(MERCANTILE LAW) BAR ANSWERS

(2019 (A) (2) (b))

No. Mr. X’S filing of a derivative is not proper.

Under the rules, a stockholder or member may bring an action in the name of a corporation or association, as the
case may be, provided that:
1) He was a stockholder or member at the time of the acts or transactions subject of the action occurred and at
the time the action was filed;
2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all
remedies available under the articles of incorporation, by – laws, or laws or rules governing the corporation or
partnership to obtain the relief he desires;
3) The suit is not a nuisance or harassment suit; and
4) No appraisal rights are available for the act or acts complained of.
In the case at bar, a year before Mr. X became a stockholder of ABC Corp, ABC Corp. entered into a
merchandising contract which terms and conditions were totally lopsided in favor of the counterparty, XYZ, Inc.

Hence, Mr. X’S filing of a derivative is not proper because when the contract was entered he was not yet a
stockholder of ABC Corp.

(2019 (A) (2) (b))

Yes. Ms. Z’s contention is not correct.

The law states, all stockholders of a stock corporation shall enjoy preemptive right to subscribe to all issues
or disposition of shares of any class, in proportion to their respective shareholdings, unless such right is denied by
the articles of incorporation or an amendment thereto.

In the case at bar, DEF Corp. sent notices to its stockholders with a reminder that, pursuant to DEF Corp.’s
Articles of Incorporation, any stockholder who fails to exercise his or her pre – emptive right over the new issued
share’s of stock within 3 weeks from receipt of notice would be considered to have waived the same.

Hence, Ms. Z’s contention is not correct because every stockholder must be given a reasonable time within
which to exercise their preemptive rights provided that upon expiration of said period, any stockholder who has not
exercise such right will be deemed to have waived it.

(2019 (A) (4) (a))

No. Mr. P should not be held liable.

The law states, corporations are juridical persons to which the law grants a juridical personality, separate
and distinct from that of each shareholder.

In the case at bar, J Bank argued that Mr. P, President of X. Corp., should be held solidarily liable together
with the corporation because he signed the loan document on behalf of X. Corp.

Hence, Mr. P should not be held liable because the obligations of a corporation, acting through its directors,
and employees, are its own sole liabilities.

(2019 (A) (4) (b))

No. Y, Inc. should not be held liable.

Jurisprudence states the elements of alter – ego piercing:

1) Control, not mere majority or complete stock control, but complete domination, not only of finances but
of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction
at the time no separate mind, will or existence of its own;
2) such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation
of a statutory or other positive legal duty or dishonest and unjust act in contravention of plaintiff’s legal rights; and

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3) the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.

In the case at bar, J Bank contended that Y, Inc. should also be held solidarily liable because the
shareholdings of both corporations are identically owned and their operations are controlled by the same people,
hence, Y, Inc. is a mere alter ego of X Corp.

Hence, Y, Inc. should not be held liable because the fact that control was not used to perpetuate fraud mere
majority or complete stock control is not sufficient basis to pierce the veil of corporate fiction.

(2019 (A) (5) (a))

No. The case is not considered an intra – corporate dispute.

Jurisprudence states, there are two tests in determining intra – corporate dispute, namely: relationship test
and nature of controversy test. In relationship test, an intra – controversy test is one between the corporation,
partnership or association and its stockholders, partners, members or officers. Further, in nature of controversy test
an intra – corporate controversy arises when the controversy is not only rooted in the existence of an intra –
corporate relationship, but also in the enforcement of the parties’ correlative rights and obligations under the
Revised Corporation Code and the internal and intra – corporate regulatory rules of the corporation.

In the case at bar, Mr. Y filed an injunction against Z Company to prohibit the latter from selling shares
which Mr. Y allegedly partly paid from Z Company.

Hence, the case is not considered an intra – corporate dispute because there is no indication that Mr. Y is a
stockholder of Z Company.

(2019 (A) (5) (b))

Yes. The case is considered an intra – corporate dispute.

Jurisprudence states, there are two tests in determining intra – corporate dispute, namely: relationship test
and nature of controversy test. In relationship test, an intra – controversy test is one between the corporation,
partnership or association and its stockholders, partners, members or officers. Further, in nature of controversy test
an intra – corporate controversy arises when the controversy is not only rooted in the existence of an intra –
corporate relationship, but also in the enforcement of the parties’ correlative rights and obligations under the
Revised Corporation Code and the internal and intra – corporate regulatory rules of the corporation.

In the case at bar, Z Company filed a case against Mr. Y in order to collect the unpaid balance of his stock
subscriptions.

Hence, the case is considered an intra – corporate dispute because the issue of unpaid subscription pertains
to the enforcement of their rights and obligations under the Revised Corporation Code and it presupposes of the
existence of the abovementioned tests.

(2019 (A) (6))

The contentions of XYZ Insurance Co. are bereft of merit.

The law states, after a policy of life insurance made payable on the death of the insured shall have been in
force during the lifetime of the insured for a period of 2 years from the date of its issue or of its last reinstatement
the insurer cannot prove that the policy is rescindable by reason of the fraudulent concealment or misrepresentation
of the insured or his agent.

In the case at bar, in January 2016, Mr. H was issued a life insurance policy by XYZ Insurance despite
concealing the fact that Mr. H had been previously diagnosed with colon cancer. Unfortunately, in January 2019,
Mr. H committed suicide.

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In view of the foregoing law, the first contention of XYZ Insurance is not meritorious because the
insurance policy have been in force for 3 years, and thus, after the 2 year period lapses, or when the insured dies
within the period, the insurer must make good on the policy, even though the policy was obtained by fraud,
concealment, or misrepresentation.

Further, the law states, the insurer in a life insurance contract shall be liable in case of suicide only when it
is committed after the policy has been in force for a period of 2 years from the date of its issue or of its last
reinstatement, unless the policy provides a shorter period.

Accordingly, the second contention of XYZ Insurance is not meritorious because Mr. H committed suicide
3 years after the issuance of the insurance policy, and thus, it could be held liable to the beneficiary of Mr. H.

Hence, the contentions of XYZ Insurance Co. are bereft of merit.

(2019 (A) (7))

No. The copy of the Deed of Sale faxed by Ms. K to Ms. J is not considered an electronic document under
the Electronic Commerce Act.

The law states, an electronic document refers to data, information or the representation of information,
figures, symbols or other modes of written expression, described or however represented, by which a right is
established or an obligation extinguished, or a fact may be proved and affirmed, which is received, recorded,
transmitted, stored, processed, retrieved or produced electronically.

In the case at bar, Ms. K send faxed copy of the Deed of Sale to Ms. J.

Hence, the copy of the Deed of Sale faxed by Ms. K to Ms. J is not considered an electronic document
under the Electronic Commerce Act because facsimile transmissions are not paperless but are paper – based. It is, at
best, an exact copy preserving all the marks of an original.

(2019 (A) (8) (b))

No. KLM Printers, Inc.’s invocation of the doctrine of fair use is not proper in this case.

The law states, the fair use of a copyrighted work for criticism, comment, news reporting, teaching
including limited number of copies for classroom use, scholarship, research, and seminal purposes is not an
infringement of copyright.
in the case at bar, KLM Printers, Inc. possessed soft copies of certain textbooks on file and would print book – alikes
of these textbooks upon order and for a fee.

Hence, KLM Printers, Inc.’s invocation of the doctrine of fair use is not proper in this case because the
reproduction of the copies is not one of the circumstances in the abovementioned law but for commercial purposes.

((2019) (A) (9) (b))

No. X Pharmaceuticals, Inc.’s patent applicability for Disilopis should not be granted.
The law states, any technical solution of a problem in any field of human activity which involves an inventive step
new, and is industrially applicable shall be patentable. Further, an invention shall not be considered new if it forms
part of a prior art.

In the case at bar, X Pharmaceuticals, Inc. has been manufacturing a patented antibiotic ointment
Marvelopis. Consequently, the company filed an application for Disilopis, which, although constituting the same
substance as marvelopis, is no longer treated as an antibiotic but as skin whitening.

Hence, X Pharmaceuticals, Inc.’s patent applicability for Disilopis should not be granted because an
invention must possess the essential elements of novelty, originality and precedence and for the patentee to be
entitled to the protection the invention must be new to the world. It is immaterial if the patent is for a different
purpose.

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((2019) (A) (10))

Yes. The defense of W Hotels, Inc.’s defense against the petition for cancellation of trademark is tenable.

The law states, the use of a mark by a company related with the registrant or applicant shall inure to the
latter’s benefit, and such use shall not affect the validity of such mark or of its registration, provided if use of a mark
by person is controlled by the registrant or applicant with respect to the nature and quality of the goods or services,
such use shall inure to the benefit of the registrant or applicant.

In the case at bar, W Hotels, Inc. maintained in its application for registration that it has using been its “W”
trademark in Philippine commerce because its hotel reservation services, albeit for its hotel abroad, are made
accessible to Philippine residents through its interactive websites prominently displaying the “W” trademark.

Hence, the defense of W Hotels, Inc.’s defense against the petition for cancellation of trademark is tenable
because the use of a registered mark representing the owner’s goods or services by means of an interactive website
may constitute proof of actual use that is sufficient to maintain the registration of the same.

((2019) (B) (11) (a))

No. W Medical Inc. cannot file a petition for suspension of payment.

The law states, an individual debtor who possessing sufficient property to cover all his debts but foreseeing
the impossibility of meeting them when they respectively fall due, may file a verified petition that he be declared in
the state of suspension of payments by the court of the province or city in which he has resides for months prior to
the filing of his petition.

Hence, W Medical Inc. cannot file a petition for suspension of payment because the abovementioned law
expressly states that such remedy is only available to insolvent individual debtor and not to juridical insolvent
debtor.
((2019) (B) (11) (d))
Yes. The Court may convert the petition for rehabilitation filed by W Medical, Inc. into one of liquidation.

The law states, within 10 days from receipt of the report of the rehabilitation receiver the court may convert
the proceedings into one for the liquidation of the debtor upon a finding that the debtor is insolvent and there is no
substantial likelihood for the debtor to be successfully rehabilitated as determined in accordance with the rules to be
promulgated by the Supreme Court.

In the case at bar, while W Medical, Inc.’s assets are more than its liabilities and it is able to turn a monthly profit, it
could not pay its loan installments to Bank X as the fall due.

Hence, the Court may convert the petition for rehabilitation filed by W Medical, Inc. into one of liquidation
because it is apparent that it is insolvent and there is no substantial likelihood that it could be successfully
rehabilitated.

((2019) (B) (12) (a))

No. The case filed against Z Insurance Co. should not be suspended in light of the Commencement Order.

The law states, the stay or suspension order shall not apply to the enforcement of claims against sureties
and other persons solidarily liable with the debtor, and 3rd party or accommodation mortgagors as well as issuers or
letters of credit, unless the property subject of the 3rd party or accommodation mortgage is necessary for the
rehabilitation of the debtor as determined by the court upon recommendation by the rehabilitation receiver.

In the case at bar, due to EFG, Inc. default in its loan obligation, Bank Y filed a case against Z Insurance
Co.

Hence, the case filed against Z Insurance Co. should not be suspended in light of the Commencement Order

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because a surety agreements falls upon the exemption of the application of the stay or suspension order.

((2019) (B) (12) (b))

No. The criminal case filed against Mr. P should not be suspended in the light of the Commencement
Order.

The law states, the stay or suspension order shall not apply any criminal action against individual debtor or
owner, partner, director or officer of a debtor shall not be affected by proceeding commence under the law.

In the case at bar, pending criminal case for violation of the Bouncing Checks against the President EFG,
Inc., Mr. P, who signed the check as signatory for the company.

Hence, the criminal case filed against Mr. P should not be suspended in the light of the Commencement
Order because the prosecution of the officers of the corporation has no bearing on the pending rehabilitation of the
corporation, especially since they are charged in their individual capacities.

((2019) (B) (14))

No. XYZ, Inc. is not required to conduct a tender offer.

The law states, any person or group of persons acting in concert, who intends to acquire 35% of the
outstanding voting shares or such outstanding voting shares that are sufficient to gain control of the board in a public
company in or more transactions within a period of 12 months, shall disclose such intention and contemporaneously
make a tender offer for the percentage sought to all holders of such securities within the same period.

In the case at bar, in 2015, 25% of ABC Corp., a publicly – listed company, shareholdings were acquired
by XYZ, Inc. Consequently, 3 years after XYZ, Inc. sought to obtain additional 12% shareholding ABC Corp.

Hence, XYZ, Inc. is not required to conduct a tender offer because while purchase of equity securities
covering 35% of the public company is subject to mandatory tender offer rule, the equity securities should have been
acquired during a 12 – month period.

((2019) (B) (15) (a))

Yes. The information disclosed by Mr. P to Mr. B is considered as material nonpublic information for
purposes of insider trading.

The law states, information is material nonpublic, if it has not been generally disclosed to the public and
would likely affect the market price of the security after being disseminated to the public and the lapse of a
reasonable time for market to absorb such information; or would be considered by a reasonable person important
under the circumstances in determining his course of action whether to buy, sell or hold a security.

In the case at bar, Mr. P, the president of a publicly – listed company, was notified that the corporation has
just been awarded a PHP.5,000,000,000.00 construction contract. Consequently, before the information could be
disclosed to the public he called his stockbroker to purchase 20,000 shares of the said company.

Hence, the information disclosed by Mr. P to Mr. B is considered as material nonpublic information for
purposes of insider trading because such information is essential determining whether to buy, sell or hold a security.

((2019) (B) (15) (b))

Yes. Mr. P and Mr. B should be liable for insider trading.

The law states, it shall be unlawful to sell or buy a security of the issuer, while in possession of material
information with respect to the issuer or the security that is not generally available to the public unless the insider
proves that the information was not gained from such information.

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In view of the foregoing, Mr. P should be liable for insider trading because when he purchased the 20,000
shares, through his broker, he was in possession of material nonpublic information.

Further, the law states, a purchase of or sale of a security of the issuer made by an insider, or such insider’s
spouse or relatives by affinity or consanguinity within 2nd degree, legitimate or common – law, shall be presumed to
have been effected while in possession of material nonpublic information if transacted after such information came
into existence but prior to dissemination of such information to the public and the lapse of a reasonable time for
market to absorb such information.

Accordingly, Mr. B should also be liable for insider trading because he is a brother of Mr. P and was able
to purchased 50,000 shares of the company due to the tip disclosed to him by Mr. P.

Hence, Mr. P and Mr. B should be liable for insider trading.

((2019) (B) (16) (a))

The peso savings account of Mayor J with Bank P may be garnished. However, the U.S. Dollar savings
account with Bank D may not be subject of garnishment.

The law states, all deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities are hereby considered as of an absolutely confidential nature and may not be examined, inquired
or looked into by any person, government official, bureau or office except when the examination is made in the
course of a special or general examination of a bank and when the examination is made by an independent auditor
hired by the bank to conduct its regular audit or upon written permission of the depositor, or in cases of
impeachment, or upon order of a competent court in cases of bribery, dereliction of duty of public officials, or in
cases where the money deposited or invested is the subject matter of the litigation.

In the case at bar, Mayor J have 2 bank accounts: a peso savings account with Bank P and a U.S. Dollar
savings account with Bank D. Consequently, Mayor J’s former business, Mr. K, filed a civil case for collection sum
of money against him.

In view of the foregoing, the peso savings account of Mayor J with bank may be garnished because there is
no real inquiry in such a case, and if the existence of the deposit is disclosed the disclosure is purely incidental to the
execution process, and it is not the intention of Congress to enable debtors to evade payment of their debts through
the expedient of converting their assets into cash and depositing the same in a bank.

Further, the law states, all foreign currency deposits are hereby declared as and considered of an absolutely
confidential nature and in no instance shall foreign currency deposits be examined, inquired or looked into by any
person, government official, bureau or office whether judicial or administrative or legislative, or any other entity
whether public or private. Consequently, that said foreign currency shall be exempt from attachment, garnishment,
or any other order or process of any court, legislative body, government agency or any administrative body
whatsoever.

Accordingly, the U.S. Dollar savings account with Bank D may not be subject of garnishment because the
abovementioned law expressly prohibits such remedy.

Hence, it is only the peso savings account of Mayor J with Bank P may be garnished.

((2019) (B) (16) (b))

The peso savings account of Mayor J with Bank P may be subject to court inquiry. However, the U.S.
Dollar savings account with Bank D may not be subject of court inquiry.

The law states, all deposits of whatever nature with banks or banking institutions in the Philippines
including investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired

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or looked into by any person, government official, bureau or office, except in cases where the money deposited or
invested is the subject matter of the litigation.

In the case at bar, a criminal case for Direct Bribery under the Revised Peal Code was filed against Mayor J
and it was alleged it the Information that Mayor J received kickbacks which amounts were deposited to his bank
accounts.

In view of the foregoing, the peso savings account of Mayor J with Bank P may be subject to court inquiry
because the peso savings account is the subject matter of the criminal case filed against him.

Further, the law state, that said foreign currency shall be exempt from attachment, garnishment, or any
other order or process of any court, legislative body, government agency or any administrative body whatsoever.

Accordingly, the U.S. Dollar savings account with Bank D may not be subject of court inquiry because it is
exempt from any court order.

hence, it is only the peso savings account of Mayor J with Bank P may be subject to court inquiry.

((2019) (B) (17) (a))

No. AMCL may not examine the bank accounts of the accused – public officials even without seeking a
prior court order.

The law states, notwithstanding the provisions of the Bank Secrecy Law, Foreign Currency Deposit Act of
the Philippines and other laws, the Anti – Money Laundering Counsel may inquire into or examine any particular
deposit or investment, including related accounts, with any banking institution or non – bank financial institution
upon order of any competent court upon verified ex parte petition by the Anti – Money Laundering Council and
after determination that probable cause exists that any monetary instrument or property is in any way related to an
unlawful activity, except that no court order shall be required in cases involving unlawful activity which refers to
any act or omission or series or combination thereof involving or having direct relation to kidnapping for ransom,
violation of the Comprehensive Dangerous Drugs Act, hijacking, destructing arson and murder, and felonies or
offenses of similar nature, which are punishable under the penal laws of other countries, and terrorism and
conspiracy to commit terrorism.

In the case at bar, several public officials were charged before the Sandiganbayan violation of the Anti –
Graft and Corrupt Practices involving the anomalous awardof a multi – billion contract to Corporation Z.

Hence, AMCL may not examine the bank accounts of the accused – public officials even without seeking a
prior court order because the predicate crime of graft and corrupt practices act does not fall within the exception.

((2019) (B) (17) (b))

Yes. A court order may be issued ex parte for the freezing of the bank accounts of the accused – public
officials upon the application of the AMLC.

The law states, upon a verified ex parte petition by the Anti – Money Laundering Council and after
determination that probable cause exists that any monetary instrument or property is in any way related to an
unlawful activity, the Court of Appeals may issue freeze order which shall be effective immediately, and which shall
not exceed 6 months depending upon the circumstance of the case. However, if there is no case filed against a
person whose account has been frozen within the period determined by the court, the freeze order shall be deemed
ipso facto lifted.

In the case at bar, the Information filed against the accused – public officials alleged that each of the
accused received kickbacks from Corporation Z and that said kickbacks were deposited to their respective bank
accounts in the Philippines.

Hence, a court order may be issued ex parte for the freezing of the bank accounts of the accused – public

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officials upon the application of the AMLC because when the latter discovered that kickbacks were deposited to
their respective bank accounts it established probable cause of the commission of the crime.

((2019) (B) (19) (a))

Yes. LMN, Inc. may be considered a common carrier.

The law states, common carrier are persons, corporations, associations or firms engaged in the business of carrying
or transporting passengers or goods or both, by land, air, or water for compensation, offering their services to the
public.

In the case at bar, LMN, Inc. maintained that it is not a common carrier because its boats are not available to the
general public but only ferry resort guests and employees.
Hence, LMN, Inc. may be considered a common carrier because the law does not distinguish between a carrier
offering its services to the general public, and one who offers or solicits business only from a narrow segment of the
general population.

((2019) (B) (19) (b))

No. LMN, Inc. may not be absolved from liability on the ground of fortuitous event.

Common carriers are responsible for the loss, destruction, or deterioration of the goods, and presumed to
have been at fault or to have acted negligently unless the same is due to flood, storm, earthquake, lightning, or other
natural disaster or calamity. Provided, however, the natural disaster must have been the proximate and only cause of
the loss, and the common carrier must exercise due diligence to prevent or minimize loss before, during and after the
occurrence of the fortuitous event in order that it may be exempted from the liability.

Hence, LMN, Inc. may not be absolved from liability on the ground of fortuitous event because it was
guilty of concurring negligence in continuing with the ferry services despite storm.

((2019) (B) (20) (a))

No. Bank I’s refusal to reimburse Bank C is not warranted.

The law states, the issuing bank or the confirming bank, must examine the tender documents that the terms
and conditions of the letter of credit are strictly complied with. Documents that are not stipulated as tender
documents will not be examined.

In the case at bar, Bank I, the issuing bank, refused to reimburse Bank C for the reason that it received an e
– mail coming from Mr. P that the latter will not make any payment to Bank I in relation to the letter of credit
because the products shipped to him by F Corp. were of substandard quality.

Hence, Bank I’s refusal to reimburse Bank C is not warranted because as long as the proper documents are
presented, the issuing bank has an obligation to pay even if the buyer should later on refuse payment.

((2019) (B) (20) (b))

Yes. Bank I may refuse Bank C’s claim for reimbursement if the documents submitted by F Corp. were
proven to be actually forged but were nonetheless accepted by Bank C as sufficient.

Jurisprudence states, untruthfulness of a certificate accompanying a demand for payment under a standby
credit may qualify as fraud sufficient to support an injunction against payment provided: there is a clear proof of
fraud, the fraud constitutes fraudulent abuse of the independent purpose of the letter of credit and not only under the
main agreement; and irreparable injury might follow if injunction is not granted or the recovery of damages would
be seriously damaged.

Hence, Bank I may refuse Bank C’s claim for reimbursement if the documents submitted by F Corp. were
proven to be actually forged but were nonetheless accepted by Bank C as sufficient because the aforesaid forged

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documents may qualify as fraud sufficient to support an injunction.

((2018) (1) (a))

No. There is no merit in the case against YB.

Jurisprudence states that, Letters of credit is an engagement by a bank or other person made at the request of a
customer that the issuer will honor drafts or other demands for payment upon compliance with the condition
specified in the credit.

In the case at bar, YBM alleged that YB is liable for failure to ensure that the electronic parts loaded for
exportation in China corresponded with those described in the bill of lading.

Hence, there is no merit in the case against YB because YB only acted as an advising bank whose only
obligation after determining the apparent authenticity of the letter of credit is to transmit a copy thereof the
beneficiary of the letter of credit.

Yes. A court order may be issued ex parte for the freezing of the bank accounts of the accused – public officials
upon the application of the AMLC.

The law states, upon a verified ex parte petition by the Anti – Money Laundering Council and after
determination that probable cause exists that any monetary instrument or property is in any way related to an
unlawful activity, the Court of Appeals may issue freeze order which shall be effective immediately, and which shall
not exceed 6 months depending upon the circumstance of the case. However, if there is no case filed against a
person whose account has been frozen within the period determined by the court, the freeze order shall be deemed
ipso facto lifted.

In the case at bar, the Information filed against the accused – public officials alleged that each of the accused
received kickbacks from Corporation Z and that said kickbacks were deposited to their respective bank accounts in
the Philippines.

Hence, a court order may be issued ex parte for the freezing of the bank accounts of the accused – public
officials upon the application of the AMLC because when the latter discovered that kickbacks were deposited to
their respective bank accounts it established probable cause of the commission of the crime.

2018(1b)
No. The contention of the President is not meritorious.

The law states, if the violation of the Trust Receipt Agreement is committed by a corporation, partnership,
association or other juridical entities, the penalty provided shall be imposed upon the directors, officers, employees
or other official or persons therein responsible for the offense, without prejudice to the civil liabilities from the
criminal offense.

In the case at bar, the YEC President assailed that he cannot be held liable for the alleged violation of the Trust
Agreement since he only acted as an officer of the corporation. Accordingly, the law stated that the corporate agents
who committed the crime shall liable for such violation.

Hence, the contention of the President is not meritorious.

2018 4a)
Yes. Common carriers are presumed to be at fault whenever there is death or injury to its passengers. 

The law states, in case of death of or injuries to passengers, common carriers are presumed to have been at
fault or to have acted negligently unless they proved that the observed extraordinary diligence.

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In the case at bar, Yatco alleged they are not presumed to be at fault in case of injuries and/or death on the
part of its passenger. Accordingly, the law states that in case of death of or injuries to passengers, common carriers
are generally presumed to have been at fault.

Hence, common carriers are presumed to be at fault whenever there is death or injury to its passengers.

2018 5)
Yes. YFC is correct.

The law states, the Stay or Suspension Order shall not apply to the enforcement of claims against sureties
and other persons solidary liable with the debtor unless the accommodation mortgage is necessary for the
rehabilitation of the debtor.

In the case at bar, Ysko and Yuan executed a Continuing Suretyship Agreement in favor of YFC.
Accordingly, the suspension order shall only apply to Yellow Fin but not with Ysko and Yuan.

Hence, YFC is correct.

2018 6a)
No. Yang is not correct in saying that her designation as beneficiary was irrevocable.
The law states, the insured shall have the right to change the beneficiary he designated in the insurance
policy, unless he has expressly waived this right in said policy.

In the case at bar, Yin changed the designation of the beneficiary to an irrevocable designation of Yinsel
and Yessel jointly. Accordingly, there is nothing in the insurance policy taken by Yin which indicated that the
designation of Yang as beneficiary is irrevocable.

Hence, Yang is not correct in saying that her designation as beneficiary was irrevocable.

2018 6b)
Yinsel has insurable interest on the life of Yin, while, Yessel has none.

The law states, donations made between persons who were guilty of adultery or concubinage at the time of
the donation shall be void. Further, any person who is forbidden from receiving any donation cannot be named
beneficiary of a life insurance policy by a person who cannot make any donation to him.

In the case at bar, Yin had an extra-marital affair with Yessel and bore them a daughter named Yinsel.
Consequently, Yessel cannot be allowed as beneficiary of the insurance policy executed by Yin, thus, the insurance
indemnity must go to Yinsel as Yin’s legal heir.

Hence, Yinsel has insurable interest on the life of Yin, while, Yessel has none.

2018 7a)
No. The acts of entering into the film distribution contract and the appointment of Atty. Yson cannot be
considered as of doing business in the Philippines.

The law states, doing business shall not be deemed to include appointing a representative or distributor
domiciled in the Philippine which transacts business in its own name and for its own account.

In the case at bar, California, USA based company entered into a contract with Philippine based company
for the exclusive distribution in the Philippines of movies produced in the USA by the former and subsequently,
appointed Atty. Yson, as its attorney – in – fact. Accordingly, appointing a representative or distributor domiciled in
the Philippine is not deem doing business in the Philippines.

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Hence, the acts of entering into the film distribution contract and the appointment of Atty. Yson cannot be
considered as of doing business in the Philippines.

2018 7b)
Yes. My answer will be the same if Yelp Picture becomes a substantial shareholder, and is able to elect 2
directors in the Board of Directors of Yehey Movies.

The law states, doing business shall not be deemed to include mere investment as a shareholder by a foreign
entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor, nor
having a nominee director or officer to represent its interests in such corporation.

In the case at bar, Yelp Pictures becomes a substantial shareholder, and is able to elect 2 directors in the Board
of Directors of Yehey Movies. Accordingly, it does not constitute doing business in the Philippine.

Hence, my answer will be the same.

2018 8a)
Yes. In acquiring 75% of the total capital of YHC, YEI should be required to do a mandatory tender offer.

The law states, any person or group of persons acting in concert who intends to acquire at least 15% of any
class of any equity security of a listed corporation shall make a tender offer to stockholders by filing with the
Securities and Exchange Commission a declaration to that effect and furnish the issuer, a statement containing such
of the information required.

In the case at bar, YEI acquired 75% shareholdings of YMI and YCLIN, and subsequently owns and
controls 65% of YCC.

Hence, YEI should be required to do a mandatory tender offer because the mandatory tender offer rule
includes both direct and indirect acquisition of stock.

2018 8b)
Yes. Yolly is liable for insider trading.

It shall be unlawful for any insider to communicate material non-public information about the issuer or the
security to any person who the insider knows or has reason to believe that such person will likely buy or sell a
security of the issuer while in possession of such information.

In the case at bar, Yolly one of the staff members in the office of the corporate secretary of YEI secretly
called her brother who works with a stock brokerage company to purchase 5000 shares in the name of Yolly’s
husband. Accordingly, Yolly can held liable for insider trading since insider is a person who learns material
information by a communication from any insider.

2018 9)
No. YI’s board should not heed the demand of its preferred shareholders.

The law states, the board of directors of a stock corporation may declare dividends out of the unrestricted
retained earnings which shall be payable in cash, property, or in stock to all stockholders on the basis of outstanding
stock held by them.

In the case at bar, YI realized a net profit of 100 million and unrestricted retained earnings of PHP.30
million. Accordingly, YI’s board is only allowed to declare dividends in the amount of PHP.30 million.

Hence, YI’s board should not heed the demand of its preferred shareholders.

2018 10a)

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Yes. Ynchon has a cause of action to file the Petition for Mandamus to compel the corporation to register
the 500 shares in the corporation’s books.

The law states, restrictions on the right to transfer of shares must appear in the articles of incorporation, in
the by – laws, as well as in the certificate of stock. Otherwise, the same shall not be binding on any purchaser in
good faith.

In the case at bar, Ybarra sells 500 shares for cash pursuant to a notarized Deed of Sale in favor of Ynchon,
and which certificate was duly endorsed and delivered. Accordingly, in the absence of restrictions on the right to
transfer of shares, registration of a transfer of shares of stock is a ministerial duty on the part of the corporation.

Hence, Ynchon has a cause of action to file the Petition for Mandamus to compel the corporation to register
the 500 shares in the corporation’s books.

2018 10b)
Ynchon should be the one to pay the remaining balance but without the prejudice to his right to recover
from Ybarra.

The law states, novation which consists in substitution a new debtor in the place of the original one, may be
made even without the knowledge or against the will of the original debtor, but not without the consent of the
creditor.

In the case at bar, Ybarra is the registered shareholder of 500 shares in Yakal Inc., of which only 50% has
been paid up. Accordingly, the sale of the shares to the buyer with the consent of corporation effectively resulted in
novation.

Hence, Ynchon should be the one to pay the remaining balance but without the prejudice to his right to
recover from Ybarra.

2018 11a)
No. Yenetic’s AOI cannot be formally amended to remove the right of appraisal on all dissenting
stockholders.

The law states, any stockholder of a corporation shall have the right to dissent and demand payment of the
fair value of shares, in case of an amendment to the articles of incorporation has the effect of:
1) changing or restricting the rights of any stockholder or class of shares, or
2) authorizing preferences in any respect superior to those of outstanding shares of any class, or
3) extending or shortening the term of corporate existence.

In view of the foregoing, Yenetic AOI cannot be amended to remove the appraisal right of the dissenting
stockholders because it appraisal right is a statutory right. It cannot be denied to the stockholders in cases where the
law allows such right.

2018 11b)
The law states, no corporation shall increase or decrease its capital stock or incur, create or increase any bonded
indebtedness unless approved by a majority vote of the board of directors and by 2/3 of the outstanding capital stock
at a stockholder’s meeting duly called for the purpose.

Further, any stockholder of a corporation shall have the right to dissent and demand payment of the fair value of
the shares in the following instances
1) In case an amendment to the articles of incorporation has the effect of: (RAT)
i. changing or restricting the Rights of any stockholder or class of shares, or
ii. Authorizing preferences in any respect superior to those of outstanding shares of any class, or
iii. extending or shortening the Term of corporate existence;

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2) In case of Sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the
corporate property and assets as provided in the REVISED CORPORATION CODE;
3) In case of Investment of corporate funds for any purpose other than the primary purpose of the corporation.
and
4) In case of Merger or consolidation.

Consequently, stockholders cannot exercise any appraisal right in case of amendment to the articles of
incorporation to increase capital stock because it is not one of the cases allowed by law.

2018 11c)
No. The new shares from the unissued shares cannot be offered to the new investors without having them to
offer them to the shares of record.

The law states, all stockholders of a stock corporation shall enjoy preemptive rights to subscribe to all
issues or disposition of shares of any class, in proportion to their respective shareholdings, unless such right is
denied by the articles of incorporation or an amendment thereto.

In the case at bar, an increase in the authorized capital stock of Yenetic has been legally effected with the
SEC. Accordingly, all stockholders of the corporation shall enjoy preemptive right over the new shares from the
unissued shares.

Hence, the new shares from the unissued shares cannot be offered to the new investors without having them
to offer them to the shares of record.

2018 12)
Mr. Yokada’s defense is not meritorious.

The law states, corporations are juridical persons to which the law grants a juridical personality, separate
and distinct from that of each stockholder.

In the case at bar, Yeh, Yah and Yo was able to prove that the president of Yashtag Holding was able to
withdraw PHP.300 million from the corporation for his personal account and entered into the books of the
corporation as advances to stockholders. Accordingly, the corporation’s separate personality may be disregarded
against any person if it is used to protect fraud or defend crime.

Hence, Mr. Yokada’s defense is not meritorious.

2018 13a)
No. YBC Bank cannot unilaterally increase the interest rates on the loan.

The law states, the validity or compliance of a contract cannot be left to the will of one of the contracting
parties.

In the case at bar, YBC Bank extended a loan to Mr. Yamato which provided an escalation clause that at
the anniversary date of the loan, YBC Bank was granted the option to increase the interest rate whenever there
would be an increase in the Bangko Sentral ng Pilipinas’ prevailing rates. Accordingly, a contract containing a
condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting
parties, is void.

Hence, YBC Bank cannot unilaterally increase the interest rates on the loan.

2018 13b)
No. Yamsuan has a prior right to the property.

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The law states, the States recognizes the fiduciary nature of banking that requires high standards of
integrity and performance.

In the case at bar, YBC Bank extended a loan to Mr Yamato secured by a real estate mortgage.
Consequently, the bank determined that there were 2 separate TCS over the same property.

Hence, Yamsuan has a prior right to the property because the bank is not a mortgagee – buyer in good faith.
It should have exercise due diligence to determine the true and actual owner of the real property.
 
2018 14a)
Yes. The insurer can raise the issue of failure to disclose that she had cancer as a cause for denying the
claim of the beneficiaries.

The law states, each party to a contract of insurance must communicate to the other, in good faith, all facts
within his knowledge which are material to the contract and as to which he makes no warranty, and which other has
not the means of ascertaining.

In the case at bar, Yate was failed to disclose to the insurer in her application, nor to the insurer’s
accredited physician that she was previously diagnosed by private physician of having breast cancer. Accordingly,
the duty of disclosure is mandatory before the completion and effectivity of the insurance contract.

Hence, the insurer can raise the issue of failure to disclose that she had cancer as a cause for denying the
claim of the beneficiaries.

2018 14b)
Yes. The beneficiaries are entitled to receive the proceeds of the life insurance notwithstanding the fact that
the cause of death was suicide.

The law states, the insurer in a life insurance contract shall be liable in case of suicide only when it is
committed after the policy has been in force for a period of 2 years from the date of its issuance or of its last
reinstatement, unless the policy provides a shorter period.

In the case at bar, Yate was found dead hanging in her closet 36 months after the issuance of the insurance
policy. Accordingly, it is beyond the 2 year period.

Hence, the insurer cannot raise the issue of failure to disclose that she had cancer as a cause for denying the
claim of the beneficiaries.

2018 15a)
No Aling Voling cannot successfully obtain relief to prohibit Aling Yasmin from using the brand name
Ysmaellas in her products.

The law states, except in cases of importation of drugs and medicines and of off – patent drugs and medicines
the owner of a registered mark shall the exclusive right to prevent all 3rd parties not having the owner’s consent from
using in the course of trade identical or similar designs or containers for goods or services which are identical or
similar to those in respect of which the trademark is registered where such use would result in a likelihood of
confusion.

In the case at bar, Aling Voling registered the brand name Ysmaellas as a copyright with the national library.
Accordingly, brand name are proper subjects for trademark and not copyright.

Further, jurisprudence states, in registration of trademark, without more, does not confer upon the registrant
an absolute right to the registered mark. The certificate of registration is merely a prima facie proof that the
registrant is the owner of the registered mark or trade name.

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Meanwhile, copyright is confined to literary and artistic works which are original intellectual creations in
the literary and artistic domain protected from the moment their creation and not at the time of registration

2018 15b)
Yes. Aling Yasmien can seek injunctive relief against Aling Yoling from using the brand name Ysmaellas
because of the doctrine of prior use.

The law states, except in cases of importation of drugs and medicines and off – patent drugs and medicines, the
owner of a registered mark shall have the exclusive right to prevent all 3rd parties not having the owner’s consent
from using the course of trade identical or similar signs or containers of goods for services which are identical or
similar to those in respect of which the trademark is registered where such would result in a likelihood of confusion.

In the case at bar, Aling Voling and Aling Yasmine are both selling pastillas and subsequently Aling Yasm
registered the brand name Ysmaellas with the Intellectual Property Officer. Accordingly, registration of trade name,
without more, does not confer upon the registrant an absolute right to the registered mark.

Hence, Aling Yasmien can seek injunctive relief against Aling Yoling because Evidence of prior and
continuous use of the mark or trade name by another can overcome the presumptive ownership of the registrant and
may very well entitle the former to be declared owner in an appropriate case.

2018 15c)
No. Aling Yoling cannot seek the cancellation of Aling Yasmin’s trademark registration of the brand name
Ysmaellas on the ground of well known brand.

The law states, a mark cannot be registered if it is identical with, or confusingly similar to, or constitutes of
a mark which is considered by the competent authority of the Philippines to be well – known internationally in the
Philippines, whether or not is registered here, as being already the mark of a person other than the applicant for
registration, and used for identical or similar goods or services.

In the case at bar, a distinctive – tasting pastillas is well known throughout the as having been developed in
Barangay Ysmael. Consequently, Aling Yoling regietered her pastillas under the brand name Ysmaellas.

Hence, Aling Yoling cannot seek the cancellation of Aling Yasmin’s trademark registration of the brand
name Ysmaellas on the ground of well known brand because it only applies to a mark which well – known
internationally and in the Philippines.

2018 16a)
Yes. Yosha invention is still patentable.

The law states, any technical solution of a problem in any field of human activity which is new, involves an
inventive step and is industrially applicable shall be patentable. An invention shall not be considered new if it forms
part of a prior art.

In the case at bar, Yosha, while preparing to have his invention registered with the IPO, had several models of
his new system fabricated and sold his province. Accordingly, he may still register his invention because the
principle of prior art presupposes that the one who has made the invention available to the public is a person other
than the applicant for patent.

2018 16b)
No. Yosha cannot prevent anyone who has possession of the earlier models from using
them

The law states, any prior user, who in good faith was using the invention before the filing
date or priority date of the application on which a patent is granted, shall have the right to continue the use thereof as
envisaged in such preparation within the territory where the patent produces it effect.

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In the case at bar, Yosha, while preparing to have his invention registered with the IPO, had several models of
his new system fabricated and sold his province. Accordingly, the prior users was in good faith in using the
invention.

Hence, Yosha cannot prevent anyone who has possession of the earlier models from using them.

2018 17a)
Yes. CSC is correct in dismissing the case.

The law states, electronic document refers to data, information or representation of information, figures,
symbols or other modes of written expression, described or however represented, by which a right is established or
an obligation extinguished or a fact may be proved and affirmed, which is received, recorded, transmitted, stored,
processed, retrieved or produced electronically.

In the case at bar, Yvan claimed that based on the Electronic Commerce Act of 2000, his facsimile transmission
should be considered like any genuine and authentic paper pleading. Accordingly, facsimile are not paperless but
paper based since without the original there is no way in determining the whether pleading is genuine and authentic.

2018 17b)
No. Yvan’s bank cannot be ordered by the court to disclose if there unreasonable increases in his bank
deposit when the alleged acts were committed.

The law states, all deposits of whatever nature with banks are hereby considered as of an absolutely
confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or
office except in cases where the money deposited or invested is the subject matter of the litigation.

In the case at bar, Yvan was dismissed from his employment with PAGCOR because of the alleged of the
padded credit meter readings. Accordingly, the subject of the dismissal was not the money deposited by the Yvan in
his bank.

Hence, Yvan’s bank cannot be ordered by the court to disclose if there unreasonable increases in his bank
deposit when the alleged acts were committed.

2018 18a)
Yes. The legal position of YB in requiring written permission from the depositor is correct.

The law states, all foreign currency deposits are hereby declared as and considered of an absolutely
confidential nature and, in no instance shall foreign currency deposits be examined, inquired or looked into by
any person, government official, bureau or office whether judicial or administrative or legislative, or any other
entity whether public or private except upon the written permission of the depositor.

In the case at bar, through various acts of graft and bribery, Mayor Ycasiano deposite U.S. dollar in
Foreign Currency Deposit Unit account with the Yuen Bank. Accordingly, the absence of probable cause that
foreign deposit was derived from unlawful activity AMLC cannot inquire into bank account of any depositor
without the written permission of the latter.

Hence, the legal position of YB in requiring written permission from the depositor is correct.

2018 18b)
Yes. AMLC have the power to order a banking institution to reveal matters relating to bank accounts

The law states, the AMLC may inquire into or examine any particular deposit or investment, including related
accounts, with any banking institution or non – bank financial institution upon order of any competent court upon a

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verified ex parte petition by the Anti – Money Laundering Council and after determination that probable cause exists
that any monetary instrument or property is in any way related to an unlawful activity. Mere tip will not suffice.

However, no court order is required in cases involving unlawful activity which refers to any act or omission or
series or combination thereof involving or having direct relation to kidnapping for ransom, violation of the
Comprehensive Dangerous Drugs Act, hijacking, destructive arson and murder and felonies or of similar nature,
which are punishable under the penal laws of other countries, and terrorism and conspiracy to commit terrorism.

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