SAMPLE MCQs IN MERCANTILE LAW

By
Jason R. Barlis
Head of the Department of Commercial Laws and Taxation,
Saint Louis University School of Law, Baguio City
Bar Reviewer in Commercial Law and Taxation, Albano Bar Review Center and ChanRobles Internet Bar Review
Former Bar Reviewer in Commercial Law and Taxation, Excellent Bar Review Center and Lex Reviews and Seminars


1. For an instrument to be negotiable, what is not a requirement?
a. The instrument should be in writing
b. The instrument should be signed by the maker or drawer
c. The instrument should contain words of negotiability
d. The instrument should be addressed to a drawee who must be named or
otherwise indicated with reasonable certainty
2. An instrument will be precluded from being negotiable if the instrument:
a. Fails to state the place of payment.
b. Is made subject to another agreement.
c. Fails to state the underlying consideration.
d. Is undated.
3. Which of the following designation of payee does not give rise to a bearer instrument?
a. When it is payable to the order of Batman or bearer
b. When it is payable to the order of Batman
c. When it is payable to Batman
d. All are payable to bearer
4. Which of the following is not an order instrument?
a. If it was drawn payable to the order of the drawer
b. If it was drawn payable to the order of the drawee
c. If it was drawn payable to the order of the drawer and/or the drawee
d. All the above are payable to order
5. In which situation is a negotiable instrument discharged?
a. By payment of the maker, whether or not the maker was merely for
accommodation
b. By payment in due course of the maker, whether or not the maker was merely for
accommodation
c. By payment in due course of the maker, if he was not merely accommodated
d. All of the above
6. The following are requirements for a payment to be a payment in due course, except?
a. It should not be made before maturity
b. It should be made in favor of the holder or bearer
c. It must be done in good faith
d. There should not be any notice that the holders title is defective
7. Presentment for acceptance is mandatory in the following situations
a. Where the bill is payable after sight, or in any other case, where presentment for
acceptance is necessary in order to fix the maturity of the instrument
b. Where the bill is drawn payable elsewhere than at the residence or place of
business of the drawee
c. Both A and B
d. All bills of exchange should be presented for acceptance
8. Presentment for payment is necessary
a. To charge the maker liable
b. To charge the acceptor liable
c. If it is payable at a special place
d. In cases of negotiable promissory notes
9. The following indorsements may be stricken out by the holder
a. Those which are not necessary to his title
b. All indorsements in a bearer instrument
c. In an order instrumentall indorsements subsequent to a blank indorsement
d. All of the above
10. The following are effect of crossing a check, except
a. It is issued for a specific purpose
b. The person receiving the same should inquire if the purpose has been achieved
c. It may never be negotiated
d. It is not intended to be encashed
11. Which of the following is a valid designation of a drawee?
a. To: X, Y and Z
b. To: X or Y and Z
c. To: X or Y or Z
d. To: X and/or Y and/or Z
12. Which of the following is correct with regard to a holder in due course?
a. A holder in due course is primarily liable on an instrument.
b. A holder in due course must notify subsequent transferees of his holder in due
course status.
c. A holder in due course can obtain greater rights to payment of an instrument than
his transferor had.
d. A holder in due course can give greater rights to a transferee than he has as a
holder in due course.
13. Which of the following parties are liable only after a negotiable instrument has been
presented and dishonored, and proper notice has been given?
a. Drawer, maker, acceptor, and qualified indorser.
b. Maker, acceptor, and unqualified indorser.
c. Drawer and unqualified indorser.
d. Maker and unqualified indorser.
14. Which of the following will not discharge a party from liability on a negotiable instrument?
a. Payment by the party who is primarily liable.
b. Cancellation of the instrument.
c. A subsequent holder releasing collateral securing the instrument
d. Failing to comply with a restrictive indorsement.
15. A issued a note to B. There was a total failure of consideration. B issued the note for
consideration to C who is a holder in due course. C, for valuable consideration, indorsed
the note to D who knew of the failure of consideration. Can D successfully collect from A?
a. No, because D knew the failure of consideration
b. Yes, because D acquired the rights of C, a holder in due course, and D was not a
party to any illegality
c. Yes, because D acquired the note for consideration
d. No, because D is not a holder in due course.
16. A holder in due course takes an instrument free of which of the following defenses?
a. A defense that making the note was an ultra vires act nullifying the obligation of
its corporate maker.
b. A defense that the maker was tricked into signing the note in the belief that the
note was merely a receipt and not a promissory obligation.
c. A defense that the obligation of the note was discharged by a bankruptcy court.
d. A defense that the note is voidable at the option of the maker because of a
misrepresentation employed
17. A draws a bill payable to B or order with X, as the drawee. The bill was successively
endorsed to C, D, E and F, holder. X does not pay and F has duly protested non-
payment. Y pays for the honor of C. Which of the following statement is wrong?
a. D is discharged.
b. E is discharged.
c. C is discharged.
d. Y can ask reimbursement from A.
18. T issued a note payable to the order of B in payment of contracted services that B was to
perform. B endorsed the note "pay to bearer" and delivered it to R in satisfaction of a debt
owed R. T refused to pay R on the note because B had not yet performed the services.
Must T pay R?
a. No, T does not have to pay R until the services are performed.
b. No, T does not have to pay R because the note was issued to B.
c. Yes, T has to pay R because the note was converted into bearer paper
d. Yes, T has to pay R because R was a holder in due course.
19. L purchases a home theater system from SM. L signs a Php100,000 negotiable
promissory note in connection with this purchase. This note requires monthly payments
for 5 years. After the system is installed, L begins to have trouble with it. It turns out that
there are defective components in both the video and audio aspects of the system.
Meanwhile, SM has sold Ls promissory note to M. L refuses to make any further
payments on the notes due to the breach of contract by SM. Which of the following is
true?
a. L has no further obligation to pay because the breach of contract is a real
defense.
b. L must pay the note to the extent of the fair market value of the home theater
system in its current condition.
c. L must not pay because M is not a holder in due course
d. L must pay because the obligation of a promissory note in this case is
unconditional
20. B borrowed Php1M from L. B, unable to repay the debt on its due date, fraudulently
induced P to purchase a piece of worthless costume jewelry for P1hpM. B had P write a
check for that amount naming L as the payee. B gave the check to L in satisfaction of the
debt B owed L. Unaware of B's fraud, L cashed the check. When P discovered B's fraud,
P demanded that L repay the Php1M. Under the Negotiable Instruments Law, will L be
required to repay P?
a. No, because L is a holder in due course of the check.
b. No, because L is the payee of the check and had no obligation on the check
once it is cashed.
c. Yes, because L is subject to P's defense of fraud in the inducement.
d. Yes, because L, as the payee of the check, takes it subject to all claims.
21. X issued a Php2M note to C in exchange for a painting that C claimed to have been
painted by a certain artist. The note provided that it was payable 10 days after X sold his
car. X sold his car on May 1, 2011. Meanwhile, C transferred the note to Z in payment of
work Z had performed for C. When Z presented the note to X for payment 10 days after X
sold his car, X refused to pay Z, claiming that the note was not negotiable and that C had
defrauded him because the painting was not by the painter specified and, instead, was
an almost valueless copy. Under the Negotiable Instruments Law, which of the following
statements is correct regarding the status of the note?
a. The note was not a negotiable instrument because it was not payable at a
definite time.
b. The note was not negotiable because it was subject to another writing.
c. The note was negotiable because it was for a fixed amount of money.
d. The note was negotiable because it was conditioned on an event that took place.
22. Which of the following situations will still make a holder in due course?
a. That the holder takes the instrument with blanks in its material particular
b. That the holder takes the instrument with notice of a previous dishonor
c. That the holder takes the instrument with knowledge that the maker is a mere
accommodation maker
d. That the holder takes the instrument without consideration therefor
23. Which of the following is not covered by the warranty of a qualified indorser?
a. That the instrument will be paid according to its tenor
b. That the instrument will not be dishonored on the ground of forgery
c. Those extending beyond his immediate transferee
d. That he acquired the instrument in good faith
24. Under the Negotiable Instruments Law, which of the following defenses generally may be
used against all holders of negotiable instruments?
a. Breach of warranty.
b. Fraud in the inducement.
c. Fraudulent impersonation
d. Lack of consideration.
25. S, the owner of P Business, endorses the checks he receives from his customers. His
indorsement reads: For deposit only to bank account number 01-02-345678." This is an
example of a payee doing what?
a. Placing a conditional endorsement on the check.
b. Ensuring that the drawer will not put a stop payment on the check.
c. Ensuring that the check will never be stolen.
d. Ensuring that the check cannot be negotiated if stolen.
26. In cases of maritime collision, may the doctrine of last clear chance be invoked?
a. Yes, it is available in order to exonerate the vessel from liability to the other
vessel involved in the collision, as well as to the owners of the cargoes carried by
both vessels
b. Yes, it is available in order to exonerate the vessel from liability to the other
vessel involved in the collision, but not as to the liability to the owners of the
cargoes carried by both vessels
c. Yes, it is available in order to exonerate the vessel from liability to the other
vessel involved in the collision and to the goods carried by the other vessel, but
not as to the liability to the owners of the cargoes carried by vessel claiming the
applicability of the doctrine of last clear chance
d. No, it is not available in cases of maritime collision
27. The following are available defenses of common carriers in cases of extra-contractual
suits, except:
a. Observance of due diligence in the rendition of the contract of carriage
b. The damage/loss/injury/death was caused by a fortuitous event
c. Due diligence in the selection and supervision of employees
d. The damage/loss/injury/death was caused solely by the shipper/passenger
28. When is the doctrine of inscrutable fault applicable?
a. When there is a maritime collision
b. When two or more vessels collide and it cannot be determined which vessel is at
fault
c. When two or more vessels collide and both were at fault
d. When two or more vessels collide and fault is present but it cannot be
determined which vessel is at fault
29. In a Kabit System, does the law punish the parties engaging in such kind of agreement?
a. Yes, because the contract is contrary to public policy
b. Yes, because the contract is deceptive to the public
c. No, because no penal sanctions are imposed on the parties
d. No, because the agreement is valid insofar as the parties are concerned
30. The following are requisites for a common carrier to be exonerated from liability by
reason of a natural disaster, except:
a. The natural disaster should be the proximate or only cause of the loss
b. The natural disaster should not have been foreseen
c. The common carrier exercised due diligence in preventing the loss before, during
and after the occurrence of the disaster
d. The common carrier is not guilty of delay
31. Is it valid to stipulate that the common carriers degree of diligence shall be less than that
of extraordinary?
a. Yes, it is valid as no prohibition is present under the law
b. Yes, it is valid, provided that it is in writing
c. Yes, it is valid, provided that the decree of care is not less than ordinary
d. No, it is not valid, as it is contrary to public policy
32. Is a common carrier liable for losses to goods brought about by acts of thieves or
robbers?
a. Yes, because common carriers act as insurers during the course of carriage
b. Yes, common carriers are liable even if the cause of the loss are acts of thieves
or robbers
c. No, common carriers are not liable for acts that are beyond their control
d. No, if the thieves or robbers acted with grave or irresistible force
33. Is a common carrier liable for losses to goods brought about by delays on the occasion of
strikes of employees?
a. Yes, strikes will not exonerate common carriers from liability
b. Yes, because common carriers act as insurers during the course of carriage
c. No, because common carriers should not be liable for acts beyond their control
d. No, because strikes are classified as fortuitous events
34. The following are examples of special maritime contracts, except:
a. Charter parties
b. Bottomry Loans
c. Averages
d. Respondentia Loans
35. For the prior operator rule to be invoked, the prior operator is not required to prove:
a. That the prior operator is capable of increasing its facilities
b. That the prior operator is operating an impeccable service to the public
c. That the increased service requirement may be filled in by the prior operator
d. That the present applicants service may not be needed
36. For the transportation of its cargo from the Port of Manila to the Port of Kobe, Japan,
Osawa & Co., chartered "bareboat" M/V Ilog of Karagatan Corporation. M/V Ilog met a
sea accident resulting in the loss of the cargo and in the death of some of the seamen
manning the vessel. Who should bear the loss of the cargo and the death of the seamen?
a. The vessel owner, Karagatan Corporation
b. The charterer, Osawa & Co.
c. The vessel owner, Karagatan Corporation, shall be liable for the loss of cargoes,
while the charterer, Osawa & Co. shall be liable for the death of the seamen
d. The vessel owner, Karagatan Corporation, shall be liable for the death of the
seamen, while the charterer, Osawa & Co. shall be liable for the loss of the
cargoes
37. What is the prescriptive period for actions involving damaged cargo under the Carriage of
Goods by Sea Act?
a. One year from the time of the delivery to the consignee
b. One year from the time of the delivery to the arrastre operator
c. Ten years from the time of delivery to the consignee
d. Ten years from the time of the delivery to the arrastre operator
38. Is a stipulation limiting the sum that may be recovered by the shipper or owner to 90% of
the value of the goods in case of loss due to theft valid?
a. Yes, as it is not contrary to public policy
b. Yes, because the amount of recovery is very reasonable
c. No, because it allows the carrier to escape from full liability; hence, contrary to
public policy
d. No, because the carrier is always liable to the extent of the full value of the loss
of the goods damaged or lost
39. Facts for this and the next two numbers: The goods of X were carried by the vessel of Y
from the port of Batangas to General Santos. Upon arrival, the goods of X were found to
have been contaminated. Immediately, a representative of X made a phone call to the
Vice President of Y informing the latter of the contamination of the goods. When Y failed
to pay the value of the goods, X sued Y. Y raised the defense that no proper notification
was made pursuant to Article 366 of the Code of Commerce. Question: Within what
period should the notice be made?
a. Within 24 hours from delivery
b. Within 3 days from delivery
c. Within 3 months from delivery
d. Within 1 year from delivery
40. Same facts above. The notification requirement has specific purposes. Which is not a
purpose thereof?
a. To give notice to the carrier that goods were damaged upon arrival, and to notify
the carrier of an impending liability
b. To give the carrier an opportunity to inspect the nature and extent of injury
c. To afford the carrier an opportunity to make an investigation of a claim while the
matter is still fresh and easily investigated so as to safeguard itself from false and
fraudulent claims
d. To relieve the carrier from liability in the event of failure to notify
41. Same facts above. Is the carrier liable?
a. Yes because there was breach of the contract of carriage
b. Yes because the notification issue does not affect the right of the shipper to sue
for damages
c. Yes because the notification was properly made by the shipper
d. No because there was failure to observe the notification requirement
42. Facts for this and the next number: WS imported medicines from Germany. Upon arrival
of the medicines at the airport, the same were turned over to SB Brokerage, a licensed
customs broker, which was contracted by WS to calculate the taxes that has to be paid
for the imported medicines, and to prepare the processing and claiming from the Bureau
of Customs until their final delivery to the warehouse of WS. In bringing the cargoes from
the airport to the jurisdiction of the Bureau of Customs, SB Brokerage hired motor
vehicles. After the release of the medicines from customs jurisdiction, SB Brokerage
delivered the medicines to WS. The latter, however, noted some damage to the
medicines and demanded from SB Brokerage the value of the damaged medicines. SB
Brokerage, however, denied liability on the ground that it is not the one negligent in the
handling of the medicines. WS countered that SB Brokerage is a common carrier. WS,
however, does not have any direct proof that SB was negligent. Question: Is SB
Brokerage a common carrier?
a. Yes because all the elements of being a common carrier are present
b. No because it was merely handling a definite scope of work which is the
settlement of duties, and all other activities were mere incidents of the main
function
c. No because there was not any contract of carriage between the parties
d. No because it was not rendering services in favor of the public
43. Same facts above. Is the SB Brokerage liable for the damaged medicines?
a. Yes because the negligence of SB is presumed
b. Yes because SB has the obligation to take care of the goods with the diligence of
a good father of a family; and the fact that the goods were damaged indicates
that it failed to observe the said diligence
c. No because WS cannot prove the negligence of SB
d. No because SB is a mere brokerage firm whose function is to settle customs
duties
44. PR purchased an Isuzu passenger jeepney from EG, a holder of a certificate of public
convenience for the operation of public utility vehicle plying the Baguio-San Fernando
route. While PR continued offering the jeepney for public transport services, he did not
have the registration of the vehicle transferred in his name. Neither did he secure for
himself a certificate of public convenience for its operation. Thus, per the records of the
Land Transportation Franchising and Regulatory Board, EG remained its registered
owner and operator. One day, while the jeepney was traveling along Naguillian Road, it
collided with a ten-wheeler truck owned by ML. The driver of the truck admitted
responsibility for the accident, explaining that the truck lost its brakes. PR sued ML for
damages, but the latter moved to dismiss the case on the ground that PR is not the
proper party to file the suit since he is not the registered owner of the jeepney. Resolve
the motion.
a. The motion must be granted. The registered owner, in this case, EG, should file
the suit. This is the purpose of registration, so that the sale will bind third
persons.
b. The motion must be granted. Because PR was not operating under a valid
license, he does not have any personality to sue ML.
c. The motion must be denied. PR is the party who was damaged, and it is but
proper that he was the one who filed the suit.
d. The motion must be denied. Registration of sale of motor vehicles is a mere
formality.
45. Q boarded a passenger bus. Q sat beside T. Subsequently, a fight ensued between Q
and T; thereafter, T stabbed to death Q. It turned out during the investigation that T is a
conductor of the passenger bus but was on leave that day and was on his way home.
Qs heirs sued the passenger bus, which denied liability for the act of T, alleging that it
was not liable for the acts of strangers or co-passengers. Decide.
a. The contention of the bus company is not tenable. Since T is a conductor of the
bus, the act of T is binding upon the common carrier even if T acted without
authority
b. The contention of the bus company is not tenable. Common carriers are liable
even for acts of co-passengers.
c. The bus company is correct. Since T is not on duty, he is considered as a co-
passenger; thus, it was incumbent upon the heirs of Q to prove that the carrier
could have prevented the death by the exercise of ordinary diligence
d. The bus company is correct. In fact, when the employees of common carriers
act beyond the scope of their authority, they are doing so not as employees but
as strangers, for which the carrier should not be liable.
46. While in the US, J, a Filipino businessman, bought a plane ticket from American Airways
for his flight from the US to the Philippines and with an open-schedule return flight to US.
American Airways is a resident airline carrier which has landing rights in the Philippines.
In the course of his flight from the US to the Philippines, J suffered damage. Upon
reaching the Philippines, J sued American Airways, which raised the defense that the
Philippine courts have no jurisdiction over the dispute. Decide.
a. Our courts have no jurisdiction by reason of the Warsaw convention
b. Our courts have jurisdiction because the Warsaw convention merely fixes the
rules regarding venue
c. Our courts have jurisdiction because both parties are residents of the Philippines
d. Our courts have jurisdiction even applying the Warsaw convention because
Philippines was the destination of the flight
47. X Shipping Company spent almost a fortune in refitting and repairing its luxury passenger
vessel, the MV Marina, which plied the inter-island routes of the company from La Union
in the north to Davao City in the south. The MV Marina met an untimely fate during its
post-repair voyage. It sank off the coast of Zambales while en route to La Union from
Manila. The investigation showed that the captain alone was negligent. There were no
casualties in that disaster. Faced with a claim for the payment of the refitting and repair,
X Shipping Company asserted exemption from liability on the basis of the hypothecary or
limited liability rule under Article 587 of the Code of Commerce. Is X Shipping Company's
assertion valid?
a. Yes, it is valid. The ship owner shall become liable only beyond the value of the
vessel if the ship owner has concurring negligence with the ship captain, which is
absent in this case
b. Yes, it is valid. Article 587 of the Code of Commerce expressly exempts from
liability the ship owner in the event of loss of the vessel
c. No, it is not valid. The ship captain is an agent of the ship owner, thus, the acts
of the ship captain is binding upon the owner
d. No, it is not valid. The limited liability rule is not applicable for repairs done on
the vessel and completed prior to its loss.
48. In the Insurance Code, the term "doing an insurance business" or "transacting an
insurance business" shall not include:
a. Making or proposing to make, as insurer, any insurance contract
b. Making or proposing to make, as surety, any contract of suretyship whether as a
vocation or merely incidental to any other legitimate business or activity of the
surety
c. Doing any kind of business, including a reinsurance business, specifically
recognized as constituting the doing of an insurance business within the meaning
of this Code
d. Doing or proposing to do any business in substance equivalent to any of the
foregoing in a manner designed to evade the provisions of this Code.
49. Which of the following is not a characteristic of an insurance contract:
a. It is commutative
b. It is consensual
c. It is aleatory
d. It is executed on the part of the insured but merely executory on the part of the
insurer
50. The following are consequences of a loss payable clause, except:
a. The insurance is deemed to be upon the interest of the mortgagor
b. The mortgagor does not cease to be a party to the original contract
c. Any act of the mortgagor, prior to the loss, which would otherwise avoid the
insurance, will have the same effect, provided that the property is not in the
hands of the mortgagee
d. Any act which, under the contract of insurance, is to be performed by the
mortgagor, may be performed by the mortgagee therein named, with the same
effect as if it had been performed by the mortgagor.
51. The following rules apply to subrogation, except:
a. After payment of loss by the insurer, it is subrogated to the rights of the insured
against third persons whose negligence or wrongful acts caused the loss
b. Although many policies provide for subrogation, the same actually takes effect by
operation of law
c. Subrogation is discretionary on the part of the insurer
d. Subrogation can be invoked in all types of insurances
52. Which of the following is not true about life insurances?
a. The insurable interest should exist only at the time the contract takes effect
b. The insurable interest need not be founded on strict legal basis
c. The insurable interest should exist both at the time the contract takes effect and
during the loss, if the same is founded on creditor-debtor relations
d. The beneficiary need not have insurable interest in the life insured, even if the
insurance is founded on creditor-debtor relations
53. Which of the following is not true about insurable interest in property?
a. If the insurance is taken by a person who does not have insurable interest, the
same is void
b. If the insurance is taken for the benefit of a person who does not have insurable
interest, the same is void
c. The insurable interest should be possessed both at the time the contract takes
effect and at the time of the loss
d. The existence of insurable interest does not presuppose ownership over the
property insured
54. The following persons may insure the life of the other, except:
a. The debtor, with respect to the life of the creditor
b. The child, with respect to the life of his parent
c. The creditor, with respect to the life of the debtor
d. The employer, with respect to the life of his employee
55. The following are requisites of concealment, except:
a. Knowledge by the insured of the facts concealed
b. The fact is material to the risk
c. Insured makes a warranty as to such facts
d. The insurer has no other means of ascertaining
56. Which of the following is not a material fact?
a. A fact that may have a bearing regarding the risk involved
b. A fact that does not affect the risk, but is warranted
c. A fact that affects the risk, but is not warranted
d. A fact that does not affect the risk and is not warranted
57. The following facts need to be revealed only when asked, except:
a. Those which, in the exercise of ordinary care, the other ought to know, and of
which the former has no reason to suppose him ignorant
b. Those of which the other waives communication, whether express or implied
c. Those which prove or tend to prove the existence of a risk excluded by a
warranty, whether the same be material or otherwise
d. Those which relate to a risk excepted from the policy and which are not
otherwise material.
58. Which of the following is not always true about a representation?
a. A representation is less onerous than a warranty
b. A representation may not qualify a warranty
c. A representation does not require literal compliance
d. A representation cannot modify an express provision in the contract
59. Which of the following is true in connection with incontestability of a policy of insurance?
a. To achieve incontestability, the policy must be a life or health insurance
b. The proceeds of the insurance must be payable at the moment or death or the
occurrence of a peril affecting the health of a person
c. The policy must be in force within a period of two years from effectivity, even if
the policy has lapsed
d. The principle of incontestability does not apply if the insurer would deny liability
on the ground of lack of insurable interest
60. Which of the following statements is not true about cover notes?
a. A cover note or a binder is merely a written memorandum of the most important
terms of a preliminary contract of insurance, intended to give temporary
protection pending the investigation of the risk by the insurer or until the issuance
of a formal policy.
b. It may be issued to bind insurance temporarily pending the issuance of the policy
c. Within thirty days after the issue of the cover note, a policy shall be issued in lieu
thereof
d. Cover notes may be extended or renewed beyond the original period with the
written approval of the Commissioner
61. No policy of insurance other than life shall be cancelled by the insurer except upon prior
notice thereof to the insured, and no notice of cancellation shall be effective unless it is
based on the occurrence, after the effective date of the policy, of one or more of the
following causes, except:
a. Non-payment of premium
b. Conviction of a crime whether or not it is arising out of acts increasing the hazard
insured against
c. Discovery of fraud or misrepresentation, provided that the said misrepresentation
is material
d. Discovery of willful or reckless acts or omissions increasing the hazard insured
against
62. Which of the following is not true about a warranty?
a. It must be strictly complied with
b. To avoid a contract, a mere falsity of a warranty is sufficient
c. Materiality is presumed
d. Good faith may excuse not compliance
63. When may premiums be paid on installment?
a. In case of life insurance, with or without an agreement to the payment of
premium on installment
b. In case of property insurance, with or without an agreement to the payment of
premium on installment
c. In case there is an agreement authorizing such payment of premium on
installment
d. In case of reinsurance
64. In the following situations, there could be a proportionate return of premium, except:
a. In case of surrender of policy
b. In case of over-insurance arising from double insurance
c. In case of over-insurance even if not arising from double insurance
d. In case of non-exposure of the thing insured to the peril
65. A, B and C are co-owners pro-indiviso of building. A insured the building for its full value.
The insurance policy provides that no transfer of interest in the thing insured shall be
allowed except if expressly allowed in writing by the insurer, and any transfer without the
consent of the insurer shall avoid the policy. Without securing the consent of the insurer,
A sold his interest to B. After the transfer, the building was completely destroyed by a
peril insured against. B and C were claiming for the proceeds of the insurance from the
insurer. Should the insurer pay?
a. Yes, the insurer should pay because the stipulation is void
b. Yes, because notwithstanding the stipulation, A has the right to transfer his
interest to B without resulting to the avoidance of the policy
c. No, because the act of A in selling his interest to B is against the policy
d. No, because the consent of the insurer was not obtained
66. KL insured his house against fire. In the policy, it was expressly provided that the insurer
shall not be liable if the fire was caused by explosion. Later, a misunderstanding
occurred between KL and his neighbor, JM, prompting the latter to maliciously cause the
explosion of a gas tank in KLs house. By reason of this, KLs house was totally
destroyed. Despite this factual backdrop, the insurer still paid KL the proceeds of the
insurance, and thereafter filed a suit against JM to recover the amount that had been paid
to KL. JM argued that the insurer has no right of recourse against him because the
insurer should not have paid KL in the first place. The insurer, on the other hand,
asserted that since it had already paid KL, it must be reimbursed for the said payment, by
reason of subrogation. Rule on the contentions of the parties.
a. JM is liable to the insurer, because once the insurer pays the insured,
subrogation can be availed of by operation of law
b. JM is liable to the insurer, because the fire which was resulting from the acts of
JM, and which is the immediate cause of the loss, is a peril covered by the policy
c. JM is not liable to the insurer because the right of subrogation cannot be invoked
in the present case as the insurer made a voluntary payment
d. JM is not liable to the insurer because the fire is not the proximate cause of the
loss
67. An insurance company issued a marine insurance policy covering shipment of 1,000
pieces of logs by sea from Manila to Davao. The insurance was against total loss only.
The logs were loaded in two lighters, the first with 600 pieces and the second with 400
pieces. Because of rough seas, damage was caused to the second lighter resulting in
the loss of 325 out of the 400 pieces. The owner of the shipment filed claims against the
insurer on the ground of constructive total loss inasmuch as more than three-fourths ()
of the value of the logs had been lost in one of the lighters. If you were the insurer, what
would you do?
a. I will pay the total loss to insofar as the second lighter is concerned; after which, I
will assert my right of ownership over what is remaining of the value of the goods
b. I will pay the value of the 325 pieces lost only, because that is the only extent of
the loss
c. I will not pay any amount because there was no total loss
d. I will not pay any amount because the coverage of the policy is actual total loss
only
68. Marine insurance was taken upon goods on board a ship which departed from
Madagascar to Manila, without any disclosure to the insurer of the fact that the ship had
been reported at Lloyds of London as seen at sea, deep in water and leaking. This
report, however, turned out to be wrong because the ship was at no time of the voyage
leaky or in trouble, but was later lost due to another insured risk. The insurer refused to
pay the insured, claiming concealment. The insured countered that the fact not disclosed
was erroneous and did not increase the risk. Decide.
a. The insurer is liable because there was no concealment as the information
allegedly concealed was erroneous
b. The insurer is liable because there could be no concealment on matters of
opinion or judgment
c. The insurer is not liable because in marine insurance, mere information or belief,
even by third persons, if material to the risk, should be communicated
d. The insurer is not liable because the fact that was not disclosed increased the
risk involved
69. X named Y as his beneficiary in a life insurance policy. Y died. A day later, upon
knowledge of Ys death, X died also. The heirs of X are claiming for the proceeds of the
life insurance policy. On the other hand, the heirs of Y are also claiming for the proceeds
of the said policy. To whom should the insurer give the proceeds?
a. The insurer should give to the heirs of X. Because Y predeceased X, Y did not
have the right to claim the proceeds. Thus, his (Ys) heirs also do not have the
right to the proceeds.
b. The insurer should give to the heirs of X since there is no showing that Y has
insurable interest over the life of X
c. The insurer should give to the heirs of X because the heirs of Y are not the
named beneficiaries in the policy; hence, they have no personality to claim the
proceeds
d. The insurer should give to the heirs of Y because the beneficiary, even if he
predeceases the insured, would have the right to the proceeds, and such right is
transmissible to his (Ys heirs)
70. Insular Life issued a policy to X with a face value of P1M. A provision in the policy states
that the company shall not be liable in respect of bodily injury consequent upon the
insured person attempting to commit suicide or willfully exposing himself to needless peril
except in an attempt to save human life. Three years later, X died of a bullet wound in
his head. Investigation showed that one evening, X, then heavily drunk, played with his
revolver from which he had previously removed the bullets except one. Wanting to show
off his courage to his friends, he rotated the ball of the revolver and pointed the gun at
his temple and pulled the trigger. Unfortunately, the gun fired and X slumped dead on
the floor. Can the beneficiary of X recover from the insurer?
a. Yes, because the cause of death was an accident
b. Yes, because the person can be considered as insane during the time
c. Yes, because the policy was effective already for more than two years
d. No, because the insured willfully exposed himself to needless peril, which is in
violation of the policy
71. JG obtained from Warranty Insurance Corporation a comprehensive motor vehicle
insurance to cover her brand-new automobile. She paid, and the insurer accepted
payment, in check, dated at the time she issued the same. She was issued a policy
where the insurer acknowledged receipt of premium. Immediately after going out of the
insurers office, JG was involved in a motor vehicle accident where her car became a
total wreck. She sought payment from the insurer. Could the insurer be made liable under
the insurance coverage?
a. No, because the check was not yet encashed; thus, at that time, there was no
valid contract of insurance yet
b. Yes, because she was already issued a policy
c. Yes, because the check could be immediately encashed; thus, the effect of
payment is immediately felt
d. Yes, because there was a written acknowledgment of receipt of premium; thus,
the policy is already subsisting at the time of loss
72. A owns a house valued at P5M. He sold under pacto de retro his house to B for P4M,
with A retaining the right to repurchase the house within a period of two (2) years.
Pursuant to the terms of the sale, B took possession of the property pending repurchase
by A. A maintained his insurance over the said property for its full value, while B also
took an insurance covering the same property also for its full value. While the property
was in the possession of B, and while both insurances are subsisting, the property was
destroyed by fire. Both A and B were claiming the proceeds from their respective
insurers. Should the insurers grant the claims?
a. The insurers should pay A and B the amount of P5M each
b. The insurers should pay A in the amount of P1M and B in the amount of P4M
c. The insurers should pay A in the amount of P1M and B in the amount of P5M
d. The insurers should not pay A, but should pay B in the amount of P5M
73. Rs bus bumped the car owned by V. The car was insured by Capital Insurance. For the
damage caused, Capital paid V P50,000 in amicable settlement. V executed a release of
claim against Capital. There was no stipulation in the policy regarding Capitals right of
subrogation but despite this, Capital demanded reimbursement from R. R refused
payment saying that he had already earlier paid V P45,000 for the damage to the car as
evidenced by a release of claim executed by V in favor of R. After this, Capital
demanded reimbursement from V who likewise refused to pay, saying that the total
damage to the car was P95,000. Since Capital paid V P50,000 only, V contends that she
was entitled to go after R to claim the additional P45,000. Assuming that the actual
amount of damage by V is Php95,000.00Is Capital entitled to reimbursement from R?
a. Yes, because the tortfeasor is liable for the loss which was paid by the insurer
b. Yes, because the amount of damage is Php95,000, and since R paid only
Php45,000, R should pay the remaining value of the loss
c. No, because the insured already released R from liability
d. No, because there was no stipulation as to subrogation
74. Same facts above. May Capital recover from V?
a. Yes, in the amount of Php45,000
b. Yes, in the amount of Php50,000
c. Yes, in the amount of Php5,000
d. No, there could be no recovery
75. SarapKaffe, Inc. is a corporation duly registered with the Securities and Exchange
Commission. It established its coffee outlets in various parts of Baguio City, using the
same trade name Sarap Kaffe. The name, however, was never registered with the
Intellectual Property Office. Subsequently, it learned that P established a coffee shop
with the name Sarap Kafe. SarapKaffe, Inc. sued P to prohibit him from using the said
name, and for damages. Decide
a. The suit will prosper, as prior registration with the IPO is not required to afford
protection to SarapKaffe, Inc.
b. The suit will not prosper due to non-registration of the name
c. The suit will prosper only insofar as the damages aspect, but not as to the
prohibition
d. The suit will not prosper as the name is generic; hence, not protected
76. Which of the following is a requirement to secure a Philippine patent?
a. The invention must not be available to the public anywhere in the Philippines or
in the world
b. The invention must not be obvious to a person who is an expert in the field of the
invention
c. The invention should be capable of being used in any field of human endeavor
d. The invention must have been created in the Philippines
77. To protect his newly-bought Criminal Law book written by Luis B. Reyes, Ray
photocopied the entire book. He then kept the original copy of the book in his bookshelf,
and made use of the copy for his own personal use. Did he commit any violation of law?
a. No because it was done by reason of scholastic or academic undertaking
b. No because it was just for the personal use of Ray which was copied from an
original copy of the book that he purchased
c. Yes because the act does not qualify as fair use
d. Yes because photocopying of protected works are not allowed by the Intellectual
Property Code
78. Supposing Albert Einstein were alive today and he filed with the Intellectual Property
Office (IPO) an application for patent for his theory of relativity expressed in the formula
E=mc2. Should the IPO grant the application?
a. Yes, because it can be used for various industries
b. Yes, because it is the first time that the said formula was discovered
c. Yes, because it is a new process
d. No, because it is a mere concept or formula which is not protected
79. While walking along a mall, you saw rows of perfume bottles and boxes that look exactly
like Tommy Hilfiger products. When you looked closer, the bottles and the boxes read
Our version of TOMMY HILFIGER. Is there any violation?
a. Yes, there was trademark infringement
b. Yes, there was unfair competition
c. Yes, there was trademark infringement and unfair competition
d. No, because there was an express statement that it was merely inspired by
another product
80. Judge Dexter is commissioned by the Philippine Judicial Academy to write a manual for
mediators. He is paid the amount of Php200,000.00 for writing the manual. The Academy
publishes the manual but does not acknowledge Judge Dexter as author. Who owns
copyright?
a. Judge Dexter owns the copyright
b. The Philippine Judicial Academy owns the copyright
c. Judge Dexter and the Philippine Judicial Academy jointly owns the copyright
d. No one owns the copyright
81. Same facts above, can Judge Dexter compel that he be recognized as the author?
a. Yes, because that is within his moral right
b. Yes, because that is within his economic right
c. No, because the copyright belong to the Philippine Judicial Academy
d. No, because no one owns the copyright
82. What is the concept of Droit de Suite?
a. A right granted to artists or their heirs to receive a fee on the resale of their works
of art
b. A right granted to patent holders to sue those guilty of infringement
c. A right granted to trademark holders to prevent the use of their marks in products
not created by them
d. A right to sue for infringement even those who are guilty of mere colorable
imitations of protected products/marks
83. G, a science teacher in T school, in the course of performing a research for the school,
accidently discovered a new drug. The drug was not the intention of G to discover, but
due to some freak accident, the drug was discovered. Who is entitled to the patent over
the drug?
a. G, because he was the inventor
b. T school, because it is the employer
c. G and T, jointly
d. T school, because it was not Gs intention to discover the drug and it was Ts
resources which were used
84. Non-voting shares are generally not allowed to vote. In which of the following situations
is a non-voting share allowed to vote?
a. In case of sale of corporate properties
b. Extension of corporate term
c. In case of purchase of purchase of marketable securities
d. In case of requests for rehabilitation
85. When is an appraisal right not available?
a. When preferred shares are created
b. In case of consolidations
c. When corporate properties are mortgaged
d. When certain shares are deprived the right to vote
86. What is the voting requirement to approve the declaration of a cash dividend?
a. Majority of the board of directors
b. Majority of the board of directors and majority of the outstanding capital stock
c. Majority of the board of directors and 2/3 of the outstanding capital stock
d. Majority vote of the corporate officers
87. Which is not a consequence of a merger?
a. The constituent corporations shall become a single corporation which shall be
the surviving corporation
b. The surviving corporation shall possess all the rights, privileges, immunities and
powers and shall be subject to all the duties and liabilities of a corporation
c. The surviving corporation shall possess all the rights, privileges, immunities and
franchises of each of the constituent corporations
d. All property, real or personal, and all receivables due on whatever account,
including subscriptions to shares and other choses in action, and all and every
other interest of, or belonging to, or due to each constituent corporation, shall be
deemed transferred to and vested in such surviving or consolidated corporation
provided that necessary documents to effect such transfer are complied with
88. Which of the following is not a valid by-laws provision?
a. In case of vacancy in the board, the President may choose the replacement
director
b. In case of intra-corporate conflict, a stockholder must first resort to arbitration
c. That inspection of corporate records by stockholders should be done only for a
legitimate purpose
d. Meetings of directors should be done only in the principal office of the corporation
89. Which of the following is not a valid provision in the articles of incorporation?
a. The votes needed to amend the Articles of Incorporation shall be 2/3 of the board
of directors and 2/3 of the outstanding capital stock
b. The votes needed to amend the By-Laws shall be 2/3 of the board of directors
and 2/3 of the outstanding capital stock
c. Subscribed shares, even if not fully paid, shall have the right to vote
d. Treasury shares have the right to vote
90. A non-stock corporations articles of incorporation was amended to convert it to a stock
corporation. Describe the action taken:
a. The amendment is invalid because the corporation should first dissolve
b. The amendment is valid for as long as the majority of the board assented
c. The amendment is valid for as long as the majority of the board and 2/3 of the
outstanding capital stock assented
d. The amendment is not necessary to effect the conversion
91. Which of the following is not essential during the submission of the articles of
incorporation?
a. Information (names, citizenship, residences) relating to the subscribers
b. The By-Laws of the corporation
c. The names of the interim officers of the corporation
d. The principal office of the corporation
92. Which of the following is entitled to the issuance of a stock certificate
a. Subscribed shares even if not fully paid for as long as not delinquent
b. Subscribed shares even if not fully paid, only insofar as the proportionate shares
correspond to the amount paid
c. Subscribed shares, whether delinquent or not
d. Only the fully paid shares
93. In the voting by directors, the use of proxies is
a. Never allowed
b. Always allowed
c. Not allowed, except when the By-Laws provide otherwise
d. Allowed, except when the By-Laws provide otherwise
94. Which of the following is not a valid corporate name?
a. JRB Realty and Development Incorporated
b. JRB Realty and Development Company
c. JRB Realty and Development Corporation
d. JRB Realty and Development, Inc.
95. Which of the following is not a valid corporate purpose?
a. To engage in mining and other related endeavors
b. To engage in the practice of profession
c. To engage in importing and exporting of goods
d. To engage in banking and allied services
96. Which of the following is a valid provision in the articles of incorporation of an educational
institution?
a. The trustees shall be numbering from 5 to 15
b. The trustees shall have a tenure of 5 years
c. The trustees shall be 20, in multiples of 5
d. The trustees shall be appointed by the incorporators of the school
97. A and B, directors and stockholders of J Corporation whose combined shareholdings are
amounting to 75% of the outstanding capital stock of the corporation, served upon C, a
director who is always opposed to the proposals of A and B, a notice that C is removed
as a director of J Corporation. How do you characterize the action taken by A and B?
a. The action is valid because stockholders representing 2/3 of the outstanding
capital stock have the power to remove directors
b. The action is invalid because the removal of directors can only be for cause
c. The action is valid because the removal may be with or without cause
d. The action is invalid because the proper procedure in removing directors was not
observed
98. Corporate officers should not be liable for actions taken in good faith, even if they will
cause the downfall of the corporation. This is known as the
a. Doctrine of Corporate Fiction
b. Business Judgment Rule
c. Doctrine of Corporate Opportunity
d. Theory of Concession
99. Which of the following is not a consequence of the theory of concession?
a. A corporation, whether big or small, should comply with requirements of the
Corporation Code for the validity of its actions
b. The State may inquire into the compliance with the requirements of law for its
corporate existence
c. The corporate powers are limited only to those expressly authorized by law or
incident to its existence
d. Corporate officers are liable for acts that are done in bad faith or with gross
negligence
100. P sold his shares of stocks of T Corporation to K. In order for K to be able to
vote, which of the following should be complied with?
a. The transfer should be recorded in the books of the corporation prior to the
meeting
b. The transfer should be recorded in the books of the corporation during the
meeting
c. The transfer need not be recorded in the books of the corporation
d. K should have a stock certificate issued in his name prior to the meeting
101. Which of the following is the best description of a stock and transfer book?
a. It is the best evidence of the ownership of shares
b. It is the only evidence of the ownership of shares
c. It is not an evidence of the ownership of shares
d. It is just a memorandum of who are the owners of shares in the corporation
102. Absent any provision in the By-Laws/Articles, which of the following shares may
not be able to vote?
a. Treasury shares
b. Preferred shares
c. Subscribed but unpaid shares
d. Founders shares
103. A Filipino stockholder of a corporation engaged in a business required by law to
be wholly owned by Filipino citizens became a naturalized American citizen. What is the
consequence of such event?
a. The stockholder retains his rights as such
b. The stockholder loses his rights
c. The stockholder retains his right of ownership without right to vote
d. The stockholder retains his right of ownership without right to be elected as
director
104. W Corporation reacquires its own shares of stocks. Which of the following is
correct?
a. The reacquired shares will be entitled to vote
b. The reacquired shares will be entitled to dividends
c. The reacquired shares will not be entitled to vote, neither will it be entitled to
dividends
d. The reacquired shares will not be entitled to vote, but will be entitled to dividends
105. Which of the following is not a remedy for the unjustified refusal of a corporation
to issue certificates of stocks upon fully paid subscription?
a. File a suit for mandamus to compel the corporation to issue the shares
b. File a suit for the exercise of appraisal right
c. File a suit for damages against the corporation
d. File a suit for rescission of purchase/subscription of shares
106. Q is a transferee of a share of stock in a corporation. The document evidencing
the transfer indicates that the transfer to him of the share is for the purpose of qualifying
him as a nominee director. Which of the following statements is correct?
a. Q may be elected as a director
b. Q is not eligible to be a director
c. The transfer is contrary to public policy
d. The transfer is contrary to the provisions of the Corporation Code
107. A proxy is not valid
a. If it is not notarized
b. If it is not in writing
c. If it is made in a place outside the territorial jurisdiction of the Philippines
d. In case of meetings by members of non-stock corporations
108. The number of directors/trustees
a. Should not be less than 5 but not more than 15, always in multiples of 5
b. Should not be less than 5 but not more than 15, not necessarily in multiples of 5
c. May be less than 5 or more than 15 if the By-Laws/Articles provide the same
d. Is fixed by the Corporation Code
109. The by-laws of M Corporation provides that the immediate past president is
automatically an ex-officio director of the corporation. From this fact, which of the
following statements is valid?
a. The provision is valid because directors may be appointed by the By-Laws
b. The provision is valid as it is not contrary to law
c. The provision is valid, if the ex-officio director would not have the right to vote
and will serve merely as advisor
d. The provision is valid if approved by a majority of the directors and stockholders
representing 2/3 of the outstanding capital stock
110. Neither the Articles of Incorporation nor the By-Laws of the corporation provides
entitlement to compensation by directors and officers. Which of the following is correct?
a. The directors are not entitled to compensation
b. The directors are entitled to compensation on a quantum meruit basis
c. The directors may approve their compensation scheme
d. The directors are entitled to 10% of the net income as their compensation
111. During a directors meeting, all directors present, except the presiding officer,
approved a resolution that the presiding officer shall be allowed to vote only in case of a
tie. How do you describe such resolution?
a. The resolution is valid as it is not contrary to law
b. The resolution is valid as it is approved by the directors
c. The resolution is invalid as it deprives the director of his right to vote
d. The resolution is invalid as the consent of the stockholders was not obtained
112. G owned 1,000 shares of H Corporation. He was elected to the board and was
likewise elected as corporate secretary. Subsequently, he sold his 1,000 shares to I.
What is the consequence of the event?
a. G loses all rights as director, officer and stockholder
b. G loses all rights as director and stockholder
c. G loses all rights are stockholder
d. G loses all rights are director
113. In a non-stock corporation, the officers may be
a. Appointed directly by the members
b. Elected only from the trustees
c. Elected only from the trustees and the members
d. All non-residents
114. As to residency, a corporate president
a. Should be a resident of the Philippines during his term
b. May not be a resident of the Philippines
c. Should be a resident at the time of the election but not necessarily thereafter
d. Should be a resident of the Philippines within one year prior to election
115. The directors, in a meeting, unanimously approved that the corporate president
have a fixed term of five (5) years. How do you describe the legality of the action?
a. The action is legal as it is within the power of the board to approve
b. The action is legal if the consent of the stockholders representing majority of the
corporation was secured
c. The action is illegal as it is contrary to law
d. The action is illegal since the maximum duration should be not exceeding three
years
116. A board resolution authorized the corporate officer to obtain a loan and to agree
on terms and conditions of the loan and sign the implementing documents. Based on the
foregoing, which of the following is correct?
a. The corporate officer is not authorized to assign receivables to secure the loan
as demanded by the creditor, and a new resolution is needed to effect the same
b. The corporate officer may assign receivables to secure the loan without need of
a new resolution
c. If the corporate officer signed deeds of assignment to secure the loan without a
new board resolution, he is personally liable to the corporation even if he
indicated that he is signing for the corporation
d. The corporate officer may not act for the corporation because only directors may
be empowered to act for the corporation, and not corporate officers
117. A hospital owned by a corporation failed to supervise its resident physicians and
nurses, thereby causing injuries to its patients. The corporation is
a. Directly liable due to the doctrine of corporate negligence
b. Directly liable due to the doctrine of corporate responsibility
c. Not directly liable for acts of its physicians and nurses due to the doctrine of
separate personality
d. Not directly liable due to the doctrine of independence
118. A close corporation may provide the following in its Articles, except
a. The business shall be managed by the stockholders rather than the board of
directors
b. The business shall be managed by a managing director
c. A high quorum requirement
d. No transfer in favor of third persons shall be recognized unless with prior consent
of the corporation
119. Which is a recognized mode of dissolution of a corporation?
a. Voluntary dissolution upon petition by majority vote of stockholders
b. Involuntary dissolution upon petition by creditors
c. Involuntary dissolution by the Securities and Exchange Commission, upon filing
of a verified complaint, stating the grounds therefor
d. Dissolution by shortening of corporate term, upon amendment of the articles of
incorporation, as approved by majority of the directory and the assent of the
majority of stockholders
120. MN and OP rented a safety deposit box at SIBANK. The parties signed a
contract of lease with the conditions that: the bank is not a depository of the contents of
the safe and has neither the possession nor control of the same; the bank assumed no
interest in said contents and assumes no liability in connection therewith. The safety
deposit box had two keyholes: one for the guard key which remained with the bank; and
the other for the renters' key. The box can be opened only with the use of both keys. The
renters deposited certificates of title in the box. But later, they discovered that the
certificates were gone. MN and OP now claim for damages from SIBANK. Is the bank
liable?
a. The bank is liable because the bank, as depositary, acts as insurer of the goods
placed in the safety deposit box
b. The bank is liable because the stipulation stating that the bank has no liability is
void
c. The bank is not liable because there is a stipulation exempting it from liability
d. The bank is liable as it is required to observe extraordinary diligence in the
handling of safety deposit boxes
121. What degree of care should the bank exercise in cases of safety deposit boxes?
a. Extraordinary diligence
b. Ordinary diligence
c. Utmost diligence
d. No diligence
122. The Law on Secrecy of Bank Deposits, otherwise known as RA 1405, is intended
to encourage people to deposit their money in banking institutions and also to discourage
private hoarding so that the same may be properly utilized by banks to assist in the
economic development of the country. Is a notice of garnishment served on a bank at the
instance of a creditor of a depositor covered by the said law?
a. No, because in such event, the amount of the deposit becomes, in effect, a
subject of the litigation
b. No, because the sheriff has the power to inquire into bank deposits if necessary
for purposes of execution
c. Yes, because the bank is duty bound to maintain the privacy of bank deposits in
all instances
d. No, because an exception to the bank secrecy law is when a judgment debtors
assets are subject of investigation and examination
123. An insurance company is deluded into releasing a check to A for P35M to pay for
Treasury Bills (T-bills) which A claims to be en route on board an armored truck from a
government bank. The check is delivered to A who deposits it to his account with XYZ
Bank before the insurance company realizes it is a scam. Upon such realization, the
insurance company files an action against A for recovery of the amount defrauded and
obtains a writ of preliminary attachment. In addition to the writ, the Bank is also served a
subpoena to examine the account records of A. The Bank declines to provide any
information in response to the writ and moves to quash the subpoena invoking secrecy of
bank deposits under RA 1405, as amended. Can the Bank invoke the Bank Secrecy Law
and not respond to the writ and move to quash the subpoena for examination?
a. The bank may not respond to the writ and may move to quash the subpoena
b. The bank may not respond to the writ, but may move to quash the subpoena
c. The bank should respond to the writ, but cannot move to quash the subpoena
d. The bank should respond to the writ and cannot move to quash the subpoena
124. Which is not required as an essential character of a bank
a. A listed stock corporation
b. With funds obtained from 20 or more persons
c. With capitalization as prescribed by the Monetary Board
d. Approval of the Bangko Sentral ng Pilipinas obtained immediately after
incorporation
125. Directors of newly incorporated banks may be
a. Anywhere from 5 to 15, in multiples of 5, with at least 2 independent directors
b. Anywhere from 5 to 15, with at least 2 independent directors
c. More than 15
d. Non-owners of shares of the bank
126. A bank plays a vital role in the national economy. The following, except one, is a
consequence of this principle
a. It is subject to heavy supervision by the BSP
b. It is required to exercise utmost diligence in the handling of deposits
c. It is subject to special rules concerning strikes and lockouts
d. It is required to submit reportorial requirements to the SEC
127. Y has a savings deposit with Z Bank in the amount of Php1M. Y also has a joint
current account together with X with Z Bank for Php2M. From the foregoing, which is
correct?
a. Y is insured up to Php500K for his entire deposit with Z Bank
b. Y is insured up to Php500K each for his savings deposit and current account
c. Y is insured up to Php500K for his savings deposit; while the entire current
account shall be subject to insurance for Y and X in the amount of Php500K
d. Y is insured up to Php500K for his savings deposit; while the current account
shall be subject to insurance for Y and X, each in the amount of Php500K
128. Which of the following is not designed to protect the publics interest in a bank?
a. The Prim and Proper Rule (PPR)
b. The DOSRI Rules
c. The Single Borrowers Limit (SBL) Rule
d. The Risk-Based Capital
129. Which of the following may be validly done by a bank?
a. To act directly as an insurer
b. To outsource tellers
c. To hire casual filing clerks
d. To allow its bank manager to guarantee a loan obtained from the bank
130. An investment company is engaged in the investing and reinvesting of its
customers money and/or uses them in trading in securities. The investment company
is
a. Engaged in banking activities
b. Not engaged in banking activities
c. Engaged in quasi-banking activities
d. Engaged in pseudo-banking activities
131. X placed Php3M in his time deposit. The agreement is that the time deposit is for
a period of 1 year. After 4 months, X needed money badly. Which is correct?
a. X can withdraw the entire Php3M immediately
b. X cannot withdraw the Php3M. He must have to wait for the lapse of the 1 year
period
c. X can demand for the withdrawal of only of the Php3M
d. It is valid for the bank to impose a requirement regarding time deposits that only
of the amount deposited may be the subject of pre-termination
132. A numbered account, which is one without indication of who is the account
holder
a. Is prohibited in all forms of bank accounts
b. May be allowed in peso deposits, subject to restrictions/qualification
c. May be allowed in foreign currency deposits, subject to restrictions/qualification
d. Is allowable in all forms of bank accounts, if the true identity of the client is
ascertained by the bank
133. P wants to borrow money from J Bank. P is offering his house and lot with the
following appraised values as collateral: housePhp10M; lotPhp10M. How much can
J Bank allow P to borrow?
a. Up to Php7.5M
b. Up to Php13.5M
c. Up to Php15M
d. Up to Php16M
134. W Bank extrajducically foreclosed the real estate mortgage of Q, an individual.
What is the period of redemption of Q?
a. One year from the moment of sale
b. One year from the registration of the Certificate of Sale
c. One year from the approval of the Certificate of Sale
d. No right of redemption
135. Suppose that Q in the above item is a juridical person, what is the period of
redemption of Q?
a. One year from the moment of sale
b. One year from the registration of the Certificate of Sale
c. One year from the approval of the Certificate of Sale
d. No right of redemption but a mere equity of redemption
136. Suppose that the mode of foreclosure in the above item is judicial foreclosure,
what is the period of redemption of Q?
a. One year from the moment of sale
b. One year from the registration of the Certificate of Sale
c. One year from the approval of the Certificate of Sale
d. No right of redemption
137. The proposed number of directors of a bank is 21. Comment on the legality
a. This is legally permissible for universal banks
b. This is legally permissible for commercial banks and universal banks
c. This is legally permissible for merged banks
d. This is not legally permissible
138. After an audit conducted by the BSP, it decided to immediately close a bank
without affording upon it a chance to explain its side. The bank complained on the
ground of violation of due process. BSP argued that it takes the close now, hear later
scheme to protect the public. Comment on the legality of the foregoing.
a. The close now, hear later scheme is violative of due process
b. The close now, hear later scheme is a valid measure to protect the public,
provided that subsequent judicial review is afforded
c. The closure is invalid as only courts may order the closure of banks, upon proper
petition therefor
d. The closure is valid, provided that depositors will be given a chance to withdraw
their deposits within reasonable time
139. Which of the following is not a security for purposes of the Securities Regulation
Code?
a. Bonds
b. Promissory Notes
c. Investment contracts
d. Certificates of bank deposit
140. Which is not within the powers of the SEC?
a. To decide who, between two sets of directors, are the legitimate members of the
board
b. To call for elections
c. To revoke the corporate existence of a corporation
d. To monitor the activities of the Philippine Stock Exchange
141. Which of the following is not an exempt security?
a. Debt instruments issued by the City of Baguio
b. Treasury Bills issued by the government of Hong Kong, on the assumption that
Hong Kong laws allow the Philippines to issue securities therein;
c. Shares of stocks issued by a bank;
d. Investment management policies issued by insurance companies
142. Which of the following is not an exempt transaction?
a. Assignment of shares of stocks for purposes of payment of an indebtedness
b. An isolated sale of marketable securities
c. The issuance of bonds secured by mortgage upon real estate, where the entire
mortgage together with all the bonds secured thereby are sold to a single
purchaser at a single sale
d. The sale of capital stock of a corporation to its own stockholders exclusively,
where commissions are paid or given directly or indirectly in connection with the
sale of such capital stock.
143. Which of the following are not always considered as forms of market price
manipulation?
a. Wash Sale
b. Short Sale
c. Matched Order
d. Market Rigging
144. The rule on mandatory tender offer is applicable only if the corporation is a public
company. Public company means
a. A corporation with a class of equity shares listed on the stock exchange
b. A corporation with assets of at least Fifty Million Pesos (P50,000,000.00) and
having two hundred (200) or more stockholders with at least one hundred (100)
shares each
c. A corporation with either of the first two abovementioned
d. A corporation with a combination of the first two abovementioned
145. The tender offer rule is primarily intended for the benefit of
a. The majority stockholders
b. The minority stockholders
c. The public in general
d. The stock exchange
146. Margin Trading is
a. One where the customer is required to pay in full the purchases of stocks
b. One where the customer purchases stocks by paying only a portion of the
purchase price with the stock exchange extending credit for the balance due
c. One where the customer purchases stocks by paying only a portion of the
purchase price with the broker extending credit for the balance due
d. A purchase by stock brokers of newly issued shares
147. Under the mandatory close-out rule, the following must be done in case of
insufficiency of margin
a. A call for additional margin shall be issued promptly by the broker to the
customer
b. A call for initial margin should be satisfied within five (5) business days from the
date the insufficiency is created
c. A call for maintenance margin should be satisfied within twenty four (24) hours
after the call is issued
d. All of the above must be complied with
148. Ricardo mortgaged his fishpond to AC Bank to secure a P1 Million loan. In a
separate transaction, he opened a letter of credit with the same bank for $500,000.00 in
favor of HS Bank, a foreign bank, to purchase outboard motors. Likewise, Ricardo
executed a Surety Agreement in favor of AC Bank. The outboard motors arrived and
were delivered to Ricardo, but he was not able to pay the purchase price thereof. a) Can
AC Bank take possession of the outboard motors? b) Can AC Bank also foreclose the
mortgage over the fishpond?
a. AC Bank can take possession of the outboard motors and foreclose the
mortgage to answer for all the obligations of Ricardo
b. AC Bank can take possession of the outboard motors and foreclose the
mortgage to answer for the mortgage obligations of Ricardo
c. AC Bank can not take possession of the outboard motors, but may foreclose the
mortgage to answer for the mortgage obligations of Ricardo
d. AC Bank cannot take possession of the outboard motors and cannot foreclose
the mortgage
149. The publication requirement in extrajudicial foreclosure proceedings is intended
primarily for the benefit of
a. The public
b. The mortgagor
c. The mortgagee
d. All of the above
150. Which of the following is not covered by the Anti-Money Laundering Law?
a. Opening a living trust worth Php1M with the trust department of a bank
b. Paying a housing loan of Php1.5M to Pag-Ibig
c. Securing a life insurance worth Php2M
d. Securing of a mutual fund worth Php300,000, by a person who does not have
visible means of earnings