and what is the legal consequence of the
C. Are common carriers liable for injuries to passengers even if they have issuance of such stock? (3%)
observed ordinary diligence and care? Explain. (2%)

IV.

A. Maine Den, Inc. opened an irrevocable letter of credit with Fair Bank, in
connection with Maine Den, Inc.' s importation of spare parts for its textile
mills. The imported parts were released to Maine Den, Inc. after it executed
a trust receipt in favor of Fair Bank. When Maine Den, Inc. was unable to
 VII. Securities and Exchange Commission. Did Able Corporation
violate the Securities Regulation Code? Explain. (2%)
A. A foreign company has been exporting goods to a Philippine company
for several years now. When the Philippine company failed to pay the latest B. Securities issued by the Philippine government are "exempt
exportation, the foreign company sued to collect in the Philippines. The securities" and, therefore, need not be registered with the
Philippine company interposed the defense that the foreign company was Securities and Exchange Commission prior to their sale or offering
doing business in the Philippines without a license; hence, could not sue to the public in the Philippines. What is the rationale behind this
before a Philippine court. Is this defense tenable? Explain your answer. exemption? (2%)
(3%)
C. Why is the Securities Regulation Code called a "truth in
B. Define: securities law"? (2%)

1. Doctrine of apparent authority (2%) X.

2. Trust fund doctrine (2%) Mr. and Mrs. Reyes invested their hard-earned savings in securities issued
by LEAD Bank. After discovering that the securities sold to them were not
VIII. registered with the SEC in violation of the Securities Regulation Code, the
spouses Reyes filed a complaint for nullity of contract and for recovery of
Barn filed an action to enjoin SN Company's Board of Directors from selling a sum of money with the RTC. LEAD Bank moved to dismiss the case on
a parcel of land registered in the corporation's name, to compel the the ground that it is the SEC that has primary jurisdiction over actions
corporation to recognize Barn as a stockholder with 50 shares, to allow him involving violations of the Securities Regulation Code. If you were the
to inspect the corporate books, and to claim damages against the judge, how would you rule on the motion to dismiss? (3%)
corporation and its officers. Subsequently, the corporation and the
individual defendants moved to dismiss the complaint since the XI.
corporation's certificate of registration was revoked by the SEC during the
pendency of Barn's case on the ground of non-compliance with reportorial A. Why is the Bangko Sentral ng Pilipinas considered a lender of
requirements. The special commercial court granted the motion and last resort? (2%)
reasoned that only an action for liquidation of assets can be maintained
when a corporation has been dissolved and Barn cannot seek reliefs which B. Distinguish a conservator from a receiver of a bank. (2%)
in effect lead to the continuation of the corporation's business. The court
also ruled that it lost jurisdiction over the intra-corporate controversy upon C. What is insider trading? (2%)
the dissolution of the corporation.
XII.
a.) Was the court correct? (3%)
A. Raymond invested his money in securities issued by the Philippine
b.) Four years later, SN Company files an action against Barn to government, through his bank. Subsequently, the Bureau of Internal
recover corporate assets allegedly held by the latter for liquidation. Revenue asked his bank to disclose his investments. His bank refused the
Will this action prosper? (3%) request for disclosure on the ground that the investments are confidential
under the Secrecy of Bank Deposits Law (Republic Act No. 1405, as
IX. amended). Is the bank's refusal justified? Defend your answer. (2%)

A. Able Corporation sold securities to 21 non-qualified buyers

during a 15-month period, without registering the securities with the
 B. First Bank received an order of garnishment over a client's peso XVI.
and dollar deposits in First Bank. Should First Bank comply with
that order? Explain. (3%) A. On the anti-money laundering laws:

XIII. 1. What is the distinction between a "covered transaction

report" and a "suspicious transaction report"? (2%)
A. A commercial bank wants to acquire shares in a cement manufacturing
company. Do you think it can do that? Why or why not? (2%) 2. Does the Anti-Money Laundering Council have the
authority to freeze deposits? Explain. (2%)
B. A court found the interest charged by a bank as excessive and
unconscionable and struck down the contractual stipulation on interest. If B. On foreign investments:
you were the judge, what would you impose as the applicable interest rate?
State your legal basis. (2%) 1. A foreign company has a distributor in the Philippines.
The latter acts in his own name and account. Will this
C. What is the single borrower's limit? (2%) distributorship be considered as doing business by the
foreign company in the Philippines? (3%)
XIV.
2. ABC Corporation was organized in Malaysia but has a
A. Differentiate trademark, copyright and patent from each other. (6%) branch in the Philippines. It is entirely owned by Filipino
citizens. Can you consider ABC Corporation a Philippine
B. What is the doctrine of equivalents? (2%) national? (2%)

C. In what ways would a case for infringement of trademark be different

from a case for unfair competition? (3%)

XV.

CHEN, Inc., a Taiwanese company, is a manufacturer of tires with the mark

Light Year. From 2009 to 2014, Clark Enterprises, a Philippine registered
corporation, imported tires from CHEN, Inc. under several sales contracts
and sold them here in the Philippines. In 2015, CHEN, Inc. filed a
trademark application with the Intellectual Property Office (IPO) for the
mark Light Year to be used for tires. The IPO issued CHEN, Inc. a
certificate of registration (COR) for said mark. Clark Enterprises sought the
cancellation of the COR and claimed it had a better right to register the
mark Light Year. CHEN, Inc. asserted that it was the owner of the mark
and Clark Enterprises was a mere distributor. Clark Enterprises argued that
there was no evidence on record that the tires it imported from CHEN, Inc.
bore the mark Light Year and Clark Enterprises was able to prove that it
was the first to use the mark here in the Philippines. Decide the case. (4%)
 YEAR 2014 (A) a majority vote of the Board of Directors and authorized by the
vote of the stockholders representing at least a majority of the
outstanding capital stock

(B) a majority vote of the Board of Directors and authorized by the

I. vote of the stockholders representing at least two-thirds of the
outstanding capital stock
Carlo and Bianca met in the La Boracay festivities. Immediately, they fell
in love with each other and got married soon after. They have been (C) two-thirds vote of the Board of Directors and authorized by the
cohabiting blissfully as husband and wife, but they did not have any vote of the stockholders representing at least a majority of the
offspring. As the years passed by, Carlo decided to take out an insurance outstanding capital stock
on Bianca’slife for P1,000,000.00 with him (Carlo) as sole beneficiary,
given that he did not have a steady source of income and he always (D) two-thirds vote of the Board of Directors and authorized by the
depended on Bianca both emotionally and financially. During the term of vote of the stockholders representing at least two-thirds of the
the insurance, Bianca died of what appeared to bea mysterious cause so outstanding capital stock
that Carlo immediately requested for an autopsy tobe conducted. It was
established that Bianca died of a natural cause. More than that, it was also IV.
established that Bianca was a transgender all along – a fact unknown to
Carlo. Can Carlo claim the insurance benefit? (5%)
DC is a unit owner of Medici Condominium located in Pasig City. On
September 7, 2011, Medici Condominium Corp. (Medici) demanded from
II. DC payment for alleged unpaid association dues and assessments
amounting to P195,000.00. DC disputed the claim, saying that he paid all
Bong bought 300 bags of rice from Ben for P300,000.00. As payment, dues as shown by the fact that he was previously elected as Director and
Bong indorsed to Bena Bank of the Philippine Islands (BPI) check issued President of Medici. Medici, on the other hand, claimed that DC’s obligation
by Baby in the amount of P300,000.00. Upon presentment for payment, was a carry-over of his obligations to the condominium developer, Medici
the BPI check was dishonored because Baby’s account from which it was Construction Corporation. Consequently, DCwas prevented from
drawn has been closed. To replace the dishonored check, Bong indorsed exercising his right to vote and be voted for during the 2011 election of
a crossed Development Bank of the Philippines (DBP) check issued also Medici’s Board of Directors. This prompted DC to file a complaint for
by Baby for P300,000.00. Again, the check was dishonored because of damages before the Special Commercial Court of Pasig City. Medici filed
insufficient funds. Ben sued Bong and Baby on the dishonored BPI check. a motion to dismiss on the ground that the court has no jurisdiction over
Bong interposed the defense that the BPI check was discharged by the intra-corporate dispute which the Housing and Land Use Regulatory
novation when Ben accepted the crossed DBP check as replacement for Board (HLURB) has exclusive jurisdiction over. Is Medici correct? (4%)
the BPI check. Bong cited Section 119 of the Negotiable Instruments Law
which provides that a negotiable instrument is discharged "by any other act V.
which will discharge a simple contractfor the payment of money." Is Bong
correct? (4%)
A corporation organized under the Corporation Code commences to have
corporate existence and juridical personality and is deemed incorporated:
III. (1%)

Under the Financial Rehabilitation and Insolvency Act (FRIA), the filing of (A) from the date the application for incorporation is filed with the
a petition for voluntary rehabilitation must be approved by: (1%) Securities and Exchange Commission (SEC)
 (B) from the date the SEC issues a certificate of incorporation (A) Inland Marine Insurance
under its official seal
(B) Industrial Life Insurance
(C) thirty (30) days after the date the application for incorporation
is filed with the SEC (C) Motor Vehicle Liability Insurance

(D) thirty (30) days after the datethe SEC issues a certificate of (D) Life Insurance
incorporation under its official seal
IX.
VI.
On February 21, 2013, Barrack entered into a contract of insurance with
On May 26, 2014, Jess insured with Jack Insurance (Jack) his 2014 Toyota Matino Insurance Company (Matino) involving a motor vehicle. The policy
Corolla sedan under a comprehensive motor vehicle insurance policy for obligates Matino to pay Barrack the amount of Six Hundred Thousand
one year. On July 1, 2014, Jess’ car was unlawfully taken. Hence, he Pesos (P600,000.00) in case of loss or damage to said vehicle during the
immediately reported the theft to the Traffic Management Command (TMC) period covered, which is from February 26, 2013 to February 26, 2014.
of the Philippine National Police (PNP), which made Jess accomplish a
complaint sheet as part of its procedure. In the complaint sheet, Jess On April 16, 2013, at about 9:00 a.m., Barrack instructed his driver, JJ, to
alleged that a certain Ric Silat(Silat) took possession of the subject vehicle bring the motor vehicle to a near by auto shop for tune-up. However, JJno
to add accessories and improvements thereon. However, Silat failed to longer returned and despite diligent efforts to locate the said vehicle, the
return the subject vehicle within the agreed 3-day period. As a result, Jess efforts proved futile. Resultantly, Barrack promptly notified Matino of the
notified Jack of his claim for reimbursement of the value of the lost vehicle said loss and demanded payment of the insurance proceeds
under the insurance policy. Jack refused to pay claiming that there is no of P600,000.00.
theft as Jess gave Silat lawful possession of the car. Is Jack correct? (4%)
In a letter dated July 5, 2013. Matino denied the claim, reasoning as stated
VII. in the contract that "the company shall not be liable for any malicious
damage caused by the insured, any member of his family or by a person
Jinggy went to Kluwer University(KU) in Germany for his doctorate degree in the insured’s service. Is Matino correct in denying the claim? (4%)
(Ph.D.). He completed his degree with the highest honors in the shortest
time. When he came back, he decided to set-up his own graduate school X.
in his hometown in Zamboanga. After seeking free legal advice from his
high-flying lawyer-friends, he learned that the Philippines follows the
A person is said to have an insurable interest in the subject matter insured
territoriality principle in trademark law, i.e., trademark rights are acquired
where he has a relation or connection with, or concern in it that he will
through valid registration in accordance with the law. Forth with, Jinggy
derive pecuniary benefit or advantage from its preservation. Which among
named his school the Kluwer Graduate School of Business of Mindanao
the following subject matters is not considered insurable? (1%)
and immediately secured registration with the Bureau of Trademarks. KU
did not like the unauthorized use of its name by its top alumnus no less.
KU sought your help. What advice can you give KU? (4%) (A) A partner in a firm on its future profits

VIII. (B) A general creditor on debtor’s property

As a rule, an insurance contract is consensual and voluntary. The (C) A judgment creditor on debtor’s property
exception is in the case of: (1%)
(D) A mortgage creditor on debtor’s mortgaged property
 XI. 2. Declaration and approval of the 13th month bonus;

PA Assurance (PA) was incorporated in 1980 toengage in the sale of pre- 3. Purchase of an office condominium unit at the Fort; and
need educational plans. It sold open-ended educational plans which
guaranteed the payment of tuition and other fees to planholders 4. Declaration of P10.00 per share cash dividend.
irrespective of the cost at the time of availment. Italso engaged in the sale
of fixed value plans which guaranteed the payment of a pre-determined Are the actions of the Executive Committee valid? (4%)
amount to planholders. In 1982, PAwas among the country’s top
corporations. However, it subsequently suffered financial difficulties.
XIV.
On September 8, 2005, PA filed a Petition for Corporate Rehabilitation
On September 25, 2013, Danny Marcial (Danny) procured an insurance on
before the Regional Trial Court (RTC) of Makati City. On October 17, 2005,
his life with a face value of P5,000,000.00 from RN Insurance Company
ten (10) plan holders filed an Opposition and Motion to Exclude
(RN), with his wife Tina Marcial(Tina) as sole beneficiary. On the same
Planholders from Stay Order on the ground that planholders are not
day, Danny issued an undated check to RN for the full amount of the
creditors as they (planholders) have a trust relationship with PA. Are the
premium. On October 1, 2013, RN issued the policy covering Danny’s life
planholders correct? (4%)
insurance. On October 5, 2013, Dannymet a tragic accident and died. Tina
claimed the insurance benefit, but RN was quick to deny the claim because
XII. at the time of Danny’s death, the check was not yet encashed and therefore
the premium remained unpaid.
To constitute a quorum for the transaction of corporate business, only a
majority of the number of Board of Directors is required: (1%) Is RN correct? Will your answer be the same if the check is dated October
15, 2013? (4%)
(A) as fixed by the corporate by-laws
XV.
(B) as fixed in the articles of incorporation
A, B, C, D, and Ewere members of the 2003-2004 Board of Directors of
(C) actually serving in the board FLP Corporation. At the election for the 2004-2005 Board of Directors, not
one of them was elected. They filed in court a derivative suit on behalf of
(D) actually serving in the board but constituting a quorum FLP Corporation against the newly-elected members of the Board of
Directors. They questioned the validity of the election as it was allegedly
XIII. marred by lack of quorum, and prayed for the nullification of the said
election. The 2004-2005 Board of Directorsmoved to dismiss the complaint
Pursuant to its By-Laws, Soei Corporation’s Board of Directors created an because the derivative suit is not proper. Decide. (4%)
Executive Committee to manage the affairs of the corporation in between
board meetings. The Board of Directors appointed the following members XVI.
of the Executive Committee: the President, Sarah L; the Vice President,
Jane L; and, a third member from the board, Juan Riles. On December 1, In intellectual property cases, fraudulent intent is not an element of the
2013, the Executive Committee, with Sarah L and Jane L present, met and cause of action except in cases involving: (1%)
decided on the following matters:
(A) trademark infringement
1. Purchase of a delivery van for use in the corporation’s retail
business; (B) copyright infringement
 (C) patent infringement and "wave-like" pattern of the mid-sole and outer sole of Inter Pacific’s
shoes are very similar to Skechers’ shoes, if not exact patterns thereof. On
(D) unfair competition the side of Inter-Pacific’s shoes, near the upper part, appears the stylized
"S" placed in the exact location as that of the stylized "S" the Skechers
XVII. shoes. On top of the "tongue" of both shoes, appears the stylized "S" in
practically the same location and size.
On December 1, 2010, Kore A Corporationshipped from South Korea to
LT Corporation in Manila some 300,000 sheets of high-grade special steel. In its defense, Inter-Pacific claims that under the Holistic Test, the following
The shipment was insured against all risks by NA Insurance(NA). The dissimilarities are present: the mark "S" found in Strong shoes is not
carrying vessel arrived at the Portof Manila on January 10, 2011. When the enclosed in an "oval design"; the word "Strong" is conspicuously placed at
shipment was discharged, it was noted that 25,000 sheets were damaged the backside and insoles; the hang tags labels attached to the shoes bear
and in bad order. The entire shipment was turned over to the custody of the word "Strong" for Inter-Pacific and "Skechers U.S.A." for Skechers;
ATI, the arrastre operator, on January 21, 2011 for storage and and, Strong shoes are modestly priced compared to the costs of Skechers
safekeeping, pending its withdrawal by the consignee’s authorized shoes.
customs broker, RVM.
Under the foregoing circumstances, which is the proper test to be applied
On January 26 and 29, 2011, the subject shipment was withdrawn by RVM – Holistic or Dominancy Test? Decide. (4%)
from the custody of ATI. On January 29, 2011, prior to the withdrawal of
the last batch of the shipment, a joint inspection of the cargo was XIX.
conducted per the Request for Bad Order Survey (RBO) dated January 28,
2011. The examination report showed that 30,000 sheets of steel were Guetze and his wife have three (3) children: Neymar, 25, who is now based
damaged and in bad order. in Rio de Janeiro, Brazil; Muelter, 23, who has migrated to Munich,
Germany; and James, 21, who resides in Bogota, Colombia. Neymar and
NA Insurance paid LT Corporationthe amount of P30,000,000.00 for the Muelter have since renounced their Philippine citizenship in favor of their
30,000 sheets that were damaged, as shown in the Subrogation Receipt country of residence. Nearing 70 years old, Guetze decided to incorporate
dated January 13, 2013. Thereafter, NA Insurance demanded reparation his business in Binondo, Manila. He asked his wife and three (3) children
against ATI for the goods damaged in its custody, in the amount to act as incorporators with one (1) share of stock each, while he owned
of P5,000,00.00. ATI refused to pay claiming that the claim was already 999,996 shares of the 1,000,000 shares of the capital stock. (6%)
barred by the statute of limitations. ATI alleged that the Carriage of Goods
by Sea Act (COGSA) applies in this case since the goods were shipped (A) Assuming all other requirements are met, should the Securities
from a foreign port to the Philippines. NA Insurance claims that the COGSA and Exchange Commission (SEC) accept or reject the Articles of
does not apply, since ATIis not a shipper or carrier. Who is correct? (5%) Incorporation? Why?

XVIII. (B) Being the control freak and micro-manager that he is, Guetze
asked you – his astute legal adviser – if he can serve as Chairman
Skechers Corporation sued Inter-Pacific for trademark infringement, of the Board of Directors, as President, and as General Manager
claiming that Inter-Pacificused Skechers’ registered "S" logo mark on Inter- of the corporation, all at the same time. Please advise Guetze.
Pacific’s shoe products without its consent. Skechers has registered the
trademark "SKECHERS" and the trademark "S" (with an oval design) with (C) Assuming the corporation has beenproperly registered, may
the Intellectual Property Office (IPO). the Articles of Incorporation now beamended to reduce the number
of directors to two (2) – Guetze and his wife– to reflect the real
In its complaint, Skechers points out the following similarities: the color owners of the shares of stock?
scheme of the blue, white and gray utilized by Skechers. Even the design
 XX. 3. Soterodid not have the financial capability to pay the premium
on the policy.
On May 13, 1996, PAM, Inc. obtained a P15,000,000.00 fire insurance
policy from Ilocano Insurance covering its machineries and equipment 4. Soterodid not sign the application for insurance.
effective for one (1) yearor until May 14, 1997. The policy expressly stated
that the insured properties were located at "Sanyo Precision Phils. 5. Aban was the one who filed the insurance application and
Building, Phase III, Lots 4 and 6, Block 15, PEZA, Rosario, Cavite." Before designated herself as the beneficiary.
its expiration, the policy was renewed on "as is" basis for another year or
until May 13, 1998. The subject properties were later transferred to Pace For the above reasons and claiming fraud, Ilocos Life denied Aban’s claim
Factory also in PEZA. On October 12, 1997, during the effectivity of the on April 16, 1997, but refunded the premium paid on the policy. (6%)
renewed policy, a fire broke out at the Pace Factory which totally burned
the insured properties.
(A) May Sotero validly designate her niece as beneficiary?
The policy forbade the removal of the insured properties unless sanctioned
(B) May the incontestability period set in even in cases of fraud as
by Ilocano. Condition 9(c) of the policy provides that "the insurance ceases
alleged in this case?
to attach as regards the property affected unless the insured, before the
occurrence of any loss or damage, obtains the sanction of the company
signified by endorsement upon the policy x x x (c) if the property insured is (C) Is Aban entitled to claim the proceeds under the policy?
removed to any building or place other than in that which is herein stated
to be insured." PAM claims that it has substantially complied with notifying XXII.
Ilocano through its sister company, the RBC, which, in fact, referred PAM
to Ilocano for the insurance coverage. Is Ilocano liable under the policy? Paul George Pua (Pua) filed a complaint for a sum of money against the
(4%) spouses Benito and Caroline James (Spouses James). In the complaint,
Pua prayed that the defendants pay Pua the amount of P8,500,000.00,
XXI. covered by a check. Pua asserts that defendants owed him a sum of
money way back in 1988 for which the Spouses James gave him several
On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from checks. These checks, however, had all been dishonored and Pua has not
Ilocos Bankers Life Insurance Corporation (Ilocos Life) designating been paid the amount of the loan plus the agreed interest. In 1996, the
Creencia Aban(Aban), her niece, as her beneficiary. Ilocos Life issued Spouses James approached Pua to get the computation of their liability
Policy No. 747, with a face value of P100,000.00, in Sotero’s favor on including the 2% compounded interest. After bargaining to lower the
August 30, 1993, after the requisite medical examination and payment of amount of their liability, the Spouses James gave Puaa postdated check
the premium. bearing the discounted amount of P8,500,000.00. Like the 1988 checks,
the drawee bank likewise dishonored this check. To prove his allegations,
Pua submitted the original copies of the 17 checks issued by Caroline in
On April 10, 1996, Sotero died. Aban filed a claim for the insurance
1988 and the check issued in 1996, Manila trust Check No. 750. The
proceeds on July 9, 1996. Ilocos Life conducted an investigation into the
Spouses James, on the other hand, completely denied the existence of the
claim and came out withthe following findings:
debt asserting that they had never approached Pua to borrow money in
1988 or in 1996. They assert, instead, that Pua is simply acting at the
1. Soterodid not personally apply for insurance coverage, as she instance of his sister, Lilian, to file a false charge against them using a
was illiterate. check left to fund a gambling business previously operated by Lilian and
Caroline. Decide. (5%)
2. Soterowas sickly since 1990.
 XXIII. Foton. Pura’s act of issuing the subject check did not, by itself, assume the
obligation of Freddie to Foton or automatically make her a party to the
What vote is needed to consider every decision to be a valid corporate act? contract. Is Pura liable? (5%)
(1%)
XXV.
(A) a majority of the directors present at the meeting
In an action for collection of a sum of money, the Regional Trial Court
(B) two-thirds of the directors present at the meeting (RTC) of Makati City issued a decision finding D-Securities, Inc. liable to
Rehouse Corporation for P10,000,000.00. Subsequently, the writ of
(C) a majority of the directors present at the meeting at which there execution was issued but returned unsatisfied because D-Securities had
is a quorum no more assets to satisfy the judgment. Rehouse moved for an Alias Writ
of Execution against Fairfield Bank (FB), the parent company of D-
Securities. FB opposed the motion on the grounds that it is a separate
(D) two-thirds of the directors present at the meeting at which there
entity and that it was never made a party to the case. The RTC granted the
is a quorum
motion and issued the Alias Writ of Execution. In its Resolution, the RTC
relied on the following facts: 499,995 out of the 500,000 outstanding shares
XXIV. of stocks of D-Securities are owned by FB; FB had actual knowledge of the
subject matter of litigation as the lawyers who represented D-Securities are
A criminal complaint for violation of B.P. 22 was filed by Foton Motors also the lawyers of FB. As an alter ego, there is no need for a finding of
(Foton), an entity engaged in the business of car dealership, against Pura fraud or illegality before the doctrine of piercing the veil of corporate fiction
Felipe (Pura) with the Office of the City Prosecutor of Quezon City. The can be applied. The RTC ratiocinated that being one and the same entity
Office found probable cause to indict Pura and filed an information before in the eyes of the law, the service of summons upon D-Securities has
the Metropolitan Trial Court (MeTC) of Quezon City, for her issuance of a bestowed jurisdiction over both the parent and wholly-owned subsidiary. Is
postdated check in the amount of P1,020,000.00 which was subsequently the RTC correct? (4%)
dishonored upon presentment due to "Stop Payment."
XXVI.
Pura issued the check because her son, Freddie, attracted by a huge
discount of P220,000.00, purchased a Foton Blizzard 4x2 from Foton. The DMP Corporation (DMP) obtained a loan of P20 million from National Bank
term of the transaction was Cash-on-Delivery and no downpayment was (NB) secured by a real estate mortgage over a 63,380-square-meter land
required. The car was delivered on May 14, 1997, but Freddie failed to pay situated in Cabanatuan City. Due to the Asian Economic Crisis, DMP
upon delivery. Despite non-payment, Freddie took possession of the experienced liquidity problems disenabling it from paying its loan on time.
vehicle. For that reason, NB sought the extra judicial foreclosure of the said
mortgage by filing a petition for sale on June 30, 2003. On September 4,
Pura was eventually acquitted of the charge of violating B.P. 22 but was 2003, the mortgaged property was sold at public auction, which was
found civilly liable for the amount of the check plus legal interest. Pura eventually awarded to NBas the highest bidder. That same day, the Sheriff
appealed the decision as regards the civil liability, claiming that there was executed a Certificate of Sale in favor of NB.
no privity of contract between Foton and Pura. No civil liability could be
adjudged against her because of her acquittal from the criminal charge. It On October 21, 2003, DMP filed a Petition for Rehabilitation before the
was Freddie who was civilly liable to Foton, Pura claimed. Pura added that Regional Trial Court (RTC). Pursuant to this, a Stay Order was issued by
she could not be an accommodation party either because she only came the RTC on October 27, 2003.
in after Freddie failed to pay the purchase price, or six (6) months after the
execution of the contract between Foton and Freddie. Her liability was
On the other hand, NB caused the recording of the Sheriff’s Certificate of
limited to her act of issuing a worthless check, but by her acquittal in the
Sale on December 3, 2003 with the Register of Deeds of Cabanatuan City.
criminal charge, there was no more basis for her to be held civilly liable to
NB executed an Affidavit of Consolidation of Ownership and had the same XXVIII.
annotated on the title of DMP. Consequently, the Register of Deeds
cancelled DMP’s title and issued a new title in the name of NB on Which of the following instruments is negotiable if all the other
December 10, 2003. requirements of negotiability are met? (1%)

NB also filed on March 17, 2004 an Ex-Parte Petition for Issuance of Writ (A) A promissory note with promise to pay out of the U.S. Dollar
of Possession before the RTC of Cabanatuan City. After hearing, the RTC account of the maker in XYZ Bank
issued on September 6, 2004 an Order directing the Issuance of the Writ
of Possession, which was issued on October 4, 2004. (B) A promissory note which designates the U.S. Dollar currency
in which payment is to be made
DMP claims that all subsequent actions pertaining to the Cabanatuan
property should have been held in abeyance after the Stay Order was (C) A promissory note which contains in addition a promise to paint
issued by the rehabilitation court. Is DMP correct? (4%) the portrait of the bearer

XXVII. (D) A promissory note made payable to the order of Jose Cruz or
Josefa Cruz
ELP Insurance, Inc. issued Marine Policy No. 888 in favor of FCL Corp. to
insure the shipment of 132 bundles of electric copper cathodes against all XXIX.
risks. Subsequently, the cargoes were shipped on board the vessel "M/V
Menchu" from Leyte to Pier 10, North Harbor, Manila.
KKis from Bangkok, Thailand. She studies medicine in the Pontifical
University of Santo Tomas (UST). She learned that the same foreign books
Upon arrival, FCL Corp. engaged the services of CGM, Inc. for the release prescribed in UST are 40-50% cheaper in Bangkok. So she ordered 50
and withdrawal of the cargoes from the pier and the subsequent delivery copies of each book for herself and her classmates and sold the books at
to its warehouses/plants in Valenzuela City. The goods were loaded on 20% less than the price in the Philippines. XX, the exclusive licensed
board twelve (12) trucks owned by CGM, Inc., driven by its employed publisher of the books in the Philippines, sued KK for copyright
drivers and accompanied by its employed truck helpers. Of the twelve (12) infringement. Decide. (4%)
trucks en routeto Valenzuela City, only eleven (11) reached the
destination. One (1) truck, loaded with eleven (11) bundles of copper
cathodes, failed to deliver its cargo.

Because of this incident, FCL Corp. filed with ELP Insurance, Inc. a claim
for insurance indemnity in the amount of P1,500,000.00. After the requisite
investigation and adjustment, ELP Insurance, Inc. paid FCL Corp. the
amount of P1,350,000.00 as insurance indemnity.

ELP Insurance, Inc., thereafter, filed a complaint for damages against

CGM, Inc. before the Regional Trial Court (RTC), seeking reimbursement
of the amount it had paid to FCL Corp. for the loss of the subject cargo.
CGM, Inc. denied the claim on the basis that it is not privy to the contract
entered into by and between FCL Corp. and ELP Insurance, Inc., and
hence, it is not liable therefor. If you are the judge, how will you decide the
case? (4%)
 YEAR 2013 III.

From his first term in 2007, Congressman Abner has been endorsing his
pork barrel allocations to Twin Rivers in exchange for a commission of 40%
of the face value of the allocation. Twin Rivers is a non-governmental
I. organization whose supporting papers, after audit, were found by the
Commission on Audit to be fictitious. Other than to prepare and submit
Antonio issued the following instrument: falsified papers to support the encashment of the pork barrel checks, Twin
Rivers does not appear to have done anything on the endorsed projects
August 10,2013 and Congressman Abner likewise does not appear to have bothered to
Makati City monitor the progress of the projects he endorsed. The congressman
converted most of the commissions he generated into US dollars, and
deposited these in a foreign currency account with Banco de Plata (BDP).
P100,000.00
Based on amply-supported tips given by a congressman from another
Sixty days after date, I promise to pay Bobby or his designated
political party, the Anti-Money Laundering Council sent BDP an order: (1)
.representative the sum of ONE HUNDRED THOUSAND PESOS(P
to confirm Cong. Abner's deposits with the bank and to provide details of
100,000.00) from my BPI Acct. No. 1234 if, by this due date, the sun still
these deposits; and (2) to hold all withdrawals and other transactions
sets in the west to usher in the evening and rises in the east the following
involving the congressman's bank accounts.
morning to welcome the day.
As counsel for BDP, would you advise the bank to comply with the order?
(Sgd.) Antonio Reyes
(8%)
Explain each requirement of negotiability present or absent in the
IV.
instrument. (8%)
Rudy is a fine arts student in a university. He stays in a boarding house
II.
with Bernie as his roommate. During his free time, Rudy would paint and
leave his finished works lying around the boarding house. One day, Rudy
Benny applied for life insurance for Php 1.5 Million. The insurance saw one of his works -an abstract painting entitled Manila Traffic Jam - on
company approved his application and issued an insurance policy effective display at the university cafeteria. The cafeteria operator said he
Nov. 6, 2008. Benny named his children as his beneficiaries. On April 6, purchased the painting from Bernie who represented himself as its painter
2010, Benny died of hepatoma, a liver ailment. and owner.

The insurance company denied the children's claim for the proceeds of the Rudy and the cafeteria operator immediately confronted Bernie. While
insurance policy on the ground that Benny failed to disclose in his admitting that he did not do the painting, Bernie claimed ownership of its
application two previous consultations with his doctors for diabetes and copyright since he had already registered it in his name with the National
hypertension, and that he had been diagnosed to be suffering from Library as provided in the Intellectual Property Code.
hepatoma. The insurance company also rescinded the policy and refunded
the premiums paid.
Who owns the copyright to the painting? Explain. (8%)
Was the insurance company correct? (8%)
 V. Would you, as bank counsel and as an officer of the court, advise the bank
to proceed with its contemplated action? (8%)
You are a member of the legal staff of a law firm doing corporate and
securities work for Coco Products Inc., a company with unique products VII.
derived from coconuts and whose shares are traded in the Philippine Stock
Exchange. A partner in the law firm, Atty. Buenexito, to whom you report, Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have
is the Corporate Secretary of Coco Products. You have long been investing had a long-standing insurance relationship with each other; SPMC secures
in Coco Products stocks even before you became a lawyer. the comprehensive fire insurance on its plant and facilities from SIC. The
standing business practice between them has been to allow SPMC a credit
While working with Atty. Buenexito on another file, he accidentally gave period of 90 days from the renewal of the policy within which to pay the
you the Coco Products file containing the company's planned corporate premium.
financial rehabilitation. While you knew you had the wrong file, your
curiosity prevailed and you browsed through the file before returning it. Soon after the new policy was issued and before premium payments could
Thus, you learned that a petition for financial rehabilitation is imminent, as be made, a fire gutted the covered plant and facilities to the ground. The
the company could no longer meet its obligations as they fell due. day after the fire, SPMC issued a manager's check to SIC for the fire
insurance premium, for which it was issued a receipt; a week later SPMC
Soon after, your mother is rushed to the hospital for an emergency issued its notice of loss.
operation, and you have to raise money for her hospital bills. An immediate
option for you is to sell your Coco Products shares. The sale would be very SIC responded by issuing its own manager's check for the amount of the
timely because the price of the company's stocks are still high. premiums SPMC had paid, and denied SPMC's claim on the ground that
under the "cash and carry" principle governing fire insurance, no coverage
Would you sell the shares to raise the needed funds for your mother's existed at the time the fire occurred because the insurance premium had
hospitalization? Take into account legal (5%) and ethical (3%) not been paid.
considerations. (8% total points)
Is SPMC entitled to recover for the loss from SIC? (8%)
VI.
VIII.
Delano Cruz is in default in the payment of his existing loan from BDP
Bank. To extend and restructure this loan, Delano agreed to execute a trust In the November 2010 stockholders meeting of Greenville Corporation,
receipt in the bank's favor covering the iron pellets Delano imported from eight (8) directors were elected to the board. The directors assumed their
China one year earlier. Delano subsequently succeeded in selling the iron posts in January 20 ll. Since no stockholders' meeting was held in
pellets to a smelting plant, but the proceeds went to the payment of the November 2011, the eight directors served in a holdover capacity and thus
separation benefits of his employees who were laid off as he reduced his continued discharging their powers.
operations.
In June 2012, two (2) of Greenville Corporation's directors- Director A and
When the extended loan period expired without any significant payment Director B -resigned from the board. Relying on Section 29 of the
from Delano (not even to the extent of the proceeds of the sale of the iron Corporation Code, the remaining six (6) directors elected two (2) new
pellets),BDP Bank consulted you on how to proceed against Delano. The directors to fill in the vacancy caused by the resignation of Directors A and
bank is contemplating the filing of estafa pursuant to the provisions of Pres. B.
Decree No. 115 (Trust Receipts Law) to force Delano to tum in at least the
proceeds of the sale of the iron pellets. Stockholder X questioned the election of the new directors, initially,
through a letter-complaint addressed to the board, and later (when his
letter-complaint went unheeded), through a derivative suit filed with the
court. He claimed that the vacancy in the board should be filled up by the authorized capital stock consists of voting common shares and non-voting
vote of the stockholders of Greenville Corporation. Greenville preferred shares, with equal par values of P100.00/share. Currently, the
Corporation's directors defended the legality of their action, claiming as issued and outstanding capital stock of BelPhil consists only of common
well that Stockholder X's derivative suit was improper. shares shared between Bayani Cruz, a Filipino with 60% of the issued
common shares, and Bernard Fleet, a Canadian, with 40%.
Rule on the issues raised. (8%)
To secure additional working fund, BelPhil issued preferred shares to
IX. Bernard Fleet equivalent to the currently outstanding common shares. A
suit was filed questioning the corporate action on the ground that the
Fil-Asia Air Flight 9 I 6 was on a scheduled passenger flight from Manila foreign equity holdings in the company would now exceed the 40% foreign
when it crashed as it landed at the Cagayan de Oro airport; the pilot equity limit allowed under the Constitution for public utilities.
miscalculated the plane's approach and undershot the runway. Of the I 50
people on board, ten (10) passengers died at the crash scene. Rule on the legality of Bernard Fleet's current holdings. (8%)

Of the ten who died, one was a passenger who managed to leave the plane
but was run over by an ambulance coming to the rescue. Another was an
airline employee who hitched a free ride to Cagayan de Oro and who was
not in the passenger manifest.

It appears from the Civil Aeronautics Authority investigation that the co-
pilot who had control of the plane's landing had less than the required flying
and landing time experience, and should not have been in control of the
plane at the time. He was allowed to fly as a co-pilot because of the scarcity
of pilots - Philippine pilots have been recruited by foreign airlines under
vastly improved flying terms and wages so that newer and less trained
pilots are being locally deployed. The main pilot, on the other hand, had a
very high level of blood alcohol at the time of the crash.

You are part of the team that the victims hired to handle the case for them
as a group. In your case conference, the following questions came up:

(A) Explain the causes of action legally possible under the given
facts against the airline and the pilots; whom will you specifically
implead in these causes of action? (5%)

(B) How will you handle the cases of the passenger run over by the
ambulance and the airline employee allowed to hitch a free ride to
Cagayan de Oro? (3%)

X.

Bell Philippines, Inc. (BelPhil) is a public utility company, duly incorporated

and registered with the Securities and Exchange Commission. Its
 YEAR 2012 - ESSAY (B) Yes, since the execution of the Deed of Assignment by
Claude would constitute the legal authority to cancel the
shares in his name and place them in Conrad's name.

(C) No, because corporate officers can only take direct

I. Claude, the registered stockholder of 1 000 shares in ABC Corp., instructions from the registered owners on the proper
pledged the shares to Conrad by endorsement in blank of the covering disposition of shares registered in their names.
stock certificates and, execution of a Deed of Assignment of Shares of
Stock, intended as collateral for a loan of P1.0 Million that was also (D) No, because the corporation has a primary lien on the
supported by a separate promissory note. shares covering the unpaid subscription.

I. (1) Under these facts, is there a valid pledge of the shares of II. A foreign delegation of businessmen and investment bankers called on
stock to Conrad? (1%) your law firm to discuss the possibilities of investing in various projects in
the Philippines, and wanted your thoughts on certain issues regarding
(A) No, because shares of stock are intangible personal foreign investments in the Philippines.
properties whose possession cannot be delivered and,
hence, cannot be the subject of a pledge. II. (1)The delegation has been told about the Foreign Investments
Act of 1991, as amended (FIA '91), and they asked what exactly is
(B) No, because the pledge of shares of stock requires the law's essential thrust regarding foreign investments in
double registration with the Register of Deeds of the Philippine business and industries.
principal place of business of the corporation and of the
residence of the pledgor. You replied that FIA '91 essentially reflects __________. (1 %)

(C) Yes, because endorsement and delivery of the (A) the "Filipino First Policy"
certificates of stock is equivalent to the transfer of
possession of the covered shares to the pledgee. (B) the "Foreign Investments Positive Lists" concept

(D) Yes, because the execution of the Deed of Assignment (C) the "Foreign Investments Negative Lists" concept
of Shares of Stock is equivalent to a lawful pledge of the
shares of stock.
(D) the "Control Test" concept(E) All of the above.
I. (2) After Claude defaulted on the loan, Conrad sought to have
II. (2)The delegation asked: aside from Filipino ctt1zens, what
the shares registered in his name in the books of the corporation.
entities would fall under the definition of "Philippine National" under
If you are the Corporate Secretary of ABC Corporation, would you
FIA '91?
register the shares in the name of Conrad without any written
instruction from Claude? (1%)
You replied that the definition of "Philippine national" under FIA '91
covers __________. (1%)
(A) Yes, since the endorsement and delivery of the
certificates of stock executed by Claude constitute the legal
authority to cancel the shares in his name and to place (A) domestic partnerships wholly composed of Filipino
them in Conrad's name. citizens
 (B) domestic corporations 60% of whose capital stock, II. (4) As a last question and by way of a concrete example, a
outstanding and entitled to vote, are owned and held by delegation member finally inquired - which of the following
Filipino citizens corporations or businesses in the Philippines may it invest in and
up to what extent? (1%)
(C) foreign corporations considered as doing business in
the Philippines under the Corporation Code, 100% of (A) A lifestyle magazine publication corporation, up to 40%
whose capital stock, outstanding and entitled to vote, are equity
wholly-owned by Filipino citizens
(B) An advertising corporation, up to 100% equity
(D) All of the above, because the law considers the juridical
personality, whether domestic or foreign, as a mere (C) A commercial bank, up to 60o/o equity
medium; the test of nationality is on the individuals who
control the medium (D) A jeepney manufacturing corporation, up to 100%
equity
(E) None of the above, because the term Philippine
national can only cover individuals and not juridical entities. (E) A real estate development corporation, up to 60%
equity
II. (3) The delegation heard that foreigners can invest up to 100%
of the equity in "export oriented enterprises" and you were asked III. Dennis subscribed to 10,000 shares of XYZ Corporation with a par
exactly what the term covers. value of P100 per share. However, he paid only 25% of the subscription or
P250,000.00. No call has been made on the unpaid subscription.
You replied that an "export oriented enterprise" under FIA '91 is an
enterprise that __________. (1%) How many shares is Dennis entitled to vote at the annual meeting of the
stockholders of XYZ? (1%)
(A) only engages in the export of goods and services, and
does not sell goods or services to the domestic market (A) 10,000 shares

(B) exports consistently at least 40% of its goods or (B) 2,500 shares
services, and sells at least 60% of the rest to the domestic
market
(C) 100 shares
(C) exports consistently at least 60% of the goods or
(D) 0 shares
services produced, and sells at least 40% of the rest to the
domestic market
(E) None of the above.
(D) exports consistently at least 60% of its goods or
services produced, and can sell goods or services to the IV. ABC Corp. issued redeemable shares. Under the terms of the issuance,
domestic market the shares shall be redeemed at the end of 10 years from date of issuance,
at par value plus a premium of 10%.
(E) None of the above.
Choose the correct statement relating to these redeemable shares. (1%)
 (A) ABC Corp. would need unrestricted retained earnings to be VI. Gawsengsit Corp. is a corporation incorporated in Singapore. It
able tore deem the shares. invested in Bumblebee Corp., a Philippine corporation, by acquiring 30%
of its shares. As a result, Gawsengsit Corp. nominated 30o/o of the
(B) Corporations are not allowed to issue redeemable shares; thus, directors of Bumblebee Corp., all of whom are Singaporeans and officers
the issuance by ABC Corp. is ultra vires. of Gawsengsit Corp.

(C) Holders of redeemable shares enjoy a preference over Choose the correct statement relating to Gawsengsit Corp. (1%)
creditors.
(A) Gawsengsit Corp. is doing business in the Philippines and
(D) ABC Corp. may redeem the shares at the end of 10 years requires alicense from the Securities and Exchange Commission
without need for unrestricted retained earnings provided that, after (SEC).
the redemption, there are sufficient assets to cover its debts.
(B) Gawsengsit Corp. is not doing business in the Philippines by
(E) All of the above are incorrect. its mere investment in a Philippine corporation and does not need
a license from the SEC.
V. Arnold, representing himself as an agent of Brian for the sale of Brian's
car, approached Dennis who appeared interested in buying the car. At (C) Gawsengsit Corp. has to appoint a resident agent in the
Arnold's prodding, Dennis issued a crossed check payable to Brian for Philippines.
P25,000.00 on the understanding that the check would only be shown to
Brian as evidence of Dennis' good faith and interest in buying the car. (D) Gawsengsit Corp. cannot elect directors in Bumblebee Corp.
Instead, Arnold used the check to pay for the medical expenses of his wife
in Brian's clinic after Brian, a doctor, treated her. (E) All the above choices are incorrect.

Is Brian a holder in due course (HI DC)? (1%) VII. The BIR assessed ABC Corp. for deficiency income tax for taxable
year2010 in the amount of P26,731,208.00, inclusive of surcharge and
(A) Yes, Brian is a HIDC because he was the payee of the check penalties.
and he received it for services rendered.
The BIR can __________. (1%)
(B) Yes, Brian is a HIDC because he did not need to go behind the
check that was payable to him. (A) run after the directors and officers of ABC Corp. to collect the
deficiency tax and their liability will be solidary
(C) No, Brian is not a HIDC because Dennis issued the check only
asevidence of good faith and interest in buying the car. (B) run after the stockholders of ABC Corp. and their liability will be
joint
(D) No, Brian is not a HIDC because Brian should have been
placed on notice: the check was crossed in his favor and Arnold (C) run after the stockholders of ABC Corp. and their liability will be
was not the drawer. solidary

(E) No, Brian is not a HIDC because the requisite consideration to (D) run after the unpaid subscriptions still due to ABC Corp., if any
Dennis was not present.
(E) None of the above choices is correct.
VIII. Anton imported perfumes from Taiwan and these were released to (B) by the Anti-Money Laundering Council (AMLC) when the
him by the bank under a trust receipt. While the perfumes were in Anton's account belongs to a person already convicted of money
warehouse, thieves broke in and stole all of them. laundering

Who will shoulder the loss of the stolen perfumes? (1%) (C) by the Regional Trial Court, upon ex parte motion by the AMLC,
in a criminal prosecution for money laundering pending before it
(A) The loss of the perfumes will be borne by the bank in whose
behalf the perfumes were held in trust. (D) by the Court of Appeals motu proprio in an appeal from a
judgment of conviction of a criminal charge for money laundering
(B) Anton will bear the loss.
(E) In none of the above.
(C) The exporter can hold both the bank and Anton liable for the
loss. XI. Unknown to the other four proponents, Enrico (who had been given the
task of attending to the Articles of Incorporation of the proposed
(D) The exporter from whom Anton bought the perfumes will bear corporation, Auto Mo,Ayos Ko) misappropriated the filing fees and never
the loss. filed the Articles of Incorporation with the Securities and Exchange
Commission (SEC). Instead, he prepared and presented to the proposed
(E) No one bears the loss for an unforeseen event. incorporators a falsified SEC certificate approving the Articles. Relying on
the falsified SEC certificate, the latter began assuming and discharging
corporate powers.
IX. A bank may acquire real property __________. (1%)
Auto Mo, Ayos Ko is a __________. (1%)
(A) by purchase at a public sale of properties levied to satisfy tax
delinquencies
(A) de jure corporation
(B) by purchase from a real estate corporation in the ordinary
course of the bank's business (B) de facto corporation

(C) through dacion en pago in satisfaction of a debt in favor of the (C) corporation by estoppel
bank
(D) general partnership
(D) in exchange for the purchase of shares of stocks of the bank
(E) None of the above.
(E) All of the above.
XII. Preferred shares cannot vote on the proposal __________. (1%)
(F) None of the above.
(A) to include other corporate officers in the corporation's by-laws
X. Under the Anti-Money Laundering Act, a depositor's bank account may
be frozen __________. (1%) (B) to issue corporate bonds

(A) by the bank when the account is the subject of a suspicious or (C) to shorten the corporate term
covered transaction report
(D) All of the above.
 (E) None of the above. instructed it to deny payment to STI because of the Stay Order. BDP
comes to you for advice. Your best advice is to __________. (1%)
XIII. In 2010, the Philippine National Police declared Kaddafy Benjelani
"Public Enemy No. 1" because of his terrorist activities in the country that (A) grant STI's claim. Under the "Independence Principle," the
have resulted in the death of thousands of Filipinos. A ransom of P15 bank deals only with the documents and not the underlying
million was placed on Kaddafy Benjelani's head. circumstances; hence, the presentation of the letter of credit is
sufficient.
Worried about the future of their family, Kaddafy Benjelani's estranged
wife, Aurelia, secured in December 2010 a life insurance policy on his life (B) deny STI's claim. The Stay Order covers all claims against the
and designated herself as the beneficiary. debtor and binds all its creditors. The letter of credit is a claim
against the debtor that is covered by the Stay Order.
Is the policy valid and binding? (1%)
(C) grant STI's claim. The letter of credit is not a claim against the
(A) Yes, the policy is valid and binding because Aurelia has an debtor under rehabilitation, but against the bank which has
insurable interest on the life of Kaddafy Benjelani. assumed a solidary obligation.

(B) No, the policy is not valid and binding because Kaddafy (D) deny STI's claim. If the bank disregards the Stay Order, it may
Benjelani has been officially declared a public enemy. be subject to contempt by the rehabilitation court. STI should file
its claim with the rehabilitation court.
(C) Yes, the policy is valid and binding because it has been in force
for more than two years. (E) file an action for inter pleader to resolve the parties' competing
claims.
(D) No, the policy is not valid and binding since the spouses'
estrangement removed Aurelia's insurable interest in Benjelani's XV. Akiro of Tokyo, Japan sent various goods to his friend Juan in Cebu
life. City, Philippines, through one of the vessels of Worth well Shippers, Inc.,
an American corporation. En route to Cebu City, the vessel had two stops,
(E) None of the above. first in Hong Kong, and second, in Manila.

XIV. Muebles Classico, Inc. (MC), a Manila-based furniture shop, XV.

purchased hardwood lumber from Surigao Timber, Inc. (STI), a Mindanao-
based logging company. MC was to pay STI the amount of P5.0 million for (1) While travelling from Tokyo to Hong Kong, the goods were damaged.
50 tons of lumber. To pay STI, MC opened a letter of credit with Banco de What law will govern? (1%)
Plata (BDP). BOP duly informed STI of the opening of a letter of credit in
its favor. (A) Japanese law

In the meantime, MC- which had been undergoing financial reverses- filed (B) Hong Kong law
a petition for corporate rehabilitation. The rehabilitation court issued a Stay
Order to stay the enforcement of all claims against MC. (C) Chinese law

After shipping the lumber, STJ went to BDP, presented the shipping (D) Philippine law
documents, and demanded payment of the letter of credit opened in its
favor. MC, on the other hand, informed the bank of the Stay Order and (E) American law
XV. (2) Assuming Philippine law to be applicable and Juan fails to
file a claim with the carrier, may he still commence an action to
recover damages with the court? (1%)

(A) No, the failure to file a claim with the carrier is a

condition precedent for recovery.

(B) Yes, provided he files the complaint within 10 years

from delivery.

(C) Yes, provided he files the complaint within 10 years

from discovery of the damage.

(D) Yes, provided he files the complaint within 1 year from

delivery.

(E) Yes, provided he files the complaint within 1 year from

discovery of the damage.
 YEAR 2012 - MCQ d. Yes, because the issuing bank really has no discretion to
determine whether the documents presented by the
beneficiary are sufficient or not.
1. Letters of Credit are financial devices in commercial transactions 4. AAA Carmakers opened an irrevocable Letter of Credit with BBB
which will ensure that the seller of the goods is sure to be paid Banking Corporation with CCC Cars Corporation as beneficiary.
when he parts with the goods and the buyer of the goods gets The, irrevocable Letter of Credit was opened to pay for the
control of the goods upon payment. Which statement is most importation of ten (1 0) units of Mercedes Benz S class. Upon
accurate? arrival of the cars, AAA Carmakers found out that the cars were
a. The use of the Letter of Credit serves to reduce the risk of all not in running condition and some parts were missing. As a
nonpayment of the purchase price in a sale transaction. consequence, AAA Carmakers instructed BBB Banking
b. The Letters of Credit can only be used exclusively in a Corporation not to allow drawdown on the Letter of Credit. Is this
sales transaction. legally possible?
c. The Letters of Credit are issued for the benefit of the a. No, because under the "Independence Principle",
seller only. conditions for the drawdown on the Letters of Credit are
d. (a), (b) and (c) are all correct. based only on documents, like shipping documents, and
2. Letter of Credit which is used in non-sale transaction, where it not with the condition of the goods subject of the
serves to reduce the risk of non-performance is called - importation.
a. irrevocable letter of credit; b. Yes, because the acceptance by the importer of the
b. standby letter of credit; goods subject of importation is material for the drawdown
c. confirmed letter of credit; of the Letter of Credit.
d. None of the above. c. Yes, because under the "Independence Principle", the
3. At the instance of CCC Corporation, AAA Bank issued an seller or the beneficiary is always assured of prompt
irrevocable Letter of Credit in favor of BBB Corporation. The payment if there is no breach in the contract between the
terms of the irrevocable Letter of Credit state that the beneficiary seller and the buyer.
must presfmt certain documents including a copy of the Bill of d. No, because what was opened was an irrevocable letter
Lading of the importation for the bank to release the funds. BBB of credit and not a confirmed letter of credit.
Corporation could not find the original copy of the Bill of Lading so 5. For a fee, X deposited 1,000 sacks of corn in the warehouse
it instead presented to the bank a xerox copy of the Bill of Lading. owned by Y. Y is in the business of warehousing. Y issued a
Would you advise the bank to allow the drawdown on theLetter of warehouse receipt as proof of the possession of the 1,000 sacks
Credit? of corn. The warehouse receipt states as follows: "Deliver to X or
a. No, because the rule of strict compliance in commercial bearer 1,000 sacks of corn." X wanted to use the warehouse
transactions involving letters of credit, requiring receipt as payment of his debt in favor of Z. How can the
documents set as conditions for the release of the fund ownership of the goods covered by the warehouse receipt be
,has to be strictly corn plied with or else funds will not be transferred?
released. a. Negotiate the warehouse receipt by just delivering the
b. Yes, because an irrevocable letter of credit means that warehouse receipt to Z.
the issuing bank undertakes to release the fund anytime b. Assign the warehouse receipt to Z to transfer ownership
when claimed by the beneficiary, regardless of the kind of of the goods.
document presented. c. Negotiate the warehouse receipt by specifically indorsing
c. Yes, because the issuing bank can always justify to CCC it to Z.
Corporation that xerox copies are considered as faithful d. The warehouse receipt in this case is non-negotiable.
reproduction of the original copies. 6. The warehouseman, by issuing the warehouse receipt,
acknowledges that the goods are in his possession, but he can
 refuse to deliver the goods to the holder of the warehouse receipt b. Fraud or deceit is a necessary element to hold X
covering the goods if - criminally liable for non -payment under the Trust
a. the warehouse receipt covering the goods is not Receipts Law.
presented. c. X can be held criminally liable under the Trust Receipts
b. the lien of the warehouseman is not satisfied. Law regardless of the purpose or intention for the use of
c. the said holder presents a materially altered warehouse the proceeds.
receipt. d. X cannot be held criminally liable because the underlying
d. All of the above. obligation is one of simple loan.
7. The legal remedy of the warehouseman in case of conflicting 10. X is the President of AAA Products Corporation. X signs all the
claims is to --- Trust Receipts documents for certain importations of the
a. file an action for interpleader. company. In the event of failure to deliver the proceeds of the
b. give the goods to the first one who first presented the sale of the goods to the bank, which statement is most accurate?
warehouse receipt. a. The criminal liability will not attach to X as President
c. use his discretion as to who he believes has the prior because of separate juridical personality.
right. b. For violation of Trust Receipts Law, the law specifically
d. keep the goods and appropriate them to himself. provides for the imposition of penalty upon directors I
8. BBB Banking Corporation issued a Letter of Credit in the amount officers of the corporation.
of P5Million, for the purchase of five (5) tons of corn by X. Upon c. The officer will not be held criminally accountable
arrival of the goods, the goods were delivered to the warehouse because he is just signing the trust receipt for and in
of X. Thereafter he was asked to sign a Trust Receipt covering behalf of the corporation.
the goods. When the goods were sold, X did not deliver the d. The officer of the corporation will be held liable provided it
proceeds to BBB Banking Corporation, arguing that he will need is clear that the officer concerned participated in the
the fund for the subsequent importation. Is there sufficient basis decision not to pay.
to sue for criminal action? 11. Who is the Entrustee in a Trust Receipt arrangement?
a. Yes, because X's failure to turn over the proceeds to the a. the owner of the goods;
bank is a violation of the Trust Receipt Law. b. the one who holds the goods and receives the proceeds
b. No, because the trust receipt was signed only after the from the sale of the goods;
delivery of the goods. When the trust receipt was signed, c. the person to whom goods are delivered for sale and who
the ownership of the goods was already with X. bears the risk of the loss;
c. Yes, because violation of Trust Receipt Law is mala d. the party who acquires security interest in the goods.
prohibita, intention is irrelevant. 12. Which phrase best completes the statement - In accordance with
d. No, because X has a valid reason not to deliver the the Trust Receipt Law, purchasers of the goods from the
proceeds to BBB Banking Corporation. Entrustee will:
9. X secured a loan from BBB Bank to pay for the importation of a. get the goods only as a collateral;
some dried fruits. Upon arrival of the goods consisting of dried b. not get good title to the goods;
fruits imported by X but before delivery to him, a trust receipt was c. only get security interest over the goods;
executed by X to cover the transfer of the dried fruits to his d. get good title to the goods.
possession. The dried fruits were so saleable but instead of 13. X acted as an accommodation party in signing as a maker of a
turning over the proceeds of the sale, X used the funds to pay for promissory note. Which phrase best completes the sentence -
the medical expenses of his mother who was sick of cancer of the This means that X is liable on the instrument to any holder for
bone. Which statement is most accurate? value:
a. X cannot be held criminally liable because although he did a. for as long as the holder does not know that X is only an
not pay the bank he used the proceeds for a good reason. accommodation party.
 b. even though the holder knew all along that X is only an b. that cannot anymore be paid and the underlying obligation
accommodation party. under the check is also extinguished.
c. for as long as X did not receive any consideration for c. that can still be negotiated or indorsed so that whoever is
acting as accommodation party. the holder can
d. provided X received consideration for acting as d. which has not been presented for payment within a period
accommodation party. of thirty (30) days.
14. X issued a promissory note which states, "I promise to pay Y or 18. In payment for his debt in favor of X, Y gave X a Manager's
order Php100,000.00 or one (1) unit Volvo Sedan." Which Check in the amount of Php100,000 dated May 30, 2012. Which
statement is most accurate? phrase best completes the statement - A Manager's Check:
a. The promissory note is negotiable because the forms of a. is a check issued by a manager of a bank for his own
payment are clearly stated. account.
b. The promissory note is non-negotiable because the option b. is a check issued by a manager of a bank in the name of
as to which form of payment is with the maker. the bank against the bank itself for the account of the
c. The promissory note is an invalid instrument because bank.
there is more than one form of payment. c. is like any ordinary check that needs to be presented for
d. The promissory note can be negotiated by way of payment also.
delivery. d. is better than a cashier's check in terms of use and effect.
15. X issued a promissory note which states "I promise to pay Y or 19. Which phrase best completes the statement -- A check which is
bearer the amount of HK$50,000 on or before December 30, payable to bearer is a bearer instrument and:
2013." Is the promissory note negotiable? a. negotiation can be made by delivery only;
a. No, the promissory note becomes invalid because the b. negotiation must be by written indorsement;
amount is in foreign currency. c. negotiation must be by specific indorsement;
b. Yes, the promissory note is negotiable even though the d. negotiation must be by indorsement and delivery.
amount is stated in foreign currency. 20. As payment for a debt, X issued a promissory note in favor of Y
c. No, the promissory note is not negotiable because the but the promissory note on its face was marked non-negotiable.
amount is in foreign currency. Then Y instead of indorsing the promissory note, assigned the
d. Yes, the promissory note is negotiable because the Hong same in favor of Z to whom he owed some debt also. Which
Kong dollar is a known foreign currency in the Philippines. statement is most accurate?
16. X delivered a check issued by him and payable to the order of a. Z cannot claim payment from X on the basis of the
CASH to Y in payment for certain obligations incurred by X in promissory note because it is marked non-negotiable.
favor of Y. Y then delivered the check to Z in payment for certain b. Z can claim payment from X even though it is marked
obligations. Which statement is most accurate? non-negotiable.
a. Z can encash the check even though Y did not indorse c. Z can claim payment from Y because under the
the check. Negotiable Instrument Law, negotiation and assignment is
b. Z cannot encash the check for lacking in proper one and the same.
endorsement. d. Z can claim payment from Y only because he was the
c. Y is the only one liable because he was the one who endorser of the promissory note.
delivered the check to Z. 21. Negotiable instruments are used as substitutes for money, which
d. The negotiation is not valid because the check is an means -
instrument payable to order. a. that they can be considered legal tender.
17. A stale check is a check - b. that when negotiated, they can be used to pay
a. that cannot anymore be paid although the underlying indebtedness.
obligation still exists. c. that at all times the delivery of the instrument is equivalent
to delivery of the cash.
 d. that at all times negotiation of the instruments requires b. Tiger Woods must sign both his real name and assumed
proper indorsement. name.
22. The signature of X was forged as drawer of a check. The check c. Tiger Woods can sign his assumed name.
was deposited in the account of Y and when deposited was d. the check has become non-negotiable.
accepted by AAA Bank, the drawee bank. Subsequently, AAA 27. Y, as President of and in behalf of AAA Corporation, as a way to
Bank found out that the signature of X was actually forged. Which accommodate X, one of its stockholders, endorsed the check
statement is most accurate? issued by X. Which statement is most acurate?
a. The drawee bank can recover from Y, because the check a. It is an ultra vires act.
was deposited in his account. b. It is a valid indorsement.
b. The drawee bank can recover from X, because he is the c. The corporation will be held liable to any holder in due
drawer even though his signature was forged. course.
c. The drawee bank is estopped from denying the d. It is an invalid indorsement.
genuineness of the signature of the X, the drawer of the 28. In a negotiable instrument, when the sum is expressed both in
check. numbers and in words and there is discrepancy between the
d. The drawee bank can recover from Y because as words and the numbers -
endorser he warrants the genuineness of the signature. a. the sum expressed in words will prevail over the one
23. A issued a check in the amount of Php20,000 payable to B. B expressed in numbers.
endorsed the check but only to the extent of Php1 0,000. Which b. the sum expressed in numbers will prevail over the one
statement is most accurate? expressed in words.
a. The partial indorsement is not a valid indorsement, c. the instrument becomes void because of the discrepancy.
although will result in the assignment of that part. d. this will render the instrument invalid.
b. The partial indorsement will invalidate the whole 29. A promissory note which is undated is presumed to be -
instrument. a. dated as of the date of issue;
c. The endorsee will be considered as a holder in due b. dated as of the date of the first indorsement;
course. c. promissory note is invalid because there is no date;
d. The partial indorsement is valid indorsement up to the d. dated on due date.
extent of the Php10,000. 30. An insurance contract is an aleatory contract, which means that -
24. A promissory note which does not have the words "or order" or a. the insurer will pay the insured equivalent to the amount
"or bearer" will render the promissory note non-negotiable, and of the premium paid.
therefore - b. the obligation of the insurer is to pay depending upon the
a. it will render the maker not liable; happening of an uncertain future event.
b. the note can still be assigned and the maker made liable; c. the insured pays a fixed premium for the duration of the
c. the holder can become holder in due course; policy period and the amount of the premiums paid to the
d. the promissory note can just be delivered and the maker insurer is not necessarily the same amount as what the
will still be liable. insured will get upon the happening of an uncertain future
25. A check is - event.
a. a bill of exchange; d. the obligation of the insurer is to pay depending upon the
b. the same as a promissory note; happening of an event that is certain to happen.
c. is drawn by a maker; 31. An Insurance Contract is a contract of adhesion, which means
d. a non-negotiable instrument. that in resolving ambiguities in the provision of the insurance
26. A check was issued to Tiger Woods. But what was written as contract, -
payee is the word "Tiger Woods". To validly endorse the check - a. the general rule is that, the insurance contract is to be
a. Tiger Woods must sign his real name. interpreted strictly in accordance with what is written in
the contract.
 b. are to be construed liberally in favor of the insured and b. that two (2) years after date of issuance or reinstatement
strictly against the insurer who drafted the insurance of the life insurance policy, the insurer cannot anymore
policy. prove that the policy is void ab initio or rescindable by
c. are to be construed strictly against the insured and reason of fraudulent concealment or misrepresentation of
liberally in favor of the insurer. the insured.
d. if there is an ambiguity in the insurance contract, this will c. that the insured can still claim from the insurance policy
invalidate the contract. after two (2) years even though premium is not paid.
32. X is the common law wife of Y. Y loves X so much that he took d. that the insured can only claim proceeds in a life
out a life insurance on his own life and made her the sole insurance· policy two (2) years after death.
beneficiary. Y did this to ensure that X will be financially 36. For both the Life Insurance and Property Insurance, the insurable
comfortable when he is gone. Upon the death of Y, - interest is required to be -
a. X as sole beneficiary under the life insurance policy on a. existing at the time of perfection of the contract and at the
the life of Y will be entitled to the proceeds of the life time of loss.
insurance. b. existing at the time of perfection and at the time of loss for
b. despite the designation of X as the sole beneficiary, the property insurance but only at the time of perfection for
proceeds of the life insurance will go to the estate of Y. life insurance.
c. the proceeds of the life insurance will go to the c. existing at the time of perfection for property insurance
compulsory heirs of Y. but for life insurance both at the time of perfection and at
d. the proceeds of the life insurance will be divided equally the time of loss.
amongst X and the compulsory heirs of Y. d. existing at the time of perfection only.
33. X, in January 30, 2009, or two (2) years before reaching the age 37. A house and lot is covered by a real estate mortgage (REM) in
of 65, insured his life for Php20Million. For reason unknown to his favor of ZZZ Bank. The bank required that the house be insured.
family, he took his own life two (2) days after his 65th birthday. The owner of the policy failed to endorse nor assign the policy to
The policy contains no excepted risk. Which statement is most the bank. However, the Deed of Real Estate Mortgage has· an
accurate? express provision which says that the insurance policy is also
a. The insurer will be liable. endorsed with the signing of the REM. Will this be sufficient?
b. The insurer will not be liable. a. . No, insurance policy must be expressly endorsed to the
c. The state of sanity of the insured is relevant in cases of bank so that the bank will have a right in the proceeds of
suicide in order to hold the insurer liable. such insurance in the event of loss.
d. The state of sanity of the insured is irrelevant in cases of b. The express provision contained in the Deed of Real
suicide in order to hold the insurer liable. Estate Mortgage to the effect that the policy is also
34. X, a minor, contracted an insurance on his own life. Which endorsed is sufficient.
statement is most accurate? c. Endorsement of Insurance Policy in any form is not legally
a. The life insurance policy is void ab initio. allowed.
b. The life insurance is valid provided it is with the consent of d. Endorsement of the Insurance Policy must be in a formal
the beneficiary. document to be valid.
c. The life insurance policy is valid provided the beneficiary 38. X is a passenger of a jeepney for hire being driven by Y. The
is his estate or his parents, or spouse or child. jeepney collided with another passenger jeepney being driven by
d. The life insurance is valid provided the disposition of the Z who was driving recklessly. As a result of the collision, X
proceeds will be subject to the approval of the legal suffered injuries. Both passenger jeepneys are covered by
guardian of the minor. Comprehensive Motor Vehicular Insurance Coverage. If X wants
35. The "incontestability clause" in a Life Insurance Policy means --- to claim under the "no fault indemnity clause", his claim will lie -
a. that life insurance proceeds cannot be claimed two (2) a. against the insurer of the jeepney being driven by Z who
years after the death of the insured. was the one at fault.
 b. the claim shall lie against the insurer of the passenger injuries and his car was totally destroyed as a result of the impact.
jeepney driven by Y because X was his passenger. Is PNR liable?
c. X has a choice against whom he wants to make his claim. a. PNR is not liable because X should have known that he
d. None of the above. was crossing a place designated as crossing for train, and
39. X insured the building she owns with two (2) insurance therefore should have been more careful.
companies for the same amount. In case of damage, - b. PNR is liable because Railroad companies owe to the
a. X can not claim from any of the two (2) insurers because public a duty of exercising a reasonable degree of care to
with the double insurance, the insurance coverage avoid injury to person and property at railroad crossings
becomes automatically void. which means a flagman or a watchman should have been
b. the two (2) insurers will be solidarily liable to the extent of posted to warn the public at all times.
the loss. c. PNR is not liable because it blew its horn when it was
c. the two (2) insurers will be proportionately liable. about to cross the railway along Blumentritt Avenida Ext.
d. X can choose who he wants to claim against. d. PNR is not liable because X was negligent, for listening to
40. When X insured his building, X indicated in the application that it his lpod touch while driving.
is a residential building, but actually the building was being used 43. The AAA Bus Company picks up passengers along EDSA. X, the
as a warehouse for some hazardous materials. What is the effect conductor, while on board the bus, drew his gun and randomly
on the insurance policy, i f any? shot the passengers inside. As a result, Y, a passenger, was shot
a. The insurance policy can be cancelled because of the and died instantly. Is AAA Bus Company liable?
change in the use. a. The bus company is not liable for as long as the bus
b. The insurance policy will automatically be changed. company can show that when they hired X, they did the
c. The insurance policy need not be changed. right selection process.
d. The insurance policy is fixed regardless of the change in b. The bus company cannot be held liable because what X
the use. did is not part of his responsrbility.
41. X owned a house and lot. X insured the house. The house got c. The bus company is liable because common carriers are
burned. Then he sold the partially burnt house and the lot to Y. liable for the negligence or willful act of its employees
Which statement is most accurate? even though they acted beyond the scope of their
a. X is not anymore entitled to the proceeds of the insurance responsibility.
policy because he already sold the partially burnt house d. The bus company is not liable because there is no way
and lot. that the bus company can anticipate the act of X.
b. X is still entitled to the proceeds of the insurance policy 44. X is a trader of school supplies in Calapan, Oriental Mindoro. To
because what is material is that at the time of the loss, X bring the school supplies to Calapan, it has to be transported by a
is the owner of the house and lot. vessel. Because there were so many passengers, the two (2)
c. No one is entitled to the proceeds because ownership boxes of school supplies were loaded but the shipping company
over the house and lot was already transferred. was not able to issue the Bill of Lading. So, on board, the Ship
d. Y will be the one entitled to the proceeds because he now Captain issued instead a "shipping receipt" to X indicating the two
owns the partially burnt house and lot. (2) boxes of school supplies being part of the cargo of the vessel.
42. X, while driving his Toyota Altis, tried to cross the railway tract of Which phrase therefore, is the most accurate?
Philippine (xxx line 2 unread text xxx) approached Blumentritt a. the owner of the vessel is not liable because no bill of
Avenida Ext., applied its horn as a warning to all the vehicles that lading was issued to X hence, no contract of carriage was
might be crossing the railway tract, but there was really nobody perfected.
manning the crossing. X was listening to his lpod touch, hence, b. it is possible to have a contract of carriage of cargo even
he did not hear the sound of the horn of the train and so his car without a bill of lading, and the "shipping receipt" would be
was hit by the train. As a result of the accident, X suffered some sufficient.
c. the only acceptable document of title is a Bill of Lading.
 d. None of the above. c. X will not be exempt from liability because he remains to
45. X took Philippine Airlines Flight PR 102 to Los Angeles, USA. be the registered owner and the boundary system will not
She had two (2) luggage checked-in and was issued two (2) allow the circumvention of the law to avoid liability.
baggage checks. When X reached Los Angeles one (1) of the two d. Y is the only one liable because he drove recklessly.
(2) checked in luggage could not be found. Which statement is 48. The Articles of Incorporation of AAA Corporation was approved
most accurate? by the Securities and Exchange Commission (SEC). After the
a. PAL is liable for the loss of the checked- in luggage under receipt of the Certificate of Approval from the SEC, AAA
the provisions of the Warsaw Convention on Air Corporation decided to immediately start the operation of its
Transport. business despite the fact that it has no approved By-Laws. What
b. PAL is liable for the loss only if the baggage check is the legal status of the AAA Corporation?
expressly states that the airline shall be liable in case of a. A de jure corporation;
loss. b. A de facto corporation;
c. PAL cannot be held liable because that is the risk that a c. A corporation by estoppel;
passenger takes when she checks- in her baggage. d. An unregistered corporation.
d. PAL can only be held liable if it can be proven that PAL 49. X, the President of ZZZ Corporation, was authorized by the Board
was negligent. of Directors of ZZZ Corporation to obtain a loan from YYY Bank
46. X owns a passenger jeepney covered by Certificate of Public and to sign documents in behalf of the corporation. X personally
Convenience. He allowed Y to use its Certificate of Convenience negotiated for the loan and got tile loan at very low interest rates.
for a consideration. Y therefore was operating the passenger Upon maturity of the loan, ZZZ Corporation was unable to pay.
jeepney under the same Certificate of Public Convenience (Kabit Which statement is most accurate?
System) under the name of X. The passenger jeepney met an a. Because X was personally acting in behalf of the
accident. Who will be liable? Corporation, he can be held personally liable.
a. Y, the one actually operating the jeepney, will be liable to b. X, as President, cannot be personally held liable for the
the injured party. obligation of the corporation even though he signed all the
b. X will be the one liable to the injured party despite the fact loan documents, because the loan was authorized by the
that it is Y who is actually operating the jeepney, because Board.
while the Kabit System is tolerated, the public should not c. YYY Bank can choose as to who it wants to hold liable for
be inconvenienced by the arrangement. the loan.
c. X will not be held liable if he can prove that he is not the d. If ZZZ Corporation cannot pay, X can be held subsidiarity
owner anymore. liable.
d. Public Policy dictates that the real owner, even not the 50. X owns 99% of the capital stock of SSS Corporation. X also owns
registered one, will be held liable. 99% of TTT Corporation. SSS Corporation obtained a loan from
47. X owns a fleet of taxicabs. He operates it through what is known VW Bank. On due date, SSS Corporation defaulted. TTT
as boundary system. Y drives one of such taxicabs and pays X a Corporation is financiallyhealthy. Which statement is most
fixed amount of Php1 ,000 daily under the boundary system. This accurate?
means that anything above Php1 ,000 would be the earnings of a. X being a controlling owner of SSS Corporation can
Y. Y, driving recklessly, hit an old lady crossing the street. Which automatically be held personally liable for the loan of SSS
statement is most accurate? Corporation.
a. X as the owner is exempt from liability because he was b. TTT Corporation, owned 99% by X, can automatically be
not the one driving. held liable.
b. X as the owner is exempt from liability because precisely c. SSS Corporation and TTT Corporation, although both are
the arrangement is one under the "boundary system". owned by X, are two (2) distinct corporations with
separate juridical personalities hence, the TTT
 Corporation cannot automatically be held liable for the a. The Corporate Secretary is correct because the
loan of SSS Corporation. Corporation Code provides that no certificate of stock
d. The principle of piercing the veil of corporate fiction can shall be issued to a subscriber until the shares as
be applied in this case. subscribed have been fully paid.
51. A corporation generally can issue both par value stock and no par b. The Corporate Secretary cannot refuse because a Stock
value stock. These are all fixed in the Articles of Incorporation of Certificate can be issued corresponding to the percentage
the corporation. Which of the following corporations may not be of shares which were paid.
allowed to issue no par value shares? c. The Corporate Secretary cannot refuse because a
a. Insurance companies; Certificate of Stock can be issued provided it is indicated
b. Banks; in the Certificate the actual percentage of what has been
c. Trust companies; paid.
d. All of the above. d. The Corporate Secretary cannot refuse because it is his
52. Father X, an American priest who came from New York, legal duty to issue a stock certificate corresponding to the
registered the Diocese of Bacolod of the Roman Catholic Church number of shares actually subscribed regardless of the
which was incorporated as a corporation sole. There were years actual payment.
when the head of the Diocese was a Filipino, but there were more 55. XXX Corporation and YYY Corporation have agreed to be
years when the heads were foreigners. Today, the head is an merged into one corporation. To facilitate the merger, both
American again. Y donated a piece of land located in Bacolod corporations agreed that the merger be made effective on May
City for use as a school. Which statement is most accurate? 31,2012. The Securities and Exchange Commission (SEC)
a. The Register of Deeds of Bacolod City can refuse to approved the Articles of Merger on June 30, 2012. Which
register and transfer the title because the present head of statement is most accurate?
the corporation sole is not a Filipino. a. The effective date of the merger is May 31, 2012, the date
b. The nationality of a corporation sole depends upon the stipulated by the parties as the effective date.
nationality of the head at any given time. b. The effective date of the merger is always the date of the
c. A corporation sole, regardless of the nationality of the approval of the Articles of Merger by the SEC.
head, can acquire real property either by sale or donation. c. The effective date of the merger would be the date
d. A corporation sole is not legally allowed to own real approved by the Board of Directors and the stockholders.
property. d. The stockholders and the Board of Directors can set the
53. The number of the Board of Trustees of a non-stock, non-profit effective date of the merger anytime after the approval of
educational institution should be --- the SEC.
a. five (5) only 56. AAA Corporation is a wholly owned subsidiary of BBB
b. any number for as long as it is not less than five (5) and Corporation. To support the business of AAA Corporation, BBB
no more than eleven (11) Corporation agreed to give its corporate guarantee to the loan of
c. any number in multiples of five (5), for as long as it is not AAA Corporation. What is required so that the corporate
less than five (5) and no more than fifteen (15). guarantee will be valid?
d. not less than five (5) nor more than ten (1 0) in multiples a. It only requires the approval of the Board of Directors of
of five (5). BBB Corporation.
54. X subscribed 10,000 shares in the capital stocks of AAA b. The Articles of Incorporation must provide such power
Corporation. He paid 50% of the 10,000 shares. X asked the and be approved by the Board of Directors.
Corporate Secretary to issue him the corresponding stock c. Providing corporate guarantee to another corporation is a
certificate representing the 50% of what he already paid. The necessary exercise of power of a corporation.
Corporate Secretary of the corporation refused. Was the d. It would require both the approval of the Board of
Corporate Secretary correct? Directors and the stockholders on record.
57. The capital stock of ABC Corporation is divided into common 60. South China Airlines is a foreign airline company. South China
shares and preferred shares. Preferred shares are preferred as to Airlines tickets are sold in the Philippines though Philippine
dividends and common shares are those shares which have the Airlines as their general agent. South China Airlines is not
regular and ordinary attributes of a share of a corporation. Which registered to do business as such with the Philippine Securities
statement is most accurate? and Exchange Commission. Which statement is most accurate?
a. This kind of classification may not be allowed or else it will a. Although unlicensed to do business in the Philippines,
violate the Doctrine of Equality of shares. South China Airlines can sue before the Philippine Courts
b. Classifications of shares may be allowed for as long as it and can also be sued.
is clearly stated as such in the Articles of Incorporation of b. South China Airlines can sue but cannot be sued.
the Corporation. c. South China Airlines cannot sue and cannot be sued also.
c. Classifications of shares is mainly for business purpose to d. South China Airlines can be sued in Philippine Courts but
attract investors. cannot sue.
d. Classifications of shares may be allowed with the 61. So that ABC Corporation could venture into more projects, it
approval of the stockholders and the Board of Directors. needed to raise funds by issuing new shares to increase its
58. ABC Corporation declared stock dividends to its stockholders. capitalization. X, Y, Z, J and G are the five existing shareholders
The stock dividends were approved by the Board of Directors of of the company. They hold 20% each. How will the additional
ABC Corporation. In the subsequent year however, the Board shares be divided among the existing shareholders?
again approved the redemption of all stock dividends and to pay a. The existing shareholders can subscribe to the new
the shareholdings in cash. Which statement is most accurate? shares equivalent to their existing shareholdings because
a. The redemption of the stock dividends can be validly the Corporation Code provides that each of the existing
approved by the Board without any conditions. stockholders will have preemptive rights to the extent of
b. The redemption of stock dividends may only be allowed if their existing shareholdings.
there are sufficient earnings and should not be violative of b. The existing shareholders' preemptive rights is equivalent
the trust fund doctrine. to the percentage that they want.
c. The redemption of the shares may be taken from the c. Each of the existing shareholder can exercise their right of
existing property and other assets of the corporation. first refusal against each other.
d. None of the above. d. Preemptive rights and right of first refusal are one and the
59. X sold all his shares in AAA Hotel Corporation to Y. X owns 99% same.
of AAA Hotel Corporation. As the new owner, Y wanted a 62. If ABC Corporation will increase its authorized capital stock, the
reorganization of the hotel which is to include primarily the Corporation Code requires -
separation of all existing employees and the hiring of new a. the approval of the majority of the Board of Directors only.
employees. Which statement is most accurate? b. the approval of the majority of the stockholders and the
a. With the change in ownership, in effect there is a new Board of Directors.
juridical entity and therefore all employees are considered c. the approval of 2/3 of the shareholders of the outstanding
separated. capital stock as well as the approval of the Securities and
b. Despite the change in shareholder, there is actually no Exchange Commission.
change in the juridical entity and therefore existing d. the approval of the majority of the Board of Directors and
employees can not automatically be considered approval of the shareholders holding 2/3 share of the
separated. outstanding capital stock.
c. Y, as the new shareholder, has the right to retain only 63. X is a minority stockholder of CCC Corporation. Y is a member of
those employees who in his judgment are qualified. the Board of Directors of CCC Corporation and at the same time
d. For as long as the existing employees are given their he is the President. X believes that Y is mismanaging CCC
separation pay, they can be terminated. Corporation hence, as a stockholder and in behalf of the other
 stockholders, he wanted to sue Y. Which statement is most d. This will result in automatic revocation of its license to do
accurate? business in the Philippines.
a. X can institute a derivative suit in behalf of himself as a 67. The By-laws of ABC Corporation is silent as to when a
stockholder. stockholder can be qualified to attend the meeting of the
b. A derivative suit must be instituted in behalf of the stockholders. The Corporate Secretary sent out the notice of the
corporation. stockholders meeting two (2) days before the meeting and at that
c. Derivative suit is an exclusive remedy that X can institute. time X was not yet a stockholder. On the day of the meeting,
d. Derivative suit is not the remedy in this situation. however, X became a shareholder which was duly recorded in
64. The term GGG Corporation in accordance with its Articles of the stock and transfer book. Which statement is most accurate?
Incorporation ended last January 30, 2012. The term was not a. X is a stockholder of ABC Corporation as of the time of
extended. What will happen to the corporation? meeting of the stockholders for the purpose of electing the
a. The corporation is dissolved ipso facto. members of the board.
b. There is a need to pass a board resolution to formally b. X is not qualified to elect members of the board because
dissolve the corporation. at the time the notice of the meeting was sent, she was
c. The Board of Directors must pass a resolution for the not yet a stockholder.
corporation to formally go into liquidation. c. Qualifications as to who are considered as stockholders
d. The stockholders must pass a resolution to dissolve the on record for purposes of being able to elect members of
corporation. the board are to be determined by the By-laws alone.
65. The term of one (1) year of the Board of Directors of AAA d. None of the above.
Corporation expired last February 15, 2012. No new election of 68. X, who is the Executive Vice President of ABC Corporation, a
the Board of Directors was called, hence, the existing members of listed company, can be held liable or guilty of insider trading if, he
Board continue as Directors in hold over capacity. Which -
statement is most accurate? a. bought shares of ABC Corporation when it was planning
a. This is allowed provided there is a valid and justifiable to acquire another company to improve its asset base, the
reason for not calling for an election of the new members news of which increased the price of the shares in the
of the Board. Stock Exchange.
b. This is not allowed because the term of the directors must b. bought shares of XYC Corporation, a sister company of
only be for one (1) year. ABC Corporation when he learned that XYC Corporation
c. The positions of the members of the Board of Directors was about to also list its share in the Philippine Stock
will be automatically declared vacant. Exchange.
d. Acting as members of the Board of Directors in a hold c. bought shares of ZZZ Corporation when he learned that
over capacity must be ratified by the stockholders. ABC Corporation would acquire ZZZ Corporation.
66. AAA Corporation is a foreign corporation that wants to operate a d. All of the above.
representative office here in the Philippines. As required by the 69. The purpose of the "Tender Offer" Rule is to -
Corporation Code, there is a need to appoint a Resident Agent as a. ensure an even playing field for all shareholders of a
a condition precedent to the issuance of a license to transact company in terms of opportunity to sell their
business in the Philippines. After two (2) years, AAA Corporation shareholdings.
removed its Resident Agent and did not appoint anyone anymore. b. ensure that minority shareholders in a publicly listed
Which statement is the most accurate? company are protected in the sense that they will equally
a. This can be a ground for revocation or suspension of its have the same opportunity as the majority shareholders in
license to do business. terms of selling their shares.
b. There is no more effect in the license because anyway at c. ensure that the shareholders who would also want to sell
the time of registration, a resident agent was appointed. their shareholdings will have the opportunity for a better
c. This can be a ground for suspension only. price.
 d. All of the above. c. XYZ Corporation is an Investment Company.
70. Section 38 of The Securities Regulation Code defines an d. XYZ is none of the above.
independent director as a person who must not have a relation 75. XXX Bank Corporation and ZZZ Corporation were merged into
with the corporation which would interfere with his exercise of XX ZZ Bank Corporation. So as not to create any unnecessary
independent judgment in carrying out the responsibilities of a conflict, all the former directors of both banks wanted to be
director. To ensure independence therefore, he must be - appointed /elected as members of the Board of Directors of the
a. nominated and elected by the entire shareholders; merged bank. Each bank used to have eleven (11) members of
b. nominated and elected by the minority shareholders; the board. The maximum number of directors of the merged bank
c. nominated and elected by the majority shareholders; is -
d. appointed by the Board. a. 15;
71. "Securities" issued to the public are required by law to be b. 22;
registered with - c. 21;
a. the Bangko Sentral ng Pilipinas; d. 11.
b. the Philippine Stock Exchange; 76. All senior officers of ABC Bank are entitled to obtain a housing
c. the Securities and Exchange Commission; loan. X is an Executive Vice President for Operations of ABC
d. the Securities and Exchange Commission and the Bank. She obtained a housing loan with the ABC Bank. Which
Philippine Stock Exchange. statement is most accurate?
72. The government agency granted with the power of supervision a. The housing loan of X requires a guarantor from
and examination over banks and non-bank financial institutions somebody who is not connected with the bank.
performing quasi-banking functions, to ensure that the conduct of b. The housing loan of X requires the approval of the Board
its business is on a sound financial basis that will provide of Directors of the bank.
continued solvency and liquidity is - c. The housing loan of X, being a benefit for employees,
a. The Philippine Deposit Insurance Corporation; does not require (a) but will require (b).
b. The Bangko Sentral ng Pilipinas; d. The housing loan of X, being a benefit for employees, will
c. The Anti-Money Laundering Council; not require (a) and (b).
d. The Securities and Exchange Commission. 77. ABC Holdings Company, a Hong Kong company, owns 10% of
73. X maintains a savings deposit in the amount of Php·1 Million with XYZ Bank. Because of the peace and order situation in the
ABC Bank Corporation. X also has obtained a loan from ABC Philippines, ABC Holding Company wanted to sell its
Bank Corporation in the amount of Php1 Million. In case of shareholdings in XYZ Bank. Unfortunately, nobody is interested
default, to buy a 1 0% shareholdings in a bank. The board of directors of
a. ABC Bank can set-off the loan from the savings account XYZ Bank thought that it would be a good idea to buy back the
being maintained by X with ABC Bank. shares owned by ABC Holding Company. Which statement is
b. Set-off is not possible because legal compensation is not most acurate?
allowed in banking transaction. a. Buying back the shares by XYZ Bank is absolutely not
c. Deposit accounts are usually earmarked for specific allowed.
purpose hence offsetting is not legally possible. b. Buying back the shares may be allowed provided it is with
d. Off -setting is not possible because the obligation of X is a the approval of the Monetary Board and disposed of
"simple loan". within six (6) months.
74. XYZ Corporation is engaged in lending funds to small vendors in c. Buying back the shares may be allowed provided such
various public markets. To fund the lending, XYZ Corporation shares 'will be disposed of within ten (1 0) years.
raised funds through borrowings from friends and investors. d. Buying back the shares may be done anytime provided
Which statement is most accurate? the Board of Directors will approve the same.
a. XYZ Corporation is a bank. 78. X is being charged for violation of Anti-Graft and Corrupt
b. XYZ Corporation is a quasi-bank. Practices because he is suspected of having accumulated
 unexplained wealth. X maintains deposit accounts with ABC 81. The Bank Secrecy Law (RA 1405) prohibits disclosing any
Bank. The Ombudsman filed criminal cases against X before the information about deposit records of an individual without court
Sandiganbayan. Can the Court issue subpoenas against ABC order except -
Bank to produce all documents pertaining to all the deposit a. in an examination to determine gross estate of a
accounts of X? decedent.
a. Yes, because there is already a pending case and b. in an investigation for violation of Anti-Graft and Corrupt
provided the subpoena must be specific as to which Practices.
account. c. in an investigation by the Ombudsman.
b. Yes, it is enough that the specific bank is identified. d. in an impeachment proceeding.
c. No, because the issuance of the subpoena has no real 82. X works as a research computer engineer with the Institute of
legal basis. Computer Technology, a government agency. When not busy
d. Even without a subpoena, information about the deposit with his work, but during office hours, he developed a software
accounts of X can be submitted to the Sandiganbayan program for law firms that will allow efficient monitoring of the
because it will be used in a pending case. cases, which software program is not at all related to his work.
79. X, a private individual, maintains a dollar deposit with ABC Bank. Assuming the program is patentable, who has the right over the
X is suspected to be the leader of a Kidnap for Ransom Gang patent?
and he is suspected of depositing all ransom money in said a. x;
deposit account which are all in US Dollars. The police want to b. Institute of Computer Technology;
open said account to know if there are really deposits in big c. Neither X nor the Institute of Computer Technology can
amounts. Which statement is most accurate? claim patent right over the invention;
a. The same rules under Secrecy of Bank Deposit Act will d. X and the employer of X will jointly have the rights over
apply. the patent.
b. An approval from the Monetary Board is necessary to 83. The "test of dominancy" in the Law on Trademarks, is a way to
open the account. determine whether there exists an infringement of a trademark by
c. Because the deposit is in US Dollars, it is covered by the -
Foreign Currency Deposit Act which allows disclosure a. determining if the use of the mark has been dominant in
only upon the written persmission of the depositor. the market.
d. Approval from the Court is necessary to order disclosure b. focusing on the similarity of the prevalent features of the
of the account. competing marks which might create confusion.
80. X is a depositor of AAA Bank. She has three (3) deposit accounts c. looking at the mark whether they are similar in size, form
all under her name. One, in checking account, one in saving or color.
account and another one in time deposit account. Each account d. looking at the mark whether there is one specific feature
has a balance of Php250,000. AAA Bank became insolvent. that is dominant.
Philippine Deposit Insurance Corporation closed the Bank. X 84. X's painting of Madonna and Child was used by her mother to
therefore is unable to withdraw from all of the accounts. She then print some personalized gift wrapper. As part of her mother's
filed her claims with the Philippine Deposit Insurance Corporation. efforts to raise funds for Bantay Bata, the mother of X sold the
Which statement is most accurate? wrapper to friends. Y, an entrepeneur, liked the painting in the
a. X can claim a total of Php500,000 for all the three (3) wrapper and made many copies and sold the same through
accounts. National Bookstore. Which statement is most accurate?
b. X can only claim from one (1) account of Php250,000. a. Y can use the painting for his use because this is not a
c. X can claim a total of Php750,000 from all the three (3) copyrightable material.
accounts. b. X can sue Y for infringement because artistic works are
d. X cannot claim anything from any of the deposit accounts. protected from moment of creation.
 c. Works of art need to be copyrighted also to get protection b. is binding between the mortgagor and the mortgagee but
under the law. will not affect third party;
d. Y can use the drawing even though not copyrighted c. to be valid between the mortgagor and the mortgagee, it
because it is already a public property having been must be coupled with the delivery of the subject matter of
published already. the chattel mortgage;
85. Compulsory Licensing of Inventions which are duly patented may d. is as if a non-existent chattel mortgage.
be dispensed with or will be allowed exploitation even without 90. Which phrase best completes the statement - To bind third
agreement of the patent owner under certain circumstances, like parties, a chattel mortgage of shares of stock must be registered:
national emergency, for reason of public interest, like national a. with the Register of Deeds where the debtor resides;
security, etc. The person who can grant such authority is - b. with the Register of Deeds where the principal office of
a. the Director General of the Intellectual Property Office; the corporation is;
b. the Director of Legal Affairs of the Intellectual Property c. in the Stock and Transfer Book of the corporation with the
Office; Corporate Secretary;
c. the owner of the Patent right; d. with the Register of Deeds where the debtor resides and
d. any agent of the owner of the Patent right. the principal office of the corporation.
86. The Fair Use Doctrine allows others to utilize copyrighted works 91. Which phrase best completes the statement - The affidavit of
under certain conditions. The factors to consider whether use is good faith in a Deed of Chattel Mortgage is:
fair or not would be the purpose and character of the use, nature a. an oath where the parties swear that the mortgage is
of the copyrighted work, amount and substantiality of the portions made for the purpose of securing the obligations specified
used, and what else? and that the obligation is just and valid;
a. effect of the use upon the creator of the work. b. an affidavit, the absence of which will vitiate the mortgage
b. effect of the use upon the potential market of the work. between the parties;
c. effect of the use upon the public in general. c. necessary only if the chattel being mortgaged are growing
d. effect of the use upon the class in which the creator crops;
belongs. d. a certification from the mortgagor that he is the mortgagor
87. Which phrase best completes the statement - A chattel mortgage of the chattel.
can be constituted to secure: 92. X defaulted in his loan with Y. Y instituted extra-judicial
a. obligations both past and future; foreclosure of the property subject of a real estate mortgage that
b. obligations existing at the time the mortgage is secured the loan. X has one year within which to redeem the
constituted; property. After the foreclosure, X filed an action questioning the
c. future obligations only; validity of the extra- judicial foreclosure sale. Which statement is
d. past obligations only. most accurate?
88. Which phrase best completes the statement - A chattel mortgage a. The one (1) year period within which to redeem will be
can cover: interrupted by the filing of an action questioning the
a. only property described in the deed without exception; validity of the foreclosure.
b. can also cover substituted property; b. The one (1) year period will not be interrupted by the filing
c. properties described in the deed except in case of stock in of the action.
trade being a substitute; c. The one (1) year period will be extended for another year
d. after acquired property. because of the filing of an action questioning the validity
89. Which phrase best completes the statement - The Deed of of the foreclosure sale.
Chattel mortgage, if not registered with the Register of Deeds d. If the action which questions the validity of the foreclosure
where debtor resides: prospers, the period will be interrupted.
a. is not valid, hence not binding between the mortgagor and 93. What is the effect if the. proceeds in an extra-judicial foreclosure
the mortgagee; sale is not sufficient to pay for the obligation?
 a. the mortgagee can claim for deficiency judgment from the installments but also the details of the finance charges as
debtor. required by the Truth in Lending Act.
b. the mortgagee can claim for deficiency judgment from the c. No, because the Finance Agreement is a valid document
mortgagor even though it is a third party mortgage. to establish the existence of the obligation.
c. the mortgagee has no more recourse or claim against the d. Yes, because legally, finance charges are never allowed
debtor. in any banking transaction.
d. the mortgagee cannot claim for deficiency judgment from 97. Which of the following is an exception to the secrecy of bank
the debtor because its an extrajudicial foreclosure. deposits which are in Philippine Pesos, but NOT an exception to
94. X mortgaged her residential house and lot in favor of ABC Bank. the secrecy of foreign currency deposits?
X defaulted in her loan and so the bank foreclosed the real estate a. Upon Bangko Sentral ng Pilipinas (SSP) inquiry into or
mortgage on the residential house. Y then bought the residential examination of deposits or investments with any bank,
house and lot before the expiration of the redemption period. Can when the inquiry or examination is made in the course of
Y now take possession of the property? the SSP's periodic special examination of said bank to
a. No, because it is still covered by the redemption period ensure compliance with the Anti-Money Laundering Act
and the purchaser is not yet entitled as a matter of right to (AMLA);
take possession of the property. b. Upon Philippine Deposit Insurance Corporation (PDIC)
b. Yes, the purchaser is now entitled to the possession of and SSP inquiry into and examination of deposit accounts
the house. in case there is a finding of unsafe or unsound banking
c. No, because there is a need to talk to X to leave the practice;
house. c. Upon inquiry in cases of impeachment;
d. No, because Y was not the one who foreclosed the d. Upon inquiry by the Commissioner of Internal Revenue in
mortgage on the property. the event a taxpayer files an application to compromise
95. Which phrase best completes the statement - When a debt is his tax liabilities on the ground of financial incapacity.
secured by a real estate mortgage, upon default of the debtor: 98. The Anti-Money Laundering Law is a law that seeks to prevent
a. the only remedy of the creditor is to foreclose the real money laundering activities by providing for more transparency in
estate mortgage; the Philippine Financial System, hence the following institutions
b. another remedy is filing an action for collection and then are covered by the law, except:
foreclose if collection is not enough; a. bank and any financial institutions;
c. the creditor can foreclose the mortgage and demand b. pawnshops;
collection for any deficiency; c. casino operators;
d. None of the above. d. All of the above.
96. XYZ Corporation bought ten (1 0) units of Honda Civic from CCC 99. For purposes of determining violation of the prov1s1ons of Anti-
Corporation. ABC Bank granted a loan to XYC Corporation which Money Laundering Law, a transaction is considered as a
executed a financing agreement which provided for the principal "Suspicious Transaction" with "Covered Institutions" regardless of
amount, the installment payments, the interest rates and the due the amount involved, where which the following circumstances
dates. On due dates of the installment payments, XYZ exist/s?
Corporation was asked to pay for some handling charges and a. the amount involved is not commensurate with the client's
other fees which were not mentioned in the Financing Agreement. business or financial capacity;
Can XYC Corporation refuse to pay the same? b. there is no underlying legal or trade obligation, purpose or
a. No, because handling charges and other fees are usual in economic justification;
certain banking transactions. c. client is not properly identified;
b. Yes, because ABC Bank is required to provide XYZ d. All of the above.
Corporation not only the amount of the monthly
100. The main feature of the Foreign Investment Act of 1991 is
to introduce the concept of "Negative Lists". Under the said law,
what is a "Negative List"?
a. It is a list of business activities or enterprises in the
Philippines that foreigners are disqualified to engage in.
b. It is a list of business activities or enterprises in the
Philippines that foreigners are qualified to engage in.
c. It is a list of business activities or enterprises that are
open to foreign investments provided it is with the
approval of the Board of Investment.
d. It is a list of business activities or enterprises that are
open to foreign investments provided it is with the
approval of the Securities and Exchange Commission.
 YEAR 2012 - ESSAY consideration. When Z deposited the check to her account, the check was
dishonored for insufficiency of funds.

I a. Is Z a holder in due course? Explain your answer. (5%)

b. Who is liable on the check. The drawer or the indorser? Explain
ABC Company filed a Petition for Rehabilitation with the Court. An Order your answer. (5%)
was issued by the Court, (1) staying enforcement of all claims, whether
money or otherwise against ABC Company, its guarantors and sureties not IV
solidarily liable with the company; and (2) prohibiting ABC Company from
making payments of its liabilities, outstanding as of the date of the filing of Indicate and explain whether the promissory note is negotiable or non-
the Petition. XYC Company is a holder of an irrevocable Standby Letter of negotiable.
Credit which was previously procured by ABC Company in favor of XYC
Company to secure performance of certain obligations. In the light of the
a. I promise to pay A or bearer Php100,000.00 from my inheritance
Order issued by the Court.
which I will get after the death of my father. (2%)
b. I promise to pay A or bearer Php100,000 plus the interest rate of
a. Can XYC Company still be able to draw on their irrevocable ninety (90) – day treasury bills. (2%)
Standby Letter of Credit when due? Explain your answer. (5%) c. I promise to pay A or bearer the sum of Php100,000 if A passes
b. Explain the nature of Letters of Credit as a financial devise. (5%) the 2012 bar exams. (2%)
d. I promise to pay A or bearer the sum of Php100.000 on or before
II December 30, 2012. (2%)
e. I promise to pay A or bearer the sum of Php100,000. (2%)
CCC Car, Inc. obtained a loan from BBB Bank, which fund was used to
import ten (10) units of Mercedes Benz S class vehicles. Upon arrival of V
the vehicles and before release of said vehicles to CCC Car, Inc., X and Y,
the President and Treasurer, respectively, of CCC Car, Inc. signed the X borrowed from CCC Bank. She mortgaged her house and lot in favor of
Trust Receipt to cover the value of the ten (10) units of Mercedes Benz S the bank. X insured her house. Tt1e bank also got the house insured.
class vehicles after which, the vehicles were all delivered to the Car display
room of CCC Car, Inc. Sale of the vehicles were slow, and it took a month
a. Is this double insurance? Explain your answer. (3%)
to dispose of the ten (10) units. CCC Car, Inc. wanted to be in business
b. Is this legally valid? Explain your answer. (3%)
and to save on various documentations required by the bank, decided that
c. In case of damage, can X and CCC Bank separately claim for the
instead of turning over the proceeds of the sales, CCC Car, Inc. used the
insurance proceeds? (4%)
proceeds to buy another ten (10) units of BMW 3 series.
VI
a. Is the action of CCC Car, Inc. legally justified? Explain your answer.
(5%)
b. Will the corporate officers of CCC Car, Inc. be held liable under the X is a Filipino immigrant residing in Sacramento, California. Y is a Filipino
circumstances? Explain your answer. (5%) residing in Quezon City, Philippines. Z is a resident alien residing in Makati
City. GGG Corporation is a domestic corporation - 40% owned by
foreigners and 60% owned by Filipinos, with T as authorized
III
representative. CCC Corporation is a foreign corporation registered with
the Philippine Securities and Exchange Commission. KKK Corporation is
X borrowed money from Y in the amount of Php1Million and as payment, a domestic corporation (100%) Filipino owned. S is a Filipino, 16 years of
issued a check. Y then indorsed the check to his sister Z for no age, arid the daughter of Y.
 a. Who can be incorporators? Who can be subscribers? (2%) a. Will the extrajudicial foreclosure prosper considering that the
b. What are the differences between an incorporator and a additional Php5Million was not covered by the registration? (5%)
subscriber, if there are any? (2%) b. What is the meaning of a "dragnet clause" in a Deed of Real Estate
c. Who are qualified to become members of the board of directors of Mortgage? Under what circumstances will the "dragnet clause" be
the corporation? (2%) applicable? ( 5%)
d. Who are qualified to act as Treasurer of the company? (2%)
e. Who can be appointed Corporate Secretary? (2%) IX

VII A, B, C, D, E are all duly elected members of the Board of Directors of XYZ
Corporation. F, the general manager, entered into a supply contract with
X obtained a loan for Php50Million from SSS Bank. The collateral is his an American firm. The contract was duly approved by the Board of
vacation house in Baguio City under a real estate mortgage. X needed Directors. However, with the knowledge and consent of F, no deliveries
more funds for his business so he again borrowed another Php10Million, were made to the American firm. As a result of the non-delivery of the
this time from BBB Bank, another bank, using the same collateral. The loan promised supplies, the American firm incurred damages. The American
secured from SSS Bank fell due and X defaulted. firm would like to file a suit for damages. Can the American firm sue:

a. If SSS Bank forecloses the real estate mortgage, what rights, if a. The members of the Board of Directors individually, because they
any, are left with 888 Bank as mo1igagee also? (2%) approved the transaction? (2%)
b. If the value of the Baguio property is less than the amount of loan, b. The corporation? (2%)
what would be the recourse of SSS Bank? BBB Bank? (2%) c. F, the general manager, personally, because the non-delivery was
c. If the value of the property is more that the amount of the loan, who with his knowledge and consent? (2%)
will benefit from the excess value of the property? (2%) d. Explain the rules on liabilities of a corporation for the act of its
d. If X defaulted with its loan in favor of BBB Bank but fully paid his corporate officers and the liabilities of the corporate officers and
loan with SSS Bank, can BBB Bank foreclose the real mortgage Board of Directors of a corporation acting in behalf of the
executed in its favor? (2%) corporation. (4%)
e. Does X have any legal remedy after the foreclosure in the event
that later on he has the rnoney to pay for the loan? (1%) X
f. If SSS Bank and BBB Bank abandon their rights under the real
estate mortgage, is there any legal recourse available to them? AAA Corporation is a bank. The operations of AAA Corporation as a bank
(1%) was not doing well. So, to avert any bank run, AAA Corporation, with the
approval of the Monetary Board, sold all its assets and liabilities to BBB
VIII Banking Corporation which includes all deposit accounts. In effect then,
BBB Corporation will service all deposits of all depositors of AAA
X obtained a Php10Million loan from BBB Banking Corporation. The loan Corporation.
is secured by Real Estate Mortgage on his vacation house in Tagaytay
City. The original Deed of Real Estate Mortgage for the Php10Million was a. Will the sale of all assets and liabilities of AAA Corporation to BBB
duly registered. The Deed of Real Estate Mortgage also provides that "The Banking Corporation automatically dissolve or terminate the
mortgagor also agrees that this mortgage will secure the payment of corporate existence of AAA Corporation? Explain your answer.
additional loans or credit accommodations that may be granted by the (5%)
mortgagee ... " Subsequently, because he needed more funds, he obtained b. What are the legal requirements in order that a corporation may be
another Php5Million loan. On due dates of both loans, X failed to pay the dissolved? (5%)
Php5Million but fully paid the Php10Million. BBB Banking Corporation
instituted extrajudicial foreclosure proceedings.
 YEAR 2011 Million worth of cement or to authorize him to sell my house worth Php1
Million. Signed, A." Is the note negotiable?

(1) P rode a Sentinel Liner bus going to Baguio from Manila. At a stop- (A) No, because the exercise of the option to pay lies with A, the
over in Tarlac, the bus driver, the conductor, and the passengers maker and debtor.
disembarked for lunch. P decided, however, to remain in the bus, the door
of which was not locked. At this point, V, a vendor, sneaked into the bus (B) No, because it authorizes the sale of collateral securities in
and offered P some refreshments. When P rudely declined, V attacked case the note is not paid at maturity.
him, resulting in P suffering from bruises and contusions. Does he have
cause to sue Sentinel Liner?
(C) Yes, because the note is really payable to B or his order, the
other provisions being merely optional.
(A) Yes, since the carrier's crew did nothing to protect a passenger
who remained in the bus during the stop-over.
(D) Yes, because an election to require something to be done in
lieu of payment of money does not affect negotiability.
(B) No, since the carrier's crew could not have foreseen the attack.
(4) ABC Corp. increased its capital stocks from Php10 Million to Php15
(C) Yes, since the bus is liable for anything that goes wrong in the Million and, in the process, issued 1,000 new shares divided into Common
course of a trip. Shares "B" and Common Shares "C." T, a stockholder owning 500 shares,
insists on buying the newly issued shares through a right of pre-emption.
(D) No, since the attack on P took place when the bus was at a The company claims, however, that its By-laws deny T any right of pre-
stop-over. emption. Is the corporation correct?

(2) A cargo ship of X Shipping, Co. ran aground off the coast of Cebu during (A) No, since the By-Laws cannot deny a shareholder his right of
a storm and lost all its cargo amounting to Php50 Million. The ship itself pre-emption.
suffered damages estimated at Php80 Million. The cargo owners filed a
suit against X Shipping but it invoked the doctrine of limited liability since (B) Yes, but the denial of his pre-emptive right extends only to 500
its vessel suffered an Php80 Million damage, more than the collective value shares.
of all lost cargo. Is X Shipping correct?
(C) Yes, since the denial of the right under the By-laws is binding
(A) Yes, since under that doctrine, the value of the lost cargo and on T.
the damage to the ship can be set-off.
(D) No, since pre-emptive rights are governed by the articles of
(B) No, since each cargo owner has a separate and individual claim incorporation.
for damages.
(5) M makes a promissory note that states: "I, M, promise to pay
(C) Yes, since the extent of the ship’s damage was greater than Php5,000.00 to B or bearer. Signed, M." M negotiated the note by delivery
that of the value of the lost cargo. to B, B to N, and N to O. B had known that M was bankrupt when M issued
the note. Who would be liable to O?
(D) No, since X Shipping neither incurred a total loss nor
abandoned its ship. (A) M and N since they may be assumed to know of M's bankruptcy

(3) A writes a promissory note in favor of his creditor, B. It says: "Subject (B) N, being O's immediate negotiator of a bearer note
to my option, I promise to pay B Php1 Million or his order or give Php1
 (C) B, M, and N, being indorsers by delivery of a bearer note (8) A negotiable instrument can be indorsed by way of a restrictive
indorsement, which prohibits further negotiation and constitutes the
(D) B, having known of M's bankruptcy indorsee as agent of the indorser. As agent, the indorsee has the right,
among others, to
(6) S delivered 10 boxes of cellphones to Trek Bus Liner, for transport from
Manila to Ilocos Sur on the following day, for which S paid the freightage. (A) demand payment of the instrument only.
Meanwhile, the boxes were stored in the bus liner’s bodega. That night,
however, a robber broke into the bodega and stole S’s boxes. S sues Trek (B) notify the drawer of the payment of the instrument.
Bus Liner for contractual breach but the latter argues that S has no cause
of action based on such breach since the loss occurred while the goods (C) receive payment of the instrument.
awaited transport. Who is correct?
(D) instruct that payment be made to the drawee.
(A) The bus liner since the goods were not lost while being
transported. (9) Under the Negotiable Instruments Law, a signature by procuration
operates as a notice that the agent has but a limited authority to sign. Thus,
(B) S since the goods were unconditionally placed with T for a person who takes a bill that is drawn, accepted, or indorsed by
transportation. procuration is duty-bound to inquire into the extent of the agent's authority
by:
(C) S since the freightage for the goods had been paid.
(A) examining the agent’s special power of attorney.
(D) The bus liner since the loss was due to a fortuitous event.
(B) examining the bill to determine the extent of such authority.
(7) X Corp. operates a call center that received orders for pizzas on behalf
of Y Corp. which operates a chain of pizza restaurants. The two companies (C) asking the agent about the extent of such authority.
have the same set of corporate officers. After 2 years, X Corp. dismissed
its call agents for no apparent reason. The agents filed a collective suit for (D) asking the principal about the extent of such authority.
illegal dismissal against both X Corp. and Y Corp. based on the doctrine of
piercing the veil of corporate fiction. The latter set up the defense that the
(10) Under the Negotiable Instruments Law, if the holder has a lien on the
agents are in the employ of X Corp. which is a separate juridical entity. Is
instrument which arises either from a contract or by implication of law, he
this defense appropriate?
would be a holder for value to the extent of
(A) No, since the doctrine would apply, the two companies having
(A) his successor's interest.
the same set of corporate officers.
(B) his predecessor's interest.
(B) No, the real employer is Y Corp., the pizza company, with X
Corp. serving as an arm for receiving its outside orders for pizzas.
(C) the lien in his favor.
(C) Yes, it is not shown that one company completely dominates
the finances, policies, and business practices of the other. (D) the amount indicated on the instrument's face.

(D) Yes, since the two companies perform two distinct businesses. (11) The liability of a common carrier for the goods it transports begins from
the time of
 (A) conditional receipt. (14) Under the Anti-Money Laundering Law, a covered institution is
required to maintain a system of verifying the true identity of their clients
(B) constructive receipt. as well as persons purporting to act on behalf of

(C) actual receipt. (A) those doing business with such clients.

(D) either actual or constructive receipt. (B) unknown principals.

(12) On X’s failure to pay his loan to ABC Bank, the latter foreclosed the (C) the covered institution.
Real Estate Mortgage he executed in its favor. The auction sale was set
for Dec. 1, 2010 with the notices of sale published as the law required. The (D) such clients.
sale was, however, cancelled when Dec. 1, 2010 was declared a holiday
and re-scheduled to Jan. 10, 2011 without republication of notice. The (15) It is settled that neither par value nor book value is an accurate
auction sale then proceeded on the new date. Under the circumstances, indicator of the fair value of a share of stock of a corporation. As to unpaid
the auction sale is subscriptions to its shares of stock, as they are regarded as corporate
assets, they should be included in the
(A) rescissible.
(A) capital value.
(B) unenforceable.
(B) book value.
(C) void.
(C) par value.
(D) voidable.
(D) market value.
(13) X executed a promissory note with a face value of Php50,000.00,
payable to the order of Y. Y indorsed the note to Z, to whom Y owed (16) P sold to M 10 grams of shabu worth Php5,000.00. As he had no
Php30,000.00. If X has no defense at all against Y, for how much may Z money at the time of the sale, M wrote a promissory note promising to pay
collect from X? P or his order Php5,000. P then indorsed the note to X (who did not know
about the shabu), and X to Y. Unable to collect from P, Y then sued X on
(A) Php20,000.00, as he is a holder for value to the extent of the the note. X set up the defense of illegality of consideration. Is he correct?
difference between Y's debt and the value of the note.
(A) No, since X, being a subsequent indorser, warrants that the
(B) Php30,000.00, as he is a holder for value to the extent of his note is valid and subsisting.
lien.
(B) No, since X, a general indorser, warrants that the note is valid
(C) Php50,000.00, but with the obligation to hold Php20,000.00 for and subsisting.
Y's benefit.
(C) Yes, since a void contract does not give rise to any right.
(D) None, as Z's remedy is to run after his debtor, Y.
(D) Yes, since the note was born of an illegal consideration which
is a real defense.
(17) In a contract of carriage, the common carrier is liable for the injury or (20) The rule is that the valuation of the shares of a stockholder who
death of a passenger resulting from its employee’s fault although the latter exercises his appraisal rights is determined as of the day prior to the date
acted beyond the scope of his authority. This is based on the on which the vote was taken. This is true -

(A) rule that the carrier has an implied duty to transport the (A) regardless of any depreciation or appreciation in the share's fair
passenger safely. value.

(B) rule that the carrier has an express duty to transport the (B) regardless of any appreciation in the share's fair value.
passenger safely
(C) regardless of any depreciation in the share's fair value.
(C) Doctrine of Respondeat Superior.
(D) only if there is no appreciation or depreciation in the share's fair
(D) rule in culpa aquiliana. value.

(18) A holder in due course holds the instrument free from any defect of (21) T Shipping, Co. insured all of its vessels with R Insurance, Co. The
title of prior parties and free from defenses available to prior parties among insurance policies stated that the insurer shall answer for all damages due
themselves. An example of such a defense is - to perils of the sea. One of the insured's ship, the MV Dona Priscilla, ran
aground in the Panama Canal when its engine pipes leaked and the oil
(A) fraud in inducement. seeped into the cargo compartment. The leakage was caused by the
extensive mileage that the ship had accumulated. May the insurer be made
(B) duress amounting to forgery. to answer for the damage to the cargo and the ship?

(C) fraud in esse contractus. (A) Yes, because the insurance policy covered any or all damage
arising from perils of the sea.
(D) alteration.
(B) Yes, since there appears to have been no fault on the part of
the shipowner and shipcaptain.
(19) In elections for the Board of Trustees of non-stock corporations,
members may cast as many votes as there are trustees to be elected but
may not cast more than one vote for one candidate. This is true - (C) No, since the proximate cause of the damage was the breach
of warranty of seaworthiness of the ship.
(A) unless set aside by the members in plenary session.
(D) No, since the proximate cause of the damage was due to
ordinary usage of the ship, and thus not due to a peril of the sea.
(B) in every case even if the Board of Trustees resolves otherwise.
(22) X has been a long-time household helper of Z. X's husband, Y, has
(C) unless otherwise provided in the Articles of Incorporation or in
also been Z's long-time driver. May Z insure the lives of both X and Y with
the By-laws.
Z as beneficiary?
(D) in every case even if the majority of the members decide
(A) Yes, since X and Y render services to Z.
otherwise during the elections.
(B) No, since X and Y have no pecuniary interest on the life of Z
arising from their employment with him.
 (C) No, since Z has no pecuniary interest in the lives of X and Y (B) No, since T can waive the requirement of notice of dishonor.
arising from their employment with him.
(C) No, since F can treat U as maker due to the minority of T, the
(D) Yes, since X and Y are Z’s employees. drawee.

(23) X, Co., a partnership, is composed of A (capitalist partner), B (D) Yes, since in a bill of exchange, notice of dishonor is at all times
(capitalist partner) and C (industrial partner). If you were partner A, who required.
between B and C would you have an insurable interest on, such that you
may then insure him? (26) An insured, who gains knowledge of a material fact already after the
effectivity of the insurance policy, is not obliged to divulge it. The reason
(A) No one, as there is merely a partnership contract among A, B for this is that the test of concealment of material fact is determined
and C.
(A) at the time of the issuance of the policy.
(B) Both B and C, as they are your partners.
(B) at any time before the payment of premium.
(C) Only C, as he is an industrial partner.
(C) at the time of the payment of the premium.
(D) Only B, as he is a capitalist partner.
(D) at any time before the policy becomes effective.
(24) X is the holder of an instrument payable to him (X) or his order, with Y
as maker. X then indorsed it as follows: "Subject to no recourse, pay to Z. (27) T, the captain of MV Don Alan, while asleep in his cabin, dreamt of an
Signed, X." When Z went to collect from Y, it turned out that Y's signature Intensity 8 earthquake along the path of his ship. On waking up, he
was forged. Z now sues X for collection. Will it prosper? immediately ordered the ship to return to port. True enough, the
earthquake and tsunami struck three days later and his ship was saved.
(A) Yes, because X, as a conditional indorser, warrants that the Was the deviation proper?
note is genuine.
(A) Yes, because the deviation was made in good faith and on a
(B) Yes, because X, as a qualified indorser, warrants that the note reasonable ground for believing that it was necessary to avoid a
is genuine. peril.

(C) No, because X made a qualified indorsement. (B) No, because no reasonable ground for avoiding a peril existed
at the time of the deviation.
(D) No, because a qualified indorsement does not include the
warranty of genuineness. (C) No, because T relied merely on his supposed gift of prophecy.

(25) A bill of exchange has T for its drawee, U as drawer, and F as holder. (D) Yes, because the deviation took place based on a reasonable
When F went to T for presentment, F learned that T is only 15 years old. F belief of the captain.
wants to recover from U but the latter insists that a notice of dishonor must
first be made, the instrument being a bill of exchange. Is he correct? (28) X, drawee of a bill of exchange, wrote the words: "Accepted, with
promise to make payment within two days. Signed, X." The drawer
(A) Yes, since a notice of dishonor is essential to charging the questioned the acceptance as invalid. Is the acceptance valid?
drawer.
 (A) Yes, because the acceptance is in reality a clear assent to the (A) prior indorsee.
order of the drawer to pay.
(B) subsequent acceptor.
(B) Yes, because the form of the acceptance is really immaterial.
(C) subsequent indorser.
(C) No, because the acceptance must be a clear assent to the
order of the drawer to pay. (D) prior acceptor.

(D) No, because the document must not express that the drawee (32) X constituted a chattel mortgage on a car (valued at Php1 Million
will perform his promise within two days. pesos) to secure a P500,000.00 loan. For the mortgage to be valid, X
should have
(29) X came up with a new way of presenting a telephone directory in a
mobile phone, which he dubbed as the "iTel" and which uses lesser time (A) the right to mortgage the car to the extent of half its value.
for locating names and telephone numbers. May X have his "iTel"
copyrighted in his name? (B) ownership of the car.

(A) No, because it is a mere system or method. (C) unqualified free disposal of his car.

(B) Yes, because it is an original creation. (D) registered the car in his name.

(C) Yes, because it entailed the application of X's intellect. (33) B borrowed Php1 million from L and offered to him his BMW car worth
Php1 Million as collateral. B then executed a promissory note that reads:
(D) No, because it did not entail any application of X's intellect. "I, B, promise to pay L or bearer the amount of Php1 Million and to keep
my BMW car (loan collateral) free from any other encumbrance. Signed,
(30) D, debtor of C, wrote a promissory note payable to the order of C. C's B." Is this note negotiable?
brother, M, misrepresenting himself as C’s agent, obtained the note from
D, then negotiated it to N after forging C's signature. N indorsed it to E, (A) Yes, since it is payable to bearer.
who indorsed it to F, a holder in due course. May F recover from E?
(B) Yes, since it contains an unconditional promise to pay a sum
(A) No, since the forgery of C's signature results in the discharge certain in money.
of E.
(C) No, since the promise to just pay a sum of money is unclear.
(B) Yes, since only the forged signature is inoperative and E is
bound as indorser. (D) No, since it contains a promise to do an act in addition to the
payment of money.
(C) No, since the signature of C, the payee, was forged.
(34) A bank can be placed under receivership when, if allowed to continue
(D) Yes, since the signature of C is immaterial, he being the payee. in business, its depositors or creditors would incur

(31) A material alteration of an instrument without the assent of all parties (A) probable losses
liable thereon results in its avoidance, EXCEPT against a
(B) inevitable losses
 (C) possible losses (D) D, being the drawer

(D) a slight chance of losses (38) T, an associate attorney in XYZ Law Office, wrote a newspaper
publisher a letter disputing a columnist’s claim about an incident in the
(35) EFG Foundation, Inc., a non-profit organization, scheduled an election attorney’s family. T used the law firm’s letterhead and its computer in
for its six-member Board of Trustees. X, Y and Z, who are minority preparing the letter. T also requested the firm’s messenger to deliver the
members of the foundation, wish to exercise cumulative voting in order to letter to the publisher. Who owns the copyright to the letter?
protect their interest, although the Foundation's Articles and By-laws are
silent on the matter. As to each of the three, what is the maximum number (A) T, since he is the original creator of the contents of the letter.
of votes that he/she can cast?
(B) Both T and the publisher, one wrote the letter to the other who
(A) 6 has possession of it.

(B) 9 (C) The law office since T was an employee and he wrote it on the
firm’s letterhead.
(C) 12
(D) The publisher to whom the letter was sent.
(D) 3
(39) E received goods from T for display and sale in E's store. E was to
(36) If the drawer and the drawee are the same person, the holder may turn over to T the proceeds of any sale and return the ones unsold. To
present the instrument for payment without need of a previous document their agreement, E executed a trust receipt in T’s favor covering
presentment for acceptance. In such a case, the holder treats it as a the goods. When E failed to turn over the proceeds from his sale of the
goods or return the ones unsold despite demand, he was charged in court
(A) non-negotiable instrument. for estafa. E moved to dismiss on the ground that his liability is only civil.
Is he correct?
(B) promissory note.
(A) No, since he committed fraud when he promised to pay for the
goods and did not.
(C) letter of credit.
(B) No, since his breach of the trust receipt agreement subjects
(D) check.
him to both civil and criminal liability for estafa.
(37) D draws a bill of exchange that states: "One month from date, pay to
(C) Yes, since E cannot be charged with estafa over goods covered
B or his order Php100,000.00. Signed, D." The drawee named in the bill is
a trust receipt.
E. B negotiated the bill to M, M to N, N to O, and O to P. Due to non-
acceptance and after proceedings for dishonor were made, P asked O to
pay, which O did. From whom may O recover? (D) Yes, since it was merely a consignment sale and the buyer
could not pay.
(A) B, being the payee
(40) The authorized alteration of a warehouse receipt which does not
change its tenor renders the warehouseman liable according to the terms
(B) N, as indorser to O
of the receipt
(C) E, being the drawee
 (A) in its original tenor if the alteration is material. (A) voidable.

(B) in its original tenor. (B) rescissible.

(C) as altered if there is fraud. (C) unenforceable.

(D) as altered. (D) void.

(41) Any agreement binding upon the holder to extend the time of payment (44) On June 1, 2011, X mailed to Y Insurance, Co. his application for life
or to postpone the holder's right to enforce the instrument results in the insurance, with payment for 5 years of premium enclosed in it. On July 21,
discharge of the party secondarily liable unless made with the latter's 2011, the insurance company accepted the application and mailed, on the
consent. This agreement refers to one which the holder made with the same day, its acceptance plus the cover note. It reached X's residence on
August 11, 2011. But, as it happened, on August 4, 2011, X figured in a
(A) principal debtor. car accident. He died a day later. May X's heirs recover on the insurance
policy?
(B) principal creditor.
(A) Yes, since under the Cognition Theory, the insurance contract
(C) secondary creditor. was perfected upon acceptance by the insurer of X's application.

(D) secondary debtor. (B) No, since there is no privity of contract between the insurer and
X’s heirs.
(42) Upon execution of a trust receipt over goods, the party who is obliged
to release such goods and who retains security interest on those goods, is (C) No, since X had no knowledge of the insurer's acceptance of
called the his application before he died.

(A) holder. (D) Yes, since under the Manifestation Theory, the insurance
contract was perfected upon acceptance of the insurer of X's
application.
(B) shipper.
(45) A bill of exchange has D as drawer, E as drawee and F as payee. The
(C) entrustee.
bill was then indorsed to G, G to H, and H to I. I, the current holder
presented the bill to E for acceptance. E accepted but, as it later turned
(D) entrustor. out, D is a fictitious person. Is E freed from liability?

(43) X, warehouseman, sent a text message to Y, to whom X had issued (A) No, since by accepting, E admits the existence of the drawer.
a warehouse receipt for Y's 500 sacks of corn, notifying him of the due date
and time to settle the storage fees. The message stated also that if Y does
(B) No, since by accepting, E warrants that he is solvent.
not settle the warehouse charges within 10 days, he will advertise the
goods for sale at a public auction. When Y ignored the demand, X sold 100
sacks of corn at a public auction. For X’s failure to comply with the statutory (C) Yes, if E was not aware of that fact at the time of acceptance.
requirement of written notice to satisfy his lien, the sale of the 100 sacks of
corn is (D) Yes, since a bill of exchange with a fictitious drawer is void and
inexistent.
(46) Due to his debt to C, D wrote a promissory note which is payable to extraordinary diligence in the safety of the passenger. Is his defense
the order of C. C's brother, M, misrepresenting himself as agent of C, tenable?
obtained the note from D. M then negotiated the note to N after forging the
signature of C. May N enforce the note against D? (A) Yes, as a common carrier can rebut the presumption of
negligence by raising such a defense.
(A) Yes, since D is the principal debtor.
(B) No, as in tort actions, the proper defense is due diligence in the
(B) No, since the signature of C was forged. selection and supervision of the employee by the employer.

(C) No, since it is C who can enforce it, the note being payable to (C) No, as B, the common carrier's employee, was obviously
the order of C. negligent due to his intoxication.

(D) Yes, since D, as maker, is primarily liable on the note. (D) Yes, as a common carrier can invoke extraordinary diligence in
the safety of passengers in tort cases.
(47) T Corp. has a corporate term of 20 years under its Articles of
Incorporation or from June 1, 1980 to June 1, 2000. On June 1, 1991 it (49)X is a director in T Corp. who was elected to a 1-year term on Feb. 1,
amended its Articles of Incorporation to extend its life by 15 years from 2010. On April 11, 2010, X resigned and was replaced by R, who assumed
June 1, 1980 to June 1, 2015. The SEC approved this amendment. On as director on May 17, 2010. On Nov. 21, 2010, R died. S was then elected
June 1, 2011, however, T Corp decided to shorten its term by 1 year or in his place. Until which time should S serve as director?
until June 1, 2014. Both the 1991 and 2011 amendments were approved
by majority vote of its Board of Directors and ratified in a special meeting (A) April 11, 2011.
by its stockholders representing at least 2/3 of its outstanding capital stock.
The SEC, however, disapproved the 2011 amendment on the ground that (B) Feb. 1, 2011.
it cannot be made earlier than 5 years prior to the expiration date of the
corporate term, which is June 1, 2014. Is this SEC disapproval correct?
(C) May 17, 2011.
(A) No, since the 5-year rule on amendment of corporate term
(D) Nov. 21, 2011.
applies only to extension, not to shortening, of term.
(50) M, the maker, issued a promissory note to P, the payee which states:
(B) Yes, any amendment affecting corporate term cannot be made
"I, M, promise to pay P or order the amount of Php1 Million. Signed, M." P
earlier than 5 years prior to the corporation’s expiration date.
negotiated the note by indorsement to N, then N to O also by indorsement,
and O to Q, again by indorsement. But before O indorsed the note to Q,
(C) No, since a corporation can in fact have a corporate life of 50 O's wife wrote the figure "2" on the note after "Php1" without O's
years. knowledge, making it appear that the note is for Php12 Million. For how
much is O liable to Q?
(D) Yes, the amendment to shorten corporate term cannot be made
earlier than 5 years prior to the corporation’s expiration date. (A) Php1 Million since it is the original tenor of the note.

(48) B, while drunk, accepted a passenger in his taxicab. B then drove the (B) Php1 Million since he warrants that the note is genuine and in
taxi recklessly, and inevitably, it crashed into an electric post, resulting in all respects what it purports to be.
serious physical injuries to the passengers. The latter then filed a suit for
tort against B's operator, A, but A raised the defense of having exercised
 (C) Php12 Million since he warrants his solvency and that he has respect to the water firm’s registered trade name. Will the opposition
a good title to the note. prosper?

(D) Php12 Million since he warrants that the note is genuine and in (A) Yes, since such use is likely to deceive or confuse the public.
all respects what it purports to be.
(B) Yes, since both companies use water in conducting their
(51) X Corp., whose business purpose is to manufacture and sell vehicles, business.
invested its funds in Y Corp., an investment firm, through a resolution of its
Board of Directors. The investment grew tremendously on account of Y (C) No, since the companies are not engaged in the same line of
Corp.'s excellent business judgment. But a minority stockholder in X Corp. business.
assails the investment as ultra vires. Is he right and, if so, what is the status
of the investment? (D) No, since the root word "Eagle" is a generic name not subject
to registration.
(A) Yes, it is an ultra vires act of the corporation itself but voidable
only, subject to stockholders’ ratification. (54) For a constructive total loss to exist in marine insurance, it is required
that the person insured relinquish his interest in the thing insured. This
(B) Yes, it is an ultra vires act of its Board of Directors and thus relinquishment must be
void.
(A) actual.
(C) Yes, it is an ultra vires act of its Board of Directors but voidable
only, subject to stockholders’ ratification. (B) constructive first and if it fails, then actual.

(D) Yes, it is an ultra vires act of the corporation itself and, (C) either actual or constructive.
consequently, void.
(D) constructive.
(52) Notice of dishonor is not required to be made in all cases. One
instance where such notice is not necessary is when the indorser is the
(55) The Corporation Code sanctions a contract between two or more
one to whom the instrument is suppose to be presented for payment. The
corporations which have interlocking directors, provided there is no fraud
rationale here is that the indorser
that attends it and it is fair and reasonable under the circumstances. The
interest of an interlocking director in one corporation may be either
(A) already knows of the dishonor and it makes no sense to notify substantial or nominal. It is nominal if his interest:
him of it.
(A) does not exceed 25% of the outstanding capital stock.
(B) is bound to make the acceptance in all cases.
(B) exceeds 25% of the outstanding capital stock.
(C) has no reason to expect the dishonor of the instrument.
(C) exceeds 20% of the outstanding capital stock.
(D) must be made to account for all his actions.
(D) does not exceed 20% of the outstanding capital stock.
(53) "Eagleson Refillers, Co.," a firm that sells water to the public, opposes
the trade name application of "Eagleson Laundry, Co.," on the ground that
(56) X, an amateur astronomer, stumbled upon what appeared to be a
such trade name tends to deceive trade circles or confuse the public with
massive volcanic eruption in Jupiter while peering at the planet through his
telescope. The following week, X, without notes, presented a lecture on his (D) during the author's lifetime.
findings before the Association of Astronomers of the Philippines. To his
dismay, he later read an article in a science journal written by Y, a (59) Which of the following indorsers expressly warrants in negotiating an
professional astronomer, repeating exactly what X discovered without any instrument that 1) it is genuine and true; 2) he has a good title to it; 3) all
attribution to him. Has Y infringed on X's copyright, if any? prior parties have capacity to negotiate; and 4) it is valid and subsisting at
the time of his indorsement?
(A) No, since X did not reduce his lecture in writing or other material
form. (A) The irregular indorser.

(B) Yes, since the lecture is considered X’s original work. (B) The regular indorser.

(C) No, since no protection extends to any discovery, even if (C) The general indorser.
expressed, explained, illustrated, or embodied in a work.
(D) The qualified indorser.
(D) Yes, since Y’s article failed to make any attribution to X.
(60) Where the insurer was made to pay the insured for a loss covered by
(57) In case of disagreement between the corporation and a withdrawing the insurance contract, such insurer can run after the third person who
stockholder who exercises his appraisal right regarding the fair value of his caused the loss through subrogation. What is the basis for conferring the
shares, a three-member group shall by majority vote resolve the issue with right of subrogation to the insurer?
finality. May the wife of the withdrawing stockholder be named to the
threemember group? (A) Their express stipulation in the contract of insurance.

(A) No, the wife of the withdrawing shareholder is not a (B) The equitable assignment that results from the insurer’s
disinterested person. payment of the insured.

(B) Yes, since she could best protect her husband's shareholdings. (C) The insured’s formal assignment of his right to indemnification
to the insurer.
(C) Yes, since the rules do not discriminate against wives.
(D) The insured’s endorsement of its claim to the insurer.
(D) No, since the stockholder himself should sit in the three-
member group. (61) X invented a device which, through the use of noise, can recharge a
cellphone battery. He applied for and was granted a patent on his device,
(58) Apart from economic rights, the author of a copyright also has moral effective within the Philippines. As it turns out, a year before the grant of
rights which he may transfer by way of assignment. The term of these X's patent, Y, also an inventor, invented a similar device which he used in
moral rights shall last his cellphone business in Manila. But X files an injunctive suit against Y to
stop him from using the device on the ground of patent infringement. Will
(A) during the author's lifetime and for 50 years after his death. the suit prosper?

(B) forever. (A) No, since the correct remedy for X is a civil action for damages.

(C) 50 years from the time the author created his work. (B) No, since Y is a prior user in good faith.
 (C) Yes, since X is the first to register his device for patent (A) reduces the value of the policy.
registration.
(B) avoids the policy.
(D) Yes, since Y unwittingly used X’s patented invention.
(C) offsets the value of the policy with the additional insurances’s
(62) P, a sales girl in a flower shop at the Ayala Station of the Metro Rail value.
Transit (MRT) bought two tokens or tickets, one for her ride to work and
another for her ride home. She got to her flower shop where she usually (D) forfeits premiums already paid.
worked from 8 a.m. to 5 p.m. At about 3 p.m., while P was attending to her
duties at the flower shop, two crews of the MRT got into a fight near the (65) X found a check on the street, drawn by Y against ABC Bank, with Z
flower shop, causing injuries to P in the process. Can P sue the MRT for as payee. X forged Z's signature as an indorser, then indorsed it personally
contractual breach as she was within the MRT premises where she would and delivered it to DEF Bank. The latter, in turn, indorsed it to ABC Bank
shortly take her ride home? which charged it to the Y’s account. Y later sued ABC Bank but it set up
the forgery as its defense. Will it prosper?
(A) No, since the incident took place, not in an MRT train coach,
but at the MRT station. (A) No, since the payee's signature has been forged.

(B) No, since P had no intention to board an MRT train coach when (B) No, since Y’s remedy is to run after the forger, X.
the incident occured.
(C) Yes, since forgery is only a personal defense.
(C) Yes, since she already had a ticket for her ride home and was
in the MRTs premises at the time of the incident.
(D) Yes, since ABC Bank is bound to know the signature of Y, its
client.
(D) Yes, since she bought a round trip ticket and MRT had a duty
while she was at its station to keep her safe for her return trip.
(66) The rule is that no stock dividend shall be issued without the approval
of stockholders representing at least 2/3 of the outstanding capital stock at
(63) Forgery of bills of exchange may be subdivided into, a) forgery of an a regular or special meeting called for the purpose. As to other forms of
indorsement on the bill and b) forgery of the drawer's signature, which may dividends:
either be with acceptance by the drawee, or
(A) a mere majority of the entire Board of Directors applies.
(A) with acceptance but the bill is paid by the drawee.
(B) a mere majority of the quorum of the Board of Directors applies.
(B) without acceptance but the bill is paid by the drawer.
(C) a mere majority of the votes of stockholders representing the
(C) without acceptance but the bill is paid by the drawee. outstanding capital stock applies.

(D) with acceptance but the bill is paid by the drawer. (D) the same rule of 2/3 votes applies.

(64) If an insurance policy prohibits additional insurance on the property (67) X, at Y’s request, executed a Real Estate Mortgage (REM) on his (X’s)
insured without the insurer's consent, such provision being valid and land to secure Y's loan from Z. Z successfully foreclosed the REM when Y
reasonable, a violation by the insured defaulted on the loan but half of Y's obligation remained unpaid. May Z sue
X to enforce his right to the deficiency?
 (A) Yes, but solidarily with Y. (D) not subject to protection.

(B) Yes, since X’s is deemed to warrant that his land would cover (71) Can a drawee who accepts a materially altered check recover from
the whole obligation. the holder and the drawer?

(C) No, since it is the buyer at the auction sale who should answer (A) No, he cannot recover from either of them.
for the deficiency.
(B) Yes from both of them.
(D) No, because X is not Z’s debtor.
(C) Yes but only from the drawer.
(68) May a publicly listed universal bank own 100% of the voting stocks in
another universal bank and in a commercial bank? (D) Yes but only from the holder.

(A) Yes, if with the permission of the Bangko Sentral ng Pilipinas. (72) The rule is that the intentional cancellation of a person secondarily
liable results in the discharge of the latter. With respect to an indorser, the
(B) No, since it has no power to invest in equities. holder's right to cancel his signature is:

(C) Yes, as there is no prohibition on it. (A) without limitation.

(D) No, since under the law, the 100% ownership on voting stocks (B) not limited to the case where the indorsement is necessary to
must be in either bank only. his title.

(69) Perils of the ship, under marine insurance law, refer to loss which in (C) limited to the case where the indorsement is not necessary to
the ordinary course of events results from his title.

(A) natural and inevitable actions of the sea. (D) limited to the case where the indorsement is necessary to his
title.
(B) natural and ordinary actions of the sea.
(73) X, in the hospital for kidney dysfunction, was about to be discharged
(C) unnatural and inevitable actions of the sea. when he met his friend Y. X told Y the reason for his hospitalization. A
month later, X applied for an insurance covering serious illnesses from
(D) unnatural and ordinary actions of the sea. ABC Insurance, Co., where Y was working as Corporate Secretary. Since
X had already told Y about his hospitalization, he no longer answered a
question regarding it in the application form. Would this constitute
(70) Under the Intellectual Property Code, lectures, sermons, addresses or
concealment?
dissertations prepared for oral delivery, whether or not reduced in writing
or other material forms, are regarded as
(A) Yes, since the previous hospitalization would influence the
insurer in deciding whether to grant X's application.
(A) non-original works.
(B) No, since Y may be regarded as ABC’s agent and he already
(B) original works.
knew of X’s previous hospitalization.
(C) derivative works.
 (C) Yes, it would constitute concealment that amounts to invoked the defense that they have no personal liability, being mere
misrepresentation on X's part. directors of a fictional being. Are they correct?

(D) No, since the previous illness is not a material fact to the (A) No, since as a rule only natural persons like the members of
insurance coverage. the board of directors can commit corporate crimes.

(74) Several American doctors wanted to set up a group clinic in the (B) Yes, since it is the corporation that did not pay the tax and it
Philippines so they could render modern medical services. If the clinic is to has a personality distinct from its directors.
be incorporated under our laws, what is the required foreign equity
participation in such a corporation? (C) Yes, since the directors officially and collectively performed
acts that are imputable only to the corporation.
(A) 40%
(D) No, since the law makes directors of the corporation solidarily
(B) 0% liable for gross negligence and bad faith in the discharge of their
duties.
(C) 60%
(77) T is the registered trademark owner of "CROCOS" which he uses on
(D) 70% his ready-to-wear clothes. Banking on the popularity of T's trade mark, B
came up with his own "CROCOS" mark, which he then used for his
(75) X executed a promissory note in favor of Y by way of accommodation. "CROCOS" burgers. T now sues B for trademark infringement but B argues
It says: "Pay to Y or order the amount of Php50,000.00. Signed, X." Y then that his product is a burger, hence, there is no infringement. Is B correct?
indorsed the note to Z, and Z to T. When T sought collection from Y, the
latter countered as indorser that there should have been a presentment (A) No, since the owner of a well-known mark registered in the
first to the maker who dishonors it. Is Y correct? Philippines has rights that extends even to dissimilar kinds of
goods.
(A) No, since Y is the real debtor and thus, there is no need for
presentment for payment and dishonor by the maker. (B) Yes, since the right of the owner of a well-known mark
registered in the Philippines does not extend to goods which are
(B) Yes, since as an indorser who is secondarily liable, there must not of the same kind.
first be presentment for payment and dishonor by the maker.
(C) Yes, as B was in bad faith in coming up with his own
(C) No, since the absolute rule is that there is no need for "CROCOS" mark.
presentment for payment and dishonor to hold an indorser liable.
(D) No, since unlike T, he did not register his own "CROCOS" mark
(D) Yes, since the secondary liability of Y and Z would only arise for his product.
after presentment for payment and dishonor by the maker.
(78) A, the proprietor of a fleet of ten taxicabs, decides to adopt, as his
(76) The Board of Directors of XYZ Corp. unanimously passed a business name, "A Transport Co., Inc." May this be allowed?
Resolution approving the taking of steps that in reality amounted to willful
tax evasion. On discovering this, the government filed tax evasion charges (A) No, it would be deceptive since he is a proprietor, not a
against all the company’s members of the board of directors. The directors corporation.
 (B) No, since "A" is a generic name, not suitable for registration. (B) Yes since the majority votes in the Board was sufficient to
amend the By-laws.
(C) Yes, since his line of business is public transportation.
(C) No, because the voting in the Board should have been by
(D) Yes, since such name would give his business a corporate majority of a quorum.
identity.
(D) Yes since the votes of 2/3 of the stockholders and majority of
(79) T delivers two refrigerators to the warehouse of W who then issues a the Board were secured.
negotiable receipt undertaking the delivery of the refrigerators to "T or
bearer." T entrusted the receipt to B for safekeeping only. B negotiated it, (82) A group of Malaysians wanted to invest in the Philippines’ insurance
however, to F who bought it in good faith and for value. Who is entitled to business. After negotiations, they agreed to organize "FIMA Insurance
the delivery of the refrigerators? Corp." with a group of Filipino businessmen. FIMA would have a PhP50
Million paid up capital, PhP40 Million of which would come from the Filipino
(A) T, since he is the real owner of the refrigerators. group. All corporate officers would be Filipinos and 8 out of its 10-member
Board of Directors would be Filipinos. Can FIMA operate an insurance
(B) F, since he is a purchaser in good faith and for value. business in the Philippines?

(C) B, since T entrusted the receipt to him. (A) No, since an insurance company must have at least PhP75
Million paid-up capital.
(D) W, since he has as a warehouseman a lien on the goods.
(B) Yes, since there is substantial compliance with our
nationalization laws respecting paid-up capital and Filipino
(80) The Articles of Incorporation must be accompanied by a Treasurer's
dominated Board of Directors.
Affidavit certifying under oath, among others, that the total subscription
paid is:
(C) Yes, since FIMA’s paid up capital more than meets the
country’s nationalization laws.
(A) not less than P25,000.00.
(D) No, since an insurance company should be 100% owned by
(B) not more than P5,000.00.
Filipinos.
(C) RIGHT ANSWER not less than P5,000.00.
(83) Under the Public Service Act, an administrative agency has the power
to approve provisionally the rates of public utilities without a hearing in case
(D) not more than P25,000.00. of urgent public needs. The exercise of this power is

(81) In a special meeting called for the purpose, 2/3 of the stockholders (A) supervisory.
representing the outstanding capital stock in X. Co. authorized the
company's Board of Directors to amend its By-laws. By majority vote, the
(B) absolute.
Board then approved the amendment. Is this amendment valid?
(C) discretionary.
(A) No since the stockholders cannot delegate their right to amend
the By-laws to the Board.
(D) mandatory.
(84) X, creditor of Y, obtained a judgment in his favor in connection with (C) Yes, since he is a holder in due course of a note which is
Y's unpaid loan to him. The court's sheriff then levied on the goods that Y distinct from the sale of gecko.
stored in T's warehouse, for which the latter issued a warehouse receipt.
A month before the levy, however, Z bought the warehouse receipt for (D) Yes, since he is a holder in due course and P and M were not
value. Who has a better right over the goods? aware of the law that prohibited the sale of gecko.

(A) T, being the warehouseman with a lien on the goods (87) P authorized A to sign a bill of exchange in his (P’s) name. The bill
reads: "Pay to B or order the sum of Php1 million. Signed, A (for and in
(B) Z, being a purchaser for value of the warehouse receipt behalf of P)." The bill was drawn on P. B indorsed the bill to C, C to D, and
D to E. May E treat the bill as a promissory note?
(C) X, being Y’s judgment creditor
(A) No, because the instrument is payable to order and has been
(D) Y, being the owner of the goods indorsed several times.

(85) A promissory note states, on its face: "I, X, promise to pay Y the (B) Yes, because the drawer and drawee are one and the same
amount of Php 5,000.00 five days after completion of the on-going person.
construction of my house. Signed, X." Is the note negotiable?
(C) No, because the instrument is a bill of exchange.
(A) Yes, since it is payable at a fixed period after the occurrence of
a specified event. (D) Yes, because A was only an agent of P.

(B) No, since it is payable at a fixed period after the occurrence of (88) Z wrote out an instrument that states: "Pay to X the amount of Php1
an event which may not happen. Million for collection only. Signed, Z." X indorsed it to his creditor, Y, to
whom he owed Php1 million. Y now wants to collect and satisfy X's debt
(C) Yes, since it is payable at a fixed period or determinable future through the Php1 million on the check. May he validly do so?
time.
(A) Yes, since the indorsement to Y is for Php1 Million.
(D) No, since it should be payable at a fixed period before the
occurrence of a specified event. (B) No, since Z is not a party to the loan between X and Y.

(86) P sold to M a pair of gecko (tuko) for Php50,000.00. M then issued a (C) No, since X is merely an agent of Z, his only right being to
promissory note to P promising to pay the money within 90 days. Unknown collect.
to P and M, a law was passed a month before the sale that prohibits and
declares void any agreement to sell gecko in the country. If X acquired the (D) Yes, since X owed Y Php1 Million.
note in good faith and for value, may he enforce payment on it?
(89) X Shipping, Co., insured its vessel MV Don Teodoro for Php100 Million
(A) No, since the law declared void the contract on which the with ABC Insurance, Co. through T, an agent of X Shipping. During a
promissory note was founded. voyage, the vessel accidentally caught fire and suffered damages
estimated at Php80 Million. T personally informed ABC Insurance that X
(B) No, since it was not X who bought the gecko. Shipping was abandoning the ship. Later, ABC insurance denied X
Shipping’s claim for loss on the ground that a notice of abandonment
through its agent was improper. Is ABC Insurance right?
 (A) Yes, since X Shipping should have ratified its agent’s action. (A) RIGHT ANSWER P, since he has superior rights as a
purchaser for value and in good faith.
(B) No, since T, as agent of X Shipping who procured the
insurance, can also give notice of abandonment for his principal. (B) P, regardless of whether or not he is a purchaser for value and
in good faith.
(C) Yes, since only the agent of X Shipping relayed the fact of
abandonment. (C) G, since as an unpaid seller, he has the right of stoppage in
transitu.
(D) No, since in the first place, the damage was more than ¾ of the
ship's value. (D) W, since it appears that the warehouse charges have not been
paid.
(90) A law was passed disqualifying former members of Congress from
sitting in the Board of Directors of government-owned or controlled (92) In a signature by procuration, the principal is bound only in case the
corporations. Because of this, the Board of Directors of ABC Corp., a agent acted within the actual limits of his authority. The signature of the
government-owned and controlled corporation, disqualified C, a former agent in such a case operates as notice that he has
Congressman, from continuing to sit as one of its members. C objected,
however, insisting that under the Corporation Code members of the board (A) a qualified authority to sign.
of directors of corporations may only be removed by vote of stockholders
holding 2/3 of its outstanding capital stock in a regular or special meeting (B) a limited authority to sign.
called for that purpose. Is C correct?
(C) a special authority to sign.
(A) Yes, since the new law cannot be applied to members of the
board of directors already elected prior to its passage.
(D) full authority to sign.
(B) No, since the disqualification takes effect by operation of law, it
(93) In return for the 20 years of faithful service of X as a househelper to
is sufficient that he was declared no longer a member of the board.
Y, the latter promised to pay Php100,000.00 to X’s heirs if he (X) dies in
an accident by fire. X agreed. Is this an insurance contract?
(C) Yes, since the provisions of the Corporation Code applies as
well to government-owned and controlled corporations.
(A) Yes, since all the elements of an insurance contract are
present.
(D) No, since the board has the power to oust him even without the
new law.
(B) Yes, since X’ services may be regarded as the consideration.
(91) 002-38-0001 G, a grocery goods supplier, sold 100 sacks of rice to H
(C) No, since Y actually made a conditional donation in X’s favor.
who promised to pay once he has sold all the rice. H meantime delivered
the goods to W, a warehouseman, who issued a warehouse receipt.
Without the knowledge of G and W, H negotiated the receipt to P who (D) No, since it is in fact an innominate contract between X and Y.
acquired it in good faith and for value. P then claimed the goods from W,
who released them. After the rice was loaded on a ship bound for Manila, (94) A bill of exchange states on its face: "One (1) month after sight, pay
G invokes his right to stop the goods in transit due to his unpaid lien. Who to the order of Mr. R the amount of Php50,000.00, chargeable to the
has a better right to the rice? account of Mr. S. Signed, Mr. T." Mr. S, the drawee, accepted the bill upon
presentment by writing on it the words "I shall pay Php30,000.00 three (3)
months after sight." May he accept under such terms, which varies the (97) Shipowner X, in applying for a marine insurance policy from ABC, Co.,
command in the bill of exchange? stated that his vessel usually sails middle of August and with normally 100
tons of cargo. It turned out later that the vessel departed on the first week
(A) Yes, since a drawee accepts according to the tenor of his of September and with only 10 tons of cargo. Will this avoid the policy that
acceptance. was issued?

(B) No, since, once he accepts, a drawee is liable according to the (A) Yes, because there was breach of implied warranty.
tenor of the bill.
(B) No, because there was no intent to breach an implied warranty.
(C) Yes, provided the drawer and payee agree to the acceptance.
(C) Yes, because it relates to a material representation.
(D) No, since he is bound as drawee to accept the bill according to
its tenor. (D) No, because there was only representation of intention.

(95) May the indorsee of a promissory note indorsed to him "for deposit" (98) The Articles of Incorporation of ABC Transport Co., a public utility,
file a suit against the indorser? provides for ten (10) members in its Board of Directors. What is the
prescribed minimum number of Filipino citizens in its Board?
(A) Yes, as long as the indorser received value for the restrictive
indorsement. (A) 10

(B) Yes, as long as the indorser received value for the conditional (B) 6
indorsement.
(C) 7
(C) Yes, whether or not the indorser received value for the
conditional indorsement. (D) 5

(D) Yes, whether or not the indorser received value for the (99) P authorized A to sign a negotiable instrument in his (P’s) name. It
restrictive indorsement. reads: "Pay to B or order the sum of Php1 million. Signed, A (for and in
behalf of P)." The instrument shows that it was drawn on P. B then indorsed
(96) X issued a check in favor of his creditor, Y. It reads: " Pay to Y the to C, C to D, and D to E. E then treated it as a bill of exchange. Is
amount of Seven Thousand Hundred Pesos (Php700,000.00). Signed, X". presentment for acceptance necessary in this case?
What amount should be construed as true in such a case?
(A) No, since the drawer and drawee are the same person.
(A) Php700,000.00.
(B) No, since the bill is non-negotiable, the drawer and drawee
(B) Php700.00. being the same person.

(C) Php7,000.00. (C) Yes, since the bill is payable to order, presentment is required
for acceptance.
(D) Php700,100.00.
(D) Yes, in order to hold all persons liable on the bill.
(100) The corporate term of a stock corporation is that which is stated in
its Articles of Incorporation. It may be extended or shortened by an
amendment of the Articles when approved by majority of its Board of
Directors and:

(A) approved and ratified by at least 2/3 of all stockholders.

(B) approved by at least 2/3 of the stockholders representing the

outstanding capital stock.

(C) ratified by at least 2/3 of all stockholders.

(D) ratified by at least 2/3 of the stockholders representing the

outstanding capital stock.
 YEAR 2010 The corporation defaulted and the bank extra-judicially foreclosed on the
real estate mortgage. The bank, which was the sole bidder for P75 million,
won the award.
I
a. Can the bank sue Marquez for the deficiency of P25 million?
Briefly describe the following types of banks: (2% each) Explain. (2%)

a. universal bank b. If the bank opts to file an action for collection against the
corporation, can it afterwards institute a real action to foreclose the
b. commercial bank mortgage? Explain. (2%)

c. thrift bank c. Can the bank foreclose on the pledged shares of Marquez and
recover the deficiency from the corporation? Explain. (2%)
d. rural bank
IV
e. cooperative bank
Andante Realty, a marketing company that promotes and facilitates sales
II of real property through leverage marketing, solicits investors who are
required to be a Business Center Owner (BCO) by paying an enrollment
fee of $250. The BCO is then entitled to recruit two other investors who
a. How do you characterize the legal relationship between a
pay $250 each. The BCO receives $90 from the $250 paid by each of his
commercial bank and its safety deposit box client? (2%)
recruits and is credited a certain amount for payments made by investors
through the initial efforts of his Business Center. Once the accumulated
b. Is a stipulation in the contract for the use of a safety deposit box amount reaches $5,000, the same is used as down payment for the real
relieving the bank of liability in connection with the use thereof property chosen by the BCO.
valid? (2%)
a. Does this multi-level marketing scheme constitute an
c. Differentiate "bank deposits" from "deposit substitutes." (2%) "investment contract" under the Securities Regulation Code?
Define an "investment contract." (2%)
d. Why are banks required to maintain reserves against their
deposits and deposit substitutes? State one of three purposes for b. What procedure must be followed under the Securities
these reserves. (2%) Regulation Code to authorize the sale or offer for sale or
distribution of an investment contract? (2%)
III
c. What are the legal consequences of failure to follow this
Ozamis Paper Corporation secured loans from ABC Universal Bank in the procedure? (2%)
aggregate principal amount of P100 million, evidenced by several
promissory notes, and secured by a continuing guaranty of its principal V
stockholder Menandro at P45 million; and a real estate mortgage over
certain parcels of land owned by Marquez.
Venezia is a famous international fashion chain with outlets in Makati,
Ortigas, and Manila. It has complied with the minimum capitalization
required under the Retail Trade Nationalization Act and carries on retail
business worth more than $3 million for each of its outlets. As its Manila
outlet is not doing very well, it decides to sell all of its business there Is the proposed acquisition by XYZ subject to the mandatory tender offer
consisting of remaining inventory, furniture and fixtures and other assets rule? Why or why not? What is a tender offer and when is it mandatory?
to its competitor. (5%)

a. Venezia’s Manila outlet constitutes one-third (1/3) of its total VIII

business. Should it comply with the requirements of the Bulk Sales
Law? Why or why not? (2%) Marlon deposited with LYRIC Bank a money market placement of P1
million for a term of 31 days. On maturity date, one claiming to be Marlon
b. If instead of selling its Manila outlet, Venezia merely mortgages called up the LYRIC Bank account officer and instructed him to give the
its assets there, would it need to comply with the requirements of manager’s check representing the proceeds of the money market
the Bulk Sales Law? (2%) placement to Marlon’s girlfriend Ingrid.

c. What are the legal consequences of a failure to comply with the The check, which bore the forged signature of Marlon, was deposited in
requirements of the Bulk Sales Law? (2%) Ingrid’s account with YAMAHA Bank. YAMAHA Bank stamped a guaranty
on the check reading: "All prior endorsements and/or lack of endorsement
VI guaranteed."

a. What contractual stipulations are required in all technology Upon presentment of the check, LYRIC Bank funds the check. Days later,
transfer agreements? (2%) Marlon goes to LYRIC Bank to collect his money market placement and
discovers the foregoing transactions.
b. Enumerate three (3) stipulations that are prohibited in
technology transfer agreements. (3%) Marlon thereupon sues LYRIC Bank which in turn files a third-party
complaint against YAMAHA Bank. Discuss the respective rights and
c. Can an article of commerce serve as a trademark and at the liabilities of the two banks. (5%)
same time enjoy patent and copyright protection? Explain and give
an example. (2%) IX

VII Your client Dianne approaches you for legal advice on putting up a
medium-sized restaurant business that will specialize in a novel type of
Union Mines, Inc. has total assets of P60 million with 210 stockholders cuisine. As Dianne feels that the business is a little risky, she wonders
holding at least 100 shares each. whether she should use a corporation as the business vehicle, or just run
it as a single proprietorship. She already has an existing corporation that
is producing meat products profitably and is also considering the
The company has two principal stockholders, ABC which owns 60% of the
alternative of simply setting up the restaurant as a branch office of the
shares of stock, and XYZ which owns 17%.
existing corporation.
ABC in turn is owned to the extent of 21.31% by Acme, Inc.; 29.69% by
a. Briefly explain to your client what you see as the legal
Golden Boy, Inc.; 9% by XYZ; and the rest by individual stockholders.
advantages and disadvantages of using a separate corporation, a
single proprietorship, or a branch of an existing corporation for the
None of the parties is a publicly-listed company. proposed restaurant business. (3%)

XYZ now proposes to buy Acme’s and Golden Boy’s shares in ABC, which b. If you advise your client to use a corporation, what officer
would give it direct control of ABC and indirect control of Union Mines. positions must the corporation at least have? (2%)
 c. What particular qualifications, if any, are these officers legally XII
required to possess under the Corporation Code? (2%)
AA entered into a contract with BB for the latter to transport ladies wear
X from Manila to France with transhipment via Taiwan. Somehow the goods
were not loaded in Taiwan on time, hence, these arrived in France "off-
To secure a loan of P10 million, Mario mortgaged his building to Armando. season." AA was only paid for onehalf (1/2) the value by the buyer.
In accordance with the loan arrangements, Mario had the building insured
with First Insurance Company for P10 million, designating Armando as the AA claimed damages from BB. BB invoked prescription as a defense under
beneficiary. the Carriage of Goods by Sea Act. Considering the "loss of value" of the
ladies wear as claimed by AA, is BB’s defense tenable? Explain. (3%)
Armando also took an insurance on the building upon his own interest with
Second Insurance Company for P5 million. XIII

The building was totally destroyed by fire, a peril insured against under Paolo, the owner of an ocean-going vessel, offered to transport the logs of
both insurance policies. It was subsequently determined that the fire had Constantino from Manila to Nagoya. Constantino accepted the offer, not
been intentionally started by Mario and that in violation of the loan knowing that the vessel was manned by an irresponsible crew with deep-
agreement, he had been storing inflammable materials in the building. seated resentments against Paolo, their employer.

a. How much, if any, can Armando recover from either or both Constantino insured the cargo of logs against both perils of the sea and
insurance companies? (2%) barratry. The logs were improperly loaded on one side, thereby causing
the vessel to tilt on one side. On the way to Nagoya, the crew unbolted the
b. What happens to the P10 million debt of Mario to Armando? sea valves of the vessel causing water to flood the ship hold. The vessel
Explain. (3%) sank.

XI Constantino tried to collect from the insurance company which denied

liability, given the unworthiness of both the vessel and its crew.
Enrique obtained from Seguro Insurance Company a comprehensive
motor vehicle insurance to cover his top of the line Aston Martin. The policy Constantino countered that he was not the owner of the vessel and he
was issued on March 31, 2010 and, on even date, Enrique paid the could therefore not be responsible for conditions about which he was
premium with a personal check postdated April 6, 2010. innocent.

On April 5, 2010, the car was involved in an accident that resulted in its a. Is the insurance company liable? Why or why not? (3%)
total loss.
b. What is "barratry" in marine insurance? (2%)
On April 10, 2010, the drawee bank returned Enrique’s check with the
notation "Insufficient Funds." Upon notification, Enrique immediately XIV
deposited additional funds with the bank and asked the insurer to redeposit
the check. When OCCIDENTAL Bank folded up due to insolvency, Manuel had the
following separate deposits in his name: P200,000 in savings deposit;
Enrique thereupon claimed indemnity from the insurer. Is the insurer liable P250,000 in time deposit; P50,000 in a current account; P1 million in a trust
under the insurance coverage? Why or why not? (3%) account; and P3 million in money market placement. Under the Philippine
Deposit Insurance Corporation Act, how much could Manuel recover? XVII
Explain. (2%)
The Supreme Court has held that fraud is an exception to the
XV "independence principle" governing letters of credit. Explain this principle
and give an example of how fraud can be an exception. (3%)
While vacationing in Boracay, Valentino surreptitiously took photographs
of his girlfriend Monaliza in her skimpy bikini. Two weeks later, her XVIII
photographs appeared in the Internet and in a national celebrity magazine.
For years, Y has been engaged in the parallel importation of famous
Monaliza found out that Valentino had sold the photographs to the brands, including shoes carrying the foreign brand MAGIC. Exclusive
magazine and, adding insult to injury, uploaded them to his personal blog distributor X demands that Y cease importation because of his
on the Internet. appointment as exclusive distributor of MAGIC shoes in the Philippines.

a. Monaliza filed a complaint against Valentino for damages based Y counters that the trademark MAGIC is not registered with the Intellectual
on, among other grounds, violation of her intellectual property Property Office as a trademark and therefore no one has the right to
rights. Does she have any cause of action? Explain. (2%) prevent its parallel importation.

b. Valentino’s friend Francesco stole the photographs and a. Who is correct? Why? (2%)
duplicated them and sold them to a magazine publication.
Valentino sued Francesco for infringement and damages. Does b. Suppose the shoes are covered by a Philippine patent issued to
Valentino have any cause of action? Explain. (2%) the brand owner, what would your answer be? Explain. (2%)

c. Does Monaliza have any cause of action against Francesco? XIX

Explain. (2%)
Dr. Nobel discovered a new method of treating Alzheimer’s involving a
XVI special method of diagnosing the disease, treating it with a new medicine
that has been discovered after long experimentation and field testing, and
An importer of Christmas toys loaded 100 boxes of Santa Claus talking novel mental isometric exercises. He comes to you for advice on how he
dolls aboard a ship in Korea bound for Manila. With the intention of can have his discoveries protected.
smuggling one-half of his cargo, he took a bill of lading for only 50 boxes.
On the voyage to Manila, 50 boxes were jettisoned to save the more Can he legally protect his new method of diagnosis, the new medicine, and
precious cargo. the new method of treatment? If no, why? If yes, how? (4%)

a. Is the importer entitled to receive any indemnity for average?

Explain. (2%)

b. What are the types of averages in marine commerce? (3%)

 YEAR 2009 a. Can Atty. Edric, who owns only one (1) share in the company,
initiate a derivative suit? Why or why not? (2%)
b. If such a suit is commenced, would it constitute an intra-corporate
PART I dispute? If so, why and where would such a suit be filed? If not,
why not? (2%)
I c. Will the suit prosper? Why or why not? (3%)

TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the III
statement is false. Explain your answer in not more than two (2) sentences.
(5%) Armando, a resident of Manila, borrowed P3-million from Bernardo,
offering as security his 500 shares of stock worth P1.5-million in Xerxes
a. The Denicola Test in intellectual property law states that if design Corporation, and his 2007 BMW sedan, valued at P2-million. The
elements of an article reflect a merger of aesthetic and functional mortgage on the shares of stock was registered in the Office of the Register
considerations, the artistic aspects of the work cannot be of Deeds of Makati City where Xerxes Corporation has its principal office.
conceptually separable from the utilitarian aspects; thus, the article The mortgage on the car was registered in the Office of the Register of
cannot be copyrighted. Deeds of Manila. Armando executed a single Affidavit of Good Faith,
b. If the Ombudsman is convinced that there is a violation of law after covering both mortgages.
investigating a complaint alleging illicit bank deposits of a public
officer, the Ombudsman may order the bank concerned to allow in Armando defaulted on the payment of his obligation; thus, Bernardo
camera inspection of bank records and documents. foreclosed on the two chattel mortgages. Armando filed suit to nullify the
c. Even if the seller and the buyer in a sale in bulk violate the Bulk foreclosure and the mortgages, raising the following issues:
Sales Law, the sale would still be valid.
d. Dividends on shares of stocks can only be declared out of a. The execution of only one Affidavit of Good Faith for both
unrestricted retained earnings of the corporation. mortgages invalidated the two mortgages; (2%) and
e. A bank under receivership can still grant new loans and accept new b. The mortgage on the shares of stocks should have been registered
deposits. in the Office of the Register of Deeds of Manila where he resides,
as well as in the stock and transfer book of Xerxes Corporation.
II (3%)

Atlantis Realty Corporation (ARC), a local firm engaged in real estate Rule on the foregoing issues with reasons.
development, plans to sell one of its prime assets --- a three-hectare land
valued at about P100-million. For this purpose, the board of directors of c. Assume that Bernardo extrajudicially foreclosed on the mortgages,
ARC unanimously passed a resolution approving the sale of the property and both the car and the shares of stock were sold at public
for P75-million to Shangrila Real Estate Ventures (SREV), a rival realty auction. If the proceeds from such public sale should be P1-million
firm. The resolution also called for a special stockholders meeting at which short of Armando’s total obligation, can Bernardo recover the
the proposed sale would be up for ratification. deficiency? Why or why not? (2%)

Atty. Edric, a stockholder who owns only one (1) share in ARC, wants to IV
stop the sale. He then commences a derivative suit for and in behalf of the
corporation, to enjoin the board of directors and the stockholders from Antarctica Life Assurance Corporation (ALAC) publicly offered a specially
approving the sale. designed insurance policy covering persons between the ages of 50 to 75
who may be afflicted with serious and debilitating illnesses. Quirico applied
for insurance coverage, stating that he was already 80 years old. VII
Nonetheless, ALAC approved his application.
Global Transport Services, Inc. (GTSI) operates a fleet of cargo vessels
Quirico then requested ALAC for the issuance of a cover note while he was plying interisland routes. One of its vessels, MV Dona Juana, left the port
trying to raise funds to pay the insurance premium. ALAC granted the of Manila for Cebu laden with, among other goods, 10,000 television sets
request. Ten days after he received the cover note, Quirico had a heart consigned to Romualdo, a TV retailer in Cebu.
seizure and had to be hospitalized. He then filed a claim on the policy.
When the vessel was about ten nautical miles away from Manila, the ship
a. Can ALAC validly deny the claim on the ground that the insurance captain heard on the radio that a typhoon which, as announced by PAG-
coverage, as publicly offered, was available only to persons 50 to ASA, was on its way out of the country, had suddenly veered back into
75 years of age? Why or why not? (2%) Philippine territory. The captain realized that MV Dona Juana would
b. Did ALAC’s issuance of a cover note result in the perfection of an traverse the storm’s path, but decided to proceed with the voyage. True
insurance contract between Quirico and ALAC? Explain. (3%) enough, the vessel sailed into the storm. The captain ordered the jettison
of the 10,000 television sets, along with some other cargo, in order to
V lighten the vessel and make it easier to steer the vessel out of the path of
the typhoon. Eventually, the vessel, with its crew intact, arrived safely in
Cecilio is planning to put up a grocery store in the subdivision where he Cebu.
and his family reside. To promote this proposed business venture, he told
his wife and three children to send out promotional text messages to all the a. Will you characterize the jettison of Romualdo’s TV sets as an
residents in the subdivision. Cecilio’s family members did as instructed, average? If so, what kind of an average, and why? If not, why not?
and succeeded in reaching, through text messages, more than 80% of the (3%)
residents in the subdivision. b. Against whom does Romualdo have a cause of action for indemnity
of his lost TV sets? Explain. (3%)
Is Cecilio habitually engaged in commerce even if the grocery store has
yet to be established? Explain your answer. (3%) VIII

VI Maharlikang Pilipino Banking Corporation (MPBC) operates several

branches of Maharlikang Pilipino Rural Bank in Eastern Visayas. Almost
Lorenzo drew a bill of exchange in the amount of P100,000.00 payable to all the branch managers are close relatives of the members of the Board
Barbara or order, with his wife, Diana, as drawee. At the time the bill was of Directors of the corporation. Many undeserving relatives of the branch
drawn, Diana was unaware that Barbara is Lorenzo’s paramour. managers were granted loans. In time, the branches could not settle their
obligations to depositors and creditors.
Barbara then negotiated the bill to her sister, Elena, who paid for it for
value, and who did not know who Lorenzo was. On due date, Elena Receiving reports of these irregularities, the Supervising and Examining
presented the bill to Diana for payment, but the latter promptly dishonored Department (SED) of the Monetary Board prepared a detailed report (SED
the instrument because, by then, Diana had already learned of her Report) specifying the facts and the chronology of events relative to the
husband’s dalliance. problems that beset MPBC rural bank branches. The report concluded that
the bank branches were unable to pay their liabilities as they fell due, and
could not possibly continue in business without incurring substantial losses
a. Was the bill lawfully dishonored by Diana? Explain. (3%)
to its depositors and creditors.
b. Does the illicit cause or consideration adversely affect the
negotiability of the bill? Explain. (3%)
 a. May the Monetary Board order the closure of the MPBC rural banks
relying only on the SED Report, without need of an examination?
Explain. (3%) XII
b. If MPBC hires you as lawyer because the Monetary Board has
forbidden it from carrying on its business due to its imminent Gaudencio, a store owner, obtained a P1-million loan from Bathala
insolvency, what action will you institute to question the Monetary Financing Corporation (BFC). As security, Gaudencio executed a "Deed of
Board’s order? Explain. (3%) Assignment of Receivables," assigning 15 checks received from various
customers who bought merchandise from his store. The checks were duly
IX indorsed by Gaudencio’s customers.

When is there an ultra vires act on the part of [a] the corporation; [b] the The Deed of Assignment contains the following stipulation:
board of directors; and [c] the corporate officers. (3%)
"If, for any reason, the receivables or any part thereof cannot be
X paid by the obligors, the ASSIGNOR unconditionally and
irrevocably agrees to pay the same, assuming the liability to pay,
What are the so-called exempt securities under the Securities Regulation by way of penalty, three percent (3%) of the total amount unpaid,
Code? (2%) for the period of delay until the same is fully paid."

When the checks became due, BFC deposited them for collection, but the
drawee banks dishonored all the checks for one of the following reasons:
"account closed," "payment stopped," "account under garnishment," or
PART II "insufficiency of funds." BFC wrote Gaudencio notifying him of the
dishonored checks, and demanding payment of the loan. Because
Gaudencio did not pay, BFC filed a collection suit.
XI
In his defense, Gaudencio contended that [a] BFC did not give timely notice
TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the
of dishonor (of the checks); and [b] considering that the checks were duly
statement is false. Explain your answer in not more than two (2) sentences.
indorsed, BFC should proceed against the drawers and the indorsers of
(5%)
the checks.
a. A loan agreement which provides that the debtor shall pay interest
Are Gaudencio’s defenses tenable? Explain. (5%)
at the rate determined by the bank’s branch manager violates the
disclosure requirement of the Truth in Lending Act.
b. Under the Warehouse Receipts Law, a warehouseman loses his XIII
lien upon the goods when he surrenders possession thereof.
c. The Howey Test states that there is an investment contract when Ciriaco leased a commercial apartment from Supreme Building
a person invests money in a common enterprise and is led to Corporation (SBC). One of the provisions of the one-year lease contract
expect profits primarily from the efforts of others. states:
d. A document, dated July 15, 2009, that reads: "Pay to X or order
the sum of P5,000.00 five days after his pet dog, Sparky, dies. "18. x x x The LESSEE shall not insure against fire the chattels,
Signed Y." is a negotiable instrument. merchandise, textiles, goods and effects placed at any stall or store
e. "A bank is bound to know its depositor’s signature" is an inflexible or space in the leased premises without first obtaining the written
rule in determining the liability of a bank in forgery cases. consent of the LESSOR. If the LESSEE obtains fire insurance
coverage without the consent of the LESSOR, the insurance policy
 is deemed assigned and transferred to the LESSOR for the latter’s When Sonny sees the Lacoste advertisements, he hires you as lawyer and
benefit." asks you to sue Lacoste International before a Philippine court:

Notwithstanding the stipulation in the contract, without the consent of SBC, a. For trademark infringement in the Philippines because Lacoste
Ciriaco insured the merchandise inside the leased premises against loss International used his image without his permission; (2%)
by fire in the amount of P500,000.00 with First United Insurance b. For copyright infringement because of the unauthorized use of the
Corporation (FUIC). published photographs; (2%) and
c. For injunction in order to stop Lacoste International from featuring
A day before the lease contract expired, fire broke out inside the leased him in their commercials. (2%)
premises, damaging Ciriaco’s merchandise. Having learned of the
insurance earlier procured by Ciriaco, SBC demanded from FUIC that the Will these actions prosper? Explain.
proceeds of the insurance policy be paid directly to it, as provided in the
lease contract. d. Can Lacoste International validly invoke the defense that it is not a
Philippine company and, therefore, Philippine courts have no
Who is legally entitled to receive the insurance proceeds? Explain. (4%) jurisdiction? Explain. (2%)

XIV XVI

XXX Corporation (XXX) and its sister company, YYY Corporation (YYY), On September 15, 2007, XYZ Corporation issued to Paterno 800 preferred
are both under judicial receivership. The receiver has the option to sell all shares with the following terms:
or substantially all of the properties of YYY to XXX, or simply merge the
two corporations. Under either option, the requirements under the "The Preferred Shares shall have the following rights, preferences,
Corporation Code have to be complied with. qualifications, and limitations, to wit:

The receiver seeks your advice on whether the Bulk Sales Law will apply 1. The right to receive a quarterly dividend of One Per
to either, or both, options. What will your advice be? Explain. (4%) Centum (1%), cumulative and participating;
2. These shares may be redeemed, by drawing of lots, at any
XV time after two (2) years from date of issue, at the option of
the Corporation; x x x."
After disposing of his last opponent in only two rounds in Las Vegas, the
renowned Filipino boxer Sonny Bachao arrived at the Ninoy Aquino Today, Paterno sues XYZ Corporation for specific performance, for the
International Airport met by thousands of hero-worshipping fans and payment of dividends on, and to compel the redemption of, the preferred
hundreds of media photographers. The following day, a colored shares, under the terms and conditions provided in the stock certificates.
photograph of Sonny wearing a black polo shirt embroidered with the 2- Will the suit prosper? Explain. (3%)
inch Lacoste crocodile logo appeared on the front page of every Philippine
newspaper. XVII

Lacoste International, the French firm that manufactures Lacoste apparel Philippine Palaces Realty (PPR) had been representing itself as a
and owns the Lacoste trademark, decided to cash in on the universal registered broker of securities, duly authorized by the Securities and
popularity of the boxing icon. It reprinted the photographs, with the Exchange Commission (SEC). On October 6, 1996, PPR sold to spouses
permission of the newspaper publishers, and went on a world-wide blitz of Leon and Carina one (1) timeshare of Palacio del Boracay for
print commercials in which Sonny is shown wearing a Lacoste shirt US$7,500.00. However, its Registration Statement became effective only
alongside the phrase "Sonny Bachao just loves Lacoste."
on February 11, 1998 after the SEC issued a resolution declaring that PPR b. Do Romeo, Samuel, Teresita, and Uriel have a cause of action for
was authorized to sell securities, including timeshares. damages against UTI? Explain. (3%)
c. What, if any, are the valid defenses that CTC and UTI can raise in
On March 30, 1998, Leon and Carina wrote PPR rescinding their purchase the respective actions against them? Explain. (3%)
agreement and demanding the refund of the amount they paid, because
the Palacio del Boracay timeshare was sold to them by PPR without the XX
requisite license or authority from the SEC. PPR contended that the grant
of the SEC authority had the effect of ratifying the purchase agreement Under the Securities Regulation Code, what is the Margin Trading
(with Leon and Carina) of October 6, 1996. Rule? (2%)

Is the contention of PPR correct? Explain. (3%)

XVIII

Triple A Corporation (Triple A) was incorporated in 1960, with 500

founders’ shares and 78 common shares as its initial capital stock
subscription. However, Triple A registered its stock and transfer book only
in 1978, and recorded merely 33 common shares as the corporation’s
issued and outstanding shares.

a. In 1982, Juancho, the sole heir of one of the original incorporators

filed a petition with the Securities and Exchange Commission
(SEC) for the registration of his property rights over 120 founders’
shares and 12 common shares. The petition was supported by a
copy of the Articles of Incorporation indicating the incorporators’
initial capital stock subscription. Will the petition be granted? Why
or why not? (3%)
b. On May 6, 1992, a special stockholders’ meeting was held. At this
meeting, what would have constituted a quorum? Explain. (3%)
c. What is a stock and transfer book? (1%)

XIX

One of the passenger buses owned by Continental Transit Corporation

(CTC), plying its usual route, figured in a collision with another bus owned
by Universal Transport, Inc. (UTI). Among those injured inside the CTC
bus were: Romeo, a stow away; Samuel, a pickpocket then in the act of
robbing his seatmate when the collision occurred; Teresita, the bus driver’s
mistress who usually accompanied the driver on his trips for free; and Uriel,
holder of a free riding pass he won in a raffle held by CTC.

a. Will a suit for breach of contract of carriage filed by Romeo,

Samuel, Teresita, and Uriel against CTC prosper? Explain. (3%)
 YEAR 2008 course to a holder who does not have the status of a holder-in-due
course? Briefly explain. (2%)

I IV

X corporation entered into a contract with PT Contruction Corp. for the AB Corporation drew a check for payment to XY Bank. The check was
latter to construct and build a sugar mill within six (6) months. They agreed given to an officer of AB Corporation who was instructed to deliver it to XY
that in case of delay, PT Construction Corp. will pay X Corporation Bank. Instead, the officer, intending to defraud the Corporation, filled up
P100,000 for every day of delay. To ensure payment of the agreed amount the check by making himself as the payee and delivered it to XY Bank for
of damages, PT Construction Corp. secured from Atlantic Bank a deposit to his personal account. AB Corporation come to know of the
confirmed and irrevocable letter of credit which was accepted by X officer's fraudulent act after he absconded. AB Corporation asked XY Bank
Corporation in due time. One week before the expiration of the six (6) to recredits its amount. XY Bank refused.
month period, PT Construction Corp. requested for an extension of time to
deliver claiming that the delay was due to the fault of X Corporation. A a. If you were the judge, what issues would you consider relevant to
controversy as to the cause of the delay which involved the workmanship resolve the case? Explain (3%)
of the building ensued. The controversy remained unresolved. Despite the b. How would you decide the case? Explain. (2%)
controversy, X Corporation presented a claim against Atlantic Bank by
executing a draft against the letter of credit.
V
a. Can Atlantic Bank refuse payment due to the unresolved
Pancho drew a check to Bong and Gerard jointly. Bong indorsed the check
controversy? Explain. (3%)
and also forged Gerard's endorsement. The payor bank paid the check and
b. Can X Corporation claim directly from PT Construction Corp.?
charged Pancho's account for the amount of the check. Gerard received
Explain. (3%)
nothing from the payment.
II
a. Pancho asked the payor bank to recredit his account. Should the
bank comply? Explain fully. (3%)
Tom Cruz obtained a loan of P 1 Million from XYZ Bank to finance his b. Based on the facts, was Pancho as drawerdischarged on the
purchase of 5,000 bags of fertilizer. He executed a trust receipt in favor of instrument? Why?(2%)
XYZ Bank over the 5,000 bags of fertilizer. Tom Cruz withdrew the 5,000
bags from the warehouse to be transported to Lucena City where his store
VI
was located. On the way, armed robbers took from Tom Cruz the 5,000
bags of fertilizer. Tom Cruz now claims that his obligation to pay the loan
to XYZ Bank is extinguished because the loss was not due to his fault. Is On January 1, 2000, Antonio Rivera secured a life insurance from SOS
Tom Cruz correct? Explain. (4%) Insurance Corp. for P1 Million with Gemma Rivera, his adopted daughter,
as the beneficiary. Antonio Rivera died on March 4, 2005 and in the police
investigation, it was ascertained that Gemma Rivera participated as an
III
accessory in the killing of Antonio Rivera. Can SOS Insurance Corp. avoid
liability by setting up as a defense the participation of Gemma Rivera in the
a. As a rule under the Negotiable Instruments Law, a subsequent killing of Antonio Rivera? Discuss with reasons. (4%)
party may hold a prior party liable but not vice-versa. Give two (2)
instances where a prior party may hold a subsequent party liable.
(2%)
b. How does the "shelter principle" embodied in the Negotiable
Instruments Law operate to give the rights of a holder-in-due
 VII a. Assume that the vessel was seaworthy. Before departing, the
vessel was advised by the Japanese Meteorological Center that it
Terrazas de Patio Verde, a condominium building, has a value of P50 was safe to travel to its destination. But while at sea, the vessel
Million. The owner insured the building against fire with three (3) insurance received a report of a typhoon moving within its general path. To
companies for the following amounts: avoid the typhoon, the vessel changed its course. However, it was
still at the fringe of the typhoon when it was repeatedly hit by huge
waves, foundered and eventually sank. The captain and the crew
Northern Insurance Corp. - P20 Million were saved except three (3) who perished. Is CSC liable to
Empire? What principle of maritime law is applicable? Explain.
Southern Insurance Corp. - P30 Million
(3%)
Eastern Insurance Corp. - P50 Million b. Assume the vessel was not seaworthy as in fact its hull had leaked,
causing flooding in the vessel. Will your answer be the same?
Explain. (2%)
a. Is the owner's taking of insurance for the building with three (3) c. Assume the facts in question (b). Can the heirs of the three (3)
insurers valid? Discuss. (3%) crew members who perished recover from CSC? Explain fully.
b. The building was totally razed by fire. If the owner decides to claim (3%)
from Eastern Insurance Corp. only P50 Million, will the claim
prosper? Explain. (2%) X

VIII Nelson owned and controlled Sonnel Construction Company. Acting for the
company, Nelson contracted the construction of a building. Without first
City Railways, Inc. (CRI) provides train services, for a fee, to commuters installing a protective net atop the sidewalks adjoining the construction site,
from Manila to Calamba, Laguna. Commuters are required to purchase the company proceeded with the construction work. One day a heavy piece
tickets and then proceed to designated loading ang unloading facilities to of lumber fell from the building. It smashed a taxicab which at that time had
board the train. Ricardo Santos purchased a ticket for Calamba and gone offroad and onto the sidewalk in order to avoid the traffic. The taxicab
entered the station. While waiting, he had an altercation with the security passenger died as a result.
guard of CRI leading to a fistfight. Ricardo Santos fell on the railway just
as a train was entering the station. Ricardo Santos was run over by the a. Assume that the company had no more account and property in its
train. He died. name. As counsel for the heirs of the victim, whom will you sue for
damages, and what theory will you adopt? (3%)
In the action for damages filed by the heirs of Ricardo Santos, CRI b. If you were the counsel for Sonnel Construction, how would you
interposed lack of cause of action, contending that the mishap occurred defend your client? What would be your theory? (2%)
before Ricardo Santos boarded the train and that it was not guilty of c. Could the heirs hold the taxicab owner and driver liable? Explain.
negligence. Decide.(5%) (2%)

IX XI

On October 30, 2007, M/V Pacific, a Philippine registered vessel owned by a. Since February 8, 1935, the legislature has not passed even a
Cebu Shipping Company (CSC), sank on her voyage from Hong Kong to single law creating a private corporation. What provision of the
Manila. Empire Assurance Company (Empire) is the insurer of the lost Constitution precludes the passage of such a law? (3%)
cargoes loaded on board the vessel which were consigned to Debenhams b. May the composition of the board of directors of the National Power
Company. After it indemnified Debenhams, Empire as subrogee filed an Corporation (NPC) be validly reduced to three (3)? explain your
action for damages against CSC. answer fully. (2%)
 XII

Pedro owns 70% of the subscribed capital stock of a company which owns XV
an office building. Paolo and Juan own the remaining stock equally
between them. Paolo also owns a security agency, a janitorial company Eloise, an accomplished writer, was hired by Petong to write a bimonthly
and a catering business. In behalf of the office building company, Paolo newspaper column for Diario de Manila, a newly-established newspaper of
engaged his companies to render their services to the office building. Are which Petong was the editor-in-chief. Eloise was to be paid P1,000 for each
the service contracts valid? Explain. (4%) column that was published. In the course of two months, Eloise submitted
three columns which, after some slight editing, were printed in the
XIII newspaper. However, Diario de Manila proved unprofitable and closed
only after two months. Due to the minimal amounts involved, eloise chose
Grand Gas Corporation, a publicity listed company, discover after not to pursue any claim for payment from the newspaper, which was owned
extensive drilling a rich deposit of natural gas along the coast of Antique. by New Media Enterprises.
For five (5) months, the company did not disclose the discovery so that it
could quitely and cheaply acquire neighboring land and secure mining Three years later, Eloise was planning to publish an anthology of her
information to the Securities and Exchange Commission, all the directors works, and wanted to include the three columns that appeared in the Diario
and key officer of the company bought shares went up. The directors and de Manila in her anthology. She asks for your legal advice:
officer sold their shares at huge profits.
a. Does Eloise have to secure authorization from New Media
a. What provision of the Securities Regulation Code (SRC) did they Enterprises to be able to publish her Diario de Manila columns in
violate, if any? Explain. (4%) her own anthology? Explain fully. (4%)
b. Assuming that the employees of the establishment handling the b. Assume that New Media Enterprises plans to publish Eloise's
printing work of Grand Gas Corporation saw the exploration reports columns in its own anthology entitled, "The Best of Diaro de
which were mistakenly sent to their establishment together with Manila:. Eloise wants to prevent the publication of her columns in
other materials to be printed. They too bought shares in the that anthology since she was never paid by the newspaper. Name
company at low prices and later sold them at huge profits. Will they one irrefutable legal arguments Eloise could cite to enjoin New
be liable for violation of the SRC? Why? (3%) Media Enterprises from including her columns in its anthology.
(2%)
XIV
XVI
Ace Cruz subscribed to 100,000 shares of stock of JP Development
Corporation, which has a par value of P1 per share. He paid P25,000 and In 1999, Mocha Warm, an American musician, had a hit rap single called
promised to pay the balance before December 31, 2008. JP Development Warm Warm Honey which he himself composed and performed. The single
Corporation declared a cash dividend on October 15, 2008, payable on was produced by a California record company, Galactic Records. Many
December 1, 2008. noticed that some passages from Warm Warm Honey sounded eerily
similar to parts Unde Hassle, a 1978 hit song by the British rock band
a. For how many shares is Ace Cruz entitled to be paid cash Majesty. A copyright infringement suit was filed in the United States against
dividends? Explain. (2%) Mocha Warm by Majesty. It was later settled out of court, with Majesty
b. On December 1, 2008, can Ace Cruz compel JP Development receiving attribution as co-author of Warm Warm Honey as well as a share
Corporation to issue to him the stock certificate corresponding to in the royalties.
the P25,000 paid by him? (2%)
By 2002, Mocha Warm was nearing bankruptcy and he sold his economic c. Explain the key phrase "equality is equity" in corporate
rights over Warm Warm Honey to Galactic Records for $10,000 rehabilitation proceedings. (2%)

In 2008, Planet Films a Filipino movie producing company, commissioned XIX

DJ Chef Jean, a Filipino musician, to produce an original re-mix of Warm
Warm Honey for use in one of its latest films, Astig!. DJ Chef Jean remixed Industry Bank, which has a net worth of P1 Billion, extended a loan to
Warm Warm Honey with salsa beat and interspersed as well a recital of a Celestial Properties Inc. amounting to P270 Million. The loan was secured
poetic stanza by John Blake, a 17th century Scottish poet. DJ Chef Jean by a mortgage over a vast commercial lot in the Fort Bonifacio Global City,
died shortly after submitting the remixed Warm Warm Honey to Planet appraised at P350 Million. After audit, the Bangko Sentral ng Pilipinas gave
Films. notice that the loan to Celestial Properties exceeded the single borrower's
limit of 25% of the bank's net worth under a recent BSP Circular. In light of
Prior to the release of Astig!, Mocha Warm learns of the remixed Warm other previous similar violations of the credit limit requirement, the BSP
Warm Honey and demands that he be publicity identified as the author of advised Industry Bank to reduce the amount of the loan to Celestial
the remixed song in all the CD covers and publicity releases of Planet Properties under pain of severe sanctions. When Industry Bank informed
Films. Celestial Properties that it intended to reduce the loan by P50 Million,
Celestial Properties countered that the bank should first release a part of
a. Who are the parties or entities entitled to be credited as author of the collateral worth P50 Million. Industry Bank rejected the counter-
the remixed Warm Warm Honey? Reason out your answer. (3%) proposal, and reffered the matter to you as counsel. How would you advise
b. Who are the particular parties or entities who exercise copyright Industry Bank to proceed, with its best interest in mind? (5%)
over the remixed Warm Warm Honey? Explain. (3%)

XVII

On January 1, 2008, Al obtained a loan of P10,000 from Bob to be paid on

January 30,2008, secured by a chattel mortgage on a Toyota motor car.
On February 1, 2008, Al obtained another loan of P10,000 from Bob to be
paid on February 15, 2008. he secured this by executing a chattel
mortgage on a Honda motorcycle. On the due date of the first loan Al failed
to pay. Bob foreclosed the chattel mortgage but the car was bidded for
P6,000 only. Al also failed to pay the second loan due on February 15,
2008. Bob filed an action for collection of sum money. Al filed a motion to
dismiss claiming that Bob should first cforeclosed the mortgage on the
Honda motorcycle before he can file the action for sum of money. Decide
with reasons. (4%)

XVIII

a. Can a distressed corporation file a petition for corporate

rehabilitation after the dismissal of its earlier petition for
insolvency? Why? (2%)
b. Can the corporation file a petition for rehabilitation first, and after it
is dismissed file a petition for insolvency? Why? (2%)
 YEAR 2007 IV.
(10%)

I. Alfredo took out a policy to insure his commercial building against fire. The
(10%) broker for the insurance company agreed to give a 15-day credit within
which to pay the insurance premium. Upon delivery of the policy on May
R issued a check for P1M which he used to pay S for killing his political 15, 2006, Alfredo issued a postdated check payable on May 30, 2006. On
enemy. May 28, 2006, a fire broke out and destroyed the building owned by
Alfredo.
a. Can the check be considered a negotiable instrument?
b. Does S. have a cause of action against R in case of dishonor by a. May Alfredo recover on the insurance policy?
the drawee bank? b. Would your answer in (a) be the same if it was found that the
c. If S negotiated the check to T, who accepted it in good faith and for proximate cause of the fire was an explosion and that fire was but
value, may R be held secondarily liable by T? the immediate cause of loss and there is no excepted peril under
the policy?
Reason briefly in (a), (b) and (c). c. If the fire was found to have been caused by Alfredo's own
negligence, can he still recover on the policy?
II.
(10%) Reason briefly in (a), (b) and (c).

Alex deposited goods for which Billy, warehouseman, issued a negotiable V.

warehouse receipt wherein the goods were deliverable to Alex or order. (5%)
Alex negotiated the receipt to Caloy. Thereafter, Dario, a creditor secured
judgment against Alex and served notice of levy over the goods on the C contracted D to renovate his commercial building. D ordered construction
warehouseman. materials from E and received delivery thereof. The following day, C went
to F Bank to apply for a loan to pay the construction materials. As security
a. To whom should the warehouseman deliver the goods upon for the loan, C was made to execute a trust receipt. One year later, after C
demand? failed to pay the balance on the loan, F Bank charged him with violation of
b. Would you answer be the same if the warehouseman issued a non- the Trust Receipts Law.
negotiable warehouse receipt
a. What is a Trust Receipt?
III. b. Will the case against C prosper? Reason briefly.
(5%)
VI.
Diana and Piolo are famous personalities in showbusiness who kept their (5%)
love affair secret. They use a special instant messaging service which
allows them to see one another's typing on their own screen as each letter Discuss the trust fund doctrine
key is pressed. When Greg, the controller of the service facility, found out
their identities, he kept a copy of all the messages Diana and Piolo sent VII.
each other and published them. Is Greg liable for copyright infringement? (10%)
Reason briefly.
In a stockholder's meeting, S dissented from the corporate act converting
preferred voting shares to non-voting shares. Thereafter, S submitted his
certificates of stock for notation that his shares are dissenting. The next X.
day, S transferred his shares to T to whom new certificates were issued. (5%)
Now, T demands from the corporation the payment of the value of his
shares. Name at least five (5) predicate crimes to money laundering.

a. What is the meaning of a stockholder's appraisal right? XI.

b. Can T exercise the right of appraisal? Reason briefly. (10%)

VIII. Two vessels figured in a collision along the Straits of Guimaras resulting in
(10%) considerable loss of cargo. The damaged vessels were safely conducted
to the Port of Iloilo. Passenger A failed to file a maritime protest. B. a non-
Due to growing financial difficulties, Z Bank was unable to finish passenger but a shipper who suffered damage to his cargo, likewise did
construction of its 21-storey building on a prime lot located in Makati City. not file a maritime protest at all.
Inevitably, the Bangko Sentral ordered the closure of Z Bank and
consequently placed it under receivership. In a bid to save the bank's a. What is a maritime protest?
property investment, the President of Z Bank entered into a financing b. Can A and B successfully maintain an action to recover losses and
agreement with a group of investors for the completion of the construction damages arising from the collision? Reason briefly.
of the 21-storey building in exchange for a ten year lease and the exclusive
option to purchase the building. XII.
(5%)
a. Is the act of the President valid? Why or why not?
b. Will a suit to enforce the exclusive right of the investors to purchase Seeking to streamline its operations and to bail out its losing ventures, the
the property prosper? Reason briefly. stockholders of X Corporation unanimously adopted a proposal to sell
substantially all of the machineries and equipment used in and out its
IX. manufacturing business and to sink the proceeds of the sale for the
(5%) expansion of its cargo transport services.

On December 4, 2003, RED Corporation executed a real estate mortgage a. Would the transaction be covered by the provisions of the Bulk
in favor of BLUE Bank. RED Corporation defaulted in the payment of its Sales Law?
loan. Consequently, on June 4, 2004, BLUE Bank extrajudicially foreclosed b. How would X Corporation effect a valid sale?
the property. Being the highest bidder in the auction sale conducted, the
Bank was issued a Certificate of Sale which was registered on August 4, XIII.
2004. (10%)

Does RED Corporation still have the right to redeem the property as of a. What are the preferred claims that shall be satisfied first from the
September 14, 2007? Reason briefly. assets of an insolvent corporation?
b. How shall the remaining non-preferred creditors share in the estate
of the insolvent corporation above?
 YEAR 2006 AMLC charged him with violation of the Anti-Money Laundering Law. Upon
request of the AMLC, the bank disclosed to it Rudy's bank deposits
amounting to P100 Million. Subsequently, he was charged in court for
-I- violation of the Anti-Money Laundering Law.

1. What is the doctrine of "piercing the veil of corporate entity?" 1. Can Rudy move to dismiss the case on the ground that he has no
Explain 2.5% criminal record? 2.5%
2. To what circumstances will the doctrine apply? 2.5% 2. To raise funds for his defense, Rudy sold the houses and lots to a
3. What is the minimum and maximum number of incorporators friend. Can Luansing Realty, Inc. be compelled to transfer to the
required to incorporate a stock corporation? is this also the same buyer ownership of the houses and lots? 2.5%
minimum and maximum number of dicrectors required in a stock 3. In disclosing Rudy's bank accout:)ts to the AMLC, did the bank
corporation? 2.5% violate any law? 2.5%
4. Must all incorporators and directors be residents of the Philippines? 4. Supposing the titles of the houses and lots are in possession of the
2.5% Luansing Realty I Inc., is it under obligation to deliver the titles to
Rudy? 2.5%
- II -
-V-
Discuss the legal consequences when a bank honors a forged check. 5%
The Peninsula Insurance Company offered to insure Francis' brand new
- III - car against all risks in the sum of P1 Million for 1 year. The policy was
issued with the premium fixed at P60,000.00 payable in 6 months. Francis
Jun was about to leave for a business trip. As his usual practice, he signed only paid the first two months installments. Despite demands, he failed to
several blank checks. He instructed Ruth, his secretary, to fill them as pay the subsequent installments. Five months after the issuance of the
payment for his obligations. Ruth filled one check with her name as payee, policy, the vehicle was carnapped. Francis filed with the insurance
placed P30,000.00 thereon, endorsed and delivered it to Marie. She company a claim for its value. However, the company denied his claim on
accepted the check in good faith as payment for goods she delivered to the ground that he failed to pay the premium resulting in the cancellation
Ruth. Eventually, Ruth regretted what she did and apologized to Jun. of the policy.
Immediately he directed the drawee bank to dishonor the check. When
Marie encashed the check. it was dishonored. Can Francis recover from the Peninsula Insurance Company? 5%

1. Is Jun liable to Marie? 5% - VI -

2. Supposing the check was stolen while in Ruth's possession and a
thief filled the blank check, endorsed and delibvered it to Marie in 1. In several policy addresses extensively covered by media since his
payment for the goods he purchased from her, is Jun liable to Marie appointment on December 21, 2005, Chief Justice Artemio V.
if the check is dishonored? 5% Panganiban vowed to leave a judiciary characterized by "four Ins"
and to focus in solving the "four ACID" problems that corrode the
- IV - administration of justice in our country.

Rudy is jobless but is reputed to be a jueteng operator. He has never been Explain this "four Ins" and "four ACID" problems. 2.5%
charged or convicted of any crime. He maintains several bank accounts
and has purchased 5 houses and lots for his children from the Luansing 2. The Chief Justice also said that the judiciary must "safeguard the
Realty I Inc. Since he does not have any visible job, the company reported liberty" and "nurture the prosperity" of our people.
his purchases to the Anti-Money Laundering Council (AMLC). Thereafter,
 Explain this philosophy. Cite Decisions of the Supreme Court What are the exceptions? 5%
implementing each of these twin beacons of the Chief Justice.
2.5% - XII -

- VII - 1. Is the Securities and Exchange Commission the venue for actions
involving intra-corporate controversies? 2%
1. What is a mutual insurance company or association? 2.5%
2. Distinguish between the role of a conservator and that of a receiver - XIII -
of a bank. 2.5%
Supposing Albert Einstein were alive today and he filed with the Intellectual
- VIII - Property Office (IPO) an application for patent for his theory of relativity
expressed in the formula E=mc2. The IPO disapproved Einstein's
Pio is the president of Western Bank. His wife applied for a loan with the application on the ground that his theory of relativity is not patentable.
said bank to finance an internet cafe. The loan officer told her that her
application will not be approved because the grant of loans to related Is the IPO's action correct? 5%
interests of bank directors, officers, and stockholders is prohibited by the
General Banking Law. - XIV -

Explain whether the loan officer is correct. 5% In a written legal opinion for a client on the difference between
apprenticeship and learnership, Liza quoted without permission a labor law
- IX - expert's comment appearing in his book entitled "Annotations on the Labor
Code."
The Blue Star Corporation filed with the Regional Trial Court a petition for
rehabilitation on the ground that it foresaw the impossibility of paying its Can the labor law expert hold Liza liable for infringement of copyright for
obligations as they fall due. Finding the petition sufficient in form and quoting a portion of his book without his permission? 5%
substance, the court issued an Order appointing a rehabilitation receiver
and staying the enforcement of all claims against the corporation. - XV -

What is the rationale for the Stay Order? 5% A real estate mortgage may be foreclosed judicially or extrajudicially.

-X- In what instance maya mortgagee extrajudicially foreclose a real estate

mortgage? 5%
1. What acts or omissions are penalized under the Trust Receipts
Law? 2.5% - XVI -
2. Is lack of intent to defraud a bar to the prosecution of these acts or
omissions? 2.5%
Pursuant to a writ of execution issued by the Regional Trial Court in
"Express Bank v. Don Rubio," the sheriff levied and sold at public auction
- XI - 8 photocopying machines of Don Rubio. Is the sheriff's sale covered by the
Bulk Sales Law? 5%
Under Republic Act No.1405 (The Bank Secrecy Law), bank deposits are
considered absolutely confidential and may not be examined, inquired or
looked into by any person, government official, bureau or office.
 YEAR 2009

YEAR 2009