1998 Bar Exam Questions (Commercial Law)

I.

1. What do you understand by a bill of lading?

2. Explain the two-fold character of a bill of lading?

Suggested Answer:
1. A bill of lading may be defined as a written acknowledgment of the receipt of the
goods and agreement to transport and to deliver them at a specified place to a
person named therein or on his order.
2. A bill of lading has a two-fold character, namely, (a) it is a receipt of the goods to be
transported and (b) it constitutes a contract of carriage of the goods.
 V

1. How do you treat a negotiable instrument that is so ambiguous that there is doubt whether
it is a bill or a note?
2. X makes a promissory note for P10,000 payable to A, a minor, to help him buy school
books. A endorses the note to B for value, who in turn endorses the note to C. C knows A
is a minor. If C sues X on the note, can X set up the defense of minority and lack of
consideration?

Suggested Answer
1. Where a negotiable instrument is so ambiguous that there is doubt whether a bill or a
note, the holder may treat it either as a bill of exchange or a promissory note at his
election.
2. Yes. C is not a holder in due course. The promissory note is not a negotiable instrument
as it does not contain any word of negotiability, that is, order or bearer, or words of
similar meaning of import. Not being a holder in due course, C is to subject such personal
defenses of minority and lack of consideration. C is a mere assignee who is subject to all
defenses.

Alternative Answer
2 X cannot set up the defense of minority of A. Defense of minority is available to the
minor only. Such defense is not available to C.

X cannot set up the defense against C. Lack of consideration is a personal defense which
is only available between immediate parties or against parties who are not holders in due
course. C’s knowledge that A is a minor does not prevent C from being a holder of due
course. C took the promissory from a holder for value, B.
 VI

X draws a check against his current account with the Ortigas branch of Bonifacio Bank in favor
of B. Although C does not have sufficient funds, the bank honors the check when it is presented
to payment. Apparently, X has conspired with the bank’s bookkeeper so that his ledger card
would show that he still has sufficient funds.

The bank files an action for recovery of the amount paid to B because the check presented has no
sufficient funds. Decide the case.

Suggested Answer

The bank cannot recover the amount paid to B for the check. When the bank honored the check,
it became an acceptor. As acceptor, the bank became primarily and directly liable to the
payee/holder B.

Alternative Answer

The bank can recover form B. This is solution indebiti because there is payment by the bank to B
when such payment is not due. The check issued by X to B as payee had no sufficient funds.
 VII

For the purpose of lending his name without receiving value therefor, Pedro makes a note for
Php 20,000 payable to the order of X who in turn negotiates it to Y, the latter knowing that Pedro
is not a party for value.

1. May Y recover from Pedro if the latter interposes the absence of consideration.
2. Supposing under the same facts, Pedro pays the said Php 20,000, may he recover the
same amount from X?

Suggested Answer

1. Yes. Y can recover from Pedro. Pedro is an accommodation party. Defense of absence
consideration cannot be validly interposed by accommodation party against a holder in
due course.
2. If Pedro pays the said Php 20,000 to Y, Pedro can recover the amount from X. X is the
accommodated party or the party ultimately liable for the instrument, Pedro is only an
accommodation party. Otherwise, it would be unjust enrichment on the part of X if he is
not to pay Pedro.
 VIII

Richard Clinton makes a promissory note payable to bearer and delivers the same to Aurora
Page. Aurora Page, however, endorses it to X in the manner:

“Payable to X. Signed: Aurora Page.”

Later, X, without endorsing the promissory note, transfers and delivers the same to Napoleon.
The note is subsequently dishonored by Richard Clinton. May Napoleon proceed against Richard
Clinton for the note?

Suggested Answer

Yes. Richard Clinton is liable to Napoleon under the promissory note. The note made by Richard
Clinton is a bearer instrument. Despite special indorsement made by Aurora Page thereon, the
note remained a bearer instrument and can be negotiated by mere delivery. When X delivered
and transferred the note to Napoleon, the latter became a holder thereof. As such holder,
Napoleon can proceed against Richard Clinton.
 XIV

Luzon Warehousing Corporation received from Pedro 200 cavans of rice for deposit in its
warehouse for which a negotiable receipt was issued. While the goods were stored in said
warehouse. Cicero obtained a judgment against Pedro for the recovery of a sum of money. The
sheriff proceeded to levy upon the goods on a writ of execution and directed the warehouseman
to deliver the goods. Is the warehouseman under obligation to comply with the sheriff’s order?

Suggested Answer:

No. There was a valid negotiable receipt as there was a valid delivery of 200 cavans of rice for
deposit. In such a case, the warehouseman is not obligated to deliver to one who can comply
with Sec. 8 of the Warehouse Receipts Law, namely (1) surrender the receipt of which he is
holder; (2) willing to sign a receipt for the delivery of goods; and (3) pays the warehouseman’s
liens, that is, his fees and advances, if any.

The sheriff cannot comply with these requisites, especially the first, as he is not holder of the
receipt.