1990-2019 Commercial Law Bqa

FROM Nth Time BAR CHALLENGER TO ATTORNEY
MERCANTILE LAW for Bar Law for Dummies Training Program

ARRANGED BAR QUESTIONS AND ANSWERS 1990 TO 2019

MAIN TOOL NO. 1 (5TH OF 8 BAR SUBJECTS)
ARRANGED AND SEQUENCED

BASED ON THE MOST FREQUENTY ASKED TOPICS Page | 1
1990 - 2019 BAR EXAMINATIONS
MERCANTILE LAW
The questions for the 2019 COMLAW bar examinations are all recycled
popular topics of the past exams. WALANG BINAGO saved for Data Privacy Act.
KAGAYA NG LABOR LAW, MUKHA LANG MAHIRAP ANG MERCANTILE LAW
PERO LIMITED LANG ANG MGA TOPICS NA TINATANONG. WHY IS IT SO?
Take for example ang Insurance law. Napaka-haba niyan pero halos 10% lang niyan
ang relevant sa atin. Unlike Crim and Poli law, mga 40-60 % ng provisions ng isang
batas ay dapat madaanan ng mata mo.
After reading all the bar questions, I suggest you get the book of Judge
Miravite. Yan ang pinka-mahusay na book sa ComLaw Review dahil siya lang ang
may Bar Questions discussion. Yung Iba walang BQA, sagana lang sa maputing
papel hahaha. Manipis lang yan. Basahin ninyo lahat kasi selected na ginawa ni
Judge M sa book niya. Wonderful Book. Mura at napakahusay. Kalimitan sa mga
mahuhusay na book yung mga self-published like Miravite and Nachura for Poli.
Pag published ng third party, shortchanged sa discussion at napaka-mahal. Let us
support those authors.
Also, read current events – lalo na yung Data Privacy at National ID system.
I think if may new questions to come up manggagaling ito sa mga topics na yan.
I can’t imagine how many 2019 bar students spent as much as P100,000 sa
mga school materials, big books and centers. Ang kailangan lang naman is to
familiarize with bqas and a simple book to quick scan to pass the 2019bar. Kaya,
save your money, enjoy while studying smart for your bar exam.
THIS BAR REVIEW MATERIAL is composed of 249 pages. The sources used are UPLC, PALS, books
with BQAs and other materials that can be found in the internet. I just have the patience to ARRANGE them
based on the most asked topics from 1987 to 2019, and SEQUENCE them by year. Some answers were
paraphrased to suit the ALAC format and some were found to be so informative in lecture type answer and
better left out as they are. We are giving credits to the authors of those materials.
BAR QUESTIONS AND ANSWERS 1990-2019

MERCANTILE LAW
FIRST EDITION
OCTOBER 8, 2020
MANILA, PHILIPPINES
ALL RIGHTS RESERVED
The ARRANGER is a humble partner to succeed in your quest for a law degree and to clinch the evasive “Attorney”
title to your name. He believes that no one has the monopoly of knowledge so you may email him for any correction,
modification and suggestion at barlawfordummies@gmail.com Visit also our website www.barlawfordummies.com
For orders visit FB Page: Law Reviewers, Books and Bookstand for Sale/OR TEXT 09325293595

AVAILABLE TRAINING MATERIALS
For those who failed more than twice in the bar, I suggest you read BAR LAW FOR DUMMIES
(BLD2020) Training Materials on how to answer bar questions and spot the issue. I used Civil Law
subjects to come up with the materials to “re-wire” the brain of the examinees, because it is the
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foundation of all other bar subjects. BLD 2020 is also recommended for freshman students. Each BLD
training materials is complete with jurisprudence, 20 years of bar questions and answers and
annotation.
BAR LAW FOR DUMMIES (BLD 2020)
1. PERSONS AND FAMILY RELATIONS
2. PROPERTY
3. SUCCESSION
4. OBLIGATION AND CONTRACTS
5. SPECAIL CONTRACTS
TOPICAL BAR QUESTIONS AND ANSWERS
1. POLITICAL LAW
2. LABOR LAW
3. CIVIL LAW
4. TAXATION LAW
5. CRIMINAL LAW
6. COMMERCIAL/MERCANTILE LAW
7. REMEDIAL LAW
8. LEGAL ETHICS
FORTHCOMING MATERIALS
1. TOP 20 MOST ASKED QUESTIONS AND 20 MOST DIFFICULT QUESTIONS OF LAW
FOR EACH BAW LAW SUBJECT TO BE RELEASED ON OR BEFORE MARCH 2021.
2. VBLOG DISCUSSING THE 20 MOST DIFFICULT QUESTIONS OF LAW

HOW TO ANSWER BAR QUESTIONS
Oftentimes, examinees, who have studied enough for the bar, answer lengthly, mga dalawang pages, tapos puro bura, one
to two pages are all erased. It happened to me on the first day, fortunately, i passed that first two subjects. Mababa nga lang yung grade.
So, how to answer bar questions in a precise and concise way.
Use the ALAC pattern. Eventually, pag sanay na sanay na sanay na kayong mag answer in this format, you will develop a Page | 3
more coherent way. So, start muna tayo sa basic.
A – your direct Answer

L – state the Legal basis or bases
A – Apply the law to the pertinent facts of the case
C – Conclude
A – your direct Answer
Its either Yes, No or very seldom yung “Assuming”, Walang “It depends”. Sa mga BQA books maraming answer sila na nag-
start sa “it depends”. Well, sila yun. They intend to lecture and give you a wide range of information kaya they lecture which is good. But
answering for bar questions is very different. Dapat first sentence pa lang tama na agad ang answer. With all 8,000 booklets to check,
the examiner would just glance at the first sentence, if tama ang answer, he would just look for the legal basis, then ok na. You would
get Five (5) points. So dapat maigsi lang, at the first two sentences pa lang nadun na yung correct answer at legal basis dahil most likely
yan na lang yung babasahin ng exminer.
Pwede rin naman na hindi “yes or no” ang first word na gamitin mo. You can write a positive or negative statement like “ The
RTC’s decision to annul the marriage is not proper”. That is a negative statement. “The RTC is correct”. That is a positive statement.
If you want to be more emphatic, you can answer like this “Yes, the RTC is correct to annul the marriage” or “No, the RTC is
not correct”.
L – state the Legal basis or bases
Here, you may start with the phrase “In Article 101 of the Revised Penal Code”, “In one of the decisions of the Supreme Court”,
“In the annals of decision”, According to the Family Code”, “According to Section 10, Rule 100 of the Rules of Court”. Etc. Ayan, ganyan.
You are now justifying your answer. Do you have state the whole law, provision or case number? Wag na. You know why? Alam na ng
examiner ang batas, you don’t have to state every detail. Just state the “magic words”. Yung mga importante lang to justify your direct
Answer. That is my general suggestion. Pero, if you are 100% sure of the case number, section or law, sige ilagay mo. The problem with
that is paano if the examiner had different jurisrudence or law in mind. Di ba maraming jurisprudence na iisa lang naman ang basis? So,
I suggest wag na lang. Bawas points din yan.
Yung mga nag-fail sa bar, ang lagi nilang tanong ay “Paano ako bumagsak. Eh sure naman ako sa answer ko”. Yes, you are
sure sa direct Answer but what about your legal basis. Ayan, ito na yung crux of contention.
I talked to one passer of the 2005bar. That time sina-sauli pa ng SC ang mga answer booklet pero ngayon hindi na. So, the
exminers ay talagang mapipilitang basahin lahat ng full answers. Kasi pwedeng mag compare ang mga examinees ng results, and
contest if may lapses ang examiner in checking the answers. Ngayon hindi na, and your guess is as good as mine why?
The guy came from “#notsunga” law school. He was so confident with his answers and even thought to top the bar hahahahah
dyarannnn! 75%! Mali ang checking nito. So he aksed for the booklet and checked. Binasa niya ulit yung mga answers niya hahahah
sabi niya ... Hahahah mali nga ako.
Akala niya lang tama, pero mali. So yung mga challengers natin, if you happen to get your booklet, baka ganyan nga. Tama
yung direct answer pero mali yung legal basis.
Because A and L are the most important part of your answer, let us have an actual bar questions and answer. This time,
maging emphatic muna tayo and we state the whole law para mabasa ninyo as part of your review.
2018 BAR No. 1, Remedial Law

Danielle, a Filipino citizen and permanent resident of Milan, Italy, filed with the Regional Trial Court (RTC) of Davao City,
where she owns a rest house, a complaint for ejectment against Dan, a resident of Barangay Daliao, Davao City. Danielle's property,
which is located in Digos City, Davao del Sur, has an assessed value of PhP25,000. Appended to the complaint was Danielle's
certification on non-forum shopping executed in Davao City duly notarized by Atty. Dane Danoza, a notary public.
(a) Was there a need to refer the case to the Lupong Tagapamayapa for prior barangay conciliation before the court can take
cognizance of the case? (2.5%)
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Paano mo ito babasahin? Read first the question. Why? Para alam mo na what to look for from the facts of he case. Para
may automatic elimination ng mga unnecessary words at magfofocus ka na agad sa issue. Yan, that is how to spot the issue. So basahin
ang question.
Anong papasok sa kukote mo as you read the question? Local government code, rules on conciliation before Lupon
Tagapayapa, cases and the exception to the rule, di ba? So, ayan...eh di naka-focus ka na agad sa issue.
LCG, Section 408, paragraph F.
The lupon of each barangay shall have authority to bring together the parties actually residing in the same city or municipality for amicable
settlement of all disputes, except:
[f] disputes involving parties who actually reside in barangays of different cities or municipalities, except where such barangay units adjoin
each other and the parties thereto agree to submit their differences to amicable settlement by an appropriate lupon.
Then, basahin mo na yung question and eliminate the non-pertinent facts.
Danielle, a Filipino citizen and permanent resident of Milan, Italy, filed with the Regional Trial Court (RTC) of Davao City,
where she owns a rest house, a complaint for ejectment against Dan, a resident of Barangay Daliao, Davao City. Danielle's property,
which is located in Digos City, Davao del Sur, has an assessed value of PhP25,000. Appended to the complaint was Danielle's
certification on non-forum shopping executed in Davao City duly notarized by Atty. Dane Danoza, a notary public.
After mental elimination, the question would only be like this.
Danielle, a resident of Milan, Italy, owns a resthouse in Digos City, filed an ejectment case against Dan, a resident of
baranggay Daliao, Davao City.
So, Danielle and Dan are not residents of one barangay unit nor their barangays are adjoined.
The direct answer therefor is NO. Let us be emphatic muna for reading purposes. The answer could be any of the following.
[1] No, there was no need to refer the case to the Lupong Tagapamyapa for prior barangay conciliation before the court can
take cognizance of the case. According to Section 408, paragraph F, of the 1991 Local Government Code, the lupon of each barangay
shall have authority to bring together the parties actually residing in the same city or municipality for amicable settlement of all disputes,
except: [f] disputes involving parties who actually reside in barangays of different cities or municipalities, except where such barangay
units adjoin each other and the parties thereto agree to submit their differences to amicable settlement by an appropriate lupon.
[2] No, there is no need to refer the case to the Lupon Tagapamayapa for prior barangay conciliation. According to the 1991
Local Gocernment Code, disputes involving parties who actually resides in barangays of different cities or municipalities except where
such barangay units adjoin each other and the parties thereto agree to submit their differences to amicable settlement by an appropriate
lupon, are exempted from the pre-condition requirement of conciliation before filing of complaint in court.
[3] No. Disputes involving parties who reside in different barangay units located in different cities or municipalites except when
the barangay units are adjoined and the parties agreed thereto to submit their differences for conciliation to an appropriate lupon are
exempted from the pre-conciliatory condition before filing of complaint to court.
O, IKAW NAMAN. Get a pice of paper. Write your empatic answer using number 1. Then, sanayin mo ng sanayin ang iyong sarili na
mapaigsi ang answer without leaving the pertinent or magic words. Ypu can use the blank portion provided for your aswers.

[1]
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[2]
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[3]
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Mas mahusay if you answer as a class or group then compare kayo ng answers kasi may mag students talaga na mahusay
sa language. Remember hanggang A and L muna tayo ng ALAC. Dont anwer the A and C portion.
So, get as many bar questions you can get, open your codals at magsanay ng magsanay ng sumagot sa A and L. Practice
makes perfect.
Practice, practice, practice. Stop muna, at mag practice.

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Now that you have perfected how to the A and L, lets go to A (the second A of ALAC).
A – apply the law to the pertinent facts.
Pertinent facts means facts in the question relevant to the legal basis. So sa question above, ang mga pertinente lang yung
actual residence ni Danille and Dan.
Danielle lives is Milan while Dan lives in Daliao, Davao City. Obviously, the dispute between the parties are one of the
exceptions.
So the answer for the A portion would be like this.
HERE, Danielle is a permanent resident of Milan, Italy while Dan resides in Daliao, Davao City. They actually reside in different
baranggay units of different cities or municipalities and neither the units are adjoined.

IN THE CASE AT BAR, Danielle is a permanent resident of Milan, Italy while Dan resides in Daliao, Davao City. They actually
reside in different baranggay units of different cities or municipalities and neither the units are adjoined.
You may use phrases and words such as HERE, IN THE CASE AT BAR, o kahit wala na kung snay na sanay ka na.
Danielle is a permanent resident of Milan, Italy while Dan resides in Daliao, Davao City. They actually reside in different Page | 6
Ok let us combine ALA.
No. Disputes involving parties who reside in different barangay units located in different cities or municipalites except when
the barangay units are adjoined and the parties agreed thereto to submit their differences for conciliation to an appropriate lupon are
exempted from the pre-conciliatory condition before filing of complaint to court.
HERE, Danielle is a permanent resident of Milan, Italy while Dan resides in Daliao, Davao City. They actually reside in different
C – conclusion
Sa C portion, for emphasis na lang ito.
HENCE, the dispute can be filed directly in court.
Totoo, dapat ganyan lang kaigsi. Kasi dadaanan lang yan ng mata ng examiner. Ang importante ay yung A (direct answer) at
L (legal basis). Yung second A and C, dadaanan lang yan ng mata ng examiner kung tama na yung A and L.
So, ang ating final answer ay....
No. Disputes involving parties who reside in different barangay units located in different cities or municipalites
except when the barangay units are adjoined and the parties agreed thereto to submit their differences for conciliation to an
appropriate lupon are exempted from the pre-conciliatory condition before filing of complaint to court.
HERE, Danielle is a permanent resident of Milan, Italy, while Dan resides in Daliao, Davao City. They actually reside
in different baranggay units of different cities or municipalities and neither the units are adjoined. HENCE, the dispute can be
filed directly in court.
Compare our answer sa suggested answer of UPLC.
SUGGESTED ANSWER:
(a) No. Since Danielle is not an actual resident of Barangay Daliao, or a barangay adjacent thereto, this case is not subject to the
Katarungang Pambarangay Law; hence, prior referral to the Lupong Tagapamayapa is not a pre-condition to the filing of this
case in court (Pascual v. Pascual, G.R. No. 157830, 17 November 2005).
Di ba mas matututo ka sana if the legal basis is stated in the aswer. Pero hindi na dapat ilagay ng UPLC yun. It is for us to look for
the legal basis . Hahanapin na lang natin yung batas sa codals. Also, sa BQA Books the questions are not arranged per topic, tatatalon-
talon kayo ng topic. Mawawalan kayo ng coherence. In civil law, the first question is about annulment, then the next is about subrogation
hahahah eh di sabaw na ulit. Kasi Family code pa lang pinag-aaralan mo.
The good thing about UPLC, PALS, and other QA Books, mahahaba yung answer nila kasi they intend to teach or lecture. So
maraming information you can get from their sugested answers.
To help examinees to have a coherent preparation for the bar, I prepared BQA arranged per topic and sequenced by year. Some
suggested answers are retained kasi naka lecture type. Napaka-laking tulong for you. Some are rephrased to suit the ALAC format.

For those who have stopped for a long time and wanted to take the bar or for those who have a poor foundation, I prepared bar law
for dummies Civil Law subjects (BLDs from book 1 to 5). Mas appropriate ito sa inyo. Basahin ninyo yung BLDs because it intends to re-
wire your brain on how to study law, spot the issue and answer bar questions.
The training that you will get from BLD book 1 to 5, can also help you how to read other bar law subjects. Pinababaw ko ang
discussion to the level of k-12 para mas mahusay ninyong maintindihan. Start with Book1 Family Code hanggang book 5. So 5 training
materials yan, P600 each. Not expensive if you compare the cost sa mga training centers. Actually this lecture on how to answer bar
questions would cost you P2,000 per hour in some review centers, pero sa atin free lang yan. Bukod pa ang bayad sa individual coach. Page | 7
There is no problem with undergoing review centers, but seld-study is more encouraged. Mahirap ang buhay ngayon. This pandemic
would not get away and even if it does, the economy would not be the same the way it was not after three to five years. So, study smart
and spend less. The best assurance to pass the bar is self-study and attend free webinars and video lectures. Marami yan sa net. You
dont have spend much.
One more, mag-aral kayo how to manipulate computers and internet. No matter how good you are, if you cannot transfer your
knowledge or skills via internet...sabaw ka. One corporation prof (mga 60 years old na siya) said “ I dont know how to that (video lecture
via zoom)”. See, pag hindi siya natuto, he could be replaced by another techie prof.
Nanood ako one time ng webinar on law and video lecture, puro mukha lang nakikta ko hahaha nakakasawa. Law profs should
also get education earning units para matuto ng art of teaching. Iba kasi ang art of teaching. Teachers prepare and use instructional
materials at hindi pwede puro boses lang. Nakakapagod tumitig ng tumitig sa face ng lecturer. They should learn how to use the
environment as instructional materials.
Kaya wait for my vlog. Sa kitchen ako mag lelecture. We will teach legitime using cakes, spoon and fork for annulment, refrigerator
for intestate7 and testate succession, washing the dishes for obligation and actual contracts for contracts. Hahahaha...
Let us support each other. My clients can text me or message me anytime. Mas marami yung mga hindi ko clients na nanghihingi
ng advice kaya ang sagot ko lagi ay read BLD kasi nadoon n lahat ang issasagot ko sa inyo. May free naman na mga 50 pages ng
training so, you can download them. If you want the whole, just message me at FB Page Law Reviewers, Books and Bookstand and you
can enjoy my free advice until you take the bar2021.
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TABLE OF CONTENTS
GENERAL PRINCIPLES OF MERCANTILE LAW…10
ELECTRONIC COMMERCE ACT…11
DATA PRIVACY ACT…13
INSURANCE…14
GENERAL PRINCIPLES…14
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PAYMENT OF PREMIUM…14
INSURABLE INTERESTS…17
ASSIGNMENT OF POLICY…20
PERFECTION OF THE CONTRACT…21
PRESCRIPTION OF CLAIMS…21
MARITIME INSURANCE…22
LIFE INSURANCE ….24
PROPERTY INSURANCE…33
COMPULSORY VEHICLE LIABILITY INSURANCE…38
GROUP INSURANCE…41
NEGOTIABLE INSTRUMENTS…42
NEGOTIABILITY…44
DEFENSES…50
CHECKS…57
DEFENSES…65
FINANCIAL REHABILITATION AND INSOLVENCY ACT…71
SECURITY REGULATION CODE…77
CORPORATION CODE…88
INTRA-CORPORATE CONTROVERSY…106
PIERCING THE VEIL…109
BOD …115
DIVIDENDS…123
SHARES OF STOCKS…126
RIGHTS OF THE STOCKHOLDERS..131
CLOSE CORPORATIONS…139
CORPORATION SOLE…141
SEC…141
ULTRA-VIRES ACTS…141
ANTI-MONEY LAUNDERING ACTS…142
BANKING LAWS…146
SECRECY OF PESO DEPOSITS…147
FOREIGN CURRENCY DEPOSIT…154
BULK SALES LAW…166
INTELLECTUAL PROPERTY LAW…170
COPYRIGHT…172
TRADEMARK…179
PATENT…185
MARITIME COMMERCE…190
WAREHOUSE RECEIPT LAW…202
TRANSPORTATION LAW….206
TRUST RECEIPT LAW…218
LETTER OF CREDIT…221
PUBLIC UTILITIES…228
RETAIL TRADE LAW…229

CONSUMER PROTECTION LAW…232
PUBLIC SERVICE LAW…233
OTHER SPECIAL LAWS…236
2019 SUGGESTED ANSWER…238
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WHAT IS BLD TRAINING PROGRAM?... last page

GENERAL PRINCIPLES OF MERCANTILE LAW
ENGAGING IN COMMERCIAL TRANSACTION
(2009) Cecilio is planning to put up a grocery store in the subdivision where he and his family reside. To promote this proposed business
venture, he told his wife and three children to send out promotional text messages to all the residents in the subdivision. Cecilio’s family
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members did as instructed, and succeeded in reaching, through text messages, more than 80% of the residents in the subdivision.
Is Cecilio habitually engaged in commerce even if the grocery store has yet to be established? Explain your answer. (3%)
Yes. Even if the grocery store has yet to be established, Cecilio already habitually engaged in commerce, when per his instruction the
members of his family contacted more than 80% the residents of the subdivision where they reside. According to Article 3 of the Code of
Commerce, “legal presumption of habitually engaging in commerce shall exist from the moment the person who intends to engage
therein announces through circulars, newspapers, handbills, posters exhibited to the public, or in any other manner whatsoever an
establishment which has for its object some commercial operation. Text messages may qualify to be equivalent to electronic
documents.
(2003) What do you understand by the term “commercial transaction”? Is it essential that at least one party to a contract be a merchant
in order to consider such a commercial transaction? (4%)
A “Commercial transaction” is defined as ...... It is not essential that at least one party to the commercial transaction be a merchant. What
is essential is that the transaction evince an intent to engage in commerce or trade.
(1997) The Civil Code adopts the theory of cognition, while the Code of Commerce generally recognizes the theory of manifestation, in
the perfection of contracts. How do these two theories differ?
Under the theory of cognition, the acceptance is considered to effectively bind the offeror only from the time it came to his
knowledge. Under the theory of manifestation, the contract is perfected at the moment when the acceptance is declared or made by the
offeree.
JOINT ACCOUNT (2000)

What is a joint account? (2%)
A joint account is a transaction of merchants where other merchants agree to contribute the amount of capital agreed upon, and
participating in the favorable or unfavorable results thereof in the proportion they may determine.
JOINT ACCOUNT VS. PARTNERSHIP

(2000) Distinguish joint account from partnership. (3%)
The following are the distinctions between joint account and partnership:
(1) A partnership has a firm name while a joint account has none and is conducted in the name of the ostensible partner.
(2) While a partnership has juridical personality and may sue or be sued under its firm name, a joint account has no juridical
personality and can sue or be sued only in the name of the ostensible partner.
(3) While a partnership has a common fund, a joint account has none.
(4) While in a partnership, all general partners have the right of management, in a joint account, the ostensible partner manages
its business operations.
(5) While liquidations of a partnership may, by agreement, be entrusted to a partner or partners, in a joint account liquidation
thereof can only be done by the ostensible partner.

ELECTRONIC COMMERCE ACT
(2019) A.7. Ms. J offered to sell her car to Ms. K, an interested buyer. Consequently, Ms. J emailed Ms. K a copy of the proposed Deed
of Sale covering the same. After agreeing to its terms, Ms. K printed and then signed the emailed copy of the Deed of Sale. She then
faxed it to Ms. J who signed the faxed copy.
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Is the copy of the Deed of Sale faxed by Ms. K to Ms. J considered an electronic document under the Electronic Commerce Act? Explain.
(2%)
NO. Facsimile transmittal is not considered an electronic document under E-Commerce Act. “Electronic document” refers to information
or the representation of information, data, figures, symbols or other modes of written expression, described or however represented, by
which a right is established or an obligation extinguished, or by which a fact may be proved and affirmed, which is received, recorded,
transmitted, stored, processed, retrieved or produced electronically. (R.A. No. 8792)
Therefore, it is not within the scope as the subject document in a fax machine cannot be stored, processed, retrieved or produced
electronically after being received or transmitted.
(2018) Yvan was a slot machine operator supervisor in a casino operated by the Philippine Amusement and Gaming Corporation
(PAGCOR). On the basis of an intelligence report, he was found, in connivance with some slot machine customers, to have padded the
credit meter readings of slot machines in the casino where he was employed. After being served with notice and opportunity to contest
the findings, he was found guilty of the charges and ordered dismissed by PAGCOR. After receiving his copy of the order for dismissal,
he claimed to have sent to the Board of PAGCOR his motion for reconsideration through facsimile transmission. After a considerable
time, when his motion for reconsideration was unacted upon, he filed an action with the Civil Service Commission (CSC) for illegal
dismissal. PAGCOR claimed that his action has prescribed because it was filed more than 15 days after his dismissal became final. Yvan
claimed that there was no final decision yet because the Board of PAGCOR has not yet acted on his motion for reconsideration. He
presented a copy of his facsimile transmission addressed to the Board of PAGCOR seeking reconsideration of his dismissal, and the fact
that there has been no action taken. He claimed that based on the Electronic Commerce Act of 2000, his facsimile transmission should
be considered like any genuine and authentic paper pleading. PAGCOR denied having received it and was able to prove that the
telephone number of PAGCOR used in the facsimile transmission was wrong. CSC denied his complaint on account of prescription. He
appealed CSC's dismissal in court.
(a) Was CSC correct in dismissing the case? (2.5%)
CSC is correct in dismissing the case. The E-commerce law does not cover or allow e-filing or facsimile transmission as a mode of filing
of pleadings in administrative cases. Torres vs PAGCOR, GR 193531, December 6, 2011
(b) Can Yvan's bank be ordered by the court to disclose if there were unreasonable increases in his bank deposit when the alleged acts
were committed? (2.5%)
No, Yvan’s bank cannot be ordered by the court to disclose if there were unreasonable increases in his bank deposit when the alleged
acts were committed. The inquiry into bank deposits allowable under RA 1405 must be premised on the fact that the money deposited
in the account is itself the subject of the action. Otherwise, the inquiry will amount to an impermissible encroachment into one’s right to
privacy. (BSB Group vs Go, GR No. 168644, February 16, 2010)
(2007) Name at least five predicate crimes to money laundering. (5%)
Any five of the following are predicate crimes to money laundering:

1. Kidnapping for ransom under Article 267 of Act No. 3815, otherwise known as the Revised Penal Code, as amended;
2. Sections 3,4,5,7,8 and 9 of Article Two of Republic Act No. 6425, as amended, otherwise known as the Dangerous Drugs Act of
1972;
3. Section 3 paragraphs B, C, E, G, H and I of Republic Act No. 3019, as amended; otherwise known as the Anti-graft and Corrupt

Practices Act;
3. Plunder under Republic Act No. 7080, as amended;
4. Robbery and extortion under Articles 294,295,296,299,300,301 and 302 of the Revised Penal Code, as amended;
5. Jueteng and Masiao punished as illegal gambling under Presidential Decree No. 1602;
7. Piracy on the high seas under the Revised Penal Code, as amended and Presidential Decree No. 532;
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8. Qualified theft under Article 310 of the Revised Penal Code, as amended; (9) Swindling under Article 315 of the Revised Penal Code,
as amended.
9. Swindling under 315 of the Revised Penal code, as amended;
10. Smuggling under Republic Act Nos. 455 and 1937 Violations under Republic Act No. 8792, otherwise known as the Electronic
Commerce Act of 2000
11. Hijacking and other violations under Republic Act No 6235; destructive arson and murder, as defined under the Revised Penal Code,
as amended, including those perpetrated by terrorist against non-combatant persons and similar targets;
12. Fraudulent practices and other violations under Republic Act No. 8799, otherwise known as the securities Regulation Code of 2000
13. Felonies or offenses of a similar nature those are punishable under the penal laws of other countries. (Sec 3, Anti-Money Laundering
Act of 2001).
(2009) Cecilio is planning to put up a grocery store in the subdivision where he and his family reside. To promote this proposed business
venture, he told his wife and three children to send out promotional text messages to all the residents in the subdivision. Cecilio’s family
members did as instructed, and succeeded in reaching, through text messages, more than 80% of the residents in the subdivision.
Is Cecilio habitually engaged in commerce even if the grocery store has yet to be established? Explain your answer. (3%)
Yes. Even if the grocery store has yet to be established, Cecilio already habitually engaged in commerce, when per his instruction the
members of his family contacted more than 80% the residents of the subdivision where they reside. According to Article 3 of the Code of
Commerce, “legal presumption of habitually engaging in commerce shall exist from the moment the person who intends to engage
therein announces through circulars, newspapers, handbills, posters exhibited to the public, or in any other manner whatsoever an
establishment which has for its object some commercial operation. Text messages may qualify to be equivalent to electronic
documents.

DATA PRIVACY ACT
(2019) B.3. Enumerate at least two (2) rights of a data subject under the Data Privacy Act. (2%)
The data subject has the right to: (1) be informed whether personal information pertaining to him or her shall be, are being or have been
processed; and (2) suspend, withdraw or order the blocking, removal or destruction of his or her personal information from the personal Page | 13
information controller’s filing system upon discovery and substantial proof that the personal information are incomplete, outdated, false,
unlawfully obtained, used for unauthorized purposes or are no longer necessary for the purposes for which they were collected.
( I EXPECT A QUESTION ABOUT THE NATIONAL ID SYSTEM FOR 2021 BAR)

INSURANCE
GENERAL PRINCIPLES
Insurance; Co-Insurance vs. Re-Insurance
(1994) Distinguish co-insurance from re-insurance.
Page | 14
CO-INSURANCE is the percentage in the value of the insured property which the insured himself assumes or undertakes to act as insurer
to the extent of the deficiency in the insurance of the insured property. In case of loss or damage, the insurer will be liable only for such
proportion of the loss or damage as the amount of insurance bears to the designated percentage of the full value of the property insured.
REINSURANCE is where the insurer procures a third party, called the reinsurer, to insure him against liability by reason of such original
insurance. Basically, a reinsurance is an insurance against liability which the original insurer may incur in favor of the original insured.
PAYMENT OF PREMIUM
(2015) (B) Will an insurance policy be binding even if the premium is unpaid? What if it were partially paid? (3%)
(B) As a general rule, the insurance policy is not valid and binding, unless the premium thereof has been paid. This is the cash-and-carry
rule under the Insurance Code. Premium is the consideration for the undertaking of the insurer to indemnify the insured against a specified
peril. There are exceptions, however, one of them is, when there is an agreement allowing the insured to pay the premium in – installments
and partial payment has been made at the time of the loss (Makati Tuscany Condominium Corporation v. Court of Appeals, G.R. No.
95546, November 6, 1992, 215 SCRA 463).
(2014) On September 25, 2013, Danny Marcial (Danny) procured an insurance on his life with a face value of P5,000,000.00 from RN
Insurance Company (RN), with his wife Tina Marcial(Tina) as sole beneficiary. On the same day, Danny issued an undated check to RN
for the full amount of the premium. On October 1, 2013, RN issued the policy covering Danny’s life insurance. On October 5, 2013, Danny
met a tragic accident and died. Tina claimed the insurance benefit, but RN was quick to deny the claim because at the time of Danny’s
death, the check was not yet encashed and therefore the premium remained unpaid.
Is RN correct? (4%)
No, RN Insurance is wrong. The case at bar shows that Danny procured insurance on his life on September 25, 2013, with his wife Tina
as beneficiary, and that on the same day of September 25, 2013, he issued an undated check to RN for the full amount of the premium.
Since the undated check was issued to RN on September 25, 2013, it will be considered dated as of the same day pursuant to Section
17(c) of the Negotiable Instruments Law. The facts also show that RN Insurance issued the policy on Danny’s life on October 1, 2013
and that Danny died in an accident on October 5, 2013.
Addendum to the answer. Not necessarily should be included in the answer. Sarap ng answer ng UPLC kasi nag-lelecture sila.
RN Insurance denied that claim of Tina because at the time of Danny’s death, the check was not yet encashed and, therefore, the
premium remained unpaid. Presumably, RN Insurance is relying on the second paragraph of Article 1249 of the Civil Code which states
that the “delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of
payment only when they have been cashed, or when through the fault of the creditor they have been impaired.”
Whose fault was it that the check was not encashed? Certainly not Danny or Tina. RN Insurance had the check as early as September
25, 2013 and could have encashed the check before the death of Danny on October 5, 2013. The problem did not indicate that there was
any problem with the check, e.g. that it was not adequately funded. RN Insurance was at fault and Tina should not be denied the proceeds
of the policy.
(See the case of Malayan Insurance Co., Inc. vs Arnaldo (1987), where the Court held that the insurer could no longer claim forfeiture of
the insured’s right because it held the check used to pay the premium on a fire insurance policy for an unreasonable time; see also the

comments of Justice Jose C. Vitug (ret.) in his book, Commercial Laws and Jurisprudence, 2006 Vol 1., p. 250, that “payment x x x by
means of a check or note, accepted by the insurer, bearing a date prior to the loss, assuming an availability of funds thereof, would be
sufficient even if it remains uncashed at the time of the loss. The subsequent effects of encashment (or impairment by the fault of the
creditor) or of legal compensation under Articles 1278-1279, in relation to Article 1249 of the Civil Code, would retroact to the date of the
mercantile instrument and its acceptance by the creditor.” (IMPORTANTE ITO. SAULUHIN)
Will your answer be the same if the check is dated October 15, 2013? Page | 15
My answer would not be the same if the check were dated October 15, 2013. This answer assumes that Danny was the one who dated
the check and, therefore what he issued was a postdated check. The payment of a promissory note or a postdated check at a stated
maturity subsequent to the loss, assuming that there was no estoppel (e.g. written acknowledgment of the receipt of premium), is
insufficient to put the insurance into effect. (Vitug, Commercial Laws and Jurisprudence, 2006, Vol 1 p 250)
If it were RN Insurance who dated the check October 15, 2013, then my answer would be the same as my answer to the first question.
This is my observation. Since RN has already issued a policy in spite of the post-dated check. The presumption is that the
insurance was bought in credit. Hence, the insurance policy is effective on the day it was issued.
(2013) No.VII. Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have had a long-standing insurance relationship with
each other; SPMC secures the comprehensive fire insurance on its plant and facilities from SIC. The standing business practice between
them has been to allow SPMC a credit period of 90 days from the renewal of the policy with which to pay the premium.
Soon after the new policy was issued and before premium payments could be made, a fire gutted the covered plant and facilities to the
ground. The day after the fire, SPMC issued a manager’s check to SIC for the fire insurance premium, for which it was issued a receipt;
a week later SPMC issued its notice of loss.
SIC responded by issuing its own manager’s check for the amount of the premiums SPMC had paid, and denied SPMC’s claim on
the ground that under the cash and carry principle governing fire insurance, no coverage existed at the time the fire occurred because
the insurance premium had not been paid.
Is SPMC entitled to recover for the loss form SIC? (8%)
St. Peter Manufacturing Company is entitled to recover for the loss from stable Insurance Company. Stable Insurance Company granted
a credit term to pay the premiums. This is not against the law, because the standing business practice of allowing St. Peter Manufacturing
Company to pay the premiums after 60 or 90 days, was relied upon in good faith by SPMC. Stable Insurance Company is in estoppels
(UCPB General Insurance Company, Inc. v. Masagana Telemart, Inc. 356 SCRA 307, 2001).
(2006) The Peninsula Insurance Company offered to insure Francis' brand new car against all risks in the sum of PI Million for 1 year.
The policy was issued with the premium fixed at 160,000.00 payable in 6 months. Francis only paid the first two months installments.
Despite demands, he failed to pay the subsequent installments. Five months after the issuance of the policy, the vehicle was carnapped.
Francis filed with the insurance company a claim for its value. However, the company denied his claim on the ground that he failed to
pay the premium resulting in the cancellation of the policy.
Can Francis recover from the Peninsula Insurance Company? (5%)
Yes, when insured and insurer have agreed to the payment of premium by installments and partial payment has been made at the time
of loss, then the insurer becomes liable. When the car loss happened on the 5th month, the six months agreed period of payment had
not yet elapsed (UCPB General Insurance v. Masagana Telamart, G.R. No. 137172, April 4, 2001). Francis can recover from Peninsula
Insurance Company, but the latter has the right to deduct the amount of unpaid premium from the insurance proceeds.

(2010) No.XI. Enrique obtained from Seguro Insurance Company a comprehensive motor vehicle insurance to cover his top of the line
Aston martin. The policy was issued on March 31, 2010 and, on even date, Enrique paid the premium with a personal check postdated
April 6, 2010. On April 5, 2010, the car was involved in an accident that resulted in its total loss.
On April 10, 2010, the drawee bank returned Enrique’s check with the notation ―Insufficiency of funds. Upon notification,
Enrique immediately deposited additional funds with the bank and asked the insurer to redeposit the check.
Enrique thereupon claimed indemnity from the insurer. Is the insurer liable under the insurance coverage? Why or why not? Page | 16
The insurer is not liable under the insurance policy. Under Article 1249 of the Civil Code, the delivery of a check produces the effect of
payment only when it is encashed. The loss occurred on April 5, 2010. When the check was deposited, it was returned on April 10, 2010,
for insufficiency of funds. The check was honored only after Enrique deposited additional funds with the bank. Hence, it did not produce
the effect of payment (Vitug, Commercial Laws and Jurisprudence, Vol. I, p.250).
ALTERNATIVE ANSWER:
Yes. The insurer is liable. The insurance policy was issued. In effect, there was a grant of credit for the payment of the premium. The
insurer can deduct the amount of the check from the proceeds of the insurance.
(2007) No.IV. Alfredo took out a policy to insure this commercial building fire. The broker for the insurance company agreed to give a 15-
day credit within which pay the insurance premium. Upon delivery of the policy on May 15, 2006, Alfredo issued a postdated check
payable on May 30, 2006. On May 28, 2006, a fire broke out and destroyed the building owned by Alfredo. May Alfredo recover on the
insurance policy?
Yes, Alfredo may recover on the policy. It is valid to stipulate that the insured will be granted credit term for payment of premium. Payment
by means of a check which was accepted by the insurer, bearing a date prior to the loss, would be sufficient. The subsequent effects of
encashment retroact to the date of the check (UCPB General Insurance Co., Inc. v. Masagana Telamart, Inc., 356 SCRA 307 [2001]).
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, recovery under the insurance contract is allowed if the cause of the loss was either the proximate or the immediate cause as long
as an excepted peril, if any was not the proximate cause of the loss (Section 86, Insurance Code of the Philippines).
If the fire was found to have been caused by Alfredo’s own negligence, can he still recover on the policy?
Yes, mere negligence on the part of the insured will not prevent recovery under the insurance policy. The law merely prevents recovery
when the cause of loss is the willful act of the insured, alone or in connivance with others (Section 87, Insurance Code of the Philippines).
(2000) Name at least three instances when an insured is entitled to a return of the premium paid.
Three instances when an insured is entitled to a return of premium paid are:
1. To the WHOLE PREMIUM, if no part of his interest in the thing insured be exposed to any of the perils insured against.
2. Where the insurance is made for a definite period of time and the insured surrenders his policy, to such portion of the premium
as corresponds with the unexpired time at a pro rata rate, unless a short period rate has been agreed upon and appears on
the face of the policy, after deducting from the whole premium any claim for loss or damage under the policy which has
previously accrued.
3. When the contract is voidable on account of the fraud or misrepresentation of the insurer or of his agent or on account of facts
the existence of which the insured was ignorant without his fault; or when, by any default of the insured other than actual
fraud, the insurer never incurred any liability under the policy.
ALTERNATIVE INSTANCE:
In case of an over insurance by several insurers, the insured is entitled to a ratable return of the premium, proportioned to the amount by
which the aggregate sum insured in all the policies exceeds the insurable value of the thing at risk.

INSURABLE INTERESTS
(2019) (c) Insurable interest in property (2%)
Sec. 14 of the Insurance Code provides that an insurable interest in property may consist in (a) an existing interest; (b) an inchoate
interest founded on an existing interest; (c) an expectancy, coupled with an interest out of which the expectancy arises. Furthermore,
such an insurable interest in property must exist when the insurance takes effect, and when the loss occurs, but need not exist in the Page | 17
meantime.
(2018) Shortly after Yin and Yang were wed, they each took out separate life insurance policies on their lives, and mutually designated
one another as sole beneficiary. Both life insurance policies provided for a double indemnity clause, the cost for which was added to the
premium rate. During the last 10 years of their marriage, the spouses had faithfully paid for the annual premiums over the life policies
from both their salaries. Unfortunately, Yin fell in love with his officemate, Vessel, and they carried on an affair. After two years, their
relationship bore them a daughter named Vinsel. Without the knowledge of Yang, Yin changed the designation of the beneficiary to an
"irrevocable designation" of Vinsel and Vessel jointly. When Yang learned of the affair, she was so despondent that, having chanced
upon Yin and Vessel on a date, she rammed them down with the car she was driving, resulting in Vin's death and Vessel's complete loss
of mobilization. Yang was sued for parricide, and while the case was pending, she filed a claim on the proceeds of the life insurance of
Yin as irrevocable beneficiary, or at least his legal heir, and opposed the claims on behalf of Vessel and her daughter Vinsel. Yang
claimed that her designation as beneficiary in Vin's life insurance policy was irrevocable, in the nature of one "coupled with interest,"
since it was made in accordance with their mutual agreement to designate one another as sole beneficiary in their respective life policies.
She also claimed that the beneficiary designation of Vessel and the illegitimate minor child Vinsel was void being the product of an illicit
relationship, and therefore without "insurable interest."
(a) Is Yang correct in saying that her designation as beneficiary was irrevocable? (2.5%)
A. Yang is not correct. The insured shall have the right to change the beneficiary he designated in the policy unless he has expressly
waived this right in the policy. There is nothing in the life insurance policy taken by Yang which indicated that the designation of Ying is
irrevocable. As such, it is deemed to be revocable.
(b) Do Vessel and Vinsel have "insurable interest" on the life of Yin? (2.5%)
Vessel has no insurable interest on the life of Yin because she cannot be lawfully designated as beneficiary. Persons who are proscribed
to become donees under the rules on donation cannot be designated as beneficiary in life insurance. These include persons in illicit
relations as in the case of Yin and Veseel. Vinsel, however, has insurable interest on the life of Yin. There is no proscription in naming
an illegitimate child as a beneficiary. Heirs of Loreta Maramag vs Maramag, GR No. 181132, June 5, 2009
(2017) The newly restored Ford Mustang muscle car was just released from the car restoration shop to its owner, Seth, an avid
sportsman. Given his passion for sailing, he needed to go to a round-the-world voyage with his crew on his brand-new 180-meter yacht.
Hearing about his coming voyage, Sean, his bosom friend, asked Seth if he could borrow the car for his next roadshow. Sean, who had
been in the business of holding motor shows and promotions, proposed to display the restored car of Seth in major cities of the country.
Seth agreed and lent the Ford Mustang to Sean. Seth further expressly allowed Sean to use the car even for his own purposes on special
occasions during his absence from the country. Seth and Sean then went together to Bayad Agad Insurance Co. (BAIC) to get separate
policies for the car in their respective names.
BAIC consults you as its lawyer on whether separate policies could be issued to Seth and Sean in respect of the same car.
a. What is insurable interest? (2%)
There is insurable interest in property when he derives a benefit from its existence or would suffer a loss from its destruction, termination
or injury by the happening of the event insured against it.
b. Do Seth and Sean have separate insurable interests? Explain briefly your answer. (3%)
Seth and Sean have separate insurable interests. Seth’s insurable interest is his legal and/or equitable interests over the vehicle as an
owner while Sean’s insurable interest is the safety of the vehicle which may become the basis of liability in case of loss or damage to the
vehicle.

Another Answer:
Both has insurable interest in it. Insurable interest in property consists of either an (1) existing interest, (2) an inchoate interest founded
on an existing interest, or (3) an expectancy coupled with an existing interest in that out of which the expectancy arises. Seth, being the
owner, has an existing interest. Sean has an inchoate interest founded on an existing interest. He could be held civilly liable for the value
of the car in case of loss, destruction or damage.
Page | 18
(2015) (A) Novette entered into a contract for the purchase of certain office supplies. The goods were shipped. While in transit, the goods
were insured by Novette. Does she have an insurable interest over the goods even before delivery of the same to her? Explain. (2%)
Yes, Novette has an insurable interest in the goods. The contract of sale was already perfected and Novette acquired interest thereon,
although the goods have yet to be delivered.
(2014) Carlo and Bianca met in the La Boracay festivities. Immediately, they fell in love with each other and got married soon after. They
have been cohabiting blissfully as husband and wife, but they did not have any offspring. As the years passed by, Carlo decided to take
out an insurance on Bianca’s life for P1,000,000.00 with him (Carlo) as sole beneficiary, given that he did not have a steady source of
income and he always depended on Bianca both emotionally and financially. During the term of the insurance, Bianca died of what
appeared to be a mysterious cause so that Carlo immediately requested for an autopsy to be conducted. It was established that Bianca
died of a natural cause. More than that, it was also established that Bianca was a transgender all along – a fact unknown to Carlo. Can
Carlo claim the insurance benefit? (5%)
Yes, Carlo can claim the insurance benefit. He had insurable interest on Bianca’s life under Section 10 (b) of the Insurance Code as the
problem states that Carlo “always depended on Bianca both emotionally and financially”. The insurable interest upon the life of another
under the aforesaid provision need not be based on kinship or legal obligation to give support. The fact that their marriage may be void
is irrelevant.
(2014) A person is said to have an insurable interest in the subject matter insured where he has a relation or connection with, or concern
in it that he will derive pecuniary benefit or advantage from its preservation. Which among the following subject matters is not considered
insurable? (1%)
(B) A general creditor on debtor’s property
BANK DEPOSIT
(2000) BD has a bank deposit of half a million pesos. Since the limit of the insurance coverage of the Philippine Deposit Insurance Corp
(PDIC) (RA 3591) is only one tenth of BD’s deposit, he would like some protection for the excess by taking out an insurance against all
risks or contingencies of loss arising from any unsound or unsafe banking practices including unforeseen adverse effects of the continuing
crisis involving the banking and financial sector in the Asian region. Does BD have an insurable interest within the meaning of the
Insurance Code of the Philippines (PD1460)? (2%)
Yes. BD has insurable interest in his bank deposit. In case of loss of said deposit, more particularly to the extent of the amount in excess
of the limit covered by the PDIC Act, PBD will be damnified. He will suffer pecuniary loss of P300,000.00, that is, his bank deposit of half
a million pesos minus P200,000.00 which is the maximum amount recoverable from the PDIC.
PUBLIC ENEMY
(2000) May a member of the MILF or its breakaway group, the Abu Sayyaf, be insured with a company licensed to do business under
the Insurance Code of the Phils (PD 1460)? Explain. (3%)
A member of the MILF or the Abu Sayyaf may be insured with a company licensed to do business under the Insurance Code of the
Phils. What is prohibited to be insured is a public enemy. A public enemy is a citizen or national of a country with which the Philippines
is at war. Such member of the MILF or the Abu Sayyaf is not a citizen or national of another country, but of the Philippines.
SEPARATE INSURABLE INTEREST

(1999) A businessman in the grocery business obtained from First Insurance an insurance policy for P5M to fully cover his stocks-in-
trade from the risk of fire. Three months thereafter, a fire of accidental origin broke out and completely destroyed the grocery including
his stocks-in-trade. This prompted the businessman to file with First Insurance a claim for five million pesos representing the full value of
his goods.
First Insurance denied the claim because it discovered that at the time of the loss, the stocks-in-trade were mortgaged to a creditor who
likewise obtained from Second Insurance Company fire insurance coverage for the stocks at their full value of P5M. Page | 19
a) May the businessman and the creditor obtain separate insurance coverages over the same stocks- in-trade? Explain (3%)
b) First Insurance refused to pay claiming that double insurance is contrary to law. Is this contention tenable? (3%)
c) Suppose you are the Judge, how much would you allow the businessman and the creditor to recover from their respective
insurers. Explain (3%)
a) Yes. The businessman, as owner, and the creditor, as mortgagee, have separate insurable interests in the same stocks-in-
trade. Each may insure such interest to protect his own separate interest.
b) The contention of First Insurance that double insurance is contrary to law is untenable. There is no law providing that double
insurance is illegal per se. Moreover, in the problem at hand, there is no double insurance because the insured with the First
Insurance is different from the insured with the Second Insurance Company. The same is true with respect to the interests
insured in the two policies.
c) As Judge, I would allow the businessman to recover his total loss of P5M representing the full value of his goods which were
lost through fire. As to the creditor, I would allow him to recover the amount to the extent of or equivalent to the value of the
credit he extended to the businessman for the stocks-in-trade which were mortgaged by the businessman.
EQUITABLE INTEREST
(1991) A piece of machinery was shipped to Mr Pablo on the basis of C&F Manila. Pablo insured said machinery with the Talaga
Merchants Ins Co (Tamic) for loss or damage during the voyage. The vessel sank en route to Manila. Pablo then filed a claim with Tamic
which was denied for the reason that prior to deliver, Pablo had no insurable interest. Decide the case.
Pablo had an existing insurable interest on the piece of machinery he bought. The purchase of goods under a perfected contract of sale
already vests equitable interest on the property in favor of the buyer even while it is pending delivery (Filipino Merchants Ins Co v CA GR
85144, 28 Nov 1989)
LIFE VS. PROPERTY INSURANCE

(1997)
a) A obtains a fire insurance on his house and as a generous gesture names his neighbor as the beneficiary. If A’s house is
destroyed by fire, can B successfully claim against the policy?
b) A obtains insurance over his life and names his neighbor B the beneficiary because of A’s secret love for B. If A dies, can B
successfully claim against the policy?
a) No. In property insurance, the beneficiary must have insurable interest in the property insured. (Sec 18 Ins Code). B does not
have insurable interest in the house insured.
b) Yes. In life insurance, it is not required that the beneficiary must have insurable interest in the life of the insured. It was the
insured himself who took the policy on his own life.
(2000) IS, an elderly bachelor with no known relatives, obtained life insurance coverage for P250,000.00 from Starbrite Insurance
Corporation, an entity licensed to engage in the insurable business under the Insurance Code of the Philippines (PD1460). He also
insured his residential house for twice that amount within the same corporation. He immediately assigned all his rights to the insurance
proceeds to BX, a friend-companion living with him. Three years later, IS died in a fire that gutted his insured house two days after he
had sold it. There is no evidence of suicide or arson or involvement of BX in these events. BX demanded payment of the insurance
proceeds from the two policies, the premiums for which IS had been faithfully paying during all the time he was alive. Starbrite refused

payment, contending that BX had no insurable interest and therefore was not entitled to receive the proceeds from IS’s insurance
coverage on his life and also on his property. Is Starbrite’s contention valid? Explain? (5%)
Starbrite is correct with respect to the insurance coverage on the property of IS. The beneficiary in the property insurance policy or the
assignee thereof must have insurable interest in the property insured. BX, a mere friend-companion of IS, has no insurable interest in
the residential house of IS. BX is not entitled to receive the proceeds from IS’s insurance on his property.
Page | 20
As to the insurance coverage on the life of IS, BX is entitled to receive the proceeds. There is no requirement that BX should have
insurable interest in the life of IS. It was IS himself who took the insurance on his own life.
(2002) Distinguish insurable interest in property insurance from insurable interest in life insurance. (5%)
a) In property insurance, the expectation of benefit must have a legal basis. In life insurance, the expectation of benefit to be
derived from the continued existence of a life need not have any legal basis.
b) In property insurance, the actual value of the interest therein is the limit of the insurance that can validly be placed thereon. In
life insurance, there is no limit to the amount of insurance that may be taken upon life.
c) In property insurance, an interest insured must exist when the insurance takes effect and when the loss occurs but need not
exist in the meantime. In life insurance, it is enough that insurable interest exists at the time when the contract is made but it
need not exist at the time of loss.
ASSIGNMENT OF POLICY
(2009) No.XIII. Ciriaco leased a commercial apartment from Supreme Building Corporation (SBC). One of the provisions of the one-year
lease contract states:
―18.xxx The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at
any stall or store or space in the leased premises without first obtaining the written consent of the LESSOR. If the LESSEE obtains
fire insurance coverage without the consent of the LESSOR, the insurance policy is deemed assigned and transferred to the
LESSOR for the latter’s benefit.
Notwithstanding the stipulation in the contract, without the consent of SBC, Ciriaco insured the merchandise inside the leased premises
against loss by fire in the amount of P500, 000 with First United Insurance Corporation (FUIC).
A day before the lease contract expired, fire broke out inside the leased premises, damaging Ciriaco’s merchandise. Having learned of
the insurance earlier procured by Ciriaco, SBC demanded from FUIC that the proceeds of the insurance policy be paid directly to it, as
provided in the lease contract.
Who is legally entitled to receive the insurance proceeds? Explain. (4%)
Ciriaco is entitled to receive the proceeds of the insurance policy. The stipulation that the policy is deemed assigned and transferred to
SBC is void, because SBC has no insurable interest in the merchandise of Ciriaco (Cha v. Court of Appeals, 277 SCRA 690 (1997))
(1991) The policy of insurance upon his life, with a face value of P100th was assigned by Jose, a married man with 2 legitimate children,
to his nephew Y as security for a loan of P50th. He did not give the insurer any written notice of such assignment despite the explicit
provision to that effect in the policy. Jose died. Upon the claim on the policy by the assignee, the insurer refused to pay on the ground
that it was not notified of the assignment. Upon the other hand, the heirs of Jose contended that Y is not entitled to any amount under
the policy because the assignment without due notice to the insurer was void. Resolve the issues.

A life insurance is assignable. A provision, however, in the policy stating that written notice of such an assignment should be given to the
insurer is valid (Secs 181-182 Ins Code). The failure of the notice of assignment would thus preclude the assignee from claiming rights
under the policy. The failure of notice did not, however, avoid the policy; hence, upon the death of Jose, the proceeds would, in the
absence of a designated beneficiary, go to the estate of the insured. The estate, in turn, would be liable for the loan of P50,000 owing in
favor of Y.
Page | 21
PERFECTION OF INSURANCE CONTRACTS
(2009) No.IV. Antarctica Life Assurance Corporation (ALAC) publicly offered a specially designed insurance policy covering persons
between the ages of 50 to 75 who may be afflicted with serious and debilitating illnesses. Quirico applied for insurance coverage, stating
that he was already 80 years old. Nonetheless, ALAC approved his application.
Quirico then requested ALAC for the issuance of a cover note while he was trying to raise funds to pay the insurance premium. ALAC
granted the request. Ten days after he received the cover note, Quirico had a heart seizure and had to be hospitalized. He then filed a
claim on the policy.
Can ALAC validly deny the claim on the ground that the insurance coverage, as publicly offered, was available only to persons 50 to 75
years of age? Why or why not? (2%)
No. By approving the application of Quirino who disclosed that he was already 80 years old, ALAC waived the age requirement. ALAC is
now stopped from raising such defense of age of the insured.
Did ALAC’s issuance of a cover note result in the perfection of an insurance contract between Quirico and ALAC? Explain. (3%)
The issuance of a cover note by ALAC resulted in the perfection of the contract of insurance. In that case, it is only because there is
delay in the issuance of the policy that the cover notes was issued. The cover note is a receipt whereby the company agrees to insure
the insured for 60 days pending the issuance of a regular policy. No separate premium is to be paid on a cover note. It is not a separate
policy but is integrated in the regular policy to be subsequently issued.
(2003) Josie Gatbonton obtained from Warranty Insurance Corporation a comprehensive motor vehicle insurance to cover her brand new
automobile. She paid, and the insurer accepted payment in check. Before the check could be encashed, Josie was involved in a motor
vehicle accident where her car became a total wreck. She sought payment from the insurer. Could the insurer be made liable under the
insurance coverage? (6%)
Yes, because there was a perfected contract of insurance the moment there is a meeting of the minds with respect to the object and the
cause of payment. The payment of check is a valid payment unless upon encashment the check bounced.
PRESCRIPTION OF CLAIMS
(1996) Robin insured his building against fire with EFG Assurance. The insurance policy contained the usual stipulation that any action
or suit must be filed within one year after the rejection of the claim.
After his building burned down, Robin filed his claim for fire loss with EFG. On Feb 28, 1994, EFG denied Robin’s claim. On April 3, 1994,
Robin sought reconsideration of the denial, but EFG reiterated its position. On March 20, 1995, Robin commenced judicial action against
EFG. Should Robin’s action be given due course? Explain.
No, Robin’s action should not be given due course. Is filing of the request for reconsideration did not suspend the running of the
prescriptive period of one year stipulated in the insurance policy. Thus, when robin commenced judicial action against EFG Assurance
on March 2 0, 1995, his ability to do so had already prescribed. The one-year period is counted from Feb 28, 1994 when EFG

denied Robin’s claim, not from the date (presumably after April 3, 1994) when EFG reiterated its position denying Robin’s claim. The
reason for this rule is to insure that claims against insurance companies are promptly settled and that insurance suits are brought by the
insured while the evidence as to the origin and cause of the destruction has not yet disappeared. (See Sun Ins Office Ltd v CA gr 89741,
Mar 13 91 195s193)
MARITIME INSURANCE Page | 22

NATURE & DEFINITION
(2006) What is a mutual insurance company or association?
A mutual life insurance corporation is a cooperative that promotes the welfare of its own members, with the money collected from among
themselves and solely for their own protection and not for profit. Members are both the insurer and insured. A mutual life insurance
company has no capital stock and relies solely upon its contributions or premiums to meet unexpected losses, contingencies and
expenses (Republic v. Sunlife, G.R. No 158085, October 14, 2005).
IMPLIED WARRANTIES
(2000) What warranties are implied in marine insurance?
The following warranties are implied in marine insurance:
1) That the ship is seaworthy to make the voyage and/or to take in certain cargoes
2) That the ship shall not deviate from the voyage insured;
3) That the ship shall carry the necessary documents to show nationality or neutrality and that it will not carry any document
which will cast reasonable suspicion thereon;
4) That the ship shall not carry contraband, especially if it is making a voyage through belligerent waters.
PERIL OF THE SHIP VS. PERIL OF THE SEA

(1998) A marine insurance policy on a cargo states that “the insurer shall be liable for losses incident to perils of the sea.” During the
voyage, seawater entered the compartment where the cargo was stored due to the defective drainpipe of the ship. The insured filed an
action on the policy for recovery of the damages caused to the cargo. May the insured recover damages? (5%)
No. The proximate cause of the damage to the cargo insured was the defective drainpipe of the ship. This is peril of the ship, and not
peril of the sea. The defect in the drainpipe was the result of the ordinary use of the ship. To recover under a marine insurance policy,
the proximate cause of the loss or damage must be peril of the sea.
ALL RISK INSURANCE POLICY
(2017) A. Absolute Timber Co. (ATC) has been engaged in the logging business in Isabela. To secure one of its shipments of logs to
be transported by Andok Shipping Co., ATC purchased a marine policy with an all-risk provision. Because of a strong typhoon then hitting
Northern Luzon, the vessel sank and the shipment of logs was totally lost. ATC filed its claim, but the insurer denied the claim on several
grounds, namely: (1) the vessel had not been seaworthy; (2) the vessel’s crew had lacked sufficient training; (3) the improper loading of
the logs on only one side of the vessel had led to the tilting of the ship to that side during the stormy voyage; and (4 the extremely bad
weather had been a fortuitous event.
ATC now seeks your legal advice to know if its claim was sustainable. What is your advice? Explain your answer. (3%)
The insurance claim is sustainable. An all risk insurance policy covers all causes of conceivable loss or damage, except as otherwise
excluded in the policy or due to fraud or intentional misconduct on the part of the insured. Since there was no stipulation as to what losses
are excluded from the coverage, the insured can recover.

SUBROGATION
(2014) ELP Insurance, Inc. issued Marine Policy No. 888 in favor of FCL Corp. to insure the shipment of 132 bundles of electric copper
cathodes against all risks. Subsequently, the cargoes were shipped on board the vessel "M/V Menchu" from Leyte to Pier 10, North
Harbor, Manila.
Upon arrival, FCL Corp. engaged the services of CGM, Inc. for the release and withdrawal of the cargoes from the pier and the subsequent Page | 23
delivery to its warehouses/plants in Valenzuela City. The goods were loaded on board twelve (12) trucks owned by CGM, Inc., driven by
its employed drivers and accompanied by its employed truck helpers. Of the twelve (12) trucks en route to Valenzuela City, only eleven
(11) reached the destination. One (1) truck, loaded with eleven (11) bundles of copper cathodes, failed to deliver its cargo.
Because of this incident, FCL Corp. filed with ELP Insurance, Inc. a claim for insurance indemnity in the amount of P1,500,000.00. After
the requisite investigation and adjustment, ELP Insurance, Inc. paid FCL Corp. the amount of P1,350,000.00 as insurance indemnity.
ELP Insurance, Inc., thereafter, filed a complaint for damages against CGM, Inc. before the Regional Trial Court (RTC), seeking
reimbursement of the amount it had paid to FCL Corp. for the loss of the subject cargo. CGM, Inc. denied the claim on the basis that it is
not privy to the contract entered into by and between FCL Corp. and ELP Insurance, Inc., and hence, it is not liable therefor. If you are
the judge, how will you decide the case? (4%)
I will decide the case in favor of ELP Insurance. Even if CGM, Inc. is not privy to the contract between FCL Corp. and ELP Insurance, it
is still liable for the loss of the subject cargo. Art. 2207 of the Civil Code states if the plaintiff’s property has been insured and he has
received indemnity from the insurance company for injury or loss arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured against the wrong-doer or the person who has violated the contract,
which in this case is CGM. Since ELP Insurance is subrogated to the rights of FCL Corporation to the extent of the amount it paid to the
latter under the marine insurance contract, it has the right to seek reimbursement from CGM, Inc, for breach of contract and/or tort
(Loadmasters Customs Services, Inc. vs Glodel Brokerage Corporation and R & B Insurance Corp (2011)
ACTUAL TOTAL LOSS

(1992) An insurance company issued a marine insurance policy covering a shipment by sea from Mindoro to Batangas of 1,000 pieces
of Mindoro garden stones against “total loss only.” The stones were loaded in two lighters, the first with 600 pieces and the second with
400 pieces. Because of rough seas, damage was caused the second lighter resulting in the loss of 325 out of the 400 pieces. The owner
of the shipment filed claims against the insurance company on the ground of constructive total loss inasmuch as more than ¾ of the
value of the stones had been lost in one of the lighters.
Is the insurance company liable under its policy? Why?
The insurance company is not liable under its policy covering against “total loss only” the shipment of 1,000 pieces of Mindoro garden
stones. There is no constructive total loss that can claimed since the ¾ rule is to be computed on the total 1,000 pieces of Mindoro garden
stones covered by the single policy coverage (see Oriental Assurance Co v CA 200 s 459)
(1996) RC Corporation purchased rice from Thailand, which it intended to sell locally. Due to stormy weather, the ship carrying the rice
became submerged in sea water, and with it the rice cargo. When the cargo arrived in Manila, RC filed a claim for total loss with the
insurer, because the rice was no longer fit for human consumption. Admittedly, the rice could still be used as animal feed. Is RC’s claim
for total loss justified? Explain.
Yes, RC’s claim for total loss is justified. The rice, which was imported from Thailand for sale locally, is obviously intended for consumption
by the public. The complete physical destruction of the rice is not essential to constitute an actual total loss. Such a loss exists in this
case since the rice, having been soaked in sea water and thereby rendered unfit for human consumption, has become totally useless for
the purpose for which it was imported (Pan Malayan Ins. Co v CA GR 95070 Sep 5, 1991)
CONSTRUCTIVE TOTAL LOSS

(2005) M/V Pearly Shells, a passenger and cargo vessel, was insured for P40,000,000.00 against “constructive total loss.” Due to a
typhoon, it sank near Palawan. Luckily, there were no casualties, only injured passengers. The ship owner sent a notice of abandonment

of his interest over the vessel to the insurance company which then hired professionals to afloat the vessel for P900,000.00. When re-
floated, the vessel needed repairs estimated at P2,000,000.00. The insurance company refused to pay the claim of the ship owner,
stating that there was “no constructive total loss.”
a) Was there “constructive total loss” to entitle the ship owner to recover from the insurance company? Explain.
b) Was it proper for the ship owner to send a notice of abandonment to the insurance company? Explain. (5%)
Page | 24
No, there was no "constructive total loss" because the vessel was refloated and the costs of refloating plus the needed repairs (P 2.9
Million) will not be more than three-fourths of the value of the vessel. A constructive total loss is one which gives to a person insured a
right to abandon. (Sec, 131, Insurance Code) There would have been a constructive total loss had the vessel MN Pearly Shells suffer
loss or needed refloating and repairs of more than the required three-fourths of its value, i.e., more than P30.0 Million (Sec. 139, Insurance
Code, cited in Oriental Assurance v. Court of Appeals and Panama Saw Mill, G.R. No. 94052, August 9, 1991)
However, the insurance company shall pay for the total costs of refloating and needed repairs (P2.9 Million).
c) Was it proper for the ship owner to send a notice of abandonment to the insurance company? Explain.
No, it was not proper for the ship owner to send a notice of abandonment to the insurance company because abandonment can only be
availed of when, in a marine insurance contract, the amount to be expended to recover the vessel would have been more than three-
fourths of its value. Vessel MN Pearly Shells needed only P2.9 Million, which does not meet the required three- fourths of its value to
merit abandonment. (Section 139, Insurance Code, cited in Oriental Assurance v. Court of Appeals and Panama Saiv Mill, G.R. No.
94052, August 9, 1991)
BARRATRY
(2010) (B) What is barratry in marine insurance? (2%)
Barratry is any willful misconduct in the part of the master or crew in pursuance of some unlawful or fraudulent purpose without the
consent of the owner and to the prejudice of the interest of the owner (Roque v. Intermediate Appellate Court, supra).
LIFE INSURANCE
UNLIMITED INSURANCE ON LIFE
(2017) The law on life insurance prohibits double insurance. (2%)
FALSE. The danger of over insurance, which is present in double insurance, is not present in life insurance. Insurable interest in life is
unlimited. Thus, the same is allowed.
MISREPRESENTATION
(2018) On June 21, 2008, Yate took out a life insurance policy on her life in the amount of PhP 10 million and named her husband Vandy
and daughter as joint irrevocable beneficiaries. Before the policy was issued and the premiums were paid, Yate underwent a medical
checkup with a physician accredited by the insurer, and the only result found was that she was suffering from high blood pressure. Yate
was previously diagnosed by a private physician of having breast cancer which she did not disclose to the insurer in her application, nor
to the insurer's accredited physician because by then, she was told that she was already cancer-free after undergoing surgery which
removed both her breasts. She was later diagnosed with psychotic tendency that graduated into extreme despondency. She was found
dead hanging in her closet 36 months after the issuance of the policy. The police authorities declared it to be a case of suicide. The policy
did not include suicide as an excepted risk.
(a) Can the insurer raise the issue of failure to disclose that she had cancer as a cause for denying the claim of the beneficiaries? (2.5%)

A. The insurer cannot raise the issue of concealment because only material facts known to the insured at the time of the issuance of the
policy should be disclosed to the insurer. (Section 28 of the IC ) Yate’s previous cancer diagnosis is no longer a material fact at the time
she procured the policy.
(2016) X insured his life for P20 million. X, plays golf and regularly exercises every day, hence is considered in good health. He did not
know, however, that his frequent headache is really caused by his being hypertensive. In his application form for a life insurance for
himself, he did not put a check to the question if he is suffering from hypertension, believing that because of his active lifestyle, being Page | 25
hypertensive is a remote possibility. While playing golf one day, X collapsed at the fairway and was declared dead on arrival at the
hospital. His death certificate stated that X suffered a massive heart attack.
[a] Will the beneficiary of X be entitled to the proceeds of the life insurance under the circumstances, despite the non-disclosure
that he is hypertensive at the time of application? (2.5%)
No, the beneficiary of X is not entitled to the proceeds of the life insurance. The hypertension of X is a material fact that should have been
disclosed to the insurer. The concealment of such material fact entitles the insurer to rescind the insurance policy.
ALTERNATIVE ANSWER
The beneficiary of X should be entitled to the proceeds of the insurance since the non-disclosure of his health condition was out of good
faith for he was not aware that he was suffering from hypertension.
Take this as a lecture
Yes. The beneficiary of X shall be entitled to the proceeds of the insurance.
Section 28 of the Insurance Code provides that each party to a contract of insurance must communicate to the other, in good faith, all
facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has not the
means of ascertaining. The fraudulent intent on the part of the insured must be established to entitle the insurer to rescind the contract.
Misrepresentation as a defense of the insurer to avoid liability is an affirmative defense and the duty to establish such defense by
satisfactory and convincing evidence rests upon the insurer. In the case at bar, the insurer failed to clearly and satisfactorily establish its
defense, and is therefore liable to pay the proceeds of the insurance. There was no fraudulent intent on the part of the insured. (GREAT
PACIFIC LIFE ASSURANCE CORP., vs. COURT OF APPEALS AND MEDARDA V. LEUTERIO)
[b] If X died in an accident instead of a heart attack, would the fact of X's failure to disclose that he is hypertensive be considered
as material information? (2.5%)
It is still a material information. It is settled that the insured cannot recover even though the material fact not disclosed is not the cause
of the loss.
Kunf alam lang ng insurer na hypertensive si insured, hindi sila mag-iissue ng policy in the first place.
Take this as a lecture.
Yes. It is a material information.
Section 26 of The Insurance Code is explicit in requiring a party to a contract of insurance to communicate to the other, in good faith, all
facts within his knowledge which are material to the contract and as to which he makes no warranty, and which the other has no means
of ascertaining. Said Section provides: A neglect to communicate that which a party knows and ought to communicate, is called
concealment.
Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom
communication is due, in forming his estimate of the disadvantages of the proposed contract or in making his inquiries (The Insurance
Code, Sec. 31).
The terms of the contract are clear. The insured is specifically required to disclose to the insurer matters relating to his health. The
information which the insured failed to disclose were material and relevant to the approval and issuance of the insurance policy. The

matters concealed would have definitely affected petitioner's action on his application, either by approving it with the corresponding
adjustment for a higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of the insured
by petitioner in order for it to reasonably assess the risk involved in accepting the application.
In Vda. de Canilang v. Court of Appeals, 223 SCRA 443 (1993), we held that materiality of the information withheld does not depend on
the state of mind of the insured. Neither does it depend on the actual or physical events which ensue. Anent the finding that the facts
concealed had no bearing to the cause of death of the insured, it is well settled that the insured need not die of the disease he had failed Page | 26
to disclose to the insurer. It is sufficient that his non-disclosure misled the insurer in forming his estimates of the risks of the proposed
insurance policy or in making inquiries (Henson v. The Philippine American Life Insurance Co., 56 O.G. No. 48 [1960]), (SUNLIFE
ASSURANCE COMPANY OF CANADA vs. The Hon. COURT OF APPEALS and Spouses ROLANDO and BERNARDA BACANI).
(2013) No.II. Benny applied for life insurance for Php 1.5 Million. The insurance company approved his application and issued an
insurance policy effective Nov, 6, 2008. Benny named his children as his beneficiaries. On April 6, 2010, Benny died of hepatoma, a liver
ailment.
The insurance company denied the children’s claim for the proceeds of the insurance policy on the ground that Benny failed to disclose
in his application two previous consultations with his doctors for diabetes and hypertension, and that he had been diagnosed to be
suffering from hepatoma. The insurance company also rescinded the policy and refunded the premiums paid.
Was the insurance company correct? (8%)
The insurance company correctly rescinded the policy because of concealment (Section 27 of Insurance Code). Benny did not disclose
that he was suffering from diabetes, hypertension, and hepatoma. The concealment is material, because these are serious ailments
(Florendo v. Philam Plans, Inc., 666 SCRA 618, 2012). Benny died less than two years from the date of the issuance of the policy (Section
48 of Insurance Code).
(2001) A applied for a non-medical life insurance. The insured did not inform the insurer that one week prior to his application for
insurance, he was examined and confined at St. Luke’s Hospital where he was diagnosed for lung cancer. The insured soon thereafter
died in a plane crash. Is the insurer liable considering that the fact concealed had no bearing with the cause of death of the insured?
Why? (5%)
No. The concealed fact is material to the approval and issuance of the insurance policy. It is well settled that the insured need not die of
the disease he failed to disclose to the insurer. It is sufficient that his nondisclosure misled the insurer in forming his estimate of the risks
of the proposed insurance policy or in making inquiries.
INCONTESTABILITY PERIOD
(2019) A.6. In January 2016, Mr. H was issued a life insurance policy by XYZ Insurance Co., wherein his wife, Mrs. W, was designated
as the sole beneficiary. Unbeknownst to XYZ Insurance Co., however, Mr. H had been previously diagnosed with colon cancer, the fact
of which Mr. H had concealed during the entire time his insurance policy was being processed.
In January 2019, Mr. H unfortunately committed suicide. Due to her husband’s death, Mrs. W, as beneficiary, filed a claim with XYZ
Insurance Co. to recover the proceeds of the late Mr. H’s life insurance policy. However, XYZ Insurance Co. resisted the claim, contending
that: 1. the policy is void ab initio because Mr. H fraudulently concealed or misrepresented his medical condition, i.e., his colon cancer;
and 2. as an insurer in a life insurance policy, it cannot be held liable in case of suicide. Rule on each of XYZ Insurance Co.’s contentions.
Rule on each of XYZ Insurance Co.’s contentions. (5%)
The first contention is not tenable. Section 48 of the Insurance Code provides that under the incontestability clause, after a policy of life
insurance made payable upon the death of the insured shall have been in force during the lifetime of the insured for a period of two years
from the issuance of the policy or last reinstatement, the insurer must make good on the policy even though the policy was obtained
through fraud, concealment or misrepresentation. Even if Mr. H had concealed or misrepresented that he was previously diagnosed with
colon cancer, XYZ can no longer rescind the policy since it has been in force already for three years.
On the second contention, XYZ Insurance is liable despite the suicide of Mr. H. Under Section 180-A of the Insurance Code, the insurer
is liable when suicide is committed after the policy has been in force for a period of two years from the date of issue or its last

reinstatement. In this case, Mr. H committed suicide three years after issuance of the policy; thus, XYZ should be liable to the beneficiary
of Mr. H.
(2018) On June 21, 2008, Yate took out a life insurance policy on her life in the amount of PhP 10 million and named her husband Vandy
and daughter as joint irrevocable beneficiaries. Before the policy was issued and the premiums were paid, Yate underwent a medical
checkup with a physician accredited by the insurer, and the only result found was that she was suffering from high blood pressure. Yate
was previously diagnosed by a private physician of having breast cancer which she did not disclose to the insurer in her application, nor Page | 27
to the insurer's accredited physician because by then, she was told that she was already cancer-free after undergoing surgery which
removed both her breasts. She was later diagnosed with psychotic tendency that graduated into extreme despondency. She was found
dead hanging in her closet 36 months after the issuance of the policy. The police authorities declared it to be a case of suicide. The policy
did not include suicide as an excepted risk.
(b) Are the beneficiaries entitled to receive the proceeds of the life insurance notwithstanding the fact that the cause of death was
suicide? (2.5%)
Yes, the insurer is liable. The rule is that the insurer in life insurance is liable in case of suicide only when it is committed after the policy
has been in force for a period of two years from the date of issue or last reinstatement. The rule, however, admits of an exception so that
when suicide is committed in the state of insanity, it shall be compensable regardless of the date of commission. (Section 183 of the
Insurance Code). In the given facts, Yate was diagnosed with psychotic tendency that graduated into extreme despondency. Thus, even
though Yate committed 36 months from issuance of the policy, the insurer is liable.
(2014) On July 3, 1993, Delia Sotero (Sotero) took out a life insurance policy from Ilocos Bankers Life Insurance Corporation (Ilocos Life)
designating Creencia Aban (Aban), her niece, as her beneficiary. Ilocos Life issued Policy No. 747, with a face value of P100,000.00, in
Sotero’s favor on August 30, 1993, after the requisite medical examination and payment of the premium.
On April 10, 1996, Sotero died. Aban filed a claim for the insurance proceeds on July 9, 1996. Ilocos Life conducted an investigation into
the claim and came out with the following findings:
1. Sotero did not personally apply for insurance coverage, as she was illiterate.
2. Sotero was sickly since 1990.
3. Sotero did not have the financial capability to pay the premium on the policy.
4. Sotero did not sign the application for insurance.
5. Aban was the one who filed the insurance application and designated herself as the beneficiary.
For the above reasons and claiming fraud, Ilocos Life denied Aban’s claim on April 16, 1997, but refunded the premium paid on the policy.
(A) May Sotero validly designate her niece as beneficiary?
Yes, Sotero may validly designate her niece as beneficiary. The same is not prohibited under the Insurance Code or any other law
pertinent to the problem.
(B) May the incontestability period set in even in cases of fraud as alleged in this case?
Yes, the incontestability period applies even in cases of fraud as claimed in this problem. Note that the findings are those of the insurer
and these were made in an investigation conducted unilaterally by the insurer more than 3 years after the policy was taken out by Sotero.
These findings may very well be dismissed as self-serving considering the incontestability clause set out in Sec. 48 of the Insurance
Code.
CONSIDER THIS AS A LECTURE
Sec. 48 regulates both the actions of the insurers and prospective takers of life insurance. It gives insurers enough time to inquire whether
the policy was obtained by fraud, concealment, or misrepresentation; on the other hand, it forewarns scheming individuals that their

attempts at insurance fraud would be timely uncovered – thus deterring them from venturing into such nefarious enterprise. At the same
time, legitimate policy holders are absolutely protected from unwarranted denial of their claims or delay in the collection of insurance
proceeds occasioned by allegations of fraud, concealment, or misrepresentation by insurers, claims which may no longer be set up after
the two-year period expires as ordained under the law.
Thus, the self-regulating feature of Sec. 48 lies in the fact that both the insurer and the insured are given the assurance that any dishonest
scheme to obtain life insurance would be exposed, and attempts at unduly denying a claim would be struck down. Life insurance policies Page | 28
that pass the statutory two-year period are essentially treated as legitimate and beyond question, and the individuals who wield them are
made secure by the thought that they will be paid promptly upon claim. In this manner, Sec. 48 contributes to the stability of the insurance
industry.
Sec. 48 prevents a situation where the insurer knowingly continues to accept annual premium payments on life insurance, only to later
on deny a claim on the policy on specious claims of fraudulent concealment and misrepresentation, such as what obtains in the instant
case. Thus, instead of conducting at the first instance an investigation into the circumstances surrounding the issuance of the insurance
policy which would have timely exposed the supposed flaws and irregularities attending it as it now professes, Ilocos Life appears to have
turned a blind eye and opted instead to continue collecting collected the premiums and devoted the same to its own profit. It cannot now
deny the claim when it is called to account. Sec. 48 must be applied to it with full force and effect.
Insurers may not be allowed to delay the payment of claims by filing frivolous cases in court, hoping that the inevitable may be put off for
years – or even decades – by the pendency of these unnecessary court cases. In the meantime, they benefit from collecting the interest
and/or returns on both the premiums previously paid by the insured and the insurance proceeds which should otherwise go to their
beneficiaries. The business of insurance is a highly regulated commercial activity in the country, and is imbued with public interest. An
insurance contract is a contract of adhesion that must be construed liberally in favor of the insured and strictly against the insurer in order
to safeguard the former’s interest (Manila Bankers Life Insurance Corp vs Aban (2013)
(C) Is Aban entitled to claim the proceeds under the policy?
Yes, Aban is entitled to claim the proceeds under the policy as beneficiary for the same reasons adduced in (B) above.
(2014) On September 25, 2013, Danny Marcial (Danny) procured an insurance on his life with a face value of P5,000,000.00 from RN
Insurance Company (RN), with his wife Tina Marcial(Tina) as sole beneficiary. On the same day, Danny issued an undated check to RN
for the full amount of the premium. On October 1, 2013, RN issued the policy covering Danny’s life insurance. On October 5, 2013, Danny
met a tragic accident and died. Tina claimed the insurance benefit, but RN was quick to deny the claim because at the time of Danny’s
death, the check was not yet encashed and therefore the premium remained unpaid.
Is RN correct? (4%)
No, RN Insurance is wrong. The case at bar shows that Danny procured insurance on his life on September 25, 2013, with his wife Tina
as beneficiary, and that on the same day of September 25, 2013, he issued an undated check to RN for the full amount of the premium.
Since the undated check was issued to RN on September 25, 2013, it will be considered dated as of the same day pursuant to Section
17(c) of the Negotiable Instruments Law. The facts also show that RN Insurance issued the policy on Danny’s life on October 1, 2013
and that Danny died in an accident on October 5, 2013.
Addendum to the answer. Not necessarily should be included in the answer. Sarap ng answer ng UPLC kasi nag-lelecture sila.
RN Insurance denied that claim of Tina because at the time of Danny’s death, the check was not yet encashed and, therefore, the
premium remained unpaid. Presumably, RN Insurance is relying on the second paragraph of Article 1249 of the Civil Code which states
that the “delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of
payment only when they have been cashed, or when through the fault of the creditor they have been impaired.”
Whose fault was it that the check was not encashed? Certainly not Danny or Tina. RN Insurance had the check as early as September
25, 2013 and could have encashed the check before the death of Danny on October 5, 2013. The problem did not indicate that there was
any problem with the check, e.g. that it was not adequately funded. RN Insurance was at fault and Tina should not be denied the proceeds
of the policy.

(See the case of Malayan Insurance Co., Inc. vs Arnaldo (1987), where the Court held that the insurer could no longer claim forfeiture of
the insured’s right because it held the check used to pay the premium on a fire insurance policy for an unreasonable time; see also the
comments of Justice Jose C. Vitug (ret.) in his book, Commercial Laws and Jurisprudence, 2006 Vol 1., p. 250, that “payment x x x by
means of a check or note, accepted by the insurer, bearing a date prior to the loss, assuming an availability of funds thereof, would be
sufficient even if it remains uncashed at the time of the loss. The subsequent effects of encashment (or impairment by the fault of the
creditor) or of legal compensation under Articles 1278-1279, in relation to Article 1249 of the Civil Code, would retroact to the date of the
mercantile instrument and its acceptance by the creditor.” (IMPORTANTE ITO. SAULUHIN)
Page | 29
Will your answer be the same if the check is dated October 15, 2013?
My answer would not be the same if the check were dated October 15, 2013. This answer assumes that Danny was the one who dated
the check and, therefore what he issued was a postdated check. The payment of a promissory note or a postdated check at a stated
maturity subsequent to the loss, assuming that there was no estoppel (e.g. written acknowledgment of the receipt of premium), is
insufficient to put the insurance into effect. (Vitug, Commercial Laws and Jurisprudence, 2006, Vol 1 p 250)
If it were RN Insurance who dated the check October 15, 2013, then my answer would be the same as my answer to the first question.
This is my observation. Since RN has already issued a policy in spite of the post-dated check. The presumption is that the
insurance was bought in credit. Hence, the insurance policy is effective on the day it was issued.
(1994) On September 23, 1990, Tan took a life insurance policy from Philam. The policy was issued on November 6, 1990. He died on
April 26, 1992 of hepatoma. The insurance company denied the beneficiaries’ claim and rescinded the policy by reason of alleged
misrepresentation and concealment of material facts made by Tan in his application. It returned the premiums paid.
The beneficiaries contend that the company had no right to rescind the contract as rescission must be done “during the lifetime” of the
insured within two years and prior to the commencement of the action. Is the contention of the beneficiaries tenable?
No. The incontestability clause does not apply. The insured dies within less than two years from the issuance of the policy on September
23, 1990. The insured died on April 26, 1992, or less than 2 years from September 23, 1990. The right of the insurer to rescind is only
lost if the beneficiary has commenced an action on the policy. There is no such action in this case. (Tan v CA 174 s 143)
(1996) Juan procured a “non-medical” life insurance from Good Life Insurance. He designated his wife, Petra, as the beneficiary. Earlier,
in his application in response to the question as to whether or not he had ever been hospitalized, he answered in the negative. He forgot
to mention his confinement at the Kidney Hospital.
After Juan died in a plane crash, Petra filed a claim with Good Life. Discovering Juan’s previous hospitalization, Good Life rejected Petra’s
claim on the ground of concealment and misrepresentation. Petra sued Good Life, invoking good faith on part of Juan.
Will Petra’s suit prosper? Explain.
No, Petra’s suit will not prosper (assuming that the policy of life insurance has been in force for a period of less than 2 years from the
date of its issue). The matters which Juan failed to disclose was material and relevant to the approval and issuance of the insurance
policy. They would have affected Good Life’s action on his application, either by approving it with the corresponding adjustment for a
higher premium or rejecting the same. Moreover, a disclosure may have warranted a medical examination of Juan by Good Life in order
for it to reasonably assess the risk involved in accepting the application. In any case, good faith is no defense in concealment. The waiver
of a medical examination in the ‘non-medical’ life insurance from Good Life makes it even more necessary that Juan supply complete
information about his previous hospitalization for such information constitutes an important factor which Good Life takes into consideration
in deciding whether to issue the policy or not. (See Sunlife Assurance Co of Canada v CA GR 105135, June 22, 1995 245 s 268)

If the policy of life insurance has been in force for a period of 2 years or more from the date of its issue (on which point the given facts
are vague) then Good Life can no longer prove that the policy is void ab initio or is rescindible by reason of the fraudulent concealment
or misrepresentation of Juan ( Sec 48 Ins Code)
(1997) The assured answers “No” to the question in the application for a life policy: “Are you suffering from any form of heart illness?” In
fact, the assured has been a heart patient for many years. On 7 Sep 1991, the assured is killed in a plane crash. The insurance company
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denies the claim for insurance proceeds and returns the premiums paid. Is the decision of the insurance company justified?
Assuming that the incontestability clause does not apply because the policy has not been in force for 2 years, from the date of issue,
during the lifetime of the insured, the decision of the insurance company not to pay is justified. There was fraudulent concealment. It is
not material that the insured died of a different cause than the fact concealed. The fact concealed, that is heart ailment, is material to the
determination by the insurance company whether or not to accept the application for insurance and to require the medical examination
of the insured.
However, if the incontestability clause which applies to the insurance policy covering the life of the insured had been in force for 2 years
from issuance thereof, the insurance company would not be justified in denying the claim for proceeds of the insurance and in returning
the premium paid. In that case, the insurer cannot prove the policy void ab initio or resciissible by reason of fraudulent concealment or
misrepresentation of the insured.
(1991) Atty Roberto took out a life insurance policy from the Dana Ins Co (DIC) on 1 Sep 1989. On 31 Aug 1990, Roberto died. DIC
refused to pay his beneficiaries because it discovered that Robert had misrepresented certain material facts in his application. The
beneficiaries sued on the basis that DIC can contest the validity of the insurance policy only within 2 years from the date of issue and
during the lifetime of the insured. Decide the case.
I would rule in favor of the insurance company. The incontestability clause, applies only if the policy had been in effect for at least 2 years.
The 2-year period is counted from the time the insurance becomes effective until the death of the insured and not thereafter (Tan v CA
GR 48044, 29 Jun 1989)
ALTERNATIVE ANSWER:
I would rule in favor of the insurance company. Although an insurer may not rescind the contract on ground of misrepresentation after an
action is commenced for recovery under the policy, the insurer is not precluded from invoking the ground of misrepresentation as a
defense in the action for recovery. This is alright since the bar problem is not covered yet by the incontestability clause.
(1998) Renato was issued a life insurance policy on January 2, 1990. He concealed the fact that 3 years prior to the issuance of his life
insurance policy, he had been seeing a doctor about his heart ailment.
On March 1, 1992, Renato died of heart failure. May the heirs file a claim on the proceeds of the life insurance policy of Renato? (5%)
Yes. The life insurance policy in question was issued on January 9, 1990. More than 2 years had elapsed when Renato, the insured,
died on March 1, 1992. The incontestability clause applies.
INCONTESTABILITY CLAUSE
The insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within which to contest the
policy, whether or not, the insured still lives within such period. After two years, the defenses of concealment or misrepresentation, no
matter how patent or well founded, no longer lie.
BENEFICIARY
DEATH OF INSURED DUE TO BENEFICIARY

(2008) No.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.
Under Sec. 12 of the Insurance Code. The interest of a beneficiary shall be forfeited when the beneficiary is the principal, accomplice, or
accessory in willfully bringing about the death of the insured. In which event, the nearest relative of the insured shall receive the proceeds
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of said insurance, if not otherwise disqualified. Thus, the insurance company must still pay out the proceed of the life insurance policy to
the nearest qualified relative of the insured.
IRREVOCABLE BENEFICIARY
(2005) What are the effects of an irrevocable designation of a beneficiary under the Insurance Code? Explain. (2%)
The irrevocable designation gives the beneficiary a vested right over Life Insurance. The Insured cannot act to divest the irrevocable
beneficiary, in whole or in part, without the beneficiary's consent. To be specific:
(1) The beneficiary designated in a life insurance contract cannot be changed without the consent of the beneficiary because he
has a vested interest in the policy (Philamlife v. Pineda, G.R. No. 54216, July 19, 1989, citing Gcrcio v. Sun Life, G.R. No.
23703, September 28, 1925; and Go v. Redfern, G.R. No. 47705, April 25, 1841);
(2) Neither can the Insured take the cash surrender value, assign or even borrow on said policy without the beneficiary's consent
(Nario v. Philamlife, G.R. No. 22796, June 26, 1967);
(3) The Insured cannot add another beneficiary because that would reduce the amount which the first beneficiary may recover
and therefore adversely affect his vested right (Go v. Redfem, G.R. No. 47705, April 25, 1941);
(4) Unless the policy allows, the Insured cannot even designate another beneficiary should the original beneficiary predecease
him. His estate acquires the beneficiary's vested right upon his death; and
(5) The Insured cannot allow his creditors to attach or execute on the policy. (Philamlife v. Pineda, G.R. No. 54216, July 19, 1989)
(2005) Jacob obtained a life insurance policy for P1 Million designating irrevocably Diwata, a friend, as his beneficiary. Jacob, however,
changed his mind and wants Yob and Jojo, his other friends, to be included as beneficiaries considering that the proceeds of the policy
are sufficient for the three friends. Can Jacob still add Yob and Jojo as his beneficiaries? Explain. (2%)
No, Jacob can no longer add Yob and Jojo as his beneficiaries in addition to Diwata. As the irrevocable beneficiary, Diwata has acquired
a-vested right over Jacob's life insurance policy. Any additional beneficiaries will reduce the amount which Diwata, as the first beneficiary,
may recover, which will adversely affect her vested right. (Go v. Redfern, G.R. No. 47705, April 25, 1941)
(1998) Juan de la Cruz was issued Policy No. 8888 of the Midland Life Insurance Co on a whole life plan for P20,000 on August 19,
1989. Juan is married to Cynthia with whom he has three legitimate children. He, however, designated Purita, his common-law wife, as
the revocable beneficiary. Juan referred to Purita in his application and policy as the legal wife. Three (3) years later, Juan died. Purita
filed her claim for the proceeds of the policy as the designated beneficiary therein. The widow, Cynthia, also filed a claim as the legal
wife. To whom should the proceeds of the insurance policy be awarded? (5%)
The proceeds of the insurance policy shall be awarded to the ESTATE of Juan de la Cruz. Purita, the common- law-wife, is disqualified
as the beneficiary of the deceased because of illicit relation between the deceased and Purita, the designated beneficiary. Due to such
illicit relation, Purita cannot be a donee of the deceased. Hence, she cannot also be his beneficiary.

INSURED
Accident Policy
(2004) CNI insure SAM under a homeowner's policy against claims for accidental injuries by neighbors. SAM's minor son, BOY, injured
3 children of POS, a neighbor, who sued SAM for damages. SAM's lawyer was ATT, who was paid for his services by the insurer for
reporting periodically on the case to CNI. In one report, ATT disclosed to CNI that after his investigations, he found the injuries to the 3
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children not accidental but intentional.
SAM lost the case in court, and POS was awarded one million pesos in damages which he sought to collect from the insurer. But CNI
used ATTs report to deny the claim on the ground that the injuries to POS's 3 children were intentional, hence excluded from the policy's
coverage. POS countered that CNI was estopped from using ATTs report because it was unethical for ATT to provide prejudicial
information against his client to the insurer, CNI.
Who should prevail: the claimant, POS; or the insurer, CNI? Decide with reasons briefly. (5%)
CNI is not estopped from using ATT's report, because CNI, in the first place, commissioned it and paid ATT for it. On the other hand,
ATT has no conflict of interest because SAM and CNI are on the same side — their interests being congruent with each other, namely,
to oppose POS's claim. It cannot be said that ATT has used the information to the disadvantage or prejudice of SAM.
However, in Finman General Assurance Corp. v. Court of Appeals, 213 SCRA 493 (1992), it was explained that there is no "accident" in
the context of an accident policy, if it is the natural result of the insured's voluntary act, unaccompanied by anything unforeseen except
the injury. There is no accident when a deliberate act is performed, unless some additional and unforeseen happening occurs that brings
about the injury. This element of deliberateness is not clearly shown from the facts of the case, especially considering the fact that BOY
is a minor, and the injured parties are also children. Accordingly, it is possible that CNI may not prosper. ATT's report is not conclusive
on POS or the court.
Accident vs. Suicide

(1990) Luis was the holder of an accident insurance policy effective Nov 1, 1988 to Oct 31, 1989. At a boxing contest held on Jan 1, 1989
and sponsored by his employer, he slipped and was hit on the fact by his opponent so he fell and his head hit one of the posts of the
boxing ring. He was rendered unconscious and was dead on arrival at the hospital due to “intra-cranial hemorrhage.”
Can his father who is a beneficiary under said insurance policy successfully claim indemnity from the insurance company? Explain.
Yes, the father who is a beneficiary under the accidental insurance can successfully claim indemnity for the death of the insured. Clearly,
the proximate cause of death was the boxing contest. Death sustained in a boxing contest is an accident. (De la Cruz v Capital Ins &
Surety)
(1993) S Insurance Co issued a personal accident policy to Bob Tan with a face value of P500th. In the evening of Sep 5, 1992, after
his birthday party, Tan was in a happy mood but not drunk. He was playing with his hand gun, from which he previously removed the
magazine. As his secretary was watching television, he stood in front of her and pointed the gun at her. She pushed it aside and said
that it may be loaded. He assured her that it was not and then pointed it at his temple. The next moment, there was an explosion and
Tan slumped to the floor lifeless.
The wife of the deceased sought payment on the policy but her claim was rejected. The insurance company agreed that there was no
suicide. However, it was the submission of the insurance company that there was no accident. In support thereof, it contended a) that
there was no accident when a deliberate act was performed unless some additional, unexpected, independent and unforeseen happening
occur which produces or brings about the injury or death; and b) that the insured willfully exposed himself to needless peril and thus
removed himself from the coverage of the insurance policy. Are the two contentions of the insurance company tenable? Explain.

No. These two contentions are not tenable. The insurer is liable for injury or death even due to the insured’s gross negligence. The fact
that the insured removed the magazine from the hand gun means that the insured did not willfully expose himself to needless peril. At
most, the insured is only guilty of negligence (Sun Ins v CA 211 s 554)
(1995) Sun-Moon Insurance issued a Personal Accident Policy to Henry Dy with a face value of P500th. A provision in the policy states
that “the company shall not be liable in respect of “bodily injury’ consequent upon the insured person attempting to commit suicide or
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willfully exposing himself to needless peril except in an attempt to save human life.” Six months later Henry Dy died of a bullet wound in
his head. Investigation showed that one evening Henry was in a happy mood although he was not drunk. He was playing with his handgun
from which he had previously removed its magazine. He pointed the gun at his sister who got scared. He assured her it was not loaded.
He then pointed the gun at his temple and pulled the trigger. The gun fired and Henry slumped on the floor.
Henry’s wife Beverly, as the designated beneficiary, sought to collect under the policy. Sun-Moon Insurance rejected her claim on the
ground that the death of Henry was not accidental. Beverly sued the insurer.
Decide and Discuss fully.
Beverly can recover the proceeds of the policy from the insurer. The death of the insured was not due to suicide or willful exposure to
needless peril which are excepted risks. The insured’s act was purely an act of negligence which is covered by the policy and for which
the insured got the insurance for his protection. In fact, he removed the magazine from the gun and when he pointed the gun to his temple
he did so because he thought that it was safe for him to do so. He did so to assure his sister that the gun was harmless. There is none
in the policy that would relieve the insurer of liability for the death of the insured since the death was an accident.
PROPERTY INSURANCE
THEORY OF COGNITION
(2016) Jason is the proud owner of a newly-built house worth P5 million. As a protection against any possible loss or damage to his
house, Jason applied for a fire insurance policy thereon with Shure Insurance Corporation (Shure) on October 11, 2016 and paid the
premium in cash. It took the company a week to approve Jason's application.
On October 18, 2016, Shure mailed the approved policy to Jason which the latter received five (5) days later. However, Jason's house
had been razed by fire which transpired a day before his receipt of the approved policy. Jason filed a written claim with Shure under the
insurance policy. Shure prays for the denial of the claim on the ground that the theory of cognition applies to contracts of insurance.
Decide Jason's claim with reasons. (5%)
Jason cannot recover on the insurance policy since he had no knowledge of the insurer's acceptance of his application before his house
(insured property) was raze by fire.
An insurance contract is a consensual contract and is therefore perfected the moment there is a meeting of minds with respect to the
object and the cause or consideration. What is being followed in insurance contracts is what is known as the “cognition theory”. In
Enriquez vs. Sun Life Assurance Co., the contract for a life annuity in was not perfected because it has not been proved satisfactorily
that the acceptance of the application ever came to the knowledge of the applicant.
In the case at bar, the policy was received by Jason only a day after the occurrence of the insured risk. There was no perfected contract
of fire insurance yet. Thus, Jason's claim under said policy should be denied.
Answer (2):
Jason written claim with Shure under the insurance policy will prosper. Fire insurance policy was paid in cash to Shure Insurance
Corporation on October 11, 2016 and the contract was perfected on October 18, 2016 with receipt of the approved policy.
Section 77. “An insurer is entitled to payment of the premium as soon as the thing insured is exposed to the peril insured against.
Notwithstanding any agreement to the contrary, no policy or contract of insurance issued by an insurance company is valid and binding

unless and until the premium thereof has been paid, except in the case of a life or an industrial life policy whenever the grace period
provision applies.”
Article 78 of the Insurance Code “An acknowledgment in a policy or contract of insurance of the receipt of premium is conclusive evidence
of its payment, so far as to make the policy binding, notwithstanding any stipulation therein that it shall not be binding until the premium
is actually paid“.
What is being followed in insurance contracts is what is known as the “cognition theory” Thus, “an acceptance made by letter shall not Page | 34
bind the person making the offer except from the time it came to his knowledge”.(Enriquez vs. Sun Life Assurance Co. of Canada, 41
Phil. 269)
Essential elements of the general rule pertaining to the mailing and delivery of mail matter as announced by the American courts, namely,
when a letter or other mail matter is addressed and mailed with postage prepaid there is a rebuttable presumption of fact that it was
received by the addressee as soon as it could have been transmitted to him in the ordinary course of the mails. But if any one of these
elemental facts fails to appear, it is fatal to the presumption. For instance, a letter will not be presumed to have been received by the
addressee unless it is shown that it was deposited in the post-office, properly addressed and stamped. (See 22 C.J., 96, and 49 L. R. A.
[N. S.], pp. 458, et seq., notes.)
Cognition theory applies only to life and health insurance and not to property and liability insurance.
TRANSFER OF THE THING INSURED
(2014) On May 13, 1996, PAM, Inc. obtained a P15,000,000.00 fire insurance policy from Ilocano Insurance covering its machineries
and equipment effective for one (1) year or until May 14, 1997. The policy expressly stated that the insured properties were located at
"Sanyo Precision Phils. Building, Phase III, Lots 4 and 6, Block 15, PEZA, Rosario, Cavite." Before its expiration, the policy was renewed
on "as is" basis for another year or until May 13, 1998. The subject properties were later transferred to Pace Factory also in PEZA. On
October 12, 1997, during the effectivity of the renewed policy, a fire broke out at the Pace Factory which totally burned the insured
properties.
The policy forbade the removal of the insured properties unless sanctioned by Ilocano. Condition 9(c) of the policy provides that "the
insurance ceases to attach as regards the property affected unless the insured, before the occurrence of any loss or damage, obtains
the sanction of the company signified by endorsement upon the policy x x x (c) if the property insured is removed to any building or place
other than in that which is herein stated to be insured." PAM claims that it has substantially complied with notifying Ilocano through its
sister company, the RBC, which, in fact, referred PAM to Ilocano for the insurance coverage. Is Ilocano liable under the policy? (4%)
Ilocano Insurance is not liable under the policy. By the clear and express condition in the renewal policy, the removal of the insured
property to any building or place required the consent of Ilocano. Any transfer effected by PAM, Inc. without Ilocano’s consent (as is the
case here) would free the latter from any liability. (Malayan Insurance Company vs PAPCO (2013)
DOUBLE INSURANE
(2012) No.V X borrowed from CCC Bank. She mortgaged her house and lot in favor of the bank. X insured her house. The bank also
got the house insured. Is this double insurance? Explain your answer. (3%)
No, there is no double insurance. Double insurance exists where the same person is insured by several insurers separately with respect
to the same subject and interest. (Sec. 93, Insurance Code)
Is this legally valid? Explain your answer. (3%)
Yes, X and CCC Bank can both insure the house as they have different insurable interest therein. X, the borrower mortgagor, has an
insurable interest in the house being the owner thereof while CCC Bank, the lender, also has an insurable interest in the house as
mortgagee thereof.
In case of damage, can X and CCC Bank separately claim for the insurance proceeds? (4%)

Yes. If X obtained an open policy then she could claim an amount corresponding to the extent of the damage based on the value of the
house determined as of the date the damage occurred, but not to exceed the face value of the insurance policy; however, if she obtained
a valued policy then she could claim an amount corresponding to the extent of the damage based on the agreed upon valuation of the
house.
As for CCC Bank, it could claim an amount corresponding to the extent of the damage but not to exceed the amount of the loan it
Page | 35
extended to X or so much thereof as may remain unpaid.
(2005) When does double insurance exist? (2%)
Under Section 93 of the Insurance Code, there is double insurance when there is over-insurance with two or more companies, covering
the same property, the same insurable interest and the same risk. Double insurance exists where the same person is insured by several
insurers separately in respect of the same subject matter and interests. (Geagonia v. Court of Appeals, G.R. No. 114427, February 6,
1995)
(1993) Julie and Alma formed a business partnership. Under the business name Pino Shop, the partnership engaged in a sale of
construction materials. Julie insured the stocks in trade of Pino Shop with WGC Insurance Co for P350th. Subsequently, she again got
an insurance contract with RSI for P1m and then from EIC for P200th. A fire of unknown origin gutted the store of the partnership. Julie
filed her claims with the three insurance companies. However, her claims were denied separately for breach of policy condition which
required the insured to give notice of any insurance effected covering the stocks in trade. Julie went to court and contended that she
should not be blamed for the omission, alleging that the insurance agents for WGC, RSI and EIC knew of the existence of the additional
insurance coverages and that she was not informed about the requirement that such other or additional insurance should be stated in
the policy.
Is the contention of Julie tenable? Explain.
May she recover on her fire insurance policies? Explain.
1) No. An insured is required to disclose the other insurances covering the subject matter of the insurance being applied for.
(New Life Ent v CA 207 s 669)
2) No, because she is guilty of violation of a warranty/ condition.
(2005) What is the nature of the liability of the several insurers in double insurance? Explain. (2%)
The nature of the liability of the several insurers in double insurance is that each insurer is bound to the contribute ratably to the loss in
proportion to the amount for which he is liable under his contract as provided for by Sec 94 of ICP par. The ratable contribution of each
of each insurer will be determined based on the following formula: AMOUNT OF POLICY divided by TOTAL INSURANCE TAKEN
multiplied by LOSS = LIABILITY OF THE INSURER.
ALTERNATIVE ANSWER:
Each insurer is bound, as between himself and other insurers, to contribute ratably to the loss in proportion to the amount for which he is
liable under his contract. (Sec. 94, Insurance Code)
(2008) No.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

Is the owner’s taking of insurance for the building with three (3) insurers valid? Discuss. (3%)
Taking out insurance covering the same property, same insurable interest and same risk with three insurance companies is “double
insurance,” recognized under Sec. 93 of the Insurance Code. However, in American Home Assurance Co. v, Chua, G.R. No. 130421, 28
June 1999, the court referred to the common inclusion of the “other insurance clause” in fire insurance policies, requiring disclosure of
co-insurance of the same property with other insurers.
Page | 36
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%)
Insured can recover from Eastern Insurance Corp. up to the extent of his loss. However, Eastern may refuse to pay if the policy
contains an “other insurance clause” stipulating that non- disclosure of double insurance will avoid the policy (Geagonia v. Country
Bankers Insurance, G.R. No. 114427, 06 February 1995.) As there is no indication of a contractual prohibition on double or other
insurance, all insurance contracts over the building are deemed valid and enforceable.
The law prohibits double or over- recovery, not double insurance. Since Eastern insured the property up 50% of the total coverage, it is
liable for only 50% of the total actual loss. Eastern insurance Corp. is liable to the extent of its coverage but may recover one-half of the
total indemnity from the co-insurers in the proportion of 60% (Southern Insurance) – 40% (Northern Insurance).
(1990)
a) Suppose that Fortune owns a house valued at P600th and insured the same against fire with 3 insurance companies as
follows:
X – P400th
Y – P200th
Z – P600th
In the absence of any stipulation in the policies from which insurance company or companies may Fortune recover in case fire should
destroy his house completely?
Fortune may recover from the insurers in such order as he may select up to their concurrent liability (Sec 94 Ins Code)
Valued Policy
b) If each of the fire insurance policies obtained by Fortune in the problem (a) is a valued policy and the value of his house was
fixed in each of the policies at P1m, how much would Fortune recover from X if he has already obtained full payment on the
insurance policies issued by Y and Z?
Fortune may still recover only the balance of P200,000 from X insurance company since the insured may only recover up to the extent
of his loss.
ALTERNATIVE:
Having already obtained full payment on the insurance policies issued by Y and Z, Fortune may no longer recover from X insurance
policy.
Open Policy
c) If each of the policies obtained by Fortune in the problem (a) above is an open policy and it was immediately determined after
the fire that the value of Fortune’s house was P2.4m, how much may he collect from X,Y and Z?

In an open policy, the insured may recover his total loss up to the amount of the insurance cover. Thus, the extent of recovery would be
P400th from X, P200th from Y, and P600th from Z.
d) In problem (a), what is the extent of the liability of the insurance companies among themselves?
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In problem (a), the insurance companies among themselves would be liable, viz:
X – 4/12 of P600th = P200th

Y – 2/12 of P600th = P100th
Z – 6/12 of P600th = P300th
e) Supposing in problem (a) above, Fortune was able to collect from both Y and Z, may he keep the entire amount he was able
to collect from the said 2 insurance companies?
No, he can only be indemnified for his loss, not profit thereby; hence he must return P200th of the P800th he was able to collect.
(2010) No.X. To secure a loan of P10 million, Mario mortgaged his building to Armando. In accordance with the loan arrangements, Mario
had the building insured with First Insurance Company for P10 million, designating Armando as the beneficiary. Armando also took an
insurance of the building upon his own interest with Second Insurance Company for P5 million. The building was totally destroyed by fire,
a peril insured against under both insurance policies. It was subsequent determined that the fire had been intentionally started by Mario
and that in violation of the loan agreement, he had been storing inflammable materials in the building.
How much, if any, can Armando recover from either or both insurance companies? (2%)
Armando can receive P5 million from Second Insurance Company. As mortgagee, he had an insurable interest in the building (Panlileo
v. Cosio, 97 Phil. 919 (1955)). Armando cannot collect anything from First Insurance Company. First Insurance Company is not liable for
the loss of the building. First, it was due to a willful act of Mario, who committed arson (Section 87 of the Insurance Code; East Furnitures,
Inc. v. Globe & Rutgers Fire Insurance Company, 57 Phil. 576 (1932)). Second, fire insurance policies contain a warranty that the insured
will not store hazardous materials within the insured premises. Mario breached this warranty when he stored inflammable materials in
the building. (Young v. Midland Textile Insurance Company, 30 Phil. 617 (1915)).These two factors exonerate First Insurance Company
from liability to Armando as mortgagee even though it was Mario who committed them (Section 8 of the Insurance Code).
What happens to the P10 million debt of Mario to Armando? Explain.
Since Armando would have collected P5 million from Second Insurance Company, this amount should be considered as partial payment
of the loan. Armando can only collect the balance of P5 million (Panlileo v. Cosio, supra). Second Insurance Company can recover from
Mario the amount of P5 million it paid, because it became subrogated to the rights of Armando (Panlileo v. Cosio, supra).
1994) In a civil suit, the Court ordered Benjie to pay Nat P500,000.00. To execute the judgment, the sheriff levied upon Benjie’s registered
property (a parcel of land and the building thereon),and sold the same at public auction to Nat, the highest bidder. The latter, on March
18, 1992, registered with the Register of Deeds the certificate of sale issued to him by the sheriff. Meanwhile, on January 27, 1993, Benjie
insured with Garapal Insurance for P1,000,000.00 the same building that was sold at public auction to Nat. Benjie failed to redeem the
property by March 18, 1993.
On March 19, 1993, a fire razed the building to the ground. Garapal Insurance refused to make good its obligation to Benjie under the
insurance contract.
1) Is Garapal Insurance legally justified in refusing payment to Benjie?

2) Is Nat entitled to collect on the insurance policy?

1) Yes. At the time of the loss, Benjie was no longer the owner of the property insured as he failed to redeem the property. The
law requires in property insurance that a person can recover the proceeds of the policy if he has insurable interest at the time
of the issuance of the policy and also at the time when the loss occurs. At the time of fire, Benjie no longer had insurable
interest in the property insured.
2) No. While at the time of the loss he had insurable interest in the building, as he was the owner thereof, Nat did not have any
interest in the policy. There was no automatic transfer clause in the policy that would give him such interest in the policy.
Page | 38
(2001) JQ, owner of a condominium unit, insured the same against fire with the XYZ Insurance Co., and made the loss payable to his
brother, MLQ. In case of loss by fire of the said condominium unit, who may recover on the fire insurance policy? State the reason(s) for
your answer. (5%)
JQ can recover on the fire insurance policy for the loss of said condominium unit. He has the insurable interest as owner-insured. As
beneficiary in the fire insurance policy, MLQ cannot recover on the fire insurance policy. For the beneficiary to recover on the fire or
property insurance policy, it is required that he must have insurable interest in the property insured. In this case, MLQ does not have
insurable interest in the condominium unit.
COMPULSORY VEHICLE LIABILITY INSURANCE

(2014) On May 26, 2014, Jess insured with Jack Insurance (Jack) his 2014 Toyota Corolla sedan under a comprehensive motor vehicle
insurance policy for one year. On July 1, 2014, Jess’ car was unlawfully taken. Hence, he immediately reported the theft to the Traffic
Management Command (TMC) of the Philippine National Police (PNP), which made Jess accomplish a complaint sheet as part of its
procedure. In the complaint sheet, Jess alleged that a certain Ric Silat (Silat) took possession of the subject vehicle to add accessories
and improvements thereon. However, Silat failed to return the subject vehicle within the agreed 3-day period. As a result, Jess notified
Jack of his claim for reimbursement of the value of the lost vehicle under the insurance policy. Jack refused to pay claiming that there is
no theft as Jess gave Silat lawful possession of the car. Is Jack correct? (4%)
Jack Insurance is not correct. Ric Silat was merely given physical possession of the car. He did not have juridical possession over the
same. It is also apparent that the taking by Silat of the car of Jess is without the consent or authority of the latter. Thus, the act of Silat in
depriving Jess of his car, soon after the transfer of physical possession of the same to him, constitutes theft under the insurance policy
that is compesable. (Paramount Insurance vs Spouse Remondeulaz (2012)
(2014) As a rule, an insurance contract is consensual and voluntary. The exception is in the case of: (1%)
(C) Motor Vehicle Liability Insurance, IT SHOULD BE COMPULSORY VEHICLE LIABILITY INSURANCE
(2014) On February 21, 2013, Barrack entered into a contract of insurance with Matino Insurance Company (Matino) involving a motor
vehicle. The policy obligates Matino to pay Barrack the amount of Six Hundred Thousand Pesos (P600,000.00) in case of loss or damage
to said vehicle during the period covered, which is from February 26, 2013 to February 26, 2014.
On April 16, 2013, at about 9:00 a.m., Barrack instructed his driver, JJ, to bring the motor vehicle to a near-by auto shop for tune-up.
However, JJ no longer returned and despite diligent efforts to locate the said vehicle, the efforts proved futile. Resultantly, Barrack
promptly notified Matino of the said loss and demanded payment of the insurance proceeds of P600,000.00.
In a letter dated July 5, 2013. Matino denied the claim, reasoning as stated in the contract that "the company shall not be liable for any
malicious damage caused by the insured, any member of his family or by a person in the insured’s service. Is Matino correct in denying
the claim? (4%)
MATINO INSURANCE IS NOT CORRECT. Under the insurance policy, he loss of the motor vehicle is not excluded as the loss was due
to theft, not malicious damage. The malicious damage” clause under the policy is not applicable but rather the “theft” clause. Thus, the
provision under the policy that “the company shall not be liable for any malicious damage caused by the insured, any member of his
family or by a person in the insured’s service” is not applicable. (Alpha Insurance and Surety Co vs Castor (2003)

3RD PARTY LIABILITY
(1996) While driving his car along EDSA, Cesar sideswiped Roberto, causing injuries to the latter, Roberto sued Cesar and the third party
liability insurer for damages and/or insurance proceeds. The insurance company moved to dismiss the complaint, contending that the
liability of Cesar has not yet been determined with finality.
a) Is the contention of the insurer correct? Explain.

b) May the insurer be held liable with Cesar? Page | 39
No, the contention of the insurer is not correct. There is no need to wait for the decision of the court determining Cesar’s liability with
finality before the third party liability insurer could be sued. The occurrence of the injury to Roberto immediately gave rise to the liability
of the insurer under its policy. In other words, where an insurance policy insures directly against liability, the insurer’s liability accrues
immediately upon the occurrence of the injury or event upon which the liability depends (Sherman Shafer v Judge RTC Olongapo City
Branch 75 GR l-78848, Nov 14 88 167s386)
The insurer cannot be held solidarily liable with Cesar. The liability of the insurer is based on contract while that of Cesar is based on tort.
If the insurer were solidarily liable with Cesar, it could be made to pay more than the amount stated in the policy. This would, however,
be contrary to the principles underlying insurance contracts. On the other hand, if the insurer were solidarily liable with Cesar and it is
made to pay only up to the amount stated in the insurance policy, the principles underlying solidary obligations would be violated.
(Malayan Ins Co v CA GR L-36413 Sep 26, 88 165s536; Figuracion vda de Maglana v Consolacion GR 60506 Aug 6, 92 212s268)
(2000) X was riding a suburban utility vehicle (SUV) covered by a comprehensive motor vehicle liability insurance (CMVLI) underwritten
by FastPay Insurance Company when it collided with a speeding bus owned by RM Travel Inc. The collision resulted in serious injuries
to X; Y, a passenger of the bus; and Z, a pedestrian waiting for a ride at the scene of the collision. The police report established that the
bus was the offending vehicle. The bus had CMVLI policy issued by Dragon Ins Co. X, Y, and Z jointly sued RM Travel and Dragon Ins
for indemnity under the Insurance Code of the Phils (PD1460). The lower court applied the “no fault” indemnity policy of the statute,
dismissed the suit against RM Travel, and ordered Dragon Ins to pay indemnity to all three plaintiffs. Do you agree with the court’s
judgment? Explain (2%)
No. The cause of action of Y is based on the contract of carriage, while that of X and Z is based on torts. The court should not have
dismissed the suit against RM Travel. The court should have ordered Dragon Ins to pay each of X, Y , and Z to the extent of the insurance
coverage, but whatever amount is agreed upon in the policy should be answered first by RM Travel and the succeeding amount should
be paid by Dragon Insurance up to the amount of the insurance coverage. The excess of the claims of X, Y, and Z, over and above such
insurance coverage, if any, should be answered or paid by RM Travel.
(1994) What is your understanding of a “no fault indemnity” clause found in an insurance policy?
Under the “NO FAULT INDEMNITY” clause, any claim for death or injury of any passenger or third party shall be paid without the necessity
of proving fault or negligence of any kind. The indemnity in respect of any one person shall not exceed P5,000.00, provided they are
under oath, the following proofs shall be sufficient:
1. police report of the accident; and

2. death certificate and evidence sufficient to establish the proper payee; or
3. medical report and evidence of medical or hospital disbursement in respect of which refund is claimed.
4. Claim may be made against one motor vehicle only.
(1994) Raul’s truck bumped the car owned by Luz. The car was insured by Cala Insurance. For the damage caused, Cala paid Luz
P5,000.00 in amicable settlement. Luz executed a release of claim, subrogating Cala to all her rights against Raul. When Cala demanded
reimbursement from Raul, the latter refused saying that he had already paid Luz P4,500 for the damage to the car as evidenced by a
release of claim executed by Luz discharging Raul.

So Cala demanded reimbursement from Luz, who refused to pay, saying that the total damage to the car was P9,500.00 Since Cala paid
P5,000 only, Luz contends that she was entitled to go after Raul to claim the additional P4,500.00
1) Is Cala, as subrogee of Luz, entitled to reimbursement from Raul?

2) May Cala recover what it has paid Luz?
1) No. Luz executed a release in favor of Raul (Manila Mahogany Mfg Corp v CA GR 52756, 12 Oct 1987)
Page | 40
2) Yes. Cala lost its right against Raul because of the release executed by Luz. Since the release was made without the consent
of Cala, Cala may recover the amount of P5,000 form Luz (Manila Mahogany Mfg Corp v CA GR 52756, 12 Oct 1987).
AUTHORIZED DRIVER CLAUSE

(1991) Sheryl insured her newly acquired car, a Nissan Maxima against any loss or damage for P50th and against 3rd party liability for
P20th with the XYZ Ins Co. Under the policy, the car must be driven only by an authorized driver who is either: 1) the insured, or 2) any
person driving on the insured’s order or with his permission: provided that the person driving is permitted in accordance with the licensing
or other laws or regulations to drive the motor vehicle and is not disqualified from driving such motor vehicle by order of a court.
During the effectivity of the policy, the car, then driven by Sheryl herself, who had no driver’s license, met an accident and was extensively
damaged. The estimated cost of repair was P40th. Sheryl immediately notified XYZ, but the latter refused to pay on the policy alleging
that Sheryl violated the terms thereof when she drove it without a driver’s license. Is the insurer correct?
The insurer was not correct in denying the claim since the proviso “that the person driving is permitted in accordance with the licensing,
etc.” qualified only a person driving the vehicle other than the insured at the time of the accident (Palermo v Pyramid Ins Co GR 36480
31 May 88)
ALTERNATIVE ANSWER:
The insurer is correct. The clause “authorized driver” in the policy evidently applies to both the insured and any other person driving the
vehicle at the time of the accident. The term “authorized driver” should be construed as a person who is authorized by law to driver the
vehicle.
(2003) Rick de la Cruz insured his passenger jeepney with Asiatic Insurers, Inc. The policy provided that the authorized driver of the
vehicle should have a valid and existing driver’s license. The passenger jeepney of Rick de la Cruz which was at the time driven by Jay
Cruz,
figured in an accident resulting in the death of a passenger. At the time of the accident, Jay Cruz was licensed to drive but it was
confiscated by an LTO agent who issued him a Traffic Violation Report (TVR) just minutes before the accident. Could Asiatic Insurers,
Inc., be made liable under its policy? Why? (6%)
Asiatic Insurers, Inc., should be made liable under the policy. The fact that the driver was merely holding a TVR does not violate the
condition that the driver should have a valid and existing driver’s license.
Besides, such a condition should be disregarded because what is involved is a passenger jeepney, and what is involved here is not own
damage insurance but third party liability where the injured party is a third party not privy to the contract of insurance.
(1993) HL insured his brand new car with P Ins Co for comprehensive coverage wherein the insurance company undertook to indemnify
him against loss or damage to the car a) by accidental collision ... b) by fire, external explosion, burglary, or theft, and c) malicious act.
After a month, the car was carnapped while parked in the parking space in front of the Intercontinental Hotel in Makati. HL’s wife who
was driving said car before it was carnapped reported immediately the incident to various government agencies in compliance with the
insurance requirements.

Because the car could not be recovered, HL filed a claim for the loss of the car with the insurance company but it was denied on the
ground that his wife who was driving the car when it was carnapped was in the possession of an expired driver’s license, a violation of
the “authorized driver” clause of the insurance company.
1) May the insurance company be held liable to indemnify HL for the loss of the insured vehicle? Explain.
2) Supposing that the car was brought by HL on installment basis and there were installments due and payable before the loss
of the car as well as installments not yet payable. Because of the loss of the car, the vendor demanded from HL the unpaid Page | 41
balance of the promissory note. HL resisted the demand and claimed that he was only liable for the installments due and
payable before the loss of the car but no longer liable for other installments not yet due at the time of the loss of the car.
Decide.
1) Yes. The car was lost due to theft. What applies in this case is the “theft” clause, and not the “authorized driver” clause. It is
immaterial that HL’s wife was driving the car with an expired driver’s license at the time it was carnapped.
2) The promissory note is not affected by whatever befalls the subject matter of the accessory contract. The unpaid balance on
the promissory note should be paid and not only the installments due and payable before the loss of the car.
GROUP INSURANCE
(2000) X company procured a group accident insurance policy for its construction employees variously assigned to its provincial
infrastructure projects. Y Insurance Company underwrote the coverage, the premiums of which were paid for entirely by X Company
without any employee contributions. While the policy was in effect, five of the covered employees perished at sea on their way to their
provincial assignments. Their wives sued Y Insurance Company for payment of death benefits under the policy. While the suit was
pending, the wives signed a power of attorney designating X Company executive, PJ, as their authorized representative to enter into a
settlement with the insurance company. When a settlement was reached, PJ instructed the insurance company to issue the settlement
check to the order of X Company, which will undertake the payment to the individual claimants of their respective shares. PJ
misappropriated the settlement amount and the wives pursued their case against Y Insurance Co. Will the suit prosper? Explain (3%)
Yes. The suit will prosper. Y Ins Co is liable. X Co, through its executive, PJ, acted as agent of Y Ins Co. The latter is thus bound by the
misconduct of its agent. It is the usual practice in the group insurance business that the employer-policy holder is the agent of the insurer.

NEGOTIABLE INSTRUMENTS
NEGOTIABLE INSTRUMENT
DEFINITION & CHARACTERISTICS

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(2005) What is a negotiable instrument? Give the characteristics of a negotiable instrument. (2%)
Negotiable Instrument is a written contract for the payment of money which is intended as a substitute for money and passes from one
person to another as money, in such a manner as to give a holder in due course the right to hold the instrument free from defenses
available to prior parties. Such instrument must comply with Sec. 1 of the Negotiable Instrument Law to be considered negotiable.
The characteristics of a negotiable instrument are the following:
1) Negotiability - That quality or attribute whereby a bill, note or check passes or may pass from hand to hand, similar to money,
so as to give the holder in due course the right to hold the instrument and collect the sum payable for himself free from
defenses.
2) Accumulation of Secondary Contracts as they are transferred from one person to another.
(2005) State and explain whether the following are negotiable instruments under the Negotiable Instruments Law: (5%)
1) Postal Money Order;

2) A certificate of time deposit which states “This is to certify that bearer has deposited in this bank the sum of FOUR THOUSAND
PESOS (P4,000.00) only, repayable to the depositor 200 days after date.”
3) Letters of credit;
4) Warehouse receipts;
5) Treasury warrants payable from a specific fund.
1) Postal Money Order – Non-Negotiable as it is governed by postal rules and regulation which may be inconsistent with the NIL
and it can only be negotiated once.
2) A certificate of time deposit which states “This is to certify that bearer has deposited in this bank the sum of FOUR THOUSAND
PESOS (P4,000.00) only, repayable to the depositor 200 days after date.” – Non-Negotiable as it does not comply with the
requisites of Sec. 1 of NIL
3) Letters of credit - Non-Negotiable
4) Warehouse receipts - Non-Negotiable for the same as Bill of Lading it merely represents good, not money.
5) Treasury warrants payable from a specific fund - Non-Negotiable being payable out of a particular fund.
(2005) Distinguish a negotiable document from a negotiable instrument. (2%)
Negotiable Instrument have requisites of Sec. 1 of the NIL, a holder of this instrument have right of recourse against intermediate parties
who are secondarily liable, Holder in due course may have rights better than transferor, its subject is money and the Instrument itself is
property of value. On the other hand, negotiable document does not contain requisites of Sec. 1 of NIL, it has no secondary liability of
intermediate parties, transferee merely steps into the shoes of the transferor, its subject are goods and the instrument is merely evidence
of title; thing of value are the goods mentioned in the document.
(1997) Can a bill of exchange or a promissory note qualify as a negotiable instrument if –
a. it is not dated; or
b. the day and the month, but not the year of its maturity, is given; or
c. it is payable to “cash”’ or

d. it names two alternative drawees
a) Yes. Date is not a material particular required by Sec 1 NIL for the negotiability of an instrument.
b) No. The time for payment is not determinable in this case. The year is not stated.
c) Yes. Sec 9d NIL makes the instrument payable to bearer because the name of the payee does not purport to be the name of
any person.
d) A bill may not be addressed to two or more drawees in the alternative or in succession, to be negotiable (Sec 128 NIL). To do
Page | 43
so makes the order conditional.
(1998) Richard Clinton makes a promissory note payable to bearer and delivers the same to Aurora Page. Aurora Page, however,
endorses it to X in this manner:
“Payable to X. Signed: Aurora Page.”
Later, X, without endorsing the promissory note, transfers and delivers the same to Napoleon. The note is subsequently dishonored by
Richard Clinton. May Napoleon proceed against Richard Clinton for the note? (5%)
Yes. Richard Clinton is liable to Napoleon under the promissory note. The note made by Richard Clinton is a bearer instrument. Despite
special indorsement made by Aurora Page thereon, the note remained a bearer instrument and can be negotiated by mere delivery.
When X delivered and transferred the note to Napoleon, the latter became a holder thereof. As such holder, Napoleon can proceed
against Richard Clinton.
(1997) A delivers a bearer instrument to B. B then specially indorses it to C and C later indorses it in blank to D. E steals the instrument
from D and, forging the signature of D, succeeds in “negotiating” it to F who acquires the instrument in good faith and for value.
a) If, for any reason, the drawee bank refuses to honor the check, can F enforce the instrument against the drawer?
b) In case of the dishonor of the check by both the drawee and the drawer, can F hold any of B, C and D liable secondarily on
the instrument?
a) Yes. The instrument was payable to bearer as it was a bearer instrument. It could be negotiated by mere delivery despite the
presence of special indorsements. The forged signature is unnecessary to presume the juridical relation between or among
the parties prior to the forgery and the parties after the forgery. The only party who can raise the defense of forgery against a
holder in due course is the person whose signature is forged.
b) Only B and C can be held liable by F. The instrument at the time of the forgery was payable to bearer, being a bearer
instrument. Moreover, the instrument was indorsed in blank by C to D. D, whose signature was forged by E cannot be held
liable by F.
(2001) A issued a promissory note payable to B or bearer. A delivered the note to B. B indorsed the note to C. C placed the note in his
drawer, which was stolen by the janitor X. X indorsed the note to D by forging C’s signature. D indorsed the note to E who in turn delivered
the note to F, a holder in due course, without indorsement. Discuss the individual liabilities to F of A, B and C. (5%)
A is liable to F. As the maker of the promissory note, A is directly or primarily liable to F, who is a holder in due course. Despite
the presence of the special indorsements on the note, these do not detract from the fact that a bearer instrument, like the promissory
note in question, is always negotiable by mere delivery, until it is indorsed restrictively “For Deposit Only.”
B, as a general indorser, is liable to F secondarily, and warrants that the instrument is genuine and in all respects what it
purports to be; that he has good title to it; that all prior parties had capacity to contract; that he has no knowledge of any fact which would
impair the validity of the instrument or render it valueless; that at the time of his indorsement, the instrument is valid and subsisting; and
that on due presentment, it shall be accepted or paid, or both, according to its tenor, and that if it be dishonored and the necessary

proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled
to pay.
C is not liable to F since the latter cannot trace his title to the former. The signature of C in the supposed indorsement by him
to D was forged by X. C can raise the defense of forgery since it was his signature that was forged.
ALTERNATIVE ANSWER:
Page | 44
As a general endorser, B is secondarily liable to F. C is liable to F since it is due to the negligence of C in placing the note in his drawer
that enabled X to steal the same and forge the signature of C relative to the indorsement in favor of D. As between C and F who are both
innocent parties, it is C whose negligence is the proximate cause of the loss. Hence C should suffer the loss.
NOTICE DISHONOR
When is notice of dishonor not required to be given to the drawer?
Notice of dishonor is not required to be given to the drawer in any of the following cases:
a) Where the drawer and drawee are the same person;
b) When the drawee is a fictitious person or a person not having capacity to contract;
c) When the drawer is the person to whom the instrument is presented for payment;
d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument;
e) Where the drawer has countermanded payment (Sec 114 NIL)
PLACE OF PAYMENT
PN is the holder of a negotiable promissory note within the meaning of the Negotiable Instruments Law (Act 2031). The note was originally
issued by RP to XL as payee. XL indorsed the note to PN for goods bought by XL. The note mentions the place of payment on the
specified maturity date as the office of the corporate secretary of PX Bank during banking hours. ON maturity date, RP was at the
aforesaid office ready to pay the note but PN did not show up. What PN later did was to sue XL for the face value of the note, plus interest
and costs. Will the suit prosper? Explain. (5%)
Yes. The suit will prosper as far as the face value of the note is concerned, but not with respect to the interest due subsequent to the
maturity of the note and the costs of collection. RP was ready and willing to pay the note at the specified place of payment on the specified
maturity date, but PN did not show up. PN lost his right to recover the interest due subsequent to the maturity of the note and the costs
of collection.
NEGOTIABILITY
(2018) On November 23, 2017, Yas Ysmael (Ysmael) loaned the amount of PhP 5 million to Yarn & Thread Corporation (YTC), through
its President, Ylmas Yektas (Yektas), which loan was evidenced by a Promissory Note (PN), which reads as follows:
Date: _______
Within one year from date hereof, I promise to pay to the order of YAS YSMAEL, the sum of PhP 5 million with interest at 120% per
annum.
YARN & THREAD Corporation
By:
(Sgd.)
Ylmas Yektas

Yektas was the controlling stockholder of YTC at the time the PN was issued. As security for the payment of the PN, Yektas issued and
delivered to Ysmael a postdated personal check covering the face value of the PN drawn from his account with Yellow Bell Bank and
Trust Company. The proceeds of the loan under the PN were used by YTC as working capital.
A year later, Ysmael inserted the date of "November 23, 2017" on the date section of the PN, and made a formal demand upon YTC,
through Yektas, to pay the note, but which was refused on the ground that Yektas was no longer the President and controlling shareholder Page | 45
of YTC. By this time, all the shares of YTC had already been sold to a new group of investors. Ysmael deposited the personal check
issued by Yektas which was dishonored. He then filed a collection suit against YTC and Yektas including the accrued interest.
The defendants raised the following defenses in the collection suit. Rule on the merits of each defense. (2% each)
(a) A PN issued with a blank date is one that is not payable on demand or on a fixed or determinable future time, and therefore the
insertion of the date constituted material alteration that nullified it, so that no cause of action arose.
A. The defense is not meritorious. Where the instrument is not dated, it will be considered to be dated as of the time it was issued (Section
17 of NIL ( C ). Section 14 of NIL also concedes to the payee the prima facie authority to fill-in the blanks in a negotiable instrument.
Such prima facie stands in the absence of evidence to the contrary.
(b) Yektas cannot be made liable on the PN since he signed in his capacity as President of YTC, which fact was known to Ysmael
although not indicated on the PN.
B. The defense is not meritorious. Where the instrument contains or a person adds to his signature words indicating that he signs for or
on behalf of a principal or in a representative capacity, he must disclose his principal and must indicate that he is acting on behalf of his
principal (Section 20 of NIL).
Alternative answer
The defense is meritorious. Since the matter of signing the note by Yektas on behalf of YTC is known to Ysmael, then, Yektas has no
personal liability as it may be inferred from the note that he is acting only in a representative capacity.
(c) Yektas signed the PN merely as an accommodation to YTC. As he received no consideration for the PN, it is void for lack of
consideration.
C. The defense is not meritorious. An accommodation party signs a negotiable instrument as a maker, drawer, endorser, acceptor without
receiving value therefor and only for the purpose of lending his name in another. He is liable to a holder for value notwithstanding such
holder, at the time of taking the instrument, knew him only to be an accommodation party ( Section 29 of NIL )
(d) YTC, now owned by new owners, cannot be held liable on the PN since it was entered into by its former owner and President, which
act the new Board of Directors did not ratify.
D. The defense is not meritorious. In stock sales, where shareholder sell a block of stock to new or existing shareholders, the transaction
takes place at the shareholder level only. Because the corporation has a legal personality separate and distinct from that of its
shareholders, a change in the composition of shareholders will not affect its existence nor extinguish its separate legal personality (SME
Bank vs Samson, GR No. 186641, October 8, 2013)
(e) The PN .is void for being in violation of the Usury Law seeking interest at an unconscionable rate of 120% p.a.
E. The defense is not meritorious. The Usury law is currently suspended in view of CB Circular 905 series of 1982 which lifted the ceiling
on interest rate for loans. Moreover, if the interest rate is deemed to be unconscionable despite the absence of the Usury Law, the legal
rate of interest shall be deemed to apply. Thus, the PN remains valid
Alternative answer
The PN remains valid because the obligation to pay the principal amount of the loan is distinct from the obligation to pay the interest on
the loan.

(2014) Which of the following instruments is negotiable if all the other requirements of negotiability are met? (1%)
(A) A promissory note with promise to pay out of the U.S. Dollar account of the maker in XYZ Bank
(B) A promissory note which designates the U.S. Dollar currency in which payment is to be made
(C) A promissory note which contains in addition a promise to paint the portrait of the bearer
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(D) A promissory note made payable
(1993) Discuss the negotiability or non-negotiability of the following notes
1) Manila, September 1, 1993
P2,500.00
I promise to pay Pedro San Juan or order the sum of P2,500.
(Sgd.) Noel Castro
2) Manila, June 3, 1993 P10,000.00
For value received, I promise to pay Sergio Dee or order the sum of P10,000.00 in five (5) installments, with the first
installment payable on October 5, 1993 and the other installments on or before the fifth day of the succeeding month or
thereafter.
(Sgd.) Lito Villa
The promissory note is negotiable as it complies with Sec 1, NIL.

• Firstly, it is in writing and signed by the maker, Noel Castro.
• Secondly, the promise is unconditional to pay a sum certain in money, that is, P2,500.00
• Thirdly, it is payable on demand as no date of maturity is specified.
• Fourth, it is payable to order.
The promissory note is negotiable. All the requirements of Sec 1 NIL are complied with. The sum to be paid is still certain despite that
the sum is to be paid by installments (Sec 2b NIL)
(2013) Antonio issued the following instrument:
August 10, 2013

Makati City
P100,000.00
Sixty days after date, I promise to pay Bobby or his designated representative the sum of ONE HUNDRED THOUSAND
PESOS (P100,000.00) from my BPI Acct. No. 1234, if, by this due date, the sun still sets in the west to usher in the evening
and rises in the east the following morning to welcome the day.
(Sgd.) Antonio Reyes

Explain each requirement of negotiability present or absent in the instrument.
The instrument contains a promise to pay and was signed by the maker, Antonio Reyes (Section 1(a) of Negotiable Instruments Law).
The promise to pay is unconditional insofar as the reference to the setting of the sun in the west in the evening and its rising in the east
in the morning are concerned. These are certain to happen (Section 4(c) of Negotiable Instruments Law). The promise to pay is
conditional, because the money will be taken from a particular fund, BPI Account No. 1234 (Section 3 of Negotiable Instruments Law).
The Instrument contains a promise to pay a sum certain in money, P100,000.00 (Section (b) of Negotiable Instruments Law). The money Page | 47
is payable at a determinable future time, sixty days after August 10, 2013 (Section 4(a) of Negotiable Instruments Law). The instrument
is not payable to order or to bearer (Section 1(d) of Negotiable Instruments Law).
(2012) Indicate and explain whether the promissory note is negotiable or non- negotiable.
I promise to pay A or bearer Php100,000.00 from my inheritance which I will get after the death of my father. (2%)
Not negotiable. There is no unconditional promise to pay a sum certain in money (Sec. 1 [b], NIL) as the promise is to pay the
amount out of a particular fund, i.e., the inheritance from the father of the promisor (Sec. 3, NIL).
I promise to pay A or bearer Php100,000 plus the interest rate of ninety (90) – day treasury bills. (2%)
Not negotiable. There is no unconditional promise to pay a sum certain in money. The promise to pay “the interest rate of ninety
(90)-day treasury bills” is vague because, first, there are no 90-day treasury bills (although there are 91-day, 182-day, and
364-days bills); second the promise does not specify whether the so-called “interest rate” is that established at the primary market (where
new T-bills are sold for the first time by the Bureau of Treasury) or at the secondary market (where T-bills can be bought and sold after
they have been issued in the primary market).; and third, T-bills are conventionally quoted in terms of their discount rate, rather than their
interest rate. They do not pay any interest directly; instead, they are sold at a discount of their face value and this “earn” by selling at face
value upon maturity.
I promise to pay A or bearer the sum of Php100,000 if A passes the 2012 bar exams. (2%)
Not negotiable. The promise to pay is subject to a condition, i.e., that A will pass the 2012 bar exams (Sec.1[b],NIL).
I promise to pay A or bearer the sum of Php100.000 on or before December 30, 2012. (2%)
Negotiable. It conforms fully with the requirements of negotiability under Section 1, NIL.
I promise to pay A or bearer the sum of Php100,000. (2%)
Negotiable. It conforms fully with the requirements of negotiability under Section 1,NIL. It is payable on demand because the note does
not express a time for its payment (Sec.7[b], NIL).
(2002) Which of the following stipulations or features of a promissory note (PN) affect or do not affect its negotiability, assuming that the
PN is otherwise negotiable? Indicate your answer by writing the paragraph number of the stipulation or feature of the PN as shown below
and your corresponding answer, either “Affected” or “Not affected.” Explain (5%).
a) The date of the PN is “February 30, 2002.”

b) The PN bears interest payable on the last day of each calendar quarter at a rate equal to five percent (5%) above the then
prevailing 91-day Treasury Bill rate as published at the beginning of such calendar quarter.
c) The PN gives the maker the option to make payment either in money or in quantity of palay or equivalent value.
d) The PN gives the holder the option either to require payment in money or to require the maker to serve as the bodyguard or
escort of the holder for 30 days.
a) Paragraph 1 – negotiability is “NOT AFFECTED.” The date is not one of the requirements for negotiability.
b) Paragraph 2 – negotiability is “NOT AFFECTED” The interest is to be computed at a particular time and is determinable. It
does not make the sum uncertain or the promise conditional.

c) Paragraph 3 – negotiability is “AFFECTED.” Giving the maker the option renders the promise conditional
d) Paragraph 4 – negotiability is “NOT AFFECTED.” Giving the option to the holder does not make the promise conditional.
(2002)
A. Define the following: (1) a negotiable promissory note, (2) a bill of exchange and (3) a check. (3%)
B. You are Pedro Cruz. Draft the appropriate contract language for (1) your negotiable promissory note and (2) your check, each
Page | 48
containing the essential elements of a negotiable instrument (2%)
(1) A negotiable promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging
to pay on demand or at a fixed or determinable future time, a sum certain in money to order or bearer.
(2) A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring
the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to
bearer.
(3) A check is a bill of exchange drawn on a bank payable on demand.
B. (1) Negotiable promissory note -
“September 15, 2002
“For value received, I hereby promise to pay Juan Santos or order the sum of TEN THOUSAND PESOS (P10,000) thirty (30)
days from date hereof.
(Signed) Pedro Cruz to: Philippine National Bank

Escolta, Manila Branch”
(1996) What are the requisites of a negotiable instrument?
The requisites of a negotiable instrument are as follows:
a) It must be in writing and signed by the maker or drawer;

b) It must contain an unconditional promise or order to pay a sum certain in money;
c) It must be payable to order or to bearer; and
d) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
(Sec 1 NIL)
(2009) (D) A document, dated July 15, 2009 that reads: ―Pay to X or order the sum of P5,000.00 five days after his pet dog,
Sparky, dies. Signed Y is a negotiable instrument.
True. The document is subject to a term and not a condition. The dying of the dog is a day which is certain to come. Therefore, the order
to pay is unconditional, in compliance with Section 1 of the Negotiable Instruments Law (NIL).
(Note: This answers presumes that there is a drawee)
(2000)
a) MP bought a used cell phone from JR. JR preferred cash but MP is a friend so JR accepted MR’s promissory note for P10,000.
JR thought of converting the note into cash by endorsing it to his brother KR. The promissory note is a piece of paper with the
following hand-printed notation: “MP WILL PAY JR TEN THOUSAND PESOS IN PAYMENT FOR HIS CELLPHONE 1 WEEK
FROM TODAY.” Below this notation MP’s signature with “8/1/00” next to it, indicating the date of the promissory note. When
JR presented MP’s note to KR, the latter said it was not a negotiable instrument under the law and so could not be a valid

substitute for cash. JR took the opposite view, insisting on the note’s negotiability. You are asked to referee. Which of the
opposing views is correct?
b) TH is an indorsee of a promissory note that simply states: “PAY TO JUAN TAN OR ORDER 400 PESOS.” The note has no
date, no place of payment and no consideration mentioned. It was signed by MK and written under his letterhead specifying
the address, which happens to be his residence. TH accepted the promissory note as payment for services rendered to SH,
who in turn received the note from Juan Tan as payment for a prepaid cell phone card worth 450 pesos. The payee Page | 49
acknowledged having received the note on August 1, 2000. A Bar reviewee had told TH, who happens to be your friend, that
TH is not a holder in due course under Article 52 of the Negotiable Instruments Law (Act 2031) and therefore does not enjoy
the rights and protection under the statute. TH asks for our advice specifically in connection with the note being undated and
not mentioning a place of payment and any consideration. What would your advice be? (2%).
a) KR is right. The promissory note is not negotiable. It is not issued to order or bearer. There is no word of negotiability containing
therein. It is not issued in accordance with Section 1 of the Negotiable Instruments Law
b) The fact that the instrument is undated and does not mention the place of payment does not militate against its being
negotiable. The date and place of payment are not material particulars required to make an instrument negotiable.
The fact that no mention is made of any consideration is not material. Consideration is presumed.
Ambiguous Instruments
(1998) How do you treat a negotiable instrument that is so ambiguous that there is doubt whether it is a bill or a note? (5%)
1. Where a negotiable instrument is so ambiguous that there is doubt whether it is a bill or a note, the holder may treat it either as a bill
of exchange or a promissory note at his election.
BILL OF EXCHANGE AS PROMISSORY NOTE
(2015) (C) When can you treat a bill of exchange as a promissory note? (3%)
A bill of exchange may be treated as a promissory note in the following instances:
1. the drawee is a fictitious person or a person not having the capacity to contract;
2. the drawer and the drawee are one and the same person;
3. where the instrument is so ambiguous that there is a doubt as to whether the instrument is a bill or a note, the holder may treat it either
as a bill or note, at the option of the holder (Sections 130 and 17 of the Negotiable Instruments Law).
7653).
to the order of Jose Cruz or Josefa Cruz
INDORSER
Irregular Indorser vs. General Indorser (2005)
Distinguish an irregular indorser from a general indorser. (3%)
Irregular Indorser is not a party to the instrument but he places his signature in blank before delivery. He is not a party but he becomes
one because of his signature in the instrument. Because his signature he is considered an indorser and he is liable to the parties in the
instrument. While, a General Indorser warrants that the instrument is genuine, that he has a good title to it, that all prior parties had
capacity to contract; that the instrument at the time of the indorsement is valid and subsisting; and that on due presentment, the instrument

will be accepted or paid or both accepted and paid according to its tenor, and that if it is dishonored, he will pay if the necessary
proceedings for dishonor are made.
DEFENSES
Page | 50
FORGERY: LIABILITIES OF PRIOR & SUBSEQUENT PARTIES
(1990) Jose loaned Mario some money and, to evidence his indebtedness, Mario executed and delivered to Jose a promissory note
payable to his order. Jose endorsed the note to Pablo. Bert fraudulently obtained the note from Pablo and endorsed it to Julian by forging
Pablo’s signature. Julian endorsed the note to Camilo.
a) May Camilo enforce the said promissory note against Mario and Jose?
b) May Camilo go against Pablo?
c) May Camilo enforce said note against Julian?
d) Against whom can Julian have the right of recourse?
e) May Pablo recover from either Mario or Jose?
a) Camilo may not enforce said promissory note against Mario and Jose. The promissory note at the time of forgery being
payable to order, the signature of Pablo was essential for the instrument to pass title to subsequent parties. A forged signature
was inoperative (Sec 23 NIL). Accordingly, the parties before the forgery are not juridically related to parties after the forgery
to allow such enforcement.
b) Camilo may not go against Pablo, the latter not having indorsed the instrument.
c) Camilo may enforce the instrument against Julian because of his special indorsement to Camilo, thereby making him
secondarily liable, both being parties after the forgery.
d) Julian, in turn, may enforce the instrument against Bert who, by his forgery, has rendered himself primarily liable.
e) Pablo preserves his right to recover from either Mario or Jose who remain parties juridically related to him. Mario is still
considered primarily liable to Pablo. Pablo may, in case of dishonor, go after Jose who, by his special indorsement, is
secondarily liable.
Note: It is possible that an answer might distinguish between blank and special indorsements of prior parties which can thereby
materially alter the above suggested answers. The problem did not clearly indicate the kind of indorsements made.
(1995) Alex issued a negotiable PN (promissory note) payable to Benito or order in payment of certain goods. Benito indorsed the PN to
Celso in payment of an existing obligation. Later Alex found the goods to be defective. While in Celso’s possession the PN was stolen
by Dennis who forged Celso’s signature and discounted it with Edgar, a money lender who did not make inquiries about the PN. Edgar
indorsed the PN to Felix, a holder in due course. When Felix demanded payment of the PN from Alex the latter refused to pay. Dennis
could no longer be located.
1. What are the rights of Felix, if any, against Alex, Benito, Celso and Edgar? Explain
2. Does Celso have any right against Alex, Benito and Felix? Explain.
1. Felix has no right to claim against Alex, Benito and Celso who are parties prior to the forgery of Celso’s signature by Dennis.
Parties to an instrument who are such prior to the forgery cannot be held liable by any party who became such at or subsequent
to the forgery. However, Edgar, who became a party to the instrument subsequent to the forgery and who indorsed the same
to Felix, can be held liable by the latter.
2. Celso has the right to collect from Alex and Benito. Celso is a party subsequent to the two. However, Celso has no right to
claim against Felix who is a party subsequent to Celso (Sec 60 and 66 NIL)
INCOMPLETE AND UNDELIVERED INSTRUMENT

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FROM Nth Time BAR CHALLENGER TO ATTORNEY

MERCANTILE LAW for Bar Law for Dummies Training Program

ARRANGED AND SEQUENCED

BAR QUESTIONS AND ANSWERS 1990-2019

A – your direct Answer

A – your direct Answer

L – state the Legal basis or bases

2018 BAR No. 1, Remedial Law

LCG, Section 408, paragraph F.

Then, basahin mo na yung question and eliminate the non-pertinent facts.

After mental elimination, the question would only be like this.

Practice, practice, practice. Stop muna, at mag practice.

A – apply the law to the pertinent facts.

So the answer for the A portion would be like this.

Ok let us combine ALA.

Sa C portion, for emphasis na lang ito.

HENCE, the dispute can be filed directly in court.

So, ang ating final answer ay....

Compare our answer sa suggested answer of UPLC.

2019 SUGGESTED ANSWER…238

JOINT ACCOUNT (2000)

JOINT ACCOUNT VS. PARTNERSHIP

(a) Was CSC correct in dismissing the case? (2.5%)

(2007) Name at least five predicate crimes to money laundering. (5%)

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

( I EXPECT A QUESTION ABOUT THE NATIONAL ID SYSTEM FOR 2021 BAR)

Can Francis recover from the Peninsula Insurance Company? (5%)

Three instances when an insured is entitled to a return of premium paid are:

a. What is insurable interest? (2%)

(B) A general creditor on debtor’s property

SEPARATE INSURABLE INTEREST

LIFE VS. PROPERTY INSURANCE

Who is legally entitled to receive the insurance proceeds? Explain. (4%)

MARITIME INSURANCE Page | 22

The following warranties are implied in marine insurance:

PERIL OF THE SHIP VS. PERIL OF THE SEA

ALL RISK INSURANCE POLICY

ACTUAL TOTAL LOSS

CONSTRUCTIVE TOTAL LOSS

(2010) (B) What is barratry in marine insurance? (2%)

(2017) The law on life insurance prohibits double insurance. (2%)

Take this as a lecture

Yes. The beneficiary of X shall be entitled to the proceeds of the insurance.

Take this as a lecture.

Yes. It is a material information.

Rule on each of XYZ Insurance Co.’s contentions. (5%)

2. Sotero was sickly since 1990.

4. Sotero did not sign the application for insurance.

(A) May Sotero validly designate her niece as beneficiary?

CONSIDER THIS AS A LECTURE

(C) Is Aban entitled to claim the proceeds under the policy?

Will Petra’s suit prosper? Explain.

DEATH OF INSURED DUE TO BENEFICIARY

Accident vs. Suicide

Decide Jason's claim with reasons. (5%)

TRANSFER OF THE THING INSURED

Is this legally valid? Explain your answer. (3%)

(2005) When does double insurance exist? (2%)

Is the contention of Julie tenable? Explain.

May she recover on her fire insurance policies? Explain.

Northern Insurance Corp. – P20 Million

X – 4/12 of P600th = P200th

What happens to the P10 million debt of Mario to Armando? Explain.

1) Is Garapal Insurance legally justified in refusing payment to Benjie?