2013 Bar

POLITICAL LAW
ESSAY QUESTIONS
I.
GENERAL CONSIDERATIONS STATE IMMUNITY SUITS AGAINST GOVERNMENT AGENCIES

In the last quarter of 2012, about 5,000 container vans of imported goods
intended for the Christmas Season were seized by agents of the Bureau of Customs.
The imported goods were released only on January 10, 2013. A group of importers got
together and filed an action for damages before the Regional Trial Court of Manila
against the Department of Finance and the Bureau of Customs.
The Bureau of Customs raised the defense of immunity from suit and,
alternatively, that liability should lie with XYZ Corp. which the Bureau had contracted for
the lease of ten (10) high powered van cranes but delivered only five (5) of these
cranes, thus causing the delay in its cargo-handling operations. It appears that the
Bureau, despite demand, did not pay XYZ Corp. the Php1.0 Million deposit and
advance rental required under their contract.
(A) Will the action by the group of importers prosper? (5%)
SUGGESTED ANSWER:
(A) No, the action of the group of importers will not prosper. The primary
function of the Bureau of Customs is governmental, that of assessing and
collecting lawful revenues from imported articles and all other tariff and customs
duties, fees, charges, fines, and penalties (Mobil Philippines Exploration, Inc. v.
Customs Arraste Service, 18 SCRA 120).
(B) Can XYZ Corp. sue the Bureau of Customs to collect rentals for the
delivered cranes? (5%)
SUGGESTED ANSWER:
(B) No, XYZ Corporation cannot sue the Bureau of Customs to collect
rentals for the delivered cranes. The contract was a necessary incident to the
performance of its governmental function. To properly collect the revenues and

customs duties, the Bureau of Customs must check to determine if the

declaration of the importers tallies with the landed merchandise. The cranes are
needed to haul the landed merchandise to a suitable place for inspection (Mobil
Philippines Exploration, Inc. v. Customs Arraste Service, 18 SCRA 120).
ALTERNATIVE ANSWER:
No, XYZ Corporation cannot sue the Bureau of Customs, because it has no
juridical personality separate from that of the Republic of the Philippines (Mobil
Philippines Exploration, Inc. v. Customs Arraste Service, 18 SCRA 120).
ANOTHER ALTERNATIVE ANSWER:
Yes, XYZ Corporation may sue the Bureau of Customs because the
contract is connected with a proprietary function, the operation of the arrastre
service (Philippine Refining Company v. Court of Appeals, 256 SCRA 667).
Besides, XYZ Corporation leased its van cranes, because the Bureau of Customs
undertook to pay its rentals. Justice and equity demand that the Bureau of
Customs should not be allowed to invoke state immunity from suit (Republic v.
Unimex-Micro Electronics GmBH, 518 SCRA 19).
II.
EXECUTIVE DEPARTMENT POWER OF APPOINTMENT COMMISSION ON APPOINTMENTS
CONFIRMATION

While Congress was in session, the President appointed eight acting Secretaries.
A group of Senators from the minority bloc questioned the validity of the appointments
in a petition before the Supreme Court on the ground that while Congress is in session,
no appointment that requires confirmation by the Commission on Appointments, can be
made without the latters consent, and that an undersecretary should instead be
designated as Acting Secretary.
Should the petition be granted? (5%)
SUGGESTED ANSWER:
No, the petition should not be granted. The Department Head is an alter ego
of the President and must enjoy his confidence even if the appointment will be
merely temporary. The Senators cannot require the President to designate an
Undersecretary to be the temporary alter ego of the President. (Pimental, Jr. v.
Ermita, 472 SCRA 587)
III.

BILL OF RIGHTS RIGHTS OF THE ACCUSED ASSISTANCE OF COUNSEL; RIGHT TO BE INFORMED;

EXTRAJUDICIAL CONFESSION

A robbery with homicide had taken place and Lito, Badong, and Rollie were
invited for questioning based on the information furnished by a neighbour that he saw
them come out of the victims house at about the time of the robbery/killing. The police
confronted the three with thi and other information they had gathered, and pointedly
accused them of committing the crime.
Lito initially resisted, but eventually broke down and admitted his participation in
the crime. Elated by this break and desirous of securing a written confession soonest,
the police called City Attorney Juan Buan to serve as the trios counsel and to advise
them about their rights during the investigation.
Badong and Rollie, weakened in spirit by Litos early admission, likewise
admitted their participation. The trio thus signed a joint extrajudicial confession which
served as the main evidence against them at their trial. They were convicted based on
their confession.
Should the judgment of conviction be affirmed or reversed on appeal? (5%)
SUGGESTED ANSWER:
The judgment of conviction should be reversed on appeal. It relied mainly
on the extrajudicial confession of the accused. The lawyer assisting them must
be independent. City Attorney Juan Buan is not independent. As City Attorney, he
provided legal support to the City Mayor in performing his duties, which include
the maintenance of peace and order (People v. Sunga, 399 SCRA 624).
ALTERNATIVE ANSWER:
The judgment of conviction should be affirmed if the accused failed to
object when their extrajudicial confession was offered in evidence, which was
rendered it admissible (People v. Samus, 389 SCRA 93).
IV.
JUDICIAL DEPARTMENT JUDICIAL POWER

Congress enacting a law providing for trial by jury for those charged with crimes
or offenses punishable by reclusion perpetua or life imprisonment. The law provides for
the qualifications of members of the jury, the guidelines for the bar and bench for their
selection, the manner a trial by jury shall opera, and the procedures to be followed.

Is the law constitutional? (6%)

SUGGESTED ANSWER:
The law providing for trial by jury is unconstitutional, because of the
omission in Article VIII, Section 5(5) of the 1987 Constitution of the provisions in
Article VIII, Section 13 of the 1935 Constitution and Article X, Section 5(5) 1973
Constitution, which authorized the Legislature to repeal, alter, or supplement the
rules of procedure promulgated by the Supreme Court. Congress can no longer
enact any law governing rules of procedure for the courts. (Echegaray v.
Secretary of Justice, 301 SCRA 96).
ALTERNATIVE ANSWER:
The law is valid, because the grant of the right to trial by jury involves a
substantive law and is within the competence of Congress (Article VIII, Section
5(5) of the 1987 Constitution).
V.
LAW ON PUBLIC OFFICERS ACCOUNTABILITY OF PUBLIC OFFICERS IMPEACHMENT

As a leading member of the Lapiang Mandirigma in the House of

Representatives, you were tasked by the party to initiate the moves to impeach the
President because he entered into an executive agreement with the US Ambassador for
the use of the former Subic Naval Base by the US Navy, for free, i.e., without need to
pay rent nor anyind of fees as a show of goodwill to the U.S. because of the continuing
harmonious RP-US relations.
Cite at least two (2) grounds for impeachment and explain why you chose
them. (6%)
SUGGESTED ANSWER:
The President can be impeached for culpable violation of the Constitution
and betrayal of public trust. The Supreme Court has already ruled that the
provision in Article XVIII, Section 25 of the Constitution requires a treaty even for
the mere temporary presence of foreign troops in the Philippines (Bayan v.
Zamora, 342 SCRA 499). The President cannot claim, therefore, that he acted in
good faith. (Report of the Special Committee in the Impeachment of President
Quirino, Congressional Record of the House of Representatives, Vol. IV, p. 1553).
Betrayal of public trust includes violation of the oath of the office of the President
(Record of the Constitutional Commission, Vol. II, p. 272). In his oath of office, the

President swore to preserve and defend the Constitution (Article VII, Section 5 of
the 1987 Constitution).
ALTERNATIVE ANSWER
The President can be impeached for culpable violation of the Constitution and
graft and corruption (Article XI, Section 2). By entering into the executive
agreement, the President violated Section 3(d) of the Anti-Graft and Corrupt
Practices Act because of the undue injury to the Republic of the Philippines.
VI.
PUBLIC INTERNATIONAL LAW LAW OF THE SEA

Congress passed Republic Act No. 7711 to comply with the United Nations
Convention on the Law of the Sea.
In a petition filed with the Supreme Court, Anak Ti Ilocos, an association of Ilocano
professionals, argued that Republic Act No. 7711 discarded the definition of the
Philippine territory under the Treaty of Paris and in related treaties; excluded the
Kalayaan Islands and the Scarborough Shoals from the Philippine Archipelagic
baselines; and converted internal waters into archipelagic waters.
Is the petition meritorious? (6%)
SUGGESTED ANSWER
No, the petition is not meritorious. The United Nations Convention on the Law
of the Sea has nothing to do with the acquisition or loss of territory. It merely
regulates sea-use rights over maritime zones, contiguous zones, exclusive
economic zones, and continental shelves which it delimits. The Kalayaan Islands
and the Scarborough Shoals are located at an appreciable distance from the
nearest shoreline of the Philippine archipelago. A straight baseline loped around
them from the nearest baseline will violate Article 47(3) and Article 47(2) of the
United Nations Convention on the Law of the Sea III. Whether the bodies of water
lying landward of the baselines of the Philippines are internal waters or
archipelagic waters, the Philippines retains jurisdiction over them. (Magallona v.
Ermita, 655 SCRA 476).
VII.
BILL OF RIGHTS SEARCH AND SEIZURE WARRANTLESS SEARCHES

As he was entering a bar, Arnold who s holding an unlit cigarette in his right hand
was handed a match box by someone standing near the doorway. Arnold unthinkingly
opened the matchbox to light his cigarettes and as he did so, a sprinkle of dried leaves
fell out, which the guard noticed. The guard immediately frisked Arnold, grabbed the
matchbox, and sniffed its contents. After confirming that the matchbox contained
marijuana, he immediately arrested Arnold and called in the police.
At the police station, the guard narrated to the police that the personally caught
Arnold in possession of dried marijuana leaves. Arnold did not contest the guards
statement; he steadfastly remained silent and refused to give any written statement.
Later in court, the guard testified and narrated the statements he gave the police over
Arnolds counsels objections. While Arnold presented his own witnesses to prove that
his possession and apprehension had been set-up, he himself did not testify.
The court convicted Arnold, relying largely on his admission of the charge by silence
at the police investigation and during trial.
From the constitutional law perspective, was the court correct in its ruling?
(6%)
SUGGESTED ANSWER:
The court was wrong in relying on the silence of Arnold during the police
investigation and during the trial. Under Article III, Section 12 of the 1987
Constitution, he had a right to remain silent. His silence cannot be taken as a tacit
admission, otherwise, his right to remain silent would be rendered nugatory.
Considering that his right against self-incrimination protects his right to remain
silent, he cannot be penalized for exercising it (People v. Galvez, 519 SCRA 521).
ALTERNATIVE ANSWER
The court correctly convicted Arnold. There is no showing that the evidence
for the prosecution was insufficient. When Arnold remained silent, he run the risk
of an inference of guilt from non-production of evidence in his behalf (People v.
Solis, 128 SCRA 217).
VIII.
EDUCATION, SCIENCE, TECHNOLOGY, ARTS, CULTURE AND SPORTS ACADEMIC FREEDOM

Bobby, an incoming third year college student, was denied admission by his
university, a premiere educational institution in Manila, after he failed in three (3) major

subjects in his sophomore year. The denial of admission was based on the universitys
rules and admission policies.
Unable to cope with the depression that his non-admission triggered, Bobby
committed suicide. His family sued the school for damages, citing the schools grossly
unreasonable rules that resulted in the denial of admission. They argued that these
rules violated Bobbys human rights and the priority consideration that the Constitution
gives to the education of the youth.
You are counsel for the university. Explain your arguments in support of the
universitys case. (6%)
SUGGESTED ANSWER
I shall argue that under Article XIV, Section 5(2) of the 1987 Constitution, the
educational institution enjoys academic freedom. Academic freedom includes its
rights to prescribe academic standards, policies and qualification for the
admission of a student. (University of San Agustin, Inc. v. Court of Appeals, 230
SCRA 761).
IX.
BILL OF RIGHTS WRIT OF AMPARO

Conrad is widely known in the neighbourhood as a drug addict. He is also suspected

of being a member of the notorious Akyat-Condo Gang that has previously broken into
and looted condominium units in the area.
Retired Army Colonel Sangre who is known as an anti-terrorism fighter who
disdained human and constitutional rights and has been nicknamed Terror of
Mindanao is now the Head of Security of Capricorn Land Corporation, the owner and
developer of Sagittarius Estates where a series of robberies had recently taken place.
On March 1, 2013, Conrad informed his mother, Vannie, that uniformed security
guards had invited him for a talk in their office but he refused to come. Later that day,
however, Conrad appeared to have relented; he was seen walking into the security
office flanked by two security guards. Nobody saw him leave the office afterwards.
Conrad did not go home that night and was never seen again. The following week
and after a week-long search, Vannie feared the worst because of Col. Sangres
reputation. She thus reported Conrads disappearance to the policye. When nothing
concrete resulted from the police investigation, Vannie at the advice of counsel filed

a petition for a writ of amparo to compel Col. Sangre and the Sagittarius Security Office
to produce Conrad and to hold them liable and responsible for Conrads disappearance.
(A) Did Vannies counsel give the correct legal advice? (6%)
SUGGESTED ANSWER
The advice of Vannies counsel that she file a petition for a writ of amparo is
not correct. In order that a writ of amparo can be availed of against a private
individual for the disappearance of someone, the involvement of the government
is indispensable. There is no showing of any participation of the government in
Conrads disappearance (Navia v. Pardico, 673 SCRA 618).
(B) If the petition would prosper, can Col. Sangre be held liable and/or
responsible for Conrads disappearance? (6%)
SUGGESTED ANSWER
(B) No, Col. Sangre cannot be held responsible for the disappearance of
Conrad. Command responsibility has no applicability to an amparo proceeding
(Rubrico v. Macapagal-Arroyo, 613 SCRA 233). It may be established merely to
enable the court to craft the appropriate remedies against the responsible parties
(Balao v. Macapagal-Arroyo, 662 SCRA 312).
ALTERNATIVE ANSWER
Although the writ of amparo does not pinpoint criminal culpability for a
disappearance, it determines responsibility, or at least accountability, for the
purpose of imposing the appropriate remedy. Responsibily refers to the extent
the actors have been established to have participated in an enforced
disappearance, as a measure of the remedy, to be crafted, such as the directive to
file the appropriate criminal and civil cases against the responsible parties
(Razon, Jr. v. Tagitis, 606 SCRA 598).
X.
GENERAL CONSIDERATIONS STATE IMMUNITY

The Ambassador of the Republic of the Kafiristan referred to you for handling, the
case of the Embassys Maintenance Agreement with CBM, a private domestic company
engaged in maintenance work. The Agreement binds CBM, for a defined fee, to
maintain the Embassys elevators, air-conditioning units and electrical facilities. Section
10 of the Agreement provides that the Agreement shall be governed by Philippine laws
and that any legal action shall be brought before the proper court of Makati. Kafiristan

terminated the Agreement because CBM allegedly did not comply with their agreed
maintenance standards.
CBM contested the termination and filed a complaint against Kafiristan before the
Regional Trial Court of Makati. The Ambassador wants you to file a motion to dismiss
on the ground of state immunity from suit and to oppose the position that under Section
10 of the Agreement, Kafiristan expressly waives its immunity from suit.
Under these facts, can the Embassy successfully invoke immunity from suit?
(6%)
SUGGESTED ANSWER:
Yes, the Embassy can invoke immunity from suit. Section 10 of the
Maintenance Agreement is not necessarily a waiver of sovereign immunity from
suit. It was meant to apply in case the Republic of Kafiristan elects to sue in the
local courts or waives its immunity by a subsequent act. The establishment of a
diplomatic mission is a sovereign function. This encompasses its maintenance
and upkeep. The Maintenance Agreement was in pursuit of a sovereign activity
(Republic of the Indonesia v. Vinzon, 405 SCRA 126).
XI.
GENERAL CONSIDERATIONS SEPARATION OF POWERS; DELEGATION OF POWERS
ADMINISTRATIVE LAW GENERAL PRINCIPLES

In her interview before the Judicial and Bar Council (JBC), Commissioner Annie
Amorsolo of the National Labor Relations Commission claims that she should be given
credit for judicial service because as NLRC Commissioner, she has the rank of a
Justice of the Court of Appeals; she adjudicates cases that are appealable to the Court
of Appeals; she is assigned car plate No. 10; and she is, by law, entitled to the rank,
benefits, and privileges of a Court of Appeals Justice.
If you are a member of the JBC, would you give credit to this explanation?
(6%)
SUGGESTED ANSWER:
No, I will not give credence to the explanation of Commissioner Annie
Amorsolo. Her ranking merely means that she has the same salary and benefits
as a Justice of the Court of Appeals. However, she is not actually a Justice of the
Court of Appeals. The National Labor Relations is not a court. She does not
perform judicial functions. (Noblejas v. Teehankee, 23 SCRA 405).

XII.
JUDICIAL DEPARTMENT JUDICIAL RESTRAINT

In the May 2013 elections, the Allied Workers Group of the Philippines (AWGP),
representing land-based and sea-based workers in the Philippines and overseas, won
in the party list congressional elections. Atty. Abling, a labor lawyer, is its nominee.
As part of the partys advocacy and services, Congressman Abling engages in labor
counselling, particularly for local workers with claims against their employers and for
those who need representation in collective bargaining negotiations with employers.
When labor cases arise, AWGP enters its appearance in representation of the workers
and the Congressman makes it a point to be there to accompany the workers, although
a retained counsel also formally enters his appearance and is invariably there.
Congressman Abling largely takes a passive role in the proceedings although he
occasionally speaks to supplement the retained counsels statements. It is otherwise in
CBA negotiations where he actively participates.
Management lawyers, feeling that a congressman should not actively participate in
cases before labor tribunals and before employers because of the influence a
congressman can wield, filed a disbarment case against the Congressman before the
Supreme Court for his violation of the Code of Professional Responsibility and for
breach of trust, in relation particularly with the prohibitions on legislators under the
Constitution.
Is the cited ground for disbarment meritorious? (6%)

MULTIPLE CHOICE QUESTIONS

I
BILL OF RIGHTS EQUAL PROTECTION

The equal protection clause is violated by __________________. (l % )

(A)
(B)
(C)

a law prohibiting motorcycles from plying on limited access highways.

a law granting Value Added Tax exemption to electric cooperatives that sells
electricity to the homeless poor."
a law providing that a policeman shall be preventively suspended until the
termination of a criminal case against him.

(D)
a law providing higher salaries to teachers in public schools who are '"foreign
hires"
(E)
a law that grants rights to local Filipino workers but denies the same rights to
overseas-Filipino workers.
SUGGESTED ANSWER:
(D)

(International School Alliance of Educators v. Quisumbing, 333 SCRA 13).

II
BILL OF RIGHTS RIGHT OF ASSOCIATION

Offended by the President's remarks that the Bureau of Customs is a pit of

misfits and the corrupt, the Bureau of Customs Employees Association composed of
3,000 workers seeks your legal advice on how best to protest what it views to be the
President's baseless remarks.
A prudent legal advice is that ___ _ (1%)
(A)
(B)
(C)

employees can go on mass leave of absence for one week

employees can march and rally at Mendiola every Monday
employees can barricade the gates of the Port of Manila at South Harbor and call
for the resignation of the incumbent Commissioner of Customs
(D)
employees can wear black arm bands and pins with the word "UNFAIR"
inscribed
(E)
None of the above can legally be done.
SUGGESTED ANSWER:
(D)

(Tinker v. Des Moines Independent Community School District,

393 U.S. 503; Government Seryice Insurance System v. Villariza, 625 SCRA 669)

III
LAW ON PUBLIC OFFICERS ELIGIBILITY AND QUALIFICATION REQUIREMENTS

Congress enacted Republic Act No. 1234 requiring all candidates for public
offices to post an election bond equivalent to the one (1) year salary for the position for
which they are candidates. The bond shall be forfeited if the candidates fail to obtain at
least 10% of the votes cast.
Is Republic Act No. 1234 valid? (1%)
(A)
(B)
(C)
(D)
(E)

It is valid as the bond is a means of ensuring fair, honest, peaceful and orderly
elections.
It is valid as the bond requirement ensures that only candidates with sufficient
means and who cannot be corrupted can run for public office. .
It is invalid as the requirement effectively imposes a property qualification to run
for public office.
It is invalid as the amount of the surety bond is excessive and unconscionable.
It is valid because it is a reasonable requirement; the Constitution itself expressly
supports accountability of public officers.

SUGGESTED ANSWER:
(C)

(Maquera v. Borra, 15 SCRA 7).

IV
PUBLIC INTERNATIONAL LAW INTERNATIONAL AND NATIONAL LAW

What is the legal effect of decisions of the International Court of Justice in cases
submitted to it for resolution? (1 %)
(A)
(B)
(C)
(D)
(E)

The decision is binding on other countries in similar situations.

The decision is not binding on any country, even the countries that
are parties to the case.
The decision is binding only on the parties but only with respect
to that particular case.
The decision is not binding on the parties and is only advisory.
The binding effect on the parties depends on their submission
agreement.

SUGGESTED ANSWER:
(C)

(Article 59 of the Statute of the International Court of Justice).

V
PUBLIC INTERNATIONAL LAW LAW OF THE SEA

Under the UN Convention on the Law of the Sea, the exclusive economic zone
refers to an area_____________. (1 %)
(A)
that is at least 100 miles from the baselines from which the outer
limit of the territorial sea is measured
(B)
that is at least 200 miles but not to exceed 300 miles from the baselines from
which the outer limit of the territorial sea is measured
(C)
beyond and adjacent to a countrys territorial sea which cannot go beyond 200
nautical miles from the baselines from which the outer limit of the territorial sea is
measured
(D)
that can go beyond 3 nautical miles but cannot extend 300 nautical miles from
the baselines from which the outer limit of the territorial sea is measured
(E)
None of the above.
SUGGESTED ANWER:
(E)

None of the above.

Note: The nearest to the accurate answer may be (C) but it proposes that the EEZ
cannot go beyond 200 nautical miles "from the baseline from which the outer limit
of the territorial sea is measured."
This is not correct because the baseline is the point from which the entire breadth
of the territorial sea is measured pursuant to Article 57 of the UNCLOS; not only
from its outer limit as indicated in Letter (C). Letter (C) excludes the entire
breadth of the territorial sea of 12 n.m. from the EEZ contrary to the text of-said
Article 57.
If Letter (C) is followed, EEZ will only measure 200 n.m. minus 12 n.m. of the
territorial sea, resulting in the EEZ measuring only 188 n.m. in breadth.

VI
CITIZENSHIP WHO ARE FILIPINO CITIZENS

A child born under either the 1973 or the 1987 Constitution whose father or
mother is a Filipino Citizen.at the time of his birth, is ____________.
(A)
not a Filipino as his father and mother must both be Filipino citizens at the time of
his birth.
(B)
not a Filipino citizen if his mother is a Filipino citizen but his father is not, at the
time of his birth.
(C)
a Filipino citizen no matter where he or she may be born
(D)
a Filipino citizen provided the child is born in the Philippines
(E)
a Filipino citizen if he or she so elects upon reaching the age of 21

SUGGESTED ANSWER:
(C)

(Article III, Section 1(2) of the 1973 Constitution).

(Article IV, Section 1(2) of the 1987 Constitution).

VII
LEGISLATIVE DEPARTMENT POWERS POWER OF APPROPRIATION
EXECUTIVE DEPARTMENT POWERS POWERS RELATIVE TO APPROPRIATION MEASURES

Who has control of the expenditure of public funds? (1%)

(A)
(B)
(C)
(D)

The Office of the President through the Department of Budget and Management.
The House of Representatives from where all appropriation bills emanate.
The Senate through its Committee on Finance.
The Congress of the Republic of the Philippines.

SUGGESTED ANSWER:
(A)
(Lawyers Against Monopoly and Poverty v. Secretary of Budget and
Management, 670 SCRA 373).

VIII

LOCAL GOVERNMENTS TAXING POWER

May the power of cities to raise revenues be limited by an executive order of the
President? (1%)
(A)
(B)
(C)
(D)
(E)

Yes, because local government units are under the administrative control of the
President through the Department of Interior and Local Government.
No, because local government units now enjoy full local fiscal autonomy.
No, because only limitations established by Congress can define and limit the
powers of local governments.
Yes, because the President has the power and authority to impose reasonable
restrictions on the power of cities to raise revenues.
Yes, if so provided in a citys charter

SUGGESTED ANSWER:
(C)

(Article X, Section 5 of the 1987 Constitution).

IX
JUDICIAL DEPARTMENT SUPREME COURT EN BANC AND DIVISION CASES

The provision under the Constitution - that any member who took no part,
dissented, or inhibited from a decision or resolution must state the reason for his dissent
or non-participation - applies.____________ (1 % )
(A)
(B)
(C)
(D)
Tax
(E)

only to the Supreme Court

to both the Supreme Court and the Court of Appeals
to the Supreme Court, Court of Appeals and the Sandiganbayan
to the Supreme Court, the Court of Appeals, the Sandiganbayan and the Court of
Appeals
to all collegial judicial and quasi-judicial adjudicatory bodies

SUGGESTED ANSWER:
(D)

(Article VIII, Section 13 of the 1987 Constitution).

X
GENERAL CONSIDERATIONS SEPARATION OF POWERS
CONSTITUTIONAL COMMISSION CONSTITUTIONAL SAFEGUARDS TO ENSURE INDEPENDENCE OF
COMMISSIONS

Choose the least accurate statement about the independence guaranteed by the
1987 Constitution to the following constitutional bodies: (l % )
(A)

The Constitution guarantees the. COMELEC decisional and institutional

independence similar to that granted to the Judiciary.

(B)

All bodies 1abeled as "independent" by the Constitution enjoy

autonomy as an attribute of their independence.

(C)

Not all bodies labeled as "independent" by the Constitution were intended to be

independent from the Executive branch of government.

(D)

The Constitution guarantees various degrees of independence from the other

branches of government when it labels bodies as "independent".

(E)

The COMELEC, the COA, and the CSC enjoy the same degree of
independence.

SUGGESTED ANSWER.:
(D)

(Article IX-A of the 1987 Constitution).

ALTERNATIVE ANSWER:
(C)
ANOTHER ALTERNATIVE ANSWER:
A, B, C, D and E

XI
JUDICIAL DEPARTMENT SAFEGUARDS OF JUDICIAL INDEPENDENCE

fiscal

At the Senate impeachment trial of Justice Pablo P. San Quintin, Hon. Emilio A.
Tan, Congressman and Impeachment Panel Manager, wrote the Supreme Court
requesting that the prosecutors be allowed to examine the court records of Stewards
Association of the Philippines, Inc. (SAPI) v. Filipinas Air, et al., G.R. No. 987654, a
case that is still pending. The High Court _________. (1%)
(A)
may grant the request by reason of inter-departmental courtesy
(B)
may grant the request as the records of the Filipinas Air case are public records
(C)
should deny the request since records of cases that are pending for decision are
privileged except only for pleadings, orders and resolutions that are available to the
public
(D)
should deny the request because it violates the Court's independence and the
doctrine of separation of powers
(E)
should grant the request because of the sui generis nature of the power of
impeachment, provided that the Bill of Rights is not violated
SUGGESTED ANSWER:
(C)

(In re Letters of Atty. Estelito P. Mendoza, 668 SCRA 11).

XII
GENERAL CONSIDERATIONS STATE IMMUNITY

Mr. Sinco sued the government for damages. After trial, the court ruled in his
favor and awarded damages amounting to P50 million against the government. To
satisfy the judgment against the government, which valid option is available to Mr.
Sinco? (1%)
(A)
(B)
(C)
(D)
(E)

Garnish the government funds deposited at the Land Bank.

File a claim with the Commission on Audit (COA) pursuant to Commonwealth Act
327, as amended by Presidential Decree 1445.
Make representations with the Congress to appropriate the amount to satisfy the
judgment.
File a petition for mandamus in court to compel Congress to appropriate P50
million to satisfy the judgment.
Proceed to execute the judgment as provided by the Rules of Court because the
State allowed itself to be sued.

SUGGESTED ANSWER:

(B)

(University of the Philippines v. Dizon, 619 SCRA 54).

ALTERNATIVE ANSWER:
(C)

(University of the Philippines vs. Dizon, 679 SCRA 54)

XIII
PHILIIPPINE CONSTITUTION SELF-EXECUTING AND NON-SELF-EXECUTING PROVISIONS

Which of the following provisions of the Constitution does not confer rights that
can be enforced in the courts but only provides guidelines for legislative or executive
action? (1 %)
(A)

(B)

(C)

(D)

(E)

The maintenance of peace and order, the protection of life, liberty, and property,
and-promotion of the general welfare are essential for the enjoyment by all the
people of the blessings of democracy.
The State shall give priority to education, science and technology, arts, culture,
and sports to foster patriotism and nationalism, accelerate social progress, and
promote total human liberation and development.
The natural and primary right and duty of parents in the rearing of the youth for
civic efficiency and the development of moral character shall receive the support
of the Government.
The right of the people to information on matters of public concern shall
berecognized. Access to official records, and to documents and papers
pertaining to official acts, transactions, or decisions, as well as to government
research data used as basis for policy development, shall be afforded the citizen,
subject to such limitations as may be provided by law.
All the above only provide guidelines and are not self-executing.

SUGGESTED ANSWERS:
(A) (B) (C). These are found in Article II, Sections 5, 12 and 17 of the 1987
Constitution. They are only guidelines for legislation (Kilosbayan, Inc. v. Morato,
246 SCRA 540).

(D)
The right to information is found in Article III, Section 7 of the 1987
Constitution. It is self-executory and is not a mere guideline for legislation
(Legaspi v. Civil Service Commission, 150 SCRA 530).
ALTERNATIVE ANSWER:
(E)
(Kilosbayan, Inc. v. Morato, 246 SCRA 540; Article III, Section 8 includes the
phrase "subject to such limitations as may be provided by law").

XIV
PUBLIC INTERNATIONAL LAW - TREATIES

The President entered into an executive agreement with Vietnam for the supply
to the Philippines of animal feeds not to exceed 40,000 tons in any one year. The
Association of Animal Feed Sellers of the Philippines questioned the executive
agreement for being contrary to R.A. 462 which prohibits the importation of animal
feeds from Asian countries.
Is the challenge correct? (1 %)
(A)
(B)

Yes, the executive agreement is contrary to an existing domestic law.

No, the President is solely in charge of foreign relations and all his actions in this
role form part of the law of the land.
(C)
No, international agreements are sui generis and stand independently of our
domestic laws.
(D)
Yes, the executive agreement is actually a treaty which does not take effect
without ratification by the Senate.
(E)
Yes, the challenge is correct because there is no law empowering the President
to undertake the importation.
SUGGESTED ANSWER:
(A)

(Gonzales v. Hechanova, 9 SCRA 230).

XV
BILL OF RIGHTS FREEDOM OF RELIGION NON-ESTABLISHMENT CLAUSE

The separation of Church and State is most clearly violated when

________________________. (1%)
(A)

the State funds a road project whose effect is to make a church more accessible
to its adherents
(B)
the State declares the birthplace of a founder of a religious sect as a national
historical site
(C)
the State expropriates church property in order to construct an expressway that,
among others, provides easy access to the Church's main cathedral
(D)
the State gives vehicles to bishops to assist them in church-related charitable
projects
(E)
the State allows prayers in schools for minor children without securing the prior
consent of their parents
SUGGESTED ANSWER:
(E)

(Engel v. Vitale, 370 U.S. 421).

ALTERNATIVE ANSWER:
(D)

XVI
LAW ON PUBLIC OFFICERS DISABILITIES AND INHIBITIONS OF PUBLIC OFFICERS

Patricio was elected member of the House of Representative in the May 2010
Elections. His opponent Jose questioned Patricio's victory before the House of
Representatives Electoral Tribunal and later with the Supreme Court.
In a decision promulgated in November 20 I l, the Court ruled in Jose's favor; thus,
Patricio was ousted from his seat in Congress. Within a year from that decision, the
President can appoint Patrido. (l % )
(A)
only as a member of the board of directors of any government owned and
controlled
corporation
(B)
only as a deputy Ombudsman

(C)
(D)
(E)

only as a Commissioner of the Civil Service Commission

only as Chairman of the Commission on Elections
to any position as no prohibition applies to Patricio

SUGGESTED ANSWER:
(A)

LEGISLATIVE DEPARTMENT POWERS

BILL OF RIGHTS EQUAL PROTECTION CLAUSE

XVII

Senator GSC proposed a bill increasing excise taxes on tobacco and alcohol
products. The generated incremental revenues shall be used for the universal health
care program for all Filipinos and for tobacco farmers livelihood. After the Senate
passed the bill on third reading, it was transmitted to the House of Representatives
which approved the bill in toto. The President eventually signed it into law. Atty. JFC
filed a petition before the Supreme Court, questioning the constitutionality of the new
law.
Is the law constitutional? (1%)
(A)
(B)
(C)
(D)
(E)

The law is constitutional because it is for a public purpose and has duly
satisfied the three-readings-on-separate-days rule in both Houses.
The law is unconstitutional because it violates the equal protection clause
of the Constitution; it is limited only to alcohol and liquor products.
It is constitutional because of the Enrolled Bill Theory.
It is constitutional because it is valid in form and substance and complied
with the required lawmaking procedures.
None of the above is correct.

SUGGESTED ANSWER:
(E)

(Article VI, Section 24 of the 1987 Constitution).

XVIII
EXECUTIVE DEPARTMENT POWERS

NATIONAL ECONOMY AND PATRIMONY FOREIGN LOANS

PUBLIC INTERNATIONAL LAW TREATIES

Which of the following statements is correct? (1% )

(A)
(B

(C)
(D)

(E)

The President, with the concurrence of the Monetary Board, can

guarantee a foreign loan on behalf of the Republic of the Philippines.
Congress may, by law, provide limitations on the President's power to
contract or guarantee foreign loans on behalf of the Republic of the
Philippines.
In order to be valid and effective, treaties and executive agreements must
be concurred in by at least two-thirds of all the Members of the Senate:
The President shall, at the end of every quarter of the calendar year,
submit to Congress a complete report of the loans contracted or
guaranteed by the Government or government-owned and controlled
corporations.
All the above choices are defective in some respects.

SUGGESTED ANSWER:
(B)

(Article VII, Section 20 of the 1987 Constitution).

XIX
BILL OF RIGHTS FREEDOM O F RELIGION FREE EXERCISE CLAUSE

Candida has been administratively charged of immorality for openly living with
Manuel, a married man. Candida argues that her conjugal arrangement with Manuel
fully conforms with their religious beliefs and with the teachings of their church.
In resolving whether Candida should be administratively penalized, which is the
best test to apply? (1%)
(A)
(B)
(C)
(D)
(E)

Clear and Present Danger Test

Compelling State Interest Test
Balancing of Interests Test
Conscientious Objector Test
Dangerous Tendency Test

SUGGESTED ANSWER:
(B)

(Estratia v. Escritor, 492 SCRA 1)

XX
LAW ON PUBLIC OFFICERS DE FACTO OFFICERS

Rafael questioned the qualifications of Carlos as congressman of the Third

District of Manila on the ground that Carlos is a citizen of the USA. The decision
disqualifying Carlos for being a US citizen came only in March 2010, i.e., after the
adjournment of the session of Congress on the 3rd year of the position's three-year
term.
What was Carlos' status during his incumbency as congressman? (1 %)
(A)
(B)
(C)
(D)

He was a de jure officer, having been duly elected and proclaimed.

He was not a public officer because he effectively was not entitled to be a
congressman.
He was a de jure officer since he completed the service of his term before
he was disqualified.
He was a de facto officer since he "had served and was only disqualified

later.
(E)
pointless.

He neither possesses de jure nor de facto status as such determination is

SUGGESTED ANSWER:
(D)

(Rodriguez v. Tan, 91 Phil. 724).

LABOR LAW AND SOCIAL LEGISLATION

SUGGESTED ANSWERS
ESSAY QUESTIONS
1
Jose and Erica, former sweethearts, both worked as sales representatives for
Magna, a multinational firm engaged in the manufacture and sale of pharmaceutical
products. Although the couple had already broken off their relationship, Jose continued
to have special feelings for Erica.
One afternoon, Jose chanced upon Erica riding in the car of Paolo, a coemployee and Ericas ardent suitor; the two were on their way back to the office from a
sales call on Silver Drug, a major drug retailer. In a fit of extreme jealousy, Jose
Rammed Paolos car, causing severe injuries to Paolo and Erica. Joses flare up also
caused heavy damage to the company-owned cars they were driving.
(A) As lawyer for Magna, advise the company on whether just and valid grounds
exist to dismiss Jose. (4%)
SUGGESTED ANSWER:

Jose can be dismissed for serious misconduct, violation of company rules

and regulations, and commission of a crime against the employers
representatives.
Article 282 of the Labor Code provides that an employee may terminate
an employment for any serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or his representatives in
connection with his work.
Misconduct involves the transgression of some established and definite
rule of action, forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. For misconduct to be serious
and therefore a valid ground for dismissal, it must be:
1. Of grave and aggravated character and not merely trivial or
unimportant and
2. Connected with the work of the employee.
ALTERNATIVE ANSWER:
Article 282(e) of the Labor Code talks of other analogous causes or those
which are susceptible of comparison to another in general or in specific detail as
a cause for termination of employment.
In one case, the Court considered theft committed against a co-employee
as a case analogous to serious misconduct, for which the penalty of dismissal
from service may be meted out to the erring employee. (Cosmos Bottling Corp. v.
Fermin, G.R. No. 193676/194303 [2012]). Similarly, Joses offense perpetrated

against his co-employees. Erica and Paolo, can be considered as a case

analogous to serious misconduct.
(B) Assuming this time that Magna dismissed Jose from employment for cause
and you are the lawyer of Jose , how would you argue the position that Joses
dismissal was illegal? (4%)
SUGGESTED ANSWER:
The offense committed by Jose did not relate to the performance of his
duties.
For misconduct or improper behavior to be a just cause for dismissal, it (a)
must be serious; (b) must relate to the performance of the employees duties;
and (c) must show that the employee has become unfit to continue working for
employer.
On the basis of the foregoing guidelines, it can be concluded that Paolo
was not guilty of serious misconduct: Paolo was not performing official work at
the time of the incident. (Lagrosas v. Bristol Myers Squibb, G.R. No.
1686371/170684 [2008])
Additionally, there was no compliance with the rudimentary requirements
of due process.

II
Gamma Company pay its regular employees P350.00 a day, and houses
then in a dormitory inside its factory compound in Manila. Gamma Company also
provides them with three full meals a day.

In the course of a routine inspection, a Department of Labor and

Employment (DOLE) Inspector noted that the workers pay is below the
prescribed minimum wage of P426.00 plus P30.00 allowance, and thus required
Gamma Company to pay wage differentials.
Gamma Company denies any liability, explaining that after the market
value of the company-provided board and lodging are added to the employees
P350 cash daily wage, the employees effective daily rate would be way above
the minimum pay required by law. The company counsel further points that the
employees are aware that their food and lodging form part of their salary, and
have long accepted the arrangement.
Is the companys position legally correct? (8%)
SUGGESTED ANSWER:
No. The following requisites were not complied with:
(a) Proof that such facilities are customarily furnished by the trade
(b) the provision of deductible facilities is voluntarily accepted by the
employee
(c) the facilities are charged at the fair and reasonable value. More
availment is not sufficient to allow deduction from employees wages.
(Mayon Hotel and Restaurant v. Adarna, 458 SCRA 609 [2005])
ALTERNATIVE ANSWER:
No. Rule 78, Section 4 provides that there must be a written
authorization.

III
Inter-Garments Co. manufatures garments for export and requires
its employees to render overtime work ranging from two to three hours a
day to meet its clientsdeadlines. Since 2009, it has been paying its
employees on overtime an additional 35% of their hourly rate for work
rendered in excess of their regular eight working hours.

Due to the slowdown of its export business in 2012, Inter-Garments

had to reduce its overtime work; at the same time, it adjusted the overtime
rates so that those who worked overtime were only paid an additional 25%
instead of the previous 35%. To replace the workers overtime rate loss,
the company granted a one-time 5% acroos-the-board wage increase.
Vigilant Union, the rank-and-file bargaining agent, charged the
company with Unfair Labor Practice on the ground that (1) no
consultations had been made on who would render overtime work; and (2)
the unilateral overtime pay rate reduction is a violation of Article 100
(entitled Prohibition Against Elimination or Diminution of Benefits) of the
Labor Code.
Is the union position meritorious? (8%)
SUGGESTED ANSWER:
The allegation of ULP by the Union is not meritorious. The selection
as to who would render overtime work is a management prerogative.
However, the charge of the Union on the diminution of benefits (violation
of Article 100 of the Labor Code) appears to be meritorious. Since three
(3) years have already elapsed, the overtime rate of 35% has ripened into
practive and policy, and cannot anymore be removed. (Sevilla Trading v.
Semana, 428 SCRA 239 [2004]) This is deliberate, consistent and
practiced over a long period of time.

IV
Bobby, who was assigned as company branch accountant in Tarlac
where his family also lives, was dismissed by Theta Company after
anomalies in the companys accounts were discovered in the branch.
Bobby filed a complaint and was ordered reinstated with full back wages
after the Labor Arbiter found that he had been denied due process
because no investigation actually took place.

Theta Company appealed to the National Relations Commission

(NLRC) and at the same time wrote Bobby, advising him to report to the
main company office in Makati where he would be reinstated pending
appeal. Bobby refused to comply with his new assignment because Makati
is very far from Tarlac and he cannot bring his family to live with him due
to the higher cost of living in Makati.
(A) Is Bobbys reinstatement pending appeal legally correct? (4%)
SUGGESTED ANSWER:
No. It is not legally correct. The transfer of an employee ordinarily
lies within the ambit of management prerogatives. But like other rights,
there are limits thereto. This managerial prerogative to transfer personnel
must be exercised without grave abuse of discretion =, bearing in mind the
basic elements of justice and fair play. Thus, the transfer of Bobby from
Tarlac to Makati must be done in good faith, and it must not be
unreasonable, inconvenient or prejudicial to the employee. For another,
the reinstatement of Bobby ought to be to his former position, much akin
to return to work order, i.e. to restore the status quo in the work place.
(Composite Enterprises v. Capamaroso, 529 SCRA 479 [2007]).
ALTERNATIVE ANSWER:
No. Under Article 223 of the Labor Code, the reistatement order of
the Labor Arbiter which is immediately executory even pending appeal
should pertain to restoration to status quo ante.
(B) Advise Bobby on the best course of action to take under the
circumstances. (4%)
SUGGESTED ANSWER:

THE BEST COURSE OF ACTION FOR BOBBY TO TAKE UNDER

THE CIRCUMSTANCE IS TO ALLEGE CONSTRUCTIVE DISMISSAL IN
THE SAME CASE, AND PRAY FOR SEPARATION PAY IN LIEU OF
REINSTATEMENT.

V
Cris filed a complaint for illegal dismissal against Baker Company.
The Labor Arbiter dismissed the complaint but awarded Cris financial
assistance. Only the company appealed from the Labor Arbiters ruling. It
confined its appeal solely to the question of whether financial assistance
could be awarded. The NLRC, instead of ruling solely on the appealed
issue, fully reversed the Labor Arbiters decision; it found Baker Company
liable for illegal dismissal and ordered the payment of separation pay and
full backwages.
Through a petition for certiorari under Rule 65 of the Rules of Court,
Baker Company challenged the validity of the NLRC ruling. It argued that
the NLRC acted with grave abuse of discretion when it ruled on the illegal
dismissal issue, when the only issue brought on appeal was the legal
propriety of the financial assistance award.
Cris countered that under Article 218(c) of the Labor Code, the
NLRC has the authority to correct, amend, or waive any error, defect or
irregularity whether in substance or in form in the exercise of its appellate
jurisdiction.
Decide the case. (8%)
SUGGESTED ANSWER:
The review power of the NLRC in preferred appeals is limited only
to those issues raised on appeal. Hence, it is grave abue of discretion for
the NLRC to reslove issues not raised on appeal. (United Placement
International v. NLRC, 221 SCRA 445 [1993])

ALTERNATIVE ANSWER:
In the exercise of its jurisdictio, the NLRC is empowered to
determine even issues not raised on appeal in order to full settle the
issues surrounding the case. [See: Art. 218(c), now Art. 224 (c)].

VI
Beause of the strss in caring for her four (4) growing children,
Tammy suffered a miscarriage late in her pregancy and had to undergo an
operation. In the course of the operation, her obstretician further
discovered a suspicious-looking mass that required the subsequent
removal of her uterus (hysterectomy). After surgery, her physician advised
Tammy to be on full bed rest for six (6) weeks. Meanwhile, the biopsy of
the sample tissue taken from the mass in Tammys uterus showed a
beginning malignancy that required an immediate series of chemotherapy
once a wekk for four (4) weeks.
(A) What benefits can Tammy under existing social lgislation? (4%)
SUGGESTED ANSWER:
Assuming she is employed, Tammy is entitled to a special leave
benefit of two months with full pay (Gynecological Leave) pursuant to RA
9710 or the Magna Carta of Women. She can also claim Sickness Leave
benefit in accordance with the SSS Law.
(B) What can Roger Tammys 2nd husband and the father of her two (2)
younger children claim as benefits under the circumstances? (4%)
SUGGESTED ANSWER:
Under RA 8187 or the Paternity Leave Act of 1996, Roger can
claim paternity leave of seven (7) days with full pay if he is lawfully married
to Tammy and cohabiting with her at the time of the miscarriage.

VII
Philippine Electric Company is engaged in electric power
generation and distribution. It is a unionized company with Kilusang
Makatao as the union representing its rank-and-file empoyees. During the
negotiations for their expired collective bargaining agreement (CBA), the
parties duly served their proposals and counter-proposals on one another.
The parties, however, failed to discuss the merits of their proposals and
counter-proposals in any formal negotiation meeting because their talks
already bogged down on the negotiation grounds, i.e., on the question of
how they would conduct their negotiations, particularly on whether to
consider retirement as a negotiable issue.
Because of the continued impasse, the union went on strike. The
Secretary of Labor and Employment immediately assumed jurisdiction
over the dispute to avert widespred electric power interruption in the
country. After extensive discussions and the filing of position papers
(before the National Conciliation and Mediation Board and before the
Secretary of himself) on the validity of the unions strike and on the wage
and other economic issues (including the retirement issue), the DOLE
Secretary ruled on the validity of the strike and on the disputed CBA
issues, and ordered the parties to execute a CBA based on his rulings
Did the Secreatry of Labor exceed his jurisdiction when he
proceeded to rule on the parties CBA positions even though the parties
did not fully negotiate on their own? (8%)
SUGGESTED ANSWER:
No. The power of the Secretary of Labor under Article 263(g) is
plenary. He can rule on all issues, questions or controversies arising from
the labor dispute, inluding the legality of the strike, even those over which
the Labor Arbiter has excusive jurisdiction. (Bagong Pagkakaisa ng mga
Mangagawa sa Triumph International v. Secretary G. R. Nos. 167401 and
167407, July 5, 2010)

VIII
After thirty (30) years of service, Beta Company compulsorily
retired Albert at age 65 pursuant to the companys Retirement Plan. Albert
was duly paid his full retirement benefits of one (1) month pay for every
year of service under the Plan. Thereafter, out of compassion, the
company allowed Albert to continue workinga nd paid him his old monthly
salary rate, but without the allowances taht he used to enjoy.
After five (5) years under this arrangement, the company finally
severedall employment relations wit Albert; he was declared fully retired in
a fitting ceremony but the company did not give him any further retirement
benefits. Albert thought this treatment unfair as he had rendered full
service at his usual hours in the past five(5) years. Thus, he filed a
comlaint for the allowances that were not paid to him, and for retirement
benefits for his addistional five (5) working years based either on the
company Retirement Plan or the Retirement Pay Law, whichever is
applicable.
(A) After Alberts retirement age at 65, should he be considered a egular
employee entitled to all his previous salaries and benefits when the
company allowed him to continue working? (4%)
SUGGESTED ANSWER:
He would be considered a contractual employee, and not a regular
employee. His salaries and benefits will be in accorance with the
stipulations of the contract he signed with the company.
The present case is similar to a case decided by the Supreme
Court (Januaria Rivera v. United Laboratories, G.R. No. 155639 [2009])
where the Court held that the company in employing a retired employee
whose konwledge, experience and expertise the company recognized, as
an employee or as a consultant, is not an illegality; on the contrary, it is a
recognized practice in this country.

(B) Is he entitled to additional retirement benefits for the additional service

he rendered after age 65? (4%)
SUGGESTED ANSWER:
No. He cannot be compulsorily retired twice in the same company.

IX
Pablo works as a driver at the National Tire Company (NTC). He is
a member of the Malayang Samahan ng Manggagawa sa NTC, the
eclusive rank-and-fle collective bargaining representative in the company.
The union has a CBA with the NTC which contains a union security and a
check-off clause. The union securioty clause contains a maintenance of
membership provision taht requires all members of the bargaining unit to
maintain their membership in good standing with the union during the term
of the CBA under pain of dismissal. The check-off clause on the other
hand authorizes the company to deduct from union members salaries
defined amounts of union duies and other fees. Pablo refused to issue an
authorization to the company for the check-off of his dues, maintaining
that he will personally remit his dues to the union.
(A) Would the NTC management commit unfair labor practice if it desists
from checking off Pablos union dues for lack of individual authorization
from Pablo? (4%)
SUGGESTED ANSWER:
No. Under RA 9481, violation of the Collective Bargaining
Agreement, to be an unfair labor practice, must be gross in character. It
must be a flagrant and malicious refusal to comply with the economic
provisions of the CBA.
ALTERNATIVE ANSWER:
No. Check-offs in truth impose an extra burden on the employer in
the form of additional administrative and bookkeeping costs. It is a burden
assumed by management at the instance of the union and for its benefit,

in order to facilitate the collection of dues necessary for the latters life and
sustenance. But the obligation to pay union dues and agency fees
obviously devolves not upon the employer, but the individua employee. It
is a personal obligation not demandable from the employer upon default or
refusal of the employee to consent to a check-off. The only obligation of
the employer under a check-off is to effect the deductions and remit the
collections to the union. (Holy Cross of Davao College v. Joaquin, G.R.
No. 110007 [1996])
(B) Can the union charge Pablo with disloyalty for refusing to allow the
check off of his union dues and, on this basis, ask the company to
dismiss him from employment? (4%)
SUGGSTED ANSWER:
No. The check-off clause in the CBA will not suffice. The law
prohibits interference with the disposition of ones salry. The law rewuires
inividual written authorization to deduct union dues from Pablos salaries.
For as long as he pays unino dues, Pablo cannot be terminated from
employment under the secuity clause. As a matter of fact, filling a
complaint against the union before the Department of Labor for forcible
deduction from salaries doe snot constitute acts of disloyalty against the
union. (Tolentino v. Angeles, 52 O.G. 4262)

X
For ten (10) separate but consecutive yearly contracts, Cesar has
been deployed as an able-bodied seaman by Merit Shipping, through its
local agent, Ace Maritime Services (agency), in accordance with the 2000

Philippine overseas Employment Administration Standard Employment

Contract (200 POEA-SEC), AMOSUP, and Meritt Shipping. Both the 2001
POEA-SEC and the CBA commonly provide that the same mode and
procedures for claiming disability benefits. Cesar;s last contract (for nine
months) expired on July 15, 2013.
Cesar disembarked from the vessel M/V Seven Seas on July 16,
2013 as a seaman on finished contract. He immediately reported to the
agency and complained that he had been experiencing spells of dizziness,
nausea, general weakness, and difficulty in breathing. The agency
referred to him to Dr Sales, a cardio-puulmonary specialist, who examined
and treated him; advised him to take a complete rest for a while; gave him
medications and declared him fit to resume work as a seaman.
After a month, Cesar, went back to the agency to ask fo redeployment. The agency rejected his application. Cesar responded by
demending total disability benefits based on the ailments that he
developed and suffered while on board Meritt Shipping vessels. The claim
was based on on certification of his physician (internist Dr. Reyes) that he
could no longer undertake sea duties because of the hypertension and
diabetes that afflicted him while serving on Meritt Shipping vessles in the
last 10 years. Rejected once again, Cesar filed a complaint for illegal
dismissal and the payment of total permanent disability benefits against
the agency and its principal.
Assume that you are the Labor Arbiter deciding the case. Identify
the facts and issues yu would consider material in resolving the illegal
dismissal and disability complaint. Explain your choices and their
materiality, and resolve the case. (8%)
SUGGESTED ANSWER:
1. Does the Labor Arbiter have jurisdiction to decide the case?
2. Did Cesar submit to post-employment examination within 3 days upon
his return? This is a mandatory requirement; otherwise, Cesar will
forfeit his right to claim benefits.
3. Is Dr. Sales the company-designated physician? The companydesignated physician is the on who initially determines compensability.

4. 4. Was Cesar assessed by Dr. Sales (if he is the company physician)

within 120 days?
5. 5. If the 120 days was xceded and no declaration was made as to
Cesars disability, was this extended to 240 days because Cesar
required further medical treatment?
6. Was the 240 days exceeded and still no final decision was reached as
to Cesars disability? If so, Cesar is deemed entitled to permanent total
disability benefits.
7. If the comapanys physician and Cesars physician cannot agree, was
a third physician designated to determine the true nature and extent of
the disability. The third physicians finding under the law is final and
conclusive.
8. In the matter of the complaint for illegal dismissal: There is none
because Cesar disembarked on a finished contract.
9. Seafarers are contractual employees, for a fixed ter, governed by the
contract they sign; an exception to Article 280 (now artcle 286) of the
Labor Code. Hence,the complaint for illegal dismissal will not prosper.
MULTIPLE CHOICE QUESTIONS
I.

The parties to a labor dispute can validly submit to voluntary arbitration

___________. (1%)
(A)
(B)

any disputed issue they may agree to voluntarily arbitrate

only matters that do not fall within the exclusive jurisdiction of the Labor

(C)

any disputed issue but only after conciliation at the National Conciliation
and Mediation Board fails
any disputed issue provided that the Labor Arbiter has not assumed
jurisdiction over the case on compulsory arbitration

Arbiter

(D)

(E)

only matters relating to the interpretation or implementation of a collective

bargaining agreement

SUGGESTED ANSWER:
A.

Basis: Article 262 (now Article 268) of the Labor Code. The Voluntary

Arbitrator, upon agreement of the parties, can assume jurisdiction over the
dispute.

II.
When there is no recognized collective bargaining agent, can a legitimate
labor organization validly declare a strike against the employer? (1%)
(A)
(B)
(C)

(D)
(E)

Yes, because the right to strike is guaranteed by the Constitution and

cannot be denied to any group of employers.
No, because only an exclusive bargaining agent may declare a strike
against the employer.
Yes, because the right to strike is a basic human right that the country's
international agreements and the International Labor Organization
recognize.
Yes, but only in case of unfair labor practice.
No, in the absence of a recognized bargaining agent, the worker's
recourse is to file a case before the Department of Labor and
Employment.

SUGGESTED ANSWER:
(D)

Basis: Article 263 (c) (now Article 269 (c)) of the Labor Code.

IlI.
Mr. Del Carmen, unsure if his foray into business (messengerial service catering
purely to law firms) would succeed but intending to go long-term if he hurdles the first
year, opted to open his operations with one-year contracts with two law firms although
he also accepts messengerial service requests from other firms as their orders come.
He started with one permanent secretary and six (6) messengers on a one-year, fixedterm contract.
Is the arrangement legal from the perspective of labor standards? (1%)
(A)
No, because the arrangement will circumvent worker's right to security of
tenure.
(B)
No. If allowed, the arrangement will serve as starting point in weakening
the security of tenure guarantee.
(C)
Yes, if the messengers are hired through a contractor.
(D)
Yes, because the business is temporary and the contracted undertaking is
specific and time-bound.

(E)

No, because the fixed-term provided is invalid.

SUGGESTED ANSWER:

(A)

ALTERNATIVE ANSWER:
(E)
Reason: The employer and employee must deal with each other on
more or less equal terms.

IV.
Chito was illegally dismissed by DEF Corp. effective at the close of business
hours of December 29, 2009.
IV(l) He can file a complaint for illegal dismissal without any legal bar
within __ . (1/o)
(A)
(B)
(C)
(D)
(E)

three (3) years

four (4) years
five (5) years
six (6) years
ten (10) years

SUGGESTED ANSWER:
(B)

Basis: Article 1146 of the Civil Code.

IV(2) If he has the money claims against DEF Corp., he can make the claim
without any legal bar within ______________. (1/o)
(A)
(B)
(C)
(D)
(E)

three (3) years

four (4) years
five (5) years
six (6) years
ten (10) years

SUGGESTED ANSWER:
(A)

Basis: Article 297 (formerly 291) of the Labor Code.

V.
After vainly struggling to stay financially afloat for a year, LMN Corp. finally gave
up and closed down its operations after its major creditors filed a petition for LMN's
insolvency and liquidation.
In this situation, LMN's employees are entitled to ______________ as
separation pay. (1/o)

(A)
(B)
(C)
(D)
(E)

one-half month pay for every year of service

one month pay for every year of service
one-half month pay
one month pay
no separation pay at all

SUGGESTED ANSWER:
(E)
Mining

See: Article 283 (now Article 289) of the Labor Code. (North Davao

Corp v. NLRC, G.R. No. 112546 [1996])

VI.
At age 65 and after 20 years of sewing work at home on a piece rate basis for
PQR Garments, a manufacturer-exporter to Hongkong, Aling Nena decided it was time
to retire and to just take it easy.
ls she entitled to retirement pay from PQR? (1/o)
(A)
(B)
(C)
(D)
piece pay.
(E)

Yes, but only to one month pay.

No, because she was not a regular employee.
Yes, at the same rate as regular employees.
No, because retirement pay is deemed included in her contracted per
No, because homeworkers are not entitled to retirement pay.

SUGGESTED ANSWER:

VII.

(C)

The minimum wage prescribed by law for persons with disability is

_____________. (1 %)
(A)
(B)
(C)
(D)
(E)

50% of the applicable minimum wage

75% of the applicable minimum wage
100% of the applicable minimum wage
the wage that the parties agree upon, depending on the capability of the
disabled.
the wage that the parties agree upon, depending on the capability of the
disabled, but not less than 50% of the applicable minimum wage

SUGGESTED ANSWER:

(B)

Note: This is the general rule. As an exception, if the employee is qualified

to work
and the disability has nothing to do with the work, the employee is entitled to
100%.

VIII.

What is the financial incentive, if any, granted by law to SPQ Garments

whose cutters and sewers in its garments-for-export operations are 80%
staffed by deaf-mute workers? (1 %)
(A)
(B)
(C)
(D)
(E)

Additional deduction from its gross income equivalent to 25% of amount

paid as salaries to persons with disability.
Additional deduction from its gross income equivalent to 50% of the direct
costs of the construction of facilities for the use of persons with disability.
Additional deduction from its net taxable income equivalent to 5% of its
total payroll.
Exemption from real property tax for one (1) year of the property where
facilities for persons with disability have been constructed.
The annual deduction under (A), plus a one-time deduction under (B).

SUGGESTED ANSWER:

(A)

Basis: Magna Carta for Disabled Persons.

IX.
Mr. Ortanez has been in the building construction business for several years. He
asks you, as his new labor counsel, for the rules he must observer in considering
regular employment in the construction industry.
You clarify that an employee, project or non-project, will acquire regular
status if _____________. (1 %)
(A)
(B)
(C)

he has been continuously employed for more than one year

his contract of employment has been repeatedly renewed, from project
to project, for several years
he performs work necessary and desirable to the business, without a fixed

(D)
(E)

and without reference to any specific project or undertaking

he has lived up to the company's regularization standards
all of the above

period

SUGGESTED ANSWER:

(C)

Note: With all due respect to the examiner, the question is ambiguous
since it

mentions, project of' non-project. This is confusing since the criteria in the
determination of
regular status for project and non-project employees are different.

X.
Samahang Tunay, a union of rank-and-file employees lost in a certification
election at Solam Company and has become a minority union. The majority union now
has a signed CBA with the company and the agreement contains a maintenance of
membership clause.
What can Samahang Tunay still do within the company as a union
considering that it still has members who continue to profess continued
loyalty to it? (1%)
(A)
(B)
(C)
(D)
(E)
(F)

It can still represent these members in grievance committee meetings.

It can collect agency fees from its members within the bargaining unit.
It can still demand meetings with the company on company time.
As a legitimate labor organization, it can continue to represent its
members on non-CBA-related matters.
None of the above.
All of the above.

SUGGESTED ANSWER:
(D) Basis: Article 248 (formerly Art. 242) of the Labor Code.

XI.
The members of the administrative staff of Zeta, a construction company, enjoy
ten (10) days of vacation leave with pay and ten (10) days of sick leave with pay,
annually. The workers' union, Bukluran, demands that Zeta grant its workers service
incentive leave of five (5) days in compliance with the Labor Code.
Is the union demand meritorious? (1%)
(A)
(B)
(C)
(D)
(E)

Yes, because non-compliance with the law will result in the diminution of
employee benefits.
Yes, because service incentive leave is a benefit expressly provided under
and required by the Labor Code.
No, because Zeta already complies with the law.
No, because service incentive leaye is a Labor Code benefit that does not
apply in the construction industry.
Yes, because the Labor Code benefits are separate from those voluntarily
granted by the company.

SUGGESTED ANSWER:

(C)
vacation

Basis: Article 95 of the Labor Code. The employee is already given

leave of 10 days. This is deemed a compliance with the requirement of service

incentive
leave under the law.

XII. Upon the expiration of the first three (3) years of their CBA, the union and the
company commenced negotiations. The union demanded that the company continue to
honor their 30-day union leave benefit under the CBA. The company refused on the
ground that the CBA had already expired, and the union had already consumed their
union leave under the CBA.
Who is correct? (1%)
(A)
(B)
(C)
(D)
(E)

The company is correct because the CBA has expired; hence it is no

longer bound to provide union leave.
The company is correct because the union has already consumed the
allotted union leave under the expired CBA.
The union is correct because it is still the bargaining representative for the
next two (2) years.
The union is correct because union leaves are part of the economic terms
and continue to govern until new terms are agreed upon.
They are both wrong.

SUGGESTED ANSWER: (B)

ALTERNATIVE ANSWER:
(D) Basis: Article 259 (formerly Article 253) of the Labor Code.

XIII. Hector, a topnotch Human Resources Specialist who had worked in multinational
firms both in the Philippines and overseas, was recruited by ABC Corp., because of his
impressive credentials. In the course of Hectors employment, the company
management frequently did not follow his recommendations and he felt offended by his
constant rebuff.
Thus, he toyed with the idea of resigning and of asking for the same separation
pay that ABC earlier granted to two (2) department heads when they left the company.
To obtain a legal opinion regarding his option, Hector sent an email to ABCs
retained counsel, requesting for advice on whether the grant by the company of

separation pay to his resigned colleagues has already ripened into a company practice,
and whether he can similarly avail of this benefit if he resigns from his job.
As the company's retained legal counsel, how will you respond to Hector?
(1%)
(A)
(B)

(C)

(D)
(E)

I would advise him to write management directly and inquire about the
benefits he can expect if he resigns.
I would advise him that the previous grant of separation pay to his
colleagues cannot be considered a company practice because several
other employees had resigned and were not given separation pay.
I would advise him to ask for separation pay, not on account of company
practice but on the basis of discrimination as he is similarly situated as the
two resigned department heads who were paid their separation pay.
I would not give him any legal advice because he is not my client.
I would maintain that his question involves a policy matter beyond the
competence of a legal counsel to give.

SUGGESTED ANSWER:

(D)

ALTERNATIVE ANSWER:

(A)

XIV. Aleta Quiros was a faculty member of BM Institute, a private educational

institution. She was hired on a year-to-year basis under the probationary employment
period provision of the Manual of Regulations for Private Schools. The terms and
conditions of her management were defined under her renewable yearly contract.
For a reason of its own, BM Institute no longer wanted to continue with Aletas
teaching services. Thus when the contract for her second year expired, BM Institute
advised Aleta that her contract would no longer be renewed. This advice prompted
Aleta to file a complaint for illegal dismissal against BM Institute.
Will the complaint prosper? (1 %)
(A)
(B)
(C)

(D)
(E)

Yes, because no just or authorized cause existed for the termination of her
probationary employment.
Yes, because under the Labor Code, Aleta because a regular employee
after 6 months and she may not only be dismissed for cause.
No, because there was no dismissal to speak of. Her employment was
automatically terminated upon the expiration of her year-to-year fixed term
employment.
No, because BM Institute may dismiss its faculty members at will in the
exercise of academic freedom.
No, because Aleta was still on probationary employment.

SUGGESTED ANSWER:
(A) (Yolanda Mercado v. AMA: Computer College, G. R, No. 183572 [2010])

XV. Robert, an employee of ABC Company, is married to Wanda. One day, Wanda
visited the company office with her three (3) emaciated minor children, and narrated to
the Manager that Robert had been squandering his earnings on his mistress, leaving
only a paltry sum for the support of their children. Wanda tearfully pleaded with the
Manager to let her have one half of Robert's pay every payday to ensure that her
children would at least have food on the table. To support her please, Wanda presented
a Kasulatan signed by Robert giving her one half of his salary, on the condition that she
would not complain if he stayed with his mistress on weekends.
If you were the Manager, would you release one half of Robert's salary to
Wanda? (1%)
(A)
(B)
(C)
(D)
(E)

No, because an employer is prohibited from interfering with the freedom of

its employees to dispose of their wages.
Yes, because of Robert's signed authorization to give Wanda one half of
his salary.
No, because there is no written authorization for ABC Company to release
Robert's salary to Wanda.
Yes, because it is Robert's duty to financially support his minor children.
No, because Robert's Kasulatan is based on an illegal consideration and
is of doubtful legal validity.

SUGGESTED ANSWER:

(A)

ALTERNATIVE ANSWER:

(C)

XVI. Ricardo operated a successful Makati seafood restaurant patronized by a large

clientele base for its superb cuisine and impeccable service. Ricardo charged its clients
a 10% service charge and distributed 85% of the collection equally among its rank-andfile employees, 10% among managerial employees, and 5% as reserve for losses and
breakages. Because of the huge volume of sales, the employees received sizeable
shares in the collected service charge.
As part of his business development efforts, Ricardo opened a branch in Cebu
where he maintained the same practice in the collection and distribution of service
charges. The Cebu branch, however, did not attract the forecasted clientele; hence, the
Cebu employees received lesser service charge benefits than those enjoyed by the
Makati-based employees. As a result, the Cebu branch employees demanded
equalization of benefits and filed a case with the NLRC for discrimination when Ricardo
refused their demand.

XVI (1) Will the case prosper? (1%)

(A)
(B)

(C)
(D)

(E)

Yes, because the employees are not receiving equal treatment in the
distribution of service charge benefits.
Yes, because the law provides that the 85% employees share in the
service charge collection should be equally divided among all the
employees, in this case, among the Cebu and Makati employees alike.
No, because the employees in Makati are not similarly situated as the
Cebu employees with respect to cost of living and conditions of work.
No, because the service charge benefit attaches to the outlet where
service charges are earned and should be distributed exclusively among
the employees providing service in the outlet.
No, because the market and the clientele the two branches are serving,
are different.

SUGGESTED ANSWER:

(D)

XVI (2) In order to improve the Cebu service and sales, Ricardo decided to
assign some of its Makati-based employees to Cebu to train Cebu employees and
expose them to the Makati standard of service. A chef and three waiters were assigned
to Cebu for the task. While in Cebu, the assigned personnel shared in the Cebu service
charge collection and thus received service charge benefits lesser than what they were
receiving in Makati.
If you were the lawyer for the assigned personnel, what would you advise
them to do? (1%)
(A)
(B)

(C)
(D)
(E)

I would advise them to file a complaint for unlawful diminution of service

charge benefits and for payment of differentials.
I would advise them to file a complaint for illegal transfer because work in
Cebu is highly prejudicial to them in terms of convenience and service
charge benefits.
I would advise them to file a complaint for discrimination in the grant of
service charge benefits.
I would advise them to accept their Cebu training assignment as exercise
of the companys management prerogative.
I would advise them to demand the continuation of their Makati-based
benefits and to file a complaint under (B) above if the demand is not
heeded.

SUGGESTED ANSWER:

(A)

XVII. Constant Builders, an independent contractor, was charged with illegal dismissal
and non-payment of wages and benefits of ten dismissed employees. The complainants
impleaded as co-respondent Able Company, Constant Builders principal in the
construction of Ables office building. The complaint demanded that Constant and Able
be held solidarily liable for the payment of their backwages, separation pay, and all their
unpaid wages and benefits.
If the Labor Arbiter rules in favor of the complainants, choose the
statement that best describes the extent of liabilities of Constant and Able. (1%)
(A)

(B)

(C)

(D)

Constant and Able should be held solidarily liable for the unpaid wages
and benefits, as well as backwages and separation pay, based on Article
109 of the Labor Code which provides that every employer or indirect
employer shall be held responsible with his contractor or subcontractor for
any violation of any provision of this Code.
Constant and Able should be held solidarily liable for the unpaid wages
and benefits, and should order Constant, as the workers direct employer,
to be solely liable for the backwages and separation pay.
Constant and Able should be held solidarily liable for the unpaid wages
and benefits and backwages since these pertain to labor standards
benefits for which the employer and contractor are liable under the law,
while Constant alone the actual employer should be ordered to pay the
separation pay.
Constant and Able should be held solidarily liable for the unpaid wages
and benefits, and Constant should be held liable for their backwages and
separation pay unless Able is shown to have participated with malice or
bad faith in the workers dismissal, in which case both should be held
solidarily liable.

SUGGESTED ANSWER:

(A)

XVIII. The Pinagbuklod union filed a Petition for Certification Election alleging that it was
a legitimate labor organization of the rank-and-file employees of Delta Company. On
Deltas motion, the Med Arbiter dismissed the Petition, based on the finding that
Pinagbuklod was not a legitimate labor union and had no legal personality to file a
Petition for Certification Election because membership was a mixture of rank-and-file
and supervisory employees.
Is the dismissal of the Petition for Certification Election by the Med Arbiter
proper? (1%)
(A)

Yes, because Article 245 of the Labor Code prohibits supervisory

employees from joining the union of the rank-and-file employees and
provides that a union representing both rank-and-file and supervisory
employees as members is not a legitimate labor organization.

(B)
(C)

(D)

No, because the grounds for the dismissal of a petition for certification
election does not include mixed membership in one union.
No, because a final order of cancellation of union registration is required
before a petition for certification election may be dismissed on the ground
of lack of legal personality of the union.
No, because Delta Company, did not have the legal personality to
participate in the certification election proceedings and to file a motion to
dismiss based on the legitimacy status of the petitioning union.

SUGGESTED ANSWER:

(D)

CIVIL LAW
ESSAY QUESTIONS

I.
You are a Family Court judge and before you is a Petition for the Declaration of
Nullity of Marriage (under Article 36 of the Family Code) filed by Maria against Neil.
Maria claims that Neil is psychologically incapacitated to comply with the essential
obligations of marriage because Neil is a drunkard, a womanizer, a gambler, and a
mama's boy traits that she never knew or saw when Neil was courting her. Although
summoned, Neil did not answer Maria's petition and never appeared in court.
To support her petition, Maria presented three witnesses - herself, Dr. Elsie
Chan, and Ambrosia. Dr. Chan testified on the psychological report on Neil that she
prepared. Since Neil never acknowledged nor responded to her invitation for interviews,
her report is solely based on her interviews with Maria and the spouses minor children.
Dr. Chan concluded that Neil is suffering from Narcissistic Personality Disorder, an
ailment that she found to be already present since Nell's early adulthood and one that is
grave and incurable. Maria testified on the specific instances when she found Neil
drunk, with another woman, or squandering the family's resources in a casino.
Ambrosia, the spouses current household help, corroborated Maria's testimony.
On the basis of the evidence presented, will you grant the petition? (8%)
SUGGESTED ANSWER:

No. The petition should be denied.

The psychological incapacity under Article 36 of the Family Code must be
characterized by (a) gravity, (b) juridical antecedence, and (c) incurability. It is not
enough to prove that the parties failed to meet their responsibilities and duties as
married persons; it is essential that they must be shown to be incapable of doing so,
due to some psychological (not physical) illness (Republic v. CA and Molina, G.R. No.
108763 February 13, 1997).
In this case, the pieces of evidence presented are not sufficient to conclude that
indeed Neil is suffering from a psychological incapacity (Narcissistic Personality
Disorder) existing already before the marriage, incurable and serious enough to prevent
Neil from performing his essential marital obligations.
Dr. Chan Chan's report contains mere conclusions. Being a drunkard, a
womanizer, a gambler and a mama's boy merely shows Neil's failure to perform his
marital obligations. In a number of cases, the Supreme Court did not find the existence
of psychological incapacity in cases where the respondents showed habitual
drunkenness (Republic v. Melgar, G.R. No. 139676 [2006]), blatant display of infidelity
and irresponsibility (Dedel v. CA, [2004]), or being hooked to gambling and drugs
(Republic v. Tanyag-San Jose, G.R. No. 168328, [2007]),
ALTERNATIVE ANSWER:
Yes. The petition should be granted.
The personal medical or psychological examination of respondent is not a
requirement for a declaration of psychological incapacity. It is the totality of the evidence
presented which shall determine the existence of psychological incapacity (Marcos v.
Marcos, G.R. No. 136490, October 19, 2000). Dr. Chan's report, corroborated by
Maria's and Ambrosia's testimony, t herefore, sufficiently proves Neil's psychological
incapacity to assume his marital obligations.

II.
A collision occurred at an intersection involving a bicycle and a taxicab. Both the
bicycle rider (a businessman then doing his morning exercise) and the taxi driver
claimed that the other was at fault. Based on the police report the bicycle crossed the
intersection first but the taxicab, crossing at a fast clip from the bicycle's left , could not
brake in time and hit the bicycle's rear wheel, toppling it and throwing the bicycle rider
into the sidewalk 5 meters away .
The bicycle rider suffered a fractured right knee, sustained when he fell on his
right side on the concrete side walk. He was hospitalized and was subsequently

operated on, rendering him immobile for 3 weeks and requiring physical rehabilitation
for another 3 months. In his complaint for damages, the rider prayed for the award of P
1,000,000 actual damages, P200,000 moral damages; P200,000 exemplary damages,
P 100,000 nominal damages and P50,000 attorney's fees.
Assuming the police report to be correct and as the lawyer for the bicycle rider,
what evidence (documentary and testimonial) and legal arguments will you present in
court to justify the damages that your client' claims? (8%)
SUGGESTED ANSWER:
I will base the claim of my client on quasi-delict under Article 2176 of the Civil
Code of the Philippines.
The requisites for a claim under quasi-delict to prosper are as follows:
1. Act or omission, there being fault or negligence;
2. Damage or injury; and
3. Causal connection between the damage and the act or omission.
The case clearly involves a quasi-delict where my client, the bicycle rider,
suffered injury as a result of the negligence of the over-speeding taxi driver, without fault
on my client's part.
To prove actual damages, aside from the testimony of my client, I will present his
hospital and medical bills. Receipts of the fees paid on the rehabilitation will also be
presented. [The sentence in red should be replaced with the following sentence
because he is a businessman and not an employee. Furthermore, I will present
income tax returns, contracts and other documents to prove unrealized profits as a
result of this temporary injury.] I will also call the attending physician to testify as to the
extent of the injuries suffered by my client, and to corroborate t he contents of the
medical documents.
Based on Article 2202, in quasi-delicts, the defendant shall be liable for all
damages which are the natural and probable consequences of the act of omission
complained of. It is not necessary that such damages have been foreseen or could have
been foreseen by the defendant.
Unlike actual damages, no proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The
assessment is left to the discretion of the Court (Ar t. 2216, Civil Code). There must still
be proof of pecuniary estimation, however. Moral damages can be recovered by my
client under Articles 2219 and 2200. Moral damages may be recovered in case of a
quasi-delict causing physical injuries. Additionally, it must be proved that such damages

were the proximate result of the act complained of. Medical certificates will be
presented, along with the testimony from my client and other eye-witness accounts, in
order to support the award for moral damages.
Exemplary damages may be granted if the defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner. While the amount of exemplary
damages need not be proved, the plaintiff must show that he is entitled to moral or
compensatory damages. In support of this, I will present the police report showing the
circumstances under which the accident took place, taking into account the actions of
the parties. I will ask the officials who responded to the accident to testify as to the
conduct of the parties at the time of the accident in order to determine whether
defendant was guilty of gross negligence.
Finally, attorney's fees may be recovered when exemplary damages are awarded
(Art. 2208, Civil Code).

III.
Sergio is the registered owner of a 500-square meter land. His friend, Marcelo,
who has long been interested in the property, succeeded in persuading Sergio to sell it
to him. On June 2, 2012, they agreed on the purchase price of P600,000 and that
Sergio would give Marcelo up to June 30, 2012 within which to raise the amount.
Marcelo, in a light tone, usual between them, said that they should seal their agreement
through a case of Jack Daniels Black and P5,000 pulutan" money which he
immediately handed to Sergio and which the latter accepted. The friends then sat down
and drank the first bottle from the case of bourbon.
On June 15, 2013, Sergio learned of another buyer, Roberto, who was offering
P800,000 in ready cash for the land. When Roberto confirmed that he could pay in cash
as soon as Sergio could get the documentation ready, Sergio decided to withdraw his
offer to Marcelo, hoping to just explain matters to his friend. Marcelo, however, objected
when the withdrawal was communicated to him, taking the position that they have a firm
and binding agreement that Sergio cannot simply walk away from because he has an
option to buy that is duly supported by a duly accepted valuable consideration.
(A) Does Marcelo have a cause of action against Sergio? (5%)
SUGGESTED ANSWER:
Yes. Marcelo has a cause of action against Sergio.
Under e 1324, When the offerer has allowed the offeree a certain period to
accept, the offer may be withdrawn at any time before acceptance by communicating

such withdrawal, except when the option is founded upon a consideration, as something
paid or promised.
An accepted unilateral promise to buy or to sell a determinate thing for a price
certain is binding upon the promissor if the promise is supported by a consideration
distinct from the price (Art. 1479). Consideration in an option contract may be anything
of value , unlike in sale where it must be the price certain in money or its equivalent
(San Miguel Properties Inc v. Spouses Huang, G.R. No. 137290, July 31, 2000).
Here, the case of Jack Daniels Black and the P5,000 "pulutan'' money was a
consideration to "seal their agreement", an agreement that Marcelo is given until June
30, 2012 to buy the parcel of land. There is also no showing that such consideration will
be considered part of the purchase price. Thus, Sergio's unilateral withdrawal of the
offer violated the Option Contract between him and Marcelo.
ALTERNATIVE ANSWER:
Yes. Marcelo has a cause of action against Sergio.
There is a perfected contract of sale between Sergio and Marcelo. Sergio agreed
to sell the 500 sq. m. parcel of land to Marcelo for a valuable consideration of
P600,000. Being a consensual contract, a sale is perfected by both parties giving their
consent to the thing to be sold and the price to be paid therefor. By giving Marcelo time
to raise the money, Sergio had agreed to consummate the sale on June 30, 2012. The
value of the case of Jack Daniel's Black and the P5,000 pulutan money, is considered
the earnest money to seal the bargain which shall form part of the purchase price, and
shall be deductible from the Price of P600,000. Sergio has breached the obligation
arising from the contract and is liable for damages under Article 1170 [of the Civil Code
of the Philippines].
(B) Can Sergio claim that whatever they might have agreed upon cannot be
enforced because any agreement relating to the sale of real property must be
supported by evidence in writing and they never reduced their agreement to
writing? (3%)
SUGGESTED ANSWER:
No. Sergio's claim has no legal basis.
The contract at issue in the present case is the option contract, not the contract
of sale for the real property. Therefore, Article 1403 does not apply.
The Statute of Frauds covers an agreement for the sale of real property or of an
interest therein. Such agreement is unenforceable by action, unless the same, or some
note or memorandum, thereof, be in writing. (Art. 1403 (e), Civil Code) Here, Marcelo
and Sergio merely entered into an Option Contract, which refers to a unilateral promise

to buy or sell, which need not be in writing to be enforceable (Sanchez v. Rigos, G.R.
No. L-25494, June 14, 1972, citing Atkins, Kroll and Co., Inc. v. Cua Hian Tek anti
Southwestern Sugar & Molasses Co. v. Atlantic Gulf & Pacific Co.).
ALTERNATIVE ANSWER:
No. Sergio's claim has no legal basis.
The contract of sale has already been partially executed which takes it outside
the ambit of the Statute of Frauds. It is well-settled in this jurisdiction that the Statute of
Frauds is applicable only to executory contracts, not to contracts that are totally or
partially performed (Carbonnel v. Poncio, G.R. No. L-11231, May 12, 1958).
IV.
Anselmo is the registered owner of a land and a house that his friend Boboy
occupied for a nominal rental and on the condition that Boboy would vacate the property
on demand. With Anselmo's knowledge, Boboy introduced renovations consisting of an
additional bedroom, a covered veranda, and a concrete block fence, at his own
expense.
Subsequently, Anselmo needed the property as his residence and thus asked
Boboy to vacate and tum it over to him. Boboy, despite an extension, failed to vacate
the property, forcing Anselmo to send him a written demand to vacate.
In his own written reply. Boboy signified that he was ready to leave but Anselmo
must first reimburse him the value of the improvements he introduced on the property
as he is a builder in good faith. Anselmo refused, insisting that Boboy cannot ask for
reimbursement as he is a mere lessee. Boboy responded by removing the
improvements and leaving the building in its original state.
(A)

Resolve Bo boy's claim that as a builder in good faith, he should be

reimbursed the value of the improvements he introduced. (4%)

SUGGESTED ANSWER:
Boboy's claim that he is a builder in good faith has no legal basis. A builder in
good faith is someone who occupies the property in the concept of an owner. The
provisions on builder-planter-sower under the Civil Code cover cases in which the
builder, planter and sower believe themselves to be owners of the land, or at least, to
have a claim of title thereto.
As Boboy is a lessee of the- property, even if he was paying nominal rental,
Article 1678 Civil Code, is applicable. Under this provision, if the lessee makes, in good

faith, useful improvements which are suitable to the use for which the lease is intended,
without altering the form or substance of the property leased, the lessor Upon the
termination of the lease shall pay the lessee one-half of the value of the improvements
at that time. Should the lessor refuse to reimburse said amount, the lessee may remove
the improvements, even though the principal thing may suffer damage thereby.
(B)

Can Boboy be held liable for damages for removing the improvements
over Anselmo's objection? (4%)

SUGGESTED ANSWER:
No. Boboy cannot be held liable for damages.
The lessor, Anselmo, refused to reimburse one-half of the value of the
improvements, so the lessee, Boboy, may remove the same, even though the principal
thing may suffer damage thereby. If in removing the useful improvements Boboy caused
more impairment on the property leased than is necessary he will be liable for damages
(Art. 1678, Civil Code).

V.
Josefa executed a deed of donation covering a one-hectare rice land in favor of
her daughter, Jennifer. The deed specifically provides that:
"For and in consideration of the love and service Jennifer has shown and
given to me, I hereby freely, voluntarily and irrevocably donate to her my
one-hectare rice land covered by TCT No. 11550, located in San
Fernando, Pampanga. This donation shall take effect upon my death."
The deed also contained Jennifer's signed acceptance, and an attached
notarized declaration by Josefa and Jennifer that the land will remain in Josefa's
possession and cannot be alienated, encumbered, sold or disposed of while Josefa is
still alive.
Advise Jennifer on whether the deed is a donation inter vivos or mortis causa and
explain the reasons supporting your advice. (8%)
SUGGESTED ANSWER:
The donation is a donation inter vivos.
When the donor intends that the donation shall take effect during the lifetime of
the donor, though the property shall not be delivered till after the donor's death, this
shall be a donation inter vivos (Art. 729, Civil Code).

The Civil, Code favors inter vivos transmissions. Moreover, mortis causa
donations should follow the formalities of a will (Art. 728, Civil Code). Here, there is no
showing that such formalities were followed. Thus, it is favorable to Jennifer that the
deed is a donation inter vivos.
Furthermore, what is most significant in determining the type of donation is the
absence of stipulation that the donor could revoke the donation; on the contrary, the
deeds expressly declare them to be irrevocable, a quality absolutely incompatible with
the idea of conveyances mortis causa where revocability is the essence of the act, to
the extent that a testator cannot lawfully waive or restrict his right of revocation. The
provisions of the deed of donation which state that the same will only take effect upon
the death of the donor and that there is a prohibition to alienate, encumber, dispose, or
sell the same should be harmonized with its express irrevocability (Austria-Magat v. CA,
G.R. No. 106755 , February 1, 2002).

ALTERNATIVE ANSWER:
The donation is a donation mortis causa.
The deed clearly states that the donation shall take effect upon the death of the
donor, Josefa. The donor, moreover, retained ownership of the subject property as it
was declared that the property cannot be alienated, encumbered, sold or disposed of
while the donor is still alive.
As the donation is in the nature of a mortis causa disposition, the formalities of a
will should have been complied with under Article 728 of the Civil Code; otherwise, the
donation is void and would produce no effect (The National Treasurer Of The
Philippines v. Vda. De Meimban, G.R. No. -61023, August 22, 1984).
VI.
Lito obtained a loan of P1,000,000 from Ferdie, payable within one year. To
secure payment, Lito executed a chattel mortgage on a Toyota Avanza and a real
estate mortgage on a 200-square meter piece of property
(A) Would it be legally significant from the point of view of validity and
enforceability If the loan and the mortgages' were in public or private
instruments?

SUGGESTED ANSWER:

From the point of view of validity and enforceability, there would be legal
significance if the mortgage was in a public or private instrument. As for the loan, there
is no legal significance except if interest were charged on the loan, in which case the
charging of interest must be in writing.
A contract of loan is a real contract and is perfected upon the delivery of the
object of the obligation (Art. 1934, Civil Code). Thus, a contract of loan is valid and
enforceable even if it is neither in a private nor in a public document.
As a rule, contracts shall be obligatory in whatever form they may have been
entered into provided all the essential requisites for their validity are present. With
regard to its enforceability, a contract of loan is not among those enumerated under
Article 1403 (2) of the Civil Code, which are covered by the Statute of Frauds.
It is important to note that under Article 1358 of the Civil Code, all other contracts
where the amount involved exceeds five hundred pesos must appear in writing, even a
private one. However, the requirement is not for the validity of the contract, but only for
its greater efficacy.
With regard the chattel mortgage, Act No. 1508, the Chattel Mortgage Law,
requires an affidavit of good faith stating that the chattel mortgage is supposed to stand
as security for the loan; thus, for validity of the chattel mortgage, it must be in a public
document and recorded in the Chattel Mortgage Register in the Registry of Deeds. A
real estate mortgage under the provisions of Article 2125 of the Civil Code requires that
in order that a mortgage may be validly constituted, the document in which it appears be
recorded. If the instrument is not recorded, the mortgage is nevertheless valid and
binding between the parties. Hence, for validity of both chattel and real estate
mortgages, they must appear in a public instrument. But for purposes of enforceability, it
is submitted that the form of the contract, whether in a public or private document,
would be immaterial (Mobil Oil v. Diocaresa, 29 SCRA 656 [1969]).
Also, under Article 1358, acts and contracts which have for their object the
creation or transmission of real rights over immovable property must be in a public
document for greater efficacy and a real estate mortgage is a real right over immovable
property.
(B) Litos failure to play led to the extra-judicial foreclosure of the mortgaged real
property. Within a year from foreclosure, Lito tendered a managers check to
Ferdie to redeem the property. Ferdie refused to accept payment on the
ground that he wanted payment in cash. The check does not qualify as legal
tender and does not include the interest payment.
Is Ferdies refusal justified?
SUGGESTED ANSWER:

Ferdies refusal is justified.

A check, whether a managers check or ordinary check, is not legal tender, and
an offer of a check in payment of a debt is not a valid tender of payment and may be
refused receipt by the oblige or creditors (Philippine Airlines v. CA and Amelia Tan, G.R.
No. L-49188 [1990]). Mere delivery of checks does not discharge the obligation under
judgment. A check shall produce the effect of payment only when they have been
cashed or when through the fault of the creditor, they have been impaired (Art. 1249,
Civil Code).
However, it is not necessary that tl1e right of redemption be exercised by delivery
of legal tender. A check may be used for the exercise of right of redemption, the same
being a right and not an obligation. The tender of a check is sufficient to compel
redemption but is not in itself a payment that relieves the redemptioner from, his liability
to pay the redemption price (Biana v. Gimenez, G.R. No. 132768, Septemer 9, 2005,
citing Fortunado v. CA).
Redemption within the period allowed by law is not a matter of intent but a
question of payment or valid tender of full redemption price within the said period.
Whether the redemption is being made under Act. 3135 or under the General Banking
Law, the mortgagor or his assignee is required to tender payment to make said
redemption valid (Heirs of Quisumbing v. PNB and SLDC, G.R. No. 178242, January
20, 2009).
Moreover, Ferdie's refusal was justified on the ground that the amount tendered
does not include interest. In order to effect the redemption of the foreclosed property,
the payment to the purchaser must include the following sums: (a) the bid price; (b) the
interest on the bid price, computed at one per centum (1% ) per month; and (c) the
assessments or taxes, if any, paid by the purchaser, with the same rate of interest
(Section 28, 1997 Rules of Civil Procedure). Unless there is an express stipulation to
that effect, the creditor cannot be compelled to receive partial payment of the prestation
(Art. 1248, Civil Code).

VII.
In 2005, Andres built a residential house on a lot whose only access to the
national highway was a pathway crossing Brando's property. Andres and others have
been using this pathway (pathway A) since 1980.
In 2006, Brando fenced off his property, thereby blocking Andres' access to the
national highway. Andres demanded that part of the fence be removed to maintain his
old access route to the highway (pathway A), but Brando refused, claiming that there
was another available pathway (pathway B) for ingress and egress to the highway.

Andres countered that pathway B has defects, is circuitous, and is extremely

inconvenient to use.
To settle their dispute, Andres and Brando hired Damian, a geodetic and civil
engineer, to survey and examine the two pathways and the surrounding areas, and to
determine the shortest and the least prejudicial way through the servient estates. After
the survey, the engineer concluded that pathway B is the longer route and will need
improvements and repairs, but will not significantly affect the use of Brando's property.
On the other hand, pathway A that had 1ong been in place, is the shorter route but
would significantly affect the use of Brando's property.
In light of the engineers findings and the circumstances of the case, resolve the
parties right of way dispute.
SUGGESTED ANSWER:
Andres is not entitled to the easement of right of way for Pathway A, Pathway B
must be used.
The owner of a dominant estate may validly obtain a com1pulsory right of way
only after he has established the existence of four requisites, to wit:
(1) the (dominant) estate is surrounded by other immovable and is without
adequate outlet to a public highway;
(2) after payment of the proper indemnity
(3) the isolation was not due to the proprietors own acts; and
(4) the right of way claimed is at a point least prejudicial to the servient estate,
and insofar as consistent with this rule, where the distance from the dominant
estate to the public highway may be the shortest (Art. 650, Civil Code).
However, the Supreme Court has consistently ruled that in case both criteria
cannot be complied with, the right of way shall be established at the point least
prejudicial to the servient estate.
The first and fourth requisites are not complied with. First, there is another
available outlet to the national highway (Pathway B). Second, the right of way obtained
(Pathway A) is not the least prejudicial to Brando's property, as evidenced by the
reports of the geodetic and civil engineer .
When there is already an existing adequate outlet from the dominant estate to a
public highway, even if the said outlet, for one reason or another, be inconvenient, the
need to open up another servitude is entirely unjustified (Costabella Corp. v. CA, G.R.
No. 80511, January 25, 1991). The rule that the easement of right of way shall be
established at the point least prejudicial to the servient estate is controlling (Quimen v.
Quimen), (CA, G.R. No. 112331, May 29, 1996).

[NOTE: It is not clear from the problem if there exists an easement in favor of the lot
belonging to Andres and if Brandos lot is burdened as a servient estate by a right of
way as a servient estate. If there is such an easement burdening Brandos lot, was it
created as a legal easement or as a voluntary easement. If the use of Pathway A was
only by tolerance then Brando may close it. Andres must ask for the constitution of a
legal easement through Brandos lot by proving the four requisites required Articles 649
and 650, Civil Code.]

VIII.
Ciriaco Realty Corporation (CRC) sold to the spouses Del a Cruz a 500-square
meter land (Lot A) in Paranaque. The land now has a fair market value of P1,200,000.
CRC likewise sold to the spouses Rodriguez, a 700-square meter land (Lot B) which is
adjacent to Lot A. Lot B has a present fair market value of P1,500,000.
The spouses Dela Cruz constructed a house on Lot B, relying on the
representation of the CRC sales agent that it is the property they purchased. Only upon
the completion of their house did the spouses Dela Cruz discover that they had built on
Lot B owned by the spouses Rodriguez, not on Lot A that they purchased. They spent P
1,000,000 for the house.
As their lawyer, advise the spouses Dela Cruz on their rights and
obligations under the given circumstances, and the recourses and options open
to them to protect their interests.
SUGGESTED ANSWER:
Based on the facts as stated, the spouses Dela Cruz as builders and the
spouses Rodriguez as land owners, are both in good faith. The spouses Dela Cruz are
builders in good faith because before constructing the house, they exercised due
diligence by asking the agent of CRC the location of Lot A, and they relied on the
information given by the agent who is presumed to know the identity of the lot
purchased by the Dela Cruz spouses (Pleasantville v. CA, 253 SCRA 10 [1996]). On the
other hand, there is no showing that the landowners; spouses Rodriguez; acted in bad
faith. The facts do not show that the building was done with their knowledge and without
opposition on their part (Art. 453, Civil Code). Good faith is always presumed (Art. 527,
Civil Code).
The owner of the land on which anything bas been built, sown or planted in good
faith shall have the right:
(1) to appropriate as his own the works after payment of the indemnity provided
for in Articles 546 and 548, or
(2) to oblige the one who built to pay the price of the land.

However, the builder cannot be obliged to buy the land if its value is considerably
more than that of the building. In such case, he shall pay reasonable rent if the owner of
the land does not choose to appropriate the building or trees after proper indemnity (Art.
448, Civil Code).
The house constructed by the spouses Dela Cruz is considered useful expense,
since it increased the value of the lot. As such, should the spouses Rodriguez decide to
appropriate the house, the spouses Dela Cruz are entitled to the right of retention
pending reimbursement of the expenses they incurred or the increase in value which
the thing may have acquired by reason of the improvement (Art. 546, Civil Code). Thus,
the spouses Dela Cruz may demand P1,000,000 as payment of the expenses in
building the house or increase in value of the land because of the house as a useful
improvement, as may be determined by the court from the evidence presented during
the trial (Depra vs. Dumlao, 136 SCRA 475 [1985]; Technogas Phils. vs. CA, 268 SCRA
5 [1997]).

IX.
Rica petitioned for the annulment of her ten-year old marriage to Richard.
Richard hired Atty. Cruz to represent him in the proceedings. In payment for Atty. Cruz's
acceptance and legal fees, Richard conveyed to Atty. Cruz a parcel of land in Taguig
that he recently purchased with his lotto winnings. The transfer documents were duly
signed and Atty. Cruz immediately took possession by fencing off the property's entire
perimeter.
Desperately needing money to pay for his mounting legal fees and his other
needs and despite the transfer to Atty. Cruz, Richard offered the same Parcel of land for
sale to the spouses Garcia. After inspection of the land, the spouses considered it a
good investment and purchased it from Richard. Immediately after the sale, the spouses
Garcia commenced the construction of a three-story building over the land, but they
were prevented from doing this by Atty. Cruz who claimed he has a better right in light
of the prior conveyance in his favor.
Is Atty. Cruzs claim correct?
SUGGESTED ANSWER:
No, Atty. Cruz is not correct. At first glance, it may appear that Atty. Cruz is the
one who has a better right because he first took possession of the property. However, a
lawyer is prohibited under Article 1491 of the Civil Code from acquiring the property and
rights which may be the object of any litigation in which they may take part by virtue of
their profession. While the suit is for annulment of marriage and it may be argued that
the land itself is not the object of the litigation, the annulment of marriage, if granted, will
carry with it the liquidation of the absolute community or conjugal partnership of the

spouses as the case may be (Art. 50 in relation to Art. .43 of the Family Code). Richard
purchased the land with his lotto winnings during the pendency of the suit for annulment
and on the assumption that the parties are governed by the regime of absolute
community or conjugal partnership, winnings from gambling or betting will form part
thereof. Also, since the land is part of the absolute community or conjugal partnership o
[of] Richard and Rica, it may not be sold or alienated without the consent of the latter
and any disposition or encumbrance of the property of the community or conjugal
property without the consent of the other spouse is void (Art. 96 and Art. I24,
FamilyCode).

X.
Manuel wasbom on 12 March 1940 in a 1,000-square meter property where he
grew up helping his father, Michael, cultivate the land. Michael has lived on the property
since the land was opened for settlement at about the time of the Commonwealth
government in 1935, but for some reason never secured any title to the property other
than a tax declaration in his name. He has held the property through the years in
concept of an owner and his stay was uncontested by others. He has also
conscientiously and continuously paid for realty taxes on the land.
Michael died in 2000 and Manuelas Michaels only son and heir now wants
to secure and register title to the land in his own name. He consults you for legal advice
as he wants to perfect his title to the land and secure its registration in his name.
(A) What are the laws that you need to consider in advising Manuel on how he
can perfect his title and register the land in his name? Explain the relevance
of these laws to your projected course of action.
SUGGESTED ANSWER:
(NOTE: With all due respect, it is recommended that the examiner accept and give full
credit to any of the answers given in each of the following paragraphs.)
l would advise Manuel to file an application for registration under Sec. 14 of Pres.
Decree No. 1529, or the Property Registration Decree (PRD), specifically Sec. 14 (1)
which requires (a) that the land applied for forms part of the alienable and disposable (A
& D) portion of the public domain, and (b) that the applicant has been in open,
continuous and notorious possession and occupation thereof under a bona fide claim of
ownership since June 12, 1945, or earlier. However, it is only necessary that the land is
already declared A & D land at the time the application for registration is led
(Malabanan v. Republic, G.R. No. 180067, June 30, 2009).
Manuel could also invoke Sec. 14 (2) of the same Decree, which allows
registration through ordinary acquisitive prescription for thirty years, provided, however,

that the land is patrimonial in character, i.e. already declared by the government (a) as
A & D land, and (b) no longer needed for public use or public service (Malabanan,
supra). "
Manuel could also file an application for confirmation of imperfect or incomplete
title through judicial legalization under See. 48 (b)of CANo. 141, or the Public Land
Act (PLA). But, as held in Malabanan, there is no substantial difference between this
provision and Sec. 14 (1) of the PRD. Both refer to agricultural lands already classified
as alienable and disposable at the time the application is filed, and require possession
and occupation since June 12, 1945. The only difference is that under the PRD, there
already exists a title which is to be conrmed, whereas under the PLA, the presumption
is that land is still public land (Republic v. Aquino, G.R. No. L-33983, January 27, 1983).
Manuel may also invoke vested rights acquired under Rep. Act No. 1942, dated
June 2, 1957, which amended Sec. 48 (b) of the PLA by providing for a prescriptive
period of thirty years for judicial confirmation of imperfect title. It must only be
demonstrated that possession and occupation commenced on January 24, 1947 and
the 30-year period was completed prior to the effectivity of PD No. 1073 on January 25,
1977. PD No. 1073 now requires possession and occupation since June 12, 1945
(Republic v. Espinosa, G.R. No.171514, July 18, 2012).
Another alternative is for Manuel to secure title through administrative
proceedings under the homestead or free patent provisions of the PLA. The title issued
has the same efficacy and validity as a title issued through judicial proceedings, but with
the limitation that the land cannot be sold or disposed of within five years from the
issuance of patent (Sec. 118, CA No. 141, as amended).
(B) What do you have to prove to secure Manuels objectives and what
documentation are necessary?
SUGGESTED ANSWER:
Manuel has the burden to overcome the presumption of State ownership by
well-nigh incontrovertible evidence (Ong v. Republic, G.R. No. 175746, March 12,
2008). Accordingly, he must show that the land is already classied as A&D at the time
the application for registration is led and that he has been in possession and
occupation thereof in the manner required by law since June 12, 1945, or earlier.
Manuel may tack his possession to that of his predecessor in interest (Michael)
by the testimony of disinterested and knowledgeable eyewitnesses. Overt acts of
possession may consist in introducing valuable improvements like fencing the land,
constructing a residential house thereon, cultivating the land and planting fruit bearing
trees, declaring the land for taxation purposes and paying realty taxes, all of which are
corroborative proof of possession.

To identify the land, he must submit the tracing cloth plan or a duly certified
blueprint or whiteprint copy thereof (Director of Lands v. Reyes, G.R. No. L-27594,
November 28, 1975; Director of Lands v. CA and Iglesia ni Cristo, G.R. No. L-56613,
March 14, 1988).
To show the classification of the land as A & D, the application must be
accompanied by (1) a CENRO or PENRO certification; and (2) a certified true copy of
the original classification approved by the DENR Secretary (Republic v. Bantigue, G.R.
No. 162322, March 14, 2012). A presidential or legislative act may be considered.

MULTIPLE CHOICE QUESTIONS

I.

Armand died intestate. His full-blood brothers, Bobby and Conrad, and halfblood brothers, Danny, Edward and Floro, all predeceased him. The following
are the surviving relatives:
1.
2.
3.
4.
5.

Benny and Bonnie, legitimate children of Bobby;

Cesar, legitimate child of Conrad;
Dante, illegitimate child of Danny;
Ernie, adopted child of Edward; and
Felix, grandson of Floro.

The net value of Armands estate is P1,200,000.

I. (1) How much do Benny and Bonnie stand to inherit by right of
representation? (1%)
(A) P200,000
(B) P300,000
(C) P400,000
(D) P150,000
(E) None of the above.
SUGGESTED ANSWER:
E. None of the above.
If all the brothers/sisters are disqualified to inherit, the
nephews/nieces inherit per capita, and not by right of representation
(Art. 975, Civil Code).
I. (2) How much is Dantes share in the net estate? (1%)
(A) P150,000

(B) P200,000
(C) P300,000
(D) P400,000
(E) None of the above.
SUGGESTED ANSWER:
E. None of the above.
There is no showing that Danny is an illegitimate half-blood brother
of Armand. In the absence of proof to the contrary, the law presumes
that the relationship is legitimate. Thus, Dante, an illegitimate child of
Danny, is barred from inheriting from Armand pursuant to the iron
curtain rule which disqualifies an illegitimate child from inheriting ab
intestato from the legitimate children and relatives of his father or
mother, and vice versa (Art. 992, Civil Code).
I. (3) How much is Ernies share in the net estate? (1%)
(A) P0.
(B) P400,000.
(C) P150,000.
(D) P200,000.
(E) None of the above.
SUGGESTED ANSWER:
A. 0. Or E. None of the above.
The legal relationship created by adoption is strictly between the
adopted and the adopted. It does not extend to the relatives of either
party (Sayson v. CA, G. R. Nos. 89224-25, January 23, 1992).
[Note: E. None of the above is another answer because Ernie has
no share at all in the net estate].
I. (4) How much is Felixs share in the net estate? (1%)
(A) P400,000.
(B) P150,000.
(C) P300,000.
(D) P0.
(E) None of the above.
SUGGESTED ANSWER:

D. 0. Or E. None of the above.

In the collateral line, representation is granted only to children of
brothers or sisters, Felix is a grandson of a predeceased brother.
[Note: E. None of the above is another answer because Felix has no
share at all in the net estate].

II.

A, B, C and D are the solidary debtors of X for P40,000. X released D from

the payment of his share of P10,000. When the obligation became due and
demandable, C turned out to be insolvent.
Should the share of the insolvent debtor C be divided only between
the two other remaining debtors, A & B? (1%)
(A) Yes. Remission of Ds share carries with it total extinguishment of his
obligation to the benefit of the solidary debtors.
(B) Yes. The Civil Code recognizes remission as a mode of extinguishing an
obligation. This clearly applies to D.
(C) No. The rule is that gratuitous acts should be restrictively construed,
allowing only the least transmission of rights.
(D) No, as the release of the share of one debtor would then increase the
burden of the other debtors without their consent.
SUGGESTED ANSWER:
D. No. as the release of the share of one debtor would then increase
the burden of the other debtors without their consent.
When one of the solidary debtors cannot, because of his insolvency,
reimburse his share to the debtor paying the obligation, such share
shall be borne by all his co-debtors, in proportion to the debt of each
(Art. 1217, Civil Code). Additionally, D was released only from his share
of P10,000, not from the solidary tie that binds him to A, B, and C.

III.

Amador obtained a loan of P300,000 from Basilio payable on March 25, 2012.
As security for the payment of his loan, Amador constituted a mortgage on his
residential house and lot in Basilio's favor. Cacho, a good friend of Amador,
guaranteed and obligated himself to pay Basilio, in case Amador fails to pay
his loan at maturity.
(1) If Amador fails to pay Basilio his loan on March 25, 2012, can Basilio
compel Cacho to pay?

(A) No, Basilio cannot compel Cacho to pay because as guarantor, Cacho
can invoke the principle of excussion, i.e., all the assets of Basilio must
first be exhausted.
(B) No, Basilio cannot compel Cacho to pay becauseBasilio has not
exhausted the available remedies against Amador.
(C) Yes, Basilio can compel Cacho to pay because the nature of Cachos
undertaking indicates that he has bound himself solidarily with Amador.
(D) Yes, Basilio can compel Cacho who bound himself to unconditionally pay
in case Amador fails to pay; thus the benefit of excussion will not apply.
SUGGESTED ANSWER:
B. No, Basilio cannot compel Cacho to pay because Basilio has not
exhausted the available remedies against Amador.
The guarantor cannot be compelled to pay the creditor unless the
latter has exhausted all the property of the debtor and has resorted
to all the legal remedies against the debtor (Art. 2058, Civil Code).
[Note: A is not the correct answer because it states that all the
assets of Basilio (the creditor) must first be exhausted].

(2) If Amador sells his residential house and lot to Diego, can Basilio
foreclose the real estate mortgage? (1%)
(A) Yes, Basilio can foreclose the real estate mortgage because real estate
mortgage creates a real right that attaches to the property.
(B) Yes, Basilio can foreclose the real estate mortgage: It is binding upon
Diego as the mortgage is embodied in a public instrument.
(C) No, Basilio cannot foreclose the real estate mortgage. The sale confers
ownership on the buyer, Diego, who must therefore consent.
(D) No, Basilio cannot foreclose the real estate mortgage. To deprive the new
owner of ownership and possession is unjust and inequitable.
SUGGESTED ANSWER:
B. Yes, Basilio can foreclose the real estate mortgage. It is binding upon
Diego as the mortgage is embodied in a public instrument.
Since the mortgage is in a public instrument, there is constructive
notice to Diego, who is the buyer of the mortgaged property.
ALTERNATIVE ANSWER:

C. No, Basilio cannot foreclose the real estate mortgage. The sale
confers ownership on the buyer, Diego, who must therefore consent.
The mortgage is not registered, thus, cannot be binding against third
persons. (Art. 2125, Civil Code)

IV.

Cruz lent Jose his car until Jose finished his Bar exams. Soon after Cruz
delivered the car, Jose brought it to Mitsubishi Cubao for maintenance
checkup and incurred costs of P8,000. Seeing the car's peeling and
faded paint, Jose also had the car repainted for P10,000. Answer the two
questions below based on these common facts.
(1) After the bar exams, Cruz asked for the return of his car. Jose said he
would return it as soon as Cruz has reimbursed him for the car
maintenance and repainting costs of P18,000. Is Jose's refusal justified?
(1%)
(A) No, Jose's refusal is not justified. In this kind of contract, Jose is
obliged to pay for all the expenses incurred for the preservation of the
thing loaned.
(B) Yes, Jose's refusal is justified. He is obliged to pay for all the ordinary
and extraordinary expenses, but subject to reimbursement from Cruz.
(C) Yes, Joses refusal is justified. The principle of unjust enrichment
warrants the reimbursement of Jose's expenses.
(D) No, Jose's refusal is not justified. The expenses he incurred are useful
for the preservation of the thing loaned. It is Jose's obligation to
shoulder these useful expenses.
SUGGESTED ANSWER:
D. No, Jose's refusal is not justified. The expenses he incurred are
useful for the preservation of the thing loaned. It is Jose's obligation
to shoulder these useful expenses.
In commodatum, the bailee is obliged to pay for the ordinary
expenses for the use and preservation of the thing loaned (Article 1941,
Civil Code).
The bailee, Jose, has no right of retention on the ground that the
bailor owes him something, even if it may be by reason of expenses. He
can only retain it if he suffers damages by reason of a flaw or defect in
the thing loaned of which the bailor knows (Art. 1951, Civil Code).

(2) During the bar exam month, Jose lent the car to his girlfriend, Jolie,
who parked the car at the Mall of Asia's open parking lot, with the
ignition key Inside the car. Car thieves broke into and took the car.
Is Jose liable to Cruz for the loss of the car due to Jolie's
negligence? (1%)
(A) No, Jose is not liable to Cruz as the loss was not due to his fault or
negligence.
(B) No, Jose is not liable to Cruz. In the absence of any prohibition, Jose
could lend the car to Jolie. Since the loss was due to force majeure,
neither Jose nor Jolie is liable.
(C) Yes, Jose is liable to Cruz. Since Jose lent the car to Jolie without Cruz's
consent, Jose must bear the consequent loss of the car.
(D) Yes, Jose is liable to Cruz. The contract between them is personal in
nature. Jose can neither lend nor lease the car to a third person.
SUGGESTED ANSWER:
C. Yes, Jose is liable to Cruz. Since Jose lent the car to Jolie without
Cruz's consent, Jose must bear the consequent loss of the car.
The bailee is liable for the loss of the thing, even if it should be
through a fortuitous event if he lends or leases the thing to a third
person who is not a member of his household (Art. 1942, Civil Code).
V.

In 2005, L, M, N, O and P formed a partnership. L, M and N were capitalist

partners who contributed P500,000 each, while O, a limited partner,
contributed P1,000,000. P joined as an industrial partner, contributing only his
services. The Articles of Partnership, registered with the Securities and
Exchange Commission, designated L and O as managing partners; L was
liable only to the extent of his capital contribution; and P was not liable for
losses.
In Z006, the partnership earned a net profit of P800,000. In the same year, P
engaged in a different business with the consent of all the partners. However,
in 2007, the partnership incurred a net loss of P500,000. In 2008, the partners
dissolved the partnership. The proceeds of the sale of partnership assets
were insufficient to settle its obligation. After liquidation, the partnership had
an unpaid liability of P300,000.
(1) Assuming that the just and equitable share of the industrial partner,
P, in the profit in 2006 amounted to P100,000, how much is the share of
O, a limited partner, in the P800,000 net profit? (1%)
(A) P160,000.
(B) P175,000.

(C) P280,000.
(D) P200,000.
(E) None of the above.
SUGGESTED ANSWER:
C. P280,QOO.
First, deduct the share of P from the profits. P800,000 less P100,000
is P700,000. Next, get the share of O by following the proportion that the
shares of L, M, N, O is 1:1:1:2, respectively.
(2) In 2007, how much is the share of O, a limited partner, in the net loss
of P800,000? (1%)
(A) P 0.
(B) P100,000.
(C) P125,000.
(D) P200,000.
(E) None of the above.
SUGGESTED ANSWER:
D. P200,000.
A limited partner shall not become liable as a general partner unless, in
addition to the exercise of his rights and powers as a limited partner, he
takes part in the control of the business (Art. 1848, Civil Code). In the
absence of stipulation as to profits and losses, the share of each
partner in the losses shall be in proportion to what he may have
contributed. (Art. 1797).
(3) Can the partnership creditors hold L, O, and P liable after all the
assets of the partnership are exhausted? (1%)
(A) Yes. The stipulation exempting P from losses is valid only among the
partners. L is liable because the agreement limiting his liability to his
capital contribution is not valid insofar as the creditors are concerned.
Having taken part in the management of the partnership, 0 is liable as
capitalist partner.
(B) No. P is not liable because there is a valid stipulation exempting him from
losses. Since the other partners allowed him to engage in an outside
business activity, the stipulation absolving P from liability is valid. For 0, it
is basic that a limited partner is liable only up to the extent of his capital
contribution.

(C) Yes. The stipulations exempting P and L from losses are not binding upon
the creditors. 0 is likewise liable because the partnership was not formed
in accordance with the requirements of a limited partnership.
(D) No. The Civil Code allows the partners to stipulate that a partner shall not
be liable for losses. The registration of the Articles of Partnership
embodying such stipulations serves as constructive notice to the
partnership creditors.
(E) None of the above is completely accurate.
SUGGESTED ANSWER:
E. None of the above is completely accurate.
VI.

Gary is a tobacco trader and also a lending investor. He sold tobacco leaves
to Homer for delivery within a month, although tl1e period for delivery was not
guaranteed. Despite Gary's efforts to deliver on time, transportation problems
and government red tape hindered his efforts and he could only deliver after
30 days. Homer refused to accept the late delivery and to pay on the ground
that the agreed term had not been complied with. As lending investor, Gary
granted a P1,000,000 loan to Isaac to be paid within two years from execution
of the contract. As security for the loan, Isaac promised to deliver to Gary his
Toyota Innova within seven (7) days, but Isaac failed to do so. Gary was thus
compelled to demand payment for the loan before the end of the agreed twoyear term.
(1) Was Homer justified in refusing to accept the tobacco leaves?
(A) Yes. Homer was justified in refusing to accept the tobacco leaves. The
delivery was to be made within a month. Gary's promise of delivery on a
"best effort" basis made the delivery uncertain. The term, therefore, was
ambiguous.
(B) No. Homer was not justified in refusing to accept the tobacco leaves. He
consented to the terms and conditions of the sale and must abide by it.
Obligations arising from contract have the force of law between the
contracting parties.
(C) Yes. Homer was justified in his refusal to accept the delivery. The contract
contemplates an obligation with a term. Since the delivery was made after
30 days, contrary to the terms agreed upon, Gary could not insist that
Homer accept the tobacco leaves.
(D) No. Homer was not justified in refusing to accept the tobacco leaves.
There was no term in the contract but a mixed condition. The fulfillment of
the condition did not depend purely on Gary's will but on other factors,
e.g., the shipping company and the government. Homer should comply
with his obligation.
SUGGESTED ANSWER:

B. No. Homer was not justified in refusing to accept the tobacco leaves.
He consented to the terms and conditions of the sale and must abide by
it. Obligations arising from contract have the force of law between the
contracting parties.
It is clear under the facts that the period of delivery of the tobacco
leaves was not guaranteed. Gary anticipated other factors which may
prevent him from making the delivery within a month. True enough,
transportation problems and government red tape did. Such slight delay
was, thus, excusable.
Obligations arising from contract have the force of law between the
contracting parties and should be complied with in good faith (Art. 1160,
Civil Code).
(1) Can Gary compel Isaac to pay his loan even before the end of the
two-year period?
(A) Yes, Gary can compel Isaac to immediately pay the loan. Noncompliance
with the promised guaranty or security renders the obligation immediately
demandable. Isaac lost his right to make use of the period.
(B) Yes, Gary can compel Isaac to immediately pay the loan. The delivery of
the Toyota Innova is a condition for the loan. Isaac's failure to deliver the
car violated the condition upon which the loan was granted. It is but fair for
Gary to demand immediate payment.
(C) No, Gary cannot compel Isaac to immediately pay the loan. The delivery
of the car as security for the loan is an accessory contract; the principal
contract is still the P1,000,000 loan. Thus, Isaac can still make use of the
period.
(D) No, Gary cannot compel Isaac to immediately pay the loan. Equity dictates
that Gary should have granted a reasonable extension of time for Isaac to
deliver his Toyota Innova. It would be unfair and burdensome for Isaac to
pay the P1,000,000 simply because the promised security was not
delivered.
SUGGESTED ANSWER:
(A) Yes, Gary can compel Isaac to immediately pay the loan.
Noncompliance with the promised guaranty or security renders the
obligation immediately demandable. Isaac lost his right to make use
of the period.
Under Article 1198 (2) of the Civil Code, the debtor shall lose
every right to make use of the period when he does not furnish to the
creditor the guaranties or securities which he has promised.

VII.

Lito was a commercial pilot who flew for Pacific-Micronesian Air. In 1998, he
was the co-pilot of the airline's Flight MA916 that mysteriously disappeared
two hours after take-off from Agana, Guam, presumably over the Pacific
Ocean. No trace of the plane and its 105 passengers and crew waas ever
found despite diligent search; Lito himself was never heard of again. Lito left
behind his wife, Lita, and their two children.
In 2008, Lita met and married Jaime. They now have a child of their own.
While on a tour with her former high school classmates in a remote province
of China in 2010, Lita was surprised to see Lito or somebody who looked
exactly like him, but she was sure it was Lito because of the extreme surprise
that registered in his face when he also saw her. Shocked, she immediately
fled to her hotel and post haste returned to the country the next day. Lita now
comes to you for legal advice. She asks you the following questions:
(1) If Lito is alive, what is the status of his marriage to Lita?
(A) The marriage subsists because the marital bond has not been
terminated by death.
(B) The marriage was terminated when Lita married Jaime.
(C) The marriage subsists because Litas marriage to Jaime is void.
(D) The marriage is terminated because Lito is presumed dead after his
plane has been missing for more than 4 years.
(E) The marriage can be formally declared terminated if Lito would not
resurface.
SUGGESTED ANSWER:
C. The marriage subsists because Litas marriage to Jaime is void.
For the purpose of contracting the subsequent marriage under
Article 41 of the Family Code, the spouse present must institute a
summary proceeding as provided in the Family Code for the
declaration of presumptive death of the absentee, without prejudice
to the effect of reappearance of the absent spouse.
(2) If Lito is alive, what is the status of Litas marriage to Jaime?
(A) The marriage is valid because Lita's marriage to Lito was terminated
upon Lito's disappearance for more than seven years.
(B) The marriage is valid. After an absence of more than l 0 years, Lito is
already presumed dead for all purposes
(C) The marriage is void. Lito's mere absence, however lengthy,
insufficient to authorize Lita to contract a subsequent marriage.

(D) The marriage is void. If Lito is indeed alive, his marriage to Lita was
never dissolved and they can resume their marital relations at any
time.
SUGGESTED ANSWER:
Any answer is correct.
Under Article 390 of the Civil Code, after an absence of seven years,
it being unknown whether or not the absentee still lives, he shall be
presumed dead for all purposes, except for those of succession. This
provision was not repealed by the present Family Code. Applying this to
the problem, (A) may be correct. (B) may also be correct. (C) and (D)
may also be correct under Article 41 of the Family Code.
VIII.

Which of the following actions or defenses are meritorious?

(A) An action for recovery of down payment paid under a rescinded oral sale
of real property.
(B) A defense in an action for ejectment that the lessor verbally promised to
extend or renew the lease.
(C) An action for payment of sum of money filed against one who orally
promised to answer anothers debt in case the latter defaults.
(D) A defense in an action for damages that the debtor has sufficient, but
unliquidated assets to satisfy the credit acquired when it becomes due.
(E) None of the above.
SUGGESTED ANSWER:
(A) An action for recovery of down payment paid under a rescinded oral
sale of real property.
An oral sale of real property is an unenforceable contract
under the Statute of Frauds. Since, in the problem, the vendee paid
down payment, it takes it out of the ambit of the Statute of Frauds.
The rescission here must be in the sense of resolution of the
reciprocal obligation arising from the contract of sale. If the
rescinded (resolved) by the vendee on account of the vendors
failure to deliver the thing sold, the parties will go back to their
status prior to the contract. If the vendor refuses to return the down
payment, then the vendee can file an action for recovery of the down
payment.
If on the other hand, the vendor and the vendee mutually agree
to rescind, i.e., cancel the contract, the vendee likewise can file an
action for recovery of the down payment on the basis of solution
indebiti.

ALTERNATIVE ANSWER:
E. None of the above.
(A) The recovery of the down payments should be made in the same
action for rescission. Otherwise it would be a ground for
dismissal under Rule 2, Sec. 4 of the Rules of Court.
(B) Lease of a real property is covered by the Statute of Frauds.
Furthermore, it also consists of interest in real property. Hence, it
must be in writing. (Art. 1403, Civil Code)
(C) A contract of guaranty is a promise to answer for the debt of
another and hence, it is also covered by the Statute of Frauds. It
must be in writing before it can be enforced in a court action. (Art.
1403, Civil Code)
(D) The fact that a debtor has unliquidated assets does not excuse
him from paying his debt.
(E) If the technical meaning of rescission under Article 1191 of the
Civil Code will be adhered to, then there is no absolutely correct
answer. Hence, letter E is also a possible answer.

IX.

Betty entrusted to her agent, Aida, several pieces of jewelry to be sold on

commission with the express obligation to tum over to Betty the proceeds of
the sale, or to return the jewelries if not sold in a month's time. Instead of
selling the jewelries, Aida pawned them with the Tambunting Pawnshop, and
used the money for herself. Aida failed to redeem the pawned jewelries and
after a month. Betty discovered what Aida had done. Betty brought criminal
charges which resulted in Aida's conviction for estafa.
Betty thereafter filed an action against Tambunting Pawnshop for the
recovery of the jewelries. Tambunting raised the defense of ownership,
additionally arguing that it is duly licensed to engage in the pawnshop and
lending business, and that it accepted the mortgage of the jewelry in good
faith and in the regular course of its business.
If you were the judge, how will you decide the case?
(A) I will rule in favor of Betty. My ruling is based on the Civil Code provision
that one who has lost any movable or has been unlawfully deprived thereof
may recover it from the person in possession of the same. Tambunting's
claim of good faith is inconsequential.
(B) I will rule in favor of Betty. Tambunting's claim of good faith pales into
insignificance in light of the unlawful deprivation of the jewelries. However,
equity dictates that Tambunting- must be reimbursed for the pawn value of
the jewelries.
(C) I will rule in favor of Tambunting. Its good faith takes precedence over the
right of Betty to recover the jewelries.

(D) I will rule in favor of Tambunting. Good faith is always presumed.

Tambunting's lawful acquisition in the ordinary course of business coupled
with good faith gives it legal right over the jewelries.
SUGGESTED ANSWER:
(A) I will rule in favor of Betty. My ruling is based on the Civil Code
provision that one who has lost any movable or has been unlawfully
deprived thereof may recover it from the person in possession of the
same. Tambunting's claim of good faith is inconsequential.
Tambunting's claim of good faith is inconsequential.
Although possession of movable property acquired in good
faith is equivalent to a title, nevertheless, one who has lost any
movable or has been unlawfully deprived thereof may recover it from
the person in possession of the same. Betty has been deprived
unlawfully of her jewelries by the estafa committed by Aida. The
pledge of said jewelries by Aida to Tambunting Pawnshop is void
because the pledgor is not the owner (Article 2085 (2), Civil Code).
Tambunting's claim of good faith is inconsequential, because, aside
from good faith Tambunting must prove also that it acquired the
jewelries at a public sale in order to be able to retain the jewelries
until reimbursed by Betty the amount of the loan including interest.
(Art. 559, Civil Code).
The only exception the law allows is when there is acquisition
in good faith of the possessor at a public sale, in which case the
owner cannot obtain its return without reimbursing the price (Dizon
v. Suntay, 47 SCRA 160, September 29, 1972).
X.

Arlene owns a row of apartment houses in Kamuning, Quezon City. She

agreed to lease Apartment No. 1 to Janet for a period of 18 months at the rate
of P10,000 per month. The lease was not covered by any contract. Janet
promptly gave Arlene two (2) months deposit and 18 checks covering the
rental payment for 18 months. This show of good faith prompted Arlene to
promise Janet that should Arlene decide to sell the property, she would give
Janet the right of first refusal.
(1) Not long after Janet moved in, she received news that her application for a
Master of laws scholarship at Kings College in London had been
approved. Since her acceptance of the scholarship entailed a transfer of
residence, Janet asked Arlene to return the advance rental payments she
made. Arlene refused, prompting Janet to file an action to recover the
payments. Arlene filed a motion to dismiss, claiming that the lease, on
which the action is based, is unenforceable.

If you were the judge, would you grant Arlenes motion?

(A) Yes, I will grant the motion because the lease contract between Arlene
and Janet was not in writing; hence, Janet may not enforce any right
arising from the same contract.
(B) Nom I will not grant the motion because to allow Arlene to retain the
advance payments would amount to unjust enrichment.
(C) Yes, I will grant the motion because the action for recovery is
premature; Janet should first secure a judicial rescission of the contract
of lease.
(D) No. I will not grant the motion because the cause of action does not
seek to enforce any right under the contract of lease.
SUGGESTED ANSWER:
D. No. I will not grant the motion because the cause of action does
not seek to enforce any right under the contract of lease.
Janet is not asking for the continued use of the leased
premises. Moreover, the contract is outside the ambit of the Statute
of Frauds as the same has already been partially performed.
(2) Assume that Janet decided not to accept the scholarship and continued
leasing Apartment No. 1. Midway through the lease period, Arlene decided
to sell Apartment No. 1 to Jun in breach of her promise to Janet to grant
her the right of first refusal. Thus, Janet filed an action seeking the
recognition of her right of first refusal, the payment of damages for the
violation of this right, and the rescission of the sale between Arlene and
Jun.
Is Janets action meritorious?
(A) Yes, under the Civil Code, a promise to buy and sell a determinate
thing is reciprocally demandable.
(B) No, the promise to buy and sell a determinate thing was not supported
by a consideration.
(C) Yes, Janets right of first refusal was clearly violated when the property
was not offered for sale to her before it was sold to Jun.
(D) No, a right of first refusal involves an interest over real property that
must be embodied in a written contract to be enforceable.
SUGGESTED ANSWER:
D. No, a right of first refusal involves an interest over real property
that must be embodied in a written contract to be enforceable.

The right of first refusal involves a transfer of interest in real

property. As such, it is covered by the Statute of Frauds under
Article 1403 (2) of the Civil Code. It must be in writing in order to
be enforceable.

TAXATION

ESSAY QUESTIONS

I.

In its final adjustment return for the 2010 taxable year, ABC Corp. had
excess tax credits arising from its over-withholding of income payments. It opted to
carry over excess tax credits to the following year. Subsequently, ABC Corp.
changed its mind and applied for a refund of the excess tax credits.

Will the claim for refund prosper? (6%)

SUGGESTED ANSWER:
No. The claim for refund will not prosper. While the law gives the
taxpayer an option whether to carry-over or claim as refund the excess tax
credits shown on its final adjustment return, once the option to carry-over
has been made, such option shall be considered irrevocable for that taxable
period and no application for cash refund or issuance of a tax credit
certificate shall be allowed. (Section 76, NIRC; CIR v. PL Management
International Phils., Inc., April 4, 2011, 647 SCRA 72 (2011) G.R. No. 160949).

II.
A group of philanthropists organized a non-stock, non-profit hospital for charitable
purposes to provide medical services to the poor. The hospital also accepted
paying patients although none of its income accrued to any private individual; all
income were plowed back for the hospital's use and not more than 30% of its
funds were used for administrative purposes.

Is the hospital subject to tax on its income? If it is, at what rate? (6%)

SUGGESTED ANSWER:
Yes. Although, a non-stock non-profit hospital organized for charitable
purposes, is generally, exempt from income tax, it becomes taxable on

income derived from activities conducted for profit. Services rendered to

paying patients are considered activities conducted for profit which are
subject to income tax, regardless of the disposition of said income. The
hospital is subject to tax of 10% of its net income derived from paying
patients considering that the income earned appears to be derived solely
from hospital-related activities (CIR v. St. Luke's Medical Center, Inc., G.R.
Nos. 195909 & 195960, September 26, 2012).
ANOTHER SUGGESTED ANSWER:
No. The hospital is organized exclusively for charitable purposes and
since no part of its income insures to the benefit of any private individual, it
should not lose its exempt character by simply admitting paying patients.
The revenues derived from paying patients are necessary to maintain its
head above waters and allow it to sustain its charitable activities (YMCA v.
CA & CIR, 298 SCRA 83, 91 [Oct. 14, 1988] G>ZR. No. 124043).

III.
ABC Corporation is registered as a holding company and has an office in
the City of Makati. It has no actual business operations. It invested in another
company and its earnings are limited to dividends from this investment, interests
on its bank deposits, and foreign exchange gains from its foreign currency
account. The City of Makati assessed ABC Corporation as a contractor or one that
sells services for a fee.

Is the City of Makati correct? (6%)

SUGGESTED ANSWER:
No. The corporation cannot be considered as a contractor because it
does not render services for others for a fee. A contractor is one whose
activity consists essentially in the sale of all kinds of services for a fee,
regardless of whether or not the performance of the service calls for the
exercise or use of the physical or mental faculties of such contractor or its
employees. To be considered as a contractor, the corporation must derive
income from doing active business of selling services and not from deriving
purely passive income. Accordingly, a mere holding company cannot be
assessed by the City of Makati as a contractor. (Section 131(h), LGC).

IV.
Atty. Gambino is a partner in a general professional partnership. The
partnership computes its gross revenues, claims deductions allowed under the Tax
Code, and distributes the net income to the partners, including Atty. Gambino, in
accordance with its articles of partnership.

In filing his own income tax return, Att. Gambino claimed deductions that
the partnership did not claim as purchase of law books, entertainment expenses,
car insurance and car depreciation. The BIR disallowed the deductions.

Was the BIR correct? (6%)

SUGGESTED ANSWER:
No. The BIR is wrong in disallowing the deductions claimed by Atty.
Gambino. It appears that the general professional partnership (GPP) claimed
itemized deductions from its gross revenues in arriving at its distributable
net income. The share of a partner in the net income of the GPP must be
reported by him as part of his gross income from practice of profession and
he is allowed to claim further deductions which are reasonable, ordinary and
necessary in the practice of profession and were not claimed by the
partnership in computing its net income. (Section 26, NIRC; RR No. 16-2008;
2-2010).
ALTERNATIVE ANSWER:
The BIR is wrong in disallowing the deduction because if the
partnership claims itemized deductions, the partner can further claim
deductions from his share in the net income of the partnership provided
these are ordinary, necessary, reasonable, duly substantiated and not yet
claimed by the partnership in computing its distributable net income.
Consonant with these requirements of deductibility, the purchase of law
books can be considered as a capital outlay, hence not deductible outright
but subject to depreciation. Insofar as the entertainment expenses are
concerned only an amount not exceeding 1% of gross income shall be
allowed. For the car insurance and car depreciation, they are allowed as
deductions but only to the extent that the car is used in the practice of

profession. (Section 26, NIRC; RR no. 16-2008; RR No. 2-2010; Sec. 34 (A) as
implemented by RR No. 10-2002).

V.
Mr. Agustin, 75 years old and suffering from an incurable disease, decided
to sell for valuable and sufficient consideration a house and lot to his son. He died
one year later.

In the settlement of MR. Agustin's estate, the BIR argued that the house
and lot were transferred in contemplation of death and should therefore form part
of the gross estate for tax purposes.

Is the BIR correct? (7%)

SUGGESTED ANSWER:
No. The house and lot were not transferred in contemplation of death
therefore, these properties should not form part of the decedent's gross
estate. To qualify as a transfer in contemplation of death, the transfer must
be either without consideration or for insufficient consideration. Since the
house and lot were sold for valuable and sufficient consideration, there is no
transfer in contemplation of death for estate tax purposes. (Section 85(B),
NIRC).

VI.
On October 15, 2005, ABC Corp. imported 1,000 kilos of steel ingots and
paid customs duties and VAT to the Bureau of Customs on the importation. On
February 17, 2009, the Bureau of Customs, citing provisions of the Tariff and
Customs Code on post-audit, investigated and assessed ABC Corp., for deficiency
customs duties and VAT.

Is the Bureau of Customs correct? (7%)

SUGGESTED ANSWER:
No. The Bureau of Customs (BOC) has lost its right to assess
deficiency customs duties and VAT. The imported steel ingots in 2005 have
been entered and the customs duties thereon had been paid thereby making
the liquidation of the importation final and conclusive upon all parties after
the expiration of three (3) years from the date of final payment of duties and
taxes (Section 1603, TCC, as amended by RA 9135).
Note: Insofar as the VAT on importation is concerned, the underpayment will
be automatically cured when these are credited against the output tax due
upon sale by the importer when the VAT is filed. Be that as it may, an
assessment for deficiency VAT can only be made by the BIR (not by BOC),
VAT being an internal revenue tax, within three (3) years from the last day
prescribed by law for the filing of the VAT return. (Section 203, NIRC).

VII.
XYZ Law Offices, a law partnership in the Philippines and a VAT registered
taxpayer, received a query by e-mail from Gainsburg Corporation, a corporation
organized under the laws of Delaware, but the e-mail came from California where
Gainsburg has an office. Gainsburg has no office in the Philippines and does no
business in the Philippines.

XYZ Law Offices rendered its opinion on the query and billed Gainsburg
US$1,000 for the opinion. Gainsburg remitted its payment through Citibank which
converted the remitted US$1,000 to pesos and deposited the converted amount in
the XYZ Law Offices account.

What are the tax implications of the payment to XYZ Law Offices in
terms of VAT and income taxes? (7%)
SUGGESTED ANSWER:
The payment to XYZ Law Offices by Gainsburg Corporation is subject
to VAT and income tax in the Philippines.
For VAT purposes, the transaction is a zero-rated sale of services
where the output tax is zero percent and XYZ is entitled to claim as refund or
tax credit certificate the input taxes attributable to the zero-rated sale. The
services were rendered to a nonresident person, engaged in business
outside the Philippines, which services are paid for in foreign currency
inwardly remitted through the banking system, thereby making the sale of
services subject to tax at zero-rate. (Section 108(B)(2), NIRC).
For income tax purposes, the compensation is part of the gross
income of the law partnership. From its total gross income derived within

and without, it has to compute its net income in the same manner as a
corporation. The net income of the partnership whether distributed or not
will be declared by the partners as a part of their gross income who are to
pay the income tax thereon in their individual capacity. (Section 26, NIRC).

VIII.
Mr. Amado leased a piece of land owned by the Municipality of
Pinagsabitan and built a warehouse on the property for his business operation.
The Municipal Assessor assessed Mr. Amado for real property taxes on the land
and the warehouse. Mr. Amado objected to the assessment, contending that he
should not be asked to pay realty taxes on the land since it is municipal property.

Was the assessment proper? (5%)

SUGGESTED ANSWER:
Yes, the assessment is proper. The land, although owned by the
Municipality, is not exempt from real property tax because the beneficial use
has been granted to a taxable person. (Section 234(a), LGC).
IX.
In the settlement of the estate of Mr. Barbera who died intestate, his wife
renounced her inheritance and her share of the conjugal property in the favor of
their children. The BIR determined that there was a taxable gift and thus assessed
Mrs. Barbera as a donor.

Was the BIR correct? (7%)

SUGGESTED ANSWER:

The BIR is correct that there was a taxable gift but insofar as the
renunciation of the share of the wife in the conjugal property is concerned.
This is a transfer of property without any consideration which takes effect
during the lifetimes of the transferor/wife and thus qualifies as a taxable gift.
(RR No. 2-2003).
But the renunciation of the wife's share in the inheritance during the
settlement of the estate is not a taxable gift considering that the property is
automatically transferred to the other heirs by operation of law due to her
repudiation of her inheritance. (BIR Ruling DA. No. 333-07).

X.
In 2010 pursuant to a Letter of Authority (LA) issued by the Regional
Director, Mr. Abcede was assessed deficiency income taxes by the BIR for the
year 2009. He paid the deficiency. In 2011, Mr. Abcede received another LA for
the same year 2009, this time from the National Investigation Division, on the
ground that Mr. Abcede's 2009 return was fraudulent.

Mr. Abcede contested the LA on the ground that he can only be

investigated once in a taxable year. Decide. (7%)

SUGGESTED ANSWER:
The contention of Mr. Abcede is not tenable. While the general rule is
to the effect that for income tax purposes, a taxpayer must be subject to
examination and inspection by internal revenue officers only once in a
taxable year, this will not apply if there is fraud, irregularity or mistakes as
determined by the Commissioner. In the instant case, what triggered the
second examination is the findings by the BIR that Mr. Abcede's 2009 return
was fraudulent, accordingly, the examination is legally justified. (Section
235, NIRC).

XI.
In 2000, Mr. Belen bought a residential house and lot for P1,000,000. He
used the property as his and his family's principal residence. It is now year 2013
and he is thinking of selling the property to buy a new one. He seeks your advice
on how much income tax he would pay if he sells the property. The total zonal
value of the property is P5,000,000 and the fair market value per the tax
declaration is P2,500,000. He intends to sell it for P6,000,000.

What material considerations will you take into account in computing

the income tax? Please explain the legal relevance of each of these
considerations. (7%)

SUGGESTED ANSWER:
Since the planned sale involves a real property classified as a capital
asset, the material considerations to take into account to compute the
income tax are:
1. The current fair market value of the property to be sold. The current
fair market value is the higher between the zonal value and the fair
market value per tax declaration.
2. The gross selling price of the property.
3. Determination of the tax vase which is the higher between the gross
selling price and the current fair market of the property.
The income tax is computed as 6% of the tax base which is in the nature of a
final capital gains tax. (Sections 24(D)(1), NIRC).
However, since the property to be sold is a principal residence and the
purpose is to buy a new one, I will advise Mr. Belen that the sale can be
exempt from the 6% capital gains tax if he is willing to comply with the
following conditions:

a. He must utilize the proceeds of sale in acquiring a new principal

residence within 18 months from date of disposition;
b. He should notify the Commissioner of his intention to avail of the
exemption within 30 days from date of sale;
c. He should open an escrow account with a bank and deposit the 6%
capital gains tax due on the sale. If he complies with the utilization
requirement he will be entitled to get back his deposit; otherwise,
the deposit will be applied against the capital gains tax due.
(Section 24(D)(2), NIRC).

XII.
You are the retained tax counsel of ABC Corp. Your client informed you that
they have been directly approached with a proposal by a BIR insider (i.e., a middle
rank BIR official) on the tax matter they have referred to you for handling.

The BIR insider's proposal is to settle the matter by significantly reducing

the assessment, nut he will get 50% of the savings arising from the reduced
assessment.

What tax, criminal and ethical considerations will you take into
account in giving your advice? Explain the relevance of each of these
considerations. (9%)

SUGGESTED ANSWER:

I will advise my client not to accept the settlement proposal but

instead pay the entire amount of tax that is legally due to the government.
On the tax aspect, I will tell my client that a proposed assessment
covering deficiency taxes which are legally due must fully paid to exonerate
the taxpayer from further tax liabilities. The unwarranted reduction of the
proposed assessment into half and the payment thereof will not close the
case but can be re-opened anytime within ten years from discovery so as to
collect the correct amount of taxes from ABC Corp.
The act of deliberately paying an amount of tax that is less than what
is known by my client to be legally due through a cause of action that is
unlawful is considered as tax evasion. I will advise my client that conniving
with a BIR insider to reduce the proposed assessment for a fee is unlawful
which can expose the officers of the corporation to criminal liablity.
Likewise, the payment to be made to the BIR official of 50% of the savings
constitutes direct bribery punishable under the Revised Penal Code. Insofar
as the BIR officer is concerned he will also be a principal to direct bribery
and to the criminal violations penalized under Section 269 of the Tax Code.
On ethical grounds, agreeing to the settlement scheme being
proposed by the BIR insider is agreeing to the perpetration of a dishonest
act. Since taxation is symbiotic relationship, far dealing on both sides is of
paramount importance. I will remind my client that taxpayers owe honesty to

government just as government owes fairness to taxpayers. (CIR v. Tokyo

Shipping Co., Ltd., G.R. No. 68525, May 26, 1996).

MULTIPLE CHOICE QUESTIONS

ABC Corp. was dissolved and liquidating dividends were declared and paid to the
stockholders.
What tax consequence follows? (1%)
(A)
(B)
(C)
(D)

ABC Corp. should deduct a final tax of 10% from the dividends.
The stockholders should declare their gain from their investment and pay income
tax at the ordinary rates.
The dividends are exempt from tax.
ABC Corp. should withhold a 10% creditable tax.

SUGGESTED ANSWER:
(B)

(Sec. 39, BIR Ruling 39-02, Nov. 11, 2002)

II

MGC Corp. secured an income tax holiday for 5 years as a pioneer industry. On
the fourth year of the tax holiday, MGC Corp. declared and paid cash dividends to its
stockholders, all of whom are individuals.
Are the dividends taxable? (1%)
(A)
(B)
(C)
(D)

The dividends are taxable; the tax exemption of MGC Corp. does not extend to
its stockholders.
The dividends are tax exempt because of MGC Corp.s retained earnings.
The dividends are taxable if the exceed 50% of MGC Corp.s retained earnings.
The dividends are exempt if paid before the end of MGC Corp.s fiscal year.

SUGGESTED ANSWER:
(A)

(Sunio v. NLRC, G.R. No. 57767, Jan. 31, 1984)

III

Mr. Alas sells shoes in Makati through a retail store. He pays the BAT on his
gross sales to the BIR and the municipal license tax based on the same gross sales to
the City of Makati. He comes to you for advice because he thinks he is being subjected
to double taxation.
What advice will you give him? (1%)
(A)
(B)
(C)
(D)

Yes, there is double taxation and it is oppressive.

The City of Makati does not have this power.
Yes, there is double taxation and this is illegal in the Philippines.
Double taxation is allowed where one tax is imposed by the national government
and the other by the local government.

SUGGESTED ANSWER:
(D)

(CIR v. Solidbank Corp., G.R. No. 148191, Nov. 25, 2003)

IV
Congress passed a sin tax law that increased the tax rates on cigarettes by
1,000%. The law was thought to be sufficient to drive many cigarette companies out of
business, and was questioned in court by a cigarette company that would go out of
business because it would not be able to pay the increased tax.
The cigarette company is _______. (1%)
(A)
(B)
(C)
(D)

wrong because taxes are the lifeblood of the government.

wrong because the law recognizes that the power to tax is the power to destroy.
correct because no government can deprive a person of his livelihood.
correct because Congress, in this case, exceeded its power to tax.

SUGGESTED ANSWER:
(A)

(McCulloch v. Maryland, 17 U.S. 4 Wheat. 316 (1819))

Mr. Alvarez is in the retail business. He received a deficiency tax assessment

from the BIR containing only the computation of the deficiency tax and the penalties,
without any explanation of the factual and legal bases for the assessment.
Is the assessment valid? (1%)
(A)
(B)
(C)
(D)

The assessment is valid; all that Mr. Alvarez has to know is the amount of the
tax.
The assessment is invalid; the law requires a statement of the facts and the law
upon which the assessment is based.
The assessment is valid but Mr. Alvarez can still contest it.
The assessment is invalid because Mr. Alvarez has no way to determine if the
computation is erroneous.

SUGGESTED ANSWER:
(B)

(Section 228, NIRC, Azucena Reyes v. Commissioner)

VI

In 2010, Mr. Platon sent his sister Helen $1,000 via a telegraphic transfer through
the Bank of PI. The banks remittance clerk made a mistake and credited Helen with
$1,000,000 which she promptly withdrew. The bank demanded the return of the
mistakenly credited excess, but Helen refused. The BIR entered the picture and
investigated Helen.
Would the BIR be correct if it determines that Helen earned taxable income under these
facts? (1%)
(A)
(B)
(C)
(D)

No, she had no income because she had no right to the mistakenly credited
funds.
Yes, income is income regardless of the source.
No, it was not her fault that the funds in excess of $1,000 were credited to her.
No, the funds in excess of $1,000 were in effect donated to her.

SUGGESTED ANSWER:
(B)

(Javier v. Commissioner [199 SCRA 824] G.R. No. 78953)

VII

The municipality of San Isidro passed an ordinance imposing a tax on installation

managers. At that time, there was only one installation manager in the municipality;
thus, only he would be liable for the tax.
Is the law constitutional? (1%)
(A)
(B)
(C)
(D)

It is unconstitutional because it clearly discriminates against this person.

It is unconstitutional for lack of legal basis.
It is constitutional as it applies to all persons in that class.
It is constitutional because the power to tax is the power to destroy.

SUGGESTED ANSWER:
(B)

(Shell Co. Of P.I. v. Vao, 94 Phil. 387)

VIII

XYZ Corporation manufactures glass panels and is almost at the point of

insolvency. It has no more cash and all it has are unsold glass panels. It received an
assessment from the BIR for deficiency income taxes. It wants to pay but due to lack of
cash, it seeks permission to pay in kind with glass panels.
Should the BIR grant the requested permission? (1%)
(A)
(B)
(C)
(D)

It should grant permission to make payment convenient to taxpayers.

It should not grant permission, because a tax is generally a pecuniary burden.
It should grant permission; otherwise, XYZ Corporation would not be able to pay.
It should not grant permission because the government does not have the
storage facilities for glass panels.

SUGGESTED ANSWER:
(B)

(Characteristics of Taxes)

IX

Prior to the VAT law, sales of cars were subject to a sales tax but the tax applied only to
the original or the first sale; the second and subsequent sales were not subject to tax.

Deltoid Motors, Inc. (Deltoid) hit on the idea of setting up a wholly owned
subsidiary, Gonmad Motors, Inc. (Gonmad), and of selling its assembled cars to
Gonmad at a low price so it would pay a lower tax on the first sale. Gonmad would then
sell the cars to the public at a higher price without paying any sales tax on this
subsequent sale.
Characterize the arrangement. (1%)
(A)
(B)
(C)
(D)

The plan is a legitimate exercise of tax planning and merely takes advantage of a
loophole in the law.
The plan is legal because the government collects taxes anyway.
The plan is improper; the veil of corporate fiction can be pierced so that the
second sale will be considered the taxable sale.
The government must respect Gonmads separate juridical personality and
Deltoids taxable sales.

SUGGESTED ANSWER:
(B)

(Koppel Philippines, Inc. v. Yatco, 77 Phil. 496)

PRT Corp. purchased a residential house and lot with a swimming pool in an
upscale subdivision and required the company president to stay there without paying
rent; it reasoned out that the company president must maintain a certain image and be
able to entertain guests at the house to promote the companys business. The company
president declared that because they are childless, he and his wife could very well live
in a smaller house.
Was there a taxable fringe benefit? (1%)
(A)
(B)
(C)
(D)

There was no taxable fringe benefit since it was for the convenience of the
employer and was necessary for its business.
There was a taxable fringe benefit since the stay at the house was for free.
There was a taxable fringe benefit because the house was very luxurious.
There was a taxable fringe benefit because the company president was only
required to stay there and did not demand free housing.

SUGGESTED ANSWER:
(A)

(Section 33, NIRC; RR No. 3-98)

XI

Taxpayer A was required by the BIR to sign and submit a waiver of the statute of
limitations on the assessment period, to give the BIR more time to complete its
investigation. The BIR accepted the waiver but failed to indicate the date of its
acceptance.
What is the legal status of the waiver? (1%)
(A)
(B)
(C)
(D)

The waiver is valid because the date of acceptance is immaterial and

unimportant.
The waiver is invalid; the taxpayer cannot be required to waive the statute of
limitations.
The waiver is invalid; the date of acceptance is crucial in counting the start of the
period of suspension of the prescriptive period.
The waiver is valid, having been accepted by the BIR.

SUGGESTED ANSWER:
(C)

(Commissioner v. Kudos Metal Corp., G.R. No. 178087, May 5, 2010)

XII

Taxpayer Andy received on January 3, 2010 a preliminary assessment notice

(PAN) from the BIR, stating that he had fifteen (15) days from its receipt to comment or
to file a protest. Eight (8) days later (or on January 11, 2010), before he could comment
or file a protest, Andy received the final assessment notice (FAN).
Decide on the validity of the FAN. (1%)
(A)
(B)
(C)
(D)

The FAN is invalid; Andy was not given the chance to respond to the PAN, in
violation of his due process rights.
The FAN is invalid for being premature.
The FAN is valid since it was issued before the right to assess prescribed.
The FAN is valid. There is no legal requirement that the FAN should await the
protest to the PAN because protest to the PAN is not mandatory.

SUGGESTED ANSWER:
(A)

(Section 228, NIRC; RR No. 12-99)

XIII

MSI Corp. imports orange and lemon concentrates as raw material for the fruit
drinks it sells locally. The Bureau of Customs (BOC) imposed a 1% duty rate on the
concentrates. Subsequently, the BOC changed its position and held that the
concentrates should be taxed at 7% duty rate. MSI disagreed with the ruling and
questioned it in the CTA which upheld MSIs position. The Commissioner of Customs
appealed to the CTA en banc without filing a motion for reconsideration.
Resolve the appeal. (1%)
The appeal should be dismissed because a motion for reconsideration is
mandatory.
(B)
The appeal should be dismissed for having been filed out of time.
(C)
The appeal should be given due course since a motion for reconsideration is a
useless exercise.
(D)
The appeal should be upheld to be fair to the government which needs taxes.
SUGGESTED ANSWER:
(A)

(A)

(RA 2982; Rule 8, Revised Rules of the CTA)

XIV

The spouses Jun and Elvira Sandoval purchased a piece of land for P5,000,000
and included their two (2) minor children as co-purchasers in the Deed of Absolute Sale.
The Commissioner of Internal Revenue (CIR) ruled that there was an implied donation
and assessed donors taxes against the spouses.
Rule on the CIRs action. (1%)
(A)
(B)
(C)
(D)

The CIR is wrong; a donation must be express.

The CIR is wrong; financial capacity is not a requirement for a valid sale.
The CIR is correct; the amount involved is huge and ultimately ends up with the
children.
The CIR is correct; there was animus donandi since the children had no financial
capacity to be co-purchasers.

SUGGESTED ANSWER:
(D)

(Spouses Evono v. Department of Finance, et. al., CTE EB Case No. 705,
June 4, 2012)

XV

Pheleco is a power generation and distribution company operating mainly from

the City of Taguig. It owns electric poles which it also rents out to other companies that
use poles such as telephone and cable companies. Taguig passed an ordinance
imposing a fee equivalent to 1% of the annual rental for these poles. Pheleco
questioned the legality of the ordinance on the ground that it imposes an income tax
which local government units (LGUs) are prohibited from imposing.
Rule on the validity of the ordinance. (1%)
(A)
(B)
(C)
(D)

The ordinance is void; the fee is based on rental income and is therefore a tax on
income.
The ordinance is valid as a legitimate exercise of police power to regulate electric
poles.
The ordinance is void; 1% of annual rental is excessive and oppressive.
The ordinance is valid; an LGU may impose a tax on income.

SUGGESTED ANSWER:
(A)

(Section 129, RA No. 7160)

XVI

Aleta sued Boboy for breach of promise to marry. Boboy lost the case and duly
paid the courts award that included, among others, P100,000 as moral damages for the
mental anguish Aleta suffered.
Did Aleta earn a taxable income? (1%)
(A)
(B)
(C)
(D)

She had a taxable income of P100,000 since income is income from whatever
source.
She had no taxable income because it was a donation.
She had taxable income since she made a profit.
She had no taxable income since moral damages are compensatory.

SUGGESTED ANSWER:
(A)

(Section 32(B)(4), NIRC)

XVII

Mr. Mayuga donated his residential house and lot to his son and duly paid the
donors tax. In the Deed of Donation, Mr. Mayuga expressly reserved for himself the
usufruct over the property for as long as he lived.
Describe the donated property from the taxation perspective. (1%)
(A)
(B)
(C)
(D)

The property will form part of Mr. Mayugas gross estate when he dies.
The property will not form part of Mr. Mayugas gross estate when he dies
because he paid the donors tax.
The property will form part of Mr. Mayugas gross estate because died soon
after the donation.
The property will not form part of Mr. Mayugas gross estate because it is no
longer his.

SUGGESTED ANSWER:
(A)

(Section 85(B), NIRC)

XVIII

Mr. Z made an importation which he declared at the Bureau of Customs (BOC)

as Used Truck Replacement Parts. Upon investigation, the container vans contained
15 units of Porsche and Ferrari cars.
Characterize Mr. Zs action. (1%)
(A)
(B)
(C)
(D)

Mr. Z committed smuggling.

Mr. Z did not commit smuggling because he submitted his shipment to BOCs
examination.
Mr. Z only made a misdeclaration, but did not commit smuggling.
Mr. Z did not commit smuggling because the shipment has not left the customs
area.

SUGGESTED ANSWER:
(A)

(Section 3601, TCCP; Rieta v. People of the Philippines. 436 SCRA 273)

XIX

Mr. A was preparing his income tax return and had some doubt on whether a
commission he earned should be declared for the current year or for the succeedinf
year. He sought the opinion of his lawyer who advised him to report the commission in
the succeeding year. The lawyers advice turned out to be wrong; in Mr. As petition
against the BIR assessment, the court ruled against Mr. A.
Is Mr. A guilty of fraud? (1%)
(A)
(B)
(C)
(D)

Mr. A is not guilty of fraud as he simply followed the advice of his lawyer.
Mr. A is guilty of fraud; he deliberately did not report the commission in the
current year when he should have done so.
Mr. As lawyer should pay the tax for giving the wrong advice.
Mr. A is guilty for failing to consult his accountant.

SUGGESTED ANSWER:
(A)

(CIR v. CA, G.R. No. 119322, June 4, 1996)

XX

The BIR, through the Commissioner, instituted a system requiring taxpayers to

submit to the BIR a summary list of their sales and purchases during the year, indicating
the name of the seller or the buyer and the amount. Based on these lists, the BIR
discovered that in 2004 ABC Corp. purchased from XYZ Corp. goods worth P5,000,000.
XYZ Corp. did not declare these for income tax purposes as its reported gross sales for
2004 was only P1,000,000.
Which of the following defences may XYZ Corp. interpose in an assessment against it
by the BIR? (1%)
(A)
(B)
(C)
(D)

The BIR has no authority to obtain third party information to assess taxpayers.
The third party information is inadmissible as hearsay evidence.
The system of requiring taxpayers to submit third party information is illegal for
violating the right to privacy.
None of the above.

SUGGESTED ANSWER:
(D)

(Sections 5 & 6, NIRC)

MERCANTILE LAW

ESSAY QUESTIONS
I.
Antonio issued the following instrument:
August 10, 2013
Makati City
P100,000.00
Sixty days after date, I promise to pay Bobby or his designated representative
the some of ONE HUNDRED THOUSAND PESOS (P100,000.00) from my BPI
Acct. No. 1234 if, by this due date, the sum still sets in the west to usher in the
evening and rises in the east the following morning to welcome the day.
(Sgd.) Antonio Reyes
Explain each requirement of negotiability present or absent in the
instrument (8%)
SUGGESTED ANSWER:
The instrument contains a promise to pay and was signed by the maker,
Antonio Reyes (Section 1(a) of Negotiable Instruments Law).
The promise to pay is unconditional insofar as the reference to the setting
of the sun in the west in the evening and its rising in the east in the morning are
concerned. These are certain to happen (Section 4(c) of Negotiable Instruments
Law). The promise to pay is conditional, because the money will be taken from a
particular fund, BPI Account No. 1234 (Section 3 of Negotiable Instruments Law).

The instrument contains a promise to pay a sum certain in money,

P100,000.00 (Section (b) of Negotiable Instruments Law)
The money is payable at a determinable future time, sixty days after
August 10, 2013 (Section 4 (a) of Negotiable Instruments Law).
The instrument is not payable to order or to bearer (Section 1 (d) of
Negotiable Instruments Law).
II.
Benny applied for life insurance for Php 1.5 Million. The insurance
company approved his application and issued an insurance policy effective Nov.
6, 2008. Benny named his children as his beneficiaries. On April 6, 2010, Benny
died of hepatoma, a liver ailment.
The insurance company denied the childrens claim for the proceeds of
the insurance policy on the ground that Benny failed to disclose in his application
two previous consultations with his doctors for diabetes and hypertension, and
that he had been diagnosed to the suffering from hepatoma. The insurance
company also rescinded the policy and refunded the premiums paid.
Was the insurance company correct? (8%)
SUGGESTED ANSWER:
The insurance company correctly rescinded the policy because of concealment
(Section 27 of Insurance Code). Benny did not disclose that he was suffering from
diabetes, hypertension and hepatoma. The concealment is material, because these are
serious ailments (Florendo v. Philam Plans, Inc., 666 SCRA 618, 2012). Benny did less
than two years from the date of the issuance of the policy (Section 48 of Insurance
Code).
III.

From his first term in 2007, Congressman Abner has been endorsing his pork
barrel allocations to Twin Rivers in exchange for a commission of 40% of the face value
of the allocation. Twin Rivers is a non-governmental organization whose supporting
papers, after audit, were found by the Commission on Audit to be fictitious. Other than
to prepare and submit falsified papers to support the encashment of the pork barrel
checks, Twin Rivers does not appear to have done anything on the endorsed projects
and Congressman Abner likewise does not appear to have bothered to monitor the
progress of the projects he endorsed. The congressman converted most of the

commissions he generated into US dollars, and deposited these in a foreign currency

account with Banco de Plata (BDP).
Based on amply-supported tips given by a congressman from another political
party, the Anti-Money Laundering Council sent BDP an order: (1) to confirm Cong.
Abners deposits with the bank and to provide details of these deposits; and (2) to hold
all withdrawals and other transactions involving the congressmans bank accounts.
As counsel for BDP, would you advise the bank to comply with the order? (8%)\
SUGGESTED ANSWER:
I shall advise Banco de Plata not to comply with the order of the AntiMoney Laundering Council. It cannot inquired into the deposits of Congressman
Abner, regardless of currency, without a bank inquiry order from a competent
court, because crimes involved are not kidnapping for ransom, violations of the
Comprehensive Dangerous Drugs Act, hijkacking and other violations of
Republic Act No. 6235, destructive arson, murder, and terrorism and conspiracy
to commit terrorism (Section 11 of Anti-Money Laundering Act).
The Anti-Money Laundering Council cannot order Banco de Plata to hold
all withdrawals and other transactions involving the accounts of Congressman
Abner. It is the Court of Appeals which has the power to issue a freeze order
over the accounts upon petition of the Anti-Money Laundering Council (AntiMoney Laundering Act; Republic v. Cabrini Green Ross, 489 SCRA 644, 2006)
IV.
Rudy is a fine arts student in a university. He stays in a boarding house
with Bernie as his roommate. During his free time, Rudy would paint and leave
his finished works lying around the boarding house. One day, Rudy saw one of
his works an abstract painting entitled Manila Traffic Jam on display at the
university cafeteria. The cafeteria operator said he purchased the painting from
Bernie who represented himself as its painter and owner.
Rudy and the cafeteria operator immediately confronted Bernie. While
admitting that he did not do the painting, Bernie claimed ownership of its
copyright since he had already registered it in his name with the National Library
as provided in the Intellectual Property Code.

Who owns the copyright to the painting? Explain. (8%)

SUGGESTED ANSWER:
Rudy owns the copyright to the painting because he was the one who
actually created it. (Section 178, 1 of the Intellectual Property Code). His rights
existed from the moment of its creation (Section 172 of the Intellectual Property
Code; Unilever Philippines (PRC) v. Court of Appeals, 498 SCRA 334, 2006).
The registration of the painting by Bernie with the National Library did not confer
copyright upon him. The registration is merely for the purpose of completing the
records of the National Library (Section 191 of the Intellectual Property Code).
V.
You are a member of the legal staff of a law firm doing cor ortie and
securities works for Coco Products Inc., a company with unique products derived
from coconuts and whose shares are traded in the Philippine Stock Exchange. A
partner in the law firm, Atty Buenexito, to whom you report is the Corporate
Secretary of Coco Products. You have long been investing in Coco Products
stocks even before you became a lawyer.
While working with Atty. Buenexito on another file, he accidentally gave
you the Coco Products file containing the companys planned corporate financial
rehabilitation. While you knew you had the wrong file, your curiosity prevailed
and you browsed through the file before returning it. Thus, you learned that a
petition for financial rehabilitation is imminent, as the company could no long
meet its obligations as they fell due.
Soon after, your mother is rushed to the hospital for an emergency
operation, and you have to raise money for her hospital bills. An immediate
option for you is to sell your Coco Products shares. The sale would be very
timely because the price of the companys stocks are still high.
Would you sell the shares to raise the needed funds for your mothers
hospitalization? Take into account legal (5%) and ethical (3%) considerations.
(8% total points)
SUGGESTED ANSWER:

The sale of the shares does not constitute insider trading. Although Atty.
Buenexito, as corporate secretary of Coco Products, Inc., was an insider, it did
not obtain the information regarding the planned corporate rehabilitation by a
communication from him. He just accidentally gave the wrong file. (Section 3.8 of
Securities Regulation Code).
It would be unethical to sell the shares. Rule 1.01 of the Code of
Professional Responsibility provides, A lawyer shall not engage in unlawful
dishonest, immoral or deceitful conduct.
A lawyer should not only refrain from performing unlawful acts. He should
also desist from engaging in unfair deceitful conduct to conceal from the buyer of
the shares of the planned corporate rehabilitation.
VI.
Delano Cruz is in default in the payment of his existing loan from BDP
Bank. To extend and restructure this loan, Delano agreed to execute a trust
receipt in the banks favor covering the iron pellets Delano imported from China
one year earlier. Delano subsequently succeeded in selling the iron pellets to a
smelting plant, but the proceeds went to the payment of the separation benefits
of his employees who were laid off as he reduced his operations.
When the extended loan period expired without any significant payment
from Delano (not even to the extent of the proceeds of the sale of the iron
pellets), BDP Bank consulted you on how to proceed against Delano. The bank
is contemplating the filing of estafa pursuant to the provisions of Pres. Decree
No. 115 (Trust Receipts Law) to force Delano to turn in at least the proceeds of
the sale of the iron pellets.
Would you, as bank counsel and as an officer of the court, advise the
bank to proceed with its contemplated action? (8%)
SUGGESTED ANSWER:
I will not advise BDP Bank to file a criminal case for estafa against Delano.
Delano received the iron pellets he imported one year before the trust receipt
was executed. As held by the Supreme Court, where the execution of a trust
receipt agreement was made after the goods covered by it had been purchased
by and delivered to the entrustee and the latter as a consequence acquired

ownership to the goods, the transaction does not involve a trust receipt but a
simple loan even though the parties denominated the transaction as one of trust
receipt (Colinares vs, Court of Appeals, 339 SCRA 609, 2000; Consolidated
Bank and Trust Corporation v. CA, 356 SCRA 671, 2001).
VII.
Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have
had a long-standing insurance relationship with each other. SPMC secures the
comprehensive fire insurance on its plant and facilities from SIC. The standing
business practice between them has been to allow SPMC a credit period of 90
days from the renewal of the policy within which to pay the premium.
Soon after the new policy was issued and before premium payments could
be made, a fire gutted the covered plant and facilities to the ground. The day
after the fire, SPMC issued a managers check to SIC for the fire insurance
premium, for which it was issued a receipt; a week later SPMC issued its notice
of loss.
SIC responded by issuing its own managers check for the amount of the
premiums SPMC had paid, and denied SPMCs claim in the ground that under
the cash and carry principle governing fire insurance, no coverage existed at
the time the fire occurred because the insurance premium had not been paid.
Is SPMC entitled to recover for the loss from SIC? (8%)
SUGGESTED ANSWER:
St. Peter Manufacturing Company is entitled to recover for the loss from
Stable Insurance Company. Stable Insurance Company granted a credit term to
pay the premiums. This is not against the law, because the standing business
practice allowing St. Peter Manufacturing Company to pay the premiums after 60
to 90 days, was relied upon in good faith by SPMC. Stable Insurance Company
is in estoppels (UCPB General Insurance Company, Inc. v. Masagana Telemart,
Inc., 356 SCRA 307, 2001).
VIII.
In the November 2010 stockholders meeting of Greenville Corporation,
eight (8) directors were elected to the board. The directors assumed their posts
in January 2011. Since no stockholders meeting was held in November 2011,

the eight directors served in a holdover capacity and thus continued discharging
their powers.
In June 2010, two (2) of Greenville Corporations directors Director A
and Director B resigned from the board. Relying on Section 29 of the
Corporation Code, the remaining six (6) directors elected (2) new directors to fill
in the vacancy caused by the resignation of Directors A and B.
Stockholder X questioned the election of the new directors, initially, initially
through a letter-complaint addressed to the board, and later (when his letter
complaint went unheeded), through a derivative suit filled up by the vote of the
stockholders of Greenville Corporation. Green Coporations directors defended
the legality of their action, claiming as well that Stockholder Xs derivative suit
was improper.
Rule on the issues raised. (8%)
SUGGESTED ANSWER:
The remaining directors cannot elect new directors to fill in the two
vacancies. The board of directors may fill up vacancy only if the ground is not
due to expiration of term, removal or increase in the number of board seats. In
this case, the term of the two directors expired after one year. They remained in
office in a hold-over capacity only until their resignation. The hold-over period is
not part of their term. The vacancies should be filled up by election by the
stockholders (Valle Verde Country Club, Inc. v. Africa, 598 SCRA 202, 2009)
The derivative suit was improper. In a derivative suit, the corporation, not
the individual stockholder, must be the aggrieved party and that the stockholder
is suing on behalf of the corporation. What stockholder X is asserting is his
individual right as a stockholder to elect the two directors. The case partakes
more of an election contest under the rules on intra-corporate controversy.
(Legaspi Towers 300, Inc. v. Maer, 673 SCRA 453, 2012)

IX.
Fil-Asia Air Flight 916 was in a scheduled passenger flight from Manila
when it crashed as it landed at the Cagayan de Oro airport; the pilot
miscalculated the planes approach and undershot the runway. Of the 150 people
onboard, ten (10) passengers died at the crash scene.

Of the ten who died, one was a passenger who managed to leave the
plane but was run over by an ambulance coming to the rescue. Another was an
airline employee who hitched a free ride to Cagayan de Oro and who was not in
the passenger manifest.
It appears from the Civil Aeronautics Authority investigation that the copilot who had control of the planes landing had less than the required flying and
landing experience, and should not have been in control of the plane at that time.
He was allowed to fly as a co-pilot because of the scarcity of pilots Philippine
pilots have been recruited by foreign airlines under vastly improved flying terms
and wages so that newer and less trained pilots are being locally deployed. The
main pilot, on the other hand, had a very high level of blood alcohol at the time of
the crash.
You are part of the team that the victims hired to handle the case for them
as a group. In your case conference, the following questions came up:

(A) Explain the causes of action legally possible under the given facts
against the airline and the pilots; whom will you specifically implead in
these causes of action? (5%)

SUGGESTED ANSWER:
A complaint for breach of contract of carriage can be filed against Fil-Asia
Air for failure to exercise extraordinary diligence in transporting the passengers
safely from their point of embarkation to their destination. (Article 1755, Civil
Code).
A complaint based on a quasi-delict can be filed against the pilots
because of their fault and negligence. (Article 2176, Civil Code). Fil-Asia Air can
be included for negligence in the selection and supervision of the pilots. (Article
2180, Civil Code).
A third cause of action may be a criminal prosecution for reckless
imprudence resulting in homicide against two pilots. The airline will be
subsidiarily liable for the civil liability only after the pilots are convicted and found
to be insolvent.

(B) How will you handle the cases of the passenger run over by the
ambulance and the airline employee allowed to hitch a free ride to
Cagayan de Oro? (3%)

SUGGESTED ANSWER:
It is the driver of the ambulance and his employer who should be held
liable for damages, because a passenger was run over. This is in accordance
with Articles 2176 and 2180 of the Civil Code. There could also be a criminal
prosecution for reckless imprudence resulting in homicide against the ambulance
driver and the consequent civil liability.
Since the airline employee was being transported gratuitously, Fil-Asia Air
was not required to exercise extraordinary diligence for his safety and only
ordinary care. (Lara v. Valencia, 104, Phil. 65, 1958)

X.

Bell Philippines, Inc. (BelPhil) is a public utility company, duly incorporated

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

SUGGESTED ANSWER:
The holding of Bernard Fleet equivalent to the outstanding common
shares is illegal. His holdings of preferred shares should not exceed 40%. Since
the constitutional requirement of 60% Filipino ownership of the capital of public
utilities applies not only to voting control but also to beneficial ownership of the
corporation, it should also apply to the preferred shares. Preferred shares are
also entitled to vote in certain corporate matters. (Gamboa v. Teves, 682 SCRA
397, 2012). The State shall develop a self-reliant and independent national
economy effectively controlled by Filipinos. (Article 11, Sec 19. 1987
Constitution). The effective control here should be mirrored across the board on
all kinds of shares.
MULTIPLE CHOICE QUESTIONS
I
Claude, the registered stockholder of 1,000 shares in ABC Corp., pledged the shares to
Conrad by endorsement in blank of the covering stock certificates and, execution of a
Deed of Assignment of Shares of Stock, intended as collateral for a loan of P1.0 Million
that was also supported by a separate promissory note.
I.(1) Under these facts, is there a valid pledge of the shares of stock to Conrad? (1%)
(a) No, Because shares of stock are intangible personal properties whose
possession cannot be delivered and hence cannot be the subject of a pledge
(b) No, because the pledge of shares of stock requires double registration with
the Register of Deeds of the principal place of business of the corporation and
of the residence of the pledgor.
(c) Yes, because endorsement and delivery of the certificates of stock is
equivalent to the transfer of possession of the covered shares to the pledgee.
(d) Yes, because the execution of the Deed of Assignment of Shares of Stock is
equivalent to a lawful pledge of the shares of stock.
SUGGESTED ANSWER:
d) Yes, because the execution of the Deed of Assignment of Shares of
Stock is equivalent to a lawful pledge of the shares of stock. (Lopez v.
Court of Appeals , 114 SCRA 617).

I.(2) After Claude defaulted on the loan, Conrad sought to have the shares registered
in his name in the books of the corporation. If you are the Corporate Secretary of
ABC Corporation, would you register the shares in the name of Conrad without
any written instruction from Claude? (1%)
(a) Yes, since the endorsement and delivery of the certificates of stock executed
by Claude constitute the legal authority to cancel the shares in his name and
to place them in Conrads name.
(b) Yes, since the execution of the Deed Of Assignment byClaude would
constitute the legal authority to cancel theshares in his name and place them
in Conrad's name.
(c) No, because corporate officers can only take direct instructions from the
registered owners on the proper disposition of shares registered in their
names.
(d) No, because the corporation has a primary lien on the shares covering the
unpaid subscription.
SUGGESTED ANSWER:
None of the answer is correct. The pledge must be foreclosed. (Article
2112, Civil Code) Conrad cannot just appropriate the shares of stock
(Article 2088, Civil Code).
NOTE: (d) could have been the correct answer if the facts stated that
there are unpaid subscriptions because under Section 63 of the
Corporate Code , the corporation may refuse the transfer if it holds
unpaid claim on the subscribe shares (See China Banking Corporation
v. CA and Valle Verde Company Club G.R. No. 117604, March 26, 1997).

II
A foreign delegation of businessmen and investment bankers called on your law firm to
discuss the possibilities of investing in various projects in the Philippines, and wanted
your thoughts on certain issues regarding foreign investments in the Philippines.
XV. (1)
The Delegation has been told about the Foreign Investment Act of 1991,
as amended (FIA91), and they asked what exactly is the laws essential thrust
regarding foreign investments in the Philippines business and industries.
You replied that FIA 91 essentially reflects ____. (1%)

(a) The Filipino First Policy

(b) The Foreign Investments Positive Lists concept
(c) The Foreign Investments Negative Lists concept
(d) The Control Test concept
(e) All of the above
SUGGESTED ANSWER:
(a) The Foreign Investments Negative Lists concept(Section 7 of Foreign
Investment Act)
XV. (2)
The delegation asked: aside from Filipino Citizens, what entities would fall
under the definition of Philippine National under FIA 91?
You replied that the definition of Philippine National under FIA 91 covers
_____. (1%)
(a) Domestic partnerships wholly composed of Filipino citizens
(b) Domestic corporations 60% of whose capital stock, outstanding and entitled
to vote, are wholly-owned by Filipino citizens
(c) Foreign corporations considered doing business in the Philippines under the
Corporate Code, 100% of whose capital stock, outstanding and entitled to
vote, are wholly owned by Filipino citizens.
(d) All of the above, because the law considers the juridical personality, whether
domestic or foreign, as a mere medium; the test of nationality is on the
individuals who control the medium
(e) None of the above, because the term Philippine National can only cover
individuals and not juridical entities.
SUGGESTED ANSWER:
(d) All of the above, because the law considers the juridical personality,
whether domestic or foreign, as a mere medium; the test of nationality is
on the individuals who control the medium
(Section 3(a) of Foreign Investment Act)
XV. (3)
The delegation heard that foreigners can invest up to 100% of the equity
in export oriented enterprises and you were asked exactly what the term
covers:

You replied that an export oriented enterprises under FIA91 is an enterprise

that _____. (1%)
(a) Only engages on the export of goods and services, and does not sell goods
or services to the domestic market
(b) Exports consistently at least 40% of its goods or services, and sells at least
60% of the rest in the domestic market
(c) Exports consistently at least 60% of the goods or services produced, and
sells at least 40% of the rest to the domestic market
(d) Exports consistently at least 60% of its goods or services produced, and can
sell goods or services to the domestic market
(e) None of the above
SUGGESTED ANSWER:
(e) None of the above
(Section 3(e) of Foreign Investment Act)
XV. (4)
As a last question and by way of a concrete example, a delegation
member finally inquired which of the following corporations or businesses in the
Philippines may it invest in and up to what extent? (1%)
(a) A lifestyle magazine publication corporation, up to 40% equity
(b) An advertising corporation, up to 100% equity
(c) A commercial bank, up to 60% equity
(d) A jeepney manufacturing corporation, up to 100% equity
(e) A real estate development corporation, up to 60% equity
SUGGESTED ANSWER:
(d) A jeepney manufacturing corporation, up to 100% in equity
(Section 7 of Foreign Investment Act)

III
Dennis subscribed to 10,000 shares of XYZ Corporation with a par value of P100 per
share. However, he paid only 25% of the subscription or P250,000.00. No call has been
made on the unpaid subscription.

How many shares is Dennis entitled to vote at the annual meeting of the
stockholders of XYZ? (1%)
(a) 10,000 shares
(b) 2,500 shares
(c) 100 shares
(d) 0 shares
(e) None of the above
SUGGESTED ANSWER:
(a) 10,000 shares
(Section24 and 71 of Corporate Code)
IV
ABC Corp. issued redeemable shares. Under the terms of the issuance, the shares
shall be redeemable at the end of 10 years from date of issuance, at par value plus a
premium of 10%.
Choose the correct statement relating to these redeemable shares. (1%)
(a) ABC would need unrestricted retained earnings to be able to redeem shares.
(b) Corporations are not allowed to issue redeemable shares; thus the issuance
of ABC Corp. is ultra vires
(c) Holders of redeemable shares enjoy preference over creditors
(d) ABC Corp. may redeem the shares at the end of 10 years without need for
unrestricted retained earnings provided that, after the redemption, there are
sufficient assets to cover its debts.
(e) All of the above are incorrect
SUGGESTED ANSWER:
(d) ABC Corp. may redeem the shares at the end of 10 years without need
for unrestricted retained earnings provided that, after the redemption,
there are sufficient assets to cover its debts.
(Section 8 of Corporate Code; Republic Planters bank v. Agana, 269
SCRA 1, 1997)

V
Arnold, representing himself as an agent of Brian for the sale of Brians car, approached
Dennis, who appeared interested in buying the car. At Arnolds prodding, Dennis issued
a crossed check payable to Brian for P25,000.00 on the understanding that the check
would only be shown to Brian as evidence of Dennis good faith and interest in buying
the car. Instead, Arnold used the check to pay for medical expenses of his wife in
Brians clinic after Brian, a doctor treated her.
Is Brian a holder in due course (HIDC)? (1%)
(a) Yes, Brian is a HIDC because he was the payee of the check and he received
it for a service rendered
(b) Yes, Brian is a HIDC because he did not need to go behind the check that
was payable to him
(c) No, Brian is not a HIDC because Dennis issued the check only as evidence of
good faith and interest in buying the car
(d) No, Brian is not a HIDC because Brian should have been placed on notice.
The check was crossed in his favor and Arnold was nor the drawer.
(e) No, Brian is not a HIDC because the requisite consideration to Dennis was
not considered
SUGGESTED ANSWER:
(d) No, Brian is not a HIDC because Brian should have been placed on
notice. The check was crossed in his favor and Arnold was nor the
drawer.
(Vicente R. de Ocampo& Company v. Gatchalian, 3 SCRA 566, 1961)
VI
Gawsengsit Corp. is a corporation incorporated in Singapore. It invested in Bumblebee
Corp., a Philippine corporation, by acquiring 30% of its shares. As a result, Gawsengsit
Corp. nominated 30 o/o of the directors of Bumblebee Corp., all of whom are
Singaporeans and officers of Gawsengsit Corp.
Choose the correct statement relating to Gawsengsit Corp. (1%)
(a) Gawsengsit Corp is doing business in the Philippines and requires a license
from the Securities and Exchange Commission (SEC)

(b) Gawsengsit Corp os not doing business in the Philippines by its mere
investment in a Philippine corporation and does not need a license from SEC
(c) Gawsengsit Corp has to appoint a resident agent in the Philippines
(d) Gawsengsit Corp cannot elect directors in Bumblebee Corporation
(e) All of the above choices are incorrect.
SUGGESTED ANSWER:
(b) Gawsengsit Corp os not doing business in the Philippines by its mere
investment in a Philippine corporation and does not need a license from
SEC.
(Section 3(d) of Foreign Investment Act)
VII
The BIR assessed ABC Corp. for deficiency income tax for taxable year 2010 in the
amount of 26,731,208.88, inclusive of surcharges and penalties.
The BIR can ____. (1%)
(a) Run after the directors and officers of ABC Corp. to collect the deficiency tax
and their liability will be solidary
(b) Run after the stockholders of ABC Corp. and their liability will be joint
(c) Run after the stockholders of ABC Corp. and their liability will be solidary
(d) Run after the unpaid subscriptions still due to ABC Corp., if any
(e) None of the above choices is correct
SUGGESTED ANSWER:
(d) Run after the unpaid subscriptions still due to ABC Corp., if any
(Halley v. Printwell 648 SCRA 116, 2011)
VIII
Anton imported perfumes from Taiwan and these were released to him by the bank
under a trust receipt. While the perfumes were in Antons warehouse, thieves broke in
and stole all of them. Who will shoulder the loss of the stolen perfumes? (1%)
(a) The loss of the perfume will be borne by the bank in whose behalf the
perfumes were held in trust
(b) Anton will bear the loss
(c) The exporter can hold both the bank and Anton liable for the loss
(d) The Exporter from whom Anton bought the perfumes will bear the loss

(e) No one bears the loss for an unforeseen event.

SUGGESTED ANSWER:
(b) Anton will bear the loss
(Section 10 of the Trust Receipt Law)
(Rosario Textile Mills Corporation v. home Bankers Savings and Trust
Company, 462 SCRA 88, 2005)
IX
A bank may acquire real properties ______. (1%)
(a) By purchase at a public sale of properties levied to satisfy tax delinquencies
(b) By purchasing from a real estate corporation in the ordinary course of the
banks business
(c) Through dacion en pago in satisfaction of a debt in favor of the bank
(d) In exchange for the purchase of shares of stock of the bank
(e) All of the Above
(f) None of the above
SUGGESTED ANSWER:
(a) By purchasing from a real estate corporation in the ordinary course of
the banks business; or
(b) Through dacion en pago in satisfaction of a debt in favor of the bank; or
(c) In exchange for the purchase of shares of stock of the bank.
(Section 36 (7)and 62 (2) of the Corporate Code)
(Section 52 of the General banking Law)
X
Under the Anti-Money Laundering Act, a depositors bank account may be frozen ____.
(1%)
(a) By the bank when the account is the subject of a suspicious or covered
transaction report
(b) By the Anti-Money Laundering Council (AMLC) when the account belongs to
a person already convicted of money laundering
(c) By the Regional Trial Court, upon ex parte motion by the AMLC, in a criminal
prosecution of money laundering pending before it

(d) By the Court of Appeals motuproprio in an appeal from a judgment of

conviction of a criminal charge for money laundering
(e) None of the above.
SUGGESTED ANSWER:
(e) None of the above
(Section 10 of the Anti-Money Laundering Act)
XI
Unknown to the other four proponents, Enrico (who had been given the task of
attending to the Articles of Incorporation of the proposed corporation, Auto Mo,
AyosKo,) misappropriated the filing fees and never filed the Articles of Incorporation
with the Securities and Exchange Commission (SEC). Instead, he prepared and
presented to the proposed incorporators a falsified SEC certificate approving the
Articles. Relying on the falsified SEC certificate, the latter begun assuming and
discharging corporate powers.
Auto Mo, AyosKo is a _____. (1%)
(a) De Jure Corporation
(b) De Facto Corporation
(c) Corporation by Estoppel
(d) General Partnership
(e) None of the above
SUGGESTED ANSWER:
Note: The last sentence of the given problem is unclear as to whether
the term latter refers to Enrico or to the incorporators. As such, it is
necessary to qualify the answer depending on the meaning given to the
term latter.
b) Corporation by estoppel
If the term latter refers to the incorporators, the correct answer is C.
(Section 20 and 21 of the Corporate Code)
e) None of the above
If the term latter refers to Enrico, the correct answer is E. (Section 20
and 21 of the Corporate Code)

XII
Preferred shares cannot vote on the proposal __________. (1%)
(a) to include other corporate officers in the corporations by-laws
(b) to issue corporate bonds
(c) to shorten the corporate term
(d) All of the above
(e) None of the above
SUGGESTED ANSWER:
(e) None of the above.
Under letter (a), to include other corporate officers in the corporations
by-laws - This will require an amendment of the by-laws, and as such,
preferred shares shall be allowed to vote.
Under letter (b), to issue corporate bonds Such corporate bonds are
construed as bonded indebtedness, then preferred shares shall be
allowed to vote.
Under letter (c), to shorten the corporate term Under Section 6 of the
Corporation Code, preferred shares shall be allowed to vote.
XIII
In 2010, the Philippine National Police declared Kaddafy Benjelani Public Enemy No.
1 because of his terrorist activities in the country that have resulted in the death of
thousands of Filipinos. A ransom of 15 million was placed on Kaddafy Benjelanis
head.
Worried about the future of their family, Kaddafy Benjelanis estranged wife, Aurelia,
secured in December 2010 a life insurance on his life and designate herself as the
beneficiary.
Is the policy valid and binding? (1%)
(a) Yes, the policy is valid and binding because Aurelia has an insurable interest
on the life of Kaddafy Benjelani
(b) No, the policy is not valid and binding because Kaddafy Benjelani has been
officially declared a public enemy.

(c) Yes, the policy is valid and binding because it has been in force for more than
two years.
(d) No, the policy is not valid and binding since the spouses estrangement
removed Aurelias insurable interest in Benjelanis life.
(e) None of the above.
SUGGESTED ANSWER:
(a) Yes the policy is valid and binding because Aurelia has an insurable
interest on the life of Kaddafy Benjelani.
The policy is valid. Aurelia had insurable interest in the life of Kaddafy
Benjelani, because he is her husband even if they are estranged
(Section 10 (a) of the Insurance Code).
Kaddafy Benjelani is not a public enemy because he is not a national of
an enemy country. (Filipinas Compaa de Sejunos v. Christen, Huefeld
& Company, Inc, 89 Phil. 54, 1951)
XIV
Muebles Classico, Inc. (MC), a Manila-based furniture shop, purchased hardwood
lumber from SUrigao Timber, Inc. (STI), a Mindanao-based logging company. MC was
to pay STI the amount of 5.0 million for 50 tons of lumber. To pay STI, MC opened a
letter of credit with Banco de Plata (BDP). BDP duly informed STI of the opening of a
letter of credit in its favour.
In the meantime, MC which has been undergoing financial reserves filed a petition
for corporate rehabilitation. The rehabilitation court issued a Stay Order to stay the
enforcement of all claims against MC.
After shipping the lumber, STI went to BDP, presented the shipping documents, and
demanded payment of the letter of credit opened its favour. MC, on the other hand,
informed the bank of the Stay Order and instruct it to deny payment to STI because of
the Stay Order.
BDP comes to you for advice. Your best advice is to ___________. (1%)
(a) grant STIs claim. Under the Independence Principle, the bank deals only
with the documents and not theunderlying circumstances; hence, the
presentation of the letter of credit is sufficient.

(b) Deny STIs claim. The Stay Order covers all claims against the debtor and
binds all its creditors. The letter of credit is a claim against the debtor that is
covered by the Stay Order,
(c) Grant STIs claim. The letter of credit is not a claim against the debtor under
rehabilitation, but against the bank which has assumed a solidary obligation.
(d) Deny STIs claim. If the bank disregards the Stay Order, it may be subject to
contempt by the rehabilitation court. STI should file its claim with the
rehabilitation court.
(e) File an action for interpleader to resolve the parties competing claims.
SUGGESTED ANSWER:
(c) grant STIs claim. . The letter of credit is not a claim against the debtor
under rehabilitation, but against the bank which has assumed a solidary
obligation.
(Metropolitan Waterworks and Sewerage System v. Daway, 432 SCRA
559, 2004)
XV
Akiro of Tokyo, Japan sent various goods to his friend Juan in Cebu City, Philippines,
through one of the vessels of Worthwell Shippers, Inc., an American corporation. En
route to Cebu City, the vessel had two stops, first in Hongkong, and second, in Manila.
XV. (1) While travelling from Tokyo to Hong Kong, the goods were damaged.
What law will govern? (1%)
(a) Japanese Law
(b) Hong Kong Law
(c) Chinese Law
(d) Philippine Law
(e) American Law
SUGGESTED ANSWER:
(a) Philippine Law (Article 1753, Civil Code)
(Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, G.R No. L69044, May 29, 1987)

XV. (2) Assuming Philippine law to be applicable and Juan fails to file a claim with
the carrier, may he still commence an action to recover damages with the court?
(a) No, the failure to file a claim with the carrier is a condition precedent for
recovery.
(b) Yes, provided he files the complaint within 10 years from delivery.
(c) Yes, provided he files the complaint within 10 years from discovery of the
damage.
(d) Yes, provided he files the complaint within 1 year from delivery.
(e) Yes, provided he files the complaint within 1 year from discovery of the
damage.

SUGGESTED ANSWER:
(d) Yes, provided he files the complaint within 1 year from delivery.
(Section 3 (6) of Carriage of Goods by Sea Act;
Belgian Overseas Chartering & Shipping N.V. v. Philippine First Insurance
Company, Inc., 383 SCRA 23, 2002)