commercial law 2004

7/27/2019 Commercial Law 2004

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19 September 2004 8:00 A.M. – 12:00 Noon

INSTRUCTIONS

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

HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE.

GOOD LUCK ! !

BAR EXAMINATION 2004

COMMERCIAL LAW



QUESTION NO. I

A. Under a charter party, XXO Trading Company shipped sugar to Coca-Cola Companythrough SS Negros Shipping Corp., insured by Capitol Insurance Company. The cargoarrived but with shortages. Coca-Cola demanded from Capitol Insurance Co. P500,000 insettlement for XXO Trading. The MM Regional Trial Court, where the civil suit was filed,

absolved the insurance company, declaring that under the Code of Commerce, theshipping agent is civilly liable for damages in favor of third persons due to the conduct ofthe carrier’s captain, and the stipulation in the charter party exempting the owner fromliability is not against public policy. Coca-Cola appealed. Will its appeal prosper? Reasonbriefly. (5%)

B. AA entered into a contract with BB thru CC to transport ladies’ wear from Manila to Francewith transhipment at Taiwan. Somehow the goods were not loaded at Taiwan on time. Hencewhen the goods arrived in France, they arrived “off -season” and AA was paid only for one-halfthe value by the buyer. AA claimed damages from the shipping company and its agent. The

defense of the respondents was prescription.

Considering that the ladies’ wear suffered “loss of value,” as claimed by AA, should theprescriptive period be one year under the Carriage of Goods by Sea Act, or ten years underthe Civil Code? Explain briefly. (5%)

QUESTION NO. II

A. Ms. OB was employed in MAS Investment Bank. WIC, a medical drug company, retained

the Bank to assess whether it is desirable to make a tender offer for DOP company, a drugmanufacturer. OB overheard in the course of her work the plans of WIC. By herself andthru associates, she purchased DOP stocks available at the stock exchange priced at P20per share. When WIC’s tender offer was announced, DOP stocks jumped to P30 peshare. Thus OB earned a sizable profit.

Is OB liable for breach and misuse of confidential or insider information gained from heremployment? Is she also liable for damages to sellers or buyers with whom she traded? If sowhat is the measure of such damages? Explain briefly.

(5%)

B. CX maintained a checking account with UBANK, Makati Branch. One of his checks in astub of fifty was missing. Later, he discovered that Ms. DY forged his signature andsucceeded to encash P15,000 from another branch of the bank. DY was able to encash thecheck when ET, a friend, guaranteed due execution, saying that she was a holder in duecourse.

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



QUESTION NO. III

A. What is a corporation sole? How does one pierce the veil of corporate fiction?(2%)

B. Distinguish clearly (1) a private corporation from a public corporation; and (2) astock corporation from a non-stock corporation. (2%)

C. Is there a difference between a de facto corporation and a corporation byestoppel? Explain briefly. (2%)

D. Distinguish clearly (1) crossed checks from cancelled checks; and (2) cash bondfrom surety bond. (2%)

E. What is the difference between government deregulation and the privatization ofan industry? Explain briefly. (2%)

QUESTION NO. IV

A. Four months before his death, PX assigned 100 shares of stock registered in hisname in favor of his wife and his children. They then brought the deed of assignment tothe proper corporate officers for registration with the request for the transfer in thecorporation’s stock and transfer books of the assigned shares, the cancellation of thestock certificates in PX’s name, and the issuance of new stock certificates in the namesof his wife and his children as the new owners. The officers of the Corporation deniedthe request on the ground that another heir is contesting the validity of the deed ofassignment.

May the Corporation be compelled by mandamus to register the shares of stockin the names of the assignees? Explain briefly.

(5%)

B. The Board of Directors of ABC, Inc., a domestic corporation, passed a resolutionauthorizing additional issuance of shares of stocks without notice nor approval of thestockholders.

DX, a stockholder, objected to the issuance, contending that it violated his rightof pre-emption to the unissued shares. Is his contention tenable? Explain briefly.

(5%)



QUESTION NO. V

A. MN and OP rented a safety deposit box at SIBANK. The parties signed acontract of lease with the conditions that: the bank is not a depository of the contents ofthe safe and has neither the possession nor control of the same; the bank assumed nointerest in said contents and assumes no liability in connection therewith. The safety

deposit box had two keyholes: one for the guard key which remained with the bankand the other for the renters’ key. The box can be opened only with the use of bothkeys.

The renters deposited certificates of title in the box. But later, they discoveredthat the certificates were gone. MN and OP now claim for damages from SIBANK. Isthe bank liable? Explain briefly.

(5%)

B. The Law on Secrecy of Bank Deposits provides that all deposits of whatever

nature with banks or banking institutions are absolutely confidential in nature and maynot be examined, inquired or looked into by any person, government official, bureau oroffice. However, the law provides exceptions in certain instances.

Which of the following may not be among the exceptions:

1. In cases of impeachment.2. In cases involving bribery.3. In cases i nvolving BIR inquiry.4. In cases of anti-graft and corrupt practices.5. In cases where the money involved is the subject of litigation.

Explain your answer or choice briefly. (5%)

QUESTION NO. VI

A. AX, a businessman, was preparing for a business trip abroad. As he usually didin the past, he signed several checks in blank and entrusted them to his secretary withinstruction to safeguard them and fill them out only when required to pay accountsduring his absence. OB, his secretary, filled out one of the checks by placing her nameas the payee. She filled out the amount, endorsed and delivered the check to KC, whoaccepted it in good faith for payment of gems that KC sold to OB. Later, OB told AX ofwhat she did with regrets. AX timely directed the bank to dishonor the check. Could AXbe held liable to KC? Answer and reason briefly.

(5%)

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



BC, a citizen of LVM but married to ZC, an alien merchant of PNG, filed suit toinvalidate the law or exempt from its coverage their timber business.

She contended that the law is, inter alia, gravely oppressive and discriminatoryIt violated the Universal Declaration of Human Rights (UDHR) passed in 1948 by theUnited Nations, of which LVM is a member, she said, as well as the reciprocity

provisions of the World Trade Organization (WTO) Agreement of 1994, of which PNGand LVM are parties. Aside from denying them equal protection, according to BC, thelaw will also deprive her family their livelihood without due process nor justcompensation.

Assuming that the legal system of LVM is similar to ours, would Mrs. BC’scontention be tenable or not? Reason briefly. (5%)

QUESTION NO. VII

A. AA, a minority stockholder, filed a suit against BB, CC, DD, and EE, the holders

of majority shares of MOP Corporation, for alleged misappropriation of corporate funds.The complaint averred, inter alia, that MOP Corporation is the corporation in whosebehalf and for whose benefit the derivative suit is brought. In their capacity as membersof the Board of Directors, the majority stockholders adopted a resolution authorizingMOP Corporation to withdraw the suit. Pursuant to said resolution, the corporatecounsel filed a Motion to Dismiss in the name of the MOP Corporation.

Should the motion be granted or denied? Reason briefly. (5%)

B. XYZ Corporation entered into a contract of lease with ABC, Inc., over a piece ofreal estate for a term of 20 years, renewable for another 20 years, provided that XYZ’scorporate term is extended in accordance with law. Four years after the term of XYZCorporation expired, but still within the period allowed by the lease contract for theextension of the lease period, XYZ Corp. notified ABC, Inc., that it is exercising theoption to extend the lease. ABC, Inc., objected to the proposed extension, arguing thatsince the corporate life of XYZ Corp. had expired, it could no longer opt to renew thelease. XYZ Corp. countered that withstanding the lapse of its corporate term it still hasthe right to renew the lease because no quo warranto proceedings for involuntarydissolution of XYZ Corp. has been instituted by the Office of the Solicitor General.

Is the contention of XYZ Corp. meritorious? Explain briefly. (5%)



QUESTION NO. VIII

A. CDC maintained a savings account with CBank. On orders of the MM RegionaTrial Court, the Sheriff garnished P50,000 of his account, to satisfy the judgment infavor of his creditor, MO. CDC complained that the garnishment violated the Law on

the Secrecy of Bank Deposits because the existence of his savings account wasdisclosed to the public.

Is CDC’s complaint meritorious or not? Reason briefly.

(5%)

B. The Collector of Customs ordered the seizure and forfeiture of new electronic

appliances shipped by TON Corp. from Hongkong for violation of customs laws becausethey were falsely declared as used office equipment and then undervalued for purposesof customs duties. TON filed a complaint before the MM Regional Trial Court forreplevin, alleging that the Customs officials erred in the classification and valuation of itsshipment, as well as in the issuance of the warrant of seizure. The Collector moved todismiss the suit for lack of jurisdiction on the part of the trial court.

Should the Collector’s motion be granted or denied? Reason briefly. (5%)

QUESTION NO. IX

A. YKS Trading filed a complaint for specific performance with damages againsPWC Corporation for failure to deliver cement ordered by plaintiff. In its answer, PWCdenied liability on the ground, inter alia, that YKS has no personality to sue, not beingincorporated, and that the President of PWC was not authorized to enter into a contractwith plaintiff by the PWC Board of Directors, hence the contract is ultra vires. YKSTrading replied that it is a sole proprietorship owned by YKS, and that the President ofPWC had made it appear in several letters presented in evidence that he had authorityto sign contracts on behalf of the Board of Directors of PWC.

Will the suit prosper or not? Reason briefly. (5%)

B. CG, a customer, sued MERALCO in the MM Regional Trial Court to disclose thebasis of the computation of the purchased power adjustment (PPA). The trial courruled it had no jurisdiction over the case because, as contended by the defendant, thecustomer not only demanded a breakdown of MERALCO’s bill with respect to PPA buquestioned as well the imposition of the PPA, a matter to be decided by the Board ofEnergy, the regulatory agency which should also have jurisdiction over the instant suitIs the trial court’s ruling correct or not? Reason briefly. (5%)

QUESTION NO. X



A. BR and CT are noted artists whose paintings are highly prized by collectors. DrDL commissioned them to paint a mural at the main lobby of his new hospital forchildren. Both agreed to collaborate on the project for a total fee of two million pesos tobe equally divided between them. It was also agreed that Dr. DL had to provide all thematerials for the painting and pay for the wages of technicians and laborers needed forthe work on the project.

Assume that the project is completed and both BR and CT are fully paid theamount of P2M as artists’ fee by DL. Under the law on intellectual property, who wilown the mural? Who will own the copyright in the mural? Why? Explain.

(5%)

B. CNI insured SAM under a homeowner’s policy against claims for accidentainjuries by neighbors. SAM’s minor son, BOY, injured 3 children of POS, a neighborwho sued SAM for damages.

SAM’s lawyer was ATT, who was paid for his services by the insurer for reportingperiodically on the case to CNI. In one report, ATT disclosed to CNI that after hisinvestigations, he found the injuries to the 3 children not accidental but intentional.

SAM lost the case in court, and POS was awarded one million pesos in damageswhich he sought to collect from the insurer. But CNI used ATT’s report to deny theclaim on the ground that the injuries to POS’s 3 children were intentional, henceexcluded from the policy’s coverage. POS countered that CNI was estopped from using

ATT’s report because it was unethical for ATT to provide prejudicial information againsthis client to the insurer, CNI.

Who should prevail: the claimant, POS; or the insurer, CNI? Decide withreasons briefly.

(5%)

commercial law 2004

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