Commercial Law

At around 4:00 p.m. of December 25, 2020, Christmas Day, Queenie and her child, Paeng, boarded a jeepney being operated by Emil and driven by Amor. Queenie was made to sit on an empty beer case at the edge of the rear entrance/exit of the jeepney with her sleeping child on her lap. When they reached an uphill incline on the road, the jeepney slid backwards. Queenie pushed both her feet against the step board to prevent herself and her child from being thrown out of the exit, but because the step board was wet, her left foot slipped and was crushed between the step board and the coconut tree which halted the jeepney's backward motion. As a result, Queenie's leg was badly injured and had to be amputated. Queenie then sued Emil and Amor for breach of contract of carriage. Emil and Amor countered that the injuries Queenie sustained were due to her own fault since Amor had instructed everyone not to panic, but Queenie nevertheless tried to disembark which caused her foot to be crushed. If you were the judge, would you hold Emil and Amor solidarily liable? Explain briefly.

FLIP Co. is engaged in a nationalized activity requiring at least 60% Filipino ownership. Its outstanding capital stock consists of 1,000,000 shares broken down into 400,000 non-voting preferred shares and 600,000 voting common shares, out of which 20,000 are treasury shares. How many shares of the corporation must be owned by Filipinos? Explain briefly.

Yoongi, a director of BTS Corp. PH, bought substantial shares of its major supplier, Hybe, Inc. When Hybe, Inc.'s contracts were taken up by the BTS Corp. PH Board, Yoongi not only voted for their approval but influenced other directors to do so. Later, the Hybe, Inc. contracts turned out to be disadvantageous to BTS Corp. PH and caused it substantial losses. Discuss the action/s that may be pursued against Yoongi under the Revised Corporation Code. Explain briefly.

LOKO Co., using a fraudulent scheme, was able to sell its shares to investors. The sale proceeds were then secretly diverted by LOKO Co. to its wholly owned subsidiaries. Later, LOKO Co. became insolvent and was placed under receivership. On behalf of the investor-stockholders, the receiver demanded the inspection of the books and records of LOKO Co.'s subsidiaries. (a) Can LOKO Co.'s stockholders exercise, through the receiver, their right of inspection of the books and records of LOKO Co.'s subsidiaries? Explain briefly.

LOKO Co., using a fraudulent scheme, was able to sell its shares to investors. The sale proceeds were then secretly diverted by LOKO Co. to its wholly owned subsidiaries. Later, LOKO Co. became insolvent and was placed under receivership. On behalf of the investor-stockholders, the receiver demanded the inspection of the books and records of LOKO Co.'s subsidiaries. (b) Is this a case of intra-corporate dispute? Explain briefly.

Samson Manufacturing, Inc. insured its own goods with Delilah Insurance for Php2,000,000.00. The same goods were insured by Alibaba Shipping Co. with Assured Corp. for the same amount pursuant to its contract of carriage with Samson Manufacturing, Inc. Both policies warranted that no other insurance exists, and in case another insurance does exist, such would not void either policy, but in no case should the claim exceed the total amount of Php2,000,000.00 at the time of loss. Is this a case of double insurance? Explain briefly.

Muviel obtained a life insurance policy from X Insurance Corp. Muviel underwent a medical examination and was certified as qualified to be insured. Unknown to X Insurance Corp., Muviel had a mild stroke some years earlier. The insurance policy expressly provided that any misrepresentation in the questionnaire filled up by Muviel for the issuance of the policy would render the policy null, void and of no effect. (a) If Muviel dies within the two-year period from the time of issuance of the policy, will the beneficiaries of Muviel be entitled to claim the proceeds of the life insurance policy? Explain briefly.

Muviel obtained a life insurance policy from X Insurance Corp. Muviel underwent a medical examination and was certified as qualified to be insured. Unknown to X Insurance Corp., Muviel had a mild stroke some years earlier. The insurance policy expressly provided that any misrepresentation in the questionnaire filled up by Muviel for the issuance of the policy would render the policy null, void and of no effect. (b) Should Muviel die after the two-year period, will your answer be the same? Explain briefly.

Kotse Corp. is an entity that provides pre-arranged transportation services for a fee using an online-enabled platform technology that connects passengers with drivers using their own vehicles. (a) Is Kotse Corp. a common carrier? Explain briefly.

In a Facebook livestream, an author offered his books online for sale by asking interested viewers to type in “Mine” in the chatbox. A set of his books was sold to a social media influencer who later turned out to be a “joy reserver.” A “joy reserver” refers to an online buyer who enthusiastically shows interest in an item but will not actually buy it. The author made a screenshot of the social media influencer's “Mine” message as proof of the acceptance of the offer. Does the screenshot of the message prove the perfection of the sale contract? Explain briefly.

Kotse Corp. is an entity that provides pre-arranged transportation services for a fee using an online-enabled platform technology that connects passengers with drivers using their own vehicles. (b) Are the drivers engaged in common carrier service? Explain briefly.

EXIT Corp., no longer wanting to continue with its business, transferred to Entra, Inc. under an Asset Purchase Agreement all its properties and assets including goodwill. A creditor of EXIT Corp. demanded from Entra, Inc. the payment of EXIT Corp.'s debt for the reason that the transaction amounted to a merger and, therefore, the surviving corporation, Entra, Inc., must assume the debts of the absorbed corporation, EXIT Corp. Is the creditor's demand tenable? Explain briefly.

Zui Cheneris Corp. is a pharmaceutical company operating in the Philippines since 1999. One of its products is a drug called carbamazepine under the brand name “CHENAPS”, which is an anti-convulsant used to control all types of seizure disorders of varied causes like epilepsy. Nutty Pharma, also a pharmaceutical company in the Philippines, sells citicoline under the mark “CHENAPSE”, which is indicated for the treatment of cerebrovascular disease or stroke. “CHENAPSE” was registered as a trademark by Nutty Pharma with the Intellectual Property Office of the Philippines (IPO) on September 24, 2017. On November 29, 2017, Nutty Pharma filed with the Regional Trial Court (RTC) a Complaint against Zui Cheneris for Injunction, Trademark Infringement, Damages and Destruction with Prayer for Temporary Restraining Order and/or Preliminary Injunction, alleging that Zui Cheneris' “CHENAPS” is confusingly similar to its registered trademark “CHENAPSE” and the resulting likelihood of confusion is dangerous because the marks cover medical drugs intended for different types of illnesses. Zui Cheneris, in its Answer, countered that: (i) it has been selling carbamazepine under the brand name “CHENAPS” since 2004; (ii) it was impossible for Nutty Pharma not to have known the existence of “CHENAPS” before the latter's registration of “CHENAPSE” because Nutty Pharma had promoted its products in the same publications where Zui Cheneris had advertised “CHENAPS”; (iii) despite its knowledge of prior use by Zui Cheneris of “CHENAPS”, Nutty Pharma had fraudulently appropriated the “CHENAPSE” mark by registering the same with the IPO; and (iv) as the prior user, Zui Cheneris is the owner of “CHENAPS” and the continued use by Nutty Pharma of “CHENAPSE” will cause it grave and irreparable damage. Thus, Zui Cheneris prayed for the cancellation of the trademark registration of Nutty Pharma's “CHENAPSE”. (a) As the RTC judge, will you enjoin Zui Cheneris from further using the mark “CHENAPS”? Explain briefly.

Zui Cheneris Corp. is a pharmaceutical company operating in the Philippines since 1999. One of its products is a drug called carbamazepine under the brand name “CHENAPS”, which is an anti-convulsant used to control all types of seizure disorders of varied causes like epilepsy. Nutty Pharma, also a pharmaceutical company in the Philippines, sells citicoline under the mark “CHENAPSE”, which is indicated for the treatment of cerebrovascular disease or stroke. “CHENAPSE” was registered as a trademark by Nutty Pharma with the Intellectual Property Office of the Philippines (IPO) on September 24, 2017. On November 29, 2017, Nutty Pharma filed with the Regional Trial Court (RTC) a Complaint against Zui Cheneris for Injunction, Trademark Infringement, Damages and Destruction with Prayer for Temporary Restraining Order and/or Preliminary Injunction, alleging that Zui Cheneris' “CHENAPS” is confusingly similar to its registered trademark “CHENAPSE” and the resulting likelihood of confusion is dangerous because the marks cover medical drugs intended for different types of illnesses. Zui Cheneris, in its Answer, countered that: (i) it has been selling carbamazepine under the brand name “CHENAPS” since 2004; (ii) it was impossible for Nutty Pharma not to have known the existence of “CHENAPS” before the latter's registration of “CHENAPSE” because Nutty Pharma had promoted its products in the same publications where Zui Cheneris had advertised “CHENAPS”; (iii) despite its knowledge of prior use by Zui Cheneris of “CHENAPS”, Nutty Pharma had fraudulently appropriated the “CHENAPSE” mark by registering the same with the IPO; and (iv) as the prior user, Zui Cheneris is the owner of “CHENAPS” and the continued use by Nutty Pharma of “CHENAPSE” will cause it grave and irreparable damage. Thus, Zui Cheneris prayed for the cancellation of the trademark registration of Nutty Pharma's “CHENAPSE”. (b) Is Zui Cheneris' prayer for cancellation of Nutty Pharma's trademark registration tenable? Explain briefly.

Bank teller Loris submitted a Suspicious Transaction Report (STR) on Marychelle, a politically exposed person (PEP), who, when asked about her deposit of Php2,000,000.00 in cash, just winked. The Anti-Money Laundering Council did not find probable cause which could support the belief that Marychelle had committed an unlawful activity or was otherwise involved in money laundering. Marychelle now wants to sue the bank and Loris for allegedly discriminating against her. Discuss whether or not Loris and the bank are liable.

Kau Corp. had suffered tremendous losses as a result of the COVID-19 pandemic and the resulting economic slump. From a calculation of its assets and liabilities, Kau Corp. was technically insolvent, but management believed that it had the chance to survive if its rights to mineral properties could be exploited. Kau Corp. has the rights to several parcels of land containing nickel deposits. Nickel prices had gone up in the world market and nickel was in short supply. The creditors of Kau Corp. are set to file suits for collection with application for writs of attachment. As the counsel for Kau Corp., what legal action would you take to avert the suits and stave off insolvency and liquidation? Explain briefly.

A professor teaching Intellectual Property Law distributed photocopies taken from a book written by another expert to a class of 15 law students. Excerpts shown in the photocopies were meant to be for discussion and criticism in one of the class sessions. Is this a violation of the law on Copyright? Explain briefly.

A single parent started a plant-based/vegan meal delivery service during the COVID-19 pandemic using only the resources available in the kitchen and in a nearby market. After just six months, the single parent needed to expand by hiring cooks, kitchen staff, and finance and administrative personnel. A bank told the single parent that it was ready to fund the small business but the parent needed to be registered with the proper government regulatory agencies. Friends advised the single parent that registering as a single proprietorship would make their personal assets vulnerable in case the business takes a downturn. The single parent now comes to you for legal advice, wanting to have the limited liability of a corporation but is unwilling to take in partners in the business that would stifle their culinary creativity. Under the Revised Corporation Code, is it legally possible for the single parent to register as a corporation with only the single parent as stockholder? Explain briefly.

Two years since it began to operate, a corporation has amassed assets valued at over PHP60,000,000.00. It also has 250 shareholders, each holding at least 150 shares. Under the Revised Corporation Code, is the corporation required to have an independent director? Explain briefly.

A white hat hacker, a software engineer, a gamer, an ophthalmologist, and a computer engineer got together sometime in 2019 to develop a software that can identify a person using a photo of their eyes taken by a 10-megapixel camera. By early January 2020, they decided that they needed more equipment and capital, and that they had to protect their intellectual property rights. A wealthy entrepreneur offered to give them the funds they needed. They negotiated that the funds would be treated as an investment rather than a debt liability. Thus, the entrepreneur would recover through dividends rather than through amortized payments. At the same time, they did not want the wealthy entrepreneur to be involved with creative decisions in their business projects. To accommodate their desired arrangements, a new corporation was registered with the Securities and Exchange Commission. In this corporation, the wealthy entrepreneur held preferred, non-voting shares, while the others held common, voting shares. By the middle of 2020, it became clear that the software was going to be highly profitable. Unlike other facial recognition software, theirs would be able to identify a person even with low-resolution cameras found in most smartphones. It could also identify persons even if they wore facemasks. Mindful of its profitability, a Chinese corporation offered to buy all the assets of the corporation for USD10,000,000,000.00. Everyone wanted to close the deal except the wealthy entrepreneur, who insisted that they should not sell all corporate assets, but instead enter into software licensing arrangements, as these would be more profitable. Under the Revised Corporation Code, are the white hat hacker, software engineer, gamer, ophthalmologist, and computer engineer required to allow the wealthy entrepreneur, who holds preferred shares, to vote on whether they can sell all the corporate assets? Explain briefly.

A university refused an award-winning journalist's request for a copy of a senatorial candidate's transcript of grades on the ground that it would violate Republic Act No. 10173, or the Data Privacy Act of 2012. The journalist, however, argued that the candidate's whole life should be subject to scrutiny by the voting public. Is the university's position legally tenable? Explain briefly.

Twenty-five months after a life insurance policy had been issued, the insured committed suicide. Upon investigation, the insurance company discovered that the insured had been living with an undiagnosed Major Depressive Disorder for some time before the suicide. Under the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition (DSM-5), a guidebook used by many professionals to diagnose various mental health conditions, Major Depressive Disorder is recognized as a mental disorder. Would the beneficiaries of the insured's life insurance policy still be entitled to receive its proceeds? Explain briefly.

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?

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. (b) Should X Pharmaceuticals, Inc.'s patent application for Disilopis be granted? Explain.

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.

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. (b) Assuming that W Medical, Inc. is considered “insolvent,” may it file a petition for suspension of payments under the FRIA? Explain.

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. (c) Assuming that W Medical, Inc. is considered “insolvent,” what are the legally recognized modes of rehabilitation it may opt to avail of?

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. (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.

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.

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. (b) Should the criminal case filed against Mr. P be suspended in light of the Commencement Order? Explain.

Enumerate at least two (2) rights of a data subject under the Data Privacy Act.

ABC Corp. is a company whose 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 (3) years 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.

Mr. P, the president of JKL, Inc. whose shares are listed in the Philippine Stock Exchange, was notified that the corporation has just been awarded a P5,000,000,000.00 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.

Mr. P, the president of JKL, Inc. whose shares are listed in the Philippine Stock Exchange, was notified that the corporation has just been awarded a P5,000,000,000.00 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. (b) Should Mr. P and Mr. B be held liable for insider trading? Explain.

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.

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. (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.

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 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.

Mrs. T maintained a checking account with Bank U. While Mrs. T was abroad, she left her checkbook inside her 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 P200,000.00 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. (b) Is Bank U's contention tenable? Explain.

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. (b) Assuming LMN, Inc. is a common carrier, may it be absolved from liability on the ground of fortuitous event? Explain.

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.

F Corp., a corporation engaged in the export of fertilizers, entered into a sale of its products with Mr. P. In relation thereto, 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 P1,000,000.00 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 P1,000,000.00. 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 from 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.

F Corp., a corporation engaged in the export of fertilizers, entered into a sale of its products with Mr. P. In relation thereto, 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 P1,000,000.00 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 P1,000,000.00. 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 from 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. (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.

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.

Define the following term: Trust Fund Doctrine.

Define the following term: Unfair Competition.

Define the following term: Insurable interest in property.

Define the following term: Splitting of deposits.

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 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. (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.

In May 2018, ABC Corp. entered into a merchandising contract the terms and conditions of which were totally lopsided in favor of the counterparty, XYZ, Inc. As a result, ABC Corp. suffered 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?

In May 2018, ABC Corp. entered into a merchandising contract the terms and conditions of which were totally lopsided in favor of the counterparty, XYZ, Inc. As a result, ABC Corp. suffered 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. (b) Was Mr. X's filing of a derivative suit proper? Explain.

In June 2018, DEF Corp. sent notices to its stockholders informing them of the corporation's issuances 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.

In June 2018, DEF Corp. sent notices to its stockholders informing them of the corporation's issuances 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. (b) Is Ms. Z's contention correct? Explain.

In 2016, X Corp. obtained a loan worth P50,000,000.00 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 P35,000,000.00 thereby leaving a P15,000,000.00 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. J Bank also contended that Y, Inc. should 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.

In 2016, X Corp. obtained a loan worth P50,000,000.00 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 P35,000,000.00 thereby leaving a P15,000,000.00 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. J Bank also contended that Y, Inc. should 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. (b) Should Y, Inc. be held liable? Explain.

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 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.

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 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. (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.

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.

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.

Mrs. T maintained a checking account with Bank U. While Mrs. T was abroad, she left her checkbook inside her 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 P200,000.00 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.

KLM Printers, Inc. operated a mall outlet located at the ground floor of a university building in Quezon 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?

KLM Printers, Inc. operated a mall outlet located at the ground floor of a university building in Quezon 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. (b) Is KLM Printers, Inc.'s invocation of the doctrine of fair use proper in this case? Explain.

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: (b) A 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?

Yashtag Holdings, Inc.'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, and dispose of any such stock.” It further states that it has an authorized capital stock of PhP1 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/investor, 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 PhP800 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 PhP300 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.” (b) Decide on the merits of Mr. Yokada's defense against being made liable for Yashtag Holdings' obligations.

Yashtag Holdings, Inc.'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, and dispose of any such stock.” It further states that it has an authorized capital stock of PhP1 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/investor, 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 PhP800 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 PhP300 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.” (a) What are the doctrines of “Separate Juridical Personality” and “Limited Liability”?

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 Republic of the Philippines. For the 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 PhP0.01 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 PhP100 per share. Once exercised, Yelp Pictures was granted the right to nominate two (2) directors of 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 acts 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?

Shortly after Yin and Yang were wed, they each took out separate life insurance policies on 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 mobility. 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 legitimate minor child Yinsel was void, being the product of an illicit relationship and therefore without “insurable interest.” (b) Do Yessel and Yinsel have “insurable interest” on the life of Yin?

Shortly after Yin and Yang were wed, they each took out separate life insurance policies on 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 mobility. 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 legitimate 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?

Yellow Fin Tuna Corporation (Yellow Fin), a domestic corporation, applied for a credit facility in the amount of PhP50 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 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?

Ysidro, a paying passenger, was on board Bus No. 904 owned and operated by Yatco Transportation Company (Yatco). He boarded the bus at Muñoz, 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. 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. (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?

Ysidro, a paying passenger, was on board Bus No. 904 owned and operated by Yatco Transportation Company (Yatco). He boarded the bus at Muñoz, 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. 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. (b) What kind of diligence is required of common carriers like Yatco for the protection of its passengers?

Ysidro, a paying passenger, was on board Bus No. 904 owned and operated by Yatco Transportation Company (Yatco). He boarded the bus at Muñoz, 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. 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?

On November 23, 2017, Yas Ysmael (Ysmael) loaned the amount of PhP5 million to Yarn & Thread Corporation (YTC), through its President, Ylmas Yektas (Yektas). The loan was evidenced by a Promissory Note (PN) which read: “Within one year from date hereof, I promise to pay to the order of YAS YSMAEL, the sum of PhP5 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 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. (e) The PN is void for being in violation of the Usury Law, seeking interest at an unconscionable rate of 120% p.a.

On November 23, 2017, Yas Ysmael (Ysmael) loaned the amount of PhP5 million to Yarn & Thread Corporation (YTC), through its President, Ylmas Yektas (Yektas). The loan was evidenced by a Promissory Note (PN) which read: “Within one year from date hereof, I promise to pay to the order of YAS YSMAEL, the sum of PhP5 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 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. (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.

On November 23, 2017, Yas Ysmael (Ysmael) loaned the amount of PhP5 million to Yarn & Thread Corporation (YTC), through its President, Ylmas Yektas (Yektas). The loan was evidenced by a Promissory Note (PN) which read: “Within one year from date hereof, I promise to pay to the order of YAS YSMAEL, the sum of PhP5 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 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. (c) Yektas signed merely as an accommodation to YTC. As he received no consideration for the PN, it is void for lack of consideration.

YBC Bank extended a loan of PhP50 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 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, one of which was in the name of Mr. Yamsuan who occupied the property after having bought it earlier from Mr. Yamato. (b) Is YBC Bank a mortgagee in good faith? Is it preferred over Mr. Yamsuan?

On June 21, 2008, Yate took out a life insurance policy on her life in the amount of PhP10 million and named her husband Yandy 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 a 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?

On June 21, 2008, Yate took out a life insurance policy on her life in the amount of PhP10 million and named her husband Yandy 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 a 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. (b) Are the beneficiaries entitled to receive the proceeds of the life insurance notwithstanding the fact that the cause of death was suicide?

A distinctive-tasting pastillas is well known throughout the country as having been developed within the close-knit women's group in Barangay 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 Yoling under the brand name “Ysmaellas” began to attract national distinction. Aling Yoling 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). (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?

A distinctive-tasting pastillas is well known throughout the country as having been developed within the close-knit women's group in Barangay 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 Yoling under the brand name “Ysmaellas” began to attract national distinction. Aling Yoling 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). (c) Can Aling Yoling seek the cancellation of Aling Yasmin's trademark registration of the brand name “Ysmaellas,” the former relying 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 articles?

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 step. Yosha, while preparing to have his invention registered with the IPO, had several models of his new system fabricated and sold in the 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?

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 step. Yosha, while preparing to have his invention registered with the IPO, had several models of his new system fabricated and sold in the province. (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?

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, which was unacted upon. He filed an action with the Civil Service Commission (CSC) for illegal dismissal. PAGCOR claimed that his action had 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 had 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 had 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?

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, which was unacted upon. He filed an action with the Civil Service Commission (CSC) for illegal dismissal. PAGCOR claimed that his action had 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 had 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 had 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. (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?

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 the 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?

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 Republic of the Philippines. For the 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 PhP0.01 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 PhP100 per share. Once exercised, Yelp Pictures was granted the right to nominate two (2) directors of 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. (c) Must the option granted to Yelp Pictures be registered under the SRC?

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: (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?

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 Republic of the Philippines. For the 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 PhP0.01 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 PhP100 per share. Once exercised, Yelp Pictures was granted the right to nominate two (2) directors of 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. (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?

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: (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?

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 the AMLC on its own cannot order a banking institution to reveal matters relating to bank accounts. (B) Does the AMLC have the power to order a banking institution to reveal matters relating to bank accounts?

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. (b) Who is liable to pay the remaining unpaid 50% balance — Ybarra or Ynchon?

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. (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?

Yangchou Inc.'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 PhP100 million, and unrestricted retained earnings of PhP30 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 PhP30 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?

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

On November 23, 2017, Yas Ysmael (Ysmael) loaned the amount of PhP5 million to Yarn & Thread Corporation (YTC), through its President, Ylmas Yektas (Yektas). The loan was evidenced by a Promissory Note (PN) which read: “Within one year from date hereof, I promise to pay to the order of YAS YSMAEL, the sum of PhP5 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 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. (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.

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?

YBC Bank extended a loan of PhP50 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 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, 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?

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) 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?

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: (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?

On November 23, 2017, Yas Ysmael (Ysmael) loaned the amount of PhP5 million to Yarn & Thread Corporation (YTC), through its President, Ylmas Yektas (Yektas). The loan was evidenced by a Promissory Note (PN) which read: “Within one year from date hereof, I promise to pay to the order of YAS YSMAEL, the sum of PhP5 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 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. (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.

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 PhP10 million, which was the amount actually lent by him to Yolanda, but excluding the agreed interest. Yohann later endorsed and delivered the note to Yvette, under circumstances that would constitute the latter to be a holder in due course. (b) Would your answer be the same if the promissory note was actually completed by Yolanda (including the amount of PhP10 million), but stolen from her desk by Yohann? Can Yvette enforce the note against Yolanda?

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 PhP10 million, which was the amount actually lent by him to Yolanda, but excluding the agreed interest. Yohann later endorsed and delivered the note 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?

A distinctive-tasting pastillas is well known throughout the country as having been developed within the close-knit women's group in Barangay 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 Yoling under the brand name “Ysmaellas” began to attract national distinction. Aling Yoling 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 Yoling successfully obtain court relief to prohibit Aling Yasmin from using the 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?

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.

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 M/V 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 M/V 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.

TRUE or FALSE. Explain briefly your answer. The law on life insurance prohibits double insurance.

TRUE or FALSE. Explain briefly your answer. Forgery is a real defense but may only be raised against a holder not in due course.

TRUE or FALSE. Explain briefly your answer. 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.

Data Realty, Inc. (DRI) was engaged in realty development. The family of Matteo owned 100% of the capital stock of DRI. Matteo was also the President and Chairman of the Board of Directors. Other members of Matteo's family held the major positions in DRI. 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, DRI 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.

TRUE or FALSE. Explain briefly your answer. A conviction under the Trust Receipts Law shall bar a prosecution for estafa under the Revised Penal Code.

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.

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.

TRUE or FALSE. Explain briefly your answer. News reports are not copyrightable.

Alfred issued a check for P1,000.00 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 P91,000.00, 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 P91,000.00 on the check. May Good Bank claim reimbursement from Alfred? Explain your answer.

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.

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.

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 P5,000,000.00 in the open market. To test the appraisal, she pawned the necklace for P2,000,000.00. 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.

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.

Virtucio was a composer of Ilocano songs who has been quite popular in the Ilocos 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 instructors for the class to listen to the CD and analyze the works of Virtucio. Did Pascuala thereby infringe Virtucio's copyright? Explain your answer.

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. What is a commencement order, and what is the effect of its issuance? Explain your answer.

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. 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.

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). 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.

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). What are the three restrictions imposed by law on DOSRI transactions?

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.

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. Suppose you are the trial judge, will you grant the motion to suspend of Procopio, et al.? Explain your answer.

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. What is a warehouseman's claim?

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.

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. BAIC consults you as its lawyer on whether separate policies could be issued to Seth and Sean in respect of the same car. Do Seth and Sean have separate insurable interests? Explain briefly your answer.

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. BAIC consults you as its lawyer on whether separate policies could be issued to Seth and Sean in respect of the same car. What is insurable interest?

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.

Absolute Timber Co. (ATC) has been engaged in the logging business in Isabela. 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.

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. Is Safe's refusal to surrender the goods to Cyrus, Magnus and Charles legally justified? Explain your answer.

X, a government official, has a number of bank accounts in T Bank containing millions of pesos. He also opened several trust accounts in the same bank which specifically covered the placement and/or investment of funds. X was later charged with graft and corruption before the Sandiganbayan (SB) by the Ombudsman. The Special Prosecutor filed a motion praying for a court order authorizing it to look into the savings and trust accounts of X in T Bank. X opposed the motion arguing that the trust accounts are not “deposits” under the Law on Secrecy of Bank Deposits (Rep. Act No. 1405). Is the contention of X correct? Explain.

In 2015, Total Bank (Total) proposed to sell to Royal Bank (Royal) its banking business for P10 billion consisting of specified assets and liabilities. The parties reached an eventual agreement, which they termed as “Purchase and Assumption (P & A) Agreement,” in which Royal would acquire Total's specified assets and liabilities, excluding contingent claims, with the further stipulation that it should be approved by the Bangko Sentral ng Pilipinas (BSP). BSP imposed the condition that Total should place in escrow P1 billion to cover for contingent claims against it. Total complied. After securing the approval of the BSP, the two banks signed the agreement. BSP thereafter issued a circular advising all bank and non-bank intermediaries that effective January 1, 2016, “the banking activities of Total Bank and Royal Bank have been consolidated and the latter has carried out their operations since then.” Was there a merger and consolidation of the two banks in point of the Corporation Code? Explain.

In 2015, Total Bank (Total) proposed to sell to Royal Bank (Royal) its banking business for P10 billion consisting of specified assets and liabilities. The parties reached an eventual agreement, which they termed as “Purchase and Assumption (P & A) Agreement,” in which Royal would acquire Total's specified assets and liabilities, excluding contingent claims, with the further stipulation that it should be approved by the Bangko Sentral ng Pilipinas (BSP). BSP imposed the condition that Total should place in escrow P1 billion to cover for contingent claims against it. Total complied. After securing the approval of the BSP, the two banks signed the agreement. BSP thereafter issued a circular advising all bank and non-bank intermediaries that effective January 1, 2016, “the banking activities of Total Bank and Royal Bank have been consolidated and the latter has carried out their operations since then.” What is meant by a de facto merger? Discuss.

B Bank, a large universal bank, regularly extends revolving credit lines to business establishments under what it terms as socially responsible banking and private business partnership relations. All loans that are extended to clients have a common “Escalation Clause,” to wit: “B Bank hereby reserves its right to make successive increases in interest rates in accordance with the bank's adopted policies as approved by the Monetary Board; Provided that each successive increase shall be with the written assent of the depositor.” X, a regular client of the bank, contends that the “Escalation Clause” is unfair, unconscionable and contrary to law, morals, public policy and customs. Rule on the issue and explain.

What does “doing business in the Philippines” under the Foreign Investments Act of 1991 mean?

PJ Corporation (PJ) obtained a loan from ABC Bank (ABC) in the amount of P10 million for the purchase of 100 pieces of ecodoors. Thereafter, a Letter of Credit was obtained by PJ against such loan. The beneficiary of the Letter of Credit is Scrap Metal Corp. (Scrap Metal) in Beijing, China. Upon arrival of 100 pieces of ecodoors, PJ executed a Trust Receipt in favor of ABC to cover for the value of the ecodoors for its release to PJ. The terms of the Trust Receipt is that any proceeds from the sale of the ecodoors will be delivered to ABC as payment. After the ecodoors were sold, PJ, instead of paying ABC, used the proceeds of the sale to order from Scrap Metal another 100 pieces of ecodoors but using another bank to issue a new Letter of Credit fully covered by such proceeds. PJ refused to pay the proceeds of the sale of the first set of ecodoors to ABC, claiming that the ecodoors that were delivered were defective. It then instructed ABC not to negotiate the Letter of Credit that was issued in favor of Scrap Metal. As counsel of ABC, you are asked for advice on whether or not to grant the instruction of PJ. What will be your advice?

PJ Corporation (PJ) obtained a loan from ABC Bank (ABC) in the amount of P10 million for the purchase of 100 pieces of ecodoors. Thereafter, a Letter of Credit was obtained by PJ against such loan. The beneficiary of the Letter of Credit is Scrap Metal Corp. (Scrap Metal) in Beijing, China. Upon arrival of 100 pieces of ecodoors, PJ executed a Trust Receipt in favor of ABC to cover for the value of the ecodoors for its release to PJ. The terms of the Trust Receipt is that any proceeds from the sale of the ecodoors will be delivered to ABC as payment. After the ecodoors were sold, PJ, instead of paying ABC, used the proceeds of the sale to order from Scrap Metal another 100 pieces of ecodoors but using another bank to issue a new Letter of Credit fully covered by such proceeds. PJ refused to pay the proceeds of the sale of the first set of ecodoors to ABC, claiming that the ecodoors that were delivered were defective. It then instructed ABC not to negotiate the Letter of Credit that was issued in favor of Scrap Metal. Explain what is a “Letter of Credit” as a financial device and a “Trust Receipt” as a security to the Letter of Credit.

Henry is a board director in XYZ Corporation. For being the “fiscalizer” in the Board, the majority of the board directors want him removed and his shares sold at auction, so he can no longer participate even in the stockholders' meetings. Henry approaches you for advice on whether he can be removed as board director and stockholder even without cause. What is your advice? Explain “amotion” and the procedure in removing a director.

ABC Corp. is engaged in the pawnshop business involving cellphones, laptops and other gadgets of value. In order to expand its business and attract investors, it offered to any person who invests at least P100,000.00 a “Promissory Note” where it obligated itself to pay the holder a 50% return on investment within one month. Due to the attractive offer, many individuals invested in the company but not one of them was able to realize any profit after one month. Has ABC Corp. violated any law with its scheme? Explain.

C Corp. is the direct holder of 10% of the shareholdings in U Corp., a nonlisted (not public) firm, which in turn owns 62% of the shareholdings in H Corp., a publicly listed company. The other principal stockholder in H Corp. is C Corp. which owns 18% of its shares. Meanwhile, the majority stocks in U Corp. are owned by B Corp. and V Corp. at 22% and 30%, respectively. B Corp. and V Corp. later sold their respective shares in U Corp. to C Corp., thereby resulting in the increase of C Corp.'s interest in U Corp., whether direct or indirect, to more than 50%. Does the Tender Offer Rule apply in this case where there has been an indirect acquisition of the shareholdings in H Corp. by C Corp.? Discuss.

A railroad track of the Philippine National Railway (PNR) is located near a busy intersection of Puyat Avenue and Osmeña Highway. One afternoon, the intersection was heavily congested, as usual. Juan, the driver of a public utility jeepney (PUJ), drove onto the railroad tracks but could go no farther because of the heavy traffic at the intersection. After the jeepney stopped right on the railroad track, it was hit and overturned by a PNR train, resulting in the death of Kim, a passenger of the PUJ, and injuries to Juan and his other passengers. Juan, the injured passengers and Kim's family sued the PNR for damages for its negligence. It was established that the steel pole barrier before the track was broken, and that the PNR had the last clear chance of avoiding the accident. On the other hand, the PNR raised the defense that the track is for the exclusive use of the train and that motorists are aware that it is negligence per se to stop their vehicles on the tracks. Decide the case and explain.

Nautica Shipping Lines (Nautica) bought a second hand passenger ship from Japan. It modified the design of the bulkhead of the deck of the ship to accommodate more passengers. The ship sunk with its passengers in Tablas Strait due to heavy rains brought by the monsoon. The heirs of the passengers sued Nautica for its liability as a common carrier based on the reconfiguration of the bulkhead which may have compromised the stability of the ship. Nautica raised the defense that the monsoon is a fortuitous event and, at most, its liability is prescribed by the Limited Liability Rule. Decide with reasons.

C Corp. is the direct holder of 10% of the shareholdings in U Corp., a nonlisted (not public) firm, which in turn owns 62% of the shareholdings in H Corp., a publicly listed company. The other principal stockholder in H Corp. is C Corp. which owns 18% of its shares. Meanwhile, the majority stocks in U Corp. are owned by B Corp. and V Corp. at 22% and 30%, respectively. B Corp. and V Corp. later sold their respective shares in U Corp. to C Corp., thereby resulting in the increase of C Corp.'s interest in U Corp., whether direct or indirect, to more than 50%. Explain the Tender Offer Rule under the Securities Regulation Code.

In 2015, R Corp., a domestic company that is wholly owned by Filipinos, filed its opposition to the applications for Mineral Production Sharing Agreements (MPSA) of O Corp., P Corp., and Q Corp. which were pending before the Panel of Arbitrators (POA) of the Department of Environment and Natural Resources (DENR). The three corporations wanted to undertake exploration and mining activities in the province of Isabela. The oppositor alleged that at least 60% of the capital shareholdings of the applicants are owned by B Corp., a 100% Chinese corporation, in violation of Sec. 2, Art. XII of the Constitution. The applicants countered that they are qualified corporations as defined under the Philippine Mining Act of 1995 and the Foreign Investments Act of 1991 since B Corp. holds only 40% of the capital stocks in each of them and not 60% as alleged by R Corp. The Summary of Significant Accounting Policies statement of B Corp. reveals that the joint venture agreements of B Corp. with Sigma Corp. and Delta Corp. involve the O Corp., P Corp., and Q Corp. The ownership of the layered corporations and joint venture agreements show that B Corp. practically exercises control over the O, P and Q corporations. O, P and Q corporations contend that the control test should be applied and its MPSA applications granted. On the other hand, R Corp. argues that the “grandfather rule” should be applied. Decide with reasons.

X owns 10,000 shares in Z Telecoms Corp. As he is in immediate need of money, he offered to sell all his shares to his friend, Y, at a bargain price. Upon receipt of the purchase price from Y, X proceeded to indorse in blank the certificates of shares and delivered these to Y. The latter then went to the corporate secretary of Z Telecoms Corp. and requested the transfer of the shares in his name. The corporate secretary refused since X merely indorsed the certificates in blank to Y. According to the corporate secretary, the certificates should have been specifically indorsed to the purchaser, Y. Was the corporate secretary justified in declining Y's request? Discuss.

Royal Links Golf Club obtained a loan from a bank which is secured by a mortgage on a titled lot where holes 1, 2, 3 and 4 are located. The bank informed the Board of Directors (Board) that if the arrearages are not paid within thirty (30) days, it will extra-judicially foreclose the mortgage. The Board decided to offer to the members 200 proprietary membership shares, which are treasury shares, at the price of P175,000.00 per share even when the current market value is P200,000.00. In behalf and for the benefit of the corporation, Peter, a stockholder, filed a derivative suit against the members of the Board for breach of trust for selling the shares at P25,000.00 lower than its market value, and asked for the nullification of the sales and the removal of the board members. Peter claims the Club incurred a loss of P5 million. The Board presented the defense that in its honest belief any delay in the payment of the arrearages will be prejudicial to the Club as the mortgage on its assets will be foreclosed and the sale at a lower price is the best solution to the problem. Decide the suit and explain.

After securing a P1 million loan from B, A drew in B's favor a bill of exchange with C as drawee. The bill reads: “October 1, 2016. Pay to the order of B the sum of P1 million. To: C (drawee). Signed, A.” A then delivered the bill to B who, however, lost it. It turned out that it was stolen by D, B's brother. D lost no time in forging B's signature and negotiated it to E who acquired it for value and in good faith. May E recover on the bill from C, the drawee? Explain.

X insured his life for P20 million. X plays golf and regularly exercises everyday, hence is considered in good health. He did not know, however, that his frequent headache is really caused by his being hypertensive. In his application form for a life insurance for himself, he did not put a check to the question if he is suffering from hypertension, believing that because of his active lifestyle, being hypertensive is a remote possibility. While playing golf one day, X collapsed at the fairway and was declared dead on arrival at the hospital. His death certificate stated that X suffered a massive heart attack. If X died in an accident instead of a heart attack, would the fact of X's failure to disclose that he is hypertensive be considered as material information?

Company X issued a Bank A Check No. 12345 in the amount of P500,000.00 payable to the Bureau of Internal Revenue (BIR) for the company's taxes for the third quarter of 1997. The check was deposited with Bank B, the collecting bank with which the BIR has an account. The check was subsequently cleared and the amount of P500,000.00 was deducted from the company's balance. Thereafter, Company X was notified by the BIR of its non-payment of its unpaid taxes despite the P500,000.00 debit from its account. This prompted the company to seek assistance from the proper authorities to investigate on the matter. The results of the investigation disclosed that unknown then to Company X, its chief accountant Bonifacio Santos is part of a syndicate that devised a scheme to syphon its funds. It was discovered that though deposited, the check was never paid to the BIR but was passed on by Santos to Winston Reyes, Bank B's branch manager and Santos' co-conspirator. Instead of bringing the check to the clearing house, Reyes replaced Check No. 12345 with a worthless check bearing the same amount, and tampered documents to cover his tracks. No amount was then credited to the BIR. Meanwhile, Check No. 12345 was subsequently cleared and the amount therein credited into the accounts of fictitious persons, to be later withdrawn by Santos and Reyes. Company X then sued Bank B for the amount of P500,000.00 representing the amount deducted from its account. Bank B interposed the defense that Company X was guilty of contributory negligence since its confidential employee Santos was an integral part of the scheme to divert the proceeds of Check No. 12345. Is Company X entitled to reimbursement from Bank B, the collecting bank? Explain.

MS Brewery Corporation (MS) is a manufacturer and distributor of the popular beer “MS Lite.” It faces stiff competition from BA Brewery Corporation (BA) whose sales of its own beer product, “BA Lighter,” has soared to new heights. Meanwhile, sales of the “MS Lite” decreased considerably. The distribution and marketing personnel of MS later discovered that BA has stored thousands of empty bottles of “MS Lite” manufactured by MS in one of its warehouses. MS filed a suit for unfair competition against BA before the Regional Trial Court (RTC). Finding a connection between the dwindling sales of MS and the increased sales of BA, the RTC ruled that BA resorted to acts of unfair competition to the detriment of MS. Is the RTC correct? Explain.

X's “MINI-ME” burgers are bestsellers in the country. Its “MINI-ME” logo, which bears the color blue, is a registered mark and has been so since the year 2010. Y, a competitor of X, has her own burger which she named “ME-TOO” and her logo thereon is printed in bluish-green. When X sued Y for trademark infringement, the trial court ruled in favor of the plaintiff by applying the Holistic Test. The court held that Y infringed on X's mark since the dissimilarities between the two marks are too trifling and frivolous such that Y's “ME-TOO,” when compared to X's “MINI-ME,” will likely cause confusion among consumers. Is the application of the Holistic Test correct?

ABC Appliances Corporation (ABC) is a domestic corporation engaged in the production and sale of televisions and other appliances. YYY Engineers, a Taiwanese company, is the manufacturer of televisions and other appliances from whom ABC actually purchases appliances. From 2000, when ABC started doing business with YYY, it has been using the mark “TTubes” in the Philippines for the television units that were bought from YYY. In 2015, YYY filed a trademark application for “TTubes.” Later, ABC also filed its application. Both claim the right over the trademark “TTubes” for television products. YYY relies on the principle of “first to file” while ABC invokes the “doctrine of prior use.” Does the prior registration also mean a conclusive assumption that YYY Engineers is in fact the owner of the trademark “TTubes”? Briefly explain your answer.

ABC Appliances Corporation (ABC) is a domestic corporation engaged in the production and sale of televisions and other appliances. YYY Engineers, a Taiwanese company, is the manufacturer of televisions and other appliances from whom ABC actually purchases appliances. From 2000, when ABC started doing business with YYY, it has been using the mark “TTubes” in the Philippines for the television units that were bought from YYY. In 2015, YYY filed a trademark application for “TTubes.” Later, ABC also filed its application. Both claim the right over the trademark “TTubes” for television products. YYY relies on the principle of “first to file” while ABC invokes the “doctrine of prior use.” Does the fact that YYY filed its application ahead of ABC mean that YYY has the prior right over the trademark? Explain briefly.

Jason is the proud owner of a newly-built house worth P5 million. As a protection against any possible loss or damage to his house, Jason applied for a fire insurance policy thereon with Shure Insurance Corporation (Shure) on October 11, 2016 and paid the premium in cash. It took the company a week to approve Jason's application. On October 18, 2016, Shure mailed the approved policy to Jason which the latter received five (5) days later. However, Jason's house had been razed by fire which transpired a day before his receipt of the approved policy. Jason filed a written claim with Shure under the insurance policy. Shure prays for the denial of the claim on the ground that the theory of cognition applies to contracts of insurance. Decide Jason's claim with reasons.

X insured his life for P20 million. X plays golf and regularly exercises everyday, hence is considered in good health. He did not know, however, that his frequent headache is really caused by his being hypertensive. In his application form for a life insurance for himself, he did not put a check to the question if he is suffering from hypertension, believing that because of his active lifestyle, being hypertensive is a remote possibility. While playing golf one day, X collapsed at the fairway and was declared dead on arrival at the hospital. His death certificate stated that X suffered a massive heart attack. Will the beneficiary of X be entitled to the proceeds of the life insurance under the circumstances, despite the non-disclosure that he is hypertensive at the time of application?

B Bank, a large universal bank, regularly extends revolving credit lines to business establishments under what it terms as socially responsible banking and private business partnership relations. All loans that are extended to clients have a common “Escalation Clause,” to wit: “B Bank hereby reserves its right to make successive increases in interest rates in accordance with the bank's adopted policies as approved by the Monetary Board; Provided that each successive increase shall be with the written assent of the depositor.” Suppose that the “Escalation Clause” instead reads: “B Bank hereby reserves the right to make reasonable increases in interest rates in accordance with bank policies as approved by the Monetary Board; Provided, there shall be corresponding reasonable decreases in interest rates as approved by the Monetary Board.” Would this be valid? Explain.

Maine Den, Inc. opened an irrevocable letter of credit with Fair Bank, in connection with Maine Den, Inc.'s importation of spare parts for its textile mills. The imported parts were released to Maine Den, Inc. after it executed a trust receipt in favor of Fair Bank. When Maine Den, Inc. was unable to pay its obligation under the trust receipt, Fair Bank sued Maine Den, Inc. for estafa under the Trust Receipts Law. The court, however, dismissed the suit. Was the dismissal justified? Why or why not?

In what ways would a case for infringement of trademark be different from a case for unfair competition?

What is the doctrine of equivalents?

What is insider trading?

Raymond invested his money in securities issued by the Philippine government, through his bank. Subsequently, the Bureau of Internal Revenue asked his bank to disclose his investments. His bank refused the request for disclosure on the ground that the investments are confidential under the Secrecy of Bank Deposits Law (RA 1405, as amended). Is the bank's refusal justified? Defend your answer.

On foreign investments: 1. A foreign company has a distributor in the Philippines. The latter acts in his own name and account. Will this distributorship be considered as doing business by the foreign company in the Philippines? 2. ABC Corporation was organized in Malaysia but has a branch in the Philippines. It is entirely owned by Filipino citizens. Can you consider ABC Corporation a Philippine national?

Differentiate trademark, copyright and patent from each other.

What is the single borrower's limit?

A commercial bank wants to acquire shares in a cement manufacturing company. Do you think it can do that? Why or why not?

First Bank received an order of garnishment over a client's peso and dollar deposits in First Bank. Should First Bank comply with that order? Explain.

Distinguish a conservator from a receiver of a bank.

Why is the Bangko Sentral ng Pilipinas considered a lender of last resort?

Mr. and Mrs. Reyes invested their hard-earned savings in securities issued by LEAD Bank. After discovering that the securities sold to them were not registered with the Securities and Exchange Commission (SEC) in violation of the Securities Regulation Code (SRC), the spouses Reyes filed a complaint for nullity of contract and for recovery of a sum of money with the RTC. LEAD Bank moved to dismiss the case on the ground that it is the SEC that has primary jurisdiction over actions involving violations of the SRC. If you were the judge, how would you rule on the motion to dismiss?

Why is the Securities Regulation Code called a “truth in securities law”?

Securities issued by the Philippine government are “exempt securities” and, therefore, need not be registered with the Securities and Exchange Commission prior to their sale or offering to the public in the Philippines. What is the rationale behind this exemption?

Able Corporation sold securities to 21 non-qualified buyers during a 15-month period, without registering the securities with the Securities and Exchange Commission (SEC). Did Able Corporation violate the Securities Regulation Code (SRC)? Explain.

Barn filed an action to enjoin SN Company's Board of Directors from selling a parcel of land registered in the corporation's name, to compel the corporation to recognize Barn as a stockholder with 50 shares, to allow him to inspect the corporate books, and to claim damages against the corporation and its officers. Subsequently, the corporation and the individual defendants moved to dismiss the complaint since the corporation's certificate of registration was revoked by the SEC during the pendency of Barn's case on the ground of non-compliance with reportorial requirements. The special commercial court granted the motion and reasoned that only an action for liquidation of assets can be maintained when a corporation has been dissolved and Barn cannot seek reliefs which in effect lead to the continuation of the corporation's business. The court also ruled that it lost jurisdiction over the intra-corporate controversy upon the dissolution of the corporation. Four years later, SN Company files an action against Barn to recover corporate assets allegedly held by the latter for liquidation. Will this action prosper?

Barn filed an action to enjoin SN Company's Board of Directors from selling a parcel of land registered in the corporation's name, to compel the corporation to recognize Barn as a stockholder with 50 shares, to allow him to inspect the corporate books, and to claim damages against the corporation and its officers. Subsequently, the corporation and the individual defendants moved to dismiss the complaint since the corporation's certificate of registration was revoked by the SEC during the pendency of Barn's case on the ground of non-compliance with reportorial requirements. The special commercial court granted the motion and reasoned that only an action for liquidation of assets can be maintained when a corporation has been dissolved and Barn cannot seek reliefs which in effect lead to the continuation of the corporation's business. The court also ruled that it lost jurisdiction over the intra-corporate controversy upon the dissolution of the corporation. Was the court correct?

Define: 1. Doctrine of apparent authority; 2. Trust fund doctrine.

A foreign company has been exporting goods to a Philippine company for several years now. When the Philippine company failed to pay the latest exportation, the foreign company sued to collect in the Philippines. The Philippine company interposed the defense that the foreign company was doing business in the Philippines without a license; hence, could not sue before a Philippine court. Is this defense tenable? Explain your answer.

What is “watered stock” and what is the legal consequence of the issuance of such stock?

DEF Corporation has retained surplus profits in excess of 100% of its paid-in capital stock. However, it is unable to declare dividends, because it had entered into a loan agreement with a certain creditor wherein the declaration of dividends is not allowed without the consent of such creditor. If DEF Corporation cannot obtain this consent, will it be justified in not declaring dividends to its stockholders? Explain.

Is the Uniform Customs and Practice for Documentary Credits of the International Chamber of Commerce applicable to commercial letters of credit issued by a domestic bank even if not expressly mentioned in such letters of credit? What is the basis for your answer?

A standby letter of credit was issued by ABC Bank to secure the obligation of X Company to Y Company. Under the standby letter of credit, if there is failure on the part of X Company to perform its obligation, then Y Company will submit to ABC Bank a certificate of default (in the form prescribed under the standby letter of credit) and ABC Bank will have to pay Y Company the defaulted amount. Subsequently, Y Company submitted to ABC Bank a certificate of default notwithstanding the fact that X Company was not in default. Can ABC Bank refuse to honor the certificate of default? Explain.

Does the rule “res perit domino” apply in trust receipt transactions? Explain.

Are common carriers liable for injuries to passengers even if they have observed ordinary diligence and care? Explain.

What is a “Jason clause” in a charter party?

Discuss the three-fold character of a bill of lading.

Will an insurance policy be binding even if the premium is unpaid? What if it were partially paid?

Novette entered into a contract for the purchase of certain office supplies. The goods were shipped. While in transit, the goods were insured by Novette. Does she have an insurable interest over the goods even before delivery of the same to her? Explain.

When can you treat a bill of exchange as a promissory note?

Is a manager's check as good as cash? Why or why not?

Nadine has a checking account with Fair & Square Bank. One day, she lost her check book and the finder was able to forge her signature and encash the forged check. Will Nadine be able to recover the amount debited from her checking account from Fair & Square Bank? Justify your answer.

On the anti-money laundering laws: 1. What is the distinction between a “covered transaction report” and a “suspicious transaction report”? 2. Does the Anti-Money Laundering Council have the authority to freeze deposits? Explain.

CHEN, Inc., a Taiwanese company, is a manufacturer of tires with the mark Light Year. From 2009 to 2014, Clark Enterprises, a Philippine registered corporation, imported tires from CHEN, Inc. under several sales contracts and sold them here in the Philippines. In 2015, CHEN, Inc. filed a trademark application with the Intellectual Property Office (IPO) for the mark Light Year to be used for tires. The IPO issued CHEN, Inc. a certificate of registration (COR) for said mark. Clark Enterprises sought the cancellation of the COR and claimed it had a better right to register the mark Light Year. CHEN, Inc. asserted that it was the owner of the mark and Clark Enterprises was a mere distributor. Clark Enterprises argued that there was no evidence on record that the tires it imported from CHEN, Inc. bore the mark Light Year and Clark Enterprises was able to prove that it was the first to use the mark here in the Philippines. Decide the case.

Which of the following instruments is negotiable if all the other requirements of negotiability are met? (1%) A) A promissory note with promise to pay out of the U.S. Dollar account of the maker in XYZ Bank; B) A promissory note which designates the U.S. Dollar currency in which payment is to be made; C) A promissory note which contains in addition a promise to paint the portrait of the bearer; D) A promissory note made payable to the order of Jose Cruz or Josefa Cruz.

ELP Insurance, Inc. issued Marine Policy No. 888 in favor of FCL Corp. to insure the shipment of 132 bundles of electric copper cathodes against all risks. Subsequently, the cargoes were shipped on board the vessel "M/V Menchu" from Leyte to Pier 10, North Harbor, Manila. Upon arrival, FCL Corp. engaged the services of CGM, Inc. for the release and withdrawal of the cargoes from the pier and the subsequent delivery to its warehouses/plants in Valenzuela City. The goods were loaded on board twelve (12) trucks owned by CGM, Inc., driven by its employed drivers and accompanied by its employed truck helpers. Of the twelve (12) trucks en route to Valenzuela City, only eleven (11) reached the destination. One (1) truck, loaded with eleven (11) bundles of copper cathodes, failed to deliver its cargo. Because of this incident, FCL Corp. filed with ELP Insurance, Inc. a claim for insurance indemnity in the amount of P1,500,000.00. After the requisite investigation and adjustment, ELP Insurance, Inc. paid FCL Corp. the amount of P1,350,000.00 as insurance indemnity. ELP Insurance, Inc., thereafter, filed a complaint for damages against CGM, Inc. before the Regional Trial Court (RTC), seeking reimbursement of the amount it had paid to FCL Corp. for the loss of the subject cargo. CGM, Inc. denied the claim on the basis that it is not privy to the contract entered into by and between FCL Corp. and ELP Insurance, Inc., and hence, it is not liable therefor. If you are the judge, how will you decide the case? (4%)

DMP Corporation (DMP) obtained a loan of P20 million from National Bank (NB) secured by a real estate mortgage over a 63,380 sq. m. land situated in Cabanatuan City. Due to the Asian Economic Crisis, DMP experienced liquidity problems disenabling it from paying its loan on time. For that reason, NB sought the extrajudicial foreclosure of the said mortgage by filing a petition for sale on June 30, 2003. On September 4, 2003, the mortgaged property was sold at public auction, which was eventually awarded to NB as the highest bidder. That same day, the Sheriff executed a Certificate of Sale in favor of NB. On October 21, 2003, DMP filed a Petition for Rehabilitation before the Regional Trial Court (RTC). Pursuant to this, a Stay Order was issued by the RTC on October 27, 2003. On the other hand, NB caused the recording of the Sheriff's Certificate of Sale on December 3, 2003 with the Register of Deeds of Cabanatuan City. NB executed an Affidavit of Consolidation of Ownership and had the same annotated on the title of DMP. Consequently, the Register of Deeds cancelled DMP's title and issued a new title in the name of NB on December 10, 2003. NB also filed on March 17, 2004 an Ex-Parte Petition for Issuance of Writ of Possession before the RTC of Cabanatuan City. After hearing, the RTC issued on September 6, 2004 an Order directing the Issuance of the Writ of Possession, which was issued on October 4, 2004. DMP claims that all subsequent actions pertaining to the Cabanatuan property should have been held in abeyance after the Stay Order was issued by the rehabilitation court. Is DMP correct? (4%)

In an action for collection of a sum of money, the Regional Trial Court (RTC) of Makati City issued a decision finding D-Securities, Inc. liable to Rehouse Corporation for P10,000,000.00. Subsequently, the writ of execution was issued but returned unsatisfied because D-Securities had no more assets to satisfy the judgment. Rehouse moved for an Alias Writ of Execution against Fairfield Bank (FB), the parent company of D-Securities. FB opposed the motion on the grounds that it is a separate entity and that it was never made a party to the case. The RTC granted the motion and issued the Alias Writ of Execution. In its Resolution, the RTC relied on the following facts: 499,995 out of the 500,000 outstanding shares of stocks of D-Securities are owned by FB; FB had actual knowledge of the subject matter of litigation as the lawyers who represented D-Securities are also the lawyers of FB. As an alter ego, there is no need for a finding of fraud or illegality before the doctrine of piercing the veil of corporate fiction can be applied. The RTC ratiocinated that being one and the same entity in the eyes of the law, the service of summons upon D-Securities has bestowed jurisdiction over both the parent and wholly-owned subsidiary. Is the RTC correct? (4%)

A criminal complaint for violation of B.P. 22 was filed by Foton Motors (Foton), an entity engaged in the business of car dealership, against Pura Felipe (Pura) with the Office of the City Prosecutor of Quezon City. The Office found probable cause to indict Pura and filed an information before the Metropolitan Trial Court (MeTC) of Quezon City, for her issuance of a post-dated check in the amount of P1,020,000.00 which was subsequently dishonored upon presentment due to "Stop Payment." Pura issued the check because her son, Freddie, attracted by a huge discount of P220,000.00, purchased a Foton Blizzard 4x2 from Foton. The term of the transaction was Cash-on-Delivery and no down payment was required. The car was delivered on May 14, 1997, but Freddie failed to pay upon delivery. Despite non-payment, Freddie took possession of the vehicle. Pura was eventually acquitted of the charge of violating B.P. 22 but was found civilly liable for the amount of the check plus legal interest. Pura appealed the decision as regards the civil liability, claiming that there was no privity of contract between Foton and Pura. No civil liability could be adjudged against her because of her acquittal from the criminal charge. It was Freddie who was civilly liable to Foton, Pura claimed. Pura added that she could not be an accommodation party either because she only came in after Freddie failed to pay the purchase price, or six (6) months after the execution of the contract between Foton and Freddie. Her liability was limited to her act of issuing a worthless check, but by her acquittal in the criminal charge, there was no more basis for her to be held civilly liable to Foton. Pura's act of issuing the subject check did not, by itself, assume the obligation of Freddie to Foton or automatically make her a party to the contract. Is Pura liable? (5%)

What vote is needed to consider every decision to be a valid corporate act? (1%) A) a majority of the directors present at the meeting; B) two-thirds of the directors present at the meeting; C) a majority of the directors present at the meeting at which there is a quorum; D) two-thirds of the directors present at the meeting at which there is a quorum.

Guetze and his wife have three (3) children: Neymar, 25, who is now based in Rio de Janeiro, Brazil; Muelter, 23, who has migrated to Munich, Germany; and James, 21, who resides in Bogota, Colombia. Neymar and Muelter have since renounced their Philippine citizenship in favor of their country of residence. Nearing 70 years old, Guetze decided to incorporate his business in Binondo, Manila. He asked his wife and three (3) children to act as incorporators with one (1) share of stock each, while he owned 999,996 shares of the 1,000,000 shares of the capital stock. (6%) (A) Assuming all other requirements are met, should the Securities and Exchange Commission (SEC) accept or reject the Articles of Incorporation? Why? (B) Being the control freak and micro-manager that he is, Guetze asked you — his astute legal adviser — if he can serve as Chairman of the Board of Directors, as President, and as General Manager of the corporation, all at the same time. Please advise Guetze. (C) Assuming the corporation has been properly registered, may the Articles of Incorporation now be amended to reduce the number of directors to two (2) — Guetze and his wife — to reflect the real owners of the shares of stock?

Skechers Corporation sued Inter-Pacific for trademark infringement, claiming that Inter-Pacific used Skechers' registered "S" logo mark on Inter-Pacific's shoe products without its consent. Skechers has registered the trademark "SKECHERS" and the trademark "S" (with an oval design) with the Intellectual Property Office (IPO). In its complaint, Skechers points out the following similarities: the color scheme of the blue, white and gray utilized by Skechers; even the design and "wave-like" pattern of the mid-sole and outer sole of Inter-Pacific's shoes are very similar to Skechers' shoes, if not exact patterns thereof; on the side of Inter-Pacific's shoes, near the upper part, appears the stylized "S" placed in the exact location as that of the stylized "S" on the Skechers shoes; on top of the "tongue" of both shoes appears the stylized "S" in practically the same location and size. In its defense, Inter-Pacific claims that under the Holistic Test, the following dissimilarities are present: the mark "S" found in Strong shoes is not enclosed in an "oval design"; the word "Strong" is conspicuously placed at the backside and insoles; the hang tags and labels attached to the shoes bear the word "Strong" for Inter-Pacific and "Skechers U.S.A." for Skechers; and Strong shoes are modestly priced compared to the costs of Skechers shoes. Under the foregoing circumstances, which is the proper test to be applied — Holistic or Dominancy Test? Decide. (4%)

On December 1, 2010, Kore A Corporation shipped from South Korea to LT Corporation in Manila some 300,000 sheets of high-grade special steel. The shipment was insured against all risks by NA Insurance (NA). The carrying vessel arrived at the Port of Manila on January 10, 2011. When the shipment was discharged, it was noted that 25,000 sheets were damaged and in bad order. The entire shipment was turned over to the custody of ATI, the arrastre operator, on January 21, 2011 for storage and safekeeping, pending its withdrawal by the consignee's authorized customs broker, RVM. On January 26 and 29, 2011, the subject shipment was withdrawn by RVM from the custody of ATI. On January 29, 2011, prior to the withdrawal of the last batch of the shipment, a joint inspection of the cargo was conducted per the Request for Bad Order Survey (RBO) dated January 28, 2011. The examination report showed that 30,000 sheets of steel were damaged and in bad order. NA Insurance paid LT Corporation the amount of P30,000,000.00 for the 30,000 sheets that were damaged, as shown in the Subrogation Receipt dated January 13, 2013. Thereafter, NA Insurance demanded reparation against ATI for the goods damaged in its custody, in the amount of P5,000,000.00. ATI refused to pay claiming that the claim was already barred by the statute of limitations. ATI alleged that the Carriage of Goods by Sea Act (COGSA) applies in this case since the goods were shipped from a foreign port to the Philippines. NA Insurance claims that the COGSA does not apply, since ATI is not a shipper or carrier. Who is correct? (5%)

In intellectual property cases, fraudulent intent is not an element of the cause of action except in cases involving: (1%) A) trademark infringement; B) copyright infringement; C) patent infringement; D) unfair competition.

A, B, C, D, and E were members of the 2003-2004 Board of Directors of FLP Corporation. At the election for the 2004-2005 Board of Directors, not one of them was elected. They filed in court a derivative suit on behalf of FLP Corporation against the newly-elected members of the Board of Directors. They questioned the validity of the election as it was allegedly marred by lack of quorum, and prayed for the nullification of the said election. The 2004-2005 Board of Directors moved to dismiss the complaint because the derivative suit is not proper. Decide. (4%)

On May 13, 1996, PAM, Inc. obtained a P15,000,000.00 fire insurance policy from Ilocano Insurance covering its machineries and equipment effective for one (1) year or until May 14, 1997. The policy expressly stated that the insured properties were located at "Sanyo Precision Phils. Building, Phase III, Lots 4 and 6, Block 15, PEZA, Rosario, Cavite." Before its expiration, the policy was renewed on "as is" basis for another year or until May 13, 1998. The subject properties were later transferred to Pace Factory also in PEZA. On October 12, 1997, during the effectivity of the renewed policy, a fire broke out at the Pace Factory which totally burned the insured properties. The policy forbade the removal of the insured properties unless sanctioned by Ilocano. Condition 9(c) of the policy provides that "the insurance ceases to attach as regards the property affected unless the insured, before the occurrence of any loss or damage, obtains the sanction of the company signified by endorsement upon the policy x x x (c) if the property insured is removed to any building or place other than that which is herein stated to be insured." PAM claims that it has substantially complied with notifying Ilocano through its sister company, the RBC, which, in fact, referred PAM to Ilocano for the insurance coverage. Is Ilocano liable under the policy? (4%)

On September 25, 2013, Danny Marcial (Danny) procured an insurance on his life with a face value of P5,000,000.00 from RN Insurance Company (RN), with his wife Tina Marcial (Tina) as sole beneficiary. On the same day, Danny issued an undated check to RN for the full amount of the premium. On October 1, 2013, RN issued the policy covering Danny's life insurance. On October 5, 2013, Danny met a tragic accident and died. Tina claimed the insurance benefit, but RN was quick to deny the claim because at the time of Danny's death, the check was not yet encashed and therefore the premium remained unpaid. Is RN correct? Will your answer be the same if the check is dated October 15, 2013? (4%)

Pursuant to its By-Laws, Soei Corporation's Board of Directors created an Executive Committee to manage the affairs of the corporation in between board meetings. The Board of Directors appointed the following members of the Executive Committee: the President, Sarah L; the Vice President, Jane L; and a third member from the board, Juan Riles. On December 1, 2013, the Executive Committee, with Sarah L and Jane L present, met and decided on the following matters: (1) purchase of a delivery van for use in the corporation's retail business; (2) declaration and approval of the 13th month bonus; (3) purchase of an office condominium unit at the Fort; and (4) declaration of P110.00 per share cash dividend. Are the actions of the Executive Committee valid? (4%)

To constitute a quorum for the transaction of corporate business, only a majority of the number of Board of Directors is required: (1%) A) as fixed by the corporate by-laws; B) as fixed in the articles of incorporation; C) actually serving in the board; D) actually serving in the board but constituting a quorum.

On February 21, 2013, Barrack entered into a contract of insurance with Matino Insurance Company (Matino) involving a motor vehicle. The policy obligates Matino to pay Barrack the amount of Six Hundred Thousand Pesos (P600,000.00) in case of loss or damage to said vehicle during the period covered, which is from February 26, 2013 to February 26, 2014. On April 16, 2013, at about 9:00 a.m., Barrack instructed his driver, JJ, to bring the motor vehicle to a nearby auto shop for tune-up. However, JJ no longer returned and despite diligent efforts to locate the said vehicle, the efforts proved futile. Resultantly, Barrack promptly notified Matino of the said loss and demanded payment of the insurance proceeds of P600,000.00. In a letter dated July 5, 2013, Matino denied the claim, reasoning as stated in the contract that "the company shall not be liable for any malicious damage caused by the insured, any member of his family or by a person in the insured's service." Is Matino correct in denying the claim? (4%)

Carlo and Bianca met in the La Boracay festivities. Immediately, they fell in love with each other and got married soon after. They have been cohabiting blissfully as husband and wife, but they did not have any offspring. As the years passed by, Carlo decided to take out an insurance on Bianca's life for P1,000,000.00 with him (Carlo) as sole beneficiary, given that he did not have a steady source of income and he always depended on Bianca both emotionally and financially. During the term of the insurance, Bianca died of what appeared to be a mysterious cause so that Carlo immediately requested for an autopsy to be conducted. It was established that Bianca died of a natural cause. More than that, it was also established that Bianca was a transgender all along — a fact unknown to Carlo. Can Carlo claim the insurance benefit? (5%)

PA Assurance (PA) was incorporated in 1980 to engage in the sale of pre-need educational plans. It sold open-ended educational plans which guaranteed the payment of tuition and other fees to planholders irrespective of the cost at the time of availment. It also engaged in the sale of fixed value plans which guaranteed the payment of a pre-determined amount to planholders. In 1982, PA was among the country's top corporations. However, it subsequently suffered financial difficulties. On September 8, 2005, PA filed a Petition for Corporate Rehabilitation before the Regional Trial Court (RTC) of Makati City. On October 17, 2005, ten (10) planholders filed an Opposition and Motion to Exclude Planholders from Stay Order on the ground that planholders are not creditors as they (planholders) have a trust relationship with PA. Are the planholders correct? (4%)

A person is said to have an insurable interest in the subject matter insured where he has a relation or connection with, or concern in it that he will derive pecuniary benefit or advantage from its preservation. Which among the following subject matters is not considered insurable? (1%) A) A partner in a firm on its future profits; B) A general creditor on debtor's property; C) A judgment creditor on debtor's property; D) A mortgage creditor on debtor's mortgaged property.

As a rule, an insurance contract is consensual and voluntary. The exception is in the case of: (1%) A) Inland Marine Insurance; B) Industrial Life Insurance; C) Motor Vehicle Liability Insurance; D) Life Insurance.

On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Ilocos Bankers Life Insurance Corporation (Ilocos Life) designating Creencia Aban (Aban), her niece, as her beneficiary. Ilocos Life issued Policy No. 747, with a face value of P100,000.00, in Sotero's favor on August 30, 1993, after the requisite medical examination and payment of the premium. On April 10, 1996, Sotero died. Aban filed a claim for the insurance proceeds on July 9, 1996. Ilocos Life conducted an investigation into the claim and came out with the following findings: (1) Sotero did not personally apply for insurance coverage, as she was illiterate; (2) Sotero was sickly since 1990; (3) Sotero did not have the financial capability to pay the premium on the policy; (4) Sotero did not sign the application for insurance; (5) Aban was the one who filed the insurance application and designated herself as the beneficiary. For the above reasons and claiming fraud, Ilocos Life denied Aban's claim on April 16, 1997, but refunded the premium paid on the policy. (6%) (A) May Sotero validly designate her niece as beneficiary? (B) May the incontestability period set in even in cases of fraud as alleged in this case? (C) Is Aban entitled to claim the proceeds under the policy?

Jinggy went to Kluwer University (KU) in Germany for his doctorate degree (Ph.D.). He completed his degree with the highest honors in the shortest time. When he came back, he decided to set up his own graduate school in his hometown in Zamboanga. After seeking free legal advice from his high-flying lawyer-friends, he learned that the Philippines follows the territoriality principle in trademark law, i.e., trademark rights are acquired through valid registration in accordance with the law. Forthwith, Jinggy named his school the Kluwer Graduate School of Business of Mindanao and immediately secured registration with the Bureau of Trademarks. KU did not like the unauthorized use of its name by its top alumnus no less. KU sought your help. What advice can you give KU? (4%)

On May 26, 2014, Jess insured with Jack Insurance (Jack) his 2014 Toyota Corolla sedan under a comprehensive motor vehicle insurance policy for one year. On July 1, 2014, Jess' car was unlawfully taken. Hence, he immediately reported the theft to the Traffic Management Command (TMC) of the Philippine National Police (PNP), which made Jess accomplish a complaint sheet as part of its procedure. In the complaint sheet, Jess alleged that a certain Ric Silat (Silat) took possession of the subject vehicle to add accessories and improvements thereon. However, Silat failed to return the subject vehicle within the agreed 3-day period. As a result, Jess notified Jack of his claim for reimbursement of the value of the lost vehicle under the insurance policy. Jack refused to pay claiming that there is no theft as Jess gave Silat lawful possession of the car. Is Jack correct? (4%)

Bong bought 300 bags of rice from Ben for P300,000.00. As payment, Bong indorsed to Ben a Bank of the Philippine Islands (BPI) check issued by Baby in the amount of P300,000.00. Upon presentment for payment, the BPI check was dishonored because Baby's account from which it was drawn has been closed. To replace the dishonored check, Bong indorsed a crossed Development Bank of the Philippines (DBP) check issued also by Baby for P300,000.00. Again, the check was dishonored because of insufficient funds. Ben sued Bong and Baby on the dishonored BPI check. Bong interposed the defense that the BPI check was discharged by novation when Ben accepted the crossed DBP check as replacement for the BPI check. Bong cited Section 119 of the Negotiable Instruments Law which provides that a negotiable instrument is discharged "by any other act which will discharge a simple contract for the payment of money." Is Bong correct? (4%)

A corporation organized under the Corporation Code commences to have corporate existence and juridical personality and is deemed incorporated: (1%) A) from the date the application for incorporation is filed with the Securities and Exchange Commission (SEC); B) from the date the SEC issues a certificate of incorporation under its official seal; C) thirty (30) days after the date the application for incorporation is filed with the SEC; D) thirty (30) days after the date the SEC issues a certificate of incorporation under its official seal.

DC is a unit owner of Medici Condominium located in Pasig City. On September 7, 2011, Medici Condominium Corp. (Medici) demanded from DC payment for alleged unpaid association dues and assessments amounting to P195,000.00. DC disputed the claim, saying that he paid all dues as shown by the fact that he was previously elected as Director and President of Medici. Medici, on the other hand, claimed that DC's obligation was a carry-over of his obligations to the condominium developer, Medici Construction Corporation. Consequently, DC was prevented from exercising his right to vote and be voted for during the 2011 election of Medici's Board of Directors. This prompted DC to file a complaint for damages before the Special Commercial Court of Pasig City. Medici filed a motion to dismiss on the ground that the court has no jurisdiction over the intra-corporate dispute which the Housing and Land Use Regulatory Board (HLURB) has exclusive jurisdiction over. Is Medici correct? (4%)

KK is from Bangkok, Thailand. She studies medicine in the Pontifical University of Santo Tomas (UST). She learned that the same foreign books prescribed in UST are 40-50% cheaper in Bangkok. So she ordered 50 copies of each book for herself and her classmates and sold the books at 20% less than the price in the Philippines. XX, the exclusive licensed publisher of the books in the Philippines, sued KK for copyright infringement. Decide. (4%)

Under the Financial Rehabilitation and Insolvency Act (FRIA), the filing of a petition for voluntary rehabilitation must be approved by: (1%) A) a majority vote of the Board of Directors and authorized by the vote of the stockholders representing at least a majority of the outstanding capital stock; B) a majority vote of the Board of Directors and authorized by the vote of the stockholders representing at least two-thirds of the outstanding capital stock; C) two-thirds vote of the Board of Directors and authorized by the vote of the stockholders representing at least a majority of the outstanding capital stock; D) two-thirds vote of the Board of Directors and authorized by the vote of the stockholders representing at least two-thirds of the outstanding capital stock.

Paul George Pua (Pua) filed a complaint for a sum of money against the spouses Benito and Caroline James (Spouses James). In the complaint, Pua prayed that the defendants pay Pua the amount of P8,500,000.00, covered by a check. Pua asserts that defendants owed him a sum of money way back in 1988 for which the Spouses James gave him several checks. These checks, however, had all been dishonored and Pua has not been paid the amount of the loan plus the agreed interest. In 1996, the Spouses James approached Pua to get the computation of their liability including the 2% compounded interest. After bargaining to lower the amount of their liability, the Spouses James gave Pua a post-dated check bearing the discounted amount of P8,500,000.00. Like the 1988 checks, the drawee bank likewise dishonored this check. To prove his allegations, Pua submitted the original copies of the seventeen (17) checks issued by Caroline in 1988 and the check issued in 1996, Manilatrust Check No. 750. The Spouses James, on the other hand, completely denied the existence of the debt asserting that they had never approached Pua to borrow money in 1988 or 1996. They asserted, instead, that Pua is simply acting at the instance of his sister, Lilian, to file a false charge against them using a check left to fund a gambling business previously operated by Lilian and Caroline. Decide. (5%)

Delano Cruz is in default in the payment of his existing loan from BDP Bank. To extend and restructure this loan, Delano agreed to execute a trust receipt in the bank's favor covering the iron pellets Delano imported from China one year earlier. Delano subsequently succeeded in selling the iron pellets to a smelting plant, but the proceeds went to the payment of the separation benefits of his employees who were laid off as he reduced his operations. When the extended loan period expired without any significant payment from Delano (not even to the extent of the proceeds of the sale of the iron pellets), BDP Bank consulted you on how to proceed against Delano. The bank is contemplating the filing of estafa pursuant to the provisions of Pres. Decree No. 115 (Trust Receipts Law) to force Delano to turn in at least the proceeds of the sale of the iron pellets. Would you, as bank counsel and as an officer of the court, advise the bank to proceed with its contemplated action? (8%)

Dennis subscribed to 10,000 shares of XYZ Corporation with a par value of P100 per share. However, he paid only 25% of the subscription or P250,000.00. No call has been made on the unpaid subscription. How many shares is Dennis entitled to vote at the annual meeting of the stockholders of XYZ? (1%) A) 10,000 shares; B) 2,500 shares; C) 100 shares; D) 0 shares; E) None of the above.

You are a member of the legal staff of a law firm doing corporate and securities work for Coco Products Inc., a company with unique products derived from coconuts and whose shares are traded in the Philippine Stock Exchange. A partner in the law firm, Atty. Buenexito, to whom you report, is the Corporate Secretary of Coco Products. You have long been investing in Coco Products stocks even before you became a lawyer. While working with Atty. Buenexito on another file, he accidentally gave you the Coco Products file containing the company's planned corporate financial rehabilitation. While you knew you had the wrong file, your curiosity prevailed and you browsed through the file before returning it. Thus, you learned that a petition for financial rehabilitation is imminent, as the company could no longer meet its obligations as they fell due. Soon after, your mother is rushed to the hospital for an emergency operation, and you have to raise money for her hospital bills. An immediate option for you is to sell your Coco Products shares. The sale would be very timely because the prices of the company's stocks are still high. Would you sell the shares to raise the needed funds for your mother's hospitalization? Take into account legal (5%) and ethical (3%) considerations. (8% total points)

Akiro of Tokyo, Japan sent various goods to his friend Juan in Cebu City, Philippines, through one of the vessels of Worthwell Shippers, Inc., an American corporation. En route to Cebu City, the vessel had two stops, first in Hong Kong, and second, in Manila. (2) Assuming Philippine law to be applicable and Juan fails to file a claim with the carrier, may he still commence an action to recover damages with the court? (1%) A) No, the failure to file a claim with the carrier is a condition precedent for recovery; B) Yes, provided he files the complaint within 10 years from delivery; C) Yes, provided he files the complaint within 10 years from discovery of the damage; D) Yes, provided he files the complaint within 1 year from delivery; E) Yes, provided he files the complaint within 1 year from discovery of the damage.

Akiro of Tokyo, Japan sent various goods to his friend Juan in Cebu City, Philippines, through one of the vessels of Worthwell Shippers, Inc., an American corporation. En route to Cebu City, the vessel had two stops, first in Hong Kong, and second, in Manila. (1) While travelling from Tokyo to Hong Kong, the goods were damaged. What law will govern? (1%) A) Japanese law; B) Hong Kong law; C) Chinese law; D) Philippine law; E) American law.

Muebles Classico, Inc. (MC), a Manila-based furniture shop, purchased hardwood lumber from Surigao Timber, Inc. (STI), a Mindanao-based logging company. MC was to pay STI the amount of P5.0 million for 50 tons of lumber. To pay STI, MC opened a letter of credit with Banco de Plata (BDP). BDP duly informed STI of the opening of a letter of credit in its favor. In the meantime, MC — which had been undergoing financial reverses — filed a petition for corporate rehabilitation. The rehabilitation court issued a Stay Order to stay the enforcement of all claims against MC. After shipping the lumber, STI went to BDP, presented the shipping documents, and demanded payment of the letter of credit opened in its favor. MC, on the other hand, informed the bank of the Stay Order and instructed it to deny payment to STI because of the Stay Order. BDP comes to you for advice. Your best advice is to ___. (1%) A) grant STI's claim. Under the "Independence Principle," the bank deals only with the documents and not the underlying circumstances; hence, the presentation of the letter of credit is sufficient; B) deny STI's claim. The Stay Order covers all claims against the debtor and binds all its creditors. The letter of credit is a claim against the debtor that is covered by the Stay Order; C) grant STI's claim. The letter of credit is not a claim against the debtor under rehabilitation, but against the bank which has assumed a solidary obligation; D) deny STI's claim. If the bank disregards the Stay Order, it may be subject to contempt by the rehabilitation court. STI should file its claim with the rehabilitation court; E) file an action for interpleader to resolve the parties' competing claims.

In 2010, the Philippine National Police declared Kaddafy Benjelani "Public Enemy No. 1" because of his terrorist activities in the country that have resulted in the death of thousands of Filipinos. A ransom of P15 million was placed on Kaddafy Benjelani's head. Worried about the future of their family, Kaddafy Benjelani's estranged wife, Aurelia, secured in December 2010 a life insurance policy on his life and designated herself as the beneficiary. Is the policy valid and binding? (1%) A) Yes, the policy is valid and binding because Aurelia has an insurable interest on the life of Kaddafy Benjelani; B) No, the policy is not valid and binding because Kaddafy Benjelani has been officially declared a public enemy; C) Yes, the policy is valid and binding because it has been in force for more than two years; D) No, the policy is not valid and binding since the spouses' estrangement removed Aurelia's insurable interest in Benjelani's life; E) None of the above.

Preferred shares cannot vote on the proposal ___. (1%) A) to include other corporate officers in the corporation's by-laws; B) to issue corporate bonds; C) to shorten the corporate term; D) All of the above; E) None of the above.

Unknown to the other four proponents, Enrico (who had been given the task of attending to the Articles of Incorporation of the proposed corporation, Auto Mo, Ayos Ko) misappropriated the filing fees and never filed the Articles of Incorporation with the Securities and Exchange Commission (SEC). Instead, he prepared and presented to the proposed incorporators a falsified SEC certificate approving the Articles. Relying on the falsified SEC certificate, the latter began assuming and discharging corporate powers. Auto Mo, Ayos Ko is a ___. (1%) A) de jure corporation; B) de facto corporation; C) corporation by estoppel; D) general partnership; E) None of the above.

Under the Anti-Money Laundering Act, a depositor's bank account may be frozen ___. (1%) A) by the bank when the account is the subject of a suspicious or covered transaction report; B) by the Anti-Money Laundering Council (AMLC) when the account belongs to a person already convicted of money laundering; C) by the Regional Trial Court, upon ex parte motion by the AMLC, in a criminal prosecution for money laundering pending before it; D) by the Court of Appeals motu proprio in an appeal from a judgment of conviction of a criminal charge for money laundering; E) In none of the above.

A bank may acquire real property ___. (1%) A) by purchase at a public sale of properties levied to satisfy tax delinquencies; B) by purchase from a real estate corporation in the ordinary course of the bank's business; C) through dacion en pago in satisfaction of a debt in favor of the bank; D) in exchange for the purchase of shares of stocks of the bank; E) All of the above; F) None of the above.

Antonio issued the following instrument: August 10, 2013 — Makati City — P100,000.00 "Sixty days after date, I promise to pay Bobby or his designated representative the sum of ONE HUNDRED THOUSAND PESOS (P100,000.00) from my BPI Acct. No. 1234 if, by this due date, the sun still sets in the west to usher in the evening and rises in the east the following morning to welcome the day." (Sgd.) Antonio Reyes Explain each requirement of negotiability present or absent in the instrument. (8%)

Anton imported perfumes from Taiwan and these were released to him by the bank under a trust receipt. While the perfumes were in Anton's warehouse, thieves broke in and stole all of them. Who will shoulder the loss of the stolen perfumes? (1%) A) The loss of the perfumes will be borne by the bank in whose behalf the perfumes were held in trust; B) Anton will bear the loss; C) The exporter can hold both the bank and Anton liable for the loss; D) The exporter from whom Anton bought the perfumes will bear the loss; E) No one bears the loss for an unforeseen event.

Benny applied for life insurance for Php1.5 Million. The insurance company approved his application and issued an insurance policy effective Nov. 6, 2008. Benny named his children as his beneficiaries. On April 6, 2010, Benny died of hepatoma, a liver ailment. The insurance company denied the children's claim for the proceeds of the insurance policy on the ground that Benny failed to disclose in his application two previous consultations with his doctors for diabetes and hypertension, and that he had been diagnosed to be suffering from hepatoma. The insurance company also rescinded the policy and refunded the premiums paid. Was the insurance company correct? (8%)

The BIR assessed ABC Corp. for deficiency income tax for taxable year 2010 in the amount of P26,731,208.00, inclusive of surcharge and penalties. The BIR can ___. (1%) A) run after the directors and officers of ABC Corp. to collect the deficiency tax and their liability will be solidary; B) run after the stockholders of ABC Corp. and their liability will be joint; C) run after the stockholders of ABC Corp. and their liability will be solidary; D) run after the unpaid subscriptions still due to ABC Corp., if any; E) None of the above choices is correct.

Gawsengsit Corp. is a corporation incorporated in Singapore. It invested in Bumblebee Corp., a Philippine corporation, by acquiring 30% of its shares. As a result, Gawsengsit Corp. nominated 30% of the directors of Bumblebee Corp., all of whom are Singaporeans and officers of Gawsengsit Corp. Choose the correct statement relating to Gawsengsit Corp. (1%) A) Gawsengsit Corp. is doing business in the Philippines and requires a license from the Securities and Exchange Commission (SEC); B) Gawsengsit Corp. is not doing business in the Philippines by its mere investment in a Philippine corporation and does not need a license from the SEC; C) Gawsengsit Corp. has to appoint a resident agent in the Philippines; D) Gawsengsit Corp. cannot elect directors in Bumblebee Corp.; E) All the above choices are incorrect.

Arnold, representing himself as an agent of Brian for the sale of Brian's car, approached Dennis who appeared interested in buying the car. At Arnold's prodding, Dennis issued a crossed check payable to Brian for P25,000.00 on the understanding that the check would only be shown to Brian as evidence of Dennis' good faith and interest in buying the car. Instead, Arnold used the check to pay for the medical expenses of his wife in Brian's clinic after Brian, a doctor, treated her. Is Brian a holder in due course (HIDC)? (1%) A) Yes, Brian is a HIDC because he was the payee of the check and he received it for services rendered; B) Yes, Brian is a HIDC because he did not need to go behind the check that was payable to him; C) No, Brian is not a HIDC because Dennis issued the check only as evidence of good faith and interest in buying the car; D) No, Brian is not a HIDC because Brian should have been placed on notice: the check was crossed in his favor and Arnold was not the drawer; E) No, Brian is not a HIDC because the requisite consideration to Dennis was not present.

ABC Corp. issued redeemable shares. Under the terms of the issuance, the shares shall be redeemed at the end of 10 years from date of issuance, at par value plus a premium of 10%. Choose the correct statement relating to these redeemable shares. (1%) A) ABC Corp. would need unrestricted retained earnings to be able to redeem the shares; B) Corporations are not allowed to issue redeemable shares; thus, the issuance by ABC Corp. is ultra vires; C) Holders of redeemable shares enjoy a preference over creditors; D) ABC Corp. may redeem the shares at the end of 10 years without need for unrestricted retained earnings provided that, after the redemption, there are sufficient assets to cover its debts; E) All of the above are incorrect.

As a last question and by way of a concrete example, a delegation member finally inquired — which of the following corporations or businesses in the Philippines may it invest in and up to what extent? (1%) A) A lifestyle magazine publication corporation, up to 40% equity; B) An advertising corporation, up to 100% equity; C) A commercial bank, up to 60% equity; D) A jeepney manufacturing corporation, up to 100% equity; E) A real estate development corporation, up to 60% equity.

(MCQ Item II is a foreign-investment scenario in which a delegation consults you about investing in the Philippines under the Foreign Investments Act of 1991. The scenario introduction and sub-questions (1) and (2) are on source pages 216–217, which are missing from the source PDF.) The delegation heard that foreigners can invest up to 100% of the equity in "export oriented enterprises" and you were asked exactly what the term covers. You replied that an "export oriented enterprise" under FIA '91 is an enterprise that ___. (1%) A) only engages in the export of goods and services, and does not sell goods or services to the domestic market; B) exports consistently at least 40% of its goods or services, and sells at least 60% of the rest to the domestic market; C) exports consistently at least 60% of the goods or services produced, and sells at least 40% of the rest to the domestic market; D) exports consistently at least 60% of its goods or services produced, and can sell goods or services to the domestic market; E) None of the above.

Claude, the registered stockholder of 1,000 shares in ABC Corp., pledged the shares to Conrad by endorsement in blank of the covering stock certificates and execution of a Deed of Assignment of Shares of Stock, intended as collateral for a loan of P1.0 Million that was also supported by a separate promissory note. Under these facts, is there a valid pledge of the shares of stock to Conrad? (1%) A) No, because shares of stock are intangible personal properties whose possession cannot be delivered and, hence, cannot be the subject of a pledge; B) No, because the pledge of shares of stock requires double registration with the Register of Deeds of the principal place of business of the corporation and of the residence of the pledgor; C) Yes, because endorsement and delivery of the certificates of stock is equivalent to the transfer of possession of the covered shares to the pledgee; D) Yes, because the execution of the Deed of Assignment of Shares of Stock is equivalent to a lawful pledge of the shares of stock.

Bell Philippines, Inc. (BelPhil) is a public utility company, duly incorporated and registered with the Securities and Exchange Commission. Its authorized capital stock consists of voting common shares and non-voting preferred shares, with equal par values of P100.00/share. Currently, the issued and outstanding capital stock of BelPhil consists only of common shares shared between Bayani Cruz, a Filipino with 60% of the issued common shares, and Bernard Fleet, a Canadian, with 40%. To secure additional working fund, BelPhil issued preferred shares to Bernard Fleet equivalent to the currently outstanding common shares. A suit was filed questioning the corporate action on the ground that the foreign equity holdings in the company would now exceed the 40% foreign equity limit allowed under the Constitution for public utilities. Rule on the legality of Bernard Fleet's current holdings. (8%)

Rudy is a fine arts student in a university. He stays in a boarding house with Bernie as his roommate. During his free time, Rudy would paint and leave his finished works lying around the boarding house. One day, Rudy saw one of his works — an abstract painting entitled Manila Traffic Jam — on display at the university cafeteria. The cafeteria operator said he purchased the painting from Bernie who represented himself as its painter and owner. Rudy and the cafeteria operator immediately confronted Bernie. While admitting that he did not do the painting, Bernie claimed ownership of its copyright since he had already registered it in his name with the National Library as provided in the Intellectual Property Code. Who owns the copyright to the painting? Explain. (8%)

Fil-Asia Air Flight 916 was on a scheduled passenger flight from Manila when it crashed as it landed at the Cagayan de Oro airport; the pilot miscalculated the plane's approach and undershot the runway. Of the 150 people on board, ten (10) passengers died at the crash scene. Of the ten who died, one was a passenger who managed to leave the plane but was run over by an ambulance coming to the rescue. Another was an airline employee who hitched a free ride to Cagayan de Oro and who was not in the passenger manifest. It appears from the Civil Aeronautics Authority investigation that the co-pilot who had control of the plane's landing had less than the required flying and landing time experience, and should not have been in control of the plane at the time. He was allowed to fly as a co-pilot because of the scarcity of pilots — Philippine pilots have been recruited by foreign airlines under vastly improved flying terms and wages so that newer and less trained pilots are being locally deployed. The main pilot, on the other hand, had a very high level of blood alcohol at the time of the crash. You are part of the team that the victims hired to handle the case for them as a group. In your case conference, the following questions came up: (A) Explain the causes of action legally possible under the given facts against the airline and the pilots; whom will you specifically implead in these causes of action? (5%) (B) How will you handle the cases of the passenger run over by the ambulance and the airline employee allowed to hitch a free ride to Cagayan de Oro? (3%)

From his first term in 2007, Congressman Abner has been endorsing his pork barrel allocations to Twin Rivers in exchange for a commission of 40% of the face value of the allocation. Twin Rivers is a non-governmental organization whose supporting papers, after audit, were found by the Commission on Audit to be fictitious. Other than to prepare and submit falsified papers to support the encashment of the pork barrel checks, Twin Rivers does not appear to have done anything on the endorsed projects and Congressman Abner likewise does not appear to have bothered to monitor the progress of the projects he endorsed. The congressman converted most of the commissions he generated into US dollars, and deposited these in a foreign currency account with Banco de Plata (BDP). Based on amply-supported tips given by a congressman from another political party, the Anti-Money Laundering Council (AMLC) sent BDP an order: (1) to confirm Cong. Abner's deposits with the bank and to provide details of these deposits; and (2) to hold all withdrawals and other transactions involving the congressman's bank accounts. As counsel for BDP, would you advise the bank to comply with the order? (8%)

In the November 2010 stockholders meeting of Greenville Corporation, eight (8) directors were elected to the board. The directors assumed their posts in January 2011. Since no stockholders' meeting was held in November 2011, the eight directors served in a holdover capacity and thus continued discharging their powers. In June 2012, two (2) of Greenville Corporation's directors — Director A and Director B — resigned from the board. Relying on Section 29 of the Corporation Code, the remaining six (6) directors elected two (2) new directors to fill in the vacancy caused by the resignation of Directors A and B. Stockholder X questioned the election of the new directors, initially, through a letter-complaint addressed to the board, and later (when his letter-complaint went unheeded), through a derivative suit filed with the court. He claimed that the vacancy in the board should be filled up by the vote of the stockholders of Greenville Corporation. Greenville Corporation's directors defended the legality of their action, claiming as well that Stockholder X's derivative suit was improper. Rule on the issues raised. (8%)

Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have had a long-standing insurance relationship with each other; SPMC secures the comprehensive fire insurance on its plant and facilities from SIC. The standing business practice between them has been to allow SPMC a credit period of 90 days from the renewal of the policy within which to pay the premium. Soon after the new policy was issued and before premium payments could be made, a fire gutted the covered plant and facilities to the ground. The day after the fire, SPMC issued a manager's check to SIC for the fire insurance premium, for which it was issued a receipt; a week later SPMC issued its notice of loss. SIC responded by issuing its own manager's check for the amount of the premiums SPMC had paid, and denied SPMC's claim on the ground that under the "cash and carry" principle governing fire insurance, no coverage existed at the time the fire occurred because the insurance premium had not been paid. Is SPMC entitled to recover for the loss from SIC? (8%)

X is a depositor of AAA Bank. She has three (3) deposit accounts all under her name. One, in checking account, one in saving account and another one in time deposit account. Each account has a balance of Php250,000. AAA Bank became insolvent. Philippine Deposit Insurance Corporation closed the Bank. X therefore is unable to withdraw from all of the accounts. She then filed her claims with the Philippine Deposit Insurance Corporation. Which statement is most accurate? A) X can claim a total of Php500,000 for all the three (3) accounts. B) X can only claim from one (1) account of Php250,000. C) X can claim a total of Php750,000 from all the three (3) accounts. D) X cannot claim anything from any of the deposit accounts.

X sold all his shares in AAA Hotel Corporation to Y. X owns 99% of AAA Hotel Corporation. As the new owner, Y wanted a reorganization of the hotel which is to include primarily the separation of all existing employees and the hiring of new employees. Which statement is most accurate? A) With the change in ownership, in effect there is a new juridical entity and therefore all employees are considered separated. B) Despite the change in shareholder, there is actually no change in the juridical entity and therefore existing employees can not automatically be considered separated. C) Y, as the new shareholder, has the right to retain only those employees who in his judgment are qualified. D) For as long as the existing employees are given their separation pay, they can be terminated.

South China Airlines is a foreign airline company. South China Airlines tickets are sold in the Philippines though Philippine Airlines as their general agent. South China Airlines is not registered to do business as such with the Philippine Securities and Exchange Commission. Which statement is most accurate? A) Although unlicensed to do business in the Philippines, South China Airlines can sue before the Philippine Courts and can also be sued. B) South China Airlines can sue but cannot be sued. C) South China Airlines cannot sue and cannot be sued also. D) South China Airlines can be sued in Philippine Courts but cannot sue.

XXX Bank Corporation and ZZZ Corporation were merged into XX ZZ Bank Corporation. So as not to create any unnecessary conflict, all the former directors of both banks wanted to be appointed /elected as members of the Board of Directors of the merged bank. Each bank used to have eleven (11) members of the board. The maximum number of directors of the merged bank iS— A) 15; B) 22; C) 21; D) 11.

Letters of Credit are financial devices in commercial transactions which will ensure that the seller of the goods is sure to be paid when he parts with the goods and the buyer of the goods gets control of the goods upon payment. Which statement is most accurate? A) The use of the Letter of Credit serves to reduce the risk of non-payment of the purchase price in a sale transaction. B) The Letters of Credit can only be used exclusively in a sales transaction. C) The Letters of Credit are issued for the benefit of the seller only. D) (a), (b) and (c) are all correct.

Letter of Credit which is used in non-sale transaction, where it serves to reduce the risk of non-performance is called — A) irrevocable letter of credit; B) standby letter of credit; C) confirmed letter of credit; D) none of the above.

At the instance of CCC Corporation, AAA Bank issued an irrevocable Letter of Credit in favor of BBB Corporation. The terms of the irrevocable Letter of Credit state that the beneficiary must present certain documents including a copy of the Bill of Lading of the importation for the bank to release the funds. BBB Corporation could not find the original copy of the Bill of Lading so it instead presented to the bank a xerox copy of the Bill of Lading. Would you advise the bank to allow the drawdown on the Letter of Credit? A) No, because the rule of strict compliance in commercial transactions involving letters of credit, requiring documents set as conditions for the release of the fund, has to be strictly complied with or else funds will not be released. B) Yes, because an irrevocable letter of credit means that the issuing bank undertakes to release the fund anytime when claimed by the beneficiary, regardless of the kind of document presented. C) Yes, because the issuing bank can always justify to CCC Corporation that xerox copies are considered as faithful reproduction of the original copies. D) Yes, because the issuing bank really has no discretion to determine whether the documents presented by the beneficiary are sufficient or not.

AAA Carmakers opened an irrevocable Letter of Credit with BBB Banking Corporation with CCC Cars Corporation as beneficiary. The, irrevocable Letter of Credit was opened to pay for the importation of ten (10) units of Mercedes Benz S class. Upon arrival of the cars, AAA Carmakers found out that the cars were all not in running condition and some parts were missing. As a consequence, AAA Carmakers instructed BBB Banking Corporation not to allow drawdown on the Letter of Credit. Is this legally possible? A) No, because under the "Independence Principle", conditions for the drawdown on the Letters of Credit are based only on documents, like shipping documents, and not with the condition of the goods subject of the importation. B) Yes, because the acceptance by the importer of the goods subject of importation is material for the drawdown of the Letter of Credit. C) Yes, because under the “Independence Principle", the seller or the beneficiary is always assured of prompt payment if there is no breach in the contract between the seller and the buyer. D) No, because what was opened was an irrevocable letter of credit and not a confirmed letter of credit.

For a fee, X deposited 1,000 sacks of corn in the warehouse owned by Y. Y is in the business of warehousing. Y issued a warehouse receipt as proof of the possession of the 1,000 sacks of corn. The warehouse receipt states as follows: “De1iver to X or bearer 1,000 sacks of corn." X wanted to use the warehouse receipt as payment of his debt in favor of Z. How can the ownership of the goods covered by the warehouse receipt be transferred? A) Negotiate the warehouse receipt by just delivering the warehouse receipt to Z. B) Assign the warehouse receipt to Z to transfer ownership of the goods. C) Negotiate the warehouse receipt by specifically indorsing it to Z. D) The warehouse receipt in this case is nonnegotiable.

The warehouseman, by issuing the warehouse receipt, acknowledges that the goods are in his possession, but he can refuse to deliver the goods to the holder of the warehouse receipt covering the goods if — A) the warehouse receipt covering the goods is not presented. B) the lien of the warehouseman is not satised. C) the said holder presents a materially altered warehouse receipt. D) All of the above.

The legal remedy of the warehouseman in case of conflicting claims is to - A) file an action for interpleader. B) give the goods to the first one who first presented the warehouse receipt. C) use his discretion as to who he believes has the prior right. D) keep the goods and appropriate them to himself.

BBB Banking Corporation issued a Letter of Credit in the amount of P5Million, for the purchase of fifive (5) tons of corn by X. Upon arrival of the goods, the goods were delivered to the warehouse of X. Thereafter he was asked to sign a Trust Receipt covering the goods. When the goods were sold, X did not deliver the proceeds to BBB Banking Corporation, arguing that he will need the fund for the subsequent importation. Is there sufficient basis to sue for criminal action? A) Yes, because X's failure to turn over the proceeds to the bank is a violation of the Trust Receipt Law. B) No, because the trust receipt was signed only after the delivery of the goods. When the trust receipt was signed, the ownership of the goods was already with X. C) Yes, because violation of Trust Receipt Law is mala prohibita, intention is irrelevant. D) No, because X has a valid reason not to deliver the proceeds to BBB Banking Corporation.

X secured a loan from BBB Bank to pay for the importation of some dried fruits. Upon arrival of the goods consisting of dried fruits imported by X but before delivery to him, a trust receipt was executed by X to cover the transfer of the dried fruits to his possession. The dried fruits were so saleable but instead of turning over the proceeds of the sale, X used the funds to pay for the medical expenses of his mother who was sick of cancer of the bone. Which statement is most accurate? A) X cannot be held criminally liable because although he did not pay the bank he used the proceeds for a good reason. B) Fraud or deceit is a necessary element to hold X criminally liable for non-payment under the Trust Receipts Law. C) X can be held criminally liable under the Trust Receipts Law regardless of the purpose or intention for the use of the proceeds. D) X cannot be held criminally liable because the underlying obligation is one of simple loan.

X is the President of AAA Products Corporation. X signs all the Trust Receipts documents for certain importations of the company. In the event of failure to deliver the proceeds of the sale of the goods to the bank, which statement is most accurate? A) The criminal liability will not attach to X as President because of separate juridical personality. B) For violation of Trust Receipts Law, the law specifically provides for the imposition of penalty upon directors and officers of the corporation. C) The officer will not be held criminally accountable because he is just signing the trust receipt for and in behalf of the corporation. D) The officer of the corporation will be held liable provided it is clear that the officer concerned participated in the decision not to pay.

arrangement? A) the owner of the goods; B) the one who holds the goods and receives the proceeds from the sale of the goods; C) the person to whom goods are delivered for sale and who bears the risk of the loss; D) the party who acquires security interest in the goods.

Which phrase best completes the statement - In accordance with the Trust Receipt Law, purchasers of the goods from the Entrustee will: A) get the goods only as a collateral; B) not get good title to the goods; C) only get security interest over the goods; D) get good title to the goods.

X acted as an accommodation party in signing as a maker of a promissory note. Which phrase best completes the sentence - This means that X is liable on the instrument to any holder for value: A) for as long as the holder does not know that X is only an accommodation party. B) even though the holder knew all along that X is only an accommodation party. C) for as long as X did not receive any consideration for acting as accommodation party. D) provided X received consideration for acting as accormnodation party.

X issued a promissory note which states, “I promise to pay Y or order Php100,000.00 or one (1) unit Volvo Sedan.” Which statement is most accurate? A) The promissory note is negotiable because the forms of payment are clearly stated. B) The promissory note is non-negotiable because the option as to which form of payment is with the maker. C) The promissory note is an invalid instrument because there is more than one form of payment. D) The promissory note can be negotiated by way of delivery.

X issued a promissory note which states “I promise to pay Y or bearer the amount of HK$50,000 on or before December 30, 2013." Is the promissory note negotiable? A) No, the promissory note becomes invalid because the amount is in foreign currency. B) Yes, the promissory note is negotiable even though the amount is stated in foreign currency. C) No, the promissory note is not negotiable because the amount is in foreign currency. D) Yes, the promissory note is negotiable because the Hong Kong dollar is a known foreign currency in the Philippines.

X delivered a check issued by him and payable to the order of CASH to Y in payment for certain obligations incurred by X in favor of Y. Y then delivered the check to Z in payment for certain obligations. Which statement is most accurate? A) Z can encash the check even though Y did not indorse the check. B) Z cannot encash the check for lacking in proper endorsement. C) Y is the only one liable because he was the one who delivered the check to Z. D) The negotiation is not valid because the check is an instrument payable to order.

A stale check is a check - A) that cannot anymore be paid although the underlying obligation still exists. B) that cannot anymore be paid and the underlying obligation under the check is also extinguished. C) that can still be negotiated or indorsed so that whoever is the holder can D) which has not been presented for payment within a period of thirty (30) days.

In payment for his debt in favor of X, Y gave X a Manager's Check in the amount of Php100,000 dated May 30, 2012. Which phrase best completes the statement — A Manager's Check: A) is a check issued by a manager of a bank for his own account. B) is a check issued by a manager of a bank in the name of the bank against the bank itself for the account of the bank. C) is like any ordinary check that needs to be presented for payment also. D) is better than a cashier's check in terms of use and effect.

Which phrase best completes the statement - A check which is payable to bearer is a bearer instrument and: A) negotiation can be made by delivery only; B) negotiation must be by written indorsement; C) negotiation must be by specific indorsement; D) negotiation must be by indorsement and delivery.

As payment for a debt, X issued a promissory note in favor of Y but the promissory note on its face was marked non-negotiable. Then Y instead of indorsing the promissory note, assigned the same in favor of Z to whom he owed some debt also. Which statement is most accurate? A) Z cannot claim payment from X on the basis of the promissory note because it is marked non-negotiable. B) Z can claim payment from X even though it is marked non-negotiable. C) Z can claim payment from Y because under the Negotiable Instrument Law, negotiation and assignment is one and the same. D) Z can claim payment from Y only because he was the endorser of the promissory note.

Negotiable instruments are used as substitutes for money, which means — A) that they can be considered legal tender. B) that when negotiated, they can be used to pay indebtedness. C) that at all times the delivery of the instrument is equivalent to delivery of the cash. D) that at all times negotiation of the instruments requires proper indorsement.

The signature of X was forged as drawer of a check. The check was deposited in the account of Y and when deposited was accepted by AAA Bank, the drawee bank. Subsequently, AAA Bank found out that the signature of X was actually forged. Which statement is most accurate? A) The drawee bank can recover from Y, because the check was deposited in his account. B) The drawee bank can recover from X, because he is the drawer even though his signature was forged. C) The drawee bank is estopped from denying the genuineness of the signature of the X, the drawer of the check. D) The drawee bank can recover from Y because as endorser he warrants the genuineness of the signature.

A issued a check in the amount of Php20,000 payable to B. B endorsed the check but only to the extent of Php10,000. Which statement is most accurate? A) The partial indorsement is not a valid indorsement, although will result in the assignment of that part. B) The partial indorsement will invalidate the whole instrument. C) The endorsee will be considered as a holder in due course. D) The partial indorsement is valid indorsement up to the extent of the Php10,000.

A promissory note which does not have the words “or order" or “or bearer" will render the promissory note non-negotiable, and therefore A) it will render the maker not liable; B) the note can still be assigned and the maker made liable; C) the holder can become holder in due course; D) the promissory note can just be delivered and the maker will still be liable.

A check is - a bill of exchange; the same as a promissory note; is drawn by a maker; a non-negotiable instrument. A) a bill of exchange; B) the same as a promissory note; C) is drawn by a maker; D) a non-negotiable instrument.

A check was issued to Tiger Woods. But what was written as payee is the word “Tiger Woods”. To validly endorse the check — A) Tiger Woods must sign his real name. B) Tiger Woods must sign both his real name and assumed name. C) Tiger Woods can sign his assumed name. D) the check has become non-negotiable.

Y, as President of and in behalf of AAA Corporation, as a way to accommodate X, one of its stockholders, endorsed the check issued by X. Which statement is most accurate? A) it is an ultra vires act. B) it is a valid indorsement. C) the corporation will be held liable to any holder in due course. D) it is an invalid indorsement.

In a negotiable instrument, when the sum is expressed both in numbers and in words and there is discrepancy between the words and the numbers — A) the sum expressed in words will prevail over the one expressed in numbers. B) the sum expressed in numbers will prevail over the one expressed in words. C) the instrument becomes void because of the discrepancy. D) this will render the instrument invalid.

A promissory note which is undated is presumed to be - A) dated as of the date of issue; B) dated as of the date of the first indorsement; C) promissory note is invalid because there is no date; D) dated on due date.

An insurance contract is an aleatory contract, which means that — A) the insurer will pay the insured equivalent to the amount of the premium paid. B) the obligation of the insurer is to pay depending upon the happening of an uncertain future event. C) the insured pays a fixed premium for the duration of the policy period and the amount of the premiums paid to the insurer is not necessarily the same amount as what the insured will get upon the happening of an uncertain future event. D) the obligation of the insurer is to pay depending upon the happening of an event that is certain to happen.

An Insurance Contract is a contract of adhesion, which means that in resolving ambiguities in the provision of the insurance contract, — A) the general rule is that, the insurance contract is to be interpreted strictly in accordance with what is written in the contract. B) are to be construed liberally in favor of the insured and strictly against the insurer who drafted the insurance policy. C) are to be construed strictly against the insured and liberally in favor of the insurer. D) if there is an ambiguity in the insurance contract, this will invalidate the contract.

X is the common law wife of Y. Y loves X so much that he took out a life insurance on his own life and made her the sole beneficiary. Y did this to ensure that X will be financially comfortable when he is gone. Upon the death of Y, - A) X as sole beneficiary under the life insurance policy on the life of Y will be entitled to the proceeds of the life insurance. B) despite the designation of X as the sole beneficiary, the proceeds of the life insurance will go to the estate of Y. C) the proceeds of the life insurance will go to the compulsory heirs of Y. D) the proceeds of the life insurance will be divided equally amongst X and the compulsory heirs of Y.

X, in January 30, 2009, or two (2) years before reaching the age of 65, insured his life for Php20 Million. For reason unknown to his family, he took his own life two (2) days after his 65th birthday. The policy contains no excepted risk. Which statement is most accurate? A) the insurer will be liable. B) the insurer will not be liable. C) the state of sanity of the insured is relevant in cases of suicide in order to hold the insurer liable. D) the state of sanity of the insured is irrelevant in cases of suicide in order to hold the insurer liable.

X, a minor, contracted an insurance on his own life. Which statement is most accurate? A) the life insurance policy is void ab 1'n1't1'o. B) the life insurance is valid provided it is with the consent of the beneficiary. C) the life insurance policy is valid provided the beneficiary is his estate or his parents, or spouse or child. D) the life insurance is valid provided the disposition of the proceeds will be subject to the approval of the legal guardian of the minor.

The “incontestability clause" in a Life Insurance Policy means — A) that life insurance proceeds cannot be claimed two (2) years after the death of the insured. B) that two (2) years after date of issuance or reinstatement of the life insurance policy, the insurer cannot anymore prove that the policy is void ab 1'n1't1'o or rescindable by reason of fraudulent concealment or misrepresentation of the insured. C) that the insured can still claim from the insurance policy after two (2) years even though premium is not paid. D) that the insured can only claim proceeds in a life insurance policy two (2) years after death.

For both the Life Insurance and Property Insurance, the insurable interest is required to be- A) existing at the time of perfection of the contract and at the time of loss. B) existing at the time of perfection and at the time of loss for property insurance but only at the time of perfection for life insurance. C) existing at the time of perfection for property insurance but for life insurance both at the time of perfection and at the time of loss. D) existing at the time of perfection only.

A house and lot is covered by a real estate mortgage (REM) in favor of ZZZ Bank. The bank required that the house be insured. The owner of the policy failed to endorse nor assign the policy to the bank. However, the Deed of Real Estate Mortgage hasan express provision which says that the insurance policy is also endorsed with the signing of the REM. Will this be sufficient? A) No, insurance policy must be expressly endorsed to the bank so that the bank will have a right in the proceeds of such insurance in the event of loss. B) The express provision contained in the Deed of Real Estate Mortgage to the effect that the policy is also endorsed is sufficient. C) Endorsement of Insurance Policy in any form is not legally allowed. D) Endorsement of the Insurance Policy must be in a formal document to be valid.

X is a passenger of a jeepney for hire being driven by Y. The jeepney collided with another passenger jeepney being driven by Z who was driving recklessly. As a result of the collision, X suffered injuries. Both passenger jeepneys are covered by Comprehensive Motor Vehicular Insurance Coverage. If X wants to claim under the “no fault indemnity clause", his claim will lie - A) against the insurer of the jeepney being driven by Z who was the one at fault. B) the claim shall lie against the insurer of the passenger jeepney driven by Y because X was his passenger. C) X has a choice against whom he wants to make his claim. D) None of the above.

X insured the building she owns with two (2) insurance companies for the same amount. In case of damage, A) X can not claim from any of the two (2) insurers because with the double insurance, the insurance coverage becomes automatically void. B) the two (2) insurers will be solidarily liable to the extent of the loss. C) the two (2) insurers will be proportionately liable. D) X can choose who he wants to claim against.

When X insured his building, X indicated in the application that it is a residential building, but actually the building was being used as a warehouse for some hazardous materials. What is the effect on the insurance policy, if any? A) The insurance policy can be cancelled because of the change in the use. B) The insurance policy will automatically be changed. C) The insurance policy need not be changed. D) The insurance policy is fixed regardless of the change in the use.

X is a trader of school supplies in Calapan, Oriental Mindoro. To bring the school supplies to Calapan, it has to be transported by a vessel. Because there were so many passengers, the two (2) boxes of school supplies were loaded but the shipping company was not able to issue the Bill of Lading. So, on board, the Ship Captain issued instead a “shipping receipt" to X indicating the two (2) boxes of school supplies being part of the cargo of the vessel. Which phrase therefore, is the most accurate? A) The owner of the vessel is not liable because no bill of lading was issued to X hence, no contract of carriage was perfected. B) It is possible to have a contract of carriage of cargo even without a bill of lading, and the “shipping receipt" would be sufficient. C) The only acceptable docmnent of title is a Bill of Lading. D) None of the above.

X took Philippine Airlines Flight PR 102 to Los Angeles, USA. She had two (2) luggage checked-in and was issued two (2) baggage checks. When X reached Los Angeles one (1) of the two (2) checked in luggage could not be found. Which statement is most accurate? A) PAL is liable for the loss of the checked-in luggage under the provisions of the Warsaw Convention on Air Transport. B) PAL is liable for the loss only if the baggage check expressly states that the airline shall be liable in case of loss. C) PAL cannot be held liable because that is the risk that a passenger takes when she checksin her baggage. D) PAL can only be held liable if it can be proven that PAL was negligent.

X owns a passenger jeepney covered by Certificate of Public Convenience. He allowed Y to use its Certificate of Convenience for a consideration. Y therefore was operating the passenger jeepney under the same Certificate of Public Convenience (Kabit System) under the name of X. The passenger jeepney met an accident. Who will be liable? A) Y, the one actually operating the jeepney, will be liable to the injured party. B) X will be the one liable to the injured party despite the fact that it is Y who is actually operating the jeepney, because while the Kabit System is tolerated, the public should not be inconvenienced by the arrangement. C) X will not be held liable if he can prove that he is not the owner anyinore. D) Public Policy dictates that the real owner, even not the registered one, will be held liable.

X owns a fleet of taxicabs. He operates it through what is known as boundary system. Y drives one of such taxicabs and pays X a fixed amount of Php1,000 daily under the boundary system. This means that anything above Php1,000 would be the earnings of Y. Y, driving recklessly, hit an old lady crossing the street. Which statement is most accurate? A) X as the owner is exempt from liability because he was not the one driving. B) X as the owner is exempt from liability because precisely the arrangement is one under the “boundary system". C) X will not be exempt from liability because he remains to be the registered owner and the boundary system will not allow the circumvention of the law to avoid liability. D) Y is the only one liable because he drove recklessly.

The Articles of Incorporation of AAA Corporation was approved by the Securities and Exchange Commission (SEC). After the receipt of the Certificate of Approval from the SEC, AAA Corporation decided to immediately start the operation of its business despite the fact that it has no approved By-Laws. What is the legal status of the AAA Corporation? A) A de jure corporation; B) A de facto corporation; C) A corporation by estoppel; D) An unregistered corporation.

X, the President of ZZZ Corporation, was authorized by the Board of Directors of ZZZ Corporation to obtain a loan from YYY Bank and to sign documents in behalf of the corporation. X personally negotiated for the loan and got the loan at very low interest rates. Upon maturity of the loan, ZZZ Corporation was unable to pay. Which statement is most accurate? A) Because X was personally acting in behalf of the Corporation, he can be held personally liable. B) X, as President, cannot be personally held liable for the obligation of the corporation even though he signed all the loan documents, because the loan was authorized by the Board. C) YYY Bank can choose as to who it wants to hold liable for the loan. D) If ZZZ Corporation cannot pay, X can be held subsidiarily liable.

X owns 99% of the capital stock of SSS Corporation. X also owns 99% of TTT Corporation. SSS Corporation obtained a loan from VW Bank. On due date, SSS Corporation defaulted. TTT Corporation is financially healthy. Which statement is most accurate? A) X being a controlling owner of SSS Corporation can automatically be held personally liable for the loan of SSS Corporation. B) TTT Corporation, owned 99% by X, can automatically be held liable. C) SSS Corporation and TTT Corporation, although both are owned by X, are two (2) distinct corporations with separate juridical personalities hence, the TTT Corporation cannot automatically be held liable for the loan of SSS Corporation. D) The principle of piercing the veil of corporate fiction can be applied in this case.

A corporation generally can issue both par value stock and no par value stock. These are all fixed in the Articles of Incorporation of the corporation. Which of the following corporations may not be allowed to issue no par value shares? A) Insurance companies; B) Banks; C) Trust companies; D) All of the above.

Father X, an American priest who came from New York, registered the Diocese of Bacolod of the Roman Catholic Church which was incorporated as a corporation sole. There were years when the head of the Diocese was a Filipino, but there were more years when the heads were foreigners. Today, the head is an American again. Y donated a piece of land located in Bacolod City for use as a school. Which statement is most accurate? A) The Register of Deeds of Bacolod City can refuse to register and transfer the title because the present head of the corporation sole is not a Filipino. B) The nationality of a corporation sole depends upon the nationality of the head at any given time. C) A corporation sole, regardless of the nationality of the head, can acquire real property either by sale or donation. D) A corporation sole is not legally allowed to own real property.

The number of the Board of Trustees of a non-stock, non-profit educational institution should be A) fifive (5) only B) any number for as long as it is not less than fifive (5) and no more than eleven (11) C) any number in multiples of five (5), for as long as it is not less than fifive (5) and no more than fifteen (15). D) not less than fifive (5) nor more than ten (1 O) in multiples of fifive (5).

X subscribed 10,000 shares in the capital stocks of AAA Corporation. He paid 50% of the 10,000 shares. X asked the Corporate Secretary to issue him the corresponding stock certificate representing the 50% of what he already paid. The Corporate Secretary of the corporation refused. Was the Corporate Secretary correct? A) The Corporate Secretary is correct because the Corporation Code provides that no certificate of stock shall be issued to a subscriber until the shares as subscribed have been fully paid. B) The Corporate Secretary cannot refuse because a Stock Certificate can be issued corresponding to the percentage of shares which were paid. C) The Corporate Secretary cannot refuse because a Certificate of Stock can be issued provided it is indicated in the Certificate the actual percentage of what has been paid. D) The Corporate Secretary cannot refuse because it is his legal duty to issue a stock certificate corresponding to the number of shares actually subscribed regardless of the actual payment.

XXX Corporation and YYY Corporation have agreed to be merged into one corporation. To facilitate the merger, both corporations agreed that the merger be made effective on May 31, 2012. The Securities and Exchange Commission (SEC) approved the Articles of Merger on June 30, 2012. Which statement is most accurate? A) The effective date of the merger is May 31, 2012, the date stipulated by the parties as the effective date. B) The effective date of the merger is always the date of the approval of the Articles of Merger by the SEC. C) The effective date of the merger would be the date approved by the Board of Directors and the stockholders. D) The stockholders and the Board of Directors can set the effective date of the merger anytime after the approval of the SEC.

AAA Corporation is a wholly owned subsidiary of BBB Corporation. To support the business of AAA Corporation, BBB Corporation agreed to give its corporate guarantee to the loan of AAA Corporation. What is required so that the corporate guarantee will be valid? A) It only requires the approval of the Board of Directors of BBB Corporation. B) The Articles of Incorporation must provide such power and be approved by the Board of Directors. C) Providing corporate guarantee to another corporation is a necessary exercise of power of a corporation. D) It would require both the approval of the Board of Directors and the stockholders on record.

The capital stock of ABC Corporation is divided into common shares and preferred shares. Preferred shares are preferred as to dividends and common shares are those shares which have the regular and ordinary attributes of a share of a corporation. Which statement is most accurate? A) This kind of classification may not be allowed or else it will violate the Doctrine of Equality of shares. B) Classifications of shares may be allowed for as long as it is clearly stated as such in the Articles of Incorporation of the Corporation. C) Classifications of shares is mainly for business purpose to attract investors. D) Classifications of shares may be allowed with the approval of the stockholders and the Board of Directors.

So that ABC Corporation could venture into more projects, it needed to raise funds by issuing new shares to increase its capitalization. X, Y, Z, J and G are the five existing shareholders of the company. They hold 20% each. How will the additional shares be divided among the existing shareholders? A) The existing shareholders can subscribe to the new shares equivalent to their existing shareholdings because the Corporation Code provides that each of the existing stockholders will have preemptive rights to the extent of their existing shareholdings. B) The existing shareholders’ preemptive rights is equivalent to the percentage that they want. C) Each of the existing shareholder can exercise their right of first refusal against each other. D) Preemptive rights and right of first refusal are one and the same.

X is a minority stockholder of CCC Corporation. Y is a member of the Board of Directors of CCC Corporation and at the same time he is the President. X believes that Y is mismanaging CCC Corporation hence, as a stockholder and in behalf of the other stockholders, he wanted to sue Y. Which statement is most accurate? A) X can institute a derivative suit in behalf of himself as a stockholder. B) A derivative suit must be instituted in behalf of the corporation. C) Derivative suit is an exclusive remedy that X can institute. D) Derivative suit is not the remedy in this situation.

The term GGG Corporation in accordance with its Articles of Incorporation ended last January 30, 2012. The term was not extended. What will happen to the corporation? A) The corporation is dissolved ipso facto. B) There is a need to pass a board resolution to formally dissolve the corporation. C) The Board of Directors must pass a resolution for the corporation to formally go into liquidation. D) The stockholders must pass a resolution to dissolve the corporation.

The term of one (1) year of the Board of Directors of AAA Corporation expired last February 15, 2012. No new election of the Board of Directors was called, hence, the existing members of Board continue as Directors in hold over capacity. Which statement is most accurate? A) This is allowed provided there is a valid and justifiable reason for not calling for an election of the new members of the Board. B) This is not allowed because the term of the directors must only be for one (1) year. C) The positions of the members of the Board of Directors will be automatically declared vacant. D) Acting as members of the Board of Directors in a hold over capacity must be ratified by the stockholders.

AAA Corporation is a foreign corporation that wants to operate a representative office here in the Philippines. As required by the Corporation Code, there is a need to appoint a Resident Agent as a condition precedent to the issuance of a license to transact business in the Philippines. After two (2) years, AAA Corporation removed its Resident Agent and did not appoint anyone anymore. Which statement is the most accurate? A) This can be a ground for revocation or suspension of its license to do business. B) There is no more effect in the license because anyway at the time of registration, a resident agent was appointed. C) This can be a ground for suspension only. D) This will result in automatic revocation of its license to do business in the Philippines.

The By-laws of ABC Corporation is silent as to when a stockholder can be qualified to attend the meeting of the stockholders. The Corporate Secretary sent out the notice of the stockholders meeting two (2) days before the meeting and at that time X was not yet a stockholder. On the day of the meeting, however, X became a shareholder which was duly recorded in the stock and transfer book. Which statement is most accurate? A) X is a stockholder of ABC Corporation as of the time of meeting of the stockholders for the purpose of electing the members of the board. B) X is not qualified to elect members of the board because at the time the notice of the meeting was sent, she was not yet a stockholder. C) Qualifications as to who are considered as stockholders on record for purposes of being able to elect members of the board are to be determined by the By-laws alone. D) None of the above.

X, who is the Executive Vice President of ABC Corporation, a listed company, can be held liable or guilty of insider trading if, he — A) Bought shares of ABC Corporation when it was planning to acquire another company to improve its asset base, the news of which increased the price of the shares in the Stock Exchange. B) Bought shares of XY C Corporation, a sister company of ABC Corporation when he learned that XY C Corporation was about to also list its share in the Philippine Stock Exchange. C) Bought shares of ZZZ Corporation when he learned that ABC Corporation would acquire ZZZ Corporation. D) All of the above.

The purpose of the “Tender Offer" Rule is to - A) Ensure an even playing field for all shareholders of a company in terms of opportunity to sell their shareholdings. B) Ensure that minority shareholders in a publicly listed company are protected in the sense that they will equally have the same opportunity as the majority shareholders in terms of selling their shares. C) Ensure that the shareholders who would also want to sell their shareholdings will have the opportunity for a better price. D) All of the above.

Section 38 of The Securities Regulation Code defines an independent director as a person who must not have a relation with the corporation which would interfere with his exercise of independent judgment in carrying out the responsibilities of a director. To ensure independence therefore, he must be - A) Nominated and elected by the entire shareholders; B) Nominated and elected by the minority shareholders; C) Nominated and elected by the majority shareholders; D) Appointed by the Board.

"Securities" issued to the public are required by law to be registered with - A) The Bangko Sentral ng Pilipinas; B) The Philippine Stock Exchange; C) The Securities and Exchange Commission; D) The Securities and Exchange Commission and the Philippine Stock Exchange.

The government agency granted with the power of supervision and examination over banks and non-bank financial institutions performing quasi-banking functions, to ensure that the conduct of its business is on a sound financial basis that will provide continued solvency and liquidityis— A) The Philippine Deposit Insurance Corporation; B) The Bangko Sentral ng Pilipinas; C) The Anti-Money Laundering Council; D) The Securities and Exchange Commission.

X maintains a savings deposit in the amount of Php-1 Million with ABC Bank Corporation. X also has obtained a loan from ABC Bank Corporation in the amount of Phpl Million. In case of default, A) ABC Bank can set-off the loan from the savings account being maintained by X with ABC Bank. B) Set-off is not possible because legal compensation is not allowed in banking transaction. C) Deposit accounts are usually earmarked for specific purpose hence offsetting is not legally possible. D) Off -setting is not possible because the obligation of X is a “simple loan".

XYZ Corporation is engaged in lending funds to small vendors in various public markets. To fund the lending, XYZ Corporation raised funds through borrowings from friends and investors. Which statement is most accurate? A) XYZ Corporation is a bank. B) XYZ Corporation is a quasi-bank. C) XYZ Corporation is an Investment Company. D) XYZ is none of the above.

All senior officers of ABC Bank are entitled to obtain a housing loan. X is an Executive Vice President for Operations of ABC Bank. She obtained a housing loan with the ABC Bank. Which statement is most accurate? A) The housing loan of X requires a guarantor from somebody who is not connected with the bank. B) The housing loan of X requires the approval of the Board of Directors of the bank. C) The housing loan of X, being a benefit for employees, does not require (a) but will require (b). D) The housing loan of X, being a benefit for employees, will not require (a) and (b).

ABC Holdings Company, a Hong Kong company, owns 10% of XYZ Bank. Because of the peace and order situation in the Philippines, ABC Holding Company wanted to sell its shareholdings in XYZ Bank. Unfortunately, nobody is interested to buy a 10% shareholdings in a bank. The board of directors of XYZ Bank thought that it would be a good idea to buy back the shares owned by ABC Holding Company. Which statement is most accurate? a) Buying back the shares by XYZ Bank is absolutely not allowed. A) Buying back the shares may be allowed provided it is with the approval of the Monetary Board and disposed of within six B) months. C) Buying back the shares may be allowed provided such shares ‘will be disposed of within ten (1 0) years. D) Buying back the shares may be done anytime provided the Board of Directors will approve the same.

Graft and Corrupt Practices because he is suspected having accumulated unexplained of wealth. X maintains deposit accounts with ABC Bank. The Ombudsman filed criminal cases against X before the Sandiganbayan. Can the Court issue subpoenas against ABC Bank to produce all documents pertaining to all the deposit accounts of X? 2012 BAR EXAM|NATlON 175 A) Yes, because there is already a pending case and provided the subpoena must be specific as to which account. B) Yes, it is enough that the specific bank is identied. C) No, because the issuance of the subpoena has no real legal basis. D) Even without a subpoena, information about the deposit accounts of X can be submitted to the Sandiganbayan because it will be used in a pending case.

X, a private individual, maintains a dollar deposit with ABC Bank. X is suspected to be the leader of a Kidnap for Ransom Gang and he is suspected of depositing all ransom money in said deposit account which are all in US Dollars. The police want to open said account to know if there are really deposits in big amounts. Which statement is most accurate? A) The same rules under Secrecy of Bank Deposit Act will apply. B) An approval from the Monetary Board is necessary to open the account. C) Because the deposit is in US Dollars, it is covered by the Foreign Currency Deposit Act which allows disclosure only upon the written permission of the depositor. D) Approval from the Court is necessary to order disclosure of the account.

The Bank Secrecy Law (RA 1405) prohibits disclosing any information about deposit records of an individual without court order except - A) In an examination to determine gross estate of a decedent. B) In an investigation for violation of Anti-Graft and Corrupt Practices. C) In an investigation by the Ombudsman. D) In an impeachment proceeding.

X works as a research computer engineer with the Institute of Computer Technology, a government agency. When not busy with his work, but during office hours, he developed a software program for law firms that will allow efficient monitoring of the cases, which software program is not at all related to his work. Assuming the program is patentable, who has the right over the patent? A) X; B) Institute of Computer Technology; C) Neither X nor the Institute of Computer Technology can claim patent right over the invention; D) X and the employer of X will jointly have the rights over the patent.

The “test of dominancy” in the Law on Trademarks, is a way to determine whether there exists an infringement of a trademark by - A) determining if the use of the mark has been dominant in the market. B) focusing on the similarity of the prevalent features of the competing marks which might create confusion. C) looking at the mark whether they are similar in size, form or color. D) looking at the mark whether there is one specific feature that is dominant.

X's painting of Madonna and Child was used by her mother to print some personalized gift wrapper. As part of her mother's efforts to raise funds for Bantay Bata, the mother of X sold the wrapper to friends. Y, an entrepreneur, liked the painting in the wrapper and made many copies and sold the same through National Bookstore. Which statement is most accurate? A) Y can use the painting for his use because this is not a copyrightable material. B) X can sue Y for infringement because artistic works are protected from moment of creation. C) Works of art need to be copyrighted also to get protection under the law. D) Y can use the drawing even though not copyrighted because it is already a public property having been published already.

Compulsory Licensing of Inventions which are duly patented may be dispensed with or will be allowed exploitation even without agreement of the patent owner under certain circumstances, like national emergency, for reason of public interest, like national security, etc. The person who can grant such authority is — A) the Director General of the Intellectual Property Office; B) the Director of Legal Affairs of the Intellectual Property Office; C) the owner of the Patent right; D) any agent of the owner of the Patent right.

The Fair Use Doctrine allows others to utilize copyrighted works under certain conditions. The factors to consider whether use is fair or not would be the purpose and character of the use, nature of the copyrighted work, amount and substantiality of the portions used, and what else? A) effect of the use upon the creator of the work. B) effect of the use upon the potential market of the work. C) effect of the use upon the public in general. D) effect of the use upon the class in which the creator belongs.

XYZ Corporation bought ten (10) units of Honda Civic from CCC Corporation. ABC Bank granted a loan to XYC Corporation which executed a financing agreement which provided for the principal amount, the installment payments, the interest rates and the due dates. On due dates of the installment payments, XYZ Corporation was asked to pay for some handling charges and other fees which were not mentioned in the Financing Agreement. Can XYC Corporation refuse to pay the same? A) No, because handling charges and other fees are usual in certain banking transactions. B) Yes, because ABC Bank is required to provide XYZ Corporation not only the amount of the monthly installments but also the details of the finance charges as required by the Truth in Lending Act. C) No, because the Finance Agreement is a valid document to establish the existence of the obligation. D) Yes, because legally, finance charges are never allowed in any banking transaction.

Which of the following is an exception to the secrecy of bank deposits which are in Philippine Pesos, but NOT an exception to the secrecy of foreign currency deposits? A) Upon Bangko Sentral ng Pilipinas (BSP) inquiry into or examination of deposits or investments with any bank, when the inquiry or examination is made in the course of the BSP’s periodic special examination of said bank to ensure compliance with the Anti-Money Laundering Act (AMLA); B) Upon Philippine Deposit Insurance Corporation (PDIC) and SSP inquiry into and examination of deposit accounts in case there is a finding of unsafe or unsound banking practice; C) Upon inquiry in cases of impeachment; D) Upon inquiry by the Commissioner of Internal Revenue in the event a taxpayer files an application to compromise his tax liabilities on the ground of financial incapacity.

The Anti-Money Laundering Law is a law that seeks to prevent money laundering activities by providing for more transparency in the Philippine Financial System, hence the following institutions are covered by the law, except: A) bank and any financial institutions; B) pawnshops; C) casino operators; D) All of the above.

For purposes of determining violation of the provisions of Anti-Money Laundering Law, a transaction is considered as a “Suspicious Transaction" with “Covered Institutions” regardless of the amount involved, where which the following circumstances exists? A) the amount involved is not cormnensurate with the client’s business or financial capacity; B) there is no underlying legal or trade obligation, purpose or economic justification; C) client is not properly identified; D) All of the above.

The main feature of the Foreign Investment Act of 1991 is to introduce the concept of “Negative Lists". Under the said law, what is a “Negative List”? A) It is a list of business activities or enterprises in the Philippines that foreigners are disqualified to engage in. B) It is a list of business activities or enterprises in the Philippines that foreigners are qualified to engage in. C) It is a list of business activities or enterprises that are open to foreign investments provided it is with the approval of the Board of Investment. D) It is a list of business activities or enterprises that are open to foreign investments provided it is with the approval of the Securities and Exchange Commission.

ABC Company filed a Petition for Rehabilitation with the Court. An Order was issued by the Court, (1) staying enforcement of all claims, whether money or otherwise against ABC Company, its guarantors and sureties not solidarily liable with the company; and (2) prohibiting ABC Company from making payments of its liabilities, outstanding as of the date of the filing of the Petition. XYC Company is a holder of an irrevocable Standby Letter of Credit which was previously procured by ABC Company in favor of XYC Company to secure performance of certain obligations. In the light of the Order issued by the Court: Can XYC Company still be able to draw on their irrevocable Standby Letter of Credit when due? Explain your answer. (5%)

ABC Company filed a Petition for Rehabilitation with the Court. An Order was issued by the Court, (1) staying enforcement of all claims, whether money or otherwise against ABC Company, its guarantors and sureties not solidarily liable with the company; and (2) prohibiting ABC Company from making payments of its liabilities, outstanding as of the date of the filing of the Petition. XYC Company is a holder of an irrevocable Standby Letter of Credit which was previously procured by ABC Company in favor of XYC Company to secure performance of certain obligations. In the light of the Order issued by the Court: Explain the nature of Letters of Credit as a financial device. (5%)

CCC Car, Inc. obtained a loan from BBB Bank, which fund was used to import ten (10) units of Mercedes Benz S class vehicles. Upon arrival of the vehicles and before release of said vehicles to CCC Car, Inc., X and Y, the President and Treasurer, respectively, of CCC Car, Inc. signed the Trust Receipt to cover the value of the ten (10) units of Mercedes Benz S class vehicles after which, the vehicles were all delivered to the Car display room of CCC Car, Inc. Sale of the vehicles were slow, and it took a month to dispose of the ten (10) units. CCC Car, Inc. wanted to be in business and to save on various documentations required by the bank, decided that instead of turning over the proceeds of the sales, CCC Car, Inc. used the proceeds to buy another ten (10) units of BMW 3 series. Is the action of CCC Car, Inc. legally justified? Explain your answer. (5%)

CCC Car, Inc. obtained a loan from BBB Bank, which fund was used to import ten (10) units of Mercedes Benz S class vehicles. Upon arrival of the vehicles and before release of said vehicles to CCC Car, Inc., X and Y, the President and Treasurer, respectively, of CCC Car, Inc. signed the Trust Receipt to cover the value of the ten (10) units of Mercedes Benz S class vehicles after which, the vehicles were all delivered to the Car display room of CCC Car, Inc. Sale of the vehicles were slow, and it took a month to dispose of the ten (10) units. CCC Car, Inc. wanted to be in business and to save on various documentations required by the bank, decided that instead of turning over the proceeds of the sales, CCC Car, Inc. used the proceeds to buy another ten (10) units of BMW 3 series. Will the corporate officers of CCC Car, Inc. be held liable under the circumstances? Explain your answer. (5%)

X borrowed money from Y in the amount of Php1 Million and as payment, issued a check. Y then indorsed the check to his sister Z for no consideration. When Z deposited the check to her account, the check was dishonored for insufficiency of funds. Is Z a holder in due course? Explain your answer. (5%)

X borrowed money from Y in the amount of Php1 Million and as payment, issued a check. Y then indorsed the check to his sister Z for no consideration. When Z deposited the check to her account, the check was dishonored for insufficiency of funds. Who is liable on the check? The drawer or the indorser? Explain your answer. (5%)

Indicate and explain whether the promissory note is negotiable or non-negotiable. a) I promise to pay A or bearer Php100,000.00 from my inheritance which I will get after the death of my father. (2%) b) I promise to pay A or bearer Php100,000 plus the interest rate of ninety (90) day treasury bills. (2%) c) I promise to pay A or bearer the sum of Php100,000 if A passes the 2012 bar exams. (2%) d) I promise to pay A or bearer the sum of Php100,000 on or before December 30, 2012. (2%) e) I promise to pay A or bearer the sum of Php100,000. (2%)

X borrowed from CCC Bank. She mortgaged her house and lot in favor of the bank. X insured her house. The bank also got the house insured. a) Is this double insurance? Explain your answer. (3%) b) Is this legally valid? Explain your answer. (3%) c) In case of damage, can X and CCC Bank separately claim for the insurance proceeds? (4%)

X is a Filipino immigrant residing in Sacramento, California. Y is a Filipino residing in Quezon City, Philippines. Z is a resident alien residing in Makati City. GGG Corporation is a domestic corporation — 40% owned by foreigners and 60% owned by Filipinos, with T as authorized representative. CCC Corporation is a foreign corporation registered with the Philippine Securities and Exchange Commission. KKK Corporation is a domestic corporation (100%) Filipino owned. S is a Filipino, 16 years of age, and the daughter of Y. a) Who can be incorporators? Who can be subscribers? (2%) b) What are the differences between an incorporator and a subscriber, if there are any? (2%) c) Who are qualified to become members of the board of directors of the corporation? (2%) d) Who are qualified to act as Treasurer of the company? (2%) e) Who can be appointed Corporate Secretary? (2%)

A, B, C, D, E are all duly elected members of the Board of Directors of XYZ Corporation. F, the general manager, entered into a supply contract with an American firm. The contract was duly approved by the Board of Directors. However, with the knowledge and consent of F, no deliveries were made to the American firm. As a result of the non-delivery of the promised supplies, the American firm incurred damages. The American firm would like to file a suit for damages. Can the American firm sue: a) The members of the Board of Directors individually, because they approved the transaction? (2%) b) The corporation? (2%) c) F, the general manager, personally, because the non-delivery was with his knowledge and consent? (2%) d) Explain the rules on liabilities of a corporation for the act of its corporate officers and the liabilities of the corporate officers and Board of Directors of a corporation acting in behalf of the corporation. (4%)

AAA Corporation is a bank. The operations of AAA Corporation as a bank were not doing well. So, to avert any bank run, AAA Corporation, with the approval of the Monetary Board, sold all its assets and liabilities to BBB Banking Corporation which includes all deposit accounts. In effect then, BBB Corporation will service all deposits of all depositors of AAA Corporation. a) Will the sale of all assets and liabilities of AAA Corporation to BBB Banking Corporation automatically dissolve or terminate the corporate existence of AAA Corporation? Explain your answer. (5%) b) What are the legal requirements in order that a corporation may be dissolved? (5%)

May a publicly listed universal bank own 100% of the voting stocks in another universal bank and in a commercial bank? A) Yes, if with the permission of the Bangko Sentral ng Pilipinas. B) No, since it has no power to invest in equities. C) Yes, as there is no prohibition on it. D) No, since under the law, the 100% ownership on voting stocks must be in either bank only.

strument in his (P's) name. It reads: “Pay to B or order the sum of Php1 million. Signed, A (for and in behalf of P).” The instrument shows that it was drawn on P. B then indorsed to C, C to D, and D to E. E then treated it as a bill of exchange. Is presentment for acceptance necessary in this case? A) No, since the drawer and drawee are the same person. B) No, since the bill is non-negotiable, the drawer and drawee being the same person. C) Yes, since the bill is payable to order, presentment is required for acceptance. D) Yes, in order to hold all persons liable on the bill.

The Articles of Incorporation of ABC Transport Co., a public utility, provides for ten (10) members in its Board of Directors. What is the prescribed minimum number of Filipino citizens in its Board?

Shipowner X, in applying for a marine insurance policy from ABC, Co., stated that his vessel usually sails middle of August and with normally 100 tons of cargo. It turned out later that the vessel departed on the first week of September and with only 10 tons of cargo. Will this avoid the policy that was issued? A) Yes, because there was breach of implied warranty. B) No, because there was no intent to breach an implied warranty. C) Yes, because it relates to a material representation. D) No, because there was only representation of intention.

X issued a check in favor of his creditor, Y. It reads: “Pay to Y the amount of Seven Thousand Hundred Pesos (Php700,000.00). Signed, X". What amount should be construed as true in such a case? A) Php700,000.00. B) Php700.00. C) Php7,000.00. D) Php700,100.00.

May the indorsee of a promissory note indorsed to him “for deposit” file a suit against the indorser? A) Yes, as long as the indorser received value for the restrictive indorsement. B) Yes, as long as the indorser received value for the conditional indorsement. C) Yes, whether or not the indorser received value for the conditional indorsement. D) Yes, whether or not the indorser received value for the restrictive indorsement.

A bill of exchange states on its face: “One (1) month after sight, pay to the order of Mr. R the amount of Php50,000.00, chargeable to the account of Mr. S. Signed, Mr. T." Mr. S, the drawee, accepted the bill upon presentment by writing on it the words “I shall pay Php30,000.00 three (3) months after sight." May he accept under such terms, which varies the command in the bill of exchange? A) Yes, since a drawee accepts according to the tenor of his acceptance. B) No, since, once he accepts, a drawee is liable according to the tenor of the bill. C) Yes, provided the drawer and payee agree to the acceptance. D) No, since he is bound as drawee to accept the bill according to its tenor.

In return for the 20 years of faithful service of X as a househelper to Y, the latter promised to pay Php100,000.00 to X's heirs if he (X) dies in an accident by fire. X agreed. Is this an insurance contract? A) Yes, since all the elements of an insurance contract are present. B) Yes, since X’ services may be regarded as the consideration. C) No, since Y actually made a conditional donation in X’s favor. D) No, since it is in fact an innominate contract between X and Y.

In a signature by procuration, the principal is bound only in case the agent acted within the actual limits of his authority. The signature of the agent in such a case operates as notice that he has A) a qualified authority to sign. B) a limited authority to sign. C) a special authority to sign. D) full authority to sign.

002-38-0001 G, a grocery goods supplier, sold 100 sacks of rice to H who promised to pay once he has sold all the rice. H meantime delivered the goods to W, a warehouseman, who issued a warehouse receipt. Without the knowledge of G and W, H negotiated the receipt to P who acquired it in good faith and for value. P then claimed the goods from W, who released them. After the rice was loaded on a ship bound for Manila, G invokes his right to stop the goods in transit due to his unpaid lien. Who has a better right to the rice? A) P, since he has superior rights as a purchaser for value and in good faith. B) P, regardless of whether or not he is a purchaser for value and in good faith. C) G, since as an unpaid seller, he has the right of stoppage in transitu. D) W, since it appears that the warehouse charges have not been paid.

A law was passed disqualifying former members of Congress from sitting in the Board of Directors of government-owned or controlled corporations. Because of this, the Board of Directors of ABC Corp.. a government-owned and controlled corporation, disqualified C, a former Congressman, from continuing to sit as one of its members. C objected, however, insisting that under the Corporation Code members of the board of directors of corporations may only be removed by vote of stockholders holding 2/3 of its outstanding capital stock in a regular or special meeting called for that purpose. Is C correct? A) Yes, since the new law cannot be applied to members of the board of directors already elected prior to its passage. B) No, since the disqualification takes effect by operation of law, it is sufficient that he was declared no longer a member of the board. C) Yes, since the provisions of the Corporation Code applies as well to govemment-owned and controlled corporations. D) No, since the board has the power to oust him even without the new law.

X Shipping, Co., insured its vessel MV Don Teodoro for Php100 Million with ABC Insurance, Co. through T, an agent of X Shipping. During a voyage, the vessel accidentally caught fire and suffered damages estimated at Php80 Million. T personally informed ABC Insurance that X Shipping was abandoning the ship. Later, ABC insurance denied X Shipping's claim for loss on the ground that a notice of abandonment through its agent was improper. Is ABC Insurance right? A) Yes, since X Shipping should have ratified its agent’s action. B) No, since T, as agent of X Shipping who procured the insurance, can also give notice of abandonment for his principal. C) Yes, since only the agent of X Shipping relayed the fact of abandonment. D) No, since in the first place, the damage was more than 3/4 of the ship’s value.

Z wrote out an instrument that states: “Pay to X the amount of Php1 Million for collection only. Signed, Z." X indorsed it to his creditor, Y, to whom he owed Php1 million. Y now wants to collect and satisfy X's debt through the Php1 million on the check. May he validly do so? A) Yes, since the indorsement to Y is for Php1 Million. B) No, since Z is not a party to the loan between X and Y. C) No, since X is merely an agent of Z, his only right being to collect. D) Yes, since X owed Y Php1 Million.

P authorized A to sign a bill of exchange in his (P's) name. The bill reads: “Pay to B or order the sum of Php1 million. Signed, A (for and in behalf of P)." The bill was drawn on P. B indorsed the bill to C, C to D, and D to E. May E treat the bill as a promissory note? A) No, because the instrument is payable to order and has been indorsed several times. B) Yes, because the drawer and drawee are one and the same person. C) No, because the instrument is a bill of exchange. D) Yes, because A was only an agent of P.

P sold to M a pair of gecko (tuko) for Php50,000.00. M then issued a promissory note to P promising to pay the money within 90 days. Unknown to P and M, a law was passed a month before the sale that prohibits and declares void any agreement to sell gecko in the country. If X acquired the note in good faith and for value, may he enforce payment on it? A) No, since the law declared void the contract on which the promissory note was founded. B) No, since it was not X who bought the gecko. C) Yes, since he is a holder in due course of a note which is distinct from the sale of gecko. D) Yes, since he is a holder in due course and P and M were not aware of the law that prohibited the sale of gecko.

A promissory note states, on its face: “I, X, promise to pay Y the amount of Php5,000.00 five days after completion of the on-going construction of my house. Signed, X.” Is the note negotiable? A) Yes, since it is payable at a fixed period after the occurrence of a specified event. B) No, since it is payable at a xed period after the occurrence of an event which may not happen. C) Yes, since it is payable at a fixed period or determinable future time. D) No, since it should be payable at a xed period before the occurrence of a specified event.

X, creditor of Y, obtained a judgment in his favor in connection with Y's unpaid loan to him. The court's sheriff then levied on the goods that Y stored in T's warehouse, for which the latter issued a warehouse receipt. A month before the levy, however, Z bought the warehouse receipt for value. Who has a better right over the goods? A) T, being the warehouseman with a lien on the goods B) Z, being a purchaser for value of the warehouse receipt C) X, being Y's judgment creditor D) Y, being the owner of the goods

Under the Public Service Act, an administrative agency has the power to approve provisionally the rates of public utilities without a hearing in case of urgent public needs. The exercise of this power is A) supervisory. B) absolute. C) discretionary. D) mandatory.

A group of Malaysians wanted to invest in the Philippines‘ insurance business. After negotiations, they agreed to organize “FIMA Insurance Corp." with a group of Filipino businessmen. FIMA would have a PhP50 Million paid up capital, PhP40 Million of which would come from the Filipino group. All corporate officers would be Filipinos and 8 out of its 10-member Board of Directors would be Filipinos. Can FIMA operate an insurance business in the Philippines? A) No, since an insurance company must have at least PhP75 Million paid-up capital. B) Yes, since there is substantial compliance with our nationalization laws respecting paid-up capital and Filipino dominated Board of Directors. C) Yes, since FIMA’s paid up capital more than meets the country's nationalization laws. D) No, since an insurance company should be 100% owned by Filipinos.

In a special meeting called for the purpose, 2/3 of the stockholders representing the outstanding capital stock in X. Co. authorized the company's Board of Directors to amend its Bylaws. By majority vote, the Board then approved the amendment. Is this amendment valid? A) No since the stockholders cannot delegate their right to amend the By-laws to the Board. B) Yes since the majority votes in the Board was sufficient to amend the By-laws. C) No, because the voting in the Board should have been by majority of a quorum. D) Yes since the votes of 2/3 of the stockholders and majority of the Board were secured.

The Articles of Incorporation must be accompanied by a Treasurer's Affidavit certifying under oath, among others, that the total subscription paid is A) not less than P25,000.00. B) not more than P5,000.00. C) not less than P5,000.00. D) not more than P25,000.00.

T delivers two refrigerators to the warehouse of W who then issues a negotiable receipt undertaking the delivery of the refrigerators to “T or bearer." T entrusted the receipt to B for safekeeping only. B negotiated it, however, to F who bought it in good faith and for value. Who is entitled to the delivery of the refrigerators? A) T, since he is the real owner of the refrigerators. B) F, since he is a purchaser in good faith and for value. C) B, since T entrusted the receipt to him. D) W, since he has as a warehouseman a lien on the goods.

A, the proprietor of a eet of ten taxicabs, decides to adopt, as his business name, “A Transport Co., Inc." May this be allowed? A) No, it would be deceptive since he is a proprietor, not a corporation. B) No, since “A” is a generic name, not suitable for registration. C) Yes, since his line of business is public transportation. D) Yes, since such name would give his business a corporate identity.

“CROCOS" which he uses on his ready-to-wear clothes. Banking on the popularity of T's trade mark, B came up with his own “CROCOS” mark, which he then used for his “CROCOS" burgers. T 106 BAR Q &A nu COMMERCIAL LAW now sues B for trademark infringement but B argues that his product is a burger, hence, there is no infringement. Is B correct? A) No, since the owner of a well-known mark registered in the Philippines has rights that extends even to dissimilar kinds of goods. B) Yes, since the right of the owner of a wellknown mark registered in the Philippines does not extend to goods which are not of the same kind. C) Yes, as B was in bad faith in coming up with his own “CROCOS" mark. D) No, since unlike T, he did not register his own “CROCOS" mark for his product.

unanimously passed a Resolution approving the taking of steps that in reality amounted to willful tax evasion. On discovering this, the government filed tax evasion charges against all the company’s members of the board of directors. The directors invoked the defense that they have no personal liability, being mere directors of a fictional being. Are they correct? A) No, since as a rule only natural persons like the members of the board of directors can commit corporate crimes. B) Yes, since it is the corporation that did not pay the tax and it has a personality distinct from its directors. C) Yes, since the directors officially and collectively performed acts that are imputable only to the corporation. D) No, since the law makes directors of the corporation solidarily liable for gross negligence and bad faith in the discharge of their duties.

X executed a promissory note in favor of Y by way of accommodation. It says: "Pay to Y or order the amount of Php50,000.00. Signed, X." Y then indorsed the note to Z, and Z to T. When T sought collection from Y, the latter countered as indorser that there should have been a presentment first to the maker who dishonors it. ls Y correct? A) No, since Y is the real debtor and thus, there is no need for presentment for payment and dishonor by the maker. B) Yes, since as an indorser who is secondarily liable, there must first be presentment for payment and dishonor by the maker. C) No, since the absolute rule is that there is no need for presentment for payment and dishonor to hold an indorser liable. D) Yes, since the secondary liability of Y and Z would only arise after presentment for payment and dishonor by the maker.

Several American doctors wanted to set up a group clinic in the Philippines so they could render modern medical services. If the clinic is to be incorporated under our laws, what is the required foreign equity participation in such a corporation? A) 40% B) 0% C) 60% D) 70%

X, in the hospital for kidney dysfunction, was about to be discharged when he met his friend Y. X told Y the reason for his hospitalization. A month later, X applied for an insurance covering serious illnesses from ABC Insurance, Co., where Y was working as Corporate Secretary. Since X had already told Y about his hospitalization, he no longer answered a question regarding it in the application form. Would this constitute concealment? A) Yes, since the previous hospitalization would influence the insurer in deciding whether to grant X's application. B) No, since Y may be regarded as ABC's agent and he already knew of X's previous hospitalization. C) Yes, it would constitute concealment that amounts to misrepresentation on X's part. D) No, since the previous illness is not a material fact to the insurance coverage.

The rule is that the intentional cancellation of a person secondarily liable results in the discharge of the latter. With respect to an indorser, the holder's right to cancel his signature is: A) without limitation. B) not limited to the case where the indorsement is necessary to his title. C) limited to the case where the indorsement is not necessary to his title. D) limited to the case where the indorsement is necessary to his title.

Can a drawee who accepts a materially altered check recover from the holder and the drawer? A) No, he cannot recover from either of them. B) Yes from both of them. C) Yes but only from the drawer. D) Yes but only from the holder.

Under the Intellectual Property Code, lectures, sermons, addresses or dissertations prepared for oral delivery, whether or not reduced in writing or other material forms, are regarded as A) non-original works. B) original works. C) derivative works. D) not subject to protection

Perils of the ship, under marine insurance law, refer to loss which in the ordinary course of events results from A) natural and inevitable actions of the sea. B) natural and ordinary actions of the sea. C) unnatural and inevitable actions of the sea. D) unnatural and ordinary actions of the sea.

The corporate term of a stock corporation is that which is stated in its Articles of Incorporation. It may be extended or shortened by an amendment of the Articles when approved by majority of its Board of Directors and: A) approved and ratified by at least 2/3 of all stockholders. B) approved by at least 2/3 of the stockholders representing the outstanding capital stock. C) ratified by at least 2/3 of all stockholders. D) ratified by at least 2/3 of the stockholders representing the outstanding capital stock.

X, at Y's request, executed a Real Estate Mortgage (REM) on his (X's) land to secure Y's loan from Z. Z successfully foreclosed the REM when Y defaulted on the loan but half of Y's obligation remained unpaid. May Z sue X to enforce his right to the deficiency? A) Yes, but solidarily with Y. B) Yes, since X's is deemed to warrant that his land would cover the whole obligation. C) No, since it is the buyer at the auction sale who should answer for the deciency. D) No, because X is not Z's debtor.

The rule is that no stock dividend shall be issued without the approval of stockholders representing at least 2/3 of the outstanding capital stock at a regular or special meeting called for the purpose. As to other forms of dividends: A) a mere majority of the entire Board of Directors applies. B) a mere majority of the quorum of the Board of Directors applies. C) a mere majority of the votes of stockholders representing the outstanding capital stock applies. D) the same rule of 2/3 votes applies.

X found a check on the street, drawn by Y against ABC Bank, with Z as payee. X forged Z's signature as an indorser, then indorsed it personally and delivered it to DEF Bank. The latter, in turn, indorsed it to ABC Bank which charged it to the Y's account. Y later sued ABC Bank but it set up the forgery as its defense. Will it prosper? A) No, since the payee's signature has been forged. B) No, since Y’s remedy is to run after the forger, X. C) Yes, since forgery is only a personal defense. D) Yes, since ABC Bank is bound to know the signature of Y, its client.

If an insurance policy prohibits additional insurance on the property insured without the insurer’s consent, such provision being valid and reasonable, a violation by the insured A) reduces the value of the policy. B) avoids the policy. C) offsets the value of the policy with the additional insurances's value. D) forfeits premiums already paid.

Forgery of bills of exchange may be subdivided into, a) forgery of an indorsement on the bill and b) forgery of the drawer’s signature, which may either be with acceptance by the drawee, or A) with acceptance but the bill is paid by the drawee. B) without acceptance but the bill is paid by the drawer. C) without acceptance but the bill is paid by the drawee. D) with acceptance but the bill is paid by the drawer.

P, a sales girl in a flower shop at the Ayala Station of the Metro Rail Transit (MRT) bought two tokens or tickets, one for her ride to work and another for her ride home. She got to her ower shop where she usually worked from 8 a.m. to 5 p.m. At about 3 p.m., while P was attending to her duties at the flower shop, two crews of the MRT got into a fight near the ower shop, causing injuries to P in the process. Can P sue the MRT for contractual breach as she was within the MRT premises where she would shortly take her ride home? A) No, since the incident took place, not in an MRT train coach, but at the MRT station. B) No, since P had no intention to board an MRT train coach when the incident occurred. C) Yes, since she already had a ticket for her ride home and was in the MRTs premises at the time of the incident. D) Yes, since she bought a round trip ticket and MRT had a duty while she was at its station to keep her safe for her return trip.

X invented a device which, through the use of noise, can recharge a cellphone battery. He applied for and was granted a patent on his device, effective within the Philippines. As it turns out, a year before the grant of X’s patent, Y, also an inventor, invented a similar device which he used in his cellphone business in Manila. But X files an injunctive suit against Y to stop him from using the device on the ground of patent infringement. Will the suit prosper? A) No, since the correct remedy for X is a civil action for damages. B) No, since Y is a prior user in good faith. C) Yes, since X is the first to register his device for patent registration. D) Yes, since Y unwittingly used X's patented invention.

Where the insurer was made to pay the insured for a loss covered by the insurance contract, such insurer can run after the third person who caused the loss through subrogation. What is the basis for conferring the right of subrogation to the insurer? A) Their express stipulation in the contract of insurance. B) The equitable assignment that results from the insurer's payment of the insured. C) The insured’s formal assigmnent of his right to indemnification to the insurer. D) The insured's endorsement of its claim to the insurer.

Which of the following indorsers expressly warrants in negotiating an instrument that 1) it is genuine and true; 2) he has a good title to it; 3) all prior parties have capacity to negotiate; and 4) it is valid and subsisting at the time of his indorsement? A) The irregular indorser. B) The regular indorser. C) The general indorser. D) The qualified indorser.

Apart from economic rights, the author of a copyright also has moral rights which he may transfer by way of assignment. The term of these moral rights shall last A) during the author's lifetime and for 50 years after his death. B) forever. C) 50 years from the time the author created his work. D) during the author's lifetime.

In case of disagreement between the corporation and a withdrawing stockholder who exercises his appraisal right regarding the fair value of his shares, a three-member group shall by majority vote resolve the issue with finality. May the wife of the withdrawing stockholder be named to the three-member group? A) No, the wife of the withdrawing shareholder is not a disinterested person. B) Yes, since she could best protect her husband's shareholdings. C) Yes, since the rules do not discriminate against wives. D) No, since the stockholder himself should sit in the three-member group.

upon what appeared to be a massive volcanic eruption in Jupiter while peering at the planet through his telescope. The following week, X, without notes, presented a lecture on his findings before the Association of Astronomers of the Philippines. To his dismay, he later read an article in a science journal written by Y, a professional astronomer, repeating exactly what X discovered without any attribution to him. Has Y infringed on X's copyright, if any? A) No, since X did not reduce his lecture in writing or other material form. B) Yes, since the lecture is considered X's original work. C) No, since no protection extends to any discovery, even if expressed, explained, illustrated, or embodied in a work. D) Yes, since Y's article failed to make any attribution to X.

The Corporation Code sanctions a contract between two or more corporations which have interlocking directors, provided there is no fraud that attends it and it is fair and reasonable under the circumstances. The interest of an interlocking director in one corporation may be either substantial or nominal. It is nominal if his interest: A) does not exceed 25% of the outstanding capital stock. B) exceeds 25% of the outstanding capital stock. C) exceeds 20% of the outstanding capital stock. D) does not exceed 20% of the outstanding capital stock.

For a constructive total loss to exist in marine insurance, it is required that the person insured relinquish his interest in the thing insured. This relinquishment must be A) actual. B) constructive first and if it fails, then actual. C) either actual or constructive. D) constructive.

“Eagleson Refillers, Co.," a firm that sells water to the public, opposes the trade name application of “Eagleson Laundry, Co.," on the ground that such trade name tends to deceive trade circles or confuse the public with respect to the water firm's registered trade name. Will the opposition prosper? A) Yes, since such use is likely to deceive or confuse the public. B) Yes, since both companies use water in conducting their business. C) No, since the companies are not engaged in the same line of business. D) No, since the root word “Eagle” is a generic name not subject to registration.

Notice of dishonor is not required to be made in all cases. One instance where such notice is not necessary is when the indorser is the one to whom the instrument is suppose to be presented for payment. The rationale here is that the indorser A) already knows of the dishonor and it makes no sense to notify him of it. B) is bound to make the acceptance in all cases. C) has no reason to expect the dishonor of the instrument. D) must be made to account for all his actions.

X Corp., whose business purpose is to manufacture and sell vehicles, invested its funds in Y Corp., an investment firm, through a resolution of its Board of Directors. The investment grew tremendously on account of Y Corp.’s excellent business judgment. But a minority stockholder in X Corp. assails the investment as ultra vires. Is he right and, if so, what is the status of the investment? A) Yes, it is an ultra vires act of the corporation itself but voidable only, subject to stockholders’ ratification. B) Yes, it is an ultra vires act of its Board of Directors and thus void. C) Yes, it is an ultra vires act of its Board of Directors but voidable only, subject to stockholders’ ratication. D) Yes, it is an ultra vires act of the corporation itself and, consequently, void.

M, the maker, issued a promissory note to P, the payee which states: “I, M, promise to pay P or order the amount of Php1 Million. Signed, M." P negotiated the note by indorsement to N, then N to O also by indorsement, and O to Q, again by indorsement. But before O indorsed the note to Q, 0's wife wrote the figure “2” on the note after “Php1" without 0's knowledge, making it appear that the note is for Php12 Million. For how much is O liable to Q? A) Php1 Million since it is the original tenor of the note. B) Php1 Million since he warrants that the note is genuine and in all respects what it purports to be. C) Php12 Million since he warrants his solvency and that he has a good title to the note. D) Php12 Million since he warrants that the note is genuine and in all respects what it purports to be.

X is a director in T Corp. who was elected to a 1-year term on Feb. 1, 2010. On April 11, 2010, X resigned and was replaced by R, who assumed as director on May 17, 2010. On Nov. 21, 2010, R died. S was then elected in his place. Until which time should S serve as director? A) April11,2011. B) Feb. 1,2011. C) May 17, 2011. D) Nov.21,2011.

B, while drunk, accepted a passenger in his taxicab. B then drove the taxi recklessly, and inevitably, it crashed into an electric post, resulting in serious physical injuries to the passengers. The latter then filed a suit for tort against B's operator, A, but A raised the defense of having exercised extraordinary diligence in the safety of the passenger. Is his defense tenable? A) Yes, as a common carrier can rebut the presumption of negligence by raising such a defense. B) No, as in tort actions, the proper defense is due diligence in the selection and supervision of the employee by the employer. C) No, as B, the common carrier's employee, was obviously negligent due to his intoxication. D) Yes, as a common carrier can invoke extraordinaiy diligence in the safety of passengers in tort cases.

T Corp. has a corporate term of 20 years under its Articles of Incorporation or from June 1, 1980 to June 1, 2000. On June 1, 1991 it amended its Articles of Incorporation to extend its life by 15 years from June 1, 1980 to June 1, 2015. The SEC approved this amendment. On June 1, 2011, however, T Corp decided to shorten its term by 1 year or until June 1, 2014. Both the 1991 and 2011 amendments were approved by majority vote of its Board of Directors and ratified in a special meeting by its stockholders representing at least 2/3 o f its outstanding capital stock. The SEC, however, disapproved the 2011 amendment on the ground that it cannot be made earlier than 5 years prior to the expiration date of the corporate term, which is June 1, 2014. Is this SEC disapproval correct? A) No, since the 5-year rule on amendment of corporate term applies only to extension, not to shortening, of term. B) Yes, any amendment affecting corporate term cannot be made earlier than 5 years prior to the corporation’s expiration date. C) No, since a corporation can in fact have a corporate life of 50 years. D) Yes, the amendment to shorten corporate term cannot be made earlier than 5 years prior to the corporation’s expiration date.

Due to his debt to C, D wrote a promissory note which is payable to the order of C. C’s brother, M, misrepresenting himself as agent of C, obtained the note from D. M then negotiated the note to N after forging the signature of C. May N enforce the note against D? A) Yes, since D is the principal debtor. B) No, since the signature of C was forged. C) No, since it is C who can enforce it, the note being payable to the order of C. D) Yes, since D, as maker, is primarily liable on the note.

A bill of exchange has D as drawer, E as drawee and F as payee. The bill was then indorsed to G, G to H, and H to I. I, the current holder presented the bill to E for acceptance. E accepted but, as it later turned out, D is a fictitious person. Is E freed from liability? A) No, since by accepting, E admits the existence of the drawer. B) No, since by accepting, E warrants that he is solvent. C) Yes, if E was not aware of that fact at the time of acceptance. D) Yes, since a bill of exchange with a fictitious drawer is void and inexistent.

On June 1, 2011, X mailed to Y Insurance, Co. his application for life insurance, with payment for 5 years of premium enclosed in it. On July 21, 2011, the insurance company accepted the application and mailed, on the same day, its acceptance plus the cover note. It reached X's residence on August 11, 2011. But, as it happened, on August 4, 2011, X figured in a car accident. He died a day later. May X’s heirs recover on the insurance policy? A) Yes, since under the Cognition Theory, the insurance contract was perfected upon acceptance by the insurer of X’s application. B) No, since there is no privity of contract between the insurer and X’s heirs. C) No, since X had no knowledge of the insurer’s acceptance of his application before he died. D) Yes, since under the Manifestation Theory, the insurance contract was perfected upon acceptance of the insurer of X's application.

X, warehouseman, sent a text message to Y, to whom X had issued a warehouse receipt for Y's 500 sacks of corn, notifying him of the due date and time to settle the storage fees. The message stated also that if Y does not settle the warehouse charges within 10 days, he will advertise the goods for sale at a public auction. When Y ignored the demand, X sold 100 sacks of corn at a public auction. For X's failure to comply with the statutory requirement of written notice to satisfy his lien, the sale of the 100 sacks of corn is A) voidable. B) rescissible. C) unenforceable. D) void.

Upon execution of a trust receipt over goods, the party who is obliged to release such goods and who retains security interest on those goods, is called the A) holder. B) shipper. C) entrustee. D) entrustor.

Any agreement binding upon the holder to extend the time of payment or to postpone the holder's right to enforce the instrument results in the discharge of the party secondarily liable unless made with the latter's consent. This agreement refers to one which the holder made with the A) principal debtor. B) principal creditor. C) secondary creditor. D) secondary debtor.

The authorized alteration of a warehouse receipt which does not change its tenor renders the warehouseman liable according to the terms of the receipt A) in its original tenor if the alteration is material. B) in its original tenor. C) as altered if there is fraud. D) as altered.

E received goods from T for display and sale in E's store. E was to turn over to T the proceeds of any sale and return the ones unsold. To document their agreement, E executed a trust receipt in T’s favor covering the goods. When E failed to turn over the proceeds from his sale of the goods or return the ones unsold despite demand, he was charged in court for estafa. E moved to dismiss on the ground that his liability is only civil. Is he correct? A) No, since he committed fraud when he promised to pay for the goods and did not. B) No, since his breach of the trust receipt agreement subjects him to both civil and criminal liability for estafa. C) Yes, since E cannot be charged with estafa over goods covered a trust receipt. D) Yes, since it was merely a consignment sale and the buyer could not pay.

T, an associate attorney in XYZ Law Office, wrote a newspaper publisher a letter disputing a columnist's claim about an incident in the attorney’s family. T used the law firm’s letterhead and its computer in preparing the letter. T also requested the firm’s messenger to deliver the letter to the publisher. Who owns the copyright to the letter? A) T, since he is the original creator of the contents of the letter. B) Both T and the publisher, one wrote the letter to the other who has possession of it. C) The law office since T was an employee and he wrote it on the rm's letterhead. D) The publisher to whom the letter was sent.

D draws a bill of exchange that states: “One month from date, pay to B or his order Php100,000.00. Signed, D." The drawee named in the bill is E. B negotiated the bill to M, M to N, N to 0, and O to P. Due to non-acceptance and after proceedings for dishonor were made, P asked O to pay, which O did. From whom may O recover? A) B, being the payee B) N, as indorser to O C) E, being the drawee D) D, being the drawer

If the drawer and the drawee are the same person, the holder may present the instrument for payment without need of a previous presentment for acceptance. In such a case, the holder treats it as a A) non-negotiable instrument. B) promissory note. C) letter of credit. D) check.

A bank can be placed under receivership when, if allowed to continue in business, its depositors or creditors would incur A) probable losses B) inevitable losses C) possible losses D) a slight chance of losses

B borrowed Php1 million from L and offered to him his BMW car worth Php1 Million as collateral. B then executed a promissory note that reads: “I, B, promise to pay L or bearer the amount of Php1 Million and to keep my BMW car (loan collateral) free from any other encumbrance. Signed, B.” Is this note negotiable? A) Yes, since it is payable to bearer. B) Yes, since it contains an unconditional promise to pay a sum certain in money. C) No, since the promise to just pay a sum of money is unclear. D) No, since it contains a promise to do an act in addition to the payment of money.

X constituted a chattel mortgage on a car (valued at Php1 Million pesos) to secure a P500,000.00 loan. For the mortgage to be valid, X should have A) the right to mortgage the car to the extent of half its value. B) ownership of the car. C) unqualied free disposal of his car. D) registered the car in his name.

A material alteration of an instrument without the assent of all parties liable thereon results in its avoidance, EXCEPT against a A) prior indorsee. B) subsequent acceptor. C) subsequent indorser. D) prior acceptor.

D, debtor of C, wrote a promissory note payable to the order of C. C's brother, M, misrepresenting himself as C’s agent, obtained the note from D, then negotiated it to N after forging C's signature. N indorsed it to E, who indorsed it to F, a holder in due course. May F recover from E? A) No, since the forgery of C's signature results in the discharge of E. B) Yes, since only the forged signature is inoperative and E is bound as indorser. C) No, since the signature of C, the payee, was forged. D) Yes, since the signature of C is immaterial, he being the payee.

X came up with a new way of presenting a telephone directory in a mobile phone, which he dubbed as the “iTel” and which uses lesser time for locating names and telephone numbers. May X have his “iTel” copyrighted in his name? A) No, because it is a mere system or method. B) Yes, because it is an original creation. C) Yes, because it entailed the application of X's intellect. D) No, because it did not entail any application of X’s intellect.

X drawee of a bill of exchange, wrote the words: “Accepted, with promise to make payment within two days. Signed, X.” The drawer questioned the acceptance as invalid. Is the acceptance valid? A) Yes, because the acceptance is in reality a clear assent to the order of the drawer to pay. B) Yes, because the form of the acceptance is really immaterial. C) No, because the acceptance must be a clear assent to the order of the drawer to pay. D) No, because the document must not express that the drawee will perform his promise within two days.

T, the captain of MV Don Alan, while asleep in his cabin, dreamt of an Intensity 8 earthquake along the path of his ship. On waking up, he immediately ordered the ship to return to port. True enough, the earthquake and tsunami struck three days later and his ship was saved. Was the deviation proper? A) Yes, because the deviation was made in good faith and on a reasonable ground for believing that it was necessary to avoid a peril. B) No, because no reasonable ground for avoiding a peril existed at the time of the deviation. C) No, because T relied merely on his supposed gift of prophecy. D) Yes, because the deviation took place based on a reasonable belief of the captain.

An insured, who gains knowledge of a material fact already after the effectivity of the insurance policy, is not obliged to divulge it. The reason for this is that the test of concealment of material fact is determined A) at the time of the issuance of the policy. B) at any time before the payment of premium. C) at the time of the payment of the premium. D) at any time before the policy becomes effective.

A bill of exchange has T for its drawee, U as drawer, and F as holder. When F went to T for presentment, F learned that T is only 15 years old. F wants to recover from U but the latter insists that a notice of dishonor must first be made, the instrument being a bill of exchange. Is he correct? A) Yes, since a notice of dishonor is essential to charging the drawer. B) No, since T can waive the requirement of notice of dishonor. C) No, since F can treat U as maker due to the minority of T, the drawee. D) Yes, since in a bill of exchange, notice of dishonor is at all times required.

X is the holder of an instrument payable to him (X) or his order, with Y as maker. X then indorsed it as follows: “Subject to no recourse, pay to Z. Signed, X." When Z went to collect from Y, it turned out that Y's signature was forged. Z now sues X for collection. Will it prosper? A) Yes, because X, as a conditional indorser, warrants that the note is genuine. B) Yes, because X, as a qualified indorser, warrants that the note is genuine. C) No, because X made a qualified indorsement. D) No, because a qualified indorsement does not include the warranty of genuineness.

X, Co., a partnership, is composed of A (capitalist partner), B (capitalist partner) and C (industrial partner). If you were partner A, who between B and C would you have an insurable interest on, such that you may then insure him? A) No one, as there is merely a partnership contract among A, B and C. B) Both B and C, as they are your partners. C) Only C, as he is an industrial partner. D) Only B, as he is a capitalist partner.

X has been a long-time household helper of Z. X’s husband, Y, has also been Z’s longtime driver. May Z insure the lives of both X and Y with Z as beneficiary? A) Yes, since X and Y render services to Z. B) No, since X and Y have no pecuniary interest on the life of Z arising from their employment with him. C) No, since Z has no pecuniary interest in the lives of X and Y arising from their employment with him. D) Yes, since X and Y are Z’s employees.

T Shipping, Co. insured all of its vessels with R Insurance, Co. The insurance policies stated that the insurer shall answer for all damages due to perils of the sea. One of the insured's ship, the MV Dona Priscilla, ran aground in the Panama Canal when its engine pipes leaked and the oil seeped into the cargo compartment. The leakage was caused by the extensive mileage that the ship had accumulated. May the insurer be made to answer for the damage to the cargo and the ship? A) Yes, because the insurance policy covered any or all damage arising from perils of the sea. B) Yes, since there appears to have been no fault on the part of the ship-owner and ship captain. C) No, since the proximate cause of the damage was the breach of warranty of seaworthiness of the ship. D) No, since the proximate cause of the damage was due to ordinary usage of the ship, and thus not due to a peril of the sea.

The rule is that the valuation of the shares of a stockholder who exercises his appraisal rights is determined as of the day prior to the date on which the vote was taken. This is true- A) regardless of ar1y depreciation or appreciation in the share’s fair value. B) regardless of any appreciation in the share’s fair value. C) regardless of any depreciation in the share’s fair value. D) only if there is no appreciation or depreciation in the share’s fair value.

In elections for the Board of Trustees of non-stock corporations, members may cast as many votes as there are trustees to be elected but may not cast more than one vote for one candidate. This is true — A) unless set aside by the members in plenary session. B) in every case even if the Board of Trustees resolves otherwise. C) unless otherwise provided in the Articles of Incorporation or in the By-laws. D) in every case even if the majority of the members decide otherwise during the elections.

A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves. An example of such a defense is — A) fraud in inducement. B) duress amounting to forgery. C) fraud in esse contractus. D) alteration.

In a contract of carriage, the common carrier is liable for the injury or death of a passenger resulting from its employee’s fault although the latter acted beyond the scope of his authority. This is based on the A) rule that the carrier has an implied duty to transport the passenger safely. B) rule that the carrier has an express duty to transport the passenger safely C) Doctrine of Respondeat Superior. D) rule in culpa aqu1'11'a.na.

P sold to M 10 grams of shabu worth Php5,000.00. As he had no money at the time of the sale, M wrote a promissory note promising to pay P or his order Php5,000. P then indorsed the note to X (who did not know about the shabu), and X to Y. Unable to collect from P, Y then sued X on the note. X set up the defense of illegality of consideration. Is he correct? A) No, since X, being a subsequent indorser, warrants that the note is valid and subsisting. B) No, since X, a general indorser, warrants that the note is valid and subsisting. C) Yes, since a void contract does not give rise to any right. D) Yes, since the note was born of an illegal consideration which is a real defense.

It is settled that neither par value nor book value is an accurate indicator of the fair value of a share of stock of a corporation. As to unpaid subscriptions to its shares of stock, as they are regarded as corporate assets, they should be included in the A) capital value. B) book value. C) par value. D) market value.

Under the Anti-Money Laundering Law, a covered institution is required to maintain a system of verifying the true identity of their clients as well as persons purporting to act on behalf of A) those doing business with such clients. B) unknown principals. C) the covered institution. D) such clients.

X executed a promissory note with a face value of Php50,000.00, payable to the order of Y. Y indorsed the note to Z, to whom Y owed Php30,000.00. If X has no defense at all against Y, for how much may Z collect from X? A) Php20,000.00, as he is a holder for value to the extent of the difference between Y's debt and the value of the note. B) Php30,000.00, as he is a holder for value to the extent of his lien. C) Php50,000.00, but with the obligation to hold Php20,000.00 for Y's benefit. D) None, as Z’s remedy is to run after his debtor, Y.

On X's failure to pay his loan to ABC Bank, the latter foreclosed the Real Estate Mortgage he executed in its favor. The auction sale was set for Dec. 1, 2010 with the notices of sale published as the law required. The sale was, however, cancelled when Dec. 1, 2010 was declared a holiday and re-scheduled to Jan. 10, 2011 without republication of notice. The auction sale then proceeded on the new date. Under the circumstances, the auction sale is A) rescissible. B) unenforceable. C) void. D) voidable.

EFG Foundation, Inc., a non-profit organization, scheduled an election for its six-member Board of Trustees. X, Y and Z, who are minority members of the foundation, wish to exercise cumulative voting in order to protect their interest, although the Foundation's Articles and By-laws are silent on the matter. As to each of the three, what is the maximum number of votes that he/she can cast? A) 6 B) 9 C) 12 D) 3

The liability of a common carrier for the goods it transports begins from the time of A) conditional receipt. B) constructive receipt. C) actual receipt. D) either actual or constructive receipt.

Under the Negotiable Instruments Law, if the holder has a lien on the instrument which arises either from a contract or by implication of law, he would be a holder for value to the extent of A) his successor's interest. B) his predecessor's interest. C) the lien in his favor. D) the amount indicated on the instrument's face.

Under the Negotiable Instruments Law, a signature by procuration operates as a notice that the agent has but a limited authority to sign. Thus, a person who takes a bill that is drawn, accepted, or indorsed by procuration is duty-bound to inquire into the extent of the agent's authority by: A) examining the agent’s special power of attomey. B) examining the bill to determine the extent of such authority. C) asking the agent about the extent of such authority. D) asking the principal about the extent of such authority.

A negotiable instrument can be indorsed by way of a restrictive indorsement, which prohibits further negotiation and constitutes the indorsee as agent of the indorser. As agent, the indorsee has the right, among others, to A) demand payment of the instrument only. B) notify the drawer of the payment of the instrument. C) receive payment of the instrument. D) instruct that payment be made to the drawee.

X Corp. operates a call center that received orders for pizzas on behalf of Y Corp. which operates a chain of pizza restaurants. The two companies have the same set of corporate officers. After 2 years, X Corp. dismissed its call agents for no apparent reason. The agents filed a collective suit for illegal dismissal against both X Corp. and Y Corp. based on the doctrine of piercing the veil of corporate fiction. The latter set up the defense that the agents are in the employ of X Corp. which is a separate juridical entity. Is this defense appropriate? A) No, since the doctrine would apply, the two companies having the same set of corporate officers. B) No, the real employer is Y Corp., the pizza company, with X Corp. serving as an arm for receiving its outside orders for pizzas. C) Yes, it is not shown that one company completely dominates the finances, policies, and business practices of the other. D) Yes, since the two companies perform two distinct businesses.

S delivered 10 boxes of cellphones to Trek Bus Liner, for transport from Manila to Ilocos Sur on the following day, for which S paid the freightage. Meanwhile, the boxes were stored in the bus liner’s bodega. That night, however, a robber broke into the bodega and stole S's boxes. S sues Trek Bus Liner for contractual breach but the latter argues that S has no cause of action based on such breach since the loss occurred while the goods awaited transport. Who is correct? A) The bus liner since the goods were not lost while being transported. B) S since the goods were unconditionally placed with T for transportation. C) S since the freightage for the goods had been paid. D) The bus liner since the loss was due to a fortuitous event.

M makes a promissory note that states: “I, M, promise to pay Php5,000.00 to B or bearer. Signed, M." M negotiated the note by delivery to B, B to N, and N to O. B had known that M was bankrupt when M issued the note. Who would be liable to O? A) M and N since they may be assumed to know of M's bankruptcy B) N, being O's immediate negotiator of a bearer note C) B, M, and N, being indorsers by delivery of a bearer note D) B, having known of M's bankruptcy

ABC Corp. increased its capital stocks from Php10 Million to Php15 Million and, in the process, issued 1,000 new shares divided into Common Shares “B” and Common Shares “C.” T, a stockholder owning 500 shares, insists on buying the newly issued shares through a right of preemption. The company claims, however, that its By-laws deny T any right of pre-emption. Is the corporation correct? A) No, since the By-Laws cannot deny a shareholder his right of pre-emption. B) Yes, but the denial of his pre-emptive right extends only to 500 shares. C) Yes, since the denial of the right under the By-laws is binding on T. D) No, since pre-emptive rights are governed by the articles of incorporation.

A writes a promissory note in favor of his creditor, B. It says: “Subject to my option, I promise to pay B Php1 Million or his order or give Php1 Million worth of cement or to authorize him to sell my house worth Php1 Million. Signed, A." Is the note negotiable? A) No, because the exercise of the option to pay lies with A, the maker and debtor. B) No, because it authorizes the sale of collateral securities in case the note is not paid at maturity. C) Yes, because the note is really payable to B or his order, the other provisions being merely optional. D) Yes, because an election to require something to be done in lieu of payment of money does not affect negotiability.

P rode a Sentinel Liner bus going to Baguio from Manila. At a stop-over in Tarlac, the bus driver, the conductor, and the passengers disembarked for lunch. P decided, however, to remain in the bus, the door of which was not locked. At this point, V, a vendor, sneaked into the bus and offered P some refreshments. When P rudely declined, V. attacked him, resulting in P suffering from bruises and contusions. Does he have cause to sue Sentinel Liner? A) Yes, since the carrier's crew did nothing to protect a passenger who remained in the bus during the stop-over. B) No, since the carrier's crew could not have foreseen the attack. C) Yes, since the bus is liable for anything that goes wrong in the course of a trip. D) No, since the attack on P took place when the bus was at a stop-over.

A cargo ship of X Shipping, Co. ran aground off the coast of Cebu during a storm and lost all its cargo amounting to Php50 Million. The ship itself suffered damages estimated at Php80 Million. The cargo owners filed a suit against X Shipping but it invoked the doctrine of limited liability since its vessel suffered Php80 Million damage, more than the collective value of all lost cargo. Is X Shipping correct? A) Yes, since under that doctrine, the value of the lost cargo and the damage to the ship can be set-off. B) No, since each cargo owner has a separate and individual claim for damages. C) Yes, since the extent of the ship's damage was greater than that of the value of the lost cargo. D) No, since X Shipping neither incurred a total loss nor abandoned its ship.

For years, Y has been engaged in the parallel importation of famous brands, including shoes carrying the foreign brand MAGIC. Exclusive distributor X demands that Y cease importation because of his appointment as exclusive distributor of MAGIC shoes in the Philippines. Y counters that the trademark MAGIC is not registered with the Intellectual Property Office as a trademark and therefore no one has the right to prevent its parallel importation. Suppose the shoes are covered by a Philippine patent issued to the brand owner, what would your answer be? Explain.

For years, Y has been engaged in the parallel importation of famous brands, including shoes carrying the foreign brand MAGIC. Exclusive distributor X demands that Y cease importation because of his appointment as exclusive distributor of MAGIC shoes in the Philippines. Y counters that the trademark MAGIC is not registered with the Intellectual Property Office as a trademark and therefore no one has the right to prevent its parallel importation. Who is correct? Why?

The Supreme Court has held that fraud is an exception to the “independence principle” governing letters of credit. Explain this principle and give an example of how fraud can be an exception.

An importer of Christmas toys loaded 100 boxes of Santa Claus talking dolls aboard a ship in Korea bound for Manila. With the intention of smuggling one-half of his cargo, he took a bill of lading for only 50 boxes. On the voyage to Manila, 50 boxes were jettisoned to save the more precious cargo. What are the types of averages in marine commerce?

An importer of Christmas toys loaded 100 boxes of Santa Claus talking dolls aboard a ship in Korea bound for Manila. With the intention of smuggling one-half of his cargo, he took a bill of lading for only 50 boxes. On the voyage to Manila, 50 boxes were jettisoned to save the more precious cargo. Is the importer entitled to receive any indemnity for average? Explain.

While vacationing in Boracay, Valentino surreptitiously took photographs of his girlfriend Monaliza in her skimpy bikini. Two weeks later, her photographs appeared in the Internet and in a national celebrity magazine. Monaliza found out that Valentino had sold the photographs to the magazine and, adding insult to injury, uploaded them to his personal blog on the Internet. Does Monaliza have any cause of action against Francesco? Explain.

While vacationing in Boracay, Valentino surreptitiously took photographs of his girlfriend Monaliza in her skimpy bikini. Two weeks later, her photographs appeared in the Internet and in a national celebrity magazine. Monaliza found out that Valentino had sold the photographs to the magazine and, adding insult to injury, uploaded them to his personal blog on the Internet. Valentino’s friend Francesco stole the photographs and duplicated them and sold them to a magazine publication. Valentino sued Francesco for infringement and damages. Does Valentino have any cause of action? Explain.

While vacationing in Boracay, Valentino surreptitiously took photographs of his girlfriend Monaliza in her skimpy bikini. Two weeks later, her photographs appeared in the Internet and in a national celebrity magazine. Monaliza found out that Valentino had sold the photographs to the magazine and, adding insult to injury, uploaded them to his personal blog on the Internet. Monaliza filed a complaint against Valentino for damages based on, among other grounds, violation of her intellectual property rights. Does she have any cause of action? Explain.

When OCCIDENTAL Bank folded up due to insolvency, Manuel had the following separate deposits in his name: P200,000 in savings deposit; P250,000 in time deposit; P50,000 in a current account; P1 million in a trust account; and P3 million in money market placement. Under the Philippine Deposit Insurance Corporation Act, how much could Manuel recover? Explain.

Paolo, the owner of an ocean-going vessel, offered to transport the logs of Constantino from Manila to Nagoya. Constantino accepted the offer, not knowing that the vessel was manned by an irresponsible crew with deep-seated resentments against Paolo, their employer. Constantino insured the cargo of logs against both perils of the sea and barratry. The logs were improperly loaded on one side, thereby causing the vessel to tilt on one side. On the way to Nagoya, the crew unbolted the sea valves of the vessel causing water to flood the ship hold. The vessel sank. Constantino tried to collect from the insurance company which denied liability, given the unworthiness of both the vessel and its crew. Constantino countered that he was not the owner of the vessel and he could therefore not be responsible for conditions about which he was innocent. What is “barratry” in marine insurance?

Enrique obtained from Seguro Insurance Company a comprehensive motor vehicle insurance to cover his top of the line Aston Martin. The policy was issued on March 31, 2010 and, on even date, Enrique paid the premium with a personal check postdated April 6, 2010. On April 5, 2010, the car was involved in an accident that resulted in its total loss. On April 10, 2010, the drawee bank returned Enrique’s check with the notation “Insufficient Funds.” Upon notification, Enrique immediately deposited additional funds with the bank and asked the insurer to redeposit the check. Enrique thereupon claimed indemnity from the insurer. Is the insurer liable under the insurance coverage? Why or why not?

To secure a loan of P10 million, Mario mortgaged his building to Armando. In accordance with the loan arrangements, Mario had the building insured with First Insurance Company for P10 million, designating Armando as the beneficiary. Armando also took an insurance on the building upon his own interest with Second Insurance Company for P5 million. The building was totally destroyed by fire, a peril insured against under both insurance policies. It was subsequently determined that the fire had been intentionally started by Mario and that in violation of the loan agreement, he had been storing inflammable materials in the building. What happens to the P10 million debt of Mario to Armando? Explain.

To secure a loan of P10 million, Mario mortgaged his building to Armando. In accordance with the loan arrangements, Mario had the building insured with First Insurance Company for P10 million, designating Armando as the beneficiary. Armando also took an insurance on the building upon his own interest with Second Insurance Company for P5 million. The building was totally destroyed by fire, a peril insured against under both insurance policies. It was subsequently determined that the fire had been intentionally started by Mario and that in violation of the loan agreement, he had been storing inflammable materials in the building. How much, if any, can Armando recover from either or both insurance companies?

Your client Dianne approaches you for legal advice on putting up a medium-sized restaurant business that will specialize in a novel type of cuisine. As Dianne feels that the business is a little risky, she wonders whether she should use a corporation as the business vehicle, or just run it as a single proprietorship. She already has an existing corporation that is producing meat products profitably and is also considering the alternative of simply setting up the restaurant as a branch office of the existing corporation. What particular qualifications, if any, are these officers legally required to possess under the Corporation Code?

Your client Dianne approaches you for legal advice on putting up a medium-sized restaurant business that will specialize in a novel type of cuisine. As Dianne feels that the business is a little risky, she wonders whether she should use a corporation as the business vehicle, or just run it as a single proprietorship. She already has an existing corporation that is producing meat products profitably and is also considering the alternative of simply setting up the restaurant as a branch office of the existing corporation. If you advise your client to use a corporation, what officer positions must the corporation at least have?

Your client Dianne approaches you for legal advice on putting up a medium-sized restaurant business that will specialize in a novel type of cuisine. As Dianne feels that the business is a little risky, she wonders whether she should use a corporation as the business vehicle, or just run it as a single proprietorship. She already has an existing corporation that is producing meat products profitably and is also considering the alternative of simply setting up the restaurant as a branch office of the existing corporation. Briefly explain to your client what you see as the legal advantages and disadvantages of using a separate corporation, a single proprietorship, or a branch of an existing corporation for the proposed restaurant business.

Marlon deposited with LYRIC Bank a money market placement of P1 million for a term of 31 days. On maturity date, one claiming to be Marlon called up the LYRIC Bank account officer and instructed him to give the manager’s check representing the proceeds of the money market placement to Marlon’s girlfriend Ingrid. The check, which bore the forged signature of Marlon, was deposited in Ingrid’s account with YAMAHA Bank. YAMAHA Bank stamped a guaranty on the check reading: “All prior endorsements and/or lack of endorsement guaranteed.” Upon presentment of the check, LYRIC Bank funds the check. Days later, Marlon goes to LYRIC Bank to collect his money market placement and discovers the foregoing transactions. Marlon thereupon sues LYRIC Bank which in turn files a third-party complaint against YAMAHA Bank. Discuss the respective rights and liabilities of the two banks.

Union Mines, Inc. has total assets of P60 million with 210 stockholders holding at least 100 shares each. The company has two principal stockholders, ABC which owns 60% of the shares of stock, and XYZ which owns 17%. ABC in turn is owned to the extent of 21.31% by Acme, Inc.; 29.69% by Golden Boy, Inc.; 9% by XYZ; and the rest by individual stockholders. None of the parties is a publicly-listed company. XYZ now proposes to buy Acme’s and Golden Boy’s shares in ABC, which would give it direct control of ABC and indirect control of Union Mines. Is the proposed acquisition by XYZ subject to the mandatory tender offer rule? Why or why not? What is a tender offer and when is it mandatory?

Can an article of commerce serve as a trademark and at the same time enjoy patent and copyright protection? Explain and give an example.

Enumerate three (3) stipulations that are prohibited in technology transfer agreements.

What contractual stipulations are required in all technology transfer agreements?

Venezia is a famous international fashion chain with outlets in Makati, Ortigas, and Manila. It has complied with the minimum capitalization required under the Retail Trade Nationalization Act and carries on retail business worth more than $3 million for each of its outlets. As its Manila outlet is not doing very well, it decides to sell all of its business there consisting of remaining inventory, furniture and fixtures and other assets to its competitor. What are the legal consequences of a failure to comply with the requirements of the Bulk Sales Law?

Venezia is a famous international fashion chain with outlets in Makati, Ortigas, and Manila. It has complied with the minimum capitalization required under the Retail Trade Nationalization Act and carries on retail business worth more than $3 million for each of its outlets. As its Manila outlet is not doing very well, it decides to sell all of its business there consisting of remaining inventory, furniture and fixtures and other assets to its competitor. If instead of selling its Manila outlet, Venezia merely mortgages its assets there, would it need to comply with the requirements of the Bulk Sales Law?

Venezia is a famous international fashion chain with outlets in Makati, Ortigas, and Manila. It has complied with the minimum capitalization required under the Retail Trade Nationalization Act and carries on retail business worth more than $3 million for each of its outlets. As its Manila outlet is not doing very well, it decides to sell all of its business there consisting of remaining inventory, furniture and fixtures and other assets to its competitor. Venezia’s Manila outlet constitutes one-third (1/3) of its total business. Should it comply with the requirements of the Bulk Sales Law? Why or why not?

Andante Realty, a marketing company that promotes and facilitates sales of real property through leverage marketing, solicits investors who are required to be a Business Center Owner (BCO) by paying an enrollment fee of $250. The BCO is then entitled to recruit two other investors who pay $250 each. The BCO receives $90 from the $250 paid by each of his recruits and is credited a certain amount for payments made by investors through the initial efforts of his Business Center. Once the accumulated amount reaches $5,000, the same is used as down payment for the real property chosen by the BCO. What are the legal consequences of failure to follow this procedure?

Andante Realty, a marketing company that promotes and facilitates sales of real property through leverage marketing, solicits investors who are required to be a Business Center Owner (BCO) by paying an enrollment fee of $250. The BCO is then entitled to recruit two other investors who pay $250 each. The BCO receives $90 from the $250 paid by each of his recruits and is credited a certain amount for payments made by investors through the initial efforts of his Business Center. Once the accumulated amount reaches $5,000, the same is used as down payment for the real property chosen by the BCO. What procedure must be followed under the Securities Regulation Code to authorize the sale or offer for sale or distribution of an investment contract?

Andante Realty, a marketing company that promotes and facilitates sales of real property through leverage marketing, solicits investors who are required to be a Business Center Owner (BCO) by paying an enrollment fee of $250. The BCO is then entitled to recruit two other investors who pay $250 each. The BCO receives $90 from the $250 paid by each of his recruits and is credited a certain amount for payments made by investors through the initial efforts of his Business Center. Once the accumulated amount reaches $5,000, the same is used as down payment for the real property chosen by the BCO. Does this multi-level marketing scheme constitute an “investment contract” under the Securities Regulation Code? Define an “investment contract.”

Why are banks required to maintain reserves against their deposits and deposit substitutes? State one of three purposes for these reserves.

Differentiate “bank deposits” from “deposit substitutes.”

Is a stipulation in the contract for the use of a safety deposit box relieving the bank of liability in connection with the use thereof valid?

How do you characterize the legal relationship between a commercial bank and its safety deposit box client?

Briefly describe the following types of banks: (2% each) A. universal bank; B. commercial bank; C. thrift bank; D. rural bank; E. cooperative bank.

Paolo, the owner of an ocean-going vessel, offered to transport the logs of Constantino from Manila to Nagoya. Constantino accepted the offer, not knowing that the vessel was manned by an irresponsible crew with deep-seated resentments against Paolo, their employer. Constantino insured the cargo of logs against both perils of the sea and barratry. The logs were improperly loaded on one side, thereby causing the vessel to tilt on one side. On the way to Nagoya, the crew unbolted the sea valves of the vessel causing water to flood the ship hold. The vessel sank. Constantino tried to collect from the insurance company which denied liability, given the unworthiness of both the vessel and its crew. Constantino countered that he was not the owner of the vessel and he could therefore not be responsible for conditions about which he was innocent. Is the insurance company liable? Why or why not?

Dr. Nobel discovered a new method of treating Alzheimer’s involving a special method of diagnosing the disease, treating it with a new medicine that has been discovered after long experimentation and field testing, and novel mental isometric exercises. He comes to you for advice on how he can have his discoveries protected. Can he legally protect his new method of diagnosis, the new medicine, and the new method of treatment? If no, why? If yes, how?