2007 bar mercantile shit

No.I.

R issued a check for P1m which he used to pay S for killing his political enemy.
(10%) (A) Can be the check be considered a negotiable instrument?

SUGGESTED ANSWER:
Yes, the check can be considered a negotiable instrument even if it was issued
to pay S to kill his political enemy. The validity of the consideration is not
one of the requisites of a negotiable instruments constitute a defect of title
(Section 55, Negotiable Instruments Law).

(B) Does S have a cause of action against R in case of dishonor by the drawee bank?

SUGGESTED ANSWER:

No, s does not have a cause of action against R in case of dishonor of the
check by the drawee bank. S is not a holder in due course, thus, R can raise
the defense that the check was issued for an illegal consideration (Section 58,
Negotiable Instruments Law).

(C) It S negotiated the check to T, who accepted it in good faith and for value, may R
be held secondarily liable by T? Reason Briefly in (a), (b) and (c).

SUGGESTED ANSWER:

Yes, R may be held secondarily liable by T who took the check in good faith
and for value. T is a holder in due course. R cannot raise the defense of
illegality of the considerarion, because T took the check fre from the defect of
title of S

No.II.

Alex deposited goods for which Billy, a warehousemen, issued a negotiable

warehouse receipt wherein the good were deliverable to Alex or order. Alex
negotiated the receipt TC Caloy. Thereafter, Dario a creditor, secured judgment
against Alex and served notice of levy over the goods on the warehouseman. (A) To
whom should the warehousemen deliver the goods upon demand?(5%)
SUGGESTED ANSWER:

The warehouseman should deliver the goods upon demand to Caloy who is a
holder of the receipt in good faith and for value. The goods cannot be levied
upon by the creditor of Alex after it was negotiated to Caloy

B) Would your answer be the same if the warehouseman issued a non-negotiable

warehouse receipt? Reason briefly. (5%)

SUGGESTED ANSWER:

No, my answer would not be the same if the warehousemen issued a non-
negotiable warehouse receipt. In such case. The warehouseman should deliver
the goods to Datio, if the notice of levy was served on the warehouseman
prior to the notification of the warehouseman by Alex or Caloy of the transfer
of the non-negotiable receipt. In such case, the title of Caloy would be
defeated by the notice of levy by Dario

No.III.

Diana and Piolo are famous personalities in showbusiness who kept their love
affair secret. They use a special instant messaging service which allows them to see
one anothers typing on their own screen as each letter key is pressed. When Greg,
the controller of the service facility, found out their identities, he kept a copy of all
the messages Diana and Piolo sent each other and published them. Is Greg liable
for copyright infringement? Reason briefly. (5%)

SUGGESTED ANSWER:

Yes, Greg is liable for copyright infringement. Letter are among the works
which are protected from the moment of their creation (Section 172,
intellectual Property Code; Columbia Pictures, Inc. v Court of Appeals, 261
SCRA 144 [1996]). The publication of the letters without the consent of their
writers constitutes infringement of copyright.

No.IV

Alfredo took out a policy to insure this commercial building fire. The broker for the
insurance company agreed to give a 15-day credit within which pay the insurance
premium. Upon delivery of the policy on May 15, 2006, Alfredo issued a postdated
check payable on May 30, 2006. On May 28, 2006, a fire broke out and destroyed
the building owned by Alfredo. (10%) (A) May Alfredo recover on the insurance
policy?

SUGGESTED ANSWER:

Yes, Alfredo may recover on the policy. It is valid to stipulate that the insured
will be granted credit term for payment of premium. Payment by means of a
check which was accepted by the insurer, bearing a date prior to the loss,
would be sufficient. The subsequent effects of encashment retroact to the
date of the check

(B) Would your answer in (a) be the same if it was found that the proximate cause of
the fire was an explosion and that fire was but the immediate cause of loss and
there is no excepted peril under the policy?

SUGGESTED ANSWER:

Yes, recovery under the insurance contract is allowed if the cause of the loss
was either the proximate or the immediate cause as long as an excepted peril,
if any was not the proximate cause of the loss (Section 86, Insurance Code of
the Philippines).

(C) If the fire was found to have been caused by Alfredos own negligence, can he
still recover on the policy? Reason briefly in (a), (b) and (c).

SUGGESTED ANSWER:

Yes, mere negligence on the part of the insured will not prevent recovery
under the insurance policy. The law merely prevents recovery when the cause
of loss is the willful act of the insured, alone or in connivance with others

No.V.

C contracted D to renovate his commercial building. D ordered construction

materials from E and received delivery thereof. The following day, C went to F Bank
to apply for loan to pay for the construction materials. As security for the loan, C
was made to execute a trust receipt. One year later, after C failed to pay the balance
of the loan, F Bank charged him with violation of the Trust Receipts Law. (5%)
(A) What is a Trust Receipt?

SUGGESTED ANSWER:

A Trust Receipt is a written or printed document signed by the entrustee in

favor of the entruster containing terms and conditions substantially
complying with the provision of the Trust Receipts Law, whereby the bank as
entruster releases the goods to the possession of the entrustee but retains
ownership thereof while the entrustee may sell the goods and apply the
proceeds for the full payment of his liability to the bank

(B) Will the case against C prosper? Reason briefly.

SUGGESTED ANSWER:

No, the case against C will not prosper, Since C received the Construction
material from E Before the trust receipt transaction was a simple loan, with
the trust receipt merely as a collateral or security for the loan. This is
inconsistent with a trust receipt transaction where the title to the goods
remains with the bank and the goods are released to the entrustee before the
loan is granted

No.VI.

Discuss the trust fund doctrine. (5%)

SUGGESTED ANSWER:

The trust fund doctrine means that the capital stock, properties and other
assets of a corporation are regarded as equity in trust for the payment of
corporate creditors. Stated simply, the trust fund doctrine states that all
funds received by the corporation in payment of the shares of stock shall be
held in trust for the corporate creditors and other stockholders of the
corporation. Under such doctrine, no fund shall be used to buy back the
issued shares of stock except only in instances specifically allowed by the
Corporation Code
 No.VII.

In a stockholders meeting, S dissented from the corporate act converting preferred

voting shares to non-voting shares. Thereafter, S submitted his certificates of stock
for notation that his shares are dissenting. The next day, S transferred his shares
are dissenting. The next day, S transferred his shares to T to whom new certificates
were issued. Now, T demands from the corporation the payment of the value of his
shares. (10%)

(A) What is the meaning of a stockholders appraisal right?

SUGGESTED ANSWER:

Appraisal right is the right of stockholder, who dissents from a fundamental

or extraordinary corporate action, to demand payment of the fair value of his
shares. It is the right of a stockholder to withdraw from the corporation and
demand payment of the fair value of his shares after dissenting form certain
corporate acts involving fundamental changes in the corporate structure

(B) Can T exercise the right of appraisal? Reason briefly?

SUGGESTED ANSWER:

No, T cannot exercise the right of appraisal in this case. When S transferred
his shares to T and T was issued new stock certificates, the appraisal right of
S ceased, and T acquired all the rights of a regular stockholder. The transfer of
shares from S to T constitutes an abandonment of the appraisal right of S. All
the T acquired from the issuance of new stock certificated was the rights of a
regular stockholders

No.VIII.

Due to growing financial difficulties, Z Bank was unable to finish construction of its
21-storey building on a prime lot located in Makati City. Inevitably, the Bangko
Sentral ordered the closure of Z Bank and consequently placed it under
receivership. In a bid to save the banks property investment, the President of Z
Bank entered into a financing agreement with a group of investors for the
completion of the construction of the 21-storey building in exchange for a ten-year
lease and the exclusive option to purchase the building.

(A) Is the act of the President valid? Why or why not?

SUGGESTED ANSWER:
No, the bank presidents act is not valid. He had no authority to enter into the
financing agreement. Z Bank was ordered closed and placed under
receivership. Control over the properties of Z Bank passed to the receiver. The
appointment of a receiver operates to suspend the authority of the bank and
its officers over the banks assets and properties, such authority being
reposed in the receiver

(B) Will a suit to enforce the exclusive right of the investors to purchase the
property prosper? Reason briefly.

SUGGESTED ANSWER:

No, the exclusive options granted to the investors, having been entered into
by one without authority to do so, is unenforceable. The bank, therefore,
cannot be compelled to sell the property. Under Section 30 of Republic Act
No. 7653, New Central Bank Act, the properties of Z Bank should be
administered for the benefit of its creditors. The property in question can be
disposed of only for the purpose of paying the debts of Z Bank

No.IX.

On December 4, 2003, RED Corporation executed a real estate mortgage in favor of

BLUE Bank. RED Corporation defaulted in the payment of its loan. Consequently,
on June 4, 2004, BLUE Bank extra judicially foreclosed the property. Being the
highest bidder in the auction sale conducted, the Bank was issued a Certificate of
Sale which was registered on August 4, 2004. Does RED Corporation still have the
right to redeem the property as of September 14, 2007? Reason briefly. (5%)

SUGGESTED ANSWER:

No, RED Corporation has lost its right to redeem the property. Juridical
persons whose property is sold pursuant to an extrajudicial foreclosure, shall
have the right to redeem the property until registration of the certificate of
sale with the Register of Deeds, which shall in no case be more than three
months after foreclosure, whichever is earlier

No.X.
Name at least five predicate crimes to money laundering. (5%)

SUGGESTED ANSWER:

Any five of the following are predicate crimes to money laundering:

(1) Kidnapping for ransom under Article 267 of Act No.3815, otherwise known
as the Revised Penal Code, as amended;

(2) Sections 3,4,5,7,8 and 9 of Article Two of Republic Act No. 6425, as
amended, otherwise known as the Dangerous Drugs Act of 1972;

(3) Section 3 paragraphs B,C,E,G,H and I of Republic Act No. 3019, as

amended; otherwise known as the Anti-graft and Corrupt Practices Act;

(4) Plunder under Republic Act No. 7080, as amended; (

5) Robbery and extortion under Articles 294,295,296,299,300,301 and 302 of

the Revised Penal Code, as amended;

No.XI.

Two vessels figured in a collision along the Straits of Guimaras resulting in

considerable loss of cargo. The damaged vessels were safely conducted to the Port of
Iloilo Passenger A failed to file a maritime protest. B, a non-passenger but a shipper
who suffered damage to his cargo, likewise did not file a maritime protest at all.
(10%) (A) What is a maritime protest?

SUGGESTED ANSWER:

A maritime protest is a sworn statement made with 24 hours after a collision

in which the circumstances thereof are declared or made known before a
competent authority at the point of accident or the first port of arrival if in
the Philippines or the Philippine consul in a foreign country

B) Can A and B successfully maintain an action to recover losses and damages

arising from the collision? Reason briefly

SUGGESTED ANSWER:

A can maintain an action to recover damages if he was not in a condition to

make known his wishes. B can maintain an action to recover damages since
he was not on board the vessel
 No.XII.
Seeking to Streamline its operations and to ball out its losing ventures, the
stockholders of X corporation unanimously adopted a proposal to sell substantially
all of the machineries and equipment used in and about its manufacturing
business and to sink the proceeds of the sale for the expansion of its cargo
transport services.(5%) (

A) Would the transaction be covered by the provisions of eh Bulk Sales Law?

SUGGESTED ANSWER:
No. the transaction is not covered by the provisions of the Bulk sales law,
Bulk sales law applies only to retail merchants, traders and dealers. It does
not apply to manufacturers. X Corporation is engaged in the manufacturing
business

(B) How would X Corporation effect a valid sale?

SUGGESTED ANSWER: To effect a valid sale. X corporation must prepare an

affidavit stating the names of all its creditors, their addresses, the amount of
their credits and their maturities. X Corporation should give the affidavit to
the buyer who , in turn, should furnish a copy to each creditor and notify the
creditors of the proposed bulk sale to enable them to protect their interest

No.XIII.

What are the preferred claims that shall be satisfied first from the assets of an
insolvent corporation? (10%)

SUGGESTED ANSWER:

Under the Insolvency law necessary funeral expenses of the debtor is the most
preferred claim. However, this is an insolvent corporation, thus, claims shall
be paid in the ff. order:
(1) Debts due for personal services rendered the insolvent by employees,
laborers, or domestic servants immediately preceding the commencement of
proceeding in insolvency;
(2) Compensation due the laborers or their dependents under the provisions of
act numbered thirty-four hundred and twenty-eight, known as the workmens
Compensation Act, as amended by Act Numbered Thirty-eight hundred and
twelve, and under the provisions of Act Numbered Eighteen hundred and
seventy-four, known as the Employees Liability Act, and of other laws
providing for payment of indemnity for damages in cases of labor accidents;
(3) Legal expenses, and expenses incurred in the administration of the
insolvents estate for the common interest of the creditors, when properly
authorized and approved by the court; (4) Debts, taxes, and assessments due
the Insular Government;
(5) Debts, taxes, and assessments due to any province or provinces of the
Philippine Islands;

(6) Debts, taxes, and assessments due to any municipality or municipalities of

the Philippine Islands