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Distinguish the concepts: 1. Occupation v. possession.

(5%) Occupation is a mode of acquiring ownership which involves some form of holding (Articles 712 & 713, New Civil Code). Possession is the holding of a thing or the enjoyment of a right. (Article 532, NCC). Occupation can take place only with respect to property without an owner, while possession can refer to all kinds of property, whether with or without an owner. Occupation in itself, when proper, confers ownership; but possession does not by itself give rise to ownership. (II Tolentino, Civil Code, 1992 ed., p. 489). 2. Illegal and impossible conditions in a simple donation v. illegal and impossible conditions in an onerous donation. (5%) Illegal or imposable conditions in simple conditions are considered as not imposed, hence the donation is valid. (Art. 727, NCC). On the other hand, donations with an onerous cause shall be governed by the rules on contract (Art. 733, NCC). Under Art. 1183 0f the New Civil Code, (I)mpossible conditions, those contrary to good customs or public policy and those prohibited by law shall annul the obligation which depends upon them. Thus, the onerous donation is void. II. (10%) Manila Petroleum Co. owned and operated a petroleum operation facility off the coast of Manila. The facility was located on a floating platform made of wood and metal, upon which was permanently attached the heavy equipment for the petroleum operations and living quarters of the crew. The floating platform likewise contained a garden area, where trees, plants and flowers were planted. The platform was tethered to a ship, the MV 101, which was anchored to the seabed. 1. Is the platform movable or immovable property? Alternative Answer: The platform is an immovable property by destination. It was intended by the owner to remain at a fixed place on a river or coast. Article 415(9) of the New Civil Code considers as a real property docks and structures which, though, floating, are intended by their nature and object to remain at a fixed place on a river, lake or coast. NOTA BENE: In Fels Energy, Inc. v. The Province of Batangas,, G.R. No. 168557, February 16, 2007, the Court ruled that the power barges moored off the coast of Balayan, Batangas are real property under Article 415(9) of the Civil Code. This case is beyond the coverage of the 2007 Bar Exam. Alternative Answer: The platform is a movable property if it is not permanently attached or anchored to the ship or seabed. As a result, it may be brought from place to place for various purposes or may be towed or tethered to other vessels. 2. Are the equipment and living quarters movable or immovable property? Alternative Answer: With respect to the equipment, the same is real property under paragraph 5 of Article 415, NCC. It is intended to meet the needs of the industry being undertaken by Manila Petroleum Co. The equipment partakes of the nature of the immovable upon which it has been placed. The living quarters, if attached to the immovable platform with permanence, becomes an immovable as well. Permanence means they cannot be separated without destroying the platform or the quarters. (Art. 415[3], NCC). On the other hand, if the attachment is not permanent, or is merely superimposed on the platform, then the living quarters are movable property.

Civil Law I. following

Alternative Answer: With respect to the equipment, the same is real property under paragraph 5 of Article 415. It is intended to meet the needs of industry being undertaken by Manila Petroleum Co. The equipment partakes of the nature of the immovable upon which it has been placed. If the platform is movable property, then the living quarters are movable property as well because they partake of the nature of the platform to which they are attached. 3. Are the trees, plants and flowers immovable or movable property? Alternative Answer: The trees, plants and flowers are also immovable, having been planted in the garden area under Art. 415(2) which provides that Trees, plants, and growing fruits, while they are attached to the land or form an integral part of the immovable are likewise immovable property. Alternative Answer: If the platform is movable property, then the trees, plants and flowers are movable because they are not attached to the land or form an integral part of any immovable. (par.2, Art. 415, NCC) III. Explain the following concepts and doctrines and give an example of each: 1. concept of trust de son tort (constructive trust) (5%) A constructive trust is a form of implied trust created by equity to meet the demands of justice. It arises contrary to intention against one who, by fraud, duress, or abuse of confidence, undue influence or mistake or breach of fiduciary duty or wrongful disposition of anothers property, obtains or holds the legal right to property which he is not entitled to under the law. (Huang v. Court of Appeals, G.R. No. 108525, September 13, 1994). An example of constructive trust is when a property is acquired through mistake or fraud, the person obtaining it, is by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. (Art. 1456, NCC). 2. doctrine of discovered peril (last clear chance) (5%) The doctrine of discovered peril, is also known as the doctrine of last clear chance, applies in a situation where both parties are negligent so that the party who had the last clear chance or opportunity to avoid the accident by proper care, but failed to do so, is considered solely responsible for the accident. (Picart v. Smith, G.R. No. L-12219, March 15, 1918). For example, if a truck driver saw an oncoming car that swerved and entered the trucks lane to avoid running over a pedestrian, and the truck driver did not slow down or move to the side of the road and give way to the oncoming car, even though he could have done so to avoid a collision, then the truck driver shall be solely responsible for the accident. (Mckee v. IAC, G.R. No. L-68102, July 16, 1992). IV. (10%) Bedrock Land & Property Development Corp. is a development company engaged in developing and selling subdivisions, condominium units and industrial estates. In order to replenish its inventories, it embarked on an aggressive land banking program. It employed "scouts" who roam all over the Philippines to look for and conduct investigations on prospective sites for acquisition and development, whether developed, semi-developed or raw land. The management of Bedrock asks you as the company counsel to prepare a manual containing a summary of the pertinent laws and regulations relating to land registration and acquisition of title to land. The manual should include the following items: Supply this information. 1. What is the governing law? Depending on the transaction involved, one or more of the following will be the governing laws relating to land acquisition of title to land are as follows: 1. P.D. No. 1529 (Property Registration Decree)

2. Public Land Law (CA No. 141, as amended) 3. The Civil Code of the Philippines 4. Act No. 2259 (The Cadastral Act) 5. Section 194 of the Administrative Code as amended by Act No. 2837 and Act No. 3344 (System of Recording for Unregistered Real Estate) 6. P.D. No. 1073 (Extending the Period for Administrative and Judicial Legalization of Imperfect Title) 7. Article XII of the 1987 Constitution 8. P.D. No. 957 (An Act Regulating the Sale of Subdivisions and Condominiums) 9. R.A. 4276 (An Act Amending P.D. No. 957) 10. Real Property Tax Code 2. What properties are not registrable? With respect to the land banking program of Bedrock, the following properties may not be registered under the Torrens System with any Register of Deeds: (a) inalienable lands of the public domain; and (b) those prohibited under the Constitution (such as national parks, mineral lands, forest or timber lands and agricultural lands not classified as alienable and disposable.) V. (10%) What are obligations without an agreement"? Give five examples of situations giving rise to this type of obligations? Obligations without an agreement are those which are not based on contract. Apart from contracts, obligations may arise from (1) law; (2) qausi-contract; (3) delict; and (4) quasi-delict. Examples of situations giving rise to Obligations without an agreement are as follows: 1. A law was passed requiring the payment of a specific kind of tax. 2. If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. (Article 2154, NCC) 3. When a person voluntarily takes charge of the agency or management of the business or property of anther, without any power from the latter, he is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to do so. This juridical relation does not arise in either of these instances: a. When the property or business is not neglected or abandoned; b. If in fact the manager has been tacitly authorized by the owner (Article 2144, NCC) 4. A person, through negligence, caused damage or injury to another. 5. A person intentionally damaged a property of another. 6. The obligation by the recipient to return what has been paid or delivered to him by mistake, the recipient not having the right to demand it, is one that arises from quasi-contract (Article 2154, NCC) 7. The obligation of the culprit to pay actual damages for causing the death of a person is one which arises from delict or crime (Art. 2206, NCC) 8. The obligation of the tortfeasor to pay damages for injuries or damages caused by him to another person due to his act or omission, characterized by fault or negligence, is one which arises from quasidelict (Art. 2176, NCC) and 9. The obligation to pay reward for a certain act or accomplishment pursuant to a promise made to the general public is an obligation based on unilateral promise. VI. (10%)

Clara, thinking of her mortality, drafted a will and asked Roberta, Hannah, Luisa and Benjamin to be witnesses. During the day of the signing of her will, Clara fell down the stairs and broke both her arms. Coming from the hospital, Clara insisted on signing her will by thumb mark and said that she can sign her full name later. While the will was being signed, Roberta experienced a stomach ache and kept going to the restroom for long periods of time. Hannah, while waiting for her turn to sign the will, was reading the 7th Harry Potter book on the couch, beside the table on which everyone was signing. Benjamin, aside from witnessing the will, also offered to notarize it. A week after, Clara was run over by a drunk driver while crossing the street in Greenbelt. May the will of Clara be admitted to probate? Give your reasons briefly. Yes, the will of Clara may be probated. A thumbmark has been considered by the Supreme Court as a valid signature if intended by the testator to be his signature. (Garcia v. La Cuesta, G.R. No. L-4067, November 29, 1951; De Gala v. Gonzales, G.R. No. L-37756, November 28, 1933). The three witness rule required for the validity of an ordinary will is satisfied provided either of the two conditions exists: 1. Roberta could see Clara and the other witnesses sign the will at any time while she was in the toilet, had she wanted to. 2. If Roberta could not have seen Clara and the other witnesses sign the will, the same is valid if the will was acknowledged before a Notary Public other than Benjamin. It is not necessary that the testator or the witnesses should actually see the others subscribe their names to the instrument, provided that he is position to see them sign if he chooses (Nera v. Rimando, G.R. NO. 5971, February 27, 1911; Yap Tua v. Yap Ka Kuan, G.R. No. L-6845, September 1, 1914). Thus, the signing must be considered to be in the presence of Hannah, who was reading a book on the couch beside the table. VII. Write "TRUE" if the statement is true or "FALSE" if the statement is false. If the statement is FALSE, state the reason. (2% each). 1. Roberta, a Filipino, 17 years of age, without the knowledge of his parents, can acquire a house in Australia because Australian Laws allow aliens to acquire property from the age of 16. (2%) TRUE 2. If a man commits several acts of sexual infidelity, particularly in 2002, 2003, 2004, 2005, the prescriptive period to file for legal separation runs from 2002. (2%) FALSE. Every act of sexual infidelity committed by the man is a ground for legal separation under Article 55(8) of the Family Code (Tolentino, Civil Code, 1990 ed., 321) Hence, the prescriptive period begins to run upon the commission of each act of infidelity. 3. An individual, While single, purchases a house and lot in 1990 and borrows money in 1992 to repair it. In 1995, such individual gets married while the debt is still being paid. After the marriage, the debt is still the responsibility of such individual. (2%) Alternative Answer: FALSE. Under Article 94(7) of the Family Code, ante-nuptial debts of either spouse shall be considered as the liability of the absolute community property insofar as they have redounded to the benefit of the family. Alternative Answer: TRUE

4. The day after John and Marsha got married, John told her that he was impotent. Marsha continued to live with John for 2 years. Marsha is now estopped from filing an annulment case against John. FALSE. Marsha is not estopped from filing an annulment case against John on the ground of impotency under Article 45(5) of the Family Code. Unlike the other grounds for annulment of voidable marriages which are subject to ratification by continued cohabitation, the law does not allow ratification under Article 45(5). 5. Amor gave birth to Thelma when she was 15 years old. Thereafter, Amor met David and they got married when she was 20 years old. David had a son, Julian, with his ex-girlfriend Sandra. Julian and Thelma can get married. Alternative Answer: TRUE. Alternative Answer: FALSE. If the marriage was solemnized during the effectivity of the New Civil Code, the marriage between stepbrother and stepsister is void (Article 80[7]). However, under the Family Code, this marriage may be valid. (Article 38, FC) VIII. (10%) In 1986, Jennifer and Brad were madly in love. In 1989, because a certain Picasso painting reminded Brad of her, Jennifer acquired it and placed it in his bedroom. In 1990, Brad and Jennifer broke up. While Brad was mending his broken heart, he met Angie and fell in love. Because the Picasso painting reminded Angie of him, Brad in his will bequeathed the painting to Angie. Brad died in 1995. Saddened by Brads death, Jennifer asked for the Picasso painting as a remembrance of him. Angie refused and claimed that Brad, in his will, bequeathed the painting to her. Is Angie correct? Why or why not? Angie is not correct. The painting is not a property of Brad which he can dispose by will. Even if the painting was bought while they were madly in love, there can be no valid donation of such a valuable painting because it was not reduced to writing as required by Article 748(3) of the New Civil Code. Therefore, this is a legacy of property not owned by the testator. If Brad knew that he did not own the painting, it may be considered as an instruction to acquire the painting from Angie. However, if he erroneously believed he owned the painting, the legacy is void. IX. Multiple choice: Choose the right answer. (2% each) 1. The parties to a bailment are the: a. bailor; b. bailee; c. comodatario; d. all the above; e. letters a and b E 2. A deposit made in compliance with a legal obligation is: a. an extrajudicial deposit;

b. a voluntary deposit; c. a necessary deposit; d. a deposit with a warehouseman; e. letters a and b C 3. A contract of antichresis is always: a. a written contract; b. a contract, with a stipulation that the debt will be paid through receipt of the fruits of an immovable; c. Involves the payment of interests, if owing; d. All of the above; e. Letters a and b D 4. An, assignee in a proceeding under the Insolvency Law does not have the duty of: a. suing to recover the properties of the state of the insolvent debtor; b. selling property of the insolvent debtor; c. ensuring that a debtor corporation operate the business efficiently and effectively while the proceedings are pending; d. collecting and discharging debts owed to the insolvent debtor. C 5. In order to obtain approval of the proposed settlement of the debtor in an insolvency proceeding. a. the court must initiate the proposal b. 2/3 of the number of creditors should agree to the settlement; c. 3/5 of the number of creditors should agree to the settlement; d. 1/3 of the total debts must be represented by the approving creditors; e. Letters a and b B X. (10%) For purposes of this question, assume all formalities and procedural requirements have been complied with.In 1970, Ramon and Dessa got married. Prior to their marriage, Ramon had a child, Anna. In 1971 and 1972,Ramon and Dessa legally adopted Cherry and Michelle,respectively. In 1973, Dessa died while giving birth to Larry.Anna had a child, Lia. Anna never married. Cherry, on the other hand, legally adopted Shelly. Larry had twins, Hans and Gretel, with his girlfriend, Fiona. In 2005, Anna, Larry,and Cherry died in a car accident. In 2007, Ramon died.Who may inherit from Ramon and who may not? Give your reasons briefly.

Lia and Michele are the only possible heirs of Ramon. Lia succeeds by representation of Anna who, if she is an illegitimate child of Ramon, may be represented by her descendants. (Article 990, NCC). If Anna is a legitimate child, Lia may not inherit (Article 992, NCC) Michelle may inherit as an adopted child of Ramon, unless the word respectively means she was adopted only by Dessa. In the latter case, Michelle will not inherit from Ramon. Shelly cannot inherit from Ramon. She cannot represent Cherry in the inheritance of Ramon since filiation created by adoption is exclusively between the adopter and the adopted. The legal relationship does not extend to the children of the adopted. (Rabuya, Law on Persons and Family Relations, 2006 ed., III Tolentino, Civil Code, 1992 ed., 448-449). Hans and Gabriel, being illegitimate children of Larry, cannot inherit from Ramon ab intestato because of the barrier between the legitimate and the illegitimate. (Article 992, NCC) Dessa, Ana , Larry and Cherry will not inherit from Ramon because they predeceased Ramon. The law requires that one must be alive to be capacitated to inherit. (Article 1025, NCC)

Taxation Law

I. (5%)

What is the nature of the taxing power of the provinces, municipalities and cities? How will the local government units be able to exercise their taxing powers?

The taxing power of local governments is not an inherent power but one delegated under the Philippine Constitution (1987 Constitution, Article X; Manila Electric Co., v. Province of Laguna, G.R. No. 131359, May 5, 1999; Mactan Cebu International Airport Authority v. Marcos, G.R. No. 120082, September 11, 1996; Basco v. PAGCOR, G.R. No. 150947, July 15, 2003).

II. (10%)

The Local Government Code took effect on January 1, 1992.

PLDT's legislative franchise was granted sometime before 1992. Its franchise provides that PLDT will only pay 3% franchise tax in lieu of all taxes.

The legislative franchises of Smart and Globe Telecoms were granted in 1998. Their legislative franchises state that they will pay only 5% franchise tax in lieu of all taxes.

The Province of Zamboanga del Norte passed an ordinance in 1997 that imposes a local franchise tax on all telecommunication companies operating within the province. The tax is 50% of 1% of the gross annual receipts of the preceding calendar year based on the incoming receipts, or receipts realized, within territorial jurisdiction.

Is the ordinance valid? Are PLDT, Smart and Globe liable to pay franchise taxes? Reason briefly.

The ordinance is valid as it was passed pursuant to the powers of provinces and cities to impose taxes on businesses with franchises under the Local Government Code (LGC). The LGC, which took effect on January 1, 1992, withdrew tax exemptions or incentives previously enjoyed by all persons, except certain entities. (Section 193, LGC)

PLDT is liable to pay the local franchise taxes because its legislative franchise was granted by Congress prior to the passage of the LGC. Thus, the provision of the LGC withdrawing tax exemptions or incentives applies to PLDT.

Smart and Globe are exempt from the local franchise taxes imposed by the province since their respective legislative franchises were granted in 1998, or after the enactment of the LGC. Therefore, with respect to Smart and Globe, the withdrawal of tax exemptions or incentives under the :GC was superseded by the legislative franchise requiring payment of the 5% franchise tax in lieu of all taxes. (PLDT v. City of Davao, G.R. No. 143867, August 22, 2001 and March 25, 2003).

III. (5%)

What kind of taxes, fees and charges are considered as National Internal Revenue Taxes under the National Internal Revenue Code (NIRC)?

National Internal Revenue Taxes are national taxes which the Bureau of Internal Revenue shall collect under the National Internal Revenue Code (NIRC, Section 2). These are: 1. Income Tax; 2. Estate and Donors Taxes; 3. Value-Added Tax; 4. Other Percentage Taxes; 5. Excise Taxes; 6. Documentary Stamp Tax; and 7. Other taxes that may be imposed which the BIR shall collect.

IV. (10%)

XYZ Corporation, an export oriented company, was able to secure a Bureau of Internal Revenue (BIR) ruling in June 2005 that exempts from tax the importation some of its raw materials. The ruling is of first impression, which means the interpretations made by the Commissioner of Internal Revenue is one without established precedents. Subsequently, however, the BIR issued another ruling which in effect would subject to tax such kind of importation. XYZ Corporation is concerned that said ruling may have a retroactive effect, which means that all their importations done before the issuance of the second ruling could be subject to tax.

a. What is BIR ruling?

A BIR ruling is an administrative interpretation of the Revenue Law as applied and implemented by the Bureau. They can be relied upon by taxpayers and are valid until otherwise determined by the courts or modified or revoked by a subsequent ruling or opinion. They are accorded great weight and respect, but not binding on the courts. (Commission v. Ledesma, L-17509, January 30, 1970).

b. What is required to make a BIR ruling of first impression a valid one?

A BIR ruling of first impression, to be a valid ruling, must be issued within the scope of authority granted to the Commissioner of Internal Revenue, and not contravene any law or decision of the Supreme Court. (Michelle J. Lhuiller v. CIR, G.R. No. 150947, July 15, 2003; Sec. 7, NIRC)

c. Does a BIR ruling have a retroactive effect, considering the principle that tax exemptions should be interpreted strictly against the taxpayer?

A BIR ruling cannot be given retroactive effect if it would be prejudicial to the taxpayer. Section 246 of the NIRC provides for retroactive effect in the following cases:

1. Where the taxpayer deliberately mis-states or omits material facts from his return or any document required of him by the Bureau of Internal Revenue; 2. Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the rulings is based; or 3. Where the taxpayer acted in bad faith (Section 246, NIRC).

V. (10%)

ABC Corporation sold a real property in Malolos, Bulacan to XYZ Corporation. The property has been classified as residential and with a zonal valuation of P1, 000 per square meter. The capital gains tax was paid based on the zonal value. The Revenue District Officer (RDO), however, refused to issue the Certificate Authorizing Registration for the reason that based on his ocular inspection the property should have a higher zonal valuation determined by the Commissioner of Internal Revenue because the area is already a commercial area. Accordingly, the RDO wanted to make a recomputation of the taxes due by using the fair market value appearing in a nearby bank's valuation list which is practically double the existing zonal value. The RDO also wanted to assess a donor's tax on the difference between the selling price based on the zonal value and the fair market value appearing in a nearby bank's valuation list.

a. Does the RDO have the authority or discretion to unilaterally use the fair market value as the basis for determining the capital gains tax and not the zonal value as determined by the Commissioner of Internal Revenue? Reason briefly.

The RDO has no discretion. The only value that can be applied is the zonal value as fixed and determined by the Commissioner. (Section 6[E], NIRC).

b. Should the difference in the supposed taxable value be legally subject to donor's tax? Reason briefly.

By applying the fixed zonal value, there should be no difference in the taxable value and the declared value that might be subject of a donors tax. However, assuming that such a difference may exist, the variance in price may raise a legal presumption of an intended donation.

A demand gift arises only if tax is avoided as a result of selling property at a price lower than its fair market value. In a sale subject to 6% capital gains tax, the tax is always based on the gross selling price or fair market value whichever is higher. This means, therefore, that the deemed gift provision under the Tax Code will not apply because the 6% capital gains tax can be applied to the higher value.

VI. (5%)

Z is a Filipino immigrant living in the United States for more than 10 years. He is retired and he came back to the Philippines as a balikbayan. Every time he comes to the Philippines, he stays here for about a month. He regularly receives a pension from his former employer in the United States, amounting to US$1, 000 a month. While in the Philippines, with his pension pay from his former employer, he purchased three condominium units in Makati which he is renting out for P15, 000 a moth each.

a. Does the US$1, 000 pension become taxable because he is now residing in the Philippines? Reason briefly.

Alternative Answer: No, the US$1,000 pension is excluded from gross income because it is received by a Filipino resident or non-resident from a foreign private institution which under Section 32(B)(6) of the NIRC is excluded from gross income.

Alternative Answer: No, the US$1,000 pension is excluded from gross income because it is derived from sources outside of the Philippines by a non-resident citizen. He may only be taxed for income from sources within the Philippines. (Section 42[A][3] in relation to Section 23, NIRC)

b. Is his purchase of the three condominium units subject to any tax? Reason briefly.

Alternative Answer: Yes, the purchase of the 3 condominium units is subject to: 1. Documentary stamp tax (payable by either seller or purchaser) (Section 196, NIRC); 2. Local transfer tax imposed under the Local Government Code (Sec. 134, LGC) 3. Value added tax, if Z purchased the units from real estate developers and/or real estate lessors; and 4. Income tax, either capital gains tax or regular income tax, depending on whether the condominium is regarded as a capital asset or an ordinary asset of the seller

Alternative Answer: Strictly speaking, purchase is not a taxable event under the Internal Revenue Code, except for the requirement of documentary stamp tax in the case of real property. (Sec. 196, NIRC)

c. Will Z be liable to pay income tax on the P45,000 monthly income? Reason briefly.

Yes, Z shall be liable to pay income tax since he is now a taxpayer engaged in the business of leasing real property (Section 42[A][4], NIRC)

VII. (5%)

Antonia Santos, 30 years old, gainfully employed, is the sister of Edgardo Santos. She died in an airplane crash. Edgardo is a lawyer and he negotiated with the airline company and insurance company and they were able to a agree total settlement of P10 Million. This is what Antonia would have earned as somebody who was gainfully employed. Edgardo was her only heir.

a. Is the P10 Million subject to estate tax? Reason briefly. No, the P10.0 million does not form part of Antonias taxable estate. It is either damages or compensation arising from the death of Antonia. (Sec. 32[b][4], Chapter VI, NIRC as amended by RA 8424)

b. Should Edgardo report the P10 Million as his income being Antonia's only heir? Reason briefly.

No, the P10.0 million settlement need not be reported by Edgardo since the amount qualified as compensation for personal injuries which is excluded from gross income. (Section 32[B][4] of the NIRC)

VIII. (5%)

Nutrition Chippy Corporation gives all its employees (rank and file, supervisors and managers) one sack of rice every month valued at P800 per sack. During an audit investigation made by the Bureau of Internal Revenue (BIR), the BIR assessed the company for failure to withhold the corresponding withholding tax on the amount equivalent to the one sack of rice received by all the employees, contending that the sack of rice is considered as additional compensation for the rank and file employees and additional fringe benefit for the supervisions and managers. Therefore, the value of the one sack of rice every month should be considered as part of the compensation of the rank and file subject to tax. For the supervisors and managers, the employer should be the one assessed pursuant to Section 33 (a) of the NIRC. Is there a legal basis for the assessment made by the BIR? Explain your answer.

No, the monthly sack of rice not exceeding P1,000.00 for the rank and file employees is a de minimis benefit not subject to tax. The rice is a privilege the employer furnishes his employees, of relatively small value, offered to promote the health, goodwill, contentment or efficiency of his employees. (Revenue Regulations No. 02-98, [April 17. 1998]; BIR Ruling No. 023-02 [June 21, 2002] citing Section 2.78[A], Revenue Regulations No. 2-98 & Section 33, 1997 TRA as implemented by Revenue Regulations No. 398 as amended)

IX. (10%)

Weber Realty Company which owns a three-hectare land in Antipolo entered into a Joint Venture Agreement (JVA) with Prime Development Company for the development of said parcel of land. Weber Realty as owner of the land contributed the land to the Joint Venture and Prime Development agreed to develop the same into a residential subdivision and construct residential houses thereon. They agreed that they would divide the lots between them.

a. Does the JVA entered into by and between Weber and Prime create a separate taxable entity? Explain briefly.

Alternative Answer: No, since the arrangement between Weber Realty Co. and Prime Development Co. is for the purpose of understanding a construction project, there is no separate taxable entity pursuant to Section 22[B[ of the NIRC.

Alternative Answer: Yes, but only for purposes of the Value Added Tax, a joint venture for the construction project resulted in the creation of a separate taxable entity. It is not subject to income tax pursuant to Section 22[B[ of the NIRC.

b. Are the allocation and distribution of the saleable lots to Weber and prime subject to income tax and to expanded withholding tax? Explain briefly.

No, the allocation of saleable lots to Weber and Prime is not subject to income tax and the expanded withholding tax. There is no income realized in the distribution of property, but merely a return of capital.

c. Is the sale by Weber or Prime of their respective shares in the saleable lots to third parties subject to income tax and to expanded withholding tax? Explain briefly.

Yes, the sale by Weber and Prime of their respective shares results in the realization of income subject to income tax and expanded withholding tax.

X. (10%)

Noel Santos is a very bright computer science graduate. He was hired by Hewlett Packard. To entice him to accept the offer for employment, he was offered the arrangement that part of is compensation would be an insurance policy with a face value of P20 Million. The parents of Noel are made the beneficiaries of the insurance policy.

a. Will the proceeds of the insurance form part of the income of the parents of Noel and be subject to income tax? Reason briefly.

No, under the law, the proceeds of life insurance policies paid to the heirs or beneficiaries upon the death of the insured are excluded from gross income. (Sec. 32[B][1], NIRC)

b. Can the company deduct from its gross income the amount of the premium? Briefly.

Yes, the premiums paid are deductible business expenses, provided the employer is not the beneficiary. The premiums constitute ordinary and necessary expenses of the company. (Section 36[A][4] and Section 34[A], NIRC)

XI. (5%)

The Congregation of the Mary Immaculate donated a land a dormitory building located along Espaa St. in favor of the Sisters of the Holy Cross, a group of nuns operating a free clinic and high school teaching basic spiritual values. Is the donation subject to donor's tax? Reason Briefly.

The donation is not subject to donors tax. Gifts made in favor of educational and/or charitable or religious institutions shall be exempt from the donors tax provided that not more than 30% of said gifts shall be used by such donee for administration purposes. (Section 101[A][3]; Commissioner of Internal Revenue v. Court of Appeals, Court of Tax Appeals and Ateneo de Manila University, G.R. No. 115349, April 18, 1997).

XII. (5%)

Remedios, a resident citizen, died on November 10, 2006. She died leaving three condominium units in Quezon City valued at P5 Million each. Rodolfo was her only heir. He reported her death on December 5, 2006 and filed the estate tax, he asked the Commissioner of Internal Revenue to give him one year to pay the estate tax due. The Commissioner approved the request for extension of time provided that the estate tax be computed on the basis of the value of the property at the time of payment of the tax.

a. Does the Commissioner of Internal Revenue have the power to extend the payment of estate tax? If so, what are the requirements to allow such extension?

Yes, the Commissioner may extend the payment of the tax subject to the following conditions: 1. Timely payment would impose undue hardship upon the estate or the heirs; 2. Posting of a bond exceeding double the amount of the tax may be required by the Commissioner; 3. The extension shall not exceed 2 years in case of extrajudicial settlement of the estate or 5 years in case of judicial settlement. (Sec. 91, NIRC)

b. Does the condition that the basis of the estate tax will be the value at the time of the payment have legal basis? Reason briefly.

No. The value of the gross estate shall be determined at the time of death of the decedent. (Sections 85 and 90[A][1], NIRC)

XIII. (5%)

ABC Corporation won a tax refund case for P50 Million. Upon execution of the judgement and when trying to get the tax Credit Certificates (TCC) representing the refund, the Bureau of Internal Revenue (BIR) refused to issue the TCC on the basis of the fact that the corporation is under audit by the BIR and it has a potential tax liability. Is there a valid justification for the BIR to withhold the issuance of the TCC? Explain your answer briefly.

There is no valid justification to withhold the TCC. Offsetting of the amount of TCC against a potential tax liability is not allowed because both obligations are not yet fully liquidated. TCC has been determined as to its amount while the deficiency tax is yet to be determined through the completion of the audit. (Philex Mining Corporation v. Commissioner of Internal Revenue, Court of Appeals, and Court of Tax Appeals, G.R. No. 125704, August 28, 1998)


2007 bar questions and suggested answers


0 comments Saturday, April 18, 2009 Posted by Coffeeholic Writes Labels: Bar Examination Remedial Law

-I10% a. What are the rules on the recognition and enforcement of foreign judgments in our courts? (6%)

The rules on the recognition and enforcement of foreign judgments in our courts are as follows: 1. In the case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title to the thing. (Rule 39, Section 48[a], Rules of Court)

2. In case of a judgment or final order against a person, the judgment or final order is presumptive evidence against of a right as between the parties and their successors in interest by a subsequent title. (Rule 39, Section 48[b], Rules of Court)

3. In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, or fraud, or clear mistake of law or fact. (Rule 39, Section 48, last paragraph, Rules of Court)

b. Can a foreign arbitral award be enforced in the Philippines under those rules? Explain briefly. (2%)

No. Foreign arbitral awards are not enforced like foreign court judgments under Rule 39 of the Rules of Court, but they can be enforced under Section 44 (RA 9285, Alternative Dispute Resolution Act of 2004) A foreign arbitral award, when confirmed by the RTC, shall be enforced in the same manner as final and executory decisions of courts of the Philippines. Said law provides that the case shall be filed with the Regional Trial Court as a special proceeding, and if the 1958 New York Convention on the Recognition and Enforcement of Foreign Judgments is not applicable, the court may, on grounds of comity and reciprocity, recognize a non-convention award as a convention award.

c. How about a global injunction issued by a foreign court to prevent dissipation of funds against a defendant therein who has assets in the Philippines? Explain briefly. (2%)

Yes, a global injunction also known as the Mareva injunction, should be considered as an order of a foreign court. Therefore, the rule on recognition and enforcement of foreign judgments under Rule 39 must apply. (Asiavest Merchant Bankers v. CA, G.R. No. 110263, July 20, 2001) However, to prevent dissipation of funds, the action to enforce must be accompanied with an application for preliminary injuction.

- II 10%

True or False. If the answer is false, explain your answer briefly.

a. The surviving parties rule bars Maria from testifying for the claimant as to what the deceased Jose had said to her, in a claim filed by Pedro against the estate of Jose (3%) FALSE. For the survivor disqualification rule of the Dead Man Statute to apply, one of the requisites is that the witness being offered is either a party plaintiff, or his assignor or a person in whose behalf a case is prosecuted. (Rule 130, Section 23, Rules of Court). Hence, Maria, being a mere witness who does not fall within the prohibition, is not barred from testifying. (Section 23, Rule 130, Rules of Court; Razon v. Intermediate Appellate Court, G.R. Nos. 74306 and 74315, March 16, 1992).

b. A defendant who has been declared in default can avail of a petition for relief from the judgment subsequently rendered in the case. (3%) FALSE. A petition for relief is an equitable remedy that can be availed of only if the assailed judgment has been entered for being final and executory. (Sections 1 and 3, Rule 38, Rules of Court; Aboitiz International Forwarders, Inc., v. Court of Appeals, G.R. No. 142272, May 2, 2006 and other cases)

c. A motion is pleading. (2%) FALSE. A motion is not a pleading. A motion is an application for relief other than by a pleading (Section 1, Rule 15, 1997 Rules of Civil Procedure), except that in summary procedure when a prohibited motion to dismiss is filed, the court may treat the same as a pleading. Pleadings are the written statements of the respective claims and defenses on the parties submitted to the court for appropriate judgment. (Section 1, Rule 6, 1997 Rules of Civil Procedure)

d. A counterclaim is pleading. (2%) TRUE. A counterclaim is a pleading because it is claim submitted to the court for appropriate judgment. (Section 1, Rule 6, 1997 Rules of Civil Procedure). It is any claim which a defending party may have against an opposing party. (Section 6, Rule 6, 1997 Rules of Civil Procedure).

- III 10%

1. What is the hearsay rule? (5%)

The hearsay rule is that a witness can testify only to those facts which he knows of his personal knowledge; that is, those which are derived from his own perception, except as otherwise provided in the rules. (Section 36, Rule 130, Rules of Court). Moreover, hearsay evidence also includes all assertions though derived from personal knowledge, where the adverse party is not given an opportunity to crossexamine. (Section 36, Rule 130, Rules of Court)

2. In relation to the hearsay rule, what do the following rules of evidence have in common? (5%)

1. The rule on statements that are part of the res gestae; 2. The rule on dying declarations; 3. The rule on admissions against interest.

Statements that are part of the res gestae (Section 42, Rule 130, Rules of Court), dying declarations (Section 37, Rule 130, Rules of Court) and admissions against interest (Section 38, Rule 130, Rules of Court) are all exceptions to the hearsay rule.

- IV 10%

Husband H files a petition for declaration of nullity of marriage before the RTC of Pasig City. Wife W files a petition for habeas corpus before the RTC of Pasay City, praying for custody over their minor child. H files a motion to dismiss the wife's petition on the ground of the pendency of the other case. Rule.

The husbands motion to dismiss his wifes petition for habeas corpus, should be granted because the case for nullity of marriage constitutes litis pendentia. The custody of the minor child and the action for nullity of the marriage are not separate causes of action. Judgment on the issue of custody in the nullity of marriage case before the Pasig RTC, regardless of which party would prevail, would constitute res

judicata on the habeas corpus case before the Pasay RTC since the former has jurisdiction over the parties and the subject matter. (Yu v. Yu, G.R. No. 164915, March 10, 2006; Section 1[e], Rule 16, 1997 Rules of Civil Procedure; Section 2, Rule 102, Rules of Court). The evidence to support the petition for nullity necessarily involves evidence of fitness to take custody of the child as the court in the nullity proceedings has a duty under the Family Code to protect the bets interest of the child.


a. Distinguish the effects of the filling of a demurrer to the evidence in a criminal case and its filing in a civil case. (5%)

The effects of filing of a demurrer to the evidence in a criminal case. (Section 23, Rule 119, 2000 Rules of Criminal Procedure) are different from the effects of the filing of a demurrer in a civil case (Rule 33, 1997 Rules of Civil Procedure), as follows:

1. In a civil case, after the plaintiff has completed the presentation of his evidence, the defendant may move for dismissal on the ground that based on the facts and the law, the plaintiff has shown no right to relief. If the demurrer is denied, the movant shall have the right to present evidence. If the demurrer is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to present evidence. (Section 1, Rule 33, 1997 Rules of Civil Procedure).

2. In criminal cases, after the prosecution has rested its case, the court may dismiss the action on the ground of insufficiency of evidence (1) on its own initiative after giving the prosecution an opportunity to be heard or (2) upon demurrer to evidence filed by the accused with or without leave of court.

If the court denies the demurrer to evidence filed with leave of court, the accused may adduce evidence in his defense. When the demurrer to evidence is filed without leave of court, the accused waives his right to present evidence and submits the case for judgment on the basis of the evidence for the prosecution. The motion for leave of court to file demurrer to evidence shall specifically state its grounds and shall be filed within a non-extendible period of five (5) days from its receipt.

If the leave of court is granted, the accused shall file the demurrer to evidence within a non-extendible period of ten (10) days from notice. The prosecution may oppose the demurrer to evidence within a similar period from its receipt.

The order denying the motion for leave of court to file demurrer to evidence or the demurrer itself shall not be reviewable by appeal or certiorari before the judgment. (Section 23, Rule 119, 2000 Rules of Criminal Procedure)

b. What is reverse trial and when may it be resorted to? Explain briefly. (5%)

A reverse trial is a trial where the accused presents his evidence first before the prosecution submits its evidence. It may be resorted to when the accused admits the act or omission charged in the complaint or information but interposes a lawful or affirmative defense. (Section 11[e], Rule 119, 2000 Rules of Criminal Procedure; People v. Palabarica, G.R. No. 129285, May 7, 2001; Section 7, Speedy Trial Act)

In civil cases, the reverse trial may be resorted to by agreement of the parties or when the defendant sets up an affirmative defense.

- VI 10%

(a) On his way home, a member of the Caloocan City police force witnesses a bus robbery in Pasay City and effects the arrest of the suspect. Can he bring the suspect to Caloocan City for booking since that is where his station is? Explain briefly. (5%)

No. Under the Rules on Criminal Procedure, it is the duty of officer executing the warrant to arrest the accused and to deliver him to the nearest police station or jail without unnecessary delay. This rule equally applies to situations of warrantless arrest. (Section 3, Rule 113, Rules of Court)

(b) In the course of serving a search warrant, the police finds an unlicensed firearm. Can the police take the firearm even if it is not covered by the search warrant? If the warrant is subsequently quashed, is the police required to return the firearm? Explain briefly. (5%)

Yes. The police can take the unlicensed firearm even if it was not covered by the search warrant following the judicial precedent that prohibited articles may be seized for as long as the search warrant is valid. (People v. Cruz, G.R. No. 76728, August 30, 1988; People v. Mendi, G.R. Nos. 112978-81, February 19, 2001). If the warrant is subsequently quashed, the police are not required to return the firearm because it is unlicensed. It can, in fact, be ordered forfeited by the court. The search warrant does not refer to the unlicensed firearm.

- VII 10%

a. B files a petition for cancellation of the birth certificate of her daughter R on the ground of falsified material entries there in made by B's husband as the informant. The RTC sets the case for hearing and directs the publications of the order once a week for three consecutive weeks in a newspaper of general circulation. Summons was served on the Civil Registrar but there was no appearance during the hearing. The RTC granted the petition. R filed a petition for annulment of judgment before the Court of Appeals, saying that she was not notified of the petition and hence, the decision was issued in violation of due process. B opposed saying that the publication of the court order was sufficient compliance with due process. Rule. (5%)

Alternative Answer: Jurisdiction of the court over a petition for the cancellation of a birth certificate requires reasonable notice to all interested parties and also publication of the order once a week for three consecutive weeks in a newspaper of general circulation. (Section 4, Rule 108 Ceruila v. Delantar, G.R. No. 140305, December 9, 2005). In this case, publication of the order is insufficient because R, a directly concerned party, was not given reasonable notice, hence, denied due process. The lower court, therefore, did not acquire jurisdiction. Accordingly, the petition for annulment of judgment before the Court of Appeals should be granted.

Alternative Answer: In the cases of Republic v. Kho, G.R. No. 170340, 29 June 2007; Alba v. Court of Appeals, G.R. No. 164041, July 29, 2005; and Barco v. Court of Appeals, G.R. No. 120587, January 20, 2004, the court held that publication of the order of hearing under Section4 of Rule 108 cured the failure to implead an indispensable party. The court said that a petition for correction is an action in rem, an action against a thing and not against a person. The decision on the petition binds not only the parties thereto but the whole world. An in rem proceeding is validated essentially through publication. Publication is notice to the whole world that the proceeding has for its object to bar indefinitely all who might be minded to make an objection of any sort against the right sought to be established. It is the publication of such notice that brings in the whole world as a party in the case and vests the court with jurisdiction to hear and decide it.

b. G files a complaint for recovery of possession and damage against F. in the course of the trial, G marked his evidence but his counsel failed to file a formal offer of evidence. F then presented in evidence tax declarations in the name of his father to establish that his father is a co-owner of the property. The court ruled in favor of F, saying that G failed to prove sole ownership of the property in the face of F's evidence. Was the court correct? Explain briefly. (5%)

The court shall consider no evidence which has not been formally offered. The trial court rendered judgment considering only the evidence offered by F. The offer is necessary because it is the duty of the judge to rest his findings of fact and his judgment only and strictly upon the evidence offered by the parties at the trial (People v. Pecardal, G.R. No. 71381, November 24, 1986) and because the purpose for which the evidence is offered must be specified. (Section 34, Rule 1, Rules of Court.) However, there have been exceptional instances when the Court allowed exhibited documents which were not offered by duly identified by testimony and incorporated in the records of the case. (People v. Mate, L-34754, March 21, 1981).

- VIII 10%

a. X files an unlawful detainer case against Y before the appropriate Metropolitan Trial Court. In his answer, Y avers as a special and affirmative defense that he is a tenant of X's deceased father in whose name the property remains registered. What should the court do? Explain briefly. (5%)

The court should proceed to hear the case under the Rules of Summary Procedure. Unlawful detainer refers to actual physical possession, not ownership. Defendant Y, who is in actual possession, is the real party in interest. (Lao v. Lao, G.R. No. 149599, May 11, 2005) It does not matter if her is a tenant of the deceased father of the plaintiff, X, or that Xs father is the registered owner of the property. His term expired. He merely continues to occupy the property by mere tolerance and he can be evicted upon mere demand. (People v. Court of Appeals, G.R. No. 14364, June 3, 2004).

b. The heirs of H agree among themselves that they will honor the division of H's estate as indicated in her Last Will and Testament. To avoid the expense of going to court in a Petition for Probate of the Will, can they instead execute an Extrajudicial Settlement Agreement among themselves? Explain briefly. (5%)

No. The law states that no will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court. (Article 838, Civil Code; Lopez v. Gonzaga, G.R. No. L-18788, January 30, 1964). This probate of the will is mandatory. (Guevarra v. Guevarra, G.R. No.L-48840, December 29, 1943.)

- IX 10%

L was charged with illegal possession of shabu before the RTC. Although bail was allowable under his indictment, he could not afford to post bail, and so he remained in detention at the City Jail. For various

reasons ranging from the promotion of the Presiding Judge, to the absence of the trial prosecutor, and to the lack of the notice to the City Jail Warden, the arraignment of L was postponed nineteen times over a period of two years. Twice during that period, L's counsel filed motions to dismiss, invoking the right of the accused to a speedy trial. Both motions were denied by the RTC. Can L file a petition for mandamus? Reason briefly.

Yes, L can file a petition for mandamus, invoking the right to a speedy trial. (Section 3, Rule 65, 1997 Rules of Civil Procedure) The numerous and unreasonable postponements displayed an abusive exercise of discretion. (Lumanlaw v. Peralta, G.R. No. 164953, February 13, 2006)


a. RC filed a complaint for annulment of the foreclosure sale against Bank V. in its answer, Bank V set up a counter claim for actual damages and litigation expenses. RC filed a motion to dismiss the counterclaim on the ground the Bank V's Answer with Counterclaim was not accompanied by a certification against forum shopping. Rule. (5%)

The motion to dismiss the counterclaim should be denied. A certification against forum shopping should not be required in a compulsory counterclaim because it is not an initiatory pleading. (Section 5, Rule 7, 1991 Rules of Civil Procedure; Carpio v. Rural Bank of Sto. Tomas [Batangas], Inc., G.R. No. 153171, May 4, 2006)

b. A files a case against B. While awaiting decision on the case, A goes to the United States to work. Upon her return to the Philippines, seven years later, A discovers that a decision was rendered by the court in her favor a few months after she had left. Can a file a motion for execution of the judgment? Explain briefly. (5%)

No. A cannot file a motion for execution of the judgment seven years after the entry of the judgment. She can only do that within five (5) years from entry of judgment. However, she can file a case for revival of the judgment, which can be done before it is barred by the statute of limitations. (Section 6, Rule 39, 1997 Rules of Civil Procedure) which is within ten (10) years from the date of finality of the judgment. (Macias v. Lim, G.R. No. 139284, June 4, 2004)

NOTHING FOLLOWS. 2007 bar questions and suggested answers (POLITICAL LAW)

0 comments Saturday, April 18, 2009 Posted by Coffeeholic Writes Labels: Bar Examination Political and Public International Law

-I(10 points)

True or False. Briefly explain your answer. (a) For purposes of communication and instruction, the official languages of the Philippines are English and Filipino, until otherwise Alternative Answer: The statement is false. Article XIV, Section 7 of the 1987 Constitution provides that for purposes of communication and instruction, the official languages of the Philippines are Filipino and, until otherwise provided by law, English. Thus, while Filipino will always be an official language, Congress may, by law, remove English as the other official language. Hence, the statement is false as the continuation of English as an official language is subject to the control and discretion of Congress.

Alternative Answer: The statement is true. To be more precise, however, what is only to remain as official until otherwise provided by law is English. Filipino will always be an official language under the Charter.

(b) The 1987 Constitution has increased the scope of academic freedom recognized under the previous Constitution. Alternative Answer: The statement is true. The 1987 Constitution provides that academic freedom shall be enjoyed in all institutions of higher learning. This is more expansive in scope than the 1973 Constitution which stated that: All institutions of higher learning shall enjoy academic freedom. While the 1973 Charter suggests that academic freedom was institutional in the sense that it belonged to the colleges and universities, the present Charter gives the guaranty to all other components of the institution, including faculty and possibly students.

Alternative Answer: The statement is false. The scope of academic freedom remains the same. Article XIV, Section 5 (2) of the Constitution provides that academic freedom shall be enjoyed in all institutions of higher learning. As

held in U.P. Board of Regents v. Court of Appeals, G.R. No. 134629, August 31, 1999, This (provision) is nothing new. The 1935 and the 1973 Constitution likewise provided for academic freedom or, more precisely, for the institutional autonomy of universities and institutions of higher learning.

-II(10 points)

The City Mayor issues an Executive Order declaring that the city promotes responsible parenthood and upholds natural family planning. He prohibits all hospitals operated by the city from prescribing the use of artificial methods of contraception, including condoms, pills, intrauterine devices and surgical sterilization. As a result, poor women in his city lost their access to affordable family planning programs. Private clinics, however, continue to render family planning counsel and devices to paying clients.

(a) Is the Executive Order in any way constitutionally infirm? Explain. Alternative Answer: The Executive Order is constitutionally infirm. Under the 1987 Constitution, the State shall defend the right of spouses to establish a family in accordance with their religious convictions and the demands of responsible parenthood. (Art. XV, Sec. 3[1]). By upholding natural family planning and prohibiting city hospitals from prescribing artificial methods of contraception, the Mayor is imposing his religious beliefs on spouses who rely on the services of city hospitals. This clearly violates the above section of the Constitution.

Moreover, the 1987 Constitution states that no person shall be denied the equal protection of the laws. (Art. III, Sec. 1). The Constitution also provides that the state shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for all. (Art. II, Section 9). The loss of access of poor city women to family planning programs is discriminatory and creates suspect classification. It also goes against the demands of social justice as enshrined in the immediately preceding provision.

Alternative Answer: Yes. It constitutes an invalid exercise of police power and violates substantive due process by depriving people of the means to control their reproductive processes. Moreover, since the national government has not outlawed the use of artificial methods of contraception, then it would be against national policies. In addition, the Mayor cannot issue such Executive Order without an underlying ordinance. (Moday v, Court of Appeals, G.R. No. 107916, February 20, 1997) Besides, the action of the Mayor may be in violation of a persons right to privacy.

(b) Is the Philippines in breach of any obligation under international law? Explain. Alternative Answer: The Philippines might be in breach of its obligations under the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) of which the country is a signatory. Under the CEDAW, State Parties shall take all appropriate measures to eliminate discrimination against women in the field of health care in order to ensure, on basis of equality of men and women, access to health care services, including those related to family planning (Article 12, Section 1) Women shall likewise have access to adequate health care facilities, including information, counseling and services in family planning. (Article 14, Section 2[b]).

(c) May the Commission on Human Rights order the Mayor to stop the implementation of the Executive Order? Explain. Alternative Answer: No, the power of the Commission on Human Rights (CHR) is limited to fact-finding investigations. Thus, it cannot issue an order to desist against the mayor, inasmuch as the order prescinds from an adjudicatory power that CHR does not possess. (Simon v. Commission on Human Rights, G.R. No. 100150, January 5, 1994; Cario v. Commission on Human Rights, G.R. No. 96681, December 2, 1991.)

- III (10 Points)

Lawrence is a Filipino computer expert based in Manila who invented a virus that destroys all the files stored in a computer. Assume that in May 2005, this virus spread all over the world and caused $50 million in damage to property in the United States, and that in June 2005, he was criminally charged before United States courts under their anti-hacker law. Assume that in July 2005, the Philippines adopted its own anti-hacker law, to strengthen existing sanctions already provided against damage to property. The United States has requested the Philippines to extradite him to US courts under the RP-US Extradition Treaty.

a. Is the Philippines under an obligation to extradite Lawrence? State the applicable rule and its rationale. Alternative Answer: The Philippine is under no obligation to extradite Lawrence. Under the principle of dual or double criminality, the crime must be punishable in both the requesting and requested states to make it extraditable. In this case, only the United States had anti-hacker law at the time of the commission of the crime in May 2005. The rational for the principle of dual criminality rests in part on the basic principle of

reciprocity and in part of the maxim nulla poena sine lege. (LA Shearer, 1971 Extradition in International Law, Manchester University Press, Manchester, p. 137.)

b. Assume that the extradition request was made after the Philippines adopted its anti-hacker legislation. Will that change your answer? Alternative Answer: It will not change my answer as the rule is that the crime must be punishable in both countries at the time of the commission of the offense. Since there was yet no such crime in the Philippines at the time when the acts complained of were done, in so far as the Philippines is concerned, Lawrence did not commit any crime.

Alternative Answer: Yes, it will change my answer if a crime like malicious mischief could be considered the equivalent of the anti-hacker law and is punishable in both countries at the time of the request for extradition.

- IV (10 points)

In 1993, historians confirmed that during World War II, "comfort women" were forced into serving the Japanese military. These women were either abducted or lured by false promises of jobs as cooks or waitresses, and eventually forced against their will to have sex with Japanese soldiers on a daily basis during the course of the war, and often suffered from severe beatings and venereal diseases. The Japanese government contends that the "comfort stations" were run as "onsite military brothels" (or prostitution houses) by private operators, and not by the Japanese military. There were many Filipina "comfort women."

a. Name at least one basic principle or norm of international humanitarian law that was violated by the Japanese military in the treatment of the "comfort women." Alternative Answer: The Japanese military violated jus cogens norms of international law concerning war crimes, crimes against humanity like white slavery, sexual slavery and trafficking in women.

Alternative Answer:

The principle of military necessity was violated. It prohibits the use of any measure that is not absolutely necessary for the purposes of the war. Military necessity is governed by several constraints: An attack or action must be intended to help in the military defeat of the enemy, it must be an attack on a military objective and the harm caused to civilians or civilian property must be proportional and not excessive in relation to the concrete and direct military advantage anticipated. Having to force women of the enemy state to serve the sexual needs of the soldiers is not absolutely necessary for the conduct of the war.

b. The surviving Filipina "comfort women" demand that the Japanese government apologize and pay them compensation. However, under the 1951 San Francisco Peace Agreement -the legal instrument that ended the state of war between Japan and the Allied Forces -all the injured states, including the Philippines, received war reparations and, in return, waived all claims against Japan arising from the war. Is that a valid defense? Alternative Answer: No, that is not a valid defense. Even if it could be argued that the Philippines, by signing said Peace Agreement had the right as a state to bring further claims, it had no authority to waive the individual right to reparations vested directly in its nationals who were victims of sexual slavery. The Philippines can only validly waive its right to recovery of reparations for injuries to the state. Moreover, there is no defense for the violation of jus cogens norms.

Alternative Answer: No. The claim is being made by the individuals, not by the State and it is recognized that individuals may also be subjects of international law apart from the state. Further, the San Francisco Peace Agreement could not be interposed as a valid defense as this could not have been contemplated therein. The use of comfort women was only confirmed long after that Agreement. Moreover, Article 17 (3) of the New Civil Code provides that prohibitive laws concerning persons, their acts or property, and those which have for their object public order, policy and good customs, shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country.

c. The surviving Filipina "comfort women" sue the Japanese government for damages before Philippine courts. Will that case prosper? Alternative Answer: The case will not prosper in view of the doctrine of sovereign immunity from suit. However, a person who feels aggrieved by the acts of a foreign sovereign can ask his own government to espouse his cause through diplomatic channels. The comfort women can request the Philippine government, through the Department of Foreign Affairs, to espouse its claims against the Japanese government. (Holy See v. Rosario, G.R. No. 101949, December 1, 1994). The sovereign authority of a State to settle the claims of its national against foreign countries has repeatedly been recognized. This may be made without the consent of the nationals or even without consultation without them. (Dames and Moore v. Regan, 433 U.S. 654, [1981])

Alternative Answer: No. since the Philippines is a signatory to that Agreement, courts may not entertain a suit since that has been waived by the State. Moreover, it can be argued that there was no state action since the prostitution houses were being run by private operators, without the control or supervision of the Japanese government. (Southeast Case, United States v. Wilhelm List, Nuremberg Case No. 7, 1949).

-V(10 points)

The Destilleria Felipe Segundo is famous for its 15-year old rum, which it has produced and marketed successfully for the past 70 years. Its latest commercial advertisement uses the line: "Nakalikim ka na ba ng kinse anyos?" Very soon, activist groups promoting women's and children's rights were up in arms against the advertisement.

a. All advertising companies in the Philippines have formed an association, the Philippine Advertising Council, and have agreed to abide by all the ethicalguidelines and decisions by the Council. In response to the protests, the Council orders the pull-out of the "kinse anyos" advertising campaign. Can Destilleria Felipe Segundo claim that its constitutional rights are thus infringed? Alternative Answer: No, Destillera Felipe Segundo may not claim that its constitutional rights, particularly freedom of expression, have been infringed. The constitutional guarantee of freedom of speech is a guarantee only against abridgment by the government and does not apply to private parties. (People v. Marti, G.R. No. 81561, January 18, 1991). Moreover, Destillera freely joined the Philippine Advertising Council and is therefore bound by the ethical guidelines and decisions of that council.

Alternative Answer: No. Constitutional rights can be validly restricted to promote good morals. Moreover, what is being exercised is commercial expression which does not enjoy the same extent of freedom as political or artistic speech. (Central Hudson Gas & Electric v. PSC, 447 U.S. 557 [1980]). The order for the withdrawal comes not from the State but from a private group of advertisers which is not within the coverage of the Bill of Rights.

b. One of the militant groups, the Amazing Amazonas, call on all government-owned and controlled corporations (GOCC) to boycott any newspaper, radio or TV station that carries the "kinse anyos" advertisements. They call on all government nominees in sequestered corporations to block any advertising funds allocated for any such newspaper, radio or TV station. Can the GOCCs and sequestered corporations validly comply?

Alternative Answer: They may comply with such call as these entities may institute certain measures to promote a socially desirable end, namely, the prevention of the exploitation and abuse of women, especially those who are not yet of age.

Alternative Answer: The GOCCs and sequestered corporations may not be compelled to boycott or block advertising funds for media companies carrying the said advertisements. These companies may have existing contracts with the media companies concerned and non-compliance may result in breach that will open them to possible suits.

- VI (10 points) True or False. Briefly explain your answer. a. An amendment to the Constitution shall be valid upon a vote of three-fourths of all the Members of the Congress.

The statement is false. The Congress, acting as a constitutional assembly, may by vote of its membership only propose amendments to the Constitution. It is ratification by the people that validates the amendment.

b. All public officers and employees shall take an oath to uphold and defend the Constitution. The statement is true as under Section 40 of the Administrative Code of 1987 (Executive Order No. 292), it is provided that all public officers and employees of the government, including every member of the armed forces shall, before entering upon discharge of his duties, take an oath or affirmation to uphold and defend the Constitution.

- VII (10 Points) Batas Pambansa 880, the Public Assembly Law of 1985, regulates the conduct of all protest rallies in the Philippines.

a. Salakay, Bayan! held a protest rally and planned to march from Quezon City to Luneta in Manila. They received a permit from the Mayor of Quezon City, but not from the Mayor of Manila. They were able to

march in Quezon City and up to the boundary separating it from the City of Manila. Three meters after crossing the boundary, the Manila Police stopped them for posing a danger to pubHc safety. Was this a valid exercise of police power? Alternative Answer: Yes, the authorities are given the power to stop marchers who do not possess a permit. However, mere exercise of the right to peaceably assemble is not considered as a danger to public safety. They could have been asked to disperse peacefully, but it should not altogether be characterized as posing a danger to public safety. (Bayan v. Ermita, G.R. No. 169848, April 25, 2006; David v. Arroyo, G.R. No. 171390, May 3, 2006).

Alternative Answer: No, this is not a valid exercise of police power. Police power has been defined as the power of promoting public welfare by restraining and regulating the use of liberty and property. (City of Manila v. Laguio, G.R. No. 118127, April 12, 2005). It is principally the Legislature that exercises the power but it may be delegated to the President and administrative agencies. Local government units exercise the power under the general welfare clause.

In this case, if Salakay applied for a permit from the city government, the application must be approved or denied within two (2) working days from the date it was filed, failing which, the permit shall be deemed granted. (Section 16, B.P. Blg. 880). Even without a permit, the law does not provide for outright stopping of the march if the demonstrators, for example, were marching peacefully without impeding traffic.

b. The security police of the Southern Luzon Expressway spotted a caravan of 20 vehicles, with paper banners taped on their sides and protesting graft and corruption in government. They were driving at 50 kilometers per hour in a 40-90 kilometers per hour zone. Some banners had been blown off by the wind, and posed a hazard to other motorists. They were stopped by the security police. The protesters then proceeded to march instead, sandwiched between the caravan vehicles. They were also stopped by the security force. May the security police validly stop the vehicles and the marchers? Alternative Answer: Yes, the security police may stop the vehicles and the marchers but only to advise the leaders to secure their banners so that it will not pose a hazard to others. They may not be prevented from heading to their destination. The marchers may also be ordered to ride the vehicles so as not to inconvenience other uses of the Expressway.

Alternative Answer: Yes. While the protesters possess the right to freely express themselves, their actuations may pose a safety risk to other motorists and therefore be the subject of regulation. The security police may undertake measures to prevent any hazard to other motorists but not altogether prevent the exercise of the right. So,

to that extent, while the protesters maybe asked to remove the banners which pose hazard to other motorists and prevent them from using the expressway as a venue for their march, the security force may not prevent them from proceeding to where they might want to go.

- VIII (10 Points)

The Provincial Governor of Bataan requested the Department of Budget and Management (DBM) to release its Internal Revenue Allocation (IRA) of P100 million for the current budget year. However, the General Appropriations Act provided that the IRA may be released only if the province meets certain conditions as determined by an Oversight Council created by the President.

a. Is this requirement valid? No, this requirement is not valid. Under the 1987 Constitution, it is provided that local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them. As held in the case of Alternative Center for Organizational Reforms and Development, v. Zamora, G.R. No. 144256 (June 08, 2005), a basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the national internal revenue. The Local Government Code specifies further that the release shall be made directly to the LGU concerned within five (5) days after every quarter of the year and shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose.

b. The Provincial Governor is a party-mate of the President. May the Bataan Representative instead file a petition to compel the DBM to release the funds? Alternative Answer: Yes, the Bataan representative may file a petition to compel the release of funds as a suit may lie against a public officer to compel the performance of a ministerial function or a duty required by law.

Alternative Answer: Yes. A congressman from a particular LGU may validly have standing to demand that IRA for his province be released in accordance with the Constitution and the Local Government Code. As a representative of his province, he has a responsibility towards his constituencies who can expect no less than faithful compliance with the Constitution. Moreover, the issue presented could be characterized as involving transcendental importance to the people and the local government units which had been guaranteed greater local autonomy.

- IX (10 Points)

The Department of Education (DepEd) requires that any school applying for a tuition fee increase must, as a condition for the increase, offer full tuition scholarships to students from low-income families. The Sagrada Familia Elementary School is a Catholic school and has applied for a tuition fee increase. Under this regulation by the DepEd, it will end up giving tuition scholarships to a total of 21 students next year. At a cost of P50,OOO per student, the school will lose a total of P1.05 million for next year.

a. Is this DepEd requirement valid? No. It constitutes deprivation of property without due process of law. The law is confiscatory as it unduly shifts the burden of providing for the welfare of the poor to the private sector. The objective may be laudable but the means would be arbitrary and unreasonable. (Quezon City v. Judge Ericta, G.R. No. 34195, June 24, 1983).

b. If instead the DepEd requires a full tuition scholarship for the highest ranking students in each grade, determined solely on the basis of academic grades and rank, will the DepEd requirement be valid? Alternative Answer: No. It would make a difference in my answer as this would still constitute a deprivation of property without due process of law. (Balacuit v. CFI, G.R. no. 38429, June 30, 1988).

Alternative Answer: Yes. Here, the matter may be considered as a reasonable regulation exacted from those who seek some form of accommodation from the government. (Telebap v. COMELEC, G.R. No. 132922, April 21, 1998). In exchange for what they get as a concession from the State, these institutions may be required to shoulder part of the cost of promoting quality education for deserving citizens.

-X(10 Points)

The Supreme Court has provided a formula for allocating seats for party-list representatives.

a. The twenty percent allocation - the combined number of all party-Iist congressmen shall not exceed twenty percent of the total membership of the House of Representatives, including those elected under the party list;

Section 5(2), Article VI of the Constitution, as implemented by R.A. No. 7941. The purpose is to assure that there will be at least a guaranteed portion of the House of Representatives reserved for the party-list members. The legislative policy is to promote the election of party-list representatives in order to enable Filipinos belonging to the marginalized and underrepresented sectors to contribute legislation that would benefit them.

b. The two percent threshold - only those parties garnering a minimum of two percent of the total valid votes cast for the party-list system are "qualified" to have a seat in the House of Representatives;

R.A. No. 7941. This is to ensure that the party-list organizations at least represents a significant portion of those voting for the party-list system that they at least have a substantial constituency which must, at the minimum, not be less than two percent (2%) of the total number of those casting their votes for partylist organizations.

c. The three-seat limit - each qualified party, regardless of the number of votes it actually obtained, is entitled to a maximum of three seats; that is, one "qualifying" and two additional seats; and

R.A. No. 7941. This is to prevent any dominant party-list organization from having a monopoly of the seats for the party-list system. Since the objective of the party-list system is to enable other groups who might otherwise have difficulty getting to Congress through the traditional system of elections, then the system developed to accommodate them must be fair and equitable enough to afford better odds to as many groups as possible.

d. The first-party rule - additional seats which a qualified party is entitled to shall be determined in relation to the total number of votes garnered by the party with the highest number of votes.

R.A. No. 7941. The party-list system is predicated, among others, on proportional representation. Thus, there is need to reflect the same in relation to the total number of votes obtained. Accordingly, the first party must not be placed on the same footing as the others who obtained less votes. The votes obtained by first placer would be the reckoning point for the computation of additional seats or members for the remaining organizations who got at least two percent (2%) of the votes cast for the party-list system. (Veterans Federation Party v. COMELEC, G.R. No. 136781, October 6, 2000).

For each of these rules, state the constitutional or legal basis, if any, and the purpose.


2007 bar questions and suggested answers (MERCANTILE LAW) 0 comments Friday, April 17, 2009 Posted by Coffeeholic Writes Labels: Bar Examination Mercantile Law

I. (10%)

R issued a check for P1M which he used to pay S for killing his political enemy. Reason briefly in (a), (b) and (c).

a. Can the check be considered a negotiable instrument? Yes, the check can be considered a negotiable instrument. In ascertaining the character of the instrument, the primordial and only consideration is its compliance with Section 1 of the Negotiable Instruments Law. Since the problem states that a check has been issues, we presume that it has all the other terms mandated under Section 1, and if it was issued payable to order or bearer, then it is a negotiable instrument.

b. Does S have a cause of action against R in case of dishonor by the drawee bank? No, S does not have a cause of action against R in case of dishonor by the drawee bank. There is still an underlying contractual relationship between S and R, evidenced by the check, and needs a valid consideration to support it. Under Section 28 of the Negotiable Instruments Law, such illegality of consideration is a defense against immediate parties but not against a holder in due course (i.e., personal defense). The consideration for the issuance of the check, as between S and R, is void involving as it does the killing of the political enemy of R.

c. If S negotiated the check to T, who accepted it in good faith and for value, may R be held secondarily liable by T? R may be held secondarily liable by T. T enjoys the presumption being a holder in due course because every holder is deemed prima facie to be a holder in due course. (Section 59, Negotiable Instruments Law), especially since he took the check in good faith and for value. Section 57 of the Negotiable Instruments Law states , A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.

II. (10%) Alex deposited goods for which Billy, warehouseman, issued a negotiable warehouse receipt wherein the goods were deliverable to Alex or order. Alex negotiated the receipt to 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 warehouseman deliver the goods upon demand? The warehouseman should deliver the goods to Caloy. The goods cannot be attached by garnishment or otherwise, or levied upon, unless the receipt be first surrendered to the warehouseman, or its negotiation is enjoined. (Section 25, Warehouse Receipts Law)

b. Would you answer be the same if the warehouseman issued a non-negotiable warehouse receipt? Reason briefly. No. The non-negotiable warehouse receipt does not confer upon the transferee the direct obligation of the warehouseman to hold possession of the goods for him. (Section 42, Warehouse Receipts Law). In such case, the law provides that when a non-negotiable warehouse receipt is transferred to Caloy, he only gets such title to the goods as Alex had and also a right to notify the warehouseman to hold the goods for Caloys account. Prior to such notice, Caloys claim can be defeated by a levy of execution upon the goods by a creditor of Alex.

III. (5%)

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 another's 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.

Yes, Greg is guilty of copyright infringement. The instant messages of Diana and Piolo are deemed to constitute letters (Section 172.1[d], Intellectual Property Code) which are protected by the sole fact of their creation irrespective of their mode or form of expression, as well as their content, quality, and purpose. (Section 172.2[d], Intellectual Property Code). For copyright to exist, it must be found in a tangible medium, usually in written form, which is fulfilled by the instant messages. Under the Electronic Commerce Act, whenever the law requires certain contracts or acts to be in writing to be valid and enforceable, then such requirement is deemed fulfilled when they are in the form of an electronic document. The instant messages are deemed to be in writing under the Electronic Commerce Act for they are in digital form or constitute electronic documents.

IV. (10%)

Alfredo took out a policy to insure his commercial building against fire. The broker for the insurance company agreed to give a 15-day credit within which to 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.Reason briefly in (a), (b) and (c).

a. May Alfredo recover on the insurance policy? Yes, Alfredo can recover on the insurance policy. Although Section 77 of the Insurance Code provides that in fire insurance, payment of premium is necessary for validity of the policy (also known as cash and carry provision), nonetheless, the rule has been modified by the decisions of the Supreme Court after the promulgation of the Insurance Code. Thus, in UCPB General Insurance v. Masagana Telemart, G.R. No. 137172, April 4, 2001, it was held that the insured should be allowed to recover on losses sustained even when premium was paid after the fact of loss, provided payment was received by the insurer during the credit period given to the insured. (See also South Sea Surety v. Court of Appeals, G.R. No. 102253, June 2, 1995; American Home Assurance v. Chua, G.R. No. 130421, June 28, 1999) where the Supreme Court ruled that is the check payment for premium was received by the insurer prior to the loss or within the credit period, the insured was allowed to recover.

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?

Yes, recovering under an insurance contract is allowed if the cause of the loss was either the proximate or the immediate cause as long as an expected peril was not the proximate cause of the loss. (Section 86, Insurance Code of the Philippines.) The fire being the immediate cause for the loss of the commercial building, would warrant recovery under the policy.

c. If the fire was found to have been caused by Alfredo's own negligence, can he still recover on the policy? Yes, he can still recover. The doctrine of contributory negligence does not in any way apply to rights under a contract of insurance, unless it is a case of willful act. (Section 87, Insurance Code of the Philippines)

V. (5%)

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 a loan to pay 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 on the loan, F Bank charged him with violation of the Trust Receipts Law.

a. What is a Trust Receipt? A trust receipt is a security transaction intended to aid financing importers or dealers in merchandise by allowing them to obtain delivery of the goods under certain covenants. (Section 4, Trust Receipts Law). It is a document executed between the entrustor and the entrustee, under which the goods are released to the latter who binds himself to hold the goods in trust, or to sell or dispose of the goods with the obligations to turn over the proceeds to the entrustor to the extent of the entrustees obligation to him, or if unsold, to return the goods.

b. Will the case against C prosper? Reason briefly. No. It is not covered by the Trust Receipts Law. In Consolidated Bank v. Court of Appeals, G.R. No. 114286, April 19, 2001, where debtor received goods subject of trust receipt before trust receipt itself was entered into, it was held that the transaction in question was a simple loan. Colinares v. Court of Appeals, G.R. No. 90828, September 5, 2000 held that the Trust Receipts Law does not seek to enforce payment of loan, rather it punishes dishonesty and abuse of confidence in handling of money or goods to the prejudice of another regardless of whether the latter is the owner.



Discuss the trust fund doctrine The Trust Fund Doctrine refers to the principle that the capital stock, property and other assets of the corporation are regarded as equity in trust for payment of corporate creditors. This doctrine is the underlying principle in the procedure for the distribution of capital assets, embodied in Corporation Code, which allows the distribution of corporate capital only in three instances: (1) amendment of the Articles of Incorporation to reduce the authorized capital stock, (2) purchase of redeemable shares by the corporation, regardless of the existence of unrestricted retained earnings, and (3) dissolution and eventual liquidation of the corporation. Furthermore, the doctrine is articulated in Section 41 on the power of a corporation to acquire its own shares and in Section 122 on the prohibition against the distribution of corporate assets and property unless the stringent requirements therefore are complied with. (Ong Yong v. Tiu, G.R. No. 144476, April 8, 2003)

VII. (10%)

In a stockholder's meeting, S dissented from the corporate act converting preferred voting shares to nonvoting shares. Thereafter, S submitted his certificates of stock for notation that 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.

a. What is the meaning of a stockholder's appraisal right? It is the right of a stockholder to withdraw from the corporation and demand in writing, payment of the fair value of his shares after registering his dissent from certain specified corporate acts involving fundamental changes in corporate structures provided that the corporation has sufficient unrestricted retained earnings. (Section 81, Commercial Code of the Philippines)

b. Can T exercise the right of appraisal? Reason briefly. No. If shares represented by the certificates bearing such notation are transferred, and the certificates consequently cancelled, the rights of the transferor as a dissenting stockholder shall cease and the transferee shall have all the rights of a regular stockholder. (Section 86, Corporation Code). T cannot exercise the right of appraisal because the certificates containing the notation of Ss dissent have been canceled. Upon such cancellation, Ss rights as a dissenting stockholder have ceased. In such a case, a new certificate without notation will be issued to T, who will be treated as a regular stockholder.



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 bank's 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? Alternative Answer: No, the act of the President is not valid. Receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way. (Villanueva v. CA, G.R. No. 114870, May 26, 1995). More importantly, under the New Central Bank Act, when a bank had been placed under receivership by the Bangko Sentral ng Pilipinas, and especially in this case where it has been ordered to be closed, the conservator, or in this case the receiver, effectively replaces the Board of Directors in exercising corporate powers.

Alternative Answer: Under the Corporation Law, the acts of the President do not fall within his apparent authority, and do not bind the corporation without prior authority of the Board of Directors, which under Section 23 of the Corporation Code is the sole repository of corporate powers.

b. Will a suit to enforce the exclusive right of the investors to purchase the property prosper? Reason briefly. The suit will not prosper. The appointment of a receiver operates to suspend the authority of the bank and its directors and officers over its property and effects, such authority being reposed in the receiver. The receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way. (Abacus Real Estate Development Center, Inc. v. The Manila Banking Corporation, G.R. No. 162279, April 6, 2005, citing Villanueva v. Court of Appeals, G.R. No. 114870, May 26, 1995).

IX. (5%)

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 extrajudicially 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.

No. RED corporation has only one (1) year from the auction sale to redeem the property. (Section 6, Act No. 3135; Section 47, General Banking Law of 2000). Instead, RED Corporation allowed three (3) years to lapse. RED Corporation should be deemed to have waived its right to redeem the property.

X. (5%)

Name at least five (5) predicate crimes to money laundering. The predicate crimes to money laundering are: 1. Kidnapping for ransom; 2. Violations of the Dangerous Drug Act; 3. Violations of the Anti-Graft and Corrupt Practices Act; 4. Plunder 5. Robbery and Extortion; 6. Jueteng and Masiao; 7. Piracy on the high seas; 8. Qualified Theft; 9. Swindling; 10. Smuggling; 11. Violations of the Electronic Commerce Act of 2000; 12. Hijacking, destructive arson, murder, and the other acts of terrorists against non-combatant persons and similar targets; 13. Fraudulent practices punished by the Securities Regulation Code of 2000; and 14. Felonies or offenses of a similar nature that are punishable under the penal laws of other countries.

XI. (10%)

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.

a. What is a maritime protest? A maritime protest is a written confirmation that must be formally lodged before a competent authority, by the captain or master of the innocent vessel, which has figured in a collision or shipwreck, within 25 hours upon arrival at the nearest port, failure of which bars recovery for loss or damage, no matter how meritorious the claim may be. (Article 835, Code of Commerce)

b. Can A and B successfully maintain an action to recover losses and damages arising from the collision? Reason briefly. A, being a passenger, cannot maintain the action to recover losses without a prior protest. B can recover because the lack of protest will not prejudice such actions to recover damage caused to persons or cargo whose owners were not on board the vessel at the time of collision. (Article 836, Code of Commerce).

XII. (5%)

Seeking to streamline its operations and to bail 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 out its manufacturing business and to sink the proceeds of the sale for the expansion of its cargo transport services.

a. Would the transaction be covered by the provisions of the Bulk Sales Law? Alternative Answer: Under a decision of the Court of Appeals (People v. Wong, G.R. No. 9776-R, March 26, 1954), it was held that the transaction can not be covered by the Bulk Sales Law, which only covers merchants who are engaged in the sale of goods and merchandise. A manufacturing concern is not considered to be a merchant business, more so when it is pursued as part of another service business, in this case the cargo transport services.

Alternative Answer: When it comes to the sale of all or substantially all of the machineries and equipment, which under the Bulk Sales Law is separate type of bulk sale apart from the sale of goods or merchandise in the ordinary course of business, such transactions are still covered by the Bulk Sales Law.

b. How would X Corporation effect a valid sale? Alternative Answer: X Corporation must comply with Sections 3, 4 and 5 of the Bulk Sales Law, namely: (1) deliver sworn statement of the names and addresses of all the creditors to whom the vendor or mortgagor may be indebted together with the amount of indebtedness due or owing to each of the said creditors; (2) apply the purchase or mortgage money to the pro-rata payment of bona fide claims of the creditors and (3) make full detailed history of the stock of goods, wares , merchandise, provisions or materials, in bulk, and notify every creditor at least ten (10) days before transferring possession.

Alternative Answer: Important corporate acts or contracts must be pursued under the direction of the Board of Directors is embodied in Section 23 of the Corporation Code. Even the sale of all or substantially all of its assets requires the prior approval of the board of directors and the ratification of stockholders owning or representing at least two-thirds (2/3) of its outstanding capital stock (Section 40, Corporation Code of the Philippines)

Under the Bulk Sales Law, X Corporations should either: (a) get the waiver of all its creditors as required under the Bulk Sales Law; or (b) if such waiver cannot be obtained, comply with the requirements under the Bulk Sales Law to prepare and give copy of the sworn certification not only of the assets being disposed of, but also the proper listing of the existing creditors of X Corporation, and thereafter to apply the proceeds of the sale proportionately to all the listed creditors. Otherwise, the sale may be vulnerable to being challenged to be fraudulent and void under the Bulk Sales Law. (Islamic Directorate of the Philippines v. Court of Appeals, G.R. No. 117897, May 14, 1997).

XIII. (10%)

a. What are the preferred claims that shall be satisfied first from the assets of an insolvent corporation?

After debtors assets have been liquidated, unless a composition has been agreed upon by the debtors creditors, debtors obligation shall be paid in the following order: 1. Article 2241 New Civil Code Specific movable property. 2. Article 2242 Specific immovable property 3. Preferred claims under Article 2244 In the order named. 4. Article 2245 New Civil Code Common credits shall be paid pro-rata. N.B. A comprehensive answer for XIII (A) would impose an unreasonable memorization of the codal provisions.

b. How shall the remaining non-preferred creditors share in the estate of the insolvent corporation above? The remaining credits do not enjoin any preference. Hence, these creditors shall be paid pro-rata. (Articles 2244 and 2251[2], Civil Code)