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2008 Legal Ethics an d P r actical Exercises B ar

Q uestio ns (/bar-exam in atio ns/bar-q uestio ns
/91-2008-bar-exam -que stio ns/223-2008-legal-
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2008 Legal Ethics and P ractical

Exercises Bar Q uestions
I

Christine was appointed counsel de oficio for Zuma, who was accused of raping his
own daughter. Zuma pleaded not guilty but thereafter privately admitted to Christine
that he did commit the crime charged.
a) In light of Zuma’s admission, what should Christine do? Explain. (3%)

b) Can Christine disclose the admission of Zuma to the court? Why or why not? (2%)

c) Can Christine withdraw as counsel of Zuma should he insist in going to trial?

Explain. (3%)

II

In 1998, Acaramba, a telecommunications company, signed a retainer agreement with

Bianca & Sophia Law Office (B & S) for the latter’s legal services for a fee of P2,000 a
month. From 1998 to 2001, the only service actually performed by B & S for
Acaramba was the review of a lease agreement and representation of Acaramba as a
complainant in a bouncing checks case. Acaramba stopped paying retainer fees in
2002 and terminated its retainer agreement with B & S in 2005. In 2007, Temavous,
another telecommunications company, requested B & S to act as its counsel in the
following transactions: (a) the acquisition of Acaramba; and (b) the acquisition of
Super-6, a company engaged in the power business.

In which transactions, if any, can Bianca & Sophia Law Office represent Temavous?
Explain fully. (7%)

III

Dumbledore, a noted professor of commercial law, wrote an article on the subject of

letters of credit which was published in the IBP Journal.

a) Assume he devoted a significant portion of the article to a commentary on how the

Supreme Court should decide a pending case involving the application of the law on
letters of credit. May he be sanctioned by the Supreme Court? Explain. (4%)

b) Assume Dumbledore did not include any commentary on the case. Assume further
after the Supreme Court decision on the case had attained finality, he wrote another
IBP Journal article, dissecting the decision and explaining why the Supreme Court
erred in all its conclusions. May he be sanctioned by the Supreme Court? Explain.
(3%)

IV

Chester asked Laarni to handle his claim to a sizeable parcel of land in Quezon City
against a well-known property developer on a contingent fee basis. Laarni asked for
15% of the land that may be recovered or 15% of whatever monetary settlement that
may be received from the property developer as her only ee contingent upon securing
a favorable final judgment or compromise settlement. Chester signed the contingent
fee agreement.

a) Assume the property developer settled the case after the case was decided by the
Regional Trial Court in favor of Chester for P1 Billion. Chester refused to pay Laarni
P150 Million on the ground that it is excessive. Is the refusal justified? Explain. (4%)

b) Assume there was no settlement and the case eventually reached the Supreme
Court which promulgated a decision in favor of Chester. This time Chester refused to
convey to Laarni 15% of the litigated land as stipulated on the ground that the
agreement violates Article 1491 of the Civil Code which prohibits lawyers from
acquiring by purchase properties and rights which are the object of litigation in which
they take part by reason of their profession. Is the refusal justified? Explain. (4%)

The vendor filed a case against the vendee for the annulment of the sale of a piece of
land.

a) Assume the vendee obtained a summary judgment against the vendor. Would the
counsel for the defendant vendee be entitled to enforce a charging lien? Explain. (4%)

b) Assume, through the excellent work of the vendee’s counsel at the pre-trial
conference and his wise use of modes of discovery, the vendor was compelled to move
for the dismissal of the complaint. In its order the court simply granted the motion.
Would your answer be the same as in question (a)? Explain. (3%)

VI

Atty. Abigail filed administrative cases before the Supreme Court against Judge Luis.
Thereafter, Atty. Abigail filed a Motion for Inhibition praying that Judge Luis inhibit
himself from trying, hearing or in any manner acting on all cases, civil and criminal, in
which Atty. Abigail is involved and handling. Should Judge Luis inhibit himself as
prayed for by Atty. Abigail? Explain fully. (6%)

VII

In need of legal services, Niko secured an appointment to meet with Atty. Henry of
Henry & Meyer Law Offices. During the meeting, Niko divulged highly private
information to Atty. Henry, believing that the lawyer would keep the confidentiality of
the information. Subsequently, Niko was shocked when he learned that Atty. Henry had
shared the confidential information with his law partner, Atty. Meyer, and their common
friend, private practitioner Atty. Canonigo. When confronted, Atty. Henry replied that
Niko never signed any confidentiality agreement, and that he shared the information
with the two lawyers to secure affirmance of his legal opinion on Niko’s problem. Did
Atty. Henry violate any rule of ethics? Explain fully. (7%)

VIII

State, with a brief explanation, whether the lawyer concerned may be sanctioned for
the conduct stated below.

a) Filing a complaint that fails to state a cause of action, thereby resulting in the
defendant succeeding in his motion to dismiss. (3%)

b) A suspended lawyer working as an independent legal assistant to gather

information and secure documents for other lawyers during the period of his
suspension. (3%)

c) A suspended lawyer allowing his non-lawyer staff to actively operate his law office
and conduct business on behalf of clients during the period of suspension. (3%)

d) Keeping money he collected as rental from his client’s tenant and remitting it to the
client when asked to do so. (3%)

e) Refusing to return certain documents to the client pending payment of his

attorney’s fees. (3%)

f) An unwed female lawyer carrying on a clandestine affair with her unwed male
hairdresser. (3%)

g) Not paying the annual IBP dues. (3%)

IX

State, with a brief explanation, whether the judge concerned may be sanctioned for
the conduct stated below.

a) Refusing to inhibit himself although one of the lawyers in the case is his second
cousin. (3%)

b) Deciding a case in accordance with a Supreme Court ruling but adding that he does
not agree with the ruling. (3%)

c) Dictating his decision in open court immediately after trial. (3%)

Ian Alba owns a house and lot at No. 9 West Aguila, Green Cross Subdivision, Quezon
City, which he leased to Jun Miranda for a term of two years starting May 1, 2006, at a
monthly rental of P50,000. Jun defaulted in the payments of his rentals for six (6)
months, from January 1, 2007 to June 30, 2007.

a) Prepare a demand letter as lawyer of Ian Alba addressed to Jun Miranda

preparatory to filing an ejectment case. (3%)

b) Assume Jun Miranda did not heed your demand letter. Draft a complaint for
ejectment. (Omit verification and affidavit of non-forum shopping). (9%)

XI

Draft a complete deed of donation of a piece of land in accordance with the form
prescribed by the Civil Code. (8%)

2008 B ar Exam ination M ercantile /

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BAR EXAM IN ATIO N 200 8

M ERCAN TILE LAW

21 September 2008 8:00 A.M. - 12 Noon

INSTRUCTIONS

This questionnaire consists of fourteen (19) numbers contained in

nine (9) pages. Read each question very carefully. Answer legibly,
clearly and concisely. Start each number on a separate page; an
answer to a subquestion under the same number may be written
continuously on the same page and on the immediately succeeding
pages until completed. Do not repeat the question.

You will be given credit for your knowledge of legal doctrine and for
the quality of your legal reasoning. A mere “Yes” or “No” answer
without any corresponding discussion will not be given any credit.

HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE

GOOD LUCK!!!

Signed DANTE O. TINGA

Chairperson
2008 Bar Examination
Committee
 PLEASE CHECK THE NUMBER OF PAGES IN THIS SET
WARNING: NOT FOR SALE OR UNAUTHORIZED USE

MERCANTILE LAW
I

X corporation entered into a contract with PT Contruction Corp. for

the latter to construct and build a sugar mill within six (6) months.
They agreed that in case of delay, PT Construction Corp. will pay X
Corporation P100,000 for every day of delay. To ensure payment of
the agreed amount of damages, PT Construction Corp. secured
from Atlantic Bank a confirmed and irrevocable letter of credit
which was accepted by X Corporation in due time. One week before
the expiration of the six (6) month period, PT Construction Corp.
requested for an extension of time to deliver claiming that the delay
was due to the fault of X Corporation. A controversy as to the cause
of the delay which involved the workmanship of the building
ensued. The controversy remained unresolved. Despite the
controversy, X Corporation presented a claim against Atlantic Bank
by executing a draft against the letter of credit.

1. Can Atlantic Bank refuse payment due to the unresolved

controversy? Explain. (3%)
2. Can X Corporation claim directly from PT Construction Corp.?
Explain. (3%)

II

Tom Cruz obtained a loan of P 1 Million from XYZ Bank to finance

his purchase of 5,000 bags of fertilizer. He executed a trust receipt
in favor of XYZ Bank over the 5,000 bags of fertilizer. Tom Cruz
withdrew the 5,000 bags from the warehouse to be transported to
Lucena City where his store was located. On the way, armed robbers
took from Tom Cruz the 5,000 bags of fertilizer. Tom Cruz now
claims that his obligation to pay the loan to XYZ Bank is
extinguished because the loss was not due to his fault. Is Tom Cruz
correct? Explain. (4%)

III

1. As a rule under the Negotiable Instruments Law, a subsequent

party may hold a prior party liable but not vice-versa. Give two
(2) instances where a prior party may hold a subsequent party
liable. (2%)
2. How does the “shelter principle” embodied in the Negotiable
Instruments Law operate to give the rights of a holder-in-due
course to a holder who does not have the status of a holder-
in-due course? Briefly explain. (2%)

IV

AB Corporation drew a check for payment to XY Bank. The check

was given to an officer of AB Corporation who was instructed to
deliver it to XY Bank. Instead, the officer, intending to defraud the
Corporation, filled up the check by making himself as the payee and
delivered it to XY Bank for deposit to his personal account. AB
Corporation come to know of the officer’s fraudulent act after he
absconded. AB Corporation asked XY Bank to recredits its amount.
XY Bank refused.

1. If you were the judge, what issues would you consider relevant
to resolve the case? Explain (3%)
2. How would you decide the case? Explain. (2%)

Pancho drew a check to Bong and Gerard jointly. Bong indorsed the
check and also forged Gerard’s endorsement. The payor bank paid
the check and charged Pancho’s account for the amount of the
check. Gerard received nothing from the payment.

1. Pancho asked the payor bank to recredit his account. Should

the bank comply? Explain fully. (3%)
2. Based on the facts, was Pancho as drawerdischarged on the
instrument? Why?(2%)

VI

On January 1, 2000, Antonio Rivera secured a life insurance from

SOS Insurance Corp. for P1 Million with Gemma Rivera, his adopted
daughter, as the beneficiary. Antonio Rivera died on March 4, 2005
and in the police investigation, it was ascertained that Gemma
Rivera participated as an accessory in the killing of Antonio Rivera.
Can SOS Insurance Corp. avoid liability by setting up as a defense
the participation of Gemma Rivera in the killing of Antonio Rivera?
Discuss with reasons. (4%)

VII

Terrazas de Patio Verde, a condominium building, has a value of

P50 Million. The owner insured the building against fire with three
(3) insurance companies for the following amounts:

Northern Insurance Corp. - P20 Million

Southern Insurance Corp. - P30 Million

Eastern Insurance Corp. - P50 Million

1. Is the owner’s taking of insurance for the building with three
(3) insurers valid? Discuss. (3%)
2. The building was totally razed by fire. If the owner decides to
claim from Eastern Insurance Corp. only P50 Million, will the
claim prosper? Explain. (2%)

VIII

City Railways, Inc. (CRI) provides train services, for a fee, to

commuters from Manila to Calamba, Laguna. Commuters are
required to purchase tickets and then proceed to designated
loading ang unloading facilities to board the train. Ricardo Santos
purchased a ticket for Calamba and entered the station. While
waiting, he had an altercation with the security guard of CRI leading
to a fistfight. Ricardo Santos fell on the railway just as a train was
entering the station. Ricardo Santos was run over by the train. He
died.
In the action for damages filed by the heirs of Ricardo Santos, CRI
interposed lack of cause of action, contending that the mishap
occurred before Ricardo Santos boarded the train and that it was
not guilty of negligence. Decide.(5%)

IX

On October 30, 2007, M/V Pacific, a Philippine registered vessel

owned by Cebu Shipping Company (CSC), sank on her voyage from
Hong Kong to Manila. Empire Assurance Company (Empire) is the
insurer of the lost cargoes loaded on board the vessel which were
consigned to Debenhams Company. After it indemnified
Debenhams, Empire as subrogee filed an action for damages
against CSC.

1. Assume that the vessel was seaworthy. Before departing, the

vessel was advised by the Japanese Meteorological Center that
it was safe to travel to its destination. But while at sea, the
vessel received a report of a typhoon moving within its general
path. To avoid the typhoon, the vessel changed its course.
However, it was still at the fringe of the typhoon when it was
repeatedly hit by huge waves, foundered and eventually sank.
The captain and the crew were saved except three (3) who
perished. Is CSC liable to Empire? What principle of maritime
law is applicable? Explain. (3%)
2. Assume the vessel was not seaworthy as in fact its hull had
leaked, causing flooding in the vessel. Will your answer be the
same? Explain. (2%)
3. Assume the facts in question (b). Can the heirs of the three (3)
crew members who perished recover from CSC? Explain fully.
(3%)

Nelson owned and controlled Sonnel Construction Company. Acting

for the company, Nelson contracted the construction of a building.
Without first installing a protective net atop the sidewalks adjoining
the construction site, the company proceeded with the construction
work. One day a heavy piece of lumber fell from the building. It
smashed a taxicab which at that time had gone offroad and onto
the sidewalk in order to avoid the traffic. The taxicab passenger
died as a result.

1. Assume that the company had no more account and property in

its name. As counsel for the heirs of the victim, whom will you
sue for damages, and what theory will you adopt? (3%)
2. If you were the counsel for Sonnel Construction, how would you
defend your client? What would be your theory? (2%)
3. Could the heirs hold the taxicab owner and driver liable?
Explain. (2%)

XI

1. Since February 8, 1935, the legislature has not passed even a

single law creating a private corporation. What provision of the
Constitution precludes the passage of such a law? (3%)
2. May the composition of the board of directors of the National
 Power Corporation (NPC) be validly reduced to three (3)?
explain your answer fully. (2%)

XII

Pedro owns 70% of the subscribed capital stock of a company

which owns an office building. Paolo and Juan own the remaining
stock equally between them. Paolo also owns a security agency, a
janitorial company and a catering business. In behalf of the office
building company, Paolo engaged his companies to render their
services to the office building. Are the service contracts valid?
Explain. (4%)

XIII

Grand Gas Corporation, a publicity listed company, discover after

extensive drilling a rich deposit of natural gas along the coast of
Antique. For five (5) months, the company did not disclose the
discovery so that it could quitely and cheaply acquire neighboring
land and secure mining information to the Securities and Exchange
Commission, all the directors and key officer of the company
bought shares went up. The directors and officer sold their shares
at huge profits.

1. What provision of the Securities Regulation Code (SRC) did

they violate, if any? Explain. (4%)
2. Assuming that the employees of the establishment handling the
printing work of Grand Gas Corporation saw the exploration
reports which were mistakenly sent to their establishment
together with other materials to be printed. They too bought
shares in the company at low prices and later sold them at
huge profits. Will they be liable for violation of the SRC? Why?
(3%)

XIV

Ace Cruz subscribed to 100,000 shares of stock of JP Development

Corporation, which has a par value of P1 per share. He paid
P25,000 and promised to pay the balance before December 31,
2008. JP Development Corporation declared a cash dividend on
October 15, 2008, payable on December 1, 2008.

1. For how many shares is Ace Cruz entitled to be paid cash

dividends? Explain. (2%)
2. On December 1, 2008, can Ace Cruz compel JP Development
Corporation to issue to him the stock certificate corresponding
to the P25,000 paid by him? (2%)

XV

Eloise, an accomplished writer, was hired by Petong to write a

bimonthly newspaper column for Diario de Manila, a newly-
established newspaper of which Petong was the editor-in-chief.
Eloise was to be paid P1,000 for each column that was published.
In the course of two months, Eloise submitted three columns which,
after some slight editing, were printed in the newspaper. However,
Diario de Manila proved unprofitable and closed only after two
months. Due to the minimal amounts involved, eloise chose not to
pursue any claim for payment from the newspaper, which was
owned by New Media Enterprises.

Three years later, Eloise was planning to publish an anthology of

her works, and wanted to include the three columns that appeared
in the Diario de Manila in her anthology. She asks for your legal
advice:

1. Does Eloise have to secure authorization from New Media

Enterprises to be able to publish her Diario de Manila columns
in her own anthology? Explain fully. (4%)
2. Assume that New Media Enterprises plans to publish Eloise’s
columns in its own anthology entitled, “The Best of Diaro de
Manila:. Eloise wants to prevent the publication of her columns
in that anthology since she was never paid by the newspaper.
Name one irrefutable legal arguments Eloise could cite to
enjoin New Media Enterprises from including her columns in its
anthology. (2%)

XVI

In 1999, Mocha Warm, an American musician, had a hit rap single

called Warm Warm Honey which he himself composed and
performed. The single was produced by a California record
company, Galactic Records. Many noticed that some passages from
Warm Warm Honey sounded eerily similar to parts Unde Hassle, a
1978 hit song by the British rock band Majesty. A copyright
infringement suit was filed in the United States against Mocha
Warm by Majesty. It was later settled out of court, with Majesty
receiving attribution as co-author of Warm Warm Honey as well as a
share in the royalties.

By 2002, Mocha Warm was nearing bankruptcy and he sold his

economic rights over Warm Warm Honey to Galactic Records for
$10,000

In 2008, Planet Films a Filipino movie producing company,

commissioned DJ Chef Jean, a Filipino musician, to produce an
original re-mix of Warm Warm Honey for use in one of its latest
films, Astig!. DJ Chef Jean remixed Warm Warm Honey with salsa
beat and interspersed as well a recital of a poetic stanza by John
Blake, a 17th century Scottish poet. DJ Chef Jean died shortly after
submitting the remixed Warm Warm Honey to Planet Films.

Prior to the release of Astig!, Mocha Warm learns of the remixed

Warm Warm Honey and demands that he be publicity identified as
the author of the remixed song in all the CD covers and publicity
releases of Planet Films.

1. Who are the parties or entities entitled to be credited as author

of the remixed Warm Warm Honey? Reason out your answer.
(3%)
2. Who are the particular parties or entities who exercise
copyright over the remixed Warm Warm Honey? Explain. (3%)

XVII

On January 1, 2008, Al obtained a loan of P10,000 from Bob to be

 paid on January 30,2008, secured by a chattel mortgage on a
Toyota motor car. On February 1, 2008, Al obtained another loan of
P10,000 from Bob to be paid on February 15, 2008. he secured this
by executing a chattel mortgage on a Honda motorcycle. On the due
date of the first loan Al failed to pay. Bob foreclosed the chattel
mortgage but the car was bidded for P6,000 only. Al also failed to
pay the second loan due on February 15, 2008. Bob filed an action
for collection of sum money. Al filed a motion to dismiss claiming
that Bob should first cforeclosed the mortgage on the Honda
motorcycle before he can file the action for sum of money. Decide
with reasons. (4%)

XVIII

1. Can a distressed corporation file a petition for corporate

rehabilitation after the dismissal of its earlier petition for
insolvency? Why? (2%)
2. Can the corporation file a petition for rehabilitation first, and
after it is dismissed file a petition for insolvency? Why? (2%)
3. Explain the key phrase “equality is equity” in corporate
rehabilitation proceedings. (2%)

XIX

Industry Bank, which has a net worth of P1 Billion, extended a loan

to Celestial Properties Inc. amounting to P270 Million. The loan was
secured by a mortgage over a vast commercial lot in the Fort
Bonifacio Global City, appraised at P350 Million. After audit, the
Bangko Sentral ng Pilipinas gave notice that the loan to Celestial
Properties exceeded the single borrower’s limit of 25% of the
bank’s net worth under a recent BSP Circular. In light of other
previous similar violations of the credit limit requirement, the BSP
advised Industry Bank to reduce the amount of the loan to Celestial
Properties under pain of severe sanctions. When Industry Bank
informed Celestial Properties that it intended to reduce the loan by
P50 Million, Celestial Properties countered that the bank should
first release a part of the collateral worth P50 Million. Industry Bank
rejected the counter-proposal, and reffered the matter to you as
counsel. How would you advise Industry Bank to proceed, with its
best interest in mind? (5%)

NOTHING FOLLOWS.

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BAR EXAMINATION 2008

REMEDIAL LAW

28 September 2008 8 A.M. - 12 NN.

INSTRUCTIONS

This questionnaire consists of twenty-one (21) questions contained

in eight (8) pages. Read each question very carefully. Answer
legibly, clearly and concisely. Start each number on a separate
page; an answer to a subquestion under the same number may be
written continuously on the same page and on the immediately
succeeding pages until completed. Do not repeat the question.

You will be given credit for your knowledge of legal doctrine and for
the quality of your legal reasoning. A mere “Yes” or “No” answer
without any corresponding discussion will not be given any credit.

HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE.

GOOD LUCK!!!

Signed DANTE O. TINGA

Chairperson
2008 Bar Examination
Committee
 PLEASE CHECK THE NUMBER OF PAGES IN THIS SET
WARNING: NOT FOR SALE OR UNAUTHORIZED USE

REMEDIAL LAW
I

Lani filed an action for partition and accounting in the Regional Trial
Court (RTC) of Manila against her sister Mary Rose, who is a
resident of Singapore and is not found in the Philippines. Upon
motion, the court ordered the publication of the summons for three
weeks in a local tabloid, Bulgar. Linda, an OFW vacationing in the
Philippines, saw the summons in Bulgar and brought a copy of the
tabloid when she returned to Singapore. Linda showed the tabloid
and the page containing the summons to Mary Rose, who said, “Yes
I know, my kumare Anita scanned and e-mailed that page of Bulgar
to me!”

Did the court acquire jurisdiction over Mary Rose? (4%)

II

Fe filed a suit for collection of P387,000 against Ramon in the RTC

of Davao City. Aside from alleging payment as a defense, Ramon in
his answer set up counterclaims for P100,000 as damages and
P30,000 as attorney’s fees as a result of the baseless filing of the
complaint, as well as for P250,000 as the balance of the purchase
price of the 30 units of air conditioners he sold to Fe.

1. Does the RTC have jurisdiction over Ramon’s counterclaims,

and if so, does he have to pay docket fees therefor? (3%)
2. Suppose Ramon’s counterclaim for the unpaid balance is
P310,000, what will happen to his counterclaims if the court
dismisses the complaint after holding a preliminary hearing on
Ramon’s affirmative defenses? (3%)
3. Under the same premise as paragraph (b) above, suppose that
instead of alleging payment as a defense in his answer, Ramon
filed a motion to dismiss on that ground, at the same time
setting up his counterclaims, and the court grants his motion.
What will happen to his counterclaims? (3%)

III

1. Angela, a resident of Quezon City, sued Antonio, a resident of

Makati City before the RTC of Quezon City for the reconveyance
of two parcels of land situated in Tarlac and Nueva Ecija,
respectively. May her action prosper? (3%)
2. Assuming that the action was for foreclosure on the mortgage
of the same parcels of land, what is the proper venue for the
action? (3%)

IV

Filomeno brought an action in the Metropolitan Trial Court (MeTC)

of Pasay City against Marcelino pleading two causes of action. The
first was a demand for the recovery of physical possession of a
parcel of land situated in Pasay City with an assessed value of
P40,000; the second was a claim for damages of P500,000 for
Marcelino’s unlawful retention of the property. Marcelino filed a
motion to dismiss on the ground that the total amount involved,
which is P540,000, is beyond the jurisdiction of the MeTC. Is
Marcelino correct? (4%)

Within the period for filing a responsive pleading, the defendant

filed a motion for bill of particulars that he set for hearing on a
certain date. However, the defendant was surprised to find on the
date set for hearing that the trial court had already denied the
motion on the day of its filing, stating that the allegations of the
complaint were sufficiently made.

1. Did the judge gravely abuse his discretion in acting on the

motion without waiting for the hearing set for the motion?
(3%)
2. If the judge grants the motion and orders the plaintiff to file
and serve the bill of particulars, can the trial judge dismiss the
case if the plaintiff does not comply with the order? (3%)

VI

After his properties were attached, defendant Porfirio filed a

sufficient counterbond. The trial court discharged the attachment.
Nonetheless, Porfirio suffered substantial prejudice due to the
unwarranted attachment. In the end, the trial court rendered a
judgment in Porfirio’s favor by ordering the plaintiff to pay damages
because the plaintiff was not entitled to the attachment. Porfirio
moved to charge the plaintiff’s attachment bond. The plaintiff and
his sureties opposed the motion, claiming that the filing of the
counterbond had relieved the plaintiff’s attachment bond from all
liability for the damages. Rule on Porfirio’s motion. (4%)

VII

1. The writ of execution was returned unsatisfied. The judgment

obligee subsequently received information that a bank holds a
substantial deposit belonging to the judgment obligor. If you
are the counsel of the judgment obligee, what steps would you
take to reach the deposit to satisfy the judgment? (3%)
2. If the bank denies holding the deposit in the name of the
judgment obligor but your client’s informant is certain that the
deposit belongs to the judgment obligor under an assumed
name, what is your remedy to reach the deposit? (3%)

VIII

Bembol was charged with rape. Bembol’s father, Ramil, approached

Artemon, the victim’s father, during the preliminary investigation
and offered P1 Million to Artemon to settle the case. Artemon
refused the offer.

1. During trial, the prosecution presented Artemon to testify on

Ramil’s offer and thereby establish an implied admission of
guilt. Is Ramil’s offer to settle admissible in evidence? (3%)
2. During the pre-trial, Bembol personally offered to settle the
 case for P1 Million to the private prosecutor, who immediately
put the offer on record in the presence of the trial judge. Is
Bembol’s offer a judicial admission of his guilt? (3%)

IX

The search warrant authorized the seizure of “undetermined

quantity of shabu.” During the service of the search warrant, the
raiding team also recovered a kilo of dried marijuana leaves
wrapped in newsprint. The accused moved to suppress the
marijuana leaves as evidence for the violation of Section 11 of the
Comprehensive Dangerous Drugs Act of 2002 since they were not
covered by the search warrant. The State justified the seizure of the
marijuana leaves under the “plain view” doctrine. There was no
indication of whether the marijuana leaves were discovered and
seized before or after the seizure of the shabu. If you are the judge,
how would you rule on the motion to suppress? (4%)

Jose, Alberto and Romeo were charged with murder. Upon filing of
the information, the RTC judge issued the warrants for their arrest.
Learning of the issuance of the warrants, the three accused jointly
filed a motion for reinvestigation and for the recall of the warrants
of arrest. On the date set for hearing of their motion, none of the
accused showed up in court for fear of being arrested. The RTC
judge denied their motion because the RTC did not acquire
jurisdiction over the persons of the movants. Did the RTC rule
correctly? (4%)

XI

Arturo lent P1 Million to his friend Robert on the condition that

Robert execute a promissory note for the loan and a real estate
mortgage over his property located in Tagaytay City. Robert
complied. In his promissory note dated September 20, 2006,
Robert undertook to pay the loan within a year from its date at 12%
per annum interest. In June 2007, Arturo requested Robert to pay
ahead of time but the latter refused and insisted on the agreement.
Arturo issued a demand letter and when Robert did not comply,
Arturo filed an action to foreclose the mortgage. Robert moved to
dismiss the complaint for lack of cause of action as the debt was
not yet due. The resolution of the motion to dismiss was delayed
because of the retirement of the judge.

1. On October 1, 2007, pending resolution of the motion to

dismiss, Arturo filed an amended complaint alleging that
Robert’s debt had in the meantime become due but that Robert
still refused to pay. Should the amended complaint be allowed
considering that no answer has been filed? (3%)
2. Would your answer be different had Arturo filed instead a
supplemental complaint stating that the debt became due after
the filing of the original complaint? (2%)

XII

After receiving the adverse decision rendered against his client, the
defendant, Atty. Sikat duly filed a notice of appeal. For his part, the
plaintiff timely filed a motion for partial new trial to seek an
increase in the monetary damages awarded. The RTC instead
rendered an amended decision further reducing the monetary
awards. Is it necessary for Atty. Sikat to file a second notice of
appeal after receiving the amended decision? (3%)

XIII

An heir/oppositor in a probate proceeding filed a motion to remove

the administrator on the grounds of neglect of duties as
administrator and absence from the country. On his part the
heir/oppositor served written interrogatories to the administrator
preparatory to presenting the latter as a witness. The administrator
objected, insisting that the modes of discovery apply only to
ordinary civil actions, not special proceedings. Rule on the matter.
(4%)

XIV

On August 15, 2008, Edgardo committed estafa against Petronilo in

the amount of P3 Million. Petronilo brought his complaint to the
National Bureau of Investigation, which found that Edgardo had
visited his lawyer twice, the first time on August 14, 2008 and the
second on August 16, 2008; and that both visits concerned the
swindling of Petronilo. During the trial of Edgardo, the RTC issued a
subpoena ad testificandum to Edgardo’s lawyer for him to testify on
the conversations during their first and second meetings. May the
subpoena be quashed on the ground of privileged communication?
Explain fully. (4%)

XV

Half-brothers Roscoe and Salvio inherited from their father a vast

tract of unregistered land. Roscoe succeeded in gaining possession
of the parcel of land in its entirety and transferring the tax
declaration thereon in his name. Roscoe sold the northern half to
Bono, Salvio’s cousin. Upon learning of the sale, Salvio asked
Roscoe to convey the southern half to him. Roscoe refused as he
even sold one-third of the southern half along the West to Carlo.
Thereupon, Salvio filed an action for the reconveyance of the
southern half against Roscoe only. Carlo was not impleaded. After
filing his answer, Roscoe sold the middle third of the southern half
to Nina. Salvio did not amend the complaint to implead Nina.

After trial, the court rendered judgment ordering Roscoe to

reconvey the entire southern half to Salvio. The judgment became
final and executory. A writ of execution having been issued, the
Sheriff required Roscoe, Carlo and Nina to vacate the southern half
and yield possession thereof to Salvio as the prevailing party. Carlo
and Nina refused, contending that they are not bound by the
judgment as they are not parties to the case. Is the contention
tenable? Explain fully. (4%)

XVI

The mutilated cadaver of a woman was discovered near a creek.

Due to witnesses attesting that he was the last person seen with the
woman when she was still alive, Carlito was arrested within five
hours after the discovery of the cadaver and brought to the police
station. The crime laboratory determined that the woman had been
raped. While in police custody, Carlito broke down in the presence
of an assisting counsel and orally confessed to the investigator that
he had raped and killed the woman, detailing the acts he had
performed up to his dumping of the body near the creek. He was
genuinely remorseful. During the trial, the State presented the
investigator to testify on the oral confession of Carlito. Is the oral
confession admissible as evidence of guilt? (4%)

XVII

Ben sold a parcel of land to Del with right to repurchase within one
(1) year. Ben remained in possession of the property. When Ben
failed to repurchase the same, title was consolidated in favor of Del.
Despite demand, Ben refused to vacate the land, constraining Del to
file a complaint for unlawful detainer. In his defense, Ben averred
that the case should be dismissed because Del had never been in
possession of the property. Is Ben correct? (4%)

XVIII

Domenico and Gen lived without benefit of marriage for twenty

years, during which time they purchased properties together. After
Domenico died without a will, Gen filed a petition for letters of
administration. Domenico’s siblings opposed the same on the
ground that Gen has no legal personality. Decide. (4%)

XIX

After Alma had started serving her sentence for violation of Batas
Pambansa Blg. 22 (BP 22), she filed a petition for writ of habeas
corpus, citing Vaca vs. CA where the sentence of imprisonment of a
party found guilty of violation of BP 22 was reduced to a fine equal
to double the amount of the check involved. She prayed that her
sentence be similarly modified and that she be immediately
released from detention. In the alternative, she prayed that pending
determination on whether the Vaca ruling applies to her, she be
allowed to post bail pursuant to Rule 102, Sec.14, which provides
that if a person is lawfully imprisoned or restrained on a charge of
having committed an offense not punishable by death, he may be
admitted to bail in the discretion of the court. Accordingly, the trial
court allowed Alma to post bail and then ordered her release. In
your opinion, is the order of the trial court correct -

1. Under Rule 102? (2%)

2. Under the Rules of Criminal Procedure? (2%)

XX

A tugboat owned by Speedy Port Service, Inc. (SPS) sank in Manila

Bay while helping tow another vessel, drowning five (5) of the crew
in the resulting shipwreck. At the maritime board inquiry, the four
(4) survivors testified. SPS engaged Atty. Ely to defend it against
potential claims and to sue the company owning the other vessel
for damages to the tug. Ely obtained signed statements from the
survivors. He also interviewed other persons, in some instance
making memoranda. The heirs of the five (5) victims filed an action
 for damages against SPS.

Plaintiffs’ counsel sent written interrogatories to Ely, asking

whether statements of witnesses were obtained; if written, copies
were to be furnished; if oral, the exact provisions were to be set
forth in detail. Ely refused to comply, arguing that the documents
and information asked are privileged communication. Is the
contention tenable? Explain. (4%)

XXI

1. Compare the certiorari jurisdiction of the Supreme Court under

the Constitution with that under Rule 65 of the Rules of Civil
Procedure. (4%)
2. Give at least three instances where the Court of Appeals may
act as a trial court. (3%)

NOTHING FOLLOWS.

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BAR EXAM IN ATIO N 2008

CRIM IN AL LAW

21 September 2008 2:00 P.M. - 5 P.M.

 INSTRUCTIONS

This questionnaire consist of fifteen (15) questions contained in six

(6) pages. Read each question very carefully. Answer legibly, clearly
and concisely. Start each number on a separate page; an answer to
a subquestion under the same number may be written continuously
on the same page and on the immediately succeeding pages until
completed. Do not repeat the question.

You will be given credit for your knowledge of legal doctrine and for
the quality of your legal reasoning. A mere ” Yes” or “No” answer
without any corresponding discussion will not be given credit.

HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE

GOOD LUCK!!!

Signed DANTE O. TINGA

Chairperson
2008 Bar Examination
Committee
 PLEASE CHECK THE NUMBER OF PAGES IN THIS SET
WARNING: NOT FOR SALE OR UNAUTHORIZED USE

CRIMINAL LAW
I

1. After due hearing on a petition for a writ of amparo founded on

the acts of enforced disappearance and extralegal killing of the
son of the complainant allegedly done by the respondent
military officers, the court granted the petition. May the military
officers be criminally charged in court with enforced
disappearance and extralegal killing? Explain fully. (3%)
2. Are human rights violations considered as crimes in the
Philippines? Explain. ( 3% )

II

While Carlos was approaching his car, he saw it being driven away
by Paolo, a thief. Carlos tried to stop Paolo by shouting at him, but
Paolo ignored him. To prevent his car from being carnapped, Carlos
drew his gun, aimed at the rear wheel of the car and fired. The shot
blew the tire which caused the car to veer out of control and collide
with an oncoming tricycle, killing the tricycle driver.

1. What is the criminal liability of Carlos, if any? Explain. ( 4% )

2. What is the criminal liability of Paolo, if any? Explain. ( 4% )

III

Olimpio caught a cold and was running a fever. His doctor

prescribed paracetamol. Olimpio went to a drug store with the
prescription, and the pharmacist sold him three(3) tablets. Upon
arriving home, he took a tablet. One hour later, he had a seizure and
died. The autopsy showed that the tablet he had taken was not
paracetamol but a pill to which he was allergic. The pharmacist was
charged with murder. Is the charge proper? If not, what should it
be? Explain. ( 6% )

IV

Manolo revealed to his friend Domeng his desire to kill Cece. He

likewise confided to Domeng his desire to borrow his revolver.
Domeng lent it. Manolo shot Cece in Manila with Domeng’s revolver.
As his gun was used in the killing,Domeng asked Mayor Tan to help
him escape. The mayor gave Domeng P5,000.00 and told him to
proceed to Mindanao to hide. Domeng went to Mindanao. The
mayor was later charged as an accessory to Cece’s murder.

1. Can he be held liable for the charge? Explain. ( 4 % )

2. Can he be held liable for any other offense? Explain fully. ( 3% )

Eman, a vagrant, found a bag containing identification cards and a

diamond ring along Roxas Blvd. Knowing that it was not his, he
went to a nearest police station to seek help in finding the owner of
the bag. At the precint PO1 Melvin attended to him. In the
investigation Eman proposed to PO1 Melvin, “in case you don’t find
the owner let’s just pawn straight to the pawnshop and pawned the
ring for P50,000.00 Eman never saw PO1 Melvin again.

1. What is the criminal liability of Eman, If any? Explain. ( 3% )

2. What is the criminal liability of PO1 Melvin, is any? Explain ( 3%
)

VI

Hubert and Eunice were married in the Philippines. Hubert took

graduate studies in New York and met his former girlfriend Eula.
They renewed their friendship and finally decided to get married.
The first wife, Eunice, heard about the marriage and secures a copy
of the marriage contract in New York. Eunice filed a case of Bigamy
against Hubert in the Philippines.

1. Will the case prosper? Explain. ( 4% )

2. If Eunice gave her consent to the second marriage, what will
your answer be? Explain. ( 3% )

VII

The inter-island vessel M/V Viva Lines I, while cruising off Batanes,

was forced to seek shelter at the harbor of Kaoshiung, Taiwan
because of a strong typhoon. While anchored in said harbor, Max,
Baldo and Bogart arrived in a speedboat, fired a bazooka at the bow
of the vessel, boarded it and divested the passengers of their
money and jewelry. A passenger of M/V Viva Lines I, Dodong
advantage of the confusion to settle an old grudge with another
passenger, and killed him. After their apprehension, all four were
charged with qualified piracy before a Philippine court.

1. Was the charge of qualified piracy against the three person (

Max, Badong and Bogart ) who boarded the inter-island vessel
correct? Explain. ( 3% )
2. Was Dodong correctly charged before the Philippine court for
qualified piracy? Explain. ( 3% )

VIII

Francis and Joan were sweethearts, but their parents had objected
to their relationship because they were first cousins. They forged a
pact in writing to commit suicide. The agreement was shoot each
other in the head which they did. Joan died. Due to medical
assistance, Francis survived. Is Francis criminally liable for the
death of Joan? Explain. ( 5% )

IX

Dennis leased his apartment to Myla for P10,000 a month. Myla

failed to pay the rent for 3months. Gabriel , the son of Dennis,
prepared a demand letter falsely alleging that his father had
authorized him to collect the unpaid rentals. Myla paid the unpaid
rentals to Gabriel who kept the payment.

1. Did Gabriel commit a crime? Explain. ( 4% )

2. Can Gabriel invoke his relationship with Dennis to avoid
criminal liability? Explain. ( 3% )
 X

Upon opening a letter containing 17 money orders, the mail carrier

forged the signatures of the payees on the money order and
encashed them. What crime or crimes did the mail carrier commit?
Explain briefly. ( 6% )

XI

Ricky was reviewing for the bar exam when the commander of a
vigilante group came to him and showed him a list of five policemen
to be liquidated by them for graft and corruption. He was further
asked if any of them is innocent. After going over the list, Ricky
pointed to two of the policemen as honest. Later, the vigilante group
liquidated the three other policemen in the list. The commander of
the vigilante group reported the liquidation to Ricky. Is Ricky
criminally liable? Explain. ( 7% )

XII

Raissa and Martin are married to each other but had been
separated for the last five years. Raissa decided to wed Juan, her
suitor. Who had no inkling that she was married. Raissa and Juan
accomplished an application for marriage license which they
subscribed and swore to before the Local Civil Registrar. Raissa
declared, in the application, that she is single. The marriage
licensed was issued. In due time, the couple were married by the
mayor. Raissa and Juan had their first sexual intercourse later in the
evening.

What crime or crimes, if any, did Raissa commit? Explain briefly. (

7% )

XIII

Lucas had been the stay-in houseboy of spouses Nestor and Julia
for Five Years. One Night, while Nestor and Julia were out having
dinner, Lucas and his friend Pedro gained entry into the masters’
bedroom with the used of a false key. They found Julia’s jewelry box
in one of the cabinets which was unlocked. Lucas believed that
Julia’s jewelry inside the box. Unknown to Lucas and Pedro, the box
was empty. Pedro took the box and left the bedroom with Lucas.
They were shock when they saw Nestor in the sala, pointing a gun
at them. Nestor ordered them to stop and hand over the box. Pedro
complied. It turned out that Nestor had just arrived in time to see
Lucas and Pedro leaving the master’s bedroom with the box.

State with reasons, the crime or crimes, if any, Lucas and Pedro
committed. ( 7% )

XIV

Eliseo, the deputy sheriff, conducted the execution sale of the

property of Andres to satisfy the judgment against him in favor of
ABC Corporation, a government-owned or controlled corporation
with an original charter. However, the representative of the
corporation failed to attend the auction sale. Gonzalo , the winning
bidder, purchased property for P100,000 which he paid to Eliseo.
Instead of remitting the amount to the Clerk of Court as ex-officio
 Provincial Sheriff, Eliseo lent the amount to Myrna, his officemate,
who promised to repay the amount within two months, with interest
thereon. However, Myrna reneged on her promise. Despite demands
of ABC Corporation, Eliseo failed to remit the said amount.

1. State with reasons, the crime or crimes, if any, committed by

Eliseo. ( 4% )
2. Would your answer to the first question be the same if ABC
Corporattion were a private corporation? Explain. ( 3% )

XV

Roger, the leader of a crime syndicate in Malate, Manila, demanded

the payment by Antonio, the owner of a motel in that area, of
P10,000 a month as “protection money”. With the monthly
payment, Roger assured, the syndicate would provide protection to
Antonio, his business, and his employees. Should Antonio refuse,
Roger warned, the motel owner would either be killed or his
establishment destroyed. Antonio refused to pay the protection
money. Days later, at round 3:00 in the morning, Mauro, a member
of the criminal syndicate, arrived at Antonio’s home and hurled a
grenade inti an open window of the bedroom where Antonio, his
wife and their three year-old daughter were sleeping. All three of
them were killed instantly when the grenade exploded.

State, with reason, the crime or crimes that had been committed as
well as the aggravating circumstances, if any, attendant
thereto.(7%)

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I.

In January 1970, Juan Gonzales bought one hectare of agricultural land in Laguna for
P100,000. This property has a current fair market value of P10 million in view of the
construction of a concrete road traversing the property. Juan Gonzales agreed to
exchange his agricultural lot in Laguna for a one-half hectare residential property
located in Batangas, with a fair market value of P10 million, owned by Alpha
Corporation, a domestic corporation engaged in the purchase and sale of real
property. Alpha Corporation acquired the property in 2007 for P9 million.

1. What is the nature of real properties exchanged for tax purposes - capital asset or
ordinary asset? Explain. ( 3% )

2. Is Juan Gonzales subject to income tax on the exchange of property? If so, what is
the tax based and rate? Explain. ( 3% )

3. Is Alpha Corporation subject to income tax on the exchange of property? If so,

what is the tax base and rate? Explain. ( 3% )

II

Jose Cerna, Filipino citizen, married to Maria Cerna, died in a vehicular accident in
NLEX on July 10, 2007. The spouses owned, among others, a 100-hectare agricultural
land in Sta. Rosa, Laguna with current fair market value of P20 million, which was
subject to matter of a Joint Venture Agreement about to be implemented with Star
Land Corporation ( SLC ), a well-known real estate development company. He bought
the said real property for P2 million fifty years ago. On January 5,2008, the
administrator of the estate and SLC jointly announced their big plans to start
conversion and development of the agricultural lands in Sta. Rosa, Laguna, into
first-class residential and commercial centers. As a result, the prices of real properties
in the locality have doubled. The administrator of the Estate of Jose Cernan filed the
estate tax return on January 9, 2008, by including in the gross estate the real property
at P2 million. After 9 months, the BIR issued deficiency estate tax assessment, by
valuing the real property at P40 million. A ) Is the BIR correct in valuing the real
property at P40 million? Explain. ( 3% ) B ) If you disagree, what is the correct value
to used for estate tax purposes? Explain. ( 3% )

III

DEF Corporation is wholly owned subsidiary of DEF, Inc., California, USA. Starting
December 15, 2004, DEF Corporation paid annual royalties to DEF, Inc., for the use of
the latter's software, for which the former, as with holding agent of the government,
withheld and remitted to the BIR the 15% final tax based on the gross royalty
payments. The withholding tax return was filed and tax remitted to the BIR on January
10 of the following year. On April 10, 2007 DEF Corporation filed written claim for tax
credit with the BIR, arising from erroneously paid income taxes covering the years
2004 and 2005. The following day, DEF Corporation filed a petition for review with the
court of Tax Appeals involving the tax credit claim for 2004 and 2005.

1. As a BIR lawyer handling the case, would you raise the defense of prescription in
your answer to the claim for tax credit? Explain. ( 4% )

2. Can the BIR lawyer raise the defense that DEF Corporation is not the proper party
to file such claim for tax credit? Explain. ( 3% )

IV

JKL Corporation is a domestic corporation engaged in the importation and sale of

motor vehicles in the Philippines and is duly registered with the Subic Bay
Metropolitan Authority ( SBMA ). In December 2007, it imported several second-hand
motor vehicles from Japan and Korea, which it stores in a warehouse in Subic Bay. It
sold these motor vehicles in April 2008, to persons residing in the customs territory.

1. Are the importations of motor vehicles from abroad subject to customs duties and
value added taxes? Explain. ( 4% )

2. if they are taxable, when must the duties and taxes be paid? What are the bases
for and purposes of computing customs duties and VAT? To whom must the duties
and VAT be paid? Explain. ( 3% )

V
Maria Suerte, a Filipino citizen, purchased a lot in Makati City in 1980 at a price of P1
million. Said property has been leased to MAS Corporation, a domestic corporation
engaged in manufacturing paper products, owned 99% by Maria Suerte. In October
2007, EIP Corporation, a real estate developer, expressed its desire to buy the Makati
property at its fair market value P300 million, payable as follows : (a) P60 million
down payment; and (b) balance, payable equally in twenty four (24) monthly
consecutive installments. Upon the advice of a tax lawyer, Maria Suerte exchanged her
Makati property for shares of stock of MAS Corporation. A BIR ruling, confirming the
tax-free exchange of property for shares of stock, was secured from the BIR National
Office and a Certificate Authorizing Registration was issued by the Revenue District
Officer (RDO) where the property was located. Subsequently, she sold her entire stock
holdings in MAS Corporation to EIP Corporation for P300 million. In view of the tax
advice, Maria Suerte paid only the capital gains tax of P29,895,000 ( P100,000 x 5%
plus P298,900,00 x 10% ), instead of the corporate income tax of P104,650,00 (
35% on P299 million gain from sale of real property ). After evaluating the capital
gains tax payment, the RDO wrote a letter to Maria Suerte, Slating that she commited
tax evasion.

Is the contention of the RDO tenable? Or was it tax avoidance that Maria Suerte had
resorted to? Explain. ( 6% )

VI

While driving his car to Baquio last month, Pedro Asuncion, together with his wife
Assunta, and only son Jaime, met an accident that caused the instantaneous death of
Jaime. The following day, Assunta also died in the hospital. The spouses and their son
had the following assets and liabilities at the time of death :

Assunta Jaime
Exclusive Conjugal Exclusive

Cash P10,000,000.00 P1,200,00.00

Cars P2,000,000.00 500,000.00

Land 5,000,000.00 2,000,000.00

Residential House 4,000,000.00

Mortgage Payable 2,500,000.00

Funeral Expenses 300,000.00

1. Is the Estate of Jaime Asuncion liable for estate tax? Explain. ( 4% )

2. Is vanishing deduction applicable to the Estate of Assunta Asuncion? Explain ( 4%

)

VII

After examining the books and records of EDS Corporation, the 2004 final assessment
notice, showing basic tax of P1,000,000 deficiency interest of P400,000 and due date
for payment of April 30, 2007, but without the demand letter, was mailed and released
by the BIR on April 15, 2007. The registered letter, containing the tax assessment,
was received by the EDS Corporation on April 25, 2007

1. What is an assessment notice? What are the requisites of a valid assessment?

Explain ( 3% )

2. As tax lawyer of EDS Corporation, what legal defense(s) would you raised against
the assessment? Explain. ( 3% ).
 VIII

The City of Manila enacted an ordinance, imposing a 5% tax on gross receipts on

rentals of space in privately-owned public markets. BAT Corporation questioned the
validity of the ordinance, stating that the tax is an income tax, which cannot be
imposed by the city government.

Do you agree with the position of BAT Corporation? Explain. ( 5% )

IX

William Antonio imported into the Philippines a luxury car worth US$100,00. This car
was, however, declared only for US$20,000 and corresponding customs duties and
taxes were paid thereon. Subsequently, the Collector of Customs discovered the
underdeclaration and he initiated forfeiture proceedings of the imported car.

1. may the Collector of Customs declare the imported car forfeited in favor of the
government? Explain. ( 3% )

2. Are forfeiture proceedings of goods illegally imported criminal in nature? Explain (

3% )

John McDonald, a U.S. Citizen residing in Makati City, bought shares of stock of a
domestic corporation whose shares are listed and traded in the Philippine Stock
Exchange at the price of P2 million Yesterday, he sold the shares of stock through his
favorite Makati stockbroker at a gain of P200,000.

1. Is John McDonald subject to Philippine Income Tax on the sale of his shares
through his stockbroker? Is he liable for any other tax? Explain. ( 3% )

2. If John McDonald deriectly sold the shares to his best friend, who is another U.S.
Citizen residing in Makati, at a gain of P200,000. Is he liable for Philippine Income
Tax? If so, what is the ntax base and rate? ( 3% )

XI

Pedro Manalo, A Filipino citizen residing in Makati City, owns a vacation house and lot
in San Francisco, California, U.S.A, which he acquired in 2000 for P15 million. On
January 10, 2006 he sold said real property to Juan Mayaman, another Filipino citizen
residing in Quezon City, for P20 million. On February 9, 2006 Manalo filed the capital
gains tax return and paid P1.2 million representing 6% capital gain tax. Since Manalo
did not derive any ordinary income, no income tax returnn was filed by him for 2006.
After the tax audit conducted in 2007, the BIR officer assessed Manalo for deficiency
income tax computed as follows: P5 million ( P20 million less P 15 million ) x 35% =
P1.75 million, without the capital gains tax paid being allowed as tax credit. Manalo
consulted a real estate broker who said that the P1.2 million capital gains tax should
be credited from P1.75 million deficiency income tax.

1. Is the BIR officer's tax assessment correct? Explain. ( 3% )

2. If you were hired by Manalo as his tax consultant, what advice would you give him
to protect his interest? Explain. ( 3% )

XII

Greenhills Condominium Corporation incorporated in 2001 is a non-stock, non profit

association of unit owner in Greenhills Tower, San Juan City. To be able to reduce the
association dues being collected from the unit owners, the Board of Directors of the
corporation agreed to lease part of the ground floor of the condominium building to
DEF Saving Bank for P120,000 a month or P1.44 million for the year, starting January
2007.

1. Is the non-stock, non-profit association liable for value added tax in 2007? If your
 answer is in the negative, is it liable for another kind of business tax? (4%)

2. Will the association be liable for value added tax in 2008 if it increases the rental
to P150,000 a month beginning January 2008? Explain. (3%)

XIII

MNO Corporation was organized on July 1, 2006, to engage in trading of school

supplies, with principal place of business in Cubao, Quezon City. Its book of account
and income statement showing gross sales as follows:

July 1, 2006 to December 31, 2006 P 5,0000,000.

January 1, 2007 to June 30, 2007 P 10,000,000.

July 1, 2007 to December 31, 2007 P 15,000,000.

Since MNO Corporation adopted fiscal year ending June 30 as its taxable year for
income tax purpose, it paid its 2% business tax for fiscal year ending June 30, 2007
based on gross dales of P15 million. However, the Quezon City Treasurer assessed the
corporation for deficiency business tax for 2007 based on gross sales of P25 million
alleging that local business taxes shall be computed based on calendar year.

1. Is the position of the city treasurer tenable? Explain. (3%)

2. May the deficiency business tax be paid in installments without surcharge and
interest? Explain. (3%)

XIV

Spouses Jose San Pedro and Clara San Pedro, both Filipino citizens, are the owners of
a residential house and lot in Quezon City. After the recent wedding of their son, Mario,
to Maria, the spouses donated said real property to them. At the time of donation, the
real property has a fair market value of P2 million.

1. Are Mario and Maria subject to income tax the value of the real property donated
to them? Explain. (4%)

2. b) Are Jose and Clara subject to donor's tax? If so, how much is the taxable gift of
each spouse and what rate shall be applied to the gift? Explain. (4%)

XV

In 2007, spouses Renato and Judy Garcia opened peso and dollar deposits at the
Philippine branch of the Hong Kong Bank in Manila. Renato is an overseas worker in
Hong Kong while Judy lives and works in Manila. During the year, the bank paid
interest income of P10,000 on the peso deposit and USS1,000 on the dollar deposit.
The bank withheld final income tax equivalent to 20% of the entire interest income
and remitted the same to the BIR.

1. Are the interest incomes on the bank deposits of spouses Renato and Judy Garcia
subject to income tax? Explain. (4%)

2. Is the bank correct in withholding the 20% final tax on the entire interest income?
Explain. (3%)

NOTHING FOLLOWS.

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