Commercial Law Bar Q - A (2017-2019) (4D1920)

1
2
2017 BAR EXAMINATIONS
I.
A.
Absolute Timber Co. (ATC) has been engaged in the logging business in lsabela. To secure one
of its shipments of logs to be transported by Andok Shipping Co., ATC purchased a marine
policy with an “all risks” provision. Because of a strong typhoon then hitting Northern Luzon,
the vessel sank and the shipment of logs was totally lost. ATC filed its claim, but the insurer
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 improper loading of the logs on only one
side of the vessel had led to the tilting of the ship to that side during the stormy voyage; and
(4) the extremely bad weather had been a fortuitous event.
ATC now seeks your legal advice to know if its claim was sustainable. What is your advice?
Explain your answer. (3%)
SUGGESTED ANSWER: ATC is entitled to the insurance claim. In the case of Filipino Merchants v. CA,
the Supreme Court held that coverage under an “all risks” provision of a marine insurance policy
creates a special type of insurance which extends coverage to risks not usually contemplated and
avoids putting upon the insured the burden of establishing that the loss was due to the peril falling
within the policy’s coverage. The burden rests on the insurer to prove that the loss is caused by a risk
that is expressly excluded. In this case, there is no stipulation as to what losses are excluded. Hence,
the insured may still recover.
B.
The newly restored Ford Mustang muscle car was just released from the car restoration shop
to its owner, Seth, an avid sportsman. Given his 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, 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 and promotions, proposed to
display the restored car of Seth in major cities of the country. Seth agreed and lent the Ford
Mustang to Sean. Seth further expressly allowed Sean to use the car even for his own purposes
on special occasions during his absence from the country. Seth and Sean then went together
to Bayad Agad Insurance Co. (BAIC) to get separate policies for the car in their respective
names.
SAIC consults you as its lawyer on whether separate policies could be issued to Seth and Sean
in respect of the same car.
(a) What is insurable interest? (2%)
SUGGESTED ANSWER: Insurable interest, as defined in the case of Lalican v. Insular Life, is that
interest which a person is deemed to have in the subject matter insured, where he has a relation or
connection with or concern in it, such that the person will derive pecuniary benefit or advantage from
the preservation of the subject matter insured and will suffer pecuniary loss or damage from its
destruction, termination, or injury by the happening of the event insured against.
(b) Do Seth and Sean have separate insurable interests? Explain Briefly your answer. (3%)
3
SUGGESTED ANSWER: Yes, both Seth and Sean have separate insurable interests. Under the
Insurance Code, an insurable interest in property may consist in: (a) an existing interest; (b) an
inchoate interest founded on an existing interest; or (c) an expectancy, coupled with an existing
interest in that out of which the expectancy arises. The said insurable interest must exist when the
insurance takes effect and when the loss occurs, but need not exist in the meantime. Here, Seth has
insurable interest over the property because as the owner, he will directly suffer from its loss. On the
other hand, Sean has insurable interest because, under the gratuitous loan entered into by the parties,
he has the obligation to take care of the property as the bailee. Otherwise, he will be civilly liable.
Therefore, both Seth and Sean have insurable interests.
II.
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 case. Dennis owned a diving and water
sports dealership in Anilao, Batangas. Morgan decided to name Dennis as entrustee because
he did not have any experience in selling such specialized sports equipment. They executed a
trust receipt agreement, with Morgan as entruster and Dennis as entrustee.
Before the sports equipment could be sold, a strong typhoon hit Batangas. Anilao and other
parts of Batangas experienced power outage. Taking advantage of the total darkness,
unidentified thieves destroyed the padlocks of the establishment of Dennis, and carted off the
equipment inside.
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 of the typhoon, and insisted that the
cause of the loss was a fortuitous event or force majeure.
Is the justification of Dennis warranted? Explain your answer. (4%)
SUGGESTED ANSWER: No. Under Section 10 of the Trust Receipts Law, the entrustee bears the loss
of the goods after delivery to him. The loss of the goods, irrespective of whether or not it was due to
the fault or negligence of the entrustee, shall not extinguish his obligation to the entruster for the
value thereof. In this case, Dennis is still liable regardless of the fact that the equipment was stolen
by thieves. Therefore, his justification is not warranted.
B.
Safe Warehouse, Inc. (Safe) issued on various dates negotiable warehouse receipts to Peter,
Paul and Mary covering certain goods deposited by the latter with the former. Peter, Paul and
Mary then negotiated and endorsed the warehouse receipts to Cyrus, Magnus and Charles
upon payment by the latter of valuable consideration for the warehouse receipts. Cyrus,
Magnus and Charles were not aware of, nor were they parties to any irregularity or infirmity
affecting the title or the face of the warehouse receipts.
On due dates of the warehouse receipts, Cyrus, Magnus and Charles demanded that Safe
surrender the goods to them. Safe refused because 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 and Mary.
4
(a) What is a warehouseman’s claim? (3%)
SUGGESTED ANSWER: Under to Section 27 of the Warehouse Receipts Law, a warehouseman’s claim
is a lien on goods deposited or on the proceeds thereof in his hands, for all lawful charges for storage
and preservation of the goods; also for all lawful claims for money advanced, interest, insurance,
transportation, labor, weighing, coopering and other charges and expenses in relation to such goods,
also for all reasonable charges and expenses for notice, and advertisements of sale, and for sale of the
goods where default had been made in satisfying the warehouseman’s lien.
(b) Is Safe’s refusal to surrender the goods to Cyrus, Magnus and Charles legally justified?
SUGGESTED ANSWER: Yes, Safe’s refusal to surrender the goods is justified. Under the Warehouse
Receipts Law, the warehouseman may withhold delivery of the goods unless the demand to deliver
is accompanied by an offer to pay the warehouseman’s lien. The lien is possessory in nature. It
attaches to the goods regardless of who is the owner thereof.
III.
A.
Data Realty, Inc. (DRI) was engaged in realty development. The family of Matteo owned 100%
of the capital stock of ORI. Matteo was also the President and Chairman of the Board of
Directors. Other members of 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, for the control
of a smaller realty company with vast landholdings, ORI and D&E engaged in an expensive
litigation that eventually led to a money judgment being rendered in favor of D&E.
Meantime, DRI, facing inability to pay its liabilities as they fall due but still holding substantial
assets, filed a petition for voluntary rehabilitation. 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 happened to be the rehabilitation court. The writ of execution
was issued.
Serving the writ of execution, Merto, the court sheriff who had just passed his Credit
Transactions subject in law school, garnished Matteo’s bank accounts, and levied his real
properties, including his house and lot in Makati.
Are the garnishment and levy of Matteo’s assets lawful and proper? Explain your answer. (4%)
SUGGESTED ANSWER: The garnishment and levy of Matteo’s assets are not valid, because Matteo is
not covered by the rehabilitation proceedings or any stay order that the rehabilitation court may
issue. It is DRI, with a legal personality separate and distinct from Matteo, which filed the petition for
rehabilitation and would have been entitled to the effects of any commencement order (and stay
order) that the court may issue. The commencement order would have the effect of setting aside any
seizure of property or attempt to enforce a claim against the debtor.
5
It would have been different if Matteo acted as surety and the court issues a commencement order
with stay order, the effects of which are retroactive to the filing of the petition. In which event, the
garnishment of his deposits and level of assets would have been valid.
B.
Sid used to be the majority stockholder and President of Excellent Corporation (Excellent).
When Meridian Co., Inc. (Meridian), a local conglomerate, took over control and ownership of
Excellent, it brought along its team of officers. Sid thus became a minority stockholder and a
minority member of the Board of Directors. Excellent, being the leading beverage
manufacturer in the country, became the monopoly when Meridian’s own beverage business
was merged with Excellent’s, thereby making Excellent virtually the only beverage
manufacturer in the country.
Left out and ignored by the management, Sid became a fiscalizer of sorts, questioning during
the Board meetings the direction being pursued by Excellent’s officers.
Ultimately, Sid demanded the inspection of the books and other corporate records of
Excellent. The management refused to comply, saying that his right as a minority stockholder
has been much reduced.
State under what conditions may Sid properly assert his right to inspect the books and other
corporate records of Excellent. Explain your answer. (3%)
SUGGESTED ANSWER: Sid may properly assert his right to inspect the books and other corporate
records of Excellent under the following conditions:
(1) The purpose of his inspection is legitimate and germane to his interest as a stockholder;
(2) The right should be exercised during reasonable hours on business day;
(3) He has not improperly used any information secured in previous examination.
IV.
Procopio, a Director and the CEO of Parisian Hotel Co., Inc. (Parisian), was charged along with
other company officials with several counts of estafa in connection with the non-remittance
of SSS premiums the company had collected from its employees. During the pendency of the
cases, Parisian filed a petition for rehabilitation. The court, finding the petition to be sufficient
in form and substance, issued a commencement order together with a stay or suspension
order.
Citing the commencement order, Procopio and the other officers facing the criminal charges
moved to suspend the proceedings in the estafa cases.
(a) What is a commencement order, and what is the effect of its issuance? Explain your answer.
(4%)
SUGGESTED ANSWER: A commencement order is an order issued by the court which signifies the
start of the rehabilitation proceedings. It shall have, among others, the following effects: 1) suspends
all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor;
6
(2) suspend all actions to enforce any judgment, attachment or other provisional remedies against
the debtor; (3) prohibit the debtor from selling, encumbering, transferring or disposing in any
manner any of its properties except in the ordinary course of business; and (4) prohibit the debtor
from making any payment of its liabilities outstanding as of the commencement date except as may
be provided herein. (Sec. 16, Financial Rehabilitation and Insolvency Act, hereinafter referred to as
FRIA).
(b) Suppose you are the trial judge, will you grant the motion to suspend of Procopio, et al.?
SUGGESTED ANSWER: No. I will not grant the motion to suspend the proceedings in the Estafa cases.
Under Sec. 18 of the FRIA, the Stay or Suspension Order shall not apply to any criminal action against
an individual debtor, or owner, partner, director or officer of a debtor.
V.
A.
Under the Nell Doctrine, so called because it was first pronounced by the Supreme Court in
the 1965 ruling in Nell v. Pacific Farms, Inc. (15 SCRA 415), the general rule is that where one
corporation sells or otherwise transfers all of its assets to another corporation, the latter is
not liable for the debts and liabilities of the transferor.
State the exceptions to the Nell Doctrine. (4%)
SUGGESTED ANSWER: The following are the exceptions to the Nell Doctrine: (a) Where the
purchaser expressly or impliedly agrees to assume such debts; (b) Where the transaction amounts
to a consolidation or merger of the corporations; (c) Where the purchasing corporation is merely a
continuation of the selling corporation (business enterprise transfer); and (d) Where the transaction
is entered into fraudulently in order to escape liability for such debts.
B.
Santorini Corporation (Santorini) was in dire straits. In order to firm up its financial standing,
it agreed to entertain the merger and takeover offer of Proficient Corporation (Proficient), the
leading company in their line of business. Erica, the major stockholder of Santorini, strongly
opposed the merger and takeover. The matter of the merger and takeover by Proficient was
included in the agenda of the next meeting of Santorini’s Board of Directors. However, owing
to Erica’s serious illness that required her to seek urgent medical treatment and care in
Singapore, she failed to attend the meeting and was consequently unable to cast her vote. The
Board of Directors approved the merger and takeover. At the time of the meeting, Santorini
had been in the red for a number of years owing to its recurring business losses and reverses.
Erica seeks your legal advice regarding her right as a stockholder opposed to the corporate
action. Explain your answer. (4%)
SUGGESTED ANSWER: Erica can exercise her right of appraisal under Sec. 76 of the RCC. Upon
approval of the merger or consolidation by the majority of the Board of Directors, the same shall be
submitted for approval of stockholders representing at least 2/3 of the outstanding capital stock of
7
each corporation at a separate corporate meeting called for that purpose, and any dissenting
stockholder may exercise the right of appraisal in accordance with the RCC. Here, there is no meeting
yet for the stockholder’s approval of the merger, hence, Erica can still exercise her right.
C.
Samito is the President and a Director of Lucky Bank (Lucky), a commercial bank holding its
main office in Makati. His brother, Othello, owned a big fishing business based in Malabon.
Othello applied for a loan of P50 Million with Lucky. Othello followed the ordinary banking
procedures in all the stages of the processing of his application. When required, he made the
necessary arrangements to guarantee the loan. Thus, in addition to the real estate mortgage,
Othello executed a joint and solidary suretyship, issued postdated checks, and submitted all
other requirements prescribed by Lucky.
When the loan application was about to be approved and the proceeds released, BG Company,
a keen competitor of Othello in the fishing industry, wrote to the Board of Directors and the
management of Lucky questioning the loan on the ground of conflict of interest due to Samito
and 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%)
SUGGESTED ANSWER: The three restrictions are as follows: (1) The account should be upon written
approval of the majority of all the directors of the lending bank excluding the director concerned; (2)
The account should be upon terms not favorable to the bank than those offered to others; and (3)
The resolution approving the loan shall be entered in the records of the bank and a copy of the entry
shall be transmitted forthwith to the Supervising and Examination Sector of the BSP (Section 36,
General Banking Law).
(b) Is BG Company’s opposition based on conflict of interest and violation of the restrictions
on DOSRI transactions legally and factually correct? Explain your answer. (4%)
SUGGESTED ANSWER: No. Under the General Banking Law, the restrictions on the borrowings and
security arrangement are imposed only to directors, officers, stockholders or their related interests.
Here, Othello is not among those enumerated and his business interests are different from that of
Lucky’s. He is also not among those with “related interest” to Samito because the BSP circular
pertains to a relative within the first degree of consanguinity or affinity. Moreover, Othello faithfully
complied with the requirements prescribed by Lucky. Hence, there is no conflict of interest and no
violation of the restrictions on DOSRI transactions.
VI.
A.
Hortencio owned a modest grocery business in Laguna. Because of the economic downturn,
he incurred huge financial liabilities. He remained afloat only because of the properties
inherited from his parents who had both come from landed families in Laguna. His main
creditor was Puresilver Company (Puresilver), the principal supplier of the merchandise sold
in his store. To secure his credit with Puresilver, he executed a real estate mortgage with a
dragnet clause involving his family’s assets worth several millions of pesos.
8
Nonetheless, Hortencio, while generally in the black, now faces a situation 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 financial condition? Explain your answer. (5%)
SUGGESTED ANSWER: Hortencio can file a petition for rehabilitation. Corporate rehabilitation
contemplates a continuance of business life and activities in an effort to restore and reinstate the
corporation to its former position of successful operation and solvency, the purpose being to enable
the debtor to gain a new lease on life and allow its creditors to be paid their claims out of its earnings.
Though Hortencio is a natural person and not a corporation, rehabilitation is possible considering
that FRIA covers an insolvent debtor, whether a natural or juridical one.
B.
Wyatt, an internet entrepreneur, engaged in a sideline business of creating computer
programs for selected clients on a per project basis and for servicing basic computer problems
of his friends and family members. His main job was being an IT consultant at Futurex Co., a
local computer company.
Because of his ill-advised investments in the stock market and the fraud perpetrated against
him by his trusted confidante, Wyatt was already drowning in debt, that is, he had far more
liabilities than his entire assets.
What legal recourse remained available to Wyatt? Explain your answer. (5%)
SUGGESTED ANSWER: Wyatt can apply for voluntary liquidation. It applies when the individual
debtor has properties not sufficient to cover his liabilities, and owing debts exceeding P500,000.
Suspension of payments is not feasible considering it applies only if he possesses sufficient property
to cover all his debts but foresees the impossibility of meeting them when they respectively fall due.
Here, Wyatt has more liabilities than assets thus voluntary liquidation is the only remedy available
to him.
VII.
A.
Virtucio was a composer of llocano songs who has been quite popular in 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 of Virtucio, she purchased a CD of his works. She copied
the CD and sent the second copy to her Music instructions for the class to listen to the CD and
analyze the works of Virtucio.
Did Pascuala thereby infringe Virtucio’s copyright? Explain your answer. (4%)
SUGGESTED ANSWER: No. Under Sec. 185.1 of the Intellectual Property Code, the fair use of a
copyrighted work for criticism, comment, news reporting, teaching including multiple copies for
classroom use, scholarship, research and similar purposes is not an infringement of copyright. Here,
while the compositions by Virtucio are said to be protected from infringement, the act of Pascuala in
copying the CD was for the sole purpose of using it in her Music class. Hence, Pascuala’s act did not
constitute copyright infringement.
9
B.
Super Biology Corporation (Super Biology) invented and patented a miracle medicine for the
cure of AIDS. Being the sole manufacturer, Super Biology sold the medicine at an exorbitant
price. Because of the sudden prevalence of AIDS cases in Metro Manila and other urban areas,
the 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. Super Biology, citing the huge costs and
expenses incurred for research and development, refused.
Assuming you are asked your opinion as the legal consultant of the DOH, discuss how you will
resolve the matter. (4%)
SUGGESTED ANSWER: I would base my opinion on Sec. 74. 1 of the Intellectual Property Code, which
provides: “a government agency or third person authorized by the government may exploit the
invention even without agreement of the patent owner, in cases including the public interest, in
particular, nutrition health or the development of other sectors as determined, by the appropriate
agency of the government, so requires.” Here, Super Biology cannot refuse the application of the DOH,
since no agreement of the patent owner is required given that the sudden prevalence of AIDS cases
can fall on the ground of public interest pertaining to health.
ALTERNATIVE SUGGESTED ANSWER: Pursuant to Sec. 93 of the Intellectual Property Code, the
DOH may file a petition for compulsory license with the Director of Legal Affairs of the IPO to exploit
the patented medicine even without the agreement of the patent owner on the ground of public
interest, in particular health. Once granted, the DOH May then produce and sell the AIDS medicines
for a cheaper price subject to payment of reasonable royalties to Super Biology.
VIII.
A.
Flora, a frequent traveller, found a purse concealed between the cushions of a large sofa inside
the VIP lounge in NAIA while she was waiting for her flight to be called. Inside the purse was a
very valuable diamond-studded necklace. She decided not to turn over the purse to the airport
management, and instead to keep it. On her return from her travels, she 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 market. To test the appraisal, she pawned the necklace for
₱2,000,000.00. 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).
Given that her appropriation of the necklace was theft, may Flora be successfully prosecuted
for money laundering? Explain briefly your answer. (4%)
SUGGESTED ANSWER: No. Money laundering is a crime whereby proceeds of an unlawful activity
are transacted making it appear that they originated from legitimate sources. One of the ways of
committing money laundering is if a person knows the cash relates to unlawful activity and
transaction. However, under the implementing rules of the Anti-Money Laundering Act, it is
specifically listed that only qualified theft is considered an unlawful activity or a predicate crime to
money laundering. As in this case, simple theft has been committed and the same did not become
qualified because it was not committed with grave abuse of confidence.
10
B.
Prosperous Bank is a domestic bank with head office in Makati. It handles the banking
requirements of thousands of clients.
The AMLC initiated a discreet investigation of the financial transactions of Lorenzo, a

suspected drug trafficker based in Naga City. The intelligence group of the AMLC, in
coordination with the counterpart group from the PDEA and the NBI, gathered ample evidence
establishing Lorenzo’s unlawful drug activities. The AMLC had probable cause that his
deposits and investments in various banks, including Prosperous Bank, were related to
money laundering.
Accordingly, the AMLC now transmits to Prosperous Bank a formal demand to allow its agents
to examine the banking transactions of Lorenzo, but Prosperous Bank refuses the demand.
Is Prosperous Bank’s refusal justified? Explain your answer. (4%)
SUGGESTED ANSWER: No. Under Sec. 11 of the Anti-Money Laundering Act as amended, no court
order shall be required for the examination of bank deposits by the AMLC when the unlawful activity
or predicate crime among others is the violation of the Comprehensive Dangerous Drugs Acts. Hence,
the formal demand is sufficient and the refusal of Prosperous Bank is not justified.
IX.
A.
Alfred issued a check for ₱1,000.00 to Benjamin, his friend, as payment for an electronic
gadget. The check was drawn against Alfred’s account with Good Bank. Benjamin then
indorsed the check specially in favor of Cesar. However, Cesar misplaced the check. Dexter, a
dormmate of Cesar, found the check, altered its amount to ₱91,000.00, and forged Cesar’s
indorsement by way of a blank indorsement in favor of Felix, a known jeweler. Felix then
caused the deposit of the check in his account with Solar Bank. As collecting bank, Solar Bank
stamped “all previous indorsements guaranteed” on the check. Seeing such stamp of the
collecting bank, Good Bank paid the amount of ₱91,000.00 on the check.
May Good Bank claim reimbursement from Alfred? Explain your answer. (4%)
SUGGESTED ANSWER: Yes. However, Good Bank may claim reimbursement only for the amount of
Php1,000, the original tenor of the instrument. In the case of Metrobank v. Cablizo, the Supreme Court
ruled that the drawee bank is under strict liability to pay to the order of the payee in accordance with
the drawer’s instructions as reflected on the face and by the terms of the check. Payment made under
materially altered instrument is not payment done in accordance with the instruction of the drawer.
When the drawee bank pays a materially altered check, it violates the terms of the check, as well as
its duty to charge its client’s account only for bona fide disbursements he had made. Since the drawee
bank, in the instant case, did not pay according to the original tenor of the instrument, as directed by
the drawer, then it has no right to claim reimbursement from the drawer, much less, the right to
deduct the erroneous payment it made from the drawer’s account which it was expected to treat with
utmost fidelity.
11
ALTERNATIVE ANSWER: No. In cases involving checks with forged indorsements, the drawee bank
may not debit the account of the drawer but may generally pass liability back through the collection
chain, the drawee bank can seek reimbursement or a return of the amount it paid from the presentor
bank or person. In this case, Good Bank cannot claim reimbursement from Alfred but may do so from
Sold Bank.
B.
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 offices in San Francisco, California. Rhodora
negotiated the check and delivered it to Yaasmin, a Filipina socialite who frequently travelled
locally 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 inside a diary kept in her vault
in her Hollywood, California house.
Discuss and explain the rights of Yaasmin on the check. (4%)
SUGGESTED ANSWER: Yaasmin can no longer enforce the check against Donald and Rhodora. Under
Sec. 186. Of the Negotiable Instruments Law, a check must be presented for payment within a
reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of
the loss caused by the delay. In banking practice, a check is considered stale after more than six (6)
months. Here, it was only 11 years later that Yaasmin found the check, clearly it was not within the
reasonable time contemplated by law nor she was excused from doing so. Thus, Wells Fargo will be
justified in refusing to honor the check if presented for payment.
X.
Wisconsin Transportation Co., Inc. (WTC) owned and operated an inter-island de luxe bus
service plying the Manila-Batangas-Mindoro route. Three friends, namely: Aurelio, Jerome
and Florencio rode on the same WTC bus from Manila bound for Mindoro. Aurelio purchased
a ticket for himself. Jerome, being a boyhood friend of the bus driver, was allowed a free ride
by agreeing to sit during the trip on a stool placed in the aisle. Florencio, already penniless
after spending all of his money on beer the night before, just stole a ride in the bus by hiding
in the on-board toilet of the bus.
During the trip, the bus collided with another bus coming from the opposite direction. The
three friends all suffered serious physical injuries.
What are WTC’s liabilities, if any, in favor of Aurelio, Jerome and Florencio? Explain your
answer. (4%)
SUGGESTED ANSWER: WTC is liable as a common carrier for the injuries suffered by Aurelio, a
passenger. According to Article 1756 of the Civil Code, common carriers are presumed to have been
at fault or to have acted negligently in case of death or injuries of passengers, unless it proves to have
observed extraordinary diligence.
However, insofar as Jerome is concerned, a stipulation limiting WTC’s liability is valid since Jerome
is an accommodation passenger. Article 1758 of the Civil Code recognizes as valid a stipulation
12
limiting the common carrier’s liability for negligence, except for willful acts or gross negligence. But
should there be no such stipulation, the carrier must still observe the same degree of diligence
accorded to Aurelio.
With respect to Florencio, WTC is not liable for injuries suffered by him. Not being a passenger,
Florencio assumes all the risks attendant to the trip, and consequently, the diligence a common
carrier is bound to extend to passengers does not apply to him.
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%)
SUGGESTED ANSWER: FALSE. According to Section 13 of the Trust Receipts Law, the failure of an
entrustee to turn over the proceeds of the sale of the goods, documents, or instruments covered by a
trust receipt to the extent of the amount owing to the entruster or as appears in the trust receipt or
to return said goods, documents, or instruments if they were not sold or disposed of in accordance
with the terms of the trust receipt shall constitute the crime of estafa under Article 315 (b) of the
RPC.
(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%)
SUGGESTED ANSWER: FALSE. The term “capital” under Section 11, Art. XII of the 1987 Constitution
refers only to shares of stock entitled to vote and not to the total outstanding capital stock. This
interpretation is consistent with the intent of the framers of the Constitution to place in the hands of
Filipino citizens the control and management of public utilities (Gamboa v. Teves, G.R. No. 176579,
June 28, 2011).
(c) Forgery is a real defense but may only be raised against a holder not in due course. (2%)
SUGGESTED ANSWER: FALSE. Forgery is as a real defense or absolute defense, which attaches to the
res or the instrument itself, and a party raising such defense in reality has no contract as to him. The
defense can thus be positively raised against any holder, even one who is in due course.
(d) News reports are not copyrightable. (2%)
SUGGESTED ANSWER: FALSE. News reports are copyrightable. This falls under the category of
audiovisual works and cinematographic works and works produced by a process analogous to
cinematography. News, as expressed in a video footage is entitled to copyright protection. (ABS-CBN
Co. v Gozon, GR. No. 195956, March 11, 2015). News of the day, however, is not copyrightable.
(e) The law on life insurance prohibits double insurance. (2%)
13
SUGGESTED ANSWER: FALSE. Insurable interest in life is unlimited. Thus, the danger of
overinsurance which may be by virtue of double insurance is, legally speaking, not present in life
insurance.
XII.
Onassis Shipping, Inc. (Onassis) operated passenger vessels and cargo 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 NGO affiliated with Greenpeace, entered into a contract with
Onassis whereby Go-Green would operate with its own crew the MN Dolphin, an ocean-going
passenger vessel of Onassis.
While on its way to Palawan carrying Go-Green’s invited guests who were international and
local observers desirous of checking certain environmental concerns in the area, the MN
Dolphin encountered high waves and strong winds caused by a typhoon in the West Philippine
Sea. The rough seas led to serious physical injuries to some of the guests.
Discuss the liabilities of Onassis and Go-Green to the passengers of the M/V Dolphin. Explain
briefly your answer. (3%)
SUGGESTED ANSWER: Under Maritime Law, Go-Green in this case is a charterer under a Charter by
Demise or Bareboat charter. As such, the whole vessel is let to Go-Green, and consequently, the entire
command, possession, and control over its navigation including the master and crew, is transferred
to it. The master and crew become the servants of the charterer, who is treated as an owner pro hac
vice of the vessel. As owner pro hac vice, Go-Green is subject to liability to others for damages caused
by negligence. The shipowner may be liable, however, where liability or injury results from
unseaworthiness or negligence which existed prior to delivery of the vessel to the demise charterer.
14
I.
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 parts from China to be sold
and distributed to various electronic manufacturing companies in Manila. YBM issued the
letter of credit and forwarded it to its correspondent bank, Yunan Bank (YB) of Beijing, to
notify the Chinese 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 upon verification
of the authenticity of the shipping documents.
The electronic parts arrived in the Port of Manila, and YBM released them to the custody of
YEC as an entrustee under a trust receipt. When YEC unpacked the imported parts in its
warehouse, it found that they were not only of inferior 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:
(a) Civil suit to hold YB liable for failure to ensure that the electronic parts loaded for
exportation in China corresponded with those described in the bill of lading. Is there any merit
in the case against YB? (2.5%)
SUGGESTED ANSWER: None, because YB has no obligation to ensure that the goods loaded for
exportation corresponded with those described in the bill of lading it being only an advising bank
whose only obligation, after determining the apparent authenticity of the letter of credit, is to
transmit a copy thereof to the beneficiary of the letter of credit. YB need not look beyond the bill of
lading.
(b) Criminal suit against YEC and its President for estafa, and sought the payment of the
amount covered in the trust receipt. The defense of the YEC President is that he cannot be held
liable for a transaction 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 corporate purposes. He cited as his legal ground the
“Doctrine of Separate Juridical Personality.” Is the President’s contention meritorious?
(2.5%)
SUGGESTED ANSWER: No. The law specifically makes the director, officer or any person responsible
for the violation of the Trust receipt agreement criminally liable precisely for the reason that a
Corporation, being a juridical entity, cannot be the subject of the penalty of imprisonment.
Nevertheless, following the same doctrine of separate legal personality, he cannot be civilly liable
there being no showing that he binds with YEC to pay the loan. Only YEC is liable to pay the loan
covered by the letter of credit/trust receipt.
II.
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 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
15
10 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.
(a) May Yvette hold Yolanda liable on the note? (2.5%)
SUGGESTED ANSWER: No. The instrument in this case is incomplete and undelivered insofar as
Yolanda is concerned. Where an incomplete instrument has not been delivered, it will not, if
completed and negotiated without authority, be a valid contract in the hands of any holder, including
a holder in due course as against Yolanda, whose signature was placed thereon before delivery.
(b) Would your answer be the same if the promissory note was actually completed by Yolanda
(including the amount of PhP 10 million), but stolen from her desk by Yohann? Can Yvette
enforce the note against Yolanda? (2.5%)
SUGGESTED ANSWER: No. Now, the instrument is complete but undelivered and in the hands of
Yvette, a holder in due course. A valid and intentional delivery to make all parties prior to Yvette
liable is conclusively presumed under the Negotiable Instruments Law. Therefore, Yvette can hold
Yolanda, a prior party, liable. A complete but undelivered instrument is only a personal defense not
available against a holder in due course.
III.
On November 23, 2017, Yas Ysmael (Ysmael) loaned the amount of PhP 5 million to Yarn &
Thread Corporation (YTC), through its President, Ylmas Yektas (Yektas), which loan was
evidenced by a Promissory Note (PN), which reads as follows:
Date: ________
Within one year from date hereof, I promise to pay to the order of YAS YSMAEL, the sum of
PhP 5 million with interest at 120% per annum.
YARN & THREAD Corporation
By:
(Sgd.)
Ylmas Yektas
Yektas was the controlling stockholder of YTC at the time the PN was issued. As security for
the payment of the PN, Yektas issued and delivered to Ysmael a postdated personal check
covering the face value of the PN drawn from his account with Yellow Bell Bank and Trust
Company. The proceeds of the loan under the PN were used by YTC as working capital.
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
16
this time, all the shares of YTC had already been sold to a new group of investors. Ysmael
deposited the personal check issued by Yektas which was dishonored. He then filed a
collection suit against YTC and Yektas including the accrued interest.
The defendants raised the following defenses in the collection suit. Rule on the merits of each
defense. (2% each)
(a) A PN issued with a blank date is one that is not payable on demand or on a fixed or
determinable future time, and therefore the insertion of the date constituted material
alteration that nullified it, so that no cause of action arose.
SUGGESTED ANSWER: The defense is not meritorious. Where the instrument is not dated, it will be
considered to be dated as of the time it was issued. The NIL also concedes to the payee the prima
facie authority to fill-in the blanks in a negotiable instrument. Such prima facie stands in the absence
of evidence to the contrary.
(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 although not indicated on the PN.
SUGGESTED ANSWER: The defense is not meritorious. Where the instrument contains or a person
adds to his signature words indicating that he signs for or on behalf of a principal or in a
representative capacity, he must disclose his principal and must indicate that he is acting on behalf
of his principal.
(c) Yektas signed the PN merely as an accommodation to YTC. As he received no consideration

for the PN, it is void for lack of consideration.
SUGGESTED ANSWER: The defense is not meritorious. An accommodation party signs a negotiable
instrument as a maker, drawer, endorser, acceptor without receiving value therefor and only for the
purpose of lending his name in another. He is liable to a holder for value notwithstanding such holder,
at the time of taking the instrument, knew him only to be an accommodation party.
(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 the new Board of Directors did not ratify.
SUGGESTED ANSWER: The defense is not meritorious. In stock sales, where shareholder sell a block
of stock to new or existing shareholders, the transaction takes place at the shareholder level only.
Because the corporation has a legal personality separate and distinct from that of its shareholders, a
change in the composition of shareholders will not affect its existence nor extinguish its separate
legal personality.
(e) The PN is void for being in violation of the Usury Law seeking interest at an unconscionable
rate of 120% p.a.
SUGGESTED ANSWER: The defense is not meritorious. The Usury law is currently suspended in view
17
of CB Circular 905 series of 1982 which lifted the ceiling on interest rate for loans. Moreover, if the
interest rate is deemed to be unconscionable despite the absence of the Usury Law, the legal rate of
interest shall be deemed to apply. Thus, the PN remains valid.
IV.
Ysidro, a paying passenger, was on board Bus No. 904 owned and operated by Yatco
Transportation Company (Yatco). He boarded the bus at Munoz, Nueva Ecija with Manila as
his final destination. He was seated on the first row, window seat on the left side of the bus. As
the bus was negotiating the national highway in front of the public market of Gerona, Tarlac,
the bus came to a full stop because of the traffic. The driver of the bus took this opportunity to
check on the tires of the bus and to relieve himself. As he was alighting from the bus to do
these, an unidentified man standing along the highway hurled a huge rock at the left side of
the bus and hit Ysidro between his eyes. He lost consciousness and immediately the driver,
with the conductor, drove the bus to bring him to the nearest hospital. He expired before the
bus could reach the hospital.
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 of injuries and/or death on the part of any of
its passengers, the common carrier is presumed to be at fault. In its defense, Yatco alleged that
it is not an absolute insurer of its passengers and that Ysidro’s death was not due to any 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 stranger over whom the common
carrier had no control, or of which it did not 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 carrier.
(a) Is a common carrier presumed to be at fault whenever there is death or injury to its
passengers, regardless of the cause of death or injury? (2.5%)
SUGGESTED ANSWER: Yes, a common carrier is presumed to be at fault whenever there is death or
injury to its passengers.
Article 1756 of the Civil Code provides that in case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence.
(b) What kind of diligence is required of common carriers like Yatco for the protection of its
passengers? (2.5%)
SUGGESTED ANSWER: Extraordinary diligence.
Article 1755 of the Civil Code provides that a common carrier is bound to carry the passengers safely
as far as human care and foresight can provide, using the utmost diligence of a very cautious person
with a due regard for all the circumstances.
18
(c) Will your answer be the same as your answer in (b) above, if the assailant was another
paying passenger who boarded the bus and deliberately stabbed Ysidro to death? (2.5%)
SUGGESTED ANSWER: My answer will be different.
Article 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by
a passenger on account of the willful acts of other passengers or strangers, if the common carrier’s
employees through the exercise of the diligence of a good father of a family could have prevented or
stopped the act or omission.
In the case of GV Florida Transport v. Heirs of Romano Battung, Jr., the Court held that the law provides
for a lesser degree of diligence, i.e., diligence of a good father of a family, in assessing the existence of
any culpability on the common carrier’s part.
V.
Yellow Fin Tuna Corporation (Yellow Fin), a domestic corporation, applied for a credit facility
in the amount of PhP 50 million with Yengzi Financial 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
of YFC wherein they guaranteed the due and full payment and performance of Yellow Fin’s
guarantee obligations under the credit facility. YFC soon discovered material inconsistencies
in the financial statements given by Yellow Fin, drawing YFC to conclude that Yellow Fin
committed misrepresentation. Under the Credit Agreement, any misrepresentation by Yellow
Fin or its sureties will constitute an event of default. YFC thus called an event of default and
filed a complaint for sum of money against Yellow Fin, Ysko, and Yuan. Immediately
thereafter, Yellow Fin filed a petition for rehabilitation. The court suspended the proceedings
in YFC’s complaint until the rehabilitation court disposed of the petition for rehabilitation.
YFC posits that the suspension of the proceedings should only be with respect to Yellow Fin
but not with respect to Ysko and Yuan.
Is YFC correct? (2.5%)
SUGGESTED ANSWER: YFC is correct.
Section 18 (c) provides that the Stay or Suspension Order shall not apply to the enforcement of clams
against sureties and other persons solidarily liable with the debtor, and third party or
accommodation mortgagors as well as issuers of letters of credit, unless the property subject of the
third party or accommodation mortgage is necessary for the rehabilitation of the debtor as
determined by the court upon recommendation by the rehabilitation receiver.
In this case, the suspension of the proceedings should not be with respect to Ysko and Yuan since
actions or proceedings against the surety of the insolvent debtor that filed a petition for rehabilitation
are not subject to the stay order; consequently, the suit may continue against Ysko and Yuan.
VI.
Shortly after Yin and Yang were wed, they each took out separate life insurance policies on
19
their lives, and mutually designated one another as sole beneficiary. Both life insurance
policies provided for a double indemnity clause, the cost for which was added to the premium
rate. During the last 10 years of their marriage, the spouses had faithfully paid for the annual
premiums over the life policies from both their salaries. Unfortunately, Yin fell in love with
his officemate, Yessel, and they carried on an affair. After two years, their relationship bore
them a daughter named Yinsel. Without the knowledge of Yang, Yin changed the designation
of the beneficiary to an “irrevocable designation” of Yinsel and Yessel jointly. When Yang
learned of the affair, she was so despondent that, having chanced upon Yin and Yessel on a
date, she rammed them down with the car she was driving, resulting in Yin’s death and
Yessel’s complete loss of mobilization. Yang was sued for parricide, and while the case was
pending, she filed a claim on the proceeds of the life insurance of Yin as irrevocable
beneficiary, or at least his legal heir, and opposed the claims on behalf of Yessel and her
daughter Yinsel. Yang claimed that her designation as beneficiary in Yin’s life insurance policy
was irrevocable, in the nature of one “coupled with interest,” since it was made in accordance
with their mutual agreement to designate one another as sole beneficiary in their respective
life policies. She also claimed that the beneficiary designation of Yessel and the illegitimate
minor child Yinsel was void being the product of an illicit relationship, and therefore without
“insurable interest.”
(a) Is Yang correct in saying that her designation as beneficiary was irrevocable? (2.5%)
SUGGESTED ANSWER: Yang is not correct.
Section 11 of the Insurance Code provides that the insured shall have the right to change the
beneficiary he designated in the policy, unless he has expressly waived his right in said policy.
In this case, there is nothing in the insurance policy taken by Yang which indicated that the
designation of Yin is irrevocable. As such, it is deemed to be revocable.
(b) Do Yessel and Yinsel have “insurable interest” on the life of Yin? (2.5%)
SUGGESTED ANSWER: Yessel has no insurable interest while Yinsel has insurable interest on the life
of Yin.
In the case of Insular Life Assurance Company, Ltd. v. Ebrado, the Court held that any pereson who is
forbidden from receiving any donation under Article 739 cannot be named beneficiary of a life
insurance policy by the person who cannot make a donation to him. Persons proscribed to become
beneficiaries include persons in illicit relations as in the case of Yin and Yessel. Hence, Yessel has no
insurable interest because she cannot be lawfully designated as beneficiary.
On the other hand, Yinsel has insurable interest on the life of Yin. In the case of Heirs of Loreta
Maramag v. Maramag, the Court held that there is no legal proscription in naming as beneficiaries
the children of illicit relationships by the insured. Hence, Yinsel has insurable interest on the life of
Yin.
20
VII.
Yelp Pictures Inc. (Yelp Pictures), a movie production company based in California, USA,
entered into a contract with Yehey Movies Inc., a Filipino movie production and distribution
company which is registered in the Philippines under the Securities Regulation Code (SRC)
and listed in the Philippine Stock Exchange Inc. (PSE), for the exclusive distribution in the
Philippines of movies produced in the USA by Yelp Pictures. Yehey Movies is currently owned
85% by Yavic Yamson, and the balance, by the public in the Philippines. For purposes of
entering into the contract, suing for breach of such contract, and prosecuting unauthorized
showing of movies produced by Yelp Pictures, it appointed Atty. Yson, a local lawyer, as its
attorney-in-fact.
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 outstanding capital stock in
Yehey Movies post-exercise of the option, at the option price of PhP .01 per number of shares
covered by the option, exercisable within a period of one (1) year from the date of the grant,
at the exercise price of PhP 100 per share. Once exercised, Yelp Pictures was granted the right
to nominate two (2) directors to the Board of Yehey Movies, and Yavic Yamson agreed to vote
all his shares for the election of directors to be nominated by Yelp Pictures.
(a) May the acts of entering into the film distribution contract, the subsequent execution and
performance of the terms of the contract in the Philippines, and the appointment of Atty. Yson,
be considered as act of “doing business” in the Philippines that will require Yelp Pictures to
register as a foreign corporation and obtain a license to do business in the Philippines? (2.5%)
SUGGESTED ANSWER: No. A foreign Corporation which owns the Copyright to foreign films and
exclusive distribution rights in the Philippines and appointed an attorney in-fact to file criminal cases
on behalf of the corporation is not doing business in the Philippines because the contract was
executed abroad and the hiring of the attorney-in-fact is merely for the protection of its property
rights Columbia Pictures v. Court of Appeals (261 SCRA 144).
Here, the acts of Yel Pictures cannot be considered as an act of doing business.
Hence, Yelp Pictures need not register as a foreign corporation nor obtain a license to do business.
(b) Will your answer in (a) be the same if Yelp Pictures exercises the option, becomes a
substantial shareholder, and is able to elect two (2) directors in the Board of Yehey Movies?
(2.5%)
SUGGESTED ANSWER: Yes, it will be the same. Mere passive investment in equity and voting the
equity shares of the corporation to elect its director in the board of a domestic corporation is not
tantamount to doing business.
(c) Must the option granted to Yelp Pictures be registered under the SRC? (2.5%)
SUGGESTED ANSWER: No. While options are securities, the option was granted only to Yelp Pictures
and not to the public. As a consequence, the option need not be registered with the SEC.
21
VIII.
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 20% by Yengco Exploration Inc.
(YEI). The remaining 20% is held by the 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 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, respectively, in the authorized
capital stock of YHC.
Yolly, one of the staff members in the office of the Corporate Secretary of YEI, was immediately
asked to type the resolution and file the disclosure with the PSE and the Securities and
Exchange Commission (SEC). Before doing that, she secretly called her brother who works
with a stock brokerage company, to purchase, in the name of Yolly’s husband, 5,000 shares in
YCC. After the acquisition was disclosed to the SEC and the PSE, the market price of YCC
increased by 50%.
(a) In acquiring 75% of the total capital stock of YHC, should YEI be required to do a
mandatory tender offer? (2.5%)
SUGGESTED ANSWER: Yes. In acquiring 75% of the total capital stock of YCC, YEI should be required
to do a mandatory tender offer.
Once a person singly or in concert with others acquires more than 50% of the voting stock of a public
company, a mandatory tender offer rule applies. The tender offer rule covers not only direct
acquisition but also indirect acquisition or any type of acquisition. Whatever may be the method by
which control of a public company is obtained either through the direct purchase of its stocks or
through indirect means, mandatory tender offer rule applies. (Cemco Holdings v. National Life
Insurance Company, 529 SCRA 2007)
Here, by acquiring the combined 75% shareholdings of YMI and YCI in YCC, YEI effectively owns 45%
of YCC. Add that to the 20% it directly owns in YCC, YEI now owns and controls 65% of YCC.
Hence, YEI should be required to do a mandatory tender offer.
(b) Can Yolly be held liable for insider trading? (2.5%)
SUGGESTED ANSWER: No. Yolly cannot be held liable for insider trading.
Insider trading is the buying and selling of securities by an insider while in the possession of material
non-public information.
Here, while Yolly is an insider because she has access to material non-public information by reason
of her relationship with the Issuer, she did not, however, buy or sell securities. She is liable, however,
for having communicated material non-public information about the issuer to any broker who by
virtue of such communication becomes an insider considering that Yolly, the insider communicating
the information knows or has reason to believe that the broker will likely buy or sell a security of the
issuer while in possession of such information. (Section 27.3 of the SRC)
22
The law makes no distinction that the insider is buying for himself or for the account of another. As
such, it is immaterial that the broker purchased securities for the account of Yolly’s husband. The
information about the MTO is also material as it will likely affect the decision of a reasonable person
to buy or sell the securities.
IX.
Yangchou lnc.’s (YI) Articles of Incorporation (AOI) provides for two (2) types 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 par value.” Its By-Laws also specifically
provides that “preferred shareholdings shall be cumulative and participating.” No other terms
of preference are provided for preferred shares in either the AOI or By-Laws of YI.
For the first five years of operations, the company was operating at a loss. At 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 declared and paid out dividends of 1 % on common
shares, and 5% on preferred shares, which amounted to a total of PhP 30 million.
However, the preferred shareholders made a formal demand that they be given an additional
3% dividend for each of the five (5) years based on the preferred shares features of
“cumulative and participating,” and an additional 1 % given to the common shareholders,
which could all be accommodated within the remaining balance of the net profits.
Should Yi’s Board heed the demand of its preferred shareholders? (2.5%)
SUGGESTED ANSWER: No. YI’s Board should not heed the demand of its preferred shareholders.
While the preferred shares are cumulative and participating, the holders thereof are entitled to
dividends only if the unrestricted retained earnings are sufficient to pay such dividends. Dividends
are declared based on unrestricted retained earnings and not on the amount of net profit (Republic
Planters Bank v. Agana, G.R. No. 51765, March 3, 1997; Section 43 of the Corporation Code).
Here, the unrestricted retained earnings are not sufficient to pay such dividends.
Hence, YI’s Board should not heed the demand of its preferred shareholders.
X.
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 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, and which certificate was duly endorsed and delivered. When
Ynchon presented the Deed of Sale and the endorsed certificate of stock, as well as proof of
payment to the Bureau of Internal Revenue (BIR) of the tax due on the sale of shares, the
Corporate Secretary of Yakal Inc. refused to register the sale on the ground of lack of written
authority from Ybarra to cancel the certificate and have the shares registered in the name of
Ynchon.
23
(a) Does Ynchon have a cause of action to file a petition for mandamus to compel the
corporation to register the 500 shares in his name in the corporation books? (2.5%)
SUGGESTED ANSWER: Yes. Ynchon has a cause of action to file the petition for mandamus to compel
the corporation to register the 500 shares in the corporation’s books. In Andaya v. Rural Bank of
Cabadbaran, GR No. 188769, August 3, 2016, the Supreme Court ruled that the transferees of shares
of stock are real parties in interest having a cause of action for mandamus to compel the registration
of transfer and the corresponding issuance of stock certificates even without the written authority
from the seller to cancel the certificate and register the shares in the books of the corporation.
(b) Who is liable to pay the remaining unpaid 50% balance - Ybarra or Ynchon? (2.5%)
SUGGESTED ANSWER: Ynchon should be the one to pay the remaining balance but without prejudice
to his right to recover from Ybarra. The effect of the sale of the shares was to extinguish the obligation
of the seller to the Corporation to pay whatever is the balance in the contract of subscription. The
sale of shares to the buyer with the consent of the corporation effectively resulted in novation.
(Interport Resources Corporation v. Securities Specialist Inc. GR No. 154069, June 6, 2016)
XI.
Yenetic Corporation wants to increase its Authorized Capital Stock (which is currently fully
subscribed and issued) to be able to increase its working capital to undertake business
expansions.
The Board of Directors consults with you as legal counsel on the proper answers to the
following issues: (2.5% each)
(a) Can Yenetic’s AOI be formally amended to remove the right of appraisal on all dissenting
stockholders in all matters under the law which requires a ratification vote of the
stockholders?
SUGGESTED ANSWER: Yenetic’s AOI cannot be amended to remove appraisal right of the
stockholders on matters requiring their approval in cases where the law grants them such appraisal
right, like:
(1) In case any amendment to the articles of incorporation has the effect of changing or restricting
the rights of any stockholder or class of shares, or of authorizing preferences in any respect
superiors to those of outstanding shares of any class, or of extending or shortening the term of
corporate existence;
(2) In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or
substantially all of the corporate property and assets;
(3) In case of merger;
(4) In case of investment of funds in the secondary purpose of the corporation or another business
Appraisal right is a statutory right. It cannot be denied to the stockholders in cases where the law
allows such right. For all the other matters under the Corporation Code which require
(b) If the increase in Authorized Capital Stock is formally submitted to the stockholders in a
meeting duly called for the purpose, what is the vote necessary for the stockholders’
ratification, and may the dissenting stockholders exercise their appraisal right?
24
SUGGESTED ANSWER: Any provision or matter stated in the AOI may be amended by a Majority vote
of the board of directors and the vote or written assent of the stockholders representing at least 2/3
of the outstanding capital stock. Stockholders cannot exercise any appraisal right in case of
amendment to the articles of incorporation to increase capital stock because this is not one of the
cases allowed by law where appraisal right may be exercised.
(c) Once the increase in the Authorized Capital Stock of Yenetic has been legally effected with
the SEC, can the new shares from the unissued shares be offered to a new limited group of
investors without 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?
SUGGESTED ANSWER: Yes. The pre-emptive right covers all issues and disposition. This includes
issuance of the unsubscribed shares that are part of the original capital stock and the increase of
capital stock. The corporation Code does not distinguish between newly issued shares and previously
unsubscribed shares, hence, the pre-emptive right is available to existing shareholders with respect
to unsubscribed but previously issued shares.
XII.
Yashtag Holdings, lnc.’s (Yashtag Holdings) AOI states that its primary purpose is “to invest in
real and personal properties of every kind or otherwise acquire and deal with stocks, bonds,
and other securities or evidence of indebtedness of any other corporation, and to hold or to
own, use, sell, deal in, and dispose of, any such stock.” It further states that it has an authorized
capital stock of PhP 1 million, all of which have been fully subscribed and paid up.
Yashtag Holdings’ President, Mr. Yokada, convinced Yeh, Yah, and Yo to lend/invest money
with Yashtag, which money will be invested in a sister company, Yashtag Realty, Inc. (Yashtag
Realty), a corporation that develops premium real estate projects in the Philippines. For the
amount loaned/invested, Yashtag Holdings issued two (2) postdated checks to each
lender/lnvestor, one representing the principal amount, and the other covering the
guaranteed interest that ranged between 18-32% p.a. On the maturity dates of the checks, the
individual lender/investor can review the loans/investment, and may either collect only the
interest or roll over the same with the principal amounts. Eventually, the bursting of the real
estate bubble brought about a serious financial crisis around the world, including the
Philippines. Yashtag Realty collapsed and with it Yashtag Holdings defaulted in the payment
of its loans/investments, as well as the dishonor of the tens of thousands of postdated checks
issued to its various lenders/investors.
Yeh, Yah, and Yo filed several charges against Yashtag Holdings and its President, making
them solidarily liable for the investments they failed to recover. Yeh, Yah, and Yo proved that
Yashtag Holdings, acting through Mr. 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
personal account and entered into the books of Yashtag Holdings as “Advances to
Stockholders.” Mr. Yokada pleads as a defense that he cannot be made personally liable on the
claim of the group under the doctrines of “Separate Juridical Personality” and “Limited
Liability.”
25
(a) What are the doctrines of “Separate Juridical Personality” and “Limited Liability”? (2.5%)
SUGGESTED ANSWER: The doctrine of separate juridical personality is a principle of law which
ordains that the corporation has a separate legal personality from the stockholders, directors and
officers composing it. The limited liability rule, on the other hand, means that the liability of a
stockholder who is not a director, officer or agent of the corporation, is limited to his subscription to
the capital stock of the corporation.
(b) Decide on the merits of Mr. Yokada’s defense against being made liable for Yashtag
Holdings’ obligations. (2.5%)
SUGGESTED ANSWER: Yokada cannot validaly invoke the doctrine of separate juridical personality
and limited liability. Yokada acted in bad faith in withdrawing 300m for his personal account. Having
acted in bad faith, he becomes solidarily liable with the corporation. Further, having issued securities
to the public without prior approval of the SEC is also another basis to hold him solidarily liable with
the issuer corporation.
XIII.
YBC Bank extended a loan of PhP 50 million to Mr. Yamato secured by a real estate mortgage
(REM) on a large tract of land. The covering Transfer Certificate of Title (TCT) of the property
mortgaged did not indicate any encumbrance or lien on it, and the bank was able to obtain a
certified true copy of the TCT from the Register of Deeds showing that the owner’s copy
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 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 the interest rate of the loan based on the escalation clause provided for in the
Loan Agreement. Mr. Yamato refused to pay based on the increased interest rate that was
effected without his consent. YBC Bank insists on the binding effect of the escalation clause
appearing on their Loan Agreement.
Mr. Yamato subsequently defaulted on the loan and vanished. Thus, YBC Bank extrajudicially
foreclosed on the REM, and was the highest bidder at the public auction sale. It was only then
that the bank determined that there were actually two separate TCTs issued for the property
and one of which was in the name of Mr. Yamsuan who occupied the property after having
bought it earlier from Mr. Yamato.
(a) Can YBC Bank unilaterally increase the interest rates on the loan? (2.5%)
SUGGESTED ANSWER: No, YBC Bank cannot unilaterally increase the interest rates on the loan, as
to do would violate the mutuality of contracts ordained under Art. 1308 of the Civil Code.
Said provision provides that: “The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them.” Consequently, a contract containing a condition
which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the
contracting parties, is void. (Philippine National Bank v. Padilla, G.R. No. 88880, April 30, 1991)
26
In this case, the Loan Agreement contained an escalation clause granting YBC Bank the option to
increase the interest loan. Considering that the decision to raise interest rates rests solely on the
discretion of one of the contracting parties, in clear violation of the principle of mutuality of contracts,
said escalation clause should be null and void.
Thus, YBC Bank cannot unilaterally increase the interest rates on the loan.
(b) Is YBC Bank a mortgagee buyer in good faith? Is it preferred over Mr. Yamsuan? (2.5%)
SUGGESTED ANSWER: No, YBC Bank is not a mortgagee-buyer in good faith for failing to exercise
the care and prudence expected of it as a banking institution.
A mortgagee, particularly a bank or financial institution whose business is impressed with public
interest, is expected to exercise more care and prudence than a private individual in its dealings, even
those involving registered lands. It should ascertain the status and condition of the property being
offered to it as a security for the loan before it approves a loan. (Philippine National Bank v. Heirs of
Militar, G.R. No. 164801 & 165165, June 30, 2006)
In the case at bar, YBC Bank discovered the existence of the other TCT only after it extrajudicially
foreclosed the mortgaged property, contrary to said expectation from it to exercise more care and
prudence than a private individual in its dealings involving registered lands. It should have
investigated the nature of the possession or the title of the Mr. Yamato.
Hence, YBC Bank is not a mortgagee-buyer in good faith
XIV.
On June 21, 2008, Yate took out a life insurance policy on her life in the amount of PhP 10
million and named her husband Vandy and daughter as joint irrevocable beneficiaries. Before
the policy was issued and the premiums were paid, Yate underwent a medical checkup with a
physician accredited by the 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 to the insurer’s
accredited physician because by then, she was told that she was already cancer-free after
undergoing surgery which removed both her breasts. She was later diagnosed with psychotic
tendency that graduated into extreme despondency. She was found dead hanging in her closet
36 months 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.
(a) Can the insurer raise the issue of failure to disclose that she had cancer as a cause for
denying the claim of the beneficiaries? (2.5%)
SUGGESTED ANSWER: No, the insurer cannot raise the issue of failure to disclose or concealment by
virtue of the incontestability clause.
In Manila Bankers Life Insurance Corp. v. Aban (G.R. No. 175666, July 29, 2013), the SC, in discussing
Sec. 48 of the Insurance Code of the Philippines, held that: Under the provision, an insurer is given
27
two years — from the effectivity of a life insurance contract and while the insured is alive — to
discover or prove that the policy is void ab initio or is rescindable by reason of the fraudulent
concealment or misrepresentation of the insured or his agent. After the two-year period lapses, or
when the insured dies within the period, the insurer must make good on the policy, even though the
policy was obtained by fraud, concealment, or misrepresentation.
In this case, the insured died 36 months after the issuance of the policy, or more than 2 years from
the effectivity of the insurance.
Thus, in accordance with the incontestability clause in Sec. 48, as explained in Manila Bankers Life
Insurance Corp. v. Aban, the insurer cannot deny the claim of the beneficiaries on the ground of
concealment or failure to disclose.
(b) Are the beneficiaries entitled to receive the proceeds of the life insurance notwithstanding
the fact that the cause of death was suicide? (2.5%)
SUGGESTED ANSWER: Yes, the beneficiaries are entitled to received the proceeds because the
suicide was committed after the policy has been in force for a period of 2 years from the date of its
issue.
Sec. 183 of the Insurance Code provides that “The insurer in a life insurance contract shall be liable
in case of suicide only when it is committed after the policy has been in force for a period of two (2)
years from the date of its issue or of its last reinstatement, unless the policy provides a shorter period:
Provided, however, That suicide committed in the state of insanity shall be compensable regardless
of the date of commission.”
Here, the insured committed suicide 36 months after the issuance of the policy, well more than the
2-year period requirement that the policy should have been in force. Moreover, it must also be added
that the insured committed suicide in a state of “psychotic tendency that graduated into extreme
despondency,” thereby making the suicide compensable regardless of the date of commission.
Thus, the beneficiaries are entitled to receive the proceeds of the life insurance notwithstanding the
fact that the cause of death was suicide.
XV.
A distinctive-tasting pastillas is well-known throughout the country as having been developed
within a close-knit women’s group in Barangay San Ysmael which is located along a very busy
national highway. Its popularity has encouraged the setting up of several shops selling similar
delicacies, with the 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 copyright with the National
Library. Her neighbor, Aling Yasmin, realizing the commercial value of the brand, started
using the term “Ysmaellas” for her pastillas but used different colors. Aling Yasmin registered
the brand name “Ysmaellas” with the Intellectual Property Office (IPO).
(a) Can Aling Voling successfully obtain court relief to prohibit Aling Yasmin from using the
28
brand name “Ysmaellas” in her products on the basis of her (Aling Yoling’s) copyright? What
is the difference between registration as a copyright and registration as a trade or brand
name? (2.5%)
SUGGESTED ANSWER: Aling Voling cannot successfully obtain court relief to prohibit Aling Yasmin
from using the brand name “Ysmaellas” in her products on the basis of her copyright as the
registration thereof as a copyright does not guarantee her the right to the exclusive use of the same
for the reason that they are not appropriate subjects of the said intellectual rights.
A trademark is any visible sign capable of distinguishing the goods (trademark) or services (service
mark) of an enterprise and shall include a stamped or marked container of goods (Intellectual
Property Code of the Philippines [IPC], Sec. 121.1). A trade name means the name or designation
identifying or distinguishing an enterprise (IPC, Sec. 121.2). Meanwhile, the scope of a copyright is
confined to literary and artistic works which are original intellectual creations in the literary and
artistic domain protected from the moment of their creation (IPC, Sec. 172). Trademark and copyright
are different intellectual property rights that cannot be interchanged with one another.
The petitioner’s copyright registration of the brand name would not guarantee her the right to the
exclusive use of the same for the reason that they are not appropriate subjects of the said intellectual
rights. (Kho v. Court of Appeals, G.R. No. 115758, March 19, 2002)
Thus, Aling Voling cannot successfully obtain court relief to prohibit Alin Yasmin from using
“Ysmaellas.”
As to the difference between registration as a copyright and registration as a trade or brand name,
the former is registered with the National Library or the Supreme Court Library (for works in the
field of law), while the latter is registered with the Intellectual Property Office. In addition, only
literary and artistic works may be registered as copyright, whereas only names or designations
identifying or distinguishing an enterprise may be registered as a trade name.
(b) Can Aling Yasmin seek injunctive relief against Aling Yoling from using the brand name
“Ysmaellas,” the latter relying on the doctrine of “prior use” as evidenced by her prior
copyright registration? (2.5%)
SUGGESTED ANSWER: No, Aling Yasmin cannot seek injunctive relief against Aling Yoling from using
the brand name “Ysmaellas,” since Aling Yasmin’s trademark registration has no effect against Aling
Yoling - the prior and continuous user and true owner.
First, Sec. 159.1 of the IPC limits the rights of a trademark registrant to be without effect against any
person, who, in good faith, before the filing date or priority date, was using the mark for the purposes
of his business or enterprise. Second and more importantly, the SC, in E.Y. Industrial Sales, Inc. v. Shen
Dar Electricity and Machinery Co., Ltd. (G.R. No. 184850, October 20, 2010), held that “prior and
continuous use of a mark may even overcome the presumptive ownership of the registrant and be
held as the owner of the mark. By itself, registration is not a mode of acquiring ownership. When the
applicant is not the owner of the trademark being applied for, he has no right to apply for registration
of the same.”
29
Here, Aling Yoling was the first to use the brand name “Ysmaellas.” Having been the prior and
continuous user of said brand name, she must therefore be considered its true owner, overcoming
the presumptive ownership of registrant Aling Yasmin.
Thus, Aling Yasmin cannot seek injunctive relief against Aling Yoling from using the brand name
“Ysmaellas.”
(c) Can Aling Yoling seek the cancellation of Aling Yasmin’s trademark registration of the
brand name “Ysmaellas” on the ground of “Well Known Brand” clearly evidenced by her (Aling
Yoling’s) prior copyright registration, actual use of the brand, and several magazine
coverages? (2.5%)
SUGGESTED ANSWER: No, Aling Yoling cannot seek the cancellation of Aling Yasmin’s trademark
registration of the brand name “Ysmaellas” on the ground of “well known brand,” because the
protection to well-known marks extend only to those marks well-known both internationally and in
the Philippines.
Sec. 123.1(e) of the IPC declares as non-registrable a mark that is identical with, or confusingly
similar to, or constitutes a translation of a mark which is considered by the competent authority of
the Philippines to be well-known internationally and in the Philippines, whether or not it is registered
here, as being already the mark of a person other than the applicant for registration, and used for
identical or similar goods or services.
Nowhere in the facts is it stated that the brand name “Ysmaellas” is well-known internationally, only
that it attracted national distinction. It cannot, therefore, be considered a well-known mark under
the IPC.
Thus, Aling Yoling cannot seek the cancellation of Aling Yasmin’s trademark registration of the brand
name “Ysmaellas” on the ground of “well known brand.”
Nonetheless, it must be noted that Aling Yoling can seek the cancellation of Aling Yasmin’s trademark
registration not on the ground of the name being well-known, but under Sec. 151 of the IPC, since the
term “any person” therein encompasses the true owner of the mark - the prior and continuous user,
and consequently the true owner, Aling Yoling. (see E.Y. Industrial Sales, Inc. v. Shen Dar Electricity
and Machinery Co., Ltd., G.R. No. 184850, October 20, 2010)
XVI.
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 pump system provides for a new system which has the
elements of novelty and inventive steps. Yosha, while preparing to have his invention
registered with the IPO, had several models of his new system fabricated and sold in his
province.
(a) Is Yosha’s invention no longer patentable by virtue of the fact that he had sold several
models to the public before the formal application for registration of patent was filed with the
IPO? (2.5%)
30
SUGGESTED ANSWER: No, Yosha’s invention is patentable. Sec. 23 of the IPC provides that an
invention shall not be considered new if it forms part of a prior art, while Sec. 24(a) of the same code
provides that prior art consists of everything which has been made available to the public anywhere
in the world before the filing date or the priority date of the application claiming the invention.
Furthermore, in the case of Manzano v. CA, the SC ruled that if a device or process has been known or
used by others prior to its invention or discovery by the applicant, an application for a patent should
be denied. In the case, it is Yosha, the inventor and owner who was filing for the registration of a
patent of his own invention. For Sec. 23 and 24(a) of the same Code and the abovementioned
jurisprudence to apply, the one who has made available the patentable invention to the public is a
person other than the applicant for patent. Yosha being the applicant in this case, the requisite of
novelty is complied with, making his invention patentable. Hence, Yosha’s invention is patentable.
(b) If Yosha is able to properly register his patent with the IPO, can he prevent anyone who
has possession of the earlier models from using them? (2.5%)
SUGGESTED ANSWER: No. Yosha, as the patent holder, cannot prevent anyone who has possession
of the earlier models from using them. Sec. 72.1 of the IPC provides that the owner of a patent has no
right to prevent third parties from using a patented product which has been put on the market in the
Philippines by the owner of the product, or with his express consent. In the case, it was Yosha, the
owner and inventor who had fabricated and sold his invention on the market in his province while
preparing to have his invention registered with the IPO. Hence, Yosha, as the patent holder, cannot
prevent anyone who has possession of the earlier models from using them.
XVII.
Yvan was a slot machine operator supervisor in a casino operated by the 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
dismissed by PAGCOR. After receiving his copy of the order for dismissal, he claimed to have
sent to the Board of PAGCOR his motion for reconsideration through facsimile transmission.
After a considerable time, when his motion for reconsideration was unacted upon, he filed an
action with the Civil Service Commission (CSC) for illegal dismissal. PAGCOR claimed that his
action has prescribed because it was filed more than 15 days after his dismissal became final.
Yvan claimed that there was no final decision yet because the Board of 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 taken. He claimed that based on the Electronic Commerce Act of
2000, his facsimile transmission should be considered like any genuine and authentic paper
pleading. PAGCOR denied having received it and was able to prove that the telephone number
of PAGCOR used in the facsimile transmission was wrong. CSC denied his complaint on account
of prescription. He appealed CSC’s dismissal in court.
(a) Was CSC correct in dismissing the case? (2.5%)
SUGGESTED ANSWER: Yes. The CSC was correct in dismissing the case. In the case of Torres v.
31
PAGCOR, the SC ruled that under the Revised Uniform Rules on Administrative Cases in the Civil
Service, a motion for reconsideration may only be filed by either mail or personal delivery. Filing a
motion for reconsideration by way of facsimile transmission is not sanctioned by the same rules. The
SC further ruled that under the Electronic Commerce Act, facsimile is not a genuine and authentic
pleading. This case has a similar factual backdrop with that of the abovementioned jurisprudence.
Applying the ruling of the case, even if Yvan submitted a motion for reconsideration which he claims
was sent through a facsimile transmission, such motion would not toll the period to appeal. Provided
that the 15-day period to appeal has expired, PAGCOR’s decision of dismissing Yvan is final. Hence,
the CSC was correct in dismissing the case.
(b) Can Yvan’s bank be ordered by the court to disclose if there were unreasonable increases
in his bank deposit when the alleged acts were committed? (2.5%)
SUGGESTED ANSWER: No. Yvan’s bank cannot be ordered by the court to disclose the contents of
his bank deposit. In the case of BSB v. Group v. Co, the SC ruled that inquiry into bank deposits
allowable under R.A. No. 1405 or the Bank Secrecy Law must be premised on the fact that the money
deposited in the account is itself the subject of the action. The subject matter of the action is to be
determined from the indictment that charges respondent with the offense, and not from the evidence
sought by the prosecution to be admitted into the records. Applying the case, the subject matter of
the action is Yvan’s connivance with some slot machine customers in padding the credit meter
readings of slot machines in the casino where he was employed leading to his dismissal. There was
no mention in any of the charges against him that he deposited the amount he had embezzled from
the machine to his bank account. Hence, Yvan’s bank cannot be ordered by the court to disclose the
contents of his bank deposit.
XVIII.
Through various acts of graft and bribery, Mayor Ycasiano accumulated a large amount of
wealth which he converted into U.S. dollars and deposited in 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 Mayor Ycasiano had in his FCDU account. YB claims that, under the Foreign
Currency Deposit Act (R.A. No. 6426, as amended), a written permission from 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 to reveal matters relating to bank accounts.
(a) Is the legal position of YB, in requiring written permission from the depositor, correct?
(2.5%)
SUGGESTED ANSWER: Yes, the legal position of YB is correct. Sec. 8 of the Foreign Currency Deposit
Act provides that all foreign currency deposits authorized under this Act are hereby declared as and
considered of an absolutely confidential nature and, except upon the written permission of the
depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any
person, government official, bureau or office whether judicial or administrative or legislative, or any
other entity whether public or private. Hence, absent the written permission of Mayor Ycasiano, the
depositor, AMLC cannot order YB to confirm the amount of U.S. dollars that Mayor Ycasiano had in
his FCDU.
32
(b) Does AMLC have the power to order a banking institution to reveal matters relating to
bank accounts? (2.5%)
SUGGESTED ANSWER: No, AMLC has no power to order a banking institution to reveal matters
relating to bank accounts. Sec. 11 of the Anti-Money Laundering Act (AMLA) provides that the AMLC
may inquire into or examine any particular deposit or investment with any banking institution or
non-bank financial institution upon order of any competent court in cases of violation of this Act
when it has been established that there is probable cause that the deposits or investments involved
are in any way related to a money laundering offense. As an exception, AMLC has authority to inquire
into bank deposits without court order when any of the following unlawful activities are involved:
(1) Kidnapping for ransom; (2) violation of the Dangerous Drugs Act; (3) Hijacking; (4) destructive
arson; (5) murder; (6) violation of the “Wire/Fund Transfer” under the AMLA; and (7) terrorism and
conspiracy to commit terrorism. Hence, absent any order of a competent court or absent any violation
of the crimes/felonies stated above, AMLC cannot issue said order.
33
A.1.
Define the following terms:
(a) Trust fund doctrine (2%)
SUGGESTED ANSWER: Trust Fund Doctrine provides that the capital stock, property, and other
assets of the corporation are regarded as equity in trust for the payment of the corporate creditors.
The subscribed capital stock of the corporation is a trust fund for the payment of debts of the
corporation, which the creditors have the right to look for the satisfaction of their credits and the
corporation may not dissipate this and the creditors may sue stockholders directly for the unpaid
subscription.
(b) Unfair competition (2%)
SUGGESTED ANSWER: Sec. 168.2 of the IPC provides that Unfair Competition is one where any
person employs deception or any other means contrary to good faith by which he shall pass off the
goods manufactured by him or in which he deals, or his business, or services for those of the one
having established such goodwill, or who shall commit any acts calculated to produce said result.
(c) Insurable interest in property (2%)
SUGGESTED ANSWER: Sec. 14 of the Insurance Code provides that an insurable interest in property
may consist in (a) an existing interest; (b) an inchoate interest founded on an existing interest; (c) an
expectancy, coupled with an interest out of which the expectancy arises. Furthermore, such an
insurable interest in property must exist when the insurance takes effect, and when the loss occurs,
but need not exist in the meantime.
(d) Splitting of deposits (2%)
SUGGESTED ANSWER: Under R.A. No. 3591, otherwise known as the PDIC Act, Splitting of Deposit
occurs whenever a deposit account with an outstanding balance of more than P500,000 under the
name of a person is broken down and transferred to two or more accounts in the name of persons or
entities who have no beneficial ownership in the transferred deposits in their names within 120 days
immediately preceding or during a bank-declared holiday or immediately preceding a closure order
issued by the Monetary Board for the purpose of availing of the maximum deposit insurance
coverage. This is a criminal act and the deposits are not entitled to any insurance payment.
A.2.
In May 2018, ABC Corp. entered into a merchandising contract which terms and conditions
were totally lopsided in favor of the counterparty, XYZ, Inc. As a result, ABC Corp. suffered
tremendous financial losses.
A year after, or in May 2019, Mr. X became a stockholder of ABC Corp. Learning about the
circumstances surrounding the merchandising contract, Mr. X filed a derivative suit against
ABC Corp. ‘s directors to claim damages on behalf of ABC Corp. due to their mismanagement.
(a) What is a derivative suit? (2%)
34
SUGGESTED ANSWER: Derivative suits are those brought by one or more stockholders or members
in the name and on behalf of the corporation, to redress wrongs committed against it, or protect or
vindicate corporate rights whenever the officials of the corporation refuse to sue or the ones to be
sued or has control of the corporation.
(b) Was Mr. X’s filing of a derivative suit proper? Explain. (3%)
SUGGESTED ANSWER: No. The derivative suit filed by Mr. X was not proper, as Mr. X was not yet a
stockholder when the act complained off was performed. For a derivative suit to be proper or valid,
the following requisites must be met, to wit: (1) He was a stockholder or member at the time the acts
or transactions subject of the action occurred and at the time the action was filed; (2) He exerted all
reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all remedies
available under the articles of incorporation, by-laws, laws or rules governing the corporation or
partnership to obtain the relief he desires; (3) No appraisal rights are available for the act or acts
complained of; (4) The suit is not a nuisance or harassment suit; and (5) Corporation must be
impleaded as a plaintiff.
In the instant case, the first requisite is wanting. Mr. X became a stockholder on May 2019, the
transaction assailed by Mr. X was made in May 2018, or a year before he became a stockholder. Hence,
not being a stockholder at the time the acts or transactions subject of the action occurred, the
derivative suit is not proper.
A.3.
In June 2018, DEF Corp. sent notices to its stockholders informing them of the corporation’s
issuance of new shares of stock. The notice included a reminder that, pursuant to DEF Corp.’ s
Articles of Incorporation, any stockholder who fails to exercise his or her pre-emptive right
within three (3) weeks from receipt of notice would be considered to have waived the same.
Ms. Z, a stockholder of DEF Corp., failed to exercise her pre-emptive right within the said
period. However, she claimed that she did not validly waive her right to do so because a waiver
must be expressed in writing.
(a) Explain the concept of pre-emptive right under the Corporation Code. (2 %)
SUGGESTED ANSWER: Pre-emptive right under Section 38 of the Revised Corporation Code is the
right of all stockholders in a stock corporation to subscribe to all issues or disposition of shares of
any class, in proportion to their respective shareholdings.
The law further provides, however, that such pre-emptive right shall not extend to shares issued in
compliance with laws requiring stock offerings or minimum stock ownership by the public and to
shares issued in good faith with the approval of the stockholders representing two-thirds (2/3) of
the outstanding capital stock in exchange for property needed for corporate purposes or in payment
of previously contracted debt.
(b) Is Ms. Z’s contention correct? Explain. (3%)
SUGGESTED ANSWER: No.
35
Section 38 of the Revised Corporation Code provides that the stockholders’ pre-emptive right may
be denied by the articles of incorporation of a stock corporation, or an amendment thereto.
Corollarily, the articles of incorporation may also limit the exercise of pre-emptive by the
stockholders, as in the present case. The notice sent to stockholders, including Ms. Z in the present
case, merely reiterates that limit imposed by the articles of incorporation. Likewise, Ms. Z’s pre-
emptive right may be validly waived in accordance thereto, without an express waiver in writing.
Thus, the contention of Ms. Z is incorrect as her pre-emptive right is already validly waived.
A.4.
In 2016, X Corp. obtained a loan worth ₱50,000,000.00 from J Bank, which was secured by a
third-party mortgage executed by Y, Inc. in favor of X Corp. Since X Corp. was not able to settle
its loan obligation to J Bank when it fell due, and despite numerous demands, J Bank
foreclosed the mortgaged properties. The properties were sold in a foreclosure sale for
₱35,000,000.00, thereby leaving a ₱15,000,000.00 deficiency. For failure of X Corp. to pay said
deficiency, J Bank filed a complaint for sum of money against X Corp., its President, Mr. P, and
Y, Inc.
With respect to Mr. P, J Bank argued that he should be held solidarily liable together with X
Corp. because he signed the loan document on behalf of X Corp. in his capacity as President.
On the other hand, J Bank contended that Y, Inc. should also be held solidarily liable because
the shareholdings of both corporations are identically owned and their operations are
controlled by the same people; hence, Y, Inc. is a mere alter ego of X Corp.
(a) Should Mr. P be held liable? Explain. (2.5%)
SUGGESTED ANSWER: No, Mr. P should not be held liable as he acted not in his personal capacity,
but as an officer of a corporation, to which the law bestows a separate and distinct juridical
personality.
In MAM Realty Development Corp. v. National Labor Relations Commission (G.R. No. 114787, June 2,
1995), the SC held that: “Obligations incurred by them, acting as such corporate agents, are not theirs
but the direct accountabilities of the corporation they represent. True, solidarily liabilities may at
times be incurred but only when exceptional circumstances warrant such as, generally, in the
following cases:
(1) When directors and trustees or, in appropriate cases, the officers of a corporation —
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
(c) are guilty of conflict of interest to the prejudice of the corporation, its stockholders or
members, and other persons.
(2) When a director or officer has consented to the issuance of watered stock or who, having
knowledge thereof, did not forthwith file with the corporate secretary his written objection
thereto.
(3) When the director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the Corporation.
36
(4) When a director, trustee or officer is made, by specific provision of law, personally liable for his
corporate action.”
In the present case, none of the exceptional circumstances are present. As such, it should only be the
corporation, not the person acting for and on its behalf, that properly could be made liable thereon.
(Tramat Mercantile, Inc. v. Court of Appeals, G.R. No. 111008, November 7, 1994)
Thus, Mr. P should not be held liable.
(b) Should Y, Inc. be held liable? Explain. (2.5%)
SUGGESTED ANSWER: No, Y, Inc. should not be held liable due to the separate and distinct juridical
personality from that of X Corp.
The existence of interlocking directors, corporate officers and shareholders, which the respondent
court considered, is not enough justification to pierce the veil of corporate fiction, in the absence of
fraud or other public policy considerations. But even when there is dominance over the affairs of the
subsidiary, the doctrine of piercing the veil of corporate fiction applies only when such fiction is used
to defeat public convenience, justify wrong, protect fraud or defend crime. To warrant resort to this
extraordinary remedy, there must be proof that the corporation is being used as a cloak or cover for
fraud or illegality, or to work injustice. Any piercing of the corporate veil has to be done with caution.
The wrongdoing must be clearly and convincingly established. It cannot just be presumed. (Jardine
Davies Inc. v. JRB Realty Inc., G.R. No. 151438, July 15, 2005)
Here, while X Corp. and Y, Inc. are identically owned and its operations are controlled by the same
people, there is no showing that the veil of corporate fiction was being used to defeat public
convenience, justify wrong, protect fraud or defend crime. Thus, the doctrine of piercing the
corporate veil does not apply.
Hence, Y, Inc. should not be held liable.
A.5.
Mr. Y filed a case captioned as “Injunction with Prayer for Status Quo Order, Temporary
Restraining Order and Damages” against Z Company to prohibit the latter from selling shares
which Mr. Y purportedly bought from Z Company. Mr. Y alleged that the subscription for the
said shares was already partly paid by him, but the subject shares were nonetheless being
offered for sale by Z Company to the corporation’s other stockholders.
(a) Is the case filed by Mr. Y against Z Company considered an intra-corporate dispute?
Explain. (2.5%)
SUGGESTED ANSWER: Yes, the case filed is an intra-corporate dispute as the issue arose out of intra-
corporate relations.
In determining whether a dispute constitutes an intra-corporate controversy, the Court uses two
tests, namely, the relationship test and the nature of the controversy test. An intra-corporate
37
controversy is one which pertains to any of the following relationships: (1) between the corporation,
partnership or association and the public; (2) between the corporation, partnership or association
and the State insofar as its franchise, permit or license to operate is concerned; (3) between the
corporation, partnership or association and its stockholders, partners, members or officers; and (4)
among the stockholders, partners or associates themselves. Under the nature of the controversy test,
“the controversy must not only be rooted in the existence of an intra-corporate relationship, but must
as well pertain to the enforcement of the parties’ correlative rights and obligations under the
Corporation Code and the internal and intra-corporate regulatory rules of the corporation.”
As ruled in the case of Gonzales v. JGH Land, applying the relationship test and the nature of the
controversy test, the current suit between the parties is clearly rooted in the existence of an intra-
corporate relationship and pertains to the enforcement of their correlative rights and obligations
under the Corporation Code and the internal and intra-corporate regulatory rules of the corporation,
hence, intra-corporate.
(b) Assuming that it was Z Company which instead filed a case against Mr. Y in order to collect
the unpaid balance of his stock subscriptions, is the case considered an intra-corporate
dispute? Explain. (2.5%)
SUGGESTED ANSWER: Yes, the case filed is still considered an intra-corporate dispute since he is
still considered a stockholder of the company whether the consideration is fully paid or not.
To determine if a case involves an intra-corporate controversy, the courts have applied two tests: the
relationship test and the nature of the controversy test. Furthermore, a person becomes a
shareholder the moment he enters into a subscription contract with an existing corporation. This
means that he is a stockholder upon acceptance of the corporation of his offer to subscribe whether
the consideration is fully paid or not.
As applied in this case, Mr. Y is thus considered a stockholder of the company because he is an owner
of the shares of stock thereof despite not having fully paid the full purchase price. Thus, being a
stockholder, such situation is clearly rooted in the existence of an intra-corporate relationship and
the nature of the controversy test.
A.6.
In January 2016, Mr. H was issued a life insurance policy by XYZ Insurance Co., wherein his
wife, Mrs. W, was designated as the sole beneficiary. Unbeknownst to XYZ Insurance Co.,
however, Mr. H had been previously diagnosed with colon cancer, the fact of which Mr. H had
concealed during the entire time his insurance policy was being processed.
In January 2019, Mr. H unfortunately committed suicide. Due to her husband’s death, Mrs. W,
as beneficiary, filed a claim with XYZ Insurance Co. to recover the proceeds of the late Mr. H’s
life insurance policy. However, XYZ Insurance Co. resisted the claim, contending that: 1. the
policy is void ab initio because Mr. H fraudulently concealed or misrepresented his medical
condition, i.e., his colon cancer; and 2. as an insurer in a life insurance policy, it cannot be held
liable in case of suicide. Rule on each of XYZ Insurance Co.’s contentions.
Rule on each of XYZ Insurance Co.’s contentions. (5%)
38
SUGGESTED ANSWER: The first contention is not tenable. Section 48 of the Insurance Code provides
that under the incontestability clause, after a policy of life insurance made payable upon the death of
the insured shall have been in force during the lifetime of the insured for a period of two years from
the issuance of the policy or last reinstatement, the insurer must make good on the policy even
though the policy was obtained through fraud, concealment or misrepresentation. Even if Mr. H had
concealed or misrepresented that he was previously diagnosed with colon cancer, XYZ can no longer
rescind the policy since it has been in force already for three years.
On the second contention, XYZ Insurance is liable despite the suicide of Mr. H. Under Section 180-A
of the Insurance Code, the insurer is liable when suicide is committed after the policy has been in
force for a period of two years from the date of issue or its last reinstatement. In this case, Mr. H
committed suicide three years after issuance of the policy; thus, XYZ should be liable to the
beneficiary of Mr. H.
A.7.
Ms. J offered to sell her car to Ms. K, an interested buyer. Consequently, Ms. J emailed Ms. K a
copy of the proposed Deed of Sale covering the same. After agreeing to its terms, Ms. K printed
and then signed the emailed copy of the Deed of Sale. She then faxed it to Ms. J who signed the
faxed copy.
Is the copy of the Deed of Sale faxed by Ms. K to Ms. J considered an electronic document under
the Electronic Commerce Act? Explain. (2%)
SUGGESTED ANSWER: NO. Facsimile transmittal is not considered an electronic document under E-
Commerce Act. “Electronic document” refers to information or the representation of information,
data, figures, symbols or other modes of written expression, described or however represented, by
which a right is established or an obligation extinguished, or by which a fact may be proved and
affirmed, which is received, recorded, transmitted, stored, processed, retrieved or produced
electronically. (R.A. No. 8792)
Therefore, it is not within the scope as the subject document in a fax machine cannot be stored,
processed, retrieved or produced electronically after being received or transmitted.
A.8.
KLM Printers, Inc. operated a small outlet located at the ground floor of a university building
in Quezcon City. It possessed soft copies of certain textbooks on file, and would print “book-
alikes” of these textbooks (or in other words, reproduced the entire textbooks) upon order
and for a fee. It would even display samples of such “book alikes” in its stall for sale to the
public.
Upon learning of KLM Printers, Inc.’s activities, the authors of the textbooks filed a suit against
it for copyright infringement. In its defense, KLM Printers, Inc. invoked the doctrine of fair use,
contending that the “book-alikes” are being used for educational purposes by those who avail
of them.
(a) What is the doctrine of fair use?
39
SUGGESTED ANSWER: Under the doctrine of fair use, persons other than the owner of the copyright
may use the copyrighted material in a reasonable manner without his consent, provided that it is
used for criticism, comment, news reporting and teaching, including multiple copies for classroom
use, scholarship, research, and similar purposes.
(b) Is KLM Printers, Inc.’s invocation of the doctrine of fair use proper in this case? Explain.
SUGGESTED ANSWER: No. The KLM Printer’s, Inc.’s invocation of fair use in this case is not proper.
The law provides four factors to determine whether the use made of a work in any particular case is
a fair use:
(1) The purpose and character of the use, including whether such use is of a commercial nature or is
for non-profit education purposes;
(2) The nature of the copyrighted work;
(3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole;
and
(4) The effect of the use upon the potential market for or value of the copyrighted work.
KLM Printer’s Inc. did not secure the consent from the authors. The reproduction of the books was
for profit. The nature of the books were all copyrighted textbooks. The amount and substantiality of
the work is not just a substantial reproduction but the reproduction of the entire textbooks. The effect
of the reproduction of the textbooks would be detrimental to the potential market of the authors of
the textbooks. Thus, KLM Printer’s Inc. cannot invoke doctrine of fair use as copyright infringement
was committed.
A.9.
X Pharmaceuticals, Inc. has been manufacturing the antibiotic ointment Marvelopis, which is
covered by a patent expiring in the year 2020. In January 2019, the company filed an
application for a new patent for Disilopis, which, although constituting the same substance as
Marvelopis, is no longer treated as an antibiotic but is targeted and marketed for a new use,
i.e., skin whitening.
(a) What are the three (3) requisites of patentability under the Intellectual Property Code?
(3%)
SUGGESTED ANSWER: The requisites of patentability are: (1) novelty; (2) inventive step; and (3)
industrial applicability. Any technical solution of a problem in any field of human activity which is
new, involves an inventive step and is industrially applicable shall be patentable (Sec. 21, Intellectual
Property Code). The IPC defines the following as: (1) novelty, that it shall not form part of a prior art;
(2) inventive step, that it is not obvious to a person skilled in the art at the time of the filing date or
priority date of the application for patent; and (3) industrial applicability, that the invention can be
produced and used in any industry.
(b) Should X Pharmaceuticals, Inc.’s patent application for Disilopis be granted? Explain. (2%)
SUGGESTED ANSWER: No, it is not patentable for lack of the requisite of inventive step. An invention
40
involves an inventive step if, having regard to prior art, it is not obvious to a person skilled in the art
at the time of the filing date or priority date of the application claiming the invention (Sec. 26,
Intellectual Property Code). Discovering new use or form of patented products does not amount to an
inventive step since it is not unobvious to persons skilled in the art as proven by the previous patent
registration of Marvelopis. An exception is when there is a substantial improvement such as addition
of a new active ingredient, which is not present in this case.
A.10.
In 2005, W Hotels, Inc., a multinational corporation engaged in the hospitality business,
applied for and was able to register its trademark “W” with the Intellectual Property Office of
the Philippines (IPO) in connection with its hotels found in different parts of the world.
In 2009, a Filipino corporation, RST Corp., filed before the IPO a petition for cancellation of W
Hotels, Inc.’s “W” trademark on the ground of non-use, claiming that W Hotels, Inc. failed to
use its mark in the Philippines because it is not operating any hotel in the country which bears
the “W” trademark.
In its defense, W Hotels, Inc. maintained that it has used its “W” trademark in Philippine
commerce, pointing out that while it did not have any hotel establishment in the Philippines,
it should still be considered as conducting its business herein because its hotel reservation
services, albeit for its hotels abroad, are made accessible to Philippine residents through its
interactive websites prominently displaying the “W” trademark. W Hotels, Inc. also presented
proof of actual booking transactions made by Philippine residents through such websites.
Is W Hotels, Inc.’s defense against the petition for cancellation of trademark tenable? Explain.
(5%)
SUGGESTED ANSWER: Yes, W Hotels, Inc.’s defense against the petition for cancellation of
trademark is tenable.
In the case of W Land Holdings, Inc. v. Starwood Hotels and Resorts Worldwide, Inc., the Supreme Court
ruled that use of a registered mark representing the owner’s goods or services by means of an
interactive website may constitute proof of actual use that is sufficient to maintain the registration
of the same. Since the internet has turned the world into one vast marketplace, the owner of a
registered mark is clearly entitled to generate and further strengthen his commercial goodwill by
actively marketing and commercially transacting his wares or services throughout multiple
platforms on the internet.
However, the mere exhibition of goods or services over the internet, without more, is not enough to
constitute actual use. The “use” contemplated by law is genuine use - that is, a bona fide kind of use
tending towards a commercial transaction in the ordinary course of trade. Since the internet creates
a borderless marketplace, it must be shown that the owner has actually transacted, or at the very
least, intentionally targeted customers of a particular jurisdiction in order to be considered as having
used the trade mark in the ordinary course of his trade in that country. A showing of an actual
commercial link to the country is therefore imperative. As the IP Code expressly requires, the use of
the mark must be “within the Philippines.” (G.R. No. 222366, December 4, 2017, Perlas-Bernabe, J.)
41
These facts and circumstances show that W Hotels, Inc.’s use of its “W” mark through its interactive
website is intended to produce a discernable commercial effect or activity within the Philippines, or
at the very least, seeks to establish commercial interaction with local consumers. Accordingly, W
Hotel’s use of the “W” mark in its reservation services through its website constitutes use of the mark
sufficient to keep its registration in force.
B.1.
W Medical, Inc. operated a full-service hospital named WMed. Using its stockholders’
advances and a mortgage loan from Bank X, W Medical, Inc. commenced the construction of a
new 11-storey WMed Annex Building. Unfortunately, due to financial constraints, only seven
(7) floors were constructed and the WMed Annex Building remained unfinished.
Despite the non-completion of the WMed Annex Building, W Medical, Inc. continued its
operations and earned modest revenues. While W Medical, Inc.’s assets are more than its
liabilities and it is able to turn a monthly profit, it could not pay its loan installments to Bank
X as they fall due.
(a) What is the concept of “insolvency” under the Financial Rehabilitation and Insolvency Act
(FRIA)? May W Medical, Inc. be considered “insolvent” under the FRIA? Explain. (3%)
SUGGESTED ANSWER: Under RA No. 10142 4(p), insolvency refers to the financial condition of a
debtor that is generally unable to pay its or his liabilities as they fall due in the ordinary course of
business or has liabilities that are greater than its or his assets. W Medical cannot be considered as
insolvent because to be insolvent under FRIA, liabilities must be greater than assets. In this case, W
Medical Inc. assets are more than its liabilities. Moreover, nothing in the facts state that it foresees its
inability to pay its obligations for more than one year. Therefore, it cannot be considered insolvent.
(b) Assuming that W Medical, Inc. is considered “insolvent”, may it file a petition for
suspension of payments under the FRIA? Explain. (2%)
SUGGESTED ANSWER: No. Petition for suspension of payments under Sec. 94 of FRIA may only be
filed by an individual debtor who has sufficient properties to cover all his debts but foresees the
impossibility of meeting his debts when they are respectively due. In the case at bar, if W Medical
Inc., is insolvent, then he has no sufficient properties to cover all his debts because his liabilities are
greater than his assets. Thus, W Medical Inc., cannot file a petition for suspension of payments under
FRIA.
(c) Assuming that W Medical, Inc. is considered “insolvent”, what are the legally recognized
modes of rehabilitation it may opt to avail of? (3%)
SUGGESTED ANSWER: Under the FRIA, W Medical, Inc., may opt to avail court supervised voluntary
proceedings or pre-negotiated rehabilitation. W Medical, Inc., may avail the former should it foresee
the impossibility of meeting debts when they respectively fall due. W Medical, Inc., may likewise file
a verified petition with the court for the approval of a pre-negotiated Rehabilitation Plan, which has
been endorsed or approved by creditors holding at least 2/3 of the total liabilities of the debtor,
including secured creditors holding more than 50% of the total secured claims of the debtor and
unsecured creditors holding more than 50% of the total unsecured claims of the debtor.
42
(d) If W Medical, Inc. files a petition for rehabilitation before the court, is it possible for the
rehabilitation proceedings to be converted into one for liquidation? Explain. (2%)
SUGGESTED ANSWER: Yes. Under Section 25 of FRIA, when the debtor is insolvent and there is no
substantial likelihood for a successful rehabilitation and there is failure of rehabilitation, the court
may convert the proceedings to liquidation proceedings. Thus, is it possible for the rehabilitation
proceedings to be converted into one for liquidation.
B.2.
EFG, Inc. is indebted to Bank Y in the amount of P50,000,000.00. The loan was secured by a
suretyship agreement issued by Z Insurance Co.
Due to EFG, Inc’s default, Bank Y filed a case against Z Insurance Co. as surety. There is also a
pending criminal case for violation of the Bouncing Checks Law against the President of EFG,
Inc., Mr. P, who signed the check as signatory for the company.
Unable to meet its obligations as they fell due, EFG, Inc. filed a petition for rehabilitation.
Finding the petition sufficient in form and substance, the court issued a Commencement
Order, which was thereafter published.
(a) Should the case filed against Z Insurance Co. be suspended in light of the Commencement
Order? Explain. (2.5%)
SUGGESTED ANSWER: No, the case against Z Insurance Co should not be suspended despite the
commencement order. Under FRIA, the stay order, which is included in the commencement order,
shall not apply to the enforcement of claims against sureties solidarily liable with the debtor (Section
18[c] FRIA) for the simple reason that it is not the one subject of the petition for rehabilitation.
Hence, the case filed against Z Insurance Co. as surety of EFG, Inc. in a loan agreement with Bank Y
will not be suspended for the simple reason that it is not the one subject of the petition for
rehabilitation.
(b) Should the criminal case filed against Mr. P be suspended in light of the Commencement
Order? Explain. (2.5%)
SUGGESTED ANSWER: The criminal case against Mr. P is not suspended by the commencement
order. Under FRIA, any criminal action against an individual debtor or owner, partner, director or
officer of a debtor shall not be affected by any proceeding commenced under the FRIA (Section 18
[g]).
Therefore, the violation of the bouncing checks law committed by Mr. P who signed the check will
not be affected by the pending rehabilitation of the insolvent debtor. This is because the prosecution
of the officers has no bearing on the pending rehabilitation of the insolvent debtor (Panlilio v.
Regional Trial Court, G.R. No. 173846, February 2, 2011).
B.3.
Enumerate at least two (2) rights of a data subject under the Data Privacy Act. (2%)
43
SUGGESTED ANSWER: The data subject has the right to:

(1) be informed whether personal information pertaining to him or her shall be, are being or have
been processed; and
(2) suspend, withdraw or order the blocking, removal or destruction of his or her personal
information from the personal information controller’s filing system upon discovery and
substantial proof that the personal information are incomplete, outdated, false, unlawfully
obtained, used for unauthorized purposes or are no longer necessary for the purposes for which
they were collected.
B.4.
ABC Corp. is a company which shares are listed in the Philippine Stock Exchange. In 2015, 25%
of ABC Corp.’s shareholdings were acquired by XYZ, Inc., while 40% of the same were acquired
by RST, Inc., both of which are non-listed private corporations. Meanwhile, the remaining 35%
of ABC Corp.’s shareholdings are held by the public.
In 2018, or three years (3) after it acquired its 25% stake in ABC Corp., XYZ, Inc. sought to
obtain an additional 12% shareholding in ABC Corp. by purchasing some of the shares owned
by RST, Inc. therein. The new acquisition will not, however, result in XYZ, Inc. gaining majority
control of ABC Corp.’s Board.
Is XYZ, Inc. required to conduct a tender offer? Explain. (3%)
SUGGESTED ANSWER: No, XYZ Inc. is not required to conduct a tender offer.
Under Section 19 of Republic Act No. 8799, it is stated:
Tender Offers. 19.1. (a) Any person or group of persons acting in concert who intends to acquire at
least fifteen percent (15%) of any class of any equity security of a listed corporation or of any class
of any equity security of a corporation with assets of at least Fifty million pesos (₱50,000,000.00) and
having two hundred (200) or more stockholders with at least one hundred (100) shares each or who
intends to acquire at least thirty percent (30%) of such equity over a period of twelve (12) months
shall make a tender offer to stockholders by filing with the Commission a declaration to that effect;
and furnish the issuer, a statement containing such of the information required in Section 17 of this
Code as the Commission may prescribe. Such person or group of persons shall publish all requests or
invitations for tender, or materials making a tender offer or requesting or inviting letters of such a
security. Copies of any additional material soliciting or requesting such tender offers subsequent to
the initial solicitation or request shall contain such information as the Commission may prescribe,
and shall be filed with the Commission and sent to the issuer not later than the time copies of such
materials are first published or sent or given to security holders.
Under existing SEC Rules, the 15% and 30% threshold acquisition of shares under the foregoing
provision was increased to thirty-five percent (35%). It is further provided therein that mandatory
tender offer is still applicable even if the acquisition is less than 35% when the purchase would result
in ownership of over 51% of the total outstanding equity securities of the public company. (Cemco
Holdings v. National Life Insurance Company, GR No. 171815, August 7, 2007)
44
Since the acquisition of the 12% shareholding does not meet the 35% threshold nor does it result in
ownership of over 51% of the total outstanding equity securities of ABC Corp., XYZ Inc. is not required
to make a tender offer.
B.5.
Mr. P, the President of JKL, Inc. which shares are listed in the Philippine Stock Exchange, was
notified that the corporation has just been awarded a ₱5,000,000,000.00 construction
contract by a reputable private company. Before this information could be disclosed to the
public, Mr. P called his stockbroker to purchase 20,000 shares of JKL, Inc. He also mentioned
the transaction to his brother, Mr. B. Mr. B, who was not involved at all in the business of JKL,
Inc., also bought 50,000 shares of JKL, Inc. because of the tip disclosed to him by Mr. P.
(a) Is the information disclosed by Mr. P to Mr. B considered as material nonpublic

information for purposes of insider trading? Explain. (2%)
SUGGESTED ANSWER: Yes, the information of the P5 billion construction contract is a material
nonpublic.
An information is material nonpublic under Subsection 27.2 of the Securities Regulation Code if: a.)
It has not been generally disclosed to the public and would likely to affect market price of the security
after being disseminated to the public and the lapse of a reasonable time for the market to absorb the
information; or b.) would be considered by a reasonable person important under the circumstances
in determining his course of action whether to buy, sell or hold a security.
In the case at hand, the information of the P5 billion construction contract acquired by JKL, Inc, in
which Mr. P is its president, is not yet generally disclosed to the public. Considering the amount
involved, this information would likely affect market price of the security after being disseminated
to the public.
Hence, the P5 billion construction contract disclosed by Mr. P, being the president of JKL, to Mr. B
prior to the disclosure of its information to the general public is considered a material non-public
information in insider trading.,
(b) Should Mr. P and Mr. B be held liable for insider trading? Explain. (3%)
SUGGESTED ANSWER: Yes, Mr. P and B are both liable for insider trading.
Subsection 27.1 of the Securities Regulation Code provides that it shall be unlawful for an insider to
sell or buy a security of the issuer, while in possession of material information with respect to the
issuer or the security that is not generally available to the public. Further, Subsection 27.1 provides
that it shall be unlawful for any insider to communicate material nonpublic information about the
issuer or the security to any person who, by virtue of the communication, becomes an insider as
defined in Subsection 3.8, where the insider communicating the information knows or has reason to
believe that such person will likely buy or sell a security of the issuer whole in possession of such
information.
45
In the present case, Mr. P, as president of JKL, is deemed as an insider that is prohibited by law to buy
a security of the issuer, JKL, while in possession of material nonpublic information with respect to
the P5 billion construction contract. As to Mr. B, by virtue of the communication made by Mr. P to
him, he also becomes an insider as defined in Subsection 3.8.
Therefore, Mr. P and B are liable for insider trading as prohibited by law when they bought shares of
the JKL while having knowledge of the said material nonpublic information.
B.6.
Mayor J has two (2) bank accounts: 1. a Peso savings account with Bank P; and 2. a U.S. Dollar
savings account with Bank D.
In 2018, Mayor J’s former business partner, Mr. K, filed a civil case for collection of sum of
money against him.
In the same year, a criminal case for Direct Bribery under the Revised Penal Code was filed
against Mayor J. It was alleged in the Information that in exchange for the expeditious
approval of various permits and licenses, Mayor J received kickbacks which amounts were
deposited to his bank accounts.
(a) In the event Mayor J is held ultimately liable in the civil case filed by Mr. K, may Mayor J’s
bank accounts in Bank P and Bank D be subject to garnishment? Explain. (2.5%)
SUGGESTED ANSWER: Mayor J’s peso saving account with Bank P may be subject to garnishment.
In the case of PCIB v. CA (G.R. No. 84526, January 28, 1991), it was held that the prohibition against
examination of or inquiry into deposit under RA 1405 or the Bank Secrecy Law not preclude its being
garnished to insure satisfaction of judgment.
Further, the Supreme Court also held in the case of China Banking Corp. v. Ortega that the disclosure
of deposits to satisfy the writ of garnishment issued by the court is not a violation of deposit secrecy
since the disclosure is purely incidental to the execution process.
However, Mayor J’s U.S. Dollar account in Bank D may not be subject to garnishment.
Section 8 of RA 6426 or the Foreign Currency Deposit Act of the Philippines provides that all foreign
currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency
deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely
confidential nature. These foreign currency deposits shall be exempt from attachment, garnishment,
or any other order or process of any court, legislative body, government agency or any administrative
body whatsoever.
(b) Assuming that the prosecution in the criminal case sought from the court an inquiry of
Mayor J’s bank accounts in Bank P and Bank D, may a bank inquiry order be issued? Explain.
(2.5%)
SUGGESTED ANSWER: Yes, Mayor J’s accounts in Bank P may be inquired into.
46
Section 2 of RA 1405 of the Bank Secrecy Law provides that all deposits of whatever nature with
banks or banking institution in the Philippines are considered confidential in nature and may not be
examined, inquired or looked into by any person, government official, bureau, or office.
This is not absolute as it is subject to exceptions such as when there is written permission or consent
in writing by the depositor, in case of impeachment, upon order of the court in cases where money
deposited or invested is subject matter of litigation, and upon order of the court in cases of bribery
or dereliction of duty of public officials, among others.
This case falls under one of the exceptions — upon order of the court in cases of bribery. Major J was
charged with direct bribery with the court.
Moreover, Section 11 of RA 10167 provides that notwithstanding RA 1405 and 6426, the Anti Money
Laundering Council may also inquire into funds and deposits if there is a probable cause they relate
to unlawful activities under the Anti-Money Laundering law (AMLA)
However, Mayor J’s dollar account in Bank D may not be inquired into.
Unlike in case of Philippine currency bank deposits where it may be examined or disclosed if there is
a relevant court order, foreign currency deposits pursuant to Foreign Currency Deposit Act are
exempt from court order and administrative process including execution, attachment, and
garnishment.
Therefore, Mayor J’s peso account may be inquired into while Mayor J’s dollar account may not be
inquired into.
B.7.
Several public officials were charged before the Sandiganbayan for violation of the Anti-Graft
and Corrupt Practices Act involving the anomalous award of a multi-billion contract to
Corporation Z. The Information alleged that each of the accused received kickbacks from
Corporation Z in exchange for the dispensation of certain bidding requirements, and that the
said kickbacks were deposited to the accused’s respective bank accounts in the Philippines.
Upon request of the Office of the Ombudsman, the Compliance and Investigation Staff of the
Anti-Money Laundering Council (AMLC) conducted an intelligence database search. The
search revealed that there were remittances to the bank accounts of the accused with six (6)
different banks.
(a) May the AMLC examine the bank accounts of the accused-public officials even without
seeking a prior court order? Explain. (2.5%)
SUGGESTED ANSWER: No, AMLC cannot examine the bank accounts in the absence of prior court
order. Sec. 11 of the Anti-Money Laundering Act (AMLA) provides that the AMLC may inquire into or
examine any particular deposit or investment with any banking institution or non-bank financial
institution upon order of any competent court in cases of violation of this Act when it has been
established that there is probable cause that the deposits or investments involved are in any way
related to a money laundering offense. As an exception, AMLC has authority to inquire into bank
47
deposits without court order when any of the following unlawful activities are involved: (1)
Kidnapping for ransom; (2) violation of the Dangerous Drugs Act; (3) Hijacking; (4) destructive
arson; (5) murder; (6) violation of the “Wire/Fund Transfer” under the AMLA; and (7) terrorism and
conspiracy to commit terrorism.
Hence, AMLC cannot examine the bank accounts of the accused public officials in the absence of order
of any competent court and absent any violation of the abovementioned unlawful activities.
(b) May a court order be issued ex parte for the freezing of the bank accounts of the accused-
public officials upon application of the AMLC? If so, in what instance may this be done and
which court can issue such order? Explain. (2.5%)
SUGGESTED ANSWER: Yes, a court order may be issued ex parte for the freezing of the bank accounts
of the accused-public officials upon application of the AMLC as provided by sec. 11 of the Anti-Money
Laundering Act.
Sec. 11 of the AMLA provides that upon a verified ex parte petition by the AMLC and after
determination that probable cause exists that any monetary instrument or property is in any way
related to an unlawful activity, the Court of Appeals may issue a freeze order which shall be effective
immediately, and which shall not exceed six (6) months depending upon the circumstances of the
case: Provided, That if there is no case filed against a person whose account has been frozen within
the period determined by the court, the freeze order shall be deemed ipso facto lifted: Provided,
further, That this new rule shall not apply to pending cases in the courts. In any case, the court should
act on the petition to freeze within twenty-four (24) hours from filing of the petition. If the application
is filed a day before a nonworking day, the computation of the twenty-four (24)-hour period shall
exclude the nonworking days.
It is solely the CA which has the authority to issue a freeze order upon application ex parte by the
AMLC and after determination that probable cause exists. It also has the exclusive jurisdiction to
extend existing freeze orders previously issued by the AMLC vis-à-vis accounts and deposits related
to money-laundering activities. (Republic v. Cabrini Green & Ramos, G.R. No. 154522, May 5, 2006)
B.8.
Mrs. T maintained a checking account with Bank U. While Mrs. T was abroad, she left her
checkbook inside her office drawer, which she kept under lock and key. However, Mrs. T’s
long-time secretary, Ms. S, knew where the checkbook was hidden. Ms. S then broke the lock
on the office drawer, took one of Mrs. T’s blank checks, and succeeded to encash ₱200,000.00
from Bank U by imitating Mrs. T’s signature. As soon as Mrs. T returned from abroad and
discovered the incident, she immediately reported the matter to Bank U, seeking that the
transaction be reversed. However, the bank refused, contending that Mrs. T should bear the
loss arising from the forgery.
(a) Is the imitation of Mrs. T’s signature considered as a material alteration under the
Negotiable Instruments Law? Explain.
SUGGESTED ANSWER: No, the imitation of Mrs. T’s signature is not considered a material alteration.
48
Section 124 of the Negotiable Instruments Law explicitly relates to a negotiable instrument being
altered and Section 125 enumerates what can be altered in order to become material alteration. They
presuppose that there is already an existing negotiable instrument before an alteration can occur. A
blank and unissued check, as in this case, lacks all the requisites of a negotiable instrument. Ms. S
cannot materially alter what is not a negotiable instrument. Therefore, the imitation of Ms. U’s
signature cannot be considered as material alteration.
(b) Is Bank U’s contention tenable? Explain.
SUGGESTED ANSWER: No, Bank U’s contention is not tenable. In the case of Samsung Construction
Company Phils., Inc. v. FEBTC the Supreme Court held that the drawee who has paid upon the forged
signature bears the loss. The exception to this rule arises only when negligence can be traced on the
part of the drawer whose signature was forged. In this case, there was no negligence on the part of
Ms. U in keeping her checkbook. Bank U must be considered as paying out of its funds and cannot
charge the amount so paid to the account of the depositor. Therefore, Bank U’s contention is
untenable.
B.9.
LMN, Inc. operates a beach resort in a secluded island off the coast of Puerto Princesa City,
Palawan. It operates three (3) motorized boats to ferry its guests from the city proper to the
island resort and vice-versa. During one rainy morning, the guests were informed that the
ferry services for that day were cancelled due to a storm forecast. In order to appease the
apparent dismay of most of the guests who will miss their flight back to Manila, the boat
captain of one of LMN, Inc.’s motorized boats decided to push through with its trip back to the
city. Shortly after the boat sailed, the storm hit and the winds and waves became stronger,
causing engine trouble to the boat. Unfortunately, the boat capsized and sank, resulting in the
death of one of the passengers, Mr. X.
This prompted Mr. X’s heirs to file a complaint for damages against LMN, Inc., which they
alleged to be a common carrier. In its defense, LMN, Inc. maintained that it is not a common
carrier because its boats are not available to the general public but only ferry resort guests
and employees.
(a) May LMN, Inc. be considered a common carrier? Explain. (3%)
SUGGESTED ANSWER: YES. LMN could be considered a common carrier.
The Civil Code under Article 1732 provides: “Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the public.”
The said provision makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in
local idiom, as “a sideline”). Article 1732 also carefully avoids making any distinction between a
person or enterprise offering transportation service on a regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
49
between a carrier offering its services to the “general public,” i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population.
In a similar case of Spouses Cruz v. Sun Holidays, the SC ruled that its ferry services are so intertwined
with its main business as to be properly considered ancillary thereto. The constancy of respondent’s
ferry services in its resort operations is underscored by it having its own Coco Beach boats. And the
tour packages it offers, which include the ferry services, may be availed of by anyone who can afford
to pay the same. These services are thus available to the public.
Thus, applying the doctrine of the above-mentioned case, LMN is considered a common carrier.
(b) Assuming LMN, Inc. is a common carrier, may it be absolved from liability on the ground
of fortuitous event? Explain. (2%)
SUGGESTED ANSWER: NO. LMN could not use the defense of fortuitous event to be absolved of
liability.
For the defense of fortuitous events to prosper the following elements must be present:
(1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply
with their obligations, must have been independent of human will;
(2) the event that constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid;
(3) the occurrence must have been such as to render it impossible for the debtors to fulfill their
obligation in a normal manner; and
(4) the obligor must have been free from any participation in the aggravation of the resulting injury
to the creditor.
To fully free a common carrier from any liability, the fortuitous event must have been the proximate
and only cause of the loss. And it should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event.
The occurrence of the incident could have been expected from the storm forecasts, released the
morning of the incident. Thus, the event was not impossible to foresee and was not impossible to
avoid, had LMN prioritized the safety of its guests.
B.10.
F Corp., a corporation engaged in the export of fertilizers, entered into a sale of its products
with Mr. P. In this relation, Bank C, F Corp.’s bank, received an irrevocable letter of credit,
payable on sight, issued by Bank I for the account of its client, Mr. P, in the amount of
₱1,000,000.00 to cover the purchase price of the sale. In the letter of credit, Bank C was
designated as the confirming bank.
After being presented the required documents under the letter of credit, Bank C issued in
favor of F Corp. a cashier’s check in the amount of ₱1,000,000.00.
50
Bank C then informed Bank I of the payment made pursuant to the letter of credit. Thereafter,
Bank C transmitted the documents presented by F Corp. to Bank I and sought to be reimbursed
for the amount it paid to F Corp.
Bank I, however, refused to reimburse Bank C for the reason that it received an e-mail coming
from Mr. P that the latter will not make any payment to Bank I in relation to the letter of credit
because the products shipped to him by F Corp. were of substandard quality.
(a) Is Bank I’s refusal to reimburse Bank C warranted? Explain. (3%)
SUGGESTED ANSWER: No, Bank I’s refusal to reimburse Bank C is not warranted under the Doctrine
of Independence
Under the Doctrine of Independence, a letter of credit transaction is comprised of three separate and
distinct, yet interrelated relationships, namely, (a) between the buyer and the seller; (b) the issuing
bank and the buyer; and (c)the issuing bank and the seller. Performance in each relationship is not
premised or conditioned upon performance in the other relationships.
(b) Assuming that the documents submitted by F Corp. were proven to be actually forged but
were nonetheless accepted by Bank C as sufficient, may Bank I refuse Bank C’s claim for
reimbursement? Explain. (2%)
SUGGESTED ANSWER: Yes, Bank I may refuse Bank C’s claim for reimbursement under the Fraud
Exception Principle.
The Fraud Exception Principle applies when there is a fraud or forgery in the underlying transaction
or the tender documents. (See Sundiang and Aquino, 2017, p.397)
51

Commercial Law Bar Q - A (2017-2019) (4D1920)

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Commercial Law Bar Q - A (2017-2019) (4D1920)

Hochgeladen von

Copyright:

Verfügbare Formate

1

(a) What is insurable interest? (2%)

Is the justification of Dennis warranted? Explain your answer. (4%)

(a) What is a warehouseman’s claim? (3%)

State the exceptions to the Nell Doctrine. (4%)

The AMLC initiated a discreet investigation of the financial transactions of Lorenzo, a

Is Prosperous Bank’s refusal justified? Explain your answer. (4%)

Discuss and explain the rights of Yaasmin on the check. (4%)

(d) News reports are not copyrightable. (2%)

(e) The law on life insurance prohibits double insurance. (2%)

(a) May Yvette hold Yolanda liable on the note? (2.5%)

YARN & THREAD Corporation

(c) Yektas signed the PN merely as an accommodation to YTC. As he received no consideration

SUGGESTED ANSWER: Extraordinary diligence.

SUGGESTED ANSWER: My answer will be different.

Is YFC correct? (2.5%)

SUGGESTED ANSWER: YFC is correct.

SUGGESTED ANSWER: Yang is not correct.

Hence, YEI should be required to do a mandatory tender offer.

(b) Can Yolly be held liable for insider trading? (2.5%)

Hence, YBC Bank is not a mortgagee-buyer in good faith

(a) Was CSC correct in dismissing the case? (2.5%)

(a) Trust fund doctrine (2%)

(b) Unfair competition (2%)

(c) Insurable interest in property (2%)

(d) Splitting of deposits (2%)

(a) What is a derivative suit? (2%)

(b) Is Ms. Z’s contention correct? Explain. (3%)

SUGGESTED ANSWER: No.

(a) Should Mr. P be held liable? Explain. (2.5%)

Thus, Mr. P should not be held liable.

(b) Should Y, Inc. be held liable? Explain. (2.5%)

Hence, Y, Inc. should not be held liable.

Rule on each of XYZ Insurance Co.’s contentions. (5%)

(a) What is the doctrine of fair use?

SUGGESTED ANSWER: The data subject has the right to:

Is XYZ, Inc. required to conduct a tender offer? Explain. (3%)

Under Section 19 of Republic Act No. 8799, it is stated:

(a) Is the information disclosed by Mr. P to Mr. B considered as material nonpublic

(b) Is Bank U’s contention tenable? Explain.

(a) May LMN, Inc. be considered a common carrier? Explain. (3%)

SUGGESTED ANSWER: YES. LMN could be considered a common carrier.

(a) Is Bank I’s refusal to reimburse Bank C warranted? Explain. (3%)

Das könnte Ihnen auch gefallen