BAR EXAMINATION 2004

COMMERCIAL LAW

19 September 2004

8:00 A.M. 12:00 Noon

INSTRUCTIONS

This questionnaire consists of ten (10) pages, excluding this cover. There are ten Roman numbers divided into sub-sets with corresponding percentages. Read each question very carefully. Answer it directly, concisely, and clearly. Write legibly. Start each Roman number on a separate page. An answer to a sub-question under the same number may be written continuously on the same and immediately succeeding pages until completed. Do not repeat the questions. A mere Yes or No answer to a problem without explanation or discussion will not be given any credit.

HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE.

GOOD LUCK ! !

QUESTION NO. I A. Under a charter party, XXO Trading Company shipped sugar to Coca-Cola Company through SS Negros Shipping Corp., insured by Capitol Insurance Company. The cargo arrived but with shortages. Coca-Cola demanded from Capitol Insurance Co. P500,000 in settlement for XXO Trading. The MM Regional Trial Court, where the civil suit was filed, absolved the insurance company, declaring that under the Code of Commerce, the shipping agent is civilly liable for damages in favor of third persons due to the conduct of the carriers captain, and the stipulation in the charter party exempting the owner from liability is not against public policy. Coca-Cola appealed. Will its appeal prosper? Reason briefly. (5%) B. AA entered into a contract with BB thru CC to transport ladies wear from Manila to France with transhipment at Taiwan. Somehow the goods were not loaded at Taiwan on time. Hence, when the goods arrived in France, they arrived off -season and AA was paid only for one-half the value by the buyer. AA claimed damages from the shipping company and its agent. The defense of the respondents was prescription. Considering that the ladies wear suffered loss of value, as claimed by AA, should the prescriptive period be one year under the Carriage of Goods by Sea Act, or ten years under the Civil Code? Explain briefly. (5%)

QUESTION NO. II A. Ms. OB was employed in MAS Investment Bank. WIC, a medical drug company, retained the Bank to assess whether it is desirable to make a tender offer for DOP company, a drug manufacturer. OB overheard in the course of her work the plans of WIC. By herself and thru associates, she purchased DOP stocks available at the stock exchange priced at P20 per share. When WICs tender offer was announced, DOP stocks jumped to P30 per share. Thus OB earned a sizable profit. Is OB liable for breach and misuse of confidential or insider information gained from her employment? Is she also liable for damages to sellers or buyers with whom she traded? If so, what is the measure of such damages? Explain briefly. (5%) B. CX maintained a checking account with UBANK, Makati Branch. One of his checks in a stub of fifty was missing. Later, he discovered that Ms. DY forged his signature and succeeded to encash P15,000 from another branch of the bank. DY was able to encash the check when ET, a friend, guaranteed due execution, saying that she was a holder in due course.

Can CX recover the money from the bank? Reason briefly. (5%)

QUESTION NO. III

A. (2%) B.

What is a corporation sole? How does one pierce the veil of corporate fiction?

Distinguish clearly (1) a private corporation from a public corporation; and (2) a stock corporation from a non-stock corporation. (2%) Is there a difference between a de facto corporation and a corporation by estoppel? Explain briefly. (2%) Distinguish clearly (1) crossed checks from cancelled checks; and (2) cash bond from surety bond. (2%) What is the difference between government deregulation and the privatization of an industry? Explain briefly. (2%) QUESTION NO. IV

C.

D.

E.

A.

Four months before his death, PX assigned 100 shares of stock registered in his name in favor of his wife and his children. They then brought the deed of assignment to the proper corporate officers for registration with the request for the transfer in the corporations stock and transfer books of the assigned shares, the cancellation of the stock certificates in PXs name, and the issuance of new stock certificates in the names of his wife and his children as the new owners. The officers of the Corporation denied the request on the ground that another heir is contesting the validity of the deed of assignment. May the Corporation be compelled by mandamus to register the shares of stock in the names of the assignees? Explain briefly. (5%)

B.

The Board of Directors of ABC, Inc., a domestic corporation, passed a resolution authorizing additional issuance of shares of stocks without notice nor approval of the stockholders. DX, a stockholder, objected to the issuance, contending that it violated his right of pre-emption to the unissued shares. Is his contention tenable? Explain briefly. (5%)

QUESTION NO. V A. MN and OP rented a safety deposit box at SIBANK. The parties signed a contract of lease with the conditions that: the bank is not a depository of the contents of the safe and has neither the possession nor control of the same; the bank assumed no interest in said contents and assumes no liability in connection therewith. The safety deposit box had two keyholes: one for the guard key which remained with the bank; and the other for the renters key. The box can be opened only with the use of both keys. The renters deposited certificates of title in the box. But later, they discovered that the certificates were gone. MN and OP now claim for damages from SIBANK. Is the bank liable? Explain briefly. (5%)

B.

The Law on Secrecy of Bank Deposits provides that all deposits of whatever nature with banks or banking institutions are absolutely confidential in nature and may not be examined, inquired or looked into by any person, government official, bureau or office. However, the law provides exceptions in certain instances. Which of the following may not be among the exceptions: 1. 2. 3. 4. 5. In cases of impeachment. In cases involving bribery. In cases involving BIR inquiry. In cases of anti-graft and corrupt practices. In cases where the money involved is the subject of litigation.

Explain your answer or choice briefly. (5%)

QUESTION NO. VI A. AX, a businessman, was preparing for a business trip abroad. As he usually did in the past, he signed several checks in blank and entrusted them to his secretary with instruction to safeguard them and fill them out only when required to pay accounts during his absence. OB, his secretary, filled out one of the checks by placing her name as the payee. She filled out the amount, endorsed and delivered the check to KC, who accepted it in good faith for payment of gems that KC sold to OB. Later, OB told AX of what she did with regrets. AX timely directed the bank to dishonor the check. Could AX be held liable to KC? Answer and reason briefly. (5%)

B.

In its exercise of police power and business regulation, the legislature of LVM State passed a law prohibiting aliens from engaging in domestic timber trade. Violators including dummies would, after proper trial, be fined and imprisoned or deported. Mrs.

BC, a citizen of LVM but married to ZC, an alien merchant of PNG, filed suit to invalidate the law or exempt from its coverage their timber business. She contended that the law is, inter alia, gravely oppressive and discriminatory. It violated the Universal Declaration of Human Rights (UDHR) passed in 1948 by the United Nations, of which LVM is a member, she said, as well as the reciprocity provisions of the World Trade Organization (WTO) Agreement of 1994, of which PNG and LVM are parties. Aside from denying them equal protection, according to BC, the law will also deprive her family their livelihood without due process nor just compensation. Assuming that the legal system of LVM is similar to ours, would Mrs. BCs contention be tenable or not? Reason briefly. (5%) QUESTION NO. VII A. AA, a minority stockholder, filed a suit against BB, CC, DD, and EE, the holders of majority shares of MOP Corporation, for alleged misappropriation of corporate funds. The complaint averred, inter alia, that MOP Corporation is the corporation in whose behalf and for whose benefit the derivative suit is brought. In their capacity as members of the Board of Directors, the majority stockholders adopted a resolution authorizing MOP Corporation to withdraw the suit. Pursuant to said resolution, the corporate counsel filed a Motion to Dismiss in the name of the MOP Corporation. Should the motion be granted or denied? Reason briefly. (5%) B. XYZ Corporation entered into a contract of lease with ABC, Inc., over a piece of real estate for a term of 20 years, renewable for another 20 years, provided that XYZs corporate term is extended in accordance with law. Four years after the term of XYZ Corporation expired, but still within the period allowed by the lease contract for the extension of the lease period, XYZ Corp. notified ABC, Inc., that it is exercising the option to extend the lease. ABC, Inc., objected to the proposed extension, arguing that since the corporate life of XYZ Corp. had expired, it could no longer opt to renew the lease. XYZ Corp. countered that withstanding the lapse of its corporate term it still has the right to renew the lease because no quo warranto proceedings for involuntary dissolution of XYZ Corp. has been instituted by the Office of the Solicitor General. Is the contention of XYZ Corp. meritorious? Explain briefly. (5%)

QUESTION NO. VIII

A.

CDC maintained a savings account with CBank. On orders of the MM Regional Trial Court, the Sheriff garnished P50,000 of his account, to satisfy the judgment in favor of his creditor, MO. CDC complained that the garnishment violated the Law on the Secrecy of Bank Deposits because the existence of his savings account was disclosed to the public. Is CDCs complaint meritorious or not? Reason briefly. (5%)

B.

The Collector of Customs ordered the seizure and forfeiture of new electronic appliances shipped by TON Corp. from Hongkong for violation of customs laws because they were falsely declared as used office equipment and then undervalued for purposes of customs duties. TON filed a complaint before the MM Regional Trial Court for replevin, alleging that the Customs officials erred in the classification and valuation of its shipment, as well as in the issuance of the warrant of seizure. The Collector moved to dismiss the suit for lack of jurisdiction on the part of the trial court. Should the Collectors motion be granted or denied? Reason briefly. (5%) QUESTION NO. IX

A.

YKS Trading filed a complaint for specific performance with damages against PWC Corporation for failure to deliver cement ordered by plaintiff. In its answer, PWC denied liability on the ground, inter alia, that YKS has no personality to sue, not being incorporated, and that the President of PWC was not authorized to enter into a contract with plaintiff by the PWC Board of Directors, hence the contract is ultra vires. YKS Trading replied that it is a sole proprietorship owned by YKS, and that the President of PWC had made it appear in several letters presented in evidence that he had authority to sign contracts on behalf of the Board of Directors of PWC. Will the suit prosper or not? Reason briefly. (5%)

B.

CG, a customer, sued MERALCO in the MM Regional Trial Court to disclose the basis of the computation of the purchased power adjustment (PPA). The trial court ruled it had no jurisdiction over the case because, as contended by the defendant, the customer not only demanded a breakdown of MERALCOs bill with respect to PPA but questioned as well the imposition of the PPA, a matter to be decided by the Board of Energy, the regulatory agency which should also have jurisdiction over the instant suit. Is the trial courts ruling correct or not? Reason briefly. (5%) QUESTION NO. X

A.

BR and CT are noted artists whose paintings are highly prized by collectors. Dr. DL commissioned them to paint a mural at the main lobby of his new hospital for children. Both agreed to collaborate on the project for a total fee of two million pesos to be equally divided between them. It was also agreed that Dr. DL had to provide all the materials for the painting and pay for the wages of technicians and laborers needed for the work on the project. Assume that the project is completed and both BR and CT are fully paid the amount of P2M as artists fee by DL. Under the law on intellectual property, who will own the mural? Who will own the copyright in the mural? Why? Explain. (5%) CNI insured SAM under a homeowners policy against claims for accidental injuries by neighbors. SAMs minor son, BOY, injured 3 children of POS, a neighbor, who sued SAM for damages. SAMs lawyer was ATT, who was paid for his services by the insurer for reporting periodically on the case to CNI. In one report, ATT disclosed to CNI that after his investigations, he found the injuries to the 3 children not accidental but intentional. SAM lost the case in court, and POS was awarded one million pesos in damages which he sought to collect from the insurer. But CNI used ATTs report to deny the claim on the ground that the injuries to POSs 3 children were intentional, hence excluded from the policys coverage. POS countered that CNI was estopped from using ATTs report because it was unethical for ATT to provide prejudicial information against his client to the insurer, CNI. Who should prevail: reasons briefly. the claimant, POS; or the insurer, CNI? (5%) Decide with

B.