1991-1996 bar mercantile questions

7/26/2019 1991-1996 BAR Mercantile Questions

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1996 BAR EXAMINATION

1. a) What are the requisites of a negotiable instrument?b) When is notice of dishonor not required to be given to the drawer?c) What constitutes a holder in course?d) What are the effects of crossing a check?

Answer:a) The requisites of a negotiable instrument are as follows:

1. It must be in writing and signed by the maker or drawer!. It must contain an unconditional "romise or order to "ay a sum certain in money#. It must be "ayable to order or to bearer and$. Where the instrument is addressed to a drawee% he must be named or otherwise

indicated therein with reasonable certainty.

b) &otice of dishonor not required to be given to the drawer in any of the following cases:

1. Where the drawer and the drawee are the same "erson!. When the drawee is a fictitious "erson or a "erson not having ca"acity to contract#. When the drawer is the "erson to whom the instrument is "resented for "ayment$. Where the drawer has no right to e'"ect or require that the drawee or acce"tor will

honor the instrument(. Where the drawer has countermanded "ayment

c) holder in due course is one who has taken the instrument under the followingconditions:

1. That it is com"lete and regular u"on its face

!. That he became a holder of it before it was overdue and without notice that t hadbeen "reviously dishonored% if such was the fact

#. That he took it in good faith and for value$. That at the time it was negotiated to him% he had no notice of any infirmity in the

instrument or defect in the title of the "erson negotiating it.

d) The effects of crossing a check are as follows:

1. The check may not be encashed but only de"osited in a banks!. The check may be negotiated only once to one who has an account with a bank#. The act of crossing a check serves as a warning to the holder thereof that the check

has been issued for a definite "ur"ose so that the holder must inquire if he has

received the check "ursuant to that "ur"ose% otherwise he is not a holder in duecourse.

!. a) *n +arch 1% 1,,-% entium /om"any ordered a com"uter from /0 ytes% and issued acrossed check in the amount of #2%222 "ost3dated +arch #1% 1,,-. 4"on recei"t of thecheck% /0 ytes discounted the check with 5und 6ouse.


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*n "ril 1% 1,,-% entium sto""ed "ayment of the check for failure of /0 ytes to deliverthe com"uter. Thus% when 5und 6ouse de"osited the check% the drawee bank dishonored it.

If 5und 6ouse files a com"laint against entium and /0 ytes for the "ayment of thedishonored check% will the com"laint "ros"er? 7'"lain.

Answer:The com"laint filed by 5und 6ouse against entium will not "ros"er but the one

against /0 ytes will. 5und 6ouse is not a holder in due course and% therefore% entiumcan raise the defense of failure of consideration against it. The check in question wasissued by entium to "ay for a com"uter that it ordered from /0 ytes. The com"uternot having been delivered% there was a failure of consideration. The check discountedwith 5und 6ouse by /0 ytes is a crossed check and this should have "ut 5und 6ouseon inquiry. It should have ascertained the title of /0 ytes to the check or the nature ofthe latter8s "ossession. 5ailing in this res"ect% 5und 6ouse is deemed guilty of grossnegligence amounting to legal absence of good faith and% thus% not a holder in duecourse. 5und 6ouse can collect from /0 ytes as the latter was the immediate indorserof the check.

b) 7va issued to Imelda a check in the amount of (2%222 "ost3dated 9e"tember #2% 1,,(%as security for a diamond ring to be sold on commission. *n 9e"tember 1(% 1,,(% Imeldanegotiated the check to +T Investment which "aid the amount of $2%222 to her.

7va failed to sell the ring% so she returned it to Imelda on 9e"tember 1,% 1,,(. 4nable toretrieve her check% 7va withdrew her funds from the drawee bank. Thus% when +TInvestment "resented the check for "ayment% the drawee bank dishonored it. ater on% when+T Investment sued her% 7va raised the defense of absence of consideration% the checkhaving been issued merely as security for the ring that she could not sell.

0oes 7va have a valid defense? 7'"lain.

Answer:

&o% 7va does not have a valid defense. 5irst% +T Investment is a holder in duecourse and% as such% holds the "ost dated check free from any defect of title of "rior"arties and from defenses available to "rior "arties among themselves. 7va can invokethe defense of absence of consideration against +T only if the latter was a "rivy to the"ur"ose for which the checks were issued and% therefore% not a holder in due course.9econd% it is not a ground for the discharge of the "ost3dated check as against a holderin due course that it was issued merely as security. The only grounds for the dischargeof negotiable instruments aw and none of those grounds are available to 7va. The

latter may not unilaterally discharge herself from her liability by mere e'"ediency ofwithdrawing her funds from the drawee bank.

#. a) &ora a""lied for loan of 122%222 with 4; ank. y way of accommodation% &ora8ssister%


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Answer:=es% + ankhonored it. Thereafter% lbert withdrew the !12%222% and closed his account.

When the check was returned to him after a month% William discovered the alteration. >+ank recredited !12%222 to William8s current account% and sought reimbursement from &0ank. &0 ank refused% claiming that >+ ank failed to return the altered check to it withinthe !$3hour clearing "eriod.

Who% as between% >+ ank and &0 ank% should bear the loss? 7'"lain.

Answer:&0 ank should bear the loss if >+ ank returned the altered check to &0 ank

within !$ hours after its discovery of the alteration. 4nder the given facts% Williamdiscovered the alteration when the altered check was returned to him after a month. Itmay safely be assumed that William immediately advised >+ ank of such fact and thatWilliam immediately advised >+ ank of such fact and that the latter "rom"tly notified&0 ank thereafter. / /ircular &o. ,% as amended% on which the decisions of the9u"reme /ourt% in the 6ongkong 9hanghai anking /or"oration v. eo"le8s ank Trust /o. and ;e"ublic ank v. /% et al. were based was e'"ressly cancelled andsu"erseded by the / /ircular &o. #1@% dated 0ecember !#% 1,@2. The latter was in

turn amended by / /ircular &o. (A2% dated 9e"tember 1,% 1,@@. s to the alteredchecks% the new rules "rovide that the drawee bank can still return them even after$:22"m of the ne't day "rovided it does so within !$ hours from discovery of thealteration but in no event beyond the "eriod fi'ed or "rovided by law for filing of a legalaction by the returning bank against the bank sending the same. ssuming that therelationshi" between the drawee bank and the collecting bank is evidenced by somewritten document% the "rescri"tive "eriod would be 12 years.

$. a) Buan "rocured a Cnon3medicalD life insurance from Eood ife Insurance. 6e designed hiswife% etra% as the beneficiary. 7arlier% in his a""lication in res"onse to the question as towhether or not he had ever been hos"italiFed% he answered in the negative. 6e forgot to

mention his confinement at the Gidney 6os"ital.

fter Buan died in a "lane crash% etra filed a claim with Eood ife. 0iscovering Buan8s"revious hos"italiFation% Eood ife reHected etra8s claim on the ground of concealment andmisre"resentation. etra sued Eood ife% invoking good faith on the "art of Buan.

Will etra8s suit "ros"er? 7'"lain.


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Answer:&o. etra8s suit will not "ros"er assuming that the "olicy of life insurance has

been in force for a "eriod of less than ! years from the date of its issue). The matterswhich Buan failed to disclose was material and relevant to the a""roval and issuance ofthe insurance "olicy. They would have affected Eood ife8s action on his a""lication%either by a""roving it with the corres"onding adHustment for a higher "remium or

reHecting the same. +oreover% a disclosure may have warranted a medical e'aminationof Buan by Eood ife in order for it to reasonably assess the risk involved in acce"tingthe a""lication. In any case% good faith is no defense in concealment. The waiver of amedical e'amination in the Cnon3medicalD life insurance from Eood ife makes it evenmore necessary that Buan su""ly com"lete information about his "revious hos"italiFationfor such information constitutes an im"ortant factor which Eood ife takes intoconsideration in deciding whether to issue the "olicy or not.

If the "olicy of life insurance has been in force for a "eriod of ! years or morefrom the date of its issue on which "oint the given facts are vague) then Eood ife canno longer "rove that the "olicy is void ab initio or is rescindable by reason of thefraudulent concealment or misre"resentation of Buan.

b) ;/ /or"oration "urchased from Thailand% which it intended to sell locally. 0ue to stormyweather% the shi" carrying the rice became submerged in sea water and with it the ricecargo. When the cargo arrived in +anila% ;/ filed a claim for total loss with the insurer%because the rice was no longer fit for human consum"tion. dmittedly% the rice could still beused as animal feed.

Is ;/8s claim for total loss Hustified? 7'"lain.

Answer:=es% ;/8s claim for total loss is Hustified. The rice% which was im"orted from

Thailand for sale locally% is obviously intended for consum"tion by the "ublic. Thecom"lete "hysical destruction of the rice is not essential to constitute an actual loss.9uch a loss e'ists in this case since the rice% having been soaked in sea water andthereby rendered unfit for human consum"tion% has become totally useless for the"ur"ose for which it was im"orted.

(. a) ;obin insured his building against fire with 75E ssurance. The insurance "olicycontained the usual sti"ulation that any action or suit must be filed within 1 year after thereHection of the claim.

fter his building burned down% ;obin filed his claim for fire loss with 75E. *n 5ebruary !A%

1,,$% 75E denied ;obin8s claim. *n "ril #% 1,,$% ;obin sought reconsideration of thedenial% but 75E reiterated its "osition. *n +arch !2%1,,(% ;obin commenced Hudicial actionagainst 75E.

9hould ;obin8s action be given due course? 7'"lain.

Answer:&o% ;obin8s action should not be given due course. 6is filing of the request for

reconsideration did not sus"end the running of the "rescri"tive "eriod of 1 year


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sti"ulated in the insurance "olicy. Thus% when ;obin commenced Hudicial action against75E on +arch !2% 1,,(% his ability to do so had already "rescribed. The 1 year "eriod iscounted from 5ebruary !A% 1,,$ when 75E denied ;obin8s claim% not from the date"resumably after "ril #% 1,,$) when 75E reiterated its "osition denying ;obin8s claim.The reason for this rule is to insure that claims against insurance com"anies are"rom"tly settled and that insurance suits are brought by the insured while the evidence

as to the origin and cause of the destruction has not yet disa""eared.

b) While driving his car along 709% /esar sideswi"ed ;oberto% causing inHuries to thelatter. ;oberto sued /esar and the third "arty liability insurer for damages andJor insurance"roceeds. The insurance com"any moved to dismiss the com"laint% contending that theliability of /esar has not yet been determined with finality.

1. Is the contention of the insurer correct? 7'"lain.!. +ay the insurer be held liable with /esar?

Answer:

1. &o% the contention of the insurer is not correct. There is no need to wait for thedecision of the court determining /esar8s liability with finality before the third "artyliability insurer could be sued. The occurrence of the inHury to ;oberto immediatelygave rise to the liability of the insurer under its "olicy. In other words% where aninsurance "olicy insures directly against liability% the insurer8s liability accruesimmediately u"on the occurrence of the inHury or event u"on which the liabilityde"ends.

!. The insurer cannot be held solidarily liable with /esar. The liability of the insurer isbased on contract while that of /esar is based on tort. If the insurer were solidarilyliable with /esar% it could be made to "ay more than the amount stated in the "olicy.This would% however% be contrary to the "rinci"les underlying insurance contracts. *n

the other hand% if the insurer were solidarily liable with /esar and it is made to "ayonly u" to the amount stated in the insurance "olicy% the "rinci"les underlyingsolidary obligations would be violated.

-. a) What are the rights of a stockholder?

Answer:The rights of a stockholder are as follows:

1. The right to vote% including the right to a""oint a "ro'y!. The right to share in the "rofits of the cor"oration% including the right to declare stock

dividends#. The right to "ro"ortionate share of the assets of the cor"oration u"on liquidation$. The right of a""raisal(. The "reem"tive right to shares-. The right to ins"ect cor"orate books and records@. The right to elect directorsA. 9uch other rights as may contractually be granted to the stockholders by the

cor"oration or by s"ecial law.


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b) When may a cor"orate director% trustee or officer be held "ersonally liable with thecor"oration?

Answer: cor"orate director% trustee or officer be held "ersonally liable with the

cor"oration under the following circumstances:

1. When he assents to a "atently unlawful act of the cor"oration!. When he acts in bad faith or with gross negligence in directing the affairs of the

cor"oration% or in conflict with the interest of the cor"oration% its stockholders or other"ersons

#. When he consents to the issuance of watered stocks or who% having knowledgethereof% does not forthwith file with the cor"orate secretary his written obHectionthereto

$. When he agrees to hold himself "ersonally and solidarily liable with the cor"orationor

(. When he is made% by s"ecific "rovision of law% to "ersonally answer for the cor"orate

action.

a) When may a cor"oration invest its funds in another cor"oration or business or for anyother "ur"oses?

Answer: cor"oration may invest its funds in another cor"oration or business or for any

"ur"ose other than the "rimary "ur"ose for which it was organiFed when the saidinvestment is a""roved by a maHority of the oard of 0irectors and such a""roval isratified by the stockholders re"resenting at least !J# of the outstanding ca"ital. Writtennotice of the "ro"osed investment and the date% time and "lace of the stockholders8

meeting at which such "ro"osal will be taken u" must be sent to each stockholder.

b) +ay a cor"oration enter into a Hoint venture?

Answer: cor"oration may enter into a Hoint venture. 6owever% inasmuch as the term Hoint

venture has no "recise legal definition% it may take various forms. It could take the formof a sim"le "ooling of resources not involving incor"oration) between ! or morecor"orations for a s"ecific "roHect% "ur"ose or undertaking% or for a limited time. It mayinvolve the creation of a more formal structure and% hence% the formation of acor"oration. If the Hoint venture would involve the creation of a "artnershi"% as the term is

understood under the /ivil /ode% then a cor"oration cannot be a "arty to it.

@. a) eonardo is the /hairman and resident% while ;a"hael is a 0irector of &T /or"oration.*n one occasion% &T /or"oration% re"resented by eonardo% and 7nter"rises% a single"ro"rietorshi" owned by ;a"hael% entered into a dealershi" agreement whereby &T/or"oration a""ointed 7nter"rises as e'clusive distributor of its "roducts in &orthernuFon.


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b) ;odman% the resident of T5 /or"oration wrote a letter to Eregorio% offering to sell to thelatter (%222 bags of fertiliFer at 122 "er bag. Eregorio signed his conformity to the letter3offer% and "aid a down "ayment of (2%222. few days later% the /or"orate 9ecretary of T5informed Eregorio of the decision of the oard of 0irectors not to ratify the letter3offer.6owever% since Eregorio had already "aid the down "ayment% T5 delivered the (22 bags offertiliFer which Eregorio acce"ted. T5 made it clear that the delivery should be considered

an entirely new transaction. Thereafter% Eregorio sought enforcement of the letter3offer.

Is there a binding contract for the (%222 bags of fertiliFer? 7'"lain.

Answer:&o% there is no binding contract for the (%222 bags of fertiliFers. 5irst% the facts do

not indicate that ;odman% the resident of T5 /or"oration% was authoriFed by the oardof 0irectors to enter into the said contract or that he was em"owered to do so undersome "rovision of the by3laws of T5. The facts do not also indicate that ;odman hasbeen clothed with the a""arent "ower to e'ecute the contract or agreements similar to it.9econd% T5 has s"ecifically informed Eregorio that it has not ratified the contract for thesale of (%222 bags of fertiliFer and that the delivery to Eregorio of (22 bags% which

Eregorio acce"ted% is an entirely new transaction.

,. a) 7 /or"oration sold its assets to +% Inc. after com"lying with the requirements of the ulk9ales aw. 9ubsequently% one of the creditors of 7 /or"oration tried to collect the amountdue it% but found out that 7 /or"oration had no more assets left. The creditor then sued +%Inc. on the theory that +% Inc. is a mere alter ego of 7 /or"oration.

Will the suit "ros"er? 7'"lain.

Answer:The suit will not "ros"er. The sale by 7 /or"oration of its assets to +% Inc. does

not result in the transfer of the liabilities of the latter to% nor in the assum"tion thereof bythe former. The facts given do not indicate that such transfer or assum"tion took "lace orwas sti"ulated u"on by the "arties in their agreement. 5urthermore% the sale by 7/or"oration of its assets is a sale of its "ro"erty. It does not involve the sale of theshares of stock of the cor"oration belonging to its stockholder. There is% therefore% nomerger or consolidation that took "lace. 7 /or"oration continues to e'ist and remainsliable to the creditor.

b) ;ichard owns ,2K of the shares of the ca"ital stock of E*+ /or"oration. *n oneoccasion% E*+ /or"oration% re"resented by ;ichard as resident and Eeneral +anager%e'ecuted a contract to sell a subdivision lot in favor of Tomas. 5or failure of E*+

/or"oration to develo" the subdivision% Tomas filed an action for rescission and damagesagainst E*+ /or"oration and ;ichard.

Will the action "ros"er? 7'"lain.

Answer:The action may "ros"er against E*+ /or"oration but definitely not against

;ichard. ;ichard has a legal "ersonality se"arate and distinct from that of E*+/or"oration. If he signed the contract to sell% he did so as the resident and Eeneral


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+anager of E*+ /or"oration and not in his "ersonal ca"acity. +ere ownershi" by;ichard of ,2K of the ca"ital stock of E*+ /or"oration is not of itself sufficient groundto disregard his se"arate legal "ersonality absent a showing% for e'am"le% that he actedmaliciously or in bad faith.

12. a) 0efine securities.

Answer:9tocks% bonds% notes% convertible debentures% warrants or other documents that

re"resent a share in a com"any or debt owed by a com"any or government entity.7vidences of obligations to "ay money or rights to "artici"ate in earnings and distributionof cor"orate assets. Instruments giving to their legal holders rights to money or other"ro"erty they are therefore instruments which have intrinsic value and are recogniFedand used as such in the regular channels of commerce.

b) What is the original and e'clusive Hurisdiction of the 97/?

Answer: The 97/ has original and e'clusive Hurisdiction over case involving:

1. 0evices or schemes amounting to fraud and misre"resentation!. /ontroversies arising out of intra3cor"orate or "artnershi" relations#. /ontroversies in the election or a""ointment of directors% officers% etc.$. etitions to be declared in the state of sus"ension of "ayment.

11. a) In 1,@2% +agno Hoined +0 /or"oration as a Bunior ccountant. 6e steadily rose fromthe ranks until he became +08s 7'ecutive


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of the "erquisites of his elective "osition% hence% intimately linked with his relations withthe cor"oration.

b) Bennifer and Eabriel owned the controlling stocks in +55 /or"oration and /*% Inc.% bothfamily cor"orations. 0ue to serious disagreements% Bennifer assigned all her shares in +55

/or"oration to Eabriel% while Eabriel assigned all his shares in /*% Inc. to Bennifer.9ubsequently% Bennifer and /*% Inc.% filed a com"laint against Eabriel and +55/or"oration in the 97/% seeking to recover the cor"orate records and funds of /*% Inc.%which Eabriel allegedly refused to turn over% and which remained in the offices of +55/or"oration.

Is there an intra3cor"orate controversy in this case? 7'"lain.

Answer:=es% there is an intra3cor"orate controversy in this case. The fact that% when the

com"laint against Eabriel and +55 /or"oration was filed with the 97/% Bennifer and/*% Inc. were no longer stockholders of +55 /or"oration did not divest the 97/ of its

Hurisdiction over the case inasmuch as Bennifer was a former stockholder of +55/or"oration and the controversy arose out of this relation.

1!. a) With a ca"ital of ,!%222% +aria o"erates a stall in the "ublic market. 9he manufacturessoa" that she sells to the general "ublic. 6er common law husband% +a ee% who has a"ending "etition for naturaliFation% occasionally finances the "urchase of goods for resale%and assist in the management of business.

Is there a violation of the ;etail trade aw? 7'"lain.

Answer:

&o% there is no violation of the ;etail Trade aw. +aria is a manufacturer whosells to the general "ublic% through her stall in the "ublic market% the soa" which shemanufactures. Inasmuch as her ca"ital does not e'ceed (%222 then she is consideredunder 9ec.$ a) of the ;etail Trade aw as not engaged in the Cretail businessD.Inasmuch as +aria8s business is not a Cretail business%D then the requirement in 9ection1 of the ;etail Trade aw that only hili""ine nationals shall engage % directly orindirectly% in the retail business is ina""licable. 5or this reason% the "artici"ation of +aee in the management of the business would not be a violation of the ;etail Trade awin relation to the nti30ummy aw.

b) 7% Inc.% a domestic cor"oration with the foreign equity% manufactures electric generators%

and sells them to the following customers: a) government offices which use the generatorsduring brownouts to render "ublic service% b) agricultural enter"rises which utiliFe thegenerators as back u" in the "rocessing of goods% c) factories% and d) its own em"loyees.

Is 7 engaged in retail trade? 7'"lain.

Answer:The sale by 7 of generators to government offices agricultural enter"rises and

factories are outside the sco"e of the term Cretail businessD and may% therefore% be made


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by the said cor"oration. 6owever% sales of generators by 7 to its own em"loyeesconstitute retail sales and are "roscribed. 4nder the amendment to the ;etail Trade awintroduced by 0 @1$% the term Cretail business shall not include a manufacturer suchas 7) selling to industrial and commercial users or consumers who use the "roductsbought by them to render service to the general "ublic e.g. the government offices)andJor to "roduce or manufacture goods which are in turn sold by them e.g.% the

agricultural enter"rises and factories).

1#. a) 0efine a common carrier?

Answer: common carrier is a "erson% cor"oration% firm or association engaged in the

business of carrying or trans"orting "assengers or goods or both% by land% water or airfor com"ensation% offering its services to the "ublic.

b) What is the test for determining whether or not one is a common carrier?

Answer:The test for determining whether or not one is a common carrier is whether the

"erson or entity% for some business "ur"ose and with general or limited clientele% offersthe service of carrying or trans"orting "assengers or goods or both for com"ensation.

1$. a) + Trucking% a small com"any% o"erates ! trucks for hire on selective basis. It caters toonly a few customers% and its trucks do not make regular or scheduled tri"s. It does not evenhave a certificate of "ublic convenience.

*n one occasion% ;eynaldo contracted + to trans"ort% for a fee% 122 sacks of rice from

+anila to Tarlac. 6owever% + failed to deliver the cargo% because its truck was hiHackedwhen the driver sto""ed in ulacan to visit his girlfriend.

1. +ay ;eynaldo hold + liable as a common carrier? 7'"lain.!. +ay + set u" the hiHacking as a defense to defeat ;eynaldo8s claim?

Answer:1. ;eynaldo may hold + liable as a common carrier. The facts that + o"erates only

! trucks for hire on a selective basis% caters only to a few customers% does not makeregular or scheduled tri"s% and does not have a certificate of "ublic convenience areof no moment as the law i) does not distinguish between one whose "rinci"albusiness activity is the carrying of "ersons or goods or both and one who does such

carrying only as an ancillary activity% ii) avoids making any distinction between a"erson or enter"rise offering trans"ortation service on a regular or scheduled basisand one offering such service on an occasional% e"isodic or unscheduled basis% andiii) refrains from the general "ublic and one who offers services or solicits businessonly from a narrow segment of the general "o"ulation.

!. + may not set u" the hiHacking as a defense to defeat ;eynaldo8s claim as the factsgiven do not indicate that the same was attended by the use of grave or irresistible


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threat% violence or force. It would a""ear that the truck was left unattended by itsdriver and was taken while he was visiting his girlfriend.

b) bus of E Transit on its way to 0avao sto""ed to enable a "assenger to alight. t thatmoment% 9antiago% who had been waiting for a ride% boarded the bus. 6owever% the bus

driver failed to notice 9antiago who was still standing on the bus "latform% and ste""ed onthe accelerator. ecause of the sudden motion% 9antiago sli""ed and fell down% sufferingserious inHuries.

+ay 9antiago hold E Transit liable for breach of contract of carriage? 7'"lain.

Answer:9antiago may hold E liable for breach of contract of carriage. It was the duty of

the driver% when he sto""ed the bus% to do no act that would have the effect of increasingthe "eril to a "assenger such as 9antiago while he was attem"ting to board the same.When a bus is not in motion there is no necessity for a "erson who wants to ride thesame to signal his intention to board. "ublic utility bus% once it sto"s% is in effect making

a continuous offer to bus riders. It is the duty of common carriers of "assengers to sto"their conveyances for a reasonable length of time in order to afford "assengers ano""ortunity to board and enter% and they are liable for inHuries suffered by boarding"assengers resulting from the sudden starting u" or Herking of their conveyances whilethey are doing so. 9antiago% by ste""ing and standing on the "latform of the bus% isalready considered a "assenger and is entitled to all the rights and "rotection "ertainingto a contract of carriage.

1(. a) What is the distinction between infringement and unfair com"etition?

Answer:

The distinction between infringement "resumably of trademark) and unfaircom"etition are as follows:1. Infringement of a trademark is the unauthoriFed use of a trademark% whereas unfair

com"etition is the "assing off of one8s goods as those of another!. 5raudulent intent is unnecessary in infringement of trademark% whereas fraudulent

intent is essential in unfair com"etition#. The "rior registration of the trademark is a "rerequisite to an action for infringement

of trademark% whereas registration of the trademark is not necessary in unfaircom"etition.

b) What is the Ctest of dominancyD?

Answer:The test of dominancy requires that if the com"eting trademark contains the main

or essential features of another and confusion and dece"tion is likely to result%infringement takes "lace. 0u"lication or imitation is not necessary nor is it necessarythat the infringing label should suggest an effort to imitate. 9imilarity in siFe% form andcolor% while relevant% is not conclusive.


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a) & /or"oration manufactures rubber shoes under the trademark CBordannD which hit thehili""ine +arket in 1,A(% and registered its trademark with the ureau of atents%Trademarks and Technology Transfer TTT) in 1,,2. G /om"any also manufacturesrubber shoes with the trademark CBavorskiD which it registered with the TTT in 1,@A.

In 1,,!% G /om"any ado"ted and co"ied the design of & /or"oration8s CBordannD

rubber shoes% both as to sha"e and color% but retained the trademark CBavorskiD on its"roducts.

+ay G /om"any be held liable to & /or"oration? 7'"lain.

Answer:G may be held liable for unfairly com"eting against & /or"oration. y

co"ying the design% sha"e and color of &8s CBordannD rubber shoes and using thesame in its rubber shoes trademarked CBavorskiD% G is obviously trying to "assoff its shoes for those of &. it is of no moment that the trademark CBavorskiD wasregistered ahead of the trademark CBordannD. riority in registration is notmaterial in an action for infringement of trademark. The basis of an action for

unfair com"etition is confusing and misleading similarly in general a""earance%not similarity of trademarks.

1-. 5inding a !$3month "ayment "lan attractive% nHo "urchased a Tamaraw 5> from ToyotaLueFon /ity. 6e "aid a down "ayment of 122%222% and obtained financing for the balancefrom I*4 /om"any. 6e e'ecuted a chattel mortgages over the vehicle in favor of I*4.When nHo defaulted% I*4 foreclosed the chattel mortgage% and sought to recover thedeficiency.

+ay I*4 still recover the deficiency? 7'"lain.

Answer:I*4 may no longer recover the deficiency. 4nder rticle 1$A$ of the /ivil /ode% in a

contract of sale of "ersonal "ro"erty the "rice of which is "ayable in installments% the vendormay% among several o"tions% foreclose the chattel mortgage on the thing sold% if one hasbeen constituted% should the vendee8s failure to "ay cover ! or more installments. In suchcase% however% the vendor shall have no further action against the "urchaser to recover anyun"aid balance of the "rice and any agreement to the contrary is void. While the given factsdid not e'"licitly state that nHo8s failure to "ay covered ! or more installments% this maysafely be "resumed because the right of I*4 to foreclose the chattel mortgage under thecircumstances is "remised on nHo8s failure to "ay ! or more installment. The foreclosurewould not have been valid if it were not so.

1@. *& Bune 1-% 1,,(%


14/63

Answer:The Hudgment obtained by


15/63

Question No. 1:

1. What requirements must be met before a certificate of "ublic convenience may be grantedunder the ublic 9ervice ct?

!. What is the "rescri"tive "eriod for actions involving lost or damaged cargo under the/arriage of Eoods by 9ea ct?

#. 4nder the ;evised 9ecurities ct% it is unlawful for an insider to sell or buy a security of theissuer if he knows a fact or s"ecial significance with res"ect to the issuer or the security thatis not generally available% without disclosing such fact to the other "arty.

a. What does the term CinsiderD mean as used in the ;evised 9ecurities ct?b. When is a fact considered to be Cof s"ecial significanceD under the same ct?c. What are the liabilities of a "erson who violates the "ertinent "rovisions of the ;evised

9ecurities ct regarding the unfair use of inside information?

Answer:1. The following are the requirements for the granting of a certificate of "ublic convenience% to

wit:

a) The a""licant must be a citiFen of the hili""ines% or a cor"oration% co3"artnershi" orassociation organiFed under the laws of the hili""ines and at least -2K of the stockor "aid3u" ca"ital of which must belong to citiFens of the hili""ines.

b) The a""licant must "rove "ublic necessity.c) The a""licant must "rove that the o"eration of the "ublic service "ro"osed and the

authoriFation to do business will "romote the "ublic interest in a "ro"er and suitablemanner.

d) The a""licant must be financially ca"able of undertaking the "ro"osed service and

meeting the res"onsibilities incident to its o"eration.

!. *ne 1) year after delivery of the goods or the date when the goods should have beendelivered.

#. a) CInsiderD means 1) the issuer% !) a director or officer of or a "erson controlling% controlledby% or under common control with% the issuer% #) a "erson whose relationshi" or formerrelationshi" to the issuer gives or gave him access to a fact of s"ecial significance about theissuer or the security that is not generally available% or $) a "erson who learns such a factfrom any of the foregoing insiders with knowledge that the "erson from whom he learns thefacts is such an insider.

b) It is one which% in addition to being material% would be likely to affect the market "riceof a security to a significant e'tent on being made generally available% or one which areasonable "erson would consider es"ecially im"ortant under the circumstances indetermining his course of action in the light of such factors as the degree of itss"ecificity% the e'tent of its difference from information generally available "reviously% andits nature and reliability.


16/63

c) The "erson may be liable to 1) a fine of not less than (%222 nor more than(22%222% or !) im"risonment of not less than @ years nor more than !1 years% #) orboth such fine and im"risonment in the discretion of the court.

If the offender is a cor"oration% "artnershi"% association or other Huridical entity% the"enalty shall be im"osed u"on the officers of the cor"oration% etc. res"onsible for the

violation. nd if such an officer is an alien% he shall% in addition to the "enalties"rescribed% be de"orted without further "roceedings after service of sentence.

Question No. 2:

;onald 9ham doing business under the name of 96+;*& +acineries 96+;*&)sold to Turtle +ercantile T4;T7) a diesel farm tractor. In "ayment% T4;T78s resident and+anager 0ick 9eldon issued a check for (2%222 in favor of 96+;*&. week after% T4;T7sold the tractor to riccio Industries ;I//I*) for -2%222. ;I//I* discovered that theengine of the tractor was reconditioned so he refused to "ay T4;T7. s a result% 0ick 9eldonordered Csto" "aymentD of the check issued to 96+;*&.

96+;*& sued T4;T7 and 0ick 9eldon. 96+;*& obtained a favorable Hudgmentholding co3defendants T4;T7 and 9eldon Hointly and severally liable.

/omment on the decision of the trial court. 0iscuss fully.

Answer:The trial court erred in holding 0ick% resident and Eeneral +anager of Turtle% Hointly and

severally liable with T4T;T7.

In issuing the check issued to 96+;*& and% thereafter% sto""ing "ayment thereof%9eldon was acting in his ca"acity as an officer of T4;T7. 6e was not acting in his "ersonalca"acity. 5urthermore% no facts have been "rovided which would indicate that the action of

9eldon was dictated by an intent to defraud 96+;*& by himself or in collusion with T4;T7.6aving acted in what he considered as his duty as an officer of the cor"oration% 9eldon shouldnot be held "ersonally liable.

Question No. 3:

/hito 9antos is a director of both latinum /or"oration TI&4+) and GWIG 9ilver/or"oration GWIG). 6e owns 1K of the outstanding ca"ital stock of TI&4+ and $2K ofGWIG. TI&4+ "lans to enter into a contract with GWIG that will make both com"anies earnvery substantial "rofits. The contract is "resented at the res"ective board meetings ofTI&4+ and GWIG.

1. In order that the contract will not be voidable% what conditions will have to be com"lied with?7'"lain.

!. If these conditions are not met% how may this contract be ratified? 7'"lain.

Answer:1. t the meeting of the oard of 0irectors of TI&4+ to a""rove the contract% /hito

9antos would have to make sure that:


17/63

a) 6is "resence as director at the meeting is not necessary to constitute a quorum forsuch meeting

b) 6is vote is not necessary for the a""roval of the contract andc) The contract is fair and reasonable under the circumstances.

t the meeting of the oard of 0irectors of GWIG to a""rove the contract% /hito would have

to make sure that:

a) There is no fraud involved andb) The contract is fair and reasonable under the circumstances.

!. If the conditions relating to quorum and required number of votes are not met% the contractmust be ratified by the vote of stockholders re"resenting at least !J# of the outstandingca"ital stock in a meeting called for the "ur"ose.

5urthermore% the adverse interest of /hito in the contract must be disclosed and thecontract is fair and reasonable.

Question No. 4:

9tikki /ement /or"oration 9TIGGI) was organiFed "rimarily for cement manufacturing.ntici"ating substantial "rofits% its resident "ro"osed that 9TIGGI invest in a) a "ower "lant"roHect% b) a concrete road "roHect% and c) quarry o"erations for limestone used in themanufacture of cement.

1. What cor"orate a""rovals or votes are needed for the "ro"osed investments? 7'"lain.!. 0escribe the "rocedure in securing these a""rovals.

Answer:1. 4nless the "ower "lant and the concrete road "roHect are reasonably necessary to the

manufacture of cement by 9TIGGI and they do not a""ear to be so)% then the a""roval ofthe said "roHects by a maHority of the oard of 0irectors and the ratification of such a""rovalby the stockholders re"resenting at least !J# of the outstanding ca"ital stock would benecessary.

s for the quarry o"erations for limestone% the same is an indis"ensable ingredient in themanufacture of cement and may% therefore% be considered reasonably necessary toaccom"lish the "rimary "ur"ose of 9TIGGI. In such case% only the a""roval of the oard of0irectors would be necessary.

!. a) The "rocedure in securing the a""roval of the oard of 0irectors is as follows:i) notice of meeting of the oard should be sent to all the directors. The notice

should state the "ur"ose of the meeting.ii) t the meeting% each of the "roHect should be a""roved by a maHority of the oard

not merely a maHority of those "resent at the meeting).

b) The "rocedure in securing the a""roval of the stockholders is as follows:i) Written notice of the "ro"osed investment and the time and "lace of the

stockholders8 meeting should be sent to each stockholder at his "lace of residenceas shown on the books of the cor"oration and de"osited to the addressee in the "ostoffice with "ostage "re"aid% or served "ersonally.


18/63

ii) t the meeting% each of the "roHects should be a""roved by the stockholdersre"resenting at least !J# of the outstanding ca"ital stock.

Question No. 5:

;obert% ;ey and en e'ecuted a Hoint venture agreement to form a close cor"oration

under the /or"oration /ode the outstanding ca"ital stock of which the # of them would equallyown. They also "rovided therein that any cor"orate act would need the vote of @2K of theoutstanding ca"ital stock. The terms of the agreement were accordingly im"lemented and thecorres"onding close cor"oration was incor"orated. fter # years% ;obert% ;ey and en could notagree on the business in which to invest the funds of the cor"oration. ;obert wants thedeadlock broken.

1. What are the remedies available to ;obert under the /or"oration /ode to break thedeadlock? 7'"lain.

!. re there any remedies to "revent the "aralyFation of the business available to ;obertunder 0 ,2!3 while the "etition to break the deadlock is "ending litigation? 7'"lain.

Answer:1. ;obert can "etition the 97/ to arbitrate the dis"ute% with such "owers as "rovided in the

/or"oration /ode.!. The 97/ can a""oint a rehabilitation receiver or a management committee.

Question No. 6:

*n *ctober 1!% 1,,#% /helsea 9traights /6797)% a cor"oration engaged in themanufacture of cigarettes% ordered from +oises im !%222 bales of tobacco. /6797 issuedto +oises im ! crossed checks "ostdated +arch 1(% 1,,$ and "ril 1(% 1,,$ in full "aymenttherefor. *n Banuary 1,% 1,,$ +oises im sold to 0ragon Investment 6ouse 0;E*&) at adiscount the ! checks drawn by /6797 in his favor.

+oises im failed to deliver the bales of tobacco as agrees des"ite /67978s demand./onsequently% on +arch 1% 1,,$ /6797 issued a Csto" "aymentD order on the ! checksissued to +oises im. 0;E*&% claiming to be a holder in due course% filed a com"laint forcollection against /6797 for the value of the checks.

;ule on the com"laint of 0;E*&. Eive your legal basis.

Answer:0;E*& cannot collect from /6797. The instruments are crossed checks which

were intended to "ay for the !%222 bales of tobacco to be delivered by +oises im. It wastherefore the obligation of 0;E*& to inquire as to the "ur"ose of the issuance of the !

crossed checks before causing them to be discounted. 5ailure on its "art to make such inquiry%which resulted in its bad faith% 0;E*& cannot claim to be a holder in due course. +oreover%the checks were sold% not endorsed% by him to 0;E*& which did not become a holder in duecourse. &ot being a holder in due course% 0;E*& is subHect to the "ersonal defense on the"art of /6797 concerning the breach of trust on the "art of +oises im in not com"lying withhis obligation to deliver the !%222 bales of tobacco.


19/63

Question No. 7:

le' issued a negotiable "romissory note &) "ayable to enito or order in "ayment ofcertain goods. enito indorsed the & to /elso in "ayment of an e'isting obligation. ater le'found the goods to be defective. While in /elso8s "ossession the & was stolen by 0ennis whoforged /elso8s signature and discounted it with 7dgar% a money lender who did not makeinquiries about the &. 7dgar indorsed the & to 5eli'% a holder in due course. When 5eli'

demanded "ayment of the & from le' the latter refused to "ay. 0ennis could no longer belocated.

1. What are the rights of 5eli'% if any% against le'. ento% /elso and 7dgar? 7'"lain.!. 0oes /elso have nay right against le'% enito and 5eli'? 7'"lain.

Answer:1. 5eli' has no right to claim against le'% enito and /elso who are "arties "rior to the forgery

of /elso8s signature by 0ennis. arties to an instrument who are such "rior to the forgerycannot be held liable by any "arty who became such at or subsequent to the forgery.6owever% 7dgar% who became a "arty to the instrument subsequent to the forgery and whoindorsed the same to 5eli'% can be held liable by the latter.

!. /elso has the right to collect from le' and enito. /elso is a "arty subsequent to the two.6owever% /elso has no right to claim against 5eli' who is a "arty subsequent to /elso.

Question No. :

9un3+oon Insurance issued a ersonal ccident olicy to 6enry 0y with a face value of(22%222. "rovision in the "olicy states that Cthe com"any shall not be liable in res"ect ofbodily inHury consequent u"on the insured "erson attem"ting to commit suicide or willfullye'"osing himself to needless "eril e'ce"t in an attem"t to save human lifeD. - months later%6enry died of a bullet wound in his head. Investigation showed that one evening 6enry was in aha""y mood although he was not drunk. 6e was "laying with his handgun from which he had

"reviously removed its magaFine. 6e "ointed the gun at his sister who got scared. 6e assuredher it was not loaded. 6e then "ointed the gun at his tem"le and "ulled the trigger. The gun firesand 6enry slum"ed dead on the floor.

6enry8s wife% everly% as the designated beneficiary% sought to collect under the "olicy.9un3+oon reHected her claim on the ground that the death of 6enry was not accidental. everlysued the insurer.

0ecide. 0iscuss fully.

Answer:everly can recover the "roceeds of the "olicy from the insurer. The death of the insured

was not due to suicide or willful e'"osure to needless "eril which are the e'ce"ted risks. Theinsured8s act was "urely on act of negligence which is covered by the "olicy and for which theinsured got the insurance for his "rotection. In fact% he removed the magaFine from the gun andwhen he "ointed the gun to his tem"le he did so because he thought that it was safe for him todo so. 6e did so to assure his sister that the gun was harmless. There is none in the "olicy thatwould relieve the insurer of liability for the death of the insured since the death was an accident.


20/63

Question No. 9:

6ouse of iFFa IMM) is the owner and o"erator of a nationwide chain of "iFFa outlets.6ouse of iquor IL4*;) is a retailer of all kinds of liquor.

6ouse of 5oods 5**09) has offered to "urchase all of the outlets% equi"ment% fi'turesand furniture of IMM. 5**09 also offered to "urchase from IL4*; all of its moderately

"riced stock constituting (2K of its total inventory.

oth IMM and IL4*; have creditors. What legal requirements must IMM andIL4*; com"ly with in order for 5**09 to consummate the transactions? 0iscuss fully.

Answer:IMM and IL4*; must "re"are an affidavit stating the names of all their creditors%

their addresses% the amounts of their credits and their res"ective maturities. IMM and IL4*;must submit said affidavit to 5**09 which% in turn% should notify the creditors about thetransaction which is about to be concluded with IMM and IL4*;.

Question No. 1!:1. 0istinguish between sus"ension of "ayments and insolvency.!. 0istinguish between voluntary insolvency and involuntary insolvency.

Answer:

1. In sus"ension of "ayments% the debtor is not insolvent. 6e only needs time within which toconvert his assetJs into cash with which to "ay his obligations when they fall due. In the caseof insolvency% the debtor is insolvent% that is% his assets are less than his liabilities

!. In voluntary insolvency% it is the debtor himself who files the "etition for insolvency% while ininvoluntary insolvency% at least # creditors are the ones who file the "etition for insolvency

against the insolvent debtor.

Question No. 11:

+ichael withdrew authority funds of the "artnershi" in the amounts of (22%222 andused 49N(2%222 for services he claims he rendered for the benefit of the "artnershi". 6ede"osited the (22%222 in his "ersonal "eso current account with ros"erity ank and the49N(2%222 in his "ersonal foreign currency savings account with 7astern ank.

The "artnershi" instituted an action in court against +ichael% ros"erity ank and7astern ank to com"el +ichael to return the subHect funds to the "artnershi" and "endinglitigation to order both banks to disallow any withdrawal from his accounts.

t the initial hearing of the case the court ordered ros"erity ank to "roduce therecords of +ichaels8s "eso current account% and 7astern ank to "roduce the records of hisforeign currency savings account.

/an the court com"el ros"erity ank and 7astern ank to disclose the bank de"ositsof +ichael? 0iscuss fully.

Answer:


21/63

=es% as far as the "eso account is concerned. 9ection ! of ; &o. 1$2( allows thedisclosure of bank de"osits in case where the money de"osited is the subHect matter of thelitigation. 9ince the case filed against +ichael is aimed at recovering the amount he withdrewfrom the funds of the "artnershi"% which amount he allegedly de"osited in his account% adisclosure of his bank de"osits would be "ro"er.

&o% with res"ect to the foreign currency account. 4nder the 5oreign /urrency aw% thee'em"tion to the "rohibition against disclosure of information concerning bank de"osits is thewritten consent of the de"ositor.

Question No. 12:

Elobal G +alaysia E*)% a 122K +alaysian3owned cor"oration% desires to build ahotel beach resort in 9amal Island% 0avao /ity% to take advantage of the increased traffic oftourists and boost the tourism industry of the hili""ines.

1. ssuming that E* has 49N122 +illion to invest in a hotel beach resort in thehili""ines% may it be allowed to acquire the land on which to build the resort? If so% under

what terms and conditions may E* acquire the land? 0iscuss fully.!. +ay E* be allowed to manage the hotel beach resort? 7'"lain.#. +ay E* be allowed to o"erate restaurants within the hotel beach resort? 7'"lain.

Answer:1. E* can secure a lease on the land. s a cor"oration with a +alaysian nationality%

E* cannot own the land.!. =es% E* can manage the hotel beach resort. There is no law "rohibiting it from

managing a resort.#. E* may be allowed to o"erate restaurants within the beach resort. This is "art of the

o"eration of the resort.

Question No. 13:

1. Two vessels coming from o""osite directions collided with each other due to fault im"utableto both. What are the liabilities of the two vessels with res"ect to the damage caused tothem and their cargoes? 7'"lain.

!. If it cannot be determined which of the vessels was at fault resulting in the collision% which"arty should bear the damage caused to the vessels and the cargoes? 7'"lain.

#. Which "arty should bear the damage to the vessels and the cargoes if the cause of thecollision was a fortuitous event? 7'"lain.

Answer:

1. 7ach vessel must bear its own damage. oth of them are at fault.

!. 7ach of them should bear their res"ective damages. 9ince it cannot be determined as towhich vessel is at fault. This is under the doctrine of Cinscrutable faultD.

#. &o "arty shall be held liable since the cause of the collision is fortuitous event. The carrier isnot an insurer.

Question No. 14:


22/63

+. 0iFon Trucking 0IM*&) entered into a hauling contract with 5airgoods /or"oration5I;E**09) whereby the former bound itself to haul the latter8s !%222 sacks of soya beanmeal from +anila ort rea to /alamba% aguna. To carry out faithfully its obligation 0IM*&subcontracted with 7nrico ;eyes the delivery of $22 sacks of the soya bean meal. side fromthe driver% three male em"loyees of ;eyes rode on the truck with the cargo. While the truck wason its way to aguna two strangers suddenly sto""ed the trucks and hiHacked the cargo.

Investigation by the "olice disclosed that one of the hiHackers was armed with a bladed wea"onwhile the other was unarmed. 5or failure to deliver the $22 sacks% 5I;E**09 sued 0iFon fordamages. 0IM*& in turn set u" a third3"arty com"laint against ;eyes which the latter resistedon the ground that the loss was due to force maHeure.

0id the hiHacking constitute force maHeure to e'cul"ate ;eyes from any liability to0IM*&? 0iscuss fully.

Answer:&o. the hiHacking in this case cannot be considered force maHeure. *nly one of the two

hiHackers was armed with a bladed wea"on. s against $ male em"loyees of ;eyes% ! hiHackers%with only one of them being armed with a bladed wea"on% cannot be considered force maHeure.

The hiHackers did not act with grave or irresistible threat% violence or force.

Question No. 15:

1. What intellectual "ro"erty rights are "rotected by co"yright?!. 9olid Investment 6ouse 9*I0) commissioned +on lanco and his son 9teve% both noted

artist% to "aint a mural for the +ain obby of the new building of 9*I0 for a contract "rice of! +.

a) Who owns the mural? 7'"lain.b) Who owns the co"yright of the mural? 7'"lain.

Answer:1. 9ection ( of 0 $, "rovides that /o"yright shall consist the e'clusive right:

a) To "rint% re"rint% "ublish% co"y% distribute% multi"ly% sell and make "hotogra"hs% "hotoengravings% and "ictorial illustrations of the works

b) To make any translation or other version or e'tracts or arrangements or ada"tationthereof to dramatiFe if it be a non3dramatic work to convert it into a non3dramatic work ifit be a drama to com"lete or e'ecute if it be a model or design

c) To e'hibit% "erform% re"resent% "roduce% or re"roduce the work in any manner or by anymethod whatever for "rofit or otherwise if not re"roduced in co"ies for sale% to sell anymanuscri"ts or any record whatsoever thereof

d) To make any other use or dis"osition of the work consistent with the laws of the land.

!. a) 9*I0 owns the mural. 9*I0 was the one who commissioned the artists to do the workand "aid for the work in the sum of ! +.

b) 4nless there is a sti"ulation to the contrary in the contract% the co"yright shall belong inHoint ownershi" to 9*I0 and +on lanco and his son 9teve.

Question No. 16:


23/63

+ario EuFman issued to 6onesto 9antos a check for (2%222 as "ayment for a second3hand car. Without the knowledge of +ario% 6onesto changed the amount to 1(2%222 whichalteration could not be detected by the naked eye. 6onesto de"osited the altered check with9hure ank which forwarded the same to rogressive ank for "ayment. rogressive ankwithout noticing the alteration "aid the check% debiting 1(2%222 from the account of +ario.6onesto withdrew the amount of 1(2%222 from 9hure ank and disa""eared. fter receiving

his bank statement% +ario discovered the alteration and demanded restitution from rogressiveank.

0iscuss fully the rights and liabilities of the "arties concerned.

Answer:The demand of +ario for restitution of the amount of 1(2%222 to his account is tenable.

rogressive ank has no right to deduct said amount from +ario8s account since the order of+ario is different. +oreover% rogressive ank is liable for the negligence of its em"loyees innot noticing the alteration which% though it cannot be detected by the naked eye% could bedetected by a magnifying instrument used by tellers.

s between rogressive ank and 9hure ank% it is the former that should bear the loss.rogressive ank failed to notify 9hure ank that there was something wrong with the checkwithin the clearing hour rule of !$ hours.



24/63

Question No.1:

1. What is your understanding of a Cno fault indemnityD clause found in an insurance "olicy?!. 0istinguish co3insurance from re3insurance.#. In letters of credit in banking transactions% distinguish the liability of a confirming bank from a

notifying bank.

Answer:1. 4nder the Cno fault indemnityD clause any claim for the death or inHury of any "assenger or

third "arty shall be "aid without the necessity of "roving fault or negligence of any kind. Theindemnity in res"ect of any one "erson shall not e'ceed 1(%222% "rovided they are underoath% the following "roofs shall be sufficient:

a) olice re"ort of the accident andb) 0eath certificate and evidence sufficient to establish the "ro"er "ayee orc) +edical re"ort and evidence of medical or hos"ital disbursement in res"ect of which

refund is claimed.

/laim may be made against one motor vehicle only.

!. /o3insurance is the "ercentage in the value of the insured "ro"erty which the insuredhimself assumes or undertakes to act as insurer to the e'tent of the deficiency in theinsurance of the insured "ro"erty. In case of loss or damage% the insurer will be liable onlyfor such "ro"ortion of the loss or damage as the amount of insurance bears to thedesignated "ercentage of the full value of the "ro"erty insured.

;einsurance is where the insurer "rocures a third "arty% called the reinsurer% to insure himagainst liability by reason of such original insurance. asically% a reinsurance is an insuranceagainst liability which the original insurer may incur in favor of the original insured.

#. In case anything wrong ha""ens to the letter of credit% a confirming bank incurs liability forthe amount of the letter of credit% while a notifying bank does not incur any liability.

Question No. 2:

1. Eive a case where a "erson who is not an issuing cor"oration% director or officer thereof% ora "erson controlling% controlled by or under common control with the issuing cor"oration% isalso considered an CinsiderD.

!. In 9ecurities aw% what is a CshortswingD transaction.#. In Cinsider tradingD% what is a Cfact of s"ecial significanceD?

Answer:1. It may be a case where a "erson% whose relationshi" or former relationshi" to the issuer

gives or gave him access to a fact of s"ecial significance about the issuer or the securitythat is not generally available% or a "erson% who learns such a fact from any of the insiders%with knowledge that the "erson from whom he learns the fact% is such an insider.

!. CshortswingD is a transaction where a "erson buys securities and sells or dis"oses of thesame within a "eriod of - months.


25/63

#. In Cinsider tradingD% a Cfact of s"ecial significanceD is% in addition to being material% such factas would likely% on being made generally available% to affect the market "rice of a security toa significant e'tent% or which a reasonable "erson would consider as es"ecially im"ortantunder the circumstances in determining his course of action in the light of such factors asthe degree of its s"ecificity% the e'tent of its difference from information generally available

"reviously% and its nature and reliability.

Question No. 3:

o ress issued in favor of Bose a "ostdated crossed check% in "ayment of news"rintwhich Bose "romised to deliver. Bose sold and negotiated the check to 7'cel Inc. at a discount.7'cel did not ask Bose the "ur"ose of crossing the check. 9ince Bose failed to deliver thenews"rint% o ordered the drawee bank to sto" "ayment on the check.

7fforts of 7'cel to collect from o failed. 7'cel wants to know from you as counsel:

1. What are the effects of crossing a check?

!. Whether as second indorser and holder of the crossed check% is it a holder in duecourse?

#. Whether o8s defense of lack of consideration as against Bose is also available asagainst 7'cel?

Answer:1. The effects of crossing a check are:

a) The check is for de"osit only in the account of the "ayee.b) The check may be indorsed only once in favor of a "erson who has an account with the

bank.c) The check is issued for a s"ecific "ur"ose and the "erson who takes it not in accordance

with said "ur"ose does not become a holder in due course and is not entitled to "aymentthereunder.

!. &o. It is a crossed check and 7'cel did not take it in accordance with the "ur"ose for whichthe check was issued. 5ailure on its "art to inquire as to said "ur"ose% "revented 7'cel frombecoming a holder in due course% as such failure or refusal constituted bad faith.

#. =es. &ot being a holder in due course% 7'cel is subHect to the "ersonal defense which oress can set u" against Bose.

Question No. 4:

Eemma drew a check on 9e"tmeber 1#% 1,,2. The holder "resented the check to thedrawee bank only on +arch (% 1,,$. The bank dishonored the check on the same date. fterdishonor by the drawee bank% the holder gave a formal notice of dishonor to Eemma through aletter dated "ril !@% 1,,$.

1. What is meant by Cunreasonable timeD as a""lied to "resentment?!. Is Eemma liable to the holder?

Answer:


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1. s a""lied to "resentment for "ayment% Creasonable timeD is meant not more than - monthsfrom the date of issue. eyond said "eriod% it is Cunreasonable timeD and the check becomesstale.

!. &o. side from the check being already stale% Eemma is also discharged from liability underthe check% being a drawer and a "erson whose liability is secondary% this is due to the givingof the notice of dishonor beyond the "eriod allowed by law. The giving of notice of dishonor

on "ril !@% 1,,$ is more than 1 month from +arch (% 1,,$ when the check wasdishonored. 9ince it is not shown that Eemma and the holder resided in the same "lace% the"eriod within which to give notice of dishonor must be the same time that the notice wouldreach Eemma if sent by mail.

Question No. 5:

/eleste% a domestic cor"oration wholly owned by 5ili"ino citiFens% is engaged in tradingand o"erates as general contractor. It buys and resells the "roducts of +atilde% a domesticcor"oration% ,2K of whose ca"ital stock is owned by aliens. ll of +atilde8s goods are made inthe hili""ines from materials found or "roduced in the hili""ines.

*n the other hand% 7/L Integrated is a 122K 5ili"ino3owned cor"oration andmanufacturer of asbestos "roducts.

/eleste and 7/L took "art in a "ublic bidding conducted by +W99 for its asbestos "i"erequirements. /eleste won the bid% having offered 1#K lower than that offered by 7/L and+W99 awarded the contract to su""ly its asbestos "i"es to /eleste. 7/L sought to nullify theaward in favor of /eleste.

1. Is /eleste barred under the 5lag aw from taking "art in bidding to su""ly thegovernment?

!. 0id /eleste and +atilde violate the nti30ummy aw?#. 0id /eleste and +atilde violate the ;etail Trade &ationaliFation aw? 7'"lain.

Answer:1. &o. The materials offered in the bids submitted are made in the hili""ines from articles

"roduced or grown in the hili""ines% and the bidder% /eleste% is a domestic entity. The 5lagaw does not a""ly. It can be invoked only against a bidder who is not a domestic entity% oragainst a domestic entity who offers im"orted materials.

!. &o% since /eleste is merely a dealer of +atilde and not an alter ego of the latter. /elestebuys and sells on its own account the "roducts of +atilde.

#. +atilde did not violate the ;etail Trade aw since it does not sell its "roducts to consumers%but to dealers who resell them. &either did /eleste violate the ;etail Trade aw since% in thefirst "lace% it is not "rohibited to engage in retail trade. esides% +atilde8s sale of theasbestos "roducts to /eleste% being wholesale% the transaction is not covered by the ;etail

Trade aw.

Question No" 6:

9tanrus% Inc.% a de"artment store with outlets in +akati% +andaluyong and LueFon /ity%is contem"lating to refurbish and renovate its +akati store in order to introduce the mostmodern and state of the art equi"ment in merchandise dis"lay. To carry out its "lan% it intends tosell of the e'isting fi'tures and equi"ment dis"lay cases% wall decoration% furniture%


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counters% etc.) to /rossroads 0e"artment 9tore. Thereafter% it will buy and install new fi'turesand equi"ment and continue o"erations.

/rossroads wants to know from you% as counsel:1. Whether the intended sale is Cbulk saleD.!. 6ow can it "rotect itself from future claims of creditors of 9tanrus.

Answer:1. =es. The sale involves all fi'tures and equi"ment% not in the ordinary course of trade and the

regular "rosecution of business of 9tanrus% Inc.

!. /rossroads should require from 9tanrus% Inc. submission of a written waiver of the ulk9ales aw by the creditors as shown by verified statements or to com"ly with therequirements of the ulk 9ales aw% that is% the seller must notify his creditors of the termsand conditions of the sale% and also% before receiving from the vendee any "art of the"urchase "rice% deliver to such vendee a written sworn statement of the names andaddresses of all his creditors together with the amount of indebtedness due to each.

Question No. 7:

In a civil suit% the /ourt ordered enHie to "ay &at (22%222. To e'ecute the Hudgment%the sheriff levied u"on enHie8s registered "ro"erty a "arcel of land and the building thereon)%and sold the same at "ublic auction to &at% the highest bidder. The latter% on +arch 1A% 1,,!%registered with the ;egister of 0eeds the certificate of sale issued to him by the sheriff.+eanwhile% on Banuary !@% 1,,#% enHie insured with Eara"al Insurance for 1 + the samebuilding that was sold at "ublic auction to &at. enHie failed to redeem the "ro"erty by +arch 1A%1,,#.

*n +arch 1,% 1,,#% a fire raFed the building to the ground. Eara"al Insurance refused tomake good its obligation to enHie under the insurance contract.

1. Is Eara"al Insurance legally Hustified in refusing "ayment to enHie?!. Is &at entitled to collect on the insurance "olicy?

Answer:1. =es. t the time of the loss% enHie was no longer the owner of the "ro"erty insured as he

failed to redeem the "ro"erty. The law requires in "ro"erty insurance that a "erson canrecover the "roceeds of the "olicy if he has insurable interest at the time of the issuance ofthe "olicy and also at the time when the loss occurs. t the time of fire% enHie no longer hadinsurable interest in the "ro"erty insured.

!. &o. While at the time of the loss he has insurable interest in the building% as he was the

owner thereof% &at did not have any interest in the "olicy. There was no automatic transferclause in the "olicy that would give him such interest in the "olicy.

Question No. :

;aul8s truck bum"ed the car owned by uF. The car was insured by /ala Insurance. 5orthe damage caused% /ala "aid uF (%222 in amicable settlement. uF e'ecuted a releaseclaim% subrogating /ala to all her rights against ;aul. When /ala demanded reimbursement


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from ;aul% the latter refused saying that he had already "aid uF $%(22 for the damage to thecar as evidenced by a release of claim e'ecuted by uF discharging ;aul.

9o /ala demanded reimbursement from uF% who refused to "ay% saying that the totaldamage to the car was ,%(22. 9ince /ala "aid (%222 only% uF contends that she was entitledto go after ;aul to claim the additional $%(22.

1. Is /ala% as subrogee of uF% entitled to reimbursement from ;aul?!. +ay /ala recover what it has "aid uF?

Answer:1. &o. uF e'ecuted a release in favor of ;aul.!. =es. /ala lost its right against ;aul because of the release e'ecuted by uF. 9ince the

release was made without the consent of /ala% /ala may recover the amount of (%222.

Question No. 9:

*n 9e"tember !#% 1,,2% Tan took a life insurance "olicy from hilam. The "olicy was

issued on &ovember -% 1,,2. 6e died on "ril !-% 1,,! of he"atoma. The insurance com"anydenied the beneficiaries8 claim and rescinded the "olicy by reason of alleged misre"resentationand concealment of material facts made by Tan in his a""lication. It returned the "remiums "aid.

The beneficiaries contend that the com"any had no right to rescind the contract asrescission must be done Cduring the lifetimeD of the insured within ! years and "rior to thecommencement of the action.

Is the contention of the beneficiaries tenable?

Answer:&o. The incontestability clause does not a""ly. The insured died within less than ! years

from the issuance of the "olicy on 9e"tember !#% 1,,2. The insured died on "ril !-% 1,,!% orless than ! years from 9e"tember !#% 1,,2.

The right of the insurer to rescind is only lost if the beneficiary has commenced an actionon the "olicy. There is no such action in this case.

Question No. 1!:

+ariter% a "aying bus "assenger% was hit above her left eye by a stone hurled at the busby an unidentified bystander as the bus was s"eeding through the &ational 6ighway. The busowner8s "ersonnel lost no time in bringing +ariter to the "rovincial hos"ital where she wasconfined and treated.

+ariter wants to sue the bus com"any for damages and seeks your advice whether shecan legally hold the bus com"any liable?

Answer:

+ariter cannot legally hold the bus com"any liable. There is no showing that any suchincident "reviously ha""ened so as to im"ose an obligation on the "art of the "ersonnel of thebus com"any to warn the "assengers and to take the necessary "recaution. 9uch hurling of astone constitutes fortuitous event in this case. The bus com"any is not an insurer.


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Question No. 11:

Toni% a co"ra dealer% loaded 1%222 sacks of co"ra on board the vessel +J< Tonichi acommon carrier engaged in coastwise trade owned by Ichi) for shi"ment from uerto Ealera to+anila.

The cargo did not reach +anila because the vessel ca"siFed and sank with all its cargo.

When Toni sued Ichi for damages based on breach of contract% the latter invoked theClimited liability ruleD

1. What do you understand of the CruleD invoked by Ichi?!. re there e'ce"tions to the Climited liability ruleD

Answer:1. y Climited liability ruleD is meant that the liability of a shi" owner for damages in case of loss

is limited to the value of the vessel involved. 6is other "ro"erties cannot be reached by the

"arties entitled to damages.

!. =es. When the shi" owner of the vessel involved is guilty of negligence% the Climited liabilityruleD does not a""ly. In such case% the shi" owner is liable to the full e'tent of the damagessustained by the aggrieved "arties.

Question No. 12:

ngelene is a customer of +eralco 7lectric /om"any +7/*). ecause of the abru"trise of the electricity rates. ngelene com"lained with +7/* insisting that she should becharged the former rates. 6owever% ngelene did not tender any "ayment.

When +7/*8s em"loyees served the first $A3hour notice of disconnection% ngelene"rotested. +7/*% however% did not im"lement the $A3hour notice of disconnection. Instead% itsem"loyees e'amined ngelene8s electric meter% changed the same% and installed another. 9till%

ngelene made no tender of "ayment.

+7/* served a second $A3hour notice of disconnection on Bune !!% 1,A$. It gavengelene until (:22"m of Bune !(% 1,A$% within which to "ay. s no "ayment had been made%+7/* cut ngelene8s electric service on Bune !A% 1,A$.

ngelene contends that the $A3hour written notice of disconnection rule cannot beinvoked by +7/* when there is a bona fide and Hust dis"ute as to the amount due as herelectric consum"tion rate.

Is ngelene8s contention valid?

Answer:&o. ngelene8s only legal recourse in this case was to "ay the electric bill under "rotest.

6er failure to do so Hustified +eralco to cut the electric service.

Question No. 13:


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cor"oration was created by a s"ecial law. ater% the law creating it was declaredinvalid. +ay such cor"oration claim to be a de facto cor"oration?

Answer:

&o. a "rivate cor"oration may be created only under the /or"oration /ode. *nly "ubliccor"oration may be created under a s"ecial law.

Where a "rivate cor"oration is created under a s"ecial law% there is no attem"t at a validincor"oration. 9uch cor"oration cannot claim a de facto status.

Question No. 14:


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a) &o. the abor rbiter has no Hurisdiction. This is not a labor case% involving em"loyer3em"loyee relationshi".

b) &o. The ;T/ has no Hurisdiction over this case which involves intra3cor"orate controversy.

c) =es. The 97/ has Hurisdiction over this case. The case is between a stockholder and a

cor"oration of which he is a stockholder% and the dis"ute arose out of such relationshi".+oreover% the question whether or not the transaction falls under the right of a""raisal so asto make the withdrawal legal% "ro"erly falls under the 97/ Hurisdiction.

Question No. 16:

;afael inherited from his uncle 12%222 shares of 9ta. na /or"oration% a closecor"oration. The shares have a "ar value of 12.22 "er share. ;afael notified 9ta. na that hewas selling his shares at @2 "er share. There being no takers among the stockholders% ;afaelsold the same to his cousin


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&o. +iguel8s contention is not tenable. The inquiry into illegally acquired "ro"ertye'tends to cases where such "ro"erty is concealed by being held by or recorded in the name ofother "ersons. To sustain +iguel8s theory and restrict the inquiry only to "ro"erty held by or inthe name of the government who illegally acquire "ro"erty an easy means of evading"rosecution. ll they have to do would be to sim"ly "lace the "ro"erty in the name of "ersonsother than their s"ouses and children.

Question No. 1:

The


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BE% who manufactures briefs and underwear% wants to know whether% under our laws% hecan use and register the trademark C;4T7D for his merchandise. What is your advice?

Answer:=es. The trademark registered in the name of aberge% Inc. covers only after3shave

lotion% shaving cream% deodorant% talcum "owder and toilet soa". It does not cover briefs and

underwear.

The limit of the trademark is stated in the certificate issued to aberge% Inc. It doesinclude briefs and underwear which are different "roducts "rotected by aberge8s trademark.

BE can register the trademark C;4T7D to cover its briefs and underwear.



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Question No. 1:

0iscuss the negotiability or non3negotiability of the following notes:

1. +anila% 9e"tember 1% 1,,#

!%(22.22I "romise to "ay edro 9an Buan or order the sum of !%(22.22

9gd.) &*7 /9T;*

!. +anila% Bune #% 1,,#12%222.22

5or value received% I "romise to "ay 9ergio 0ee or order the sum of 12%222.22in five () installments% with the first installment "ayable on *ctober (% 1,,# and theother installments on or before the fifth day of the succeeding month thereafter.

9gd.) IT*


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!. =es. aby is not a holder in due course because she had knowledge of the breach of trustcommitted by 7velyn against arry which is Hust a "ersonal defense. ut having taken theinstrument from 0evi% a holder in due course% aby has all the rights of a holder in duecourse. aby did not "artici"ate in the breach of trust committed by 7velyn who filled theblank but filled u" the instrument with (%222 instead of 1%222 as instructed by arry.

Question no. 3:

Buan 9y "urchased from CD ""liance center 1 generator set on installment with thechattel mortgage in favor of the vendor. fter getting hold of the generator set% Buan 9yimmediately sold it without consent of the vendor. Buan 9y was criminally charged with estafa.

To settle the case e'tra3Hudicially% Buan 9y "aid the sum of !2%222 and for the balanceof (%222% he e'ecuted a "romissory note for said amount with en o"eF as anaccommodation "arty. Buan 9y failed to "ay the balance.

1. What is the liability of en o"eF as an accommodation "arty? 7'"lain.

!. What is the liability of Buan 9y?

Answer:

1. en% as an accommodation "arty% is liable as maker to the holder u" to the sum of (%222even if he did not receive any consideration for the "romissory note. This is the nature ofaccommodation. ut en can ask for reimbursement from Buan% the accommodated "arty.

!. Buan is liable to the e'tent of (%222 in the hands of a holder in due course. If en "aid the"romissory note% Buan has the obligation to reimburse en for the amount "aid. If Buan "aysdirectly to the holder of the "romissory note% or he "ays en for the reimbursement of the"ayment by the latter to the holder% the instrument is discharged.

Question No. 4:*n *ctober 12% 1,A1% borrowed from / the sum of 1.( +. To hedge against the

de"reciation of the hili""ine eso% it was sti"ulated in the "romissory note e'ecuted by infavor of / that the loan shall be "aid in 49 dollars at the e'change rate "revailing on the datethe obligation was incurred% "lus interest at 1!K "er annum.

1. Is the sti"ulation valid? 7'"lain.!. ssuming that the sti"ulation is invalid% does the obligation to "ay subsist? 6ow should it

be discharged?

Answer:1. &o. The obligation was incurred in the hili""ines. 6ence% the 4niform /urrency aw% which

requires "ayment in the hili""ine currency% a""lies.

!. =es. It should be discharged in hili""ine "esos at the rate of e'change "revailing at thetime of "ayment.

Question No. 5:


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In the annual meeting of the C>=MD /or"oration% the stockholders unanimously ado"ted aresolution "ro"osed by the oard of 0irectors to sell substantially all the fi'tures and equi"mentused in and about its business. The resident of the /or"oration a""roached you and asked forlegal assistance to effect the sale.

1. What ste"s should you take so that the sale may be valid?

!. What are two instances when the sale% transfer% mortgage or assignment of stock ofgoods% wares% merchandise% "rovision% or materials otherwise than in the ordinary courseof trade and the regular "rosecution of the business of the vendor are not deemed to bea sale or transfer in bulk?

Answer:

1. The requirements of the ulk 9ales aw must be com"lied with. The seller delivers to the"urchaser a list of his creditors and the "urchaser in turn notifies such creditors of the"ro"osed sale at a sti"ulated time in advance.

!. If the sale and transfer is made 1) by vendor% mortgagor% transferor or assignor who"roduces and delivers a written waiver of the "rovisions of the ulk 9ales aw from his

creditors as shown by verified statement and !) by a vendor% mortgagor% receiver% assigneein insolvency% or "ublic officer acting under Hudicial "rocess% the sale or transfer is notcovered by the ulk 9ales aw.

Question No. 6:

1. CD invested (22%22 in a security agency on *ctober #2% 1,,2. 6e was charged withbeing a dummy of his friend% a foreigner. If you were the "rosecutor% what evidence canyou "resent to "rove violation of the nti30ummy aw?

!. Buana de la /ruF% a common3law wife of a foreigner wrested the control of a televisionfirm. t the instance of the minority grou" of the firm% she was charged with violation of

the nti30ummy aw. +ay she be convicted by the mere fact that she is a common3lawwife of a foreigner? 7'"lain.

Answer:

1. CD allows or "ermits the use or e'"loitation or enHoyment of a right% "rivilege or business%the e'ercise of enHoyment of which is e'"ressly reserved by the /onstitution or the laws tocitiFens of the hili""ines% by the foreigner not "ossessing the requisites "rescribed by the/onstitution or the laws of the hili""ines. The "rosecutor should "rove the above elementsof the crime and also the facts that CD does not have the means and resources to invest(22%222 in the security agency.

!. &o. The mere fact of being a common3law wife of a foreigner does not bring her within the

ambit of the nti30ummy law.

Question No. 7:

foreign firm is engaged in the business of manufacturing and selling rubber "roducts todealers who in turn sell them to others. It also sells directly to agricultural enter"rises%automotive assembly "lants% "ublic utilities which buy them in large bulk% and to its officers andem"loyees.


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1. Is there a violation of the ;etail Trade aw? 7'"lain.!. +ay said firm o"erate a canteen inside the "remises of its "lant e'clusive for its officials

and em"loyees without violating the ;etail Trade ct? 7'"lain.

Answer:

1. *n the assum"tion that the foreign firm is doing business in the hili""ines% the sale to the

dealers of agricultural enter"rises% automotive assembly "lants% and "ublic utilities iswholesale and% therefore% not in violation of the ;etail Trade ct.

!. =es. The o"eration of the canteen inside the "remises e'clusively for its officers andem"loyees% would amount to an in"ut in the manufacturing "rocess and% therefore% does notviolate the ;etail Trade ct.

Question No. :

< agreed to sell to /% a 9hi" and +erchandise roker% !%(22 cubic meters of logs atN!@ "er cubic meter 5*. fter ins"ecting the logs% /0 issued a "urchase order.

*n the arrangements made u"on instruction of the consignee% 6T /or"oration of osngeles% /alifornia% the 9 ank of os ngeles issued an irrevocable letter of credit availableat sight in favor of < for the total "urchase "rice of the logs. The letter of credit "rovided thatthe draft to be drawn is on 9 ank and that it be accom"anied by% among other things% acertification from /% stating that the logs have been a""roved "rior to shi"ment in accordancewith the terms and conditions of the "urchase order.

efore loading on the vessel chartered by /% the logs were ins"ected by customins"ectors and re"resentatives of the ureau of 5orestry% who certified to the good conditionand e'"ortability of the logs. fter the loading was com"leted% the /hief +ate of the vesselissued a mate recei"t of the cargo which stated that the logs are in good condition. 6owever% /refused to issue the required certification in the letter of credit. ecause of the absence of the

certification% 57 ank refused to advance "ayment on the letter of credit.

1. +ay 57 ank be held liable under the letter of credit? 7'"lain.!. 4nder the facts stated above% the seller%


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1. What are the remedies available to 5erdie against Bohann?!. If you were the lawyer of Bohann in the infringement suit% what are the defenses that

your client can assert?

Answer:

1. The following are the remedies available to 5erdie against Bohann:

a. 9eiFe and destroyb. InHunctionc. 0amages in such amount may have been obtained from the use of the invention if

"ro"erly transacted which can be more than what the infringer Bohann) received.d. ttorney8s fees and costs.

!. These are the defenses that can be asserted in an infringement suit:

a. atent is invalidb. atent is not new or "atentable

c. 9"ecification of the invention does not com"ly with 9ec.1$d. atent was issued not to the true and actual inventor% designer or author of the utility

model or the "laintiff did not derive his rights from the true and actual inventor%designer or author of the utility model.

Question No. 1!:

9 Insurance /om"any issued a ersonal ccident olicy to ob Tan with a face value of(22%222.

In the evening of 9e"tember (% 1,,!% after his birthday "arty% Tan was in a ha""y moodbut not drunk. 6e was "laying with his handgun% from which he "reviously removed the

magaFine. s his secretary was watching television% he stood in front of her and "ointed the gunat her. 9he "ushed it aside and said that it may be loaded. 6e assured her that it was not andthen "ointed it at his tem"le. The ne't moment% there was an e'"losion and Tan slum"ed to thefloor lifeless.

The wife of the deceased sought "ayment on the "olicy but her claim was reHected. Theinsurance com"any agreed that there was no suicide. 6owever% it was the submission of theinsurance com"any that there was no accident. In su""ort thereof% it contended a) that therewas no accident when a deliberated act was "erformed unless some additional% une'"ected%inde"endent and unforeseen ha""ening occur which "roduces or brings about the inHury ordeath and b) that the insured willfully e'"osed himself to needless "eril and thus removedhimself from the coverage of the insurance "olicy. re the two contentions of the insurance

com"any tenable? 7'"lain.

Answer:

&o. these ! contentions of the insurance com"any are not tenable. The insurer is liablefor inHury or death even due to the insured8s gross negligence. The fact that the insuredremoved the magaFine from the handgun means that the insured did not willfully e'"ose himselfto needless "eril. t most% the insured is only guilty of negligence.


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Question No. 11:

6 insured his brand new car with Insurance /om"any for com"rehensive coveragewherein the insurance com"any undertook to indemnify him against loss or damage to the cara) by accidental collision ''' b) by fire% e'ternal e'"losion% burglary% or theft% and c) maliciousact.

fter a month% the car was carna""ed while "arked in the "arking s"ace in front of theIntercontinental 6otel in +akati. 68s wife who was driving the said car when it was carna""edwas in "ossession of an e'"ired driver8s license% a violation of the CauthoriFed driverD clause ofthe insurance com"any.

1. +ay the insurance com"any be held liable to indemnify 6 for the loss of the insuredvehicle? 7'"lain.

!. 9u""osing that the car was brought by 6 on installment basis and there wereinstallments due and "ayable before the loss of the car% the vendor demanded from 6the un"aid balance of the "romissory note. 6 resisted the demand and claimed that hewas only liable for the installments due and "ayable before the loss of the car but nolonger liable for the other installments not yet due at the time of the loss of the car.

0ecide.

Answer:1. =es. The car was lost due to theft. What a""lies in this case is the CtheftD clause% and not the

CauthoriFed driverD clause. It is immaterial that 68s wife was driving the car with an e'"ireddriver8s license at the time it was carna""ed.

!. The "romissory note is not affected by whatever befalls the subHect matter of the accessorycontract. The un"aid balance on the "romissory note should be "aid and not only theinstallments due and "ayable before the loss of the car.

Question No. 12:

The /ity of +anila "assed an ordinance banning "rovincial buses from the city. Theordinance was challenged as invalid under the ublic 9ervice cct by > who has a certificate of"ublic convenience to o"erate auto3trucks with fi'ed routes from certain towns in ulacan and;iFal to +anila and within +anila. 5irstly% he claimed that the ordinance was null and voidbecause% among other things% it in effect amends his certificate of "ublic convenience% a thingwhich only the ublic 9ervice /ommission can do so under 9ection 1-m) of the ublic 9ervice

ct. 4nder said section% the /ommission is em"owered to amend% modify or revoke a certificateof "ublic convenience after notice and hearing. 9econdly% he contended that even if theordinance was valid% it is only the /ommission which can require com"liance with its "rovisionsunder 9ection 1@H) of said ct and since the im"lementation of the ordinance was without

sanction or a""roval of the /ommission% its enforcement was unauthoriFed and illegal.

1. +ay the reliance of > on 9ection 1-m) of the ublic 9ervice ct be sustained? 7'"lain.!. Was > correct in his contention that under 9ection 1@ H) of the "ublic 9ervice ct it is

only the /ommission which can require com"liance with the "rovision of the ordinance?7'"lain.

Answer:


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1. &o. The "ower vested in the "ublic 9ervice /ommission under 9ection 1-m) is subordina

1991-1996 bar mercantile questions

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