1. Explain/Distinguish Grandfather rule and control test.

2. Explain the trust fund doctrine.

3. 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.
(5%)

4. EFG, Inc. is indebted to Bank Y in the amount of ₱50,000,000.00. The loan was secured by
a suretyship agreement issued by Z Insurance Co.

Due to EFG, Inc's default, Bank Y filed a case against Z Insurance Co. as surety. There is
also a pending criminal case for violation of the Bouncing Checks Law against the President
of EFG, Inc., Mr. P, who signed the check as signatory for the company.

Unable to meet its obligations as they fell due, EFG, Inc. filed a petition for rehabilitation.
Finding the petition sufficient in form and substance, the court issued a Commencement
Order, which was thereafter published.

(a) Should the case filed against Z Insurance Co. be suspended in light of the
Commencement Order? Explain.

(b) Should the criminal case filed against Mr. P be suspended in light of the
Commencement Order? Explain.

5. Ysidro, a paying passenger, was on board Bus No. 904 owned and operated by Yatco
Transportation Company (Yatco). He boarded the bus at Munoz, Nueva Ecija with Manila as
his final destination. He was seated on the first row, window seat on the left side of the bus.
As the bus was negotiating the national highway in front of the public market of Gerona,
Tarlac, the bus came to a full stop because of the traffic. The driver of the bus took this
opportunity to check on the tires of the bus and to relieve himself. As he was alighting from
the bus to do these, an unidentified man standing along the highway hurled a huge rock at
the left side of the bus and hit Ysidro between his eyes. He lost consciousness and
immediately the driver, with the conductor, drove the bus to bring him to the nearest hospital.
He expired before the bus could reach the hospital.

Ysidro's wife and children brought a civil action to collect damages from Yatco, alleging that
as a common carrier, it was required to exercise extraordinary diligence in ensuring the
safety of its passengers. They contended that, in case of injuries and/or death on the part of
any of its passengers, the common carrier is presumed to be at fault. In its defense, Yatco
alleged that it is not an absolute insurer of its passengers and that Ysidro's death was not
due to any defect in the means of transport or method of transporting passengers, or the
negligent acts of its employees. Since the accident was due to the fault of a stranger over
 whom the common carrier had no control, or of which it did not have any prior knowledge to
be able to prevent it, the cause of Ysidro's death should be considered a fortuitous event and
not the liability of the common carrier.

(a) Is a common carrier presumed to be at fault whenever there is death or injury to its
passengers, regardless of the cause of death or injury?

(b) What kind of diligence is required of common carriers like Yatco for the protection of
its passengers?

(c) Will your answer be the same as your answer in (b) above, if the assailant was
another paying passenger who boarded the bus and deliberately stabbed Ysidro to
death?

6. Mr. P, the President of JKL, Inc. which shares are listed in the Philippine Stock Exchange,
was notified that the corporation has just been awarded a ₱5,000,000,000.00 construction
contract by a reputable private company. Before this information could be disclosed to the
public, Mr. P called his stockbroker to purchase 20,000 shares of JKL, Inc. He also
mentioned the transaction to his brother, Mr. B. Mr. B, who was not involved at all in the
business of JKL, Inc., also bought 50,000 shares of JKL, Inc. because of the tip disclosed to
him by Mr. P.

(a) Is the information disclosed by Mr. P to Mr. B considered as material nonpublic

information for purposes of insider trading? Explain. (2%)

(b) Should Mr. P and Mr. B be held liable for insider trading? Explain.