San Sebastian College – Recoletos

College of Law
Final Examination – Commercial Laws June 4, 2021

Do not forget to write your name and ID number on each page of your answer sheet. Use
font 11 in your answers. Give a brief explanation to your answers, a mere YES or NO will
not be given credit. After you are done screen shot (picture) your work, indicate the
number of pages you are submitting and send it directly to my email address:
virginiajeannielim@gmail.com. Do not leave the site until I have confirmed that I got your
paper.

PROBLEM EXERCISES:

1. On November 14, 2017, FBB took out a life insurance policy from X Insurance Corporation. On
October 26, 2018, FBB Died. X refused to pay his beneficiaries because it discovered that FBB has
misrepresented certain material facts in his application. The beneficiaries sued on the basis that X
can contest the validity of the insurance policy only with two (2) years from date of issue and during
the lifetime of the insured. Resolve the case.

2. Rigoberto constructed a 5-storey commercial building on his property. When it was completed, he
took out several property insurances from different insurance companies. He mentioned to two but
not to all the insurers about his purchases of property insurances. Briefly explain the nature of the
liability of the several insurers in double insurance after the building was destroyed by an accidental
fire that started at the back of his property.

3. (a) Sure Trans Inc. offers special trips to local and foreign tourists willing to travel by land visiting
several provinces. As a standard practice of the company, before any trip begins, the bus company
supervisor and mechanic give the bus a thorough check-up. The two (2) drivers assigned are also
given medical evaluation. Unfortunately, in one of its trips the bus met an accident resulting the
death and injuries to passengers. Is the carrier liable for if can prove due observance of diligence and
care in its business operation and selection of employees? Reason.

4. R works in Makati City but goes home to San Fernando Pampanga every day after work. R regularly
takes the public transport commuting from work to home, vice-versa. Last week, he was late in going
home because the office was re-locating and employees had to work overtime. RR took the midnight
trip going home. While the bus was traversing the highway R’s right eye was hit by a fist-size stone
hurled at the bus by an unidentified bystander as the bus was speeding along the express way. The
bus driver lost no time in bringing R to the provincial hospital where he was confined and treated. R
lost his right eye. R wants to sue the bus company for damages and seeks your advice whether he
can legally hold the bus company liable. What will you advise him? Explain.

5. (a) The audit team of the BSP reported to the Monetary Board of its findings on ABC Bank’s
activities: (1) the real estate securities of some borrowers were overvalued as much as 100%, (2)
Many loans have been delinquent for more than three (3) years, (3) 80% of corporate borrowers’
assets are in unsecured receivables owned by affiliate corporations with no visible assets, (4) ABC
has not addressed its deficiency in its reserve requirements, and (5) the bank officers were
repeatedly delayed in submitting the required reports to the BSP. To safeguard the interest of the
bank’s depositors, creditors, stockholders and the public what steps or measures may be taken
against the bank and by whom? Give a brief explanation.
 (b) What the mandatory requirements to be complied with before a bank found to be insolvent can
be ordered close?

6. Briefly explain what will govern the relationship between the parties in Letters of Credit:
a. Issuing bank and the Advising bank
b. Advising bank and the Beneficiary.
c. Opening bank and the applicant
d. Exporter and the importer
e. Confirming bank and the Beneficiary.

7. X Corporation is a garment factory. The Board of Directors unanimously agreed to ceased operation
due to the successive losses. The board decision was approved by 80% of the stockholders. X found a
willing buyer who agreed to acquire all of X’s assets and stock-in-trade at a discounted price. X’s
creditors were not informed of this transaction. Y, a small creditor of X’s learned of this only from
some agents who were talking about the sale of X’s properties.
(a) Y believes that the transaction is a bulk sale, and it is null and void. Is Y correct?
(b) What are the rights and liabilities of the buyer?

8. (a) Cite at least four (4) salient features of RA 11521, the latest law that amended AMLA (Jan. 31,
2021)

( b) Define of briefly explain the following:

1. Independence Principle of Letters of Credit
2. Strict Compliance Rule of Letters of Credit
3. Principle of Pari Passu of Financial Rehabilitation and Insolvency Act
4. Money Laundering
5. Letters of Credit

9. ABB Bank is a secured creditor of Y Corporation. The president of Y filed a petition under the FRIA
and sought for the rehabilitation of the company. The court issued a stay order placing all kinds of
Y’s creditor in equal footing. “ABB” claims that the stay order violated the non-impairment clause of
the constitution and the contractual agreement between the bank and the mortgagor Y Corporation.
Is “ABB” correct? Reason.

10. X opened a letter of credit with ABB Bank for the importation of 500 sets of Laptop. The gadgets and
the covering documents arrived, and X would like to take possession of the articles under a trust
receipt. The bank agrees to release the laptops to X in trust for the bank, and for X to turn over the
proceeds on the sale of the articles, or to return the articles in the event of their non-sale within
ninety (90) days from receipt thereof.

X sold all the laptops but failed to turn over the proceeds within the 90-day period agreed
upon, despite repeated demands from ABB. The bank files an estafa case against X. In his defense X
contends that he should not be held liable because the transaction emanates from a letter of credit,
which X claims is civil in nature. He invokes the constitutional provision that no one should be
imprisoned for non-payment of debts. If you were the prosecutor, would you file the case? Why?
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