FRIA

1. A) No, the case filed against Z insurance Co. should not be suspended in light of
commencement order. Under the FRIA, enforcement of claims filed against sureties with solidary
liabilities with the debtor shall not be included in the stay order because it is not one subject of
the petition.

Thus, the case filed against Z Insurance, as surety of EPG in loan agreement with the Bank will not
be suspended due to it is not subject of the rehabilitation.

B) No, the criminal case against its President is not likewise suspended in light of the
commencement order. Under the FRIA, any criminal action filed against an individual debtor,
owner or partner, director or officer of a debtor shall not be affected by any proceeding
commenced under the rehabilitation. Thus, the violation of BP 22 committed by the president
who signed the check will not be affected by the pending rehabilitation of the insolvent debtor.
The prosecution of criminal case against its officer has nothing to do with on the pending case of
rehabilitation of the insolvent debtor.

2. A) Under the FRIA, insolvency refers to the financial condition of debtor that is generally
unable to pay its liabilities as they fall due in the ordinary course of business or has liabilities that
are more than its assets. Applying the definition to this case, W medical cannot be considered as
insolvent considering its assets is more than its liabilities. Furthermore, it is not stated in the facts
that it cannot foresee to pay its liabilities for more than a year. Thus, it cannot be considered as
insolvent within the contemplation of the law.

C) No, it cannot file petition for suspension of payments. Under the FRIA, it may only be availed
of when an individual debtor has a sufficient properties to cover all the debts, however fails to
foresees the meeting his debts or liabilities when it they fell due. In the given situation, W
Medical is insolvent which has no properties to pay all his debts or liabilities because in this case,
the liabilities are more than the assets. Thus, it cannot file a petition for suspension of payment.

LEGALLY RECOGNIZED MODES OF REHABILITATION

D) Under FRIA, W medical may avail either court supervised voluntary proceedings or pre-
negotiated rehabilitation. Under the first, it may be availed if the insolvent debtor fails to forsee
the meeting of debts when they respectively fall due. Under the second, he may filed a verified
petition with court for the approval of pre-negotiated rehabilitation plan, to be endorsed or
approved by the creditors holding at least 2/3 of the total liabilities of the debtor, including
secured creditors holding more than 50% of the total secure claims of the debtor and unsecured
holding of more than 50% of the total unsecured claims of the debtor.
E) Yes, Under the FRIA, when the debtor is insolvent and there is no chance for such
rehabilitation to be successful, the court may convert the proceeding to liquidation proceedings.
Thus, it is possible for the rehabilitation to be converted into liquidation.

3. If Wyatt is registered as sole proprietorship, he may file a petition for rehabilitation or

voluntary liquidation. Under FRIA, an insolvent debtor may file a petition for rehabilitation even if
the assets are less than the liabilities. He can also file voluntary liquidation since liabilities is more
than his assets. The main objective of filing such is to get discharge, maximize recovery of assets
and effect equitable distribution of such assets based on the rules of concurrence of credits.

If Wyatt is not registered as sole proprietorship, his option is only limited to a peition for
voluntary liquidation since his assets is less than his liabilities. The petition for suspension of
payment is likewise not available in this case.

INSURANCE LAW

4. Yes, a surety contract is deemed to be an insurance contract only if made by surety who or
which, as such, is doing insurance business.

In the given situation, CBI Insurance Corporation, an insurance corporation engaged in the
insurance business. The subject agreement of the parties undoubtedly contemplates a surety
agreement, which is governed mainly by the insurance code, considering that the contract of
surety shall be deemed an insurance contract within the contemplation of the insurance code if
made by surety which is doing insurance business.

TRANSPORTATION LAW

5. To overcome the presumption of negligence, the common carrier must establish ADEQUATE
PROOF that it exercised EXTRA ORDINARY DILIGENCE OVER THE GOODS. It must do more than
merely to show that some other party could be responsible for the damage.

6. No, only the operator of the common carrier is liable because he is the only party to the
contract. Jurisprudence has already settled that A COMPLAINT FOR BREACH OF CONTRACT OF
CARRIAGE is dismissible as against the employee, who was driving the vehicle because the
parties to the contract of carriage are only the passenger, the owner and/or the operator. The
driver is not a party to the the contract of carriage as he was a mere employee of the carrier.
Thus X, has no cause of action against the driver in case of breach of contract of carriage.

CORPORATION LAW

7. No, SM cannot file a complaint against the stockholders of Corp C by invoking the trust fund
doctrine for the sole reason that it did not plead that Corp C’s insolvency or dissolution.

The capital stock of the corporation is a trust to be managed during its corporate life for the
benefit of the stockholders. It is only in the event of its dissolution or insolvency does the capital
stock become a trust fund for the benefits of the creditor.

There are 2 instances when the creditor is allowed to maintain an action upon unpaid
subscription based on the trust fund doctrine:
 1) When the debtor corporation release the subscriber to its capital stock from
obligation of paying their shares, in whole or in part, without valuable consideration or
fraudulently, to prejudice the creditors.
2) Where the debtor corporation is insolvent or has been dissolved without providing
payment for the creditors.

In the given situation, SM failed to plead that Corp C’s insolvency or its dissolution. The basis of
SM suit, it was merely a a simple collection suit against debtor Corp C. The allegation of SM
complaint is insufficient to justify the invocation and application of trust fund doctrine

8. No, the shares of C were not validly reduced and converted to treasury shares. According to
Sec. 9 of the Corporation Code which states that “treasury shares are shares of stock which
have been issued and fully paid for, but subsequently reacquired by the issuing corporation
by purchase, redemption, donation or through some lawful means”.

The Corporation is likewise explicit that in case of reacquisition of shares, the corporation must
have unrestricted retained earnings in its books to cover the shares to be purchased or
reacquired.

Note:

Even Assuming that there is consent to the reduction of shares, such agreement is void for lack
of consideration. C were not did not have any unpaid obligations for the Corporation NM.

9. No, the CHANGE OF NAME OF B did not affect its capacity to sue and be sued, and VP VR has
authority to represent the Corporation. Jurisprudence dictates that the corporation upon such
change of name, is no sense a new corporation. It is the same corporation with different name
and its character is in no respect changed. Its change of name whether effect by special act or
general law, has no effect on the identity of the corporation, or on its property rights, liabilities.
The corporation continues as before, responsible in its new name for all debts or other liabilities
which it had previously contracted or incurred.

Hence, the changed of name of Company B, having no effect on its identity particularly on its
property rights, liabilities with its character remaining very much intact, the Board Resolution and
SPA issue in favor of VP VR to institute Certiorari is valid and binding and did not lose any effect.