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    2008 Civil law

    I.

    Ana Rivera had a husband, a Filipino citizen like her, who was among the passengers on board a commercial jet

    plane which crashed in the Atlantic Ocean ten(10) years earlier and had never been heard of ever since. Believingthat her husband had died, Ana married Adolf Cruz Staedtler, a divorced German national born of a German father

    and a Filipino mother residing in Stuttgart. To avoid being required to submit the required certificate of capacity tomarry from the German Embassy in Manila, Adolf stated in the application for marriage license that he was aFilipino citizen. With the marriage license stating that Adolf was a Filipino, the couple got married in a ceremonyofficiated by the Parish Priest of Calamba, Laguna in a beach in Nasugbu, Batangas, as the local parish priestrefused to solemnize marriages except in his church. Is the marriage valid? Explain fully. (5%)

    II.

    At age 18, Marian found out that she was pregnant. She insured her own life and named herunborn child as her sole beneficiary. When she was already due to give birth, she and herboyfriend Pietro, the father of herunborn child, were kidnapped in a resort in Bataan where they were vacationing. The military gave chase and afterone week, they were found in an abandoned hut in Cavite. Marian and Pietro were hacked with bolos. Marian andthe baby she delivered were both found dead, with the babys umbilical cord already cut. Pietro survived.

    a) Can Marians baby be the beneficiary of the insurance taken on the life of the mother? (2%)b) Between Marian and the baby, who is presumed to have died ahead? (1%)c) Will Pietro, as surviving biological father of the baby, be entitled to claim the proceeds of the lifeinsurance on the life of Marian? (2%)

    III.

    Roderick and Faye were high school sweethearts. When Roderick was 18 and Faye, 16 years old,they started to live together as husband and wife without the benefit of marriage. When Fayereached 18 years ofage, her parents forcibly took her back and arranged for her marriage to Brad . Although Fayelived with Brad after the marriage, Roderick continued to regularly visit Faye while Brad wasaway at work. During their marriage, Faye gave birth to a baby girl, Laica. When Faye was 25years old, Brad discovered her continued liaison with Roderick and in one of their heatedarguments, Faye shot Brad to death. She lost no time in marrying her true love Roderick, withouta marriage license, claiming that they have been continuously cohabiting for more than 5 years.

    a) Was the marriage of Roderick and Faye valid? (2%)b)

    What is the filiation status of Laica? (2%)c) Can Laica bring an action to impugn her own status on the ground that based on DNA results,

    Roderick is her biological father? (2%)

    d) Can Laica be legitimated by the marriage of her biological parents? (1%)

    IV.

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    Gianna was born to Andy and Aimee, who at the time of Giannas birth were not married to eachother. While Andy was single at that time, Aimee was still in the process of securing a judicialdeclaration of nullity on her marriage to her ex-husband. Giannas birth certificate, which wassigned by both Andy and Aimee, registered the status of Gianna as legitimate, her surnamecarrying that of Andys, and that her parents were married to each other.

    a) Can a judicial action for correction of entries in Giannas birth certificate be successfullymaintained to:

    i) Change her status from legitimate to illegitimate (1%); andii) Change her surname from that of Andys to Aimees maiden surname? (1%)

    b) Instead of a judicial action, can administrative proceedings be brought for the purpose of makingthe above corrections? (2%)

    c) Assuming that Aimee is successful in declaring her former marriage void, and Andy and Aimeesubsequently married each other, would Gianna be legitimated? (1%)

    V.

    Despite several relationships with different women, Andrew remained unmarried. His first relationship with Brendaproduced a daughter, Amy, now 30 years old. His second, with Carla, produced two sons: Jon and Ryan. His third,with Donna, bore him two daughters: Vina and Wilma. His fourth, with Elena, bore him no children although Elenahas a daughter Jane, from a previous relationship. His last, with Fe, produced no biological children but theyinformally adopted without court proceedings, Sandy, now 13 years old, whom they consider as their own. Sandywas orphaned as a baby and was entrusted to them by the midwife who attended to Sandys birth. All the children,including Amy, now live with Andrew in his house.

    a) Is there any legal obstacle to the legal adoption of Amy by Andrew? To the legal adoption of Sandyby Andrew and Elena? (2%)

    b) In his old age, can Andrew be legally entitled to claim support from Amy, Jon, Ryan, Vina , Wilmaand Sandy assuming that all of them have the means to support him? (1%)

    c) Can Amy, Jon, Ryan, Vina, Wilma and Sandy legally claim support from each other? (2%)d) Can Jon and Jane legally marry? (1%)

    VI.

    Alex died without a will, leaving only an undeveloped and untitled lot in Taguig City. He is survived by his wifeand 4 children. His wife told the children that she is waiving her share in the property, and allowed Bobby, the eldestson who was about to get married, to construct his house on of the lot, without however obtaining the consent ofhis siblings. After settlement of Alexs estate and partition among the heirs, it was discovered that Bobbys housewas constructed on the portion allocated to his sister, Cathy. Cathy asked Bobby to demolish his house and vacatethe portion allotted to her. In lieu of demolition, Bobby offered to purchase from Cathy the lot portion on which hishouse was constructed. At that time, the house was valued at P300,000 while the portion of the lot on which thehouse was constructed was valued at P350,000.

    a) Can Cathy lawfully ask for demolition of Bobbys house? (3%)b) Can Bobby legally insist on purchasing the land? (2%)

    VII.

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    Anthony bought a piece of untitled agricultural land from Bert. Bert, in turn, acquired theproperty by forging Carlos signature in a deed of sale over the property. Carlo had been inpossession of the property for 8 years, declared it for tax purposes, and religiously paid all taxesdue on the property. Anthony is not aware of the defect in Berts title, but has been in a ctual

    physical possession of the property from the time he bought it from Bert, who had never been inpossession. Anthony has since then been in possession of the property for one year.

    a) Can Anthony acquire ownership of the property by acquisitive prescription? How many more yearsdoes he have to possess it to acquire ownership? (2%)

    b) If Carlo is able to legally recover his property, can he require Anthony to account for all the fruitshe has harvested from the property while in possession? (2%)

    c) If there are standing crops on the property when Carlo recovers possession, can Carlo appropriatethem? (2%)

    VIII.

    Adam, a building contractor, was engaged by Blas to construct a house on a lot which he (Blas)owns. While digging on the lot in order to lay down the foundation of the house, Adam hit a veryhard object. It turned out to be the vault of the old Banco de las Islas Filipinas. Using adetonation device, Adam was able to open the vault containing old notes and coins which werein circulation during the Spanish era. While the notes and coins are no longer legal tender, theywere valued at P 100 million because of their historical value and the coins silver and nickelcontent. The following filed legal claims over the notes and coins:

    i) Adam, as finder;ii) Blas, as owner of the property where they were found;iii) Bank of the Philippine Islands, as successor-in-interest of the owner of the vault; andiv) The Philippine Government because of their historical value.a) Who owns the notes and coins? (4%)b) Assuming that either or both Adam and Blas are adjudged as owners, will the notes and coins bedeemed part of their absolute community or conjugal partnership of gains with their respective spouses?(2%)

    IX .

    The properties of Jessica and Jenny, who are neighbors, lie along the banks of the MarikinaRiver. At certain timesof the year, the river would swell and as the water recedes, soil, rocks and other materials are

    deposited on Jessicas and Jennys properties. This pattern of the river swelling, receding anddepositing soil and other materials being deposited on the neighbors properties have gone on for

    many years. Knowing this pattern, Jessica constructed a concrete barrier about 2 meters from herproperty line and extending towards the river, so that when the water recedes, soil and othermaterials are trapped within this barrier. After several years, the area between Jessicas propertyline to the concrete barrier was completely filled with soil, effectively increasing Jessicasproperty by 2 meters. Jennys property, where no barrier was constructed, also increased by onemeter along the side of the river.

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    a) Can Jessica and Jenny legally claim ownership over the additional 2 meters and one meter,respectively, of land deposited along their properties? (2%)

    b) If Jessicas and Jennys properties are registered, will the benefit of such registration extend to theincreased area of their properties? (2%)

    c) Assume the two properties are on a cliff adjoining the shore of Laguna Lake. Jessica and Jenny hada hotel built on the properties. They had the earth and rocks excavated from the properties dumped on the

    adjoining shore, giving rise to a new patch of dry land. Can they validly lay claim to the patch of land?(2%)

    X.

    Arthur executed a will which contained only: (i) a provision disinheriting his daughter Bernicefor running off with a married man, and (ii) a provision disposing of his share in the familyhouse and lot in favor of his other children Connie and Dora. He did not make any provisions infavor of his wife Erica, because as the will stated, she would anyway get of the house and lotas her conjugal share. The will was very brief andstraightforward and both the above provisions were contained in page 1, which Arthur and his

    instrumental witness, signed at the bottom. Page 2 contained the attestation clause and thesignatures, at the bottom thereof, of the 3 instrumental witnesses which included Lambert, thedriver of Arthur; Yoly, the family cook, and Attorney Zorba, the lawyer who prepared the will.There was a 3rd page, but this only contained the notarial acknowledgement. The attestationclause stated the will was signed on the same occasion by Arthur and his instrumental witnesseswho all signed in the presence of each other, and the notary public who notarized the will. Thereare no marginal signatures or pagination appearing on any of the 3 pages. Upon his death, it wasdiscovered that apart from the house and lot, he had a P 1million account deposited with ABCBank.

    a) Was Erica preterited? (1%)b)

    What other defects of the will, if any, can cause denial of probate? (2%)

    c) Was the disinheritance valid? (1%)d) How should the house and lot, and the cash be distributed? (1%)

    XI .

    John and Paula, British citizens at birth, acquired Philippine citizenship by naturalization after their marriage.During their marriage the couple acquired substantial landholdings in London and in Makati. Paula bore John threechildren, Peter, Paul and Mary. In one of their trips to London, the couple executed a joint will appointing each otheras their heirs and providing that upon the death of the survivor between them the entire estate would go to Peter andPaul only but the two could not dispose of nor divide the London estate as long as they live. John and Paula died

    tragically in the London Subway terrorist attack in 2005. Peter and Paul filed a petition for probate of their parents

    will before a Makati Regional Trial Court.

    a) Should the will be admitted to probate? (2%)b) Are the testamentary dispositions valid? (2%)c) Is the testamentary prohibition against the division of the London estate valid? (2%)

    XII.

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    Ernesto, an overseas Filipino worker, was coming home to the Philippines after working for so many years in theMiddle East. He had saved P100,000 in his savings account in Manila which he intended to use to start a business inhis home country. On his flight home, Ernesto had a fatal heart attack. He left behind his widowed mother, his

    common-law wife and their twin sons. He left no will, no debts, no other relatives and no other properties exceptthe money in his savings account. Who are the heirs entitled to inherit from him and how much should each receive?

    (3%)

    XIII.

    Raymond, single, named his sister Ruffa in his will as a devisee of a parcel of land which heowned. The will imposed upon Ruffa the obligation of preserving the land and transferring it,upon her death, to her illegitimate daughter Scarlet who was then only one year old. Raymondlater died, leaving behind his widowed mother, Ruffa and Scarlet.

    a) Is the condition imposed upon Ruffa to preserve the property and to transmit it upon her death toScarlet, valid? (1%)b) If Scarlet predeceases Ruffa, who inherits the property? (2%)c) If Ruffa predeceases Raymond, can Scarlet inherit the property directly from Raymond? (2%)

    XIV.

    Stevie was born blind. He went to school for the blind, and learned to read in Braille language.He speaks English fluently. Can he:

    a) Make a will? (1%)b) Act as a witness to a will? (1%)c) In either of the above instances, must the will be read to him? (1%)

    XV.

    Eduardo was granted a loan by XYZ Bank for the purpose of improving a building which XYZleased from him. Eduardo, executed the promissory note (PN) in favor of the bank, with hisfriend Recardo as cosignatory. In the PN, they both acknowledged that they are individually andcollectively liable and waived the need for prior demand. To secure the PN, Recardo executed areal estate mortgage on his own property. When Eduardo defaulted on the PN, XYZ stoppedpayment of rentals on the building on the ground that legal compensation had set in. Since therewas still a balance due on the PN after applying the rentals, XYZ foreclosed the real estatemortgage over Recardos property. Recardo opposed the foreclosure on the ground that he isonly a co-signatory; that no demand was made upon him for payment, and assuming he is liable,his liability should not go beyond half the balance of the loan. Further, Recardo said that whenthe bank invoked compensation between the rentals and the amount of the loan, it amounted to anew contract or novation, and had the effect of extinguishing the security since he did not givehis consent (as owner of the property under the real estate mortgage) thereto.

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    a) Can XYZ Bank validly assert legal compensation? (2%)b) Can Recardos property be foreclosed to pay the full balance of the loan? (2%)c) Does Recardo have basis under the Civil Code for claiming that the original contract wasnovated? (2%)

    XVI .

    Dux leased his house to Iris for a period of 2 years, at the rate of P25,000.00 monthly, payableannually in advance. The contract stipulated that it may be renewed for another 2-year periodupon mutual agreement of the parties. The contract also granted Iris the right of first refusal topurchase the property at any time during the lease, if Dux decides to sell the property at the sameprice that the property is offered for sale to a third party. Twenty-three months after execution ofthe lease contract, Dux sold the house to his mother for P2 million. Iris claimed that the sale wasa breach of her right of first refusal. Dux said there was no breach because the property was soldto his mother who is not a third party. Iris filed an action to rescind the sale and to compel Dux tosell the property to her at the same price. Alternatively, she asked the court to extend the leasefor another 2 years on the same terms.

    a) Can Iris seek rescission of the sale of the property to Duxs mother? (3%)b) Will the alternative prayer for extension of the lease prosper? (2%)

    XVII.

    Felipe borrowed $100 from Gustavo in 1998, when the Phil P - US$ exchange rate was P56 US$1. On March 1,2008, Felipe tendered to Gustavo a cashiers check in the amount of P4,135 in payment of his US$ 100 debt, basedon the Phil P US$ exchange rate at that time. Gustavo accepted the check, but forgot to deposit it until Sept. 12,

    2008. His bank refused to accept the check because it had become stale. Gustavo now wants Felipe to pay him incash the amount of P5,600. Claiming that the previous payment was not in legal tender, and that there has beenextraordinary deflation since 1998, and therefore, Felipe should pay him the value of the debt at the time it wasincurred. Felipe refused to pay him again, claiming that Gustavo is estopped from raising the issue of legal tender,having accepted the check in March, and that it was Gustavos negligence in not depositing the check immediatelythat caused the check to become stale.

    a) Can Gustavo now raise the issue that the cashiers check is not legal tender? (2%)b) Can Felipe validly refuse to pay Gustavo again? (2%)c) Can Felipe compel Gustavo to receive US$100 instead? (1%)

    XVIII.

    AB Corp. entered into a contract with XY Corp. whereby the former agreed to construct theresearch and laboratory facilities of the latter. Under the terms of the contract, AB Corp. agreedto complete the facility in 18 months, at the total contract price of P10 million. XY Corp. paid50% of the total contract price, the balance to be paid upon completion of the work. The work

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    started immediately, but AB Corp. later experienced work slippage because of labor unrest in hiscompany. AB Corps employees claimed that they are not being paid on time; hence, the workslowdown. As of the 17th month, work was only 45% completed. AB Corp. asked for extensionof time, claiming that its labor problems is a case of fortuitous event, but this was denied by XYCorp. When it became certain that the construction could not be finished on time, XY Corp. sent

    written notice canceling the contract, and requiring AB Corp. to immediately vacate thepremises.

    a) Can the labor unrest be considered a fortuitous event? (1%)b) Can XY Corp. unilaterally and immediately cancel the contract? (2%)c) Must AB Corp. return the 50% downpayment? (2%)

    XIX.

    Juliet offered to sell her house and lot, together with all the furniture and appliances therein, to

    Dehlma. Before agreeing to purchase the property, Dehlma went to the Register of Deeds toverify Juliets title. She discovered that while the property was registered in Juliets name underthe Land Registration Act, as amended by the Property Registration Decree, it was mortgaged toElaine to secure a debt of P80,000. Wanting to buy the property, Dehlma told Juliet to redeemthe property from Elaine, and gave her an advance payment to be used for purposes of releasingthe mortgage on the property. When the mortgage was released, Juliet executed a Deed ofAbsolute Sale over the property which was duly registered with the Registry of Deeds, and a newTCT was issued in Dehlmas name. Dehlma immediately took possession over the house and lotand the movables therein. Thereafter, Dehlma went to the Assessors Office to get a new taxdeclaration under her name. She was surprised to find out that the property was already declaredfor tax purposes in the name of XYZ Bank which had foreclosed the mortgage on the propertybefore it was sold to her. XYZ Bank was also the purchaser in the foreclosure sale of theproperty. At that time, the property was still unregistered but XYZ Bank registered the SheriffsDeed of Conveyance in the day book of the Register of Deeds under Act. 3344 and obtained atax declaration in its name.

    a) Was Dehlma a purchaser in good faith? (2%)b) Who as between Dehlma and XYZ Bank has a better right to the house and lot? (2%)c) Who owns the movables inside the house? (2%)

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    2008 Bar Examinations Taxation ExamQuestions

    In January 1970, Juan Gonzales bought one hectare of agricultural land in Laguna for P100,000.This property has a current fair market value of P10 million in view of the construction of aconcrete road traversing the property. Juan Gonzales agreed to exchange his agricultural lot in

    Laguna for a one-half hectare residential property located in Batangas, with a fair market valueof P10 million, owned by Alpha Corporation, a domestic corporation engaged in the purchaseand sale of real property. Alpha Corporation acquired the property in 2007 for P9 million.

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

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

    3. Is Alpha Corporation subject to income tax on the exchange of property? If so, what isthe tax base and rate? Explain. ( 3% )

    II

    Jose Cerna, Filipino citizen, married to Maria Cerna, died in a vehicular accident in NLEX onJuly 10, 2007. The spouses owned, among others, a 100-hectare agricultural land in Sta. Rosa,Laguna with current fair market value of P20 million, which was subject to matter of a JointVenture Agreement about to be implemented with Star Land Corporation ( SLC ), a well-knownreal estate development company. He bought the said real property for P2 million fifty years ago.On January 5,2008, the administrator of the estate and SLC jointly announced their big plans tostart conversion and development of the agricultural lands in Sta. Rosa, Laguna, into first-classresidential and commercial centers. As a result, the prices of real properties in the locality havedoubled. The administrator of the Estate of Jose Cernan filed the estate tax return on January 9,

    2008, by including in the gross estate the real property at P2 million. After 9 months, the BIRissued deficiency estate tax assessment, by valuing the real property at P40 million. A ) Is theBIR correct in valuing the real property at P40 million? Explain. ( 3% ) B ) If you disagree, whatis the correct value to used for estate tax purposes? Explain. ( 3% )

    III

    DEF Corporation is wholly owned subsidiary of DEF, Inc., California, USA. Starting December15, 2004, DEF Corporation paid annual royalties to DEF, Inc., for the use of the latter's software,for which the former, as with holding agent of the government, withheld and remitted to the BIRthe 15% final tax based on the gross royalty payments. The withholding tax return was filed and

    tax remitted to the BIR on January 10 of the following year. On April 10, 2007 DEF Corporationfiled written claim for tax credit with the BIR, arising from erroneously paid income taxescovering the years 2004 and 2005. The following day, DEF Corporation filed a petition forreview with the court of Tax Appeals involving the tax credit claim for 2004 and 2005.

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

    2. Can the BIR lawyer raise the defense that DEF Corporation is not the proper party to file

    http://www.batasnatin.com/component/mailto/?tmpl=component&link=1abdcd17777e324358efebd5d9a7d2e36960d74b
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    such claim for tax credit? Explain. ( 3% )

    IV

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

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

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

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

    V

    Maria Suerte, a Filipino citizen, purchased a lot in Makati City in 1980 at a price of P1 million.Said property has been leased to MAS Corporation, a domestic corporation engaged inmanufacturing paper products, owned 99% by Maria Suerte. In October 2007, EIP Corporation,a real estate developer, expressed its desire to buy the Makati property at its fair market valueP300 million, payable as follows : (a) P60 million down payment; and (b) balance, payableequally in twenty four (24) monthly consecutive installments. Upon the advice of a tax lawyer,Maria Suerte exchanged her Makati property for shares of stock of MAS Corporation. A BIRruling, confirming the tax-free exchange of property for shares of stock, was secured from theBIR National Office and a Certificate Authorizing Registration was issued by the Revenue

    District Officer (RDO) where the property was located. Subsequently, she sold her entire stockholdings in MAS Corporation to EIP Corporation for P300 million. In view of the tax advice,Maria Suerte paid only the capital gains tax of P29,895,000 ( P100,000 x 5% plus P298,900,00 x10% ), instead of the corporate income tax of P104,650,00 ( 35% on P299 million gain from saleof real property ). After evaluating the capital gains tax payment, the RDO wrote a letter toMaria Suerte, Slating that she commited tax evasion.

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

    VI

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

    Assunta Conjugal Jaime

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    Exclusive Exclusive

    Cash P10,000,000.00 P1,200,00.00

    Cars P2,000,000.00 500,000.00

    Land 5,000,000.00 2,000,000.00

    Residential House 4,000,000.00

    Mortgage Payable 2,500,000.00

    Funeral Expenses 300,000.00

    1. Is the Estate of Jaime Asuncion liable for estate tax? Explain. ( 4% )2. Is vanishing deduction applicable to the Estate of Assunta Asuncion? Explain ( 4% )

    VII

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

    1. What is an assessment notice? What are the requisites of a valid assessment? Explain (3% )

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

    The City of Manila enacted an ordinance, imposing a 5% tax on gross receipts on rentals ofspace in privately-owned public markets. BAT Corporation questioned the validity of theordinance, stating that the tax is an income tax, which cannot be imposed by the citygovernment.

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

    IX

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

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

    2. Are forfeiture proceedings of goods illegally imported criminal in nature? Explain ( 3% )X

    John McDonald, a U.S. Citizen residing in Makati City, bought shares of stock of a domesticcorporation whose shares are listed and traded in the Philippine Stock Exchange at the price ofP2 million Yesterday, he sold the shares of stock through his favorite Makati stockbroker at again of P200,000.

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

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

    XI

    Pedro Manalo, A Filipino citizen residing in Makati City, owns a vacation house and lot in SanFrancisco, California, U.S.A, which he acquired in 2000 for P15 million. On January 10, 2006 hesold said real property to Juan Mayaman, another Filipino citizen residing in Quezon City, forP20 million. On February 9, 2006 Manalo filed the capital gains tax return and paid P1.2 millionrepresenting 6% capital gain tax. Since Manalo did not derive any ordinary income, no incometax returnn was filed by him for 2006. After the tax audit conducted in 2007, the BIR officerassessed Manalo for deficiency income tax computed as follows: P5 million ( P20 million less P15 million ) x 35% = P1.75 million, without the capital gains tax paid being allowed as tax

    credit. Manalo consulted a real estate broker who said that the P1.2 million capital gains taxshould be credited from P1.75 million deficiency income tax.

    1. Is the BIR officer's tax assessment correct? Explain. ( 3% )2. If you were hired by Manalo as his tax consultant, what advice would you give him to

    protect his interest? Explain. ( 3% )

    XII

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

    association of unit owner in Greenhills Tower, San Juan City. To be able to reduce theassociation dues being collected from the unit owners, the Board of Directors of the corporationagreed to lease part of the ground floor of the condominium building to DEF Saving Bank forP120,000 a month or P1.44 million for the year, starting January 2007.

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

    2. Will the association be liable for value added tax in 2008 if it increases the rental to

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    P150,000 a month beginning January 2008? Explain. (3%)

    XIII

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

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

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

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

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

    Since MNO Corporation adopted fiscal year ending June 30 as its taxable year for income taxpurpose, it paid its 2% business tax for fiscal year ending June 30, 2007 based on gross dales of

    P15 million. However, the Quezon City Treasurer assessed the corporation for deficiencybusiness tax for 2007 based on gross sales of P25 million alleging that local business taxes shallbe computed based on calendar year.

    1. Is the position of the city treasurer tenable? Explain. (3%)2. May the deficiency business tax be paid in installments without surcharge and interest?

    Explain. (3%)

    XIV

    Spouses Jose San Pedro and Clara San Pedro, both Filipino citizens, are the owners of a

    residential house and lot in Quezon City. After the recent wedding of their son, Mario, to Maria,the spouses donated said real property to them. At the time of donation, the real property has afair market value of P2 million.

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

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

    XV

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

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

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

    NOTHING FOLLOWS.

    2008 Bar Examination Mercantile / CommercialLaw

    BAR EXAMINATION 2008

    MERCANTILE LAW

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

    INSTRUCTIONS

    This questionnaire consists of fourteen (19) numbers contained in nine (9)pages. Read each question very carefully. Answer legibly, clearly and

    concisely. Start each number on a separate page; an answer to a subquestionunder the same number may be written continuously on the same page and onthe immediately succeeding pages until completed. Do not repeat thequestion.

    You will be given credit for your knowledge of legal doctrine and for thequality of your legal reasoning. A mere Yes or No answer without anycorresponding discussion will not be given any credit.

    HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE

    GOOD LUCK!!!

    Signed DANTE O. TINGAChairperson

    http://www.batasnatin.com/component/mailto/?tmpl=component&link=497d9bc07a7fb80c6ff7be4ac603247e9f86124e
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    2008 Bar Examination Committee

    PLEASE CHECK THE NUMBER OF PAGES IN THIS SETWARNING: NOT FOR SALE OR UNAUTHORIZED USE

    MERCANTILE LAW

    I

    X corporation entered into a contract with PT Contruction Corp. for the latterto construct and build a sugar mill within six (6) months. They agreed that incase of delay, PT Construction Corp. will pay X Corporation P100,000 forevery day of delay. To ensure payment of the agreed amount of damages, PTConstruction Corp. secured from Atlantic Bank a confirmed and irrevocableletter of credit which was accepted by X Corporation in due time. One weekbefore the expiration of the six (6) month period, PT Construction Corp.requested for an extension of time to deliver claiming that the delay was dueto the fault of X Corporation. A controversy as to the cause of the delaywhich involved the workmanship of the building ensued. The controversyremained unresolved. Despite the controversy, X Corporation presented aclaim against Atlantic Bank by executing a draft against the letter of credit.

    1. Can Atlantic Bank refuse payment due to the unresolved controversy?Explain. (3%)

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

    II

    Tom Cruz obtained a loan of P 1 Million from XYZ Bank to finance hispurchase of 5,000 bags of fertilizer. He executed a trust receipt in favor ofXYZ Bank over the 5,000 bags of fertilizer. Tom Cruz withdrew the 5,000bags from the warehouse to be transported to Lucena City where his store waslocated. On the way, armed robbers took from Tom Cruz the 5,000 bags offertilizer. Tom Cruz now claims that his obligation to pay the loan to XYZBank is extinguished because the loss was not due to his fault. Is Tom Cruzcorrect? Explain. (4%)

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    III

    1. As a rule under the Negotiable Instruments Law, a subsequent partymay hold a prior party liable but not vice-versa. Give two (2)instances where a prior party may hold a subsequent party liable. (2%)

    2. How does the shelter principle embodied in the NegotiableInstruments Law operate to give the rights of a holder-in-due course toa holder who does not have the status of a holder-in-due course?Briefly explain. (2%)

    IV

    AB Corporation drew a check for payment to XY Bank. The check was givento an officer of AB Corporation who was instructed to deliver it to XY Bank.Instead, the officer, intending to defraud the Corporation, filled up the checkby making himself as the payee and delivered it to XY Bank for deposit to hispersonal account. AB Corporation come to know of the officers fraudulentact after he absconded. AB Corporation asked XY Bank to recredits itsamount. XY Bank refused.

    1. If you were the judge, what issues would you consider relevant toresolve the case? Explain (3%)

    2. How would you decide the case? Explain. (2%)V

    Pancho drew a check to Bong and Gerard jointly. Bong indorsed the checkand also forged Gerards endorsement. The payor bank paid the check andcharged Panchos account for the amount of the check. Gerard receivednothing from the payment.

    1. Pancho asked the payor bank to recredit his account. Should the bankcomply? Explain fully. (3%)

    2. Based on the facts, was Pancho as drawerdischarged on theinstrument? Why?(2%)

    VI

    On January 1, 2000, Antonio Rivera secured a life insurance from SOSInsurance Corp. for P1 Million with Gemma Rivera, his adopted daughter, asthe beneficiary. Antonio Rivera died on March 4, 2005 and in the policeinvestigation, it was ascertained that Gemma Rivera participated as anaccessory in the killing of Antonio Rivera. Can SOS Insurance Corp. avoid

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    liability by setting up as a defense the participation of Gemma Rivera in thekilling of Antonio Rivera? Discuss with reasons. (4%)

    VII

    Terrazas de Patio Verde, a condominium building, has a value of P50 Million.The owner insured the building against fire with three (3) insurancecompanies for the following amounts:

    Northern Insurance Corp. - P20 Million

    Southern Insurance Corp. - P30 Million

    Eastern Insurance Corp. - P50 Million

    1. Is the owners taking ofinsurance for the building with three (3)insurers valid? Discuss. (3%)

    2. The building was totally razed by fire. If the owner decides to claimfrom Eastern Insurance Corp. only P50 Million, will the claimprosper? Explain. (2%)

    VIII

    City Railways, Inc. (CRI) provides train services, for a fee, to commutersfrom Manila to Calamba, Laguna. Commuters are required to purchase ticketsand then proceed to designated loading ang unloading facilities to board thetrain. Ricardo Santos purchased a ticket for Calamba and entered the station.While waiting, he had an altercation with the security guard of CRI leading toa fistfight. Ricardo Santos fell on the railway just as a train was entering thestation. Ricardo Santos was run over by the train. He died.

    In the action for damages filed by the heirs of Ricardo Santos, CRI interposedlack of cause of action, contending that the mishap occurred before RicardoSantos boarded the train and that it was not guilty of negligence. Decide.(5%)

    IX

    On October 30, 2007, M/V Pacific, a Philippine registered vessel owned byCebu Shipping Company (CSC), sank on her voyage from Hong Kong toManila. Empire Assurance Company (Empire) is the insurer of the lostcargoes loaded on board the vessel which were consigned to DebenhamsCompany. After it indemnified Debenhams, Empire as subrogee filed an

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    action for damages against CSC.

    1. Assume that the vessel was seaworthy. Before departing, the vesselwas advised by the Japanese Meteorological Center that it was safe totravel to its destination. But while at sea, the vessel received a reportof a typhoon moving within its general path. To avoid the typhoon, thevessel changed its course. However, it was still at the fringe of thetyphoon when it was repeatedly hit by huge waves, foundered andeventually sank. The captain and the crew were saved except three (3)who perished. Is CSC liable to Empire? What principle of maritimelaw is applicable? Explain. (3%)

    2. Assume the vessel was not seaworthy as in fact its hull had leaked,causing flooding in the vessel. Will your answer be the same?Explain. (2%)

    3. Assume the facts in question (b). Can the heirs of the three (3) crewmembers who perished recover from CSC? Explain fully. (3%)

    X

    Nelson owned and controlled Sonnel Construction Company. Acting for thecompany, Nelson contracted the construction of a building. Without firstinstalling a protective net atop the sidewalks adjoining the construction site,the company proceeded with the construction work. One day a heavy piece oflumber fell from the building. It smashed a taxicab which at that time hadgone offroad and onto the sidewalk in order to avoid the traffic. The taxicabpassenger died as a result.

    1. Assume that the company had no more account and property in itsname. As counsel for the heirs of the victim, whom will you sue fordamages, and what theory will you adopt? (3%)

    2. If you were the counsel for Sonnel Construction, how would youdefend your client? What would be your theory? (2%)

    3. Could the heirs hold the taxicab owner and driver liable? Explain.(2%)

    XI

    1. Since February 8, 1935, the legislature has not passed even a singlelaw creating a private corporation. What provision of the Constitutionprecludes the passage of such a law? (3%)

    2. May the composition of the board of directors of the National PowerCorporation (NPC) be validly reduced to three (3)? explain your

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    answer fully. (2%)

    XII

    Pedro owns 70% of the subscribed capital stock of a company which owns anoffice building. Paolo and Juan own the remaining stock equally betweenthem. Paolo also owns a security agency, a janitorial company and a cateringbusiness. In behalf of the office building company, Paolo engaged hiscompanies to render their services to the office building. Are the servicecontracts valid? Explain. (4%)

    XIII

    Grand Gas Corporation, a publicity listed company, discover after extensivedrilling a rich deposit of natural gas along the coast of Antique. For five (5)months, the company did not disclose the discovery so that it could quitelyand cheaply acquire neighboring land and secure mining information to theSecurities and Exchange Commission, all the directors and key officer of thecompany bought shares went up. The directors and officer sold their shares athuge profits.

    1. What provision of the Securities Regulation Code (SRC) did theyviolate, if any? Explain. (4%)

    2. Assuming that the employees of the establishment handling theprinting work of Grand Gas Corporation saw the exploration reportswhich were mistakenly sent to their establishment together with othermaterials to be printed. They too bought shares in the company at lowprices and later sold them at huge profits. Will they be liable forviolation of the SRC? Why? (3%)

    XIV

    Ace Cruz subscribed to 100,000 shares of stock of JP DevelopmentCorporation, which has a par value of P1 per share. He paid P25,000 andpromised to pay the balance before December 31, 2008. JP DevelopmentCorporation declared a cash dividend on October 15, 2008, payable onDecember 1, 2008.

    1. For how many shares is Ace Cruz entitled to be paid cash dividends?Explain. (2%)

    2. On December 1, 2008, can Ace Cruz compel JP DevelopmentCorporation to issue to him the stock certificate corresponding to the

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    In 2008, Planet Films a Filipino movie producing company, commissioned DJChef Jean, a Filipino musician, to produce an original re-mix of Warm WarmHoney for use in one of its latest films, Astig!. DJ Chef Jean remixed WarmWarm Honey with salsa beat and interspersed as well a recital of a poeticstanza by John Blake, a 17th century Scottish poet. DJ Chef Jean died shortlyafter submitting the remixed Warm Warm Honey to Planet Films.

    Prior to the release of Astig!, Mocha Warm learns of the remixed WarmWarm Honey and demands that he be publicity identified as the author of theremixed song in all the CD covers and publicity releases of Planet Films.

    1. Who are the parties or entities entitled to be credited as author of theremixed Warm Warm Honey? Reason out your answer. (3%)

    2. Who are the particular parties or entities who exercise copyright overthe remixed Warm Warm Honey? Explain. (3%)

    XVII

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

    XVIII

    1. Can a distressed corporation file a petition for corporate rehabilitationafter the dismissal of its earlier petition for insolvency? Why? (2%)

    2. Can the corporation file a petition for rehabilitation first, and after it isdismissed file a petition for insolvency? Why? (2%)

    3. Explain the key phrase equality is equity in corporate rehabilitationproceedings. (2%)

    XIX

    Industry Bank, which has a net worth of P1 Billion, extended a loan toCelestial Properties Inc. amounting to P270 Million. The loan was secured bya mortgage over a vast commercial lot in the Fort Bonifacio Global City,

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    appraised at P350 Million. After audit, the Bangko Sentral ng Pilipinas gavenotice that the loan to Celestial Properties exceeded the single borrowerslimit of 25% of the banks net worth under a recent BSP Circular. In light ofother previous similar violations of the credit limit requirement, the BSPadvised Industry Bank to reduce the amount of the loan to Celestial Propertiesunder pain of severe sanctions. When Industry Bank informed CelestialProperties that it intended to reduce the loan by P50 Million, CelestialProperties countered that the bank should first release a part of the collateralworth P50 Million. Industry Bank rejected the counter-proposal, and refferedthe matter to you as counsel. How would you advise Industry Bank toproceed, with its best interest in mind? (5%)

    NOTHING FOLLOWS.

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    2009 BAR EXAMINATION QUESTION

    CIVIL LAW

    13 September 2009 8 A.M. - 12 NN.

    INSTRUCTIONS

    This questionnaire is in TWO (2) PARTS: Part I with ten (10) questions (numbered I to X),contained in five (5) pages; and Part II with ten (10) questions (numbered XI-XX), contained infive (5) pages, for a total number of ten (10) pages.

    Write your answers to Part I and Part II in the corresponding portions indicated in the booklet.

    Begin your answer to each numbered question on a separate page; an answer to a subquestionunder the same number may be written continuously on the same page and succeeding pagesuntil completed.

    Answer the questions directly and concisely. Do not repeat the questions. Write legibly.

    HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE.

    GOOD LUCK!

    ANTONIO EDUARDO B. NACHURA

    CHAIRPERSON2009 BAR EXAMINATIONS COMMITTEE

    PLEASE CHECK THAT THIS SET CONTAINS ELEVEN (11) PAGES (INCLUDING THISPAGE).

    WARNING: NOT FOR SALE OR UNAUTHORIZED USE

    PART I

    I

    TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false.Explain your answer in not more than two (2) sentences. (5%)

    [a] The doctrine of processual presumption allows the court of the forum to presume that the

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    foreign law applicable to the case is the same as the local or domestic law.

    [b] In reserva troncal, all reservatarios (reservees) inherit as a class and in equal shares regardlessof their proximity in degree to the prepositus.

    [c] An oral partnership is valid.

    [d] An oral promise of guaranty is valid and binding.

    [e] A dead child can be legitimated.

    II

    Dr. Lopez, a 70-year old widower, and his son Roberto both died in a fire that gutted their homewhile they were sleeping in their air-conditioned rooms. Robertos wife, Marilyn, and their twochildren were spared because they were in the province at the time. Dr. Lopez left an estateworth P20M and a life insurance policy in the amount of P1M with his three children --- one ofwhom is Roberto --- as beneficiaries.

    Marilyn is now claiming for herself and her children her husbands share in the estate left by Dr.Lopez, and her husbands share in the proceeds of Dr. Lopezs life insurance policy. Rule on thevalidity of Marilyns claims with reasons. (4%)

    III

    In December 2000, Michael and Anna, after obtaining a valid marriage license, went to theOffice of the Mayor of Urbano, Bulacan, to get married. The Mayor was not there, but theMayors secretary asked Michael and Anna and their witnesses to fill up and sign the required

    marriage contract forms. The secretary then told them to wait, and went out to look for theMayor who was attending a wedding in a neighboring municipality.

    When the secretary caught up with the Mayor at the wedding reception, she showed him themarriage contract forms and told him that the couple and their witnesses were waiting in hisoffice. The Mayor forthwith signed all the copies of the marriage contract, gave them to thesecretary who returned to the Mayors office. She then gave copies of the marriage contract tothe parties, and told Michael and Anna that they were already married. Thereafter, the couplelived together as husband and wife, and had three sons.

    [a] Is the marriage of Michael and Anna valid, voidable, or void? Explain your answer. (3%)

    [b] What is the status of the three children of Michael and Anna? Explain your answer. (2%)

    [c] What property regime governs the properties acquired by the couple? Explain. (2%)

    IV

    Harry married Wilma, a very wealthy woman. Barely five (5) years into the marriage, Wilma

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    fell in love with Joseph. Thus, Wilma went to a small country in Europe, became a naturalizedcitizen of that country, divorced Harry, and married Joseph. A year thereafter, Wilma andJoseph returned and established permanent residence in the Philippines.

    [a] Is the divorce obtained by Wilma from Harry recognized in the Philippines? Explain your

    answer. (3%)

    [b] If Harry hires you as his lawyer, what legal recourse would you advise him to take? Why?(2%)

    [c] Harry tells you that he has fallen in love with another woman, Elizabeth, and wants to marryher because, after all, Wilma is already married to Joseph. Can Harry legally marry Elizabeth?Explain. (2%)

    V

    Four children, namely: Alberto, Baldomero, Caridad, and Dioscoro, were born to the spousesConrado and Clarita de la Costa. The childrens birth certificates were duly signed by Conrado,showing them to be the couples legitimate children.

    Later, one Edilberto de la Cruz executed a notarial document acknowledging Alberto andBaldomero as his illegitimate children with Clarita. Edilberto died leaving substantial properties.In the settlement of his estate, Alberto and Baldomero intervened claiming shares as thedeceaseds illegitimate children. The legitimate family of Edilberto opposed the claim.

    Are Alberto and Baldomero entitled to share in the estate of Edilberto? Explain. (4%)

    VI

    On December 1, 2000, Dr. Juanito Fuentes executed a holographic will, wherein he gave nothingto his recognized illegitimate son, Jay. Dr. Fuentes left for the United States, passed the NewYork medical licensure examinations, resided therein, and became a naturalized Americancitizen. He died in New York in 2007. The laws of New York do not recognize holographicwills or compulsory heirs.

    [a] Can the holographic will of Dr. Fuentes be admitted to probate in the Philippines? Why orwhy not? (3%)

    [b] Assuming that the will is probated in the Philippines, can Jay validly insist that he be given

    his legitime? Why or why not? (3%)

    VII

    Ramon Mayaman died intestate, leaving a net estate of P10,000,000.00. Determine how mucheach heir will receive from the estate:

    [a] If Ramon is survived by his wife, three full-blood brothers, two half-brothers, and one

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    nephew (the son of a deceased full-blood brother)? Explain. (3%)

    [b] If Ramon is survived by his wife, a half-sister, and three nephews (sons of a deceased full-blood brother)? Explain. (3%)

    VIII

    Jude owned a building which he had leased to several tenants. Without informing his tenants,Jude sold the building to Ildefonso. Thereafter, the latter notified all the tenants that he is the newowner of the building. Ildefonso ordered the tenants to vacate the premises within thirty (30)days from notice because he had other plans for the building. The tenants refused to vacate,insisting that they will only do so when the term of their lease shall have expired. Is Ildefonsobound to respect the lease contracts between Jude and his tenants? Explain your answer. (3%)

    IX

    Before migrating to Canada in 1992, the spouses Teodoro and Anita entrusted all their legal

    papers and documents to their nephew, Atty. Tan. Taking advantage of the situation, Atty. Tanforged a deed of sale, making it appear that he had bought the couples property in Quezon City.In 2000, he succeeded in obtaining a TCT over the property in his name. Subsequently, Atty.Tan sold the same property to Luis, who built an auto repair shop on the property. In 2004, Luisregistered the deed of conveyance, and title over the property was transferred in his name.

    In 2006, the spouses Teodoro and Anita came to the Philippines for a visit and discovered whathad happened to their property. They immediately hire you as lawyer. What action or actionswill you institute in order to vindicate their rights? Explain fully. (4%)

    X

    Rommels private car, while being driven by the regular family driver, Amado, hits a pedestriancausing the latters death. Rommel is not in the car when the incident happened.

    [a] Is Rommel liable for damages to the heirs of the deceased? Explain. (2%)

    [b] Would your answer be the same if Rommel was in the car at the time of the accident?Explain. (2%)

    *** END OF PART I ***

    PART II

    XI

    TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false.Explain your answer in not more than two (2) sentences. (5%)

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    [a] A clause in an arbitration contract granting one of the parties the power to choose morearbitrators than the other renders the arbitration contract void.

    [b] If there is no marriage settlement, the salary of a spouse in an adulterous marriage belongsto the conjugal partnership of gains.

    [c] Acquisitive prescription of a negative easement runs from the time the owner of the dominantestate forbids, in a notarized document, the owner of the servient estate from executing an actwhich would be lawful without the easement.

    [d] The renunciation by a co-owner of his undivided share in the co-owned property in lieu of theperformance of his obligation to contribute to taxes and expenses for the preservation of theproperty constitutes dacion en pago.

    [e] A person can dispose of his corpse through an act inter vivos.

    XII

    Emmanuel and Margarita, American citizens and employees of the U.S. State Department, gotmarried in the African state of Kenya where sterility is a ground for annulment of marriage.Thereafter, the spouses were assigned to the U.S. Embassy in Manila. On the first year of thespouses tour of duty in the Philippines, Margarita filed an annulment case against Emmanuelbefore a Philippine court on the ground of her husbands sterility at the time of the celebration ofthe marriage.

    [a] Will the suit prosper? Explain your answer. (3%)

    [b] Assume Emmanuel and Margarita are both Filipinos. After their wedding in Kenya, theycome back and take up residence in the Philippines. Can their marriage be annulled on theground of Emmanuels sterility? Explain. (3%)

    XIII

    Rafael, a wealthy bachelor, filed a petition for the adoption of Dolly, a one-year old foundlingwho had a severe heart ailment. During the pendency of the adoption proceedings, Rafael died ofnatural causes. The Office of the Solicitor General files a motion to dismiss the petition on theground that the case can no longer proceed because of the petitioners death.

    [a] Should the case be dismissed? Explain. (2%)

    [b] Will your answer be the same if it was Dolly who died during the pendency of the adoptionproceedings? Explain. (2%)

    XIV

    Rodolfo, married to Sharon, had an illicit affair with his secretary, Nanette, a 19-year old girl,and begot a baby girl, Rona. Nanette sued Rodolfo for damages: actual, for hospital and other

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    medical expenses in delivering the child by caesarean section; moral, claiming that Rodolfopromised to marry her, representing that he was single when, in fact, he was not; and exemplary,to teach a lesson to like-minded Lotharios.

    [a] If you were the judge, would you award all the claims of Nanette? Explain. (3%)

    [b] Suppose Rodolfo later on acknowledges Rona and gives her regular support, can he compelher to use his surname? Why or why not? (2%)

    [c] When Rona reaches seven (7) years old, she tells Rodolfo that she prefers to live with him,because he is better off financially than Nanette. If Rodolfo files an action for the custody ofRona, alleging that he is Ronas choice as custodial parent, will the court grant Rodolfospetition? Why or why not? (2%)

    XV

    Sarah had a deposit in a savings account with Filipino Universal Bank in the amount of fivemillion pesos (P5,000,000.00). To buy a new car, she obtained a loan from the same bank in theamount of P1,200,000.00, payable in twelve monthly installments. Sarah issued in favor of thebank post-dated checks, each in the amount of P100,000.00, to cover the twelve monthlyinstallment payments. On the third, fourth and fifth months, the corresponding checks bounced.

    The bank then declared the whole obligation due, and proceeded to deduct the amount of onemillion pesos (P1,000,000.00) from Sarahs deposit after notice to her that this is a form ofcompensation allowed by law. Is the bank correct? Explain. (4%)

    XVI

    Marciano is the owner of a parcel of land through which a river runs out into the sea. The landhad been brought under the Torrens System, and is cultivated by Ulpiano and his family asfarmworkers therein. Over the years, the river has brought silt and sediment from its sources upin the mountains and forests so that gradually the land owned by Marciano increased in area bythree hectares. Ulpiano built three huts on this additional area, where he and his two marriedchildren live. On this same area, Ulpiano and his family planted peanuts, monggo beans andvegetables. Ulpiano also regularly paid taxes on the land, as shown by tax declarations, for overthirty years.

    When Marciano learned of the increase in the size of the land, he ordered Ulpiano to demolishthe huts, and demanded that he be paid his share in the proceeds of the harvest. Marciano claims

    that under the Civil Code, the alluvium belongs to him as a registered riparian owner to whoseland the accretion attaches, and that his right is enforceable against the whole world.

    [a] Is Marciano correct? Explain. (3%)

    [b] What rights, if any, does Ulpiano have against Marciano? Explain. (3%)

    XVII

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    Rosario obtained a loan of P100,000.00 from Jennifer, and pledged her diamond ring. Thecontract signed by the parties stipulated that if Rosario is unable to redeem the ring on due date,she will execute a document in favor of Jennifer providing that the ring shall automatically beconsidered full payment of the loan.

    [a] Is the contract valid? Explain. (3%)

    [b] Will your answer to [a] be the same if the contract stipulates that upon failure of Rosario toredeem the ring on due date, Jennifer may immediately sell the ring and appropriate the entireproceeds thereof for herself as full payment of the loan? Reasons. (3%)

    XVIII

    The Ifugao Arms is a condominium project in Baguio City. A strong earthquake occurred whichleft huge cracks in the outer walls of the building. As a result, a number of condominium unitswere rendered unfit for use. May Edwin, owner of one of the condominium units affected,legally sue for partition by sale of the whole project? Explain. (4%)

    XIX

    In 1972, Luciano de la Cruz sold to Chua Chung Chun, a Chinese citizen, a parcel of land inBinondo. Chua died in 1990, leaving behind his wife and three children, one of whom, Julian, isa naturalized Filipino citizen. Six years after Chuas death, the heirs executed an extrajudicialsettlement of estate, and the parcel of land was allocated to Julian. In 2007, Luciano filed suit torecover the land he sold to Chua, alleging that the sale was void because it contravened theConstitution which prohibits the sale of private lands to aliens. Julian moved to dismiss the suiton grounds of pari delicto, laches and acquisitive prescription. Decide the case with reasons.

    (4%)

    XX

    [a] If Ligaya, a Filipino citizen residing in the United States, files a petition for change of namebefore the District Court of New York, what law shall apply? Explain. (2%)

    [b] If Henry, an American citizen residing in the Philippines, files a petition for change of namebefore a Philippine court, what law shall apply? Explain. (2%)

    *** END OF PART II *** RETURN THIS QUESTIONNAIRE WITH YOUR BOOKLET

    2009 BAR EXAMINATION QUESTION

    TAXATION

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    13 September 2009 2 P.M.5 P.M.

    INSTRUCTIONS

    This questionnaire is in TWO (2) PARTS: Part I with ten (10) questions (numbered I to X),contained in six (6) pages; and Part II with ten (10) questions (numbered XI-XX), contained infive (5) pages, for a total number of eleven (11) pages.

    Write your answers to Part I and Part II in the corresponding portions indicated in the booklet.

    Begin your answer to each numbered question on a separate page; an answer to a subquestionunder the same number may be written continuously on the same page and succeeding pagesuntil completed.

    Answer the questions directly and concisely. Do not repeat the questions. Write legibly.

    HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE.

    GOOD LUCK!

    ANTONIO EDUARDO B. NACHURA

    CHAIRPERSON2009 BAR EXAMINATIONS COMMITTEE

    PLEASE CHECK THAT THIS SET CONTAINS TWELVE (12) PAGES (INCLUDING THISPAGE).

    WARNING: NOT FOR SALE OR UNAUTHORIZED USE

    PART I

    I

    TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false.Explain your answer in not more than two (2) sentences. (5%)

    [a] A law that allows taxes to be paid either in cash or in kind is valid.

    [b] When the financial position of the taxpayer demonstrates a clear inability to pay the tax, theCommissioner of Internal Revenue may validly compromise the tax liability.

    [c] The doctrine of equitable recoupment allows a taxpayer whose claim for refund hasprescribed to offset tax liabilities with his claim of overpayment.

    [d] A law imposing a tax on income of religious institutions derived from the sale of religious

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    articles is valid.

    [e] A false return and a fraudulent return are one and the same.

    II

    Enumerate the four (4) inherent limitations on taxation. Explain each item briefly. (4%)

    III

    Melissa inherited from her father a 300-square-meter lot. At the time of her fathers death onMarch 14, 1995, the property was valued at P720,000.00. On February 28, 1996, to defray thecost of the medical expenses of her sick son, she sold the lot forP600,000.00, on cash basis. The prevailing market value of the property at the time of the salewas P3,000.00 per square meter.

    [a] Is Melissa liable to pay capital gains tax on the transaction? If so, how much and why? If not,

    why not? (4%)

    [b] Is Melissa liable to pay Value Added Tax (VAT) on the sale of the property? If so, howmuch and why? If not, why not? (4%)

    IV

    International Technologies, Inc. (ITI) filed a claim for refund for unutilized input VAT with theCourt of Tax Appeals (CTA). In the course of the trial, ITI engaged the services of anindependent Certified Public Accountant (CPA) who examined the voluminous invoices andreceipts of ITI. ITI offered in evidence only the summary prepared by the CPA, without the

    invoices and the receipts, and then submitted the case for decision.

    Can the CTA grant ITIs claim for refund based only on the CPAs summary? Explain. (4%)

    V

    Jessie brought into the Philippines a foreign-made luxury car, and paid less than the actual taxesand duties due. Due to the discrepancy, the Bureau of Customs instituted seizure proceedingsand issued a warrant of seizure and detention. The car, then parked inside a pay parking garage,was seized and brought by government agents to a government impounding facility. TheCollector ofCustoms denied Jessies request for the withdrawal of the warrant.

    Aggrieved, Jessie filed against the Collector a criminal complaint for usurpation of judicialfunctions on the ground that only a judge may issue a warrant of search and seizure.

    [a] Resolve with reasons Jessies criminal complaint. (4%)

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    [b] Would your answer be the same if the luxury car was seized while parked inside the garageof Jessies residence? Why or why not? (4%)

    VI

    The Sangguniang Bayan of the Municipality of Sampaloc, Quezon, passed an ordinanceimposing a storage fee of ten centavos (P0.10) for every 100 kilos of copra deposited in anybodega within the Municipalitys jurisdiction. The Metropolitan Manufacturing Corporation(MMC), with principal office in Makati, is engaged in the manufacture of soap, edible oil,margarine, and other coconut oil-based products. It has a warehouse in Sampaloc, Quezon, usedas storage space for the copra purchased in Sampaloc and nearby towns before the same isshipped to Makati. MMC goes to court to challenge the validity of the ordinance, demanding therefund of the storage fees it paid under protest.

    Is the ordinance valid? Explain your answer. (4%)

    VII

    Kenya International Airlines (KIA) is a foreign corporation, organized under the laws of Kenya.It is not licensed to do business in the Philippines. Its commercial airplanes do not operate withinPhilippine territory, or service passengers embarking from Philippine airports. The firm isrepresented in the Philippines by its general agent, Philippine Airlines (PAL), a Philippinecorporation.

    KIA sells airplane tickets through PAL, and these tickets are serviced by KIA airplanes outsidethe Philippines. The total sales of airline tickets transacted by PAL for KIA in 1997 amounted toP2,968,156.00. The Commissioner of Internal Revenue assessed KIA deficiency income taxes atthe rate of 35% on its taxable income, finding that KIAs airline ticket sales constituted income

    derived from sources within the Philippines.

    KIA filed a protest on the ground that the P2,968,156.00 should be considered as income derivedexclusively from sources outside the Philippines since KIA only serviced passengers outsidePhilippine territory.

    Is the position of KIA tenable? Reasons. (4%)

    VIII

    The City of Manila enacted Ordinance No. 55-66 which imposes a municipal occupation tax on

    persons practicing various professions in the city. Among those subjected to the occupation taxwere lawyers. Atty. Mariano Batas, who has a law office in Manila, pays the ordinance-imposedoccupation tax under protest. He goes to court to assail the validity of the ordinance for beingdiscriminatory. Decide with reasons. (3%)

    IX

    Republic Power Corporation (RPC) is a government-owned and controlled corporation engaged

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    in the supply, generation and transmission of electric power. In 2005, in order to provideelectricity to Southern Tagalog provinces, RPC entered into an agreement with Jethro EnergyCorporation (JEC), for the lease of JECs power barges which shall be berthed at the port ofBatangas City. The contract provides that JEC shall own the power barges and the fixtures,fittings, machinery, and equipment therein, all of which JEC shall supply at its own cost, and that

    JEC shall operate, manage and maintain the power barges for the purpose of converting the fuelof RPC into electricity. The contract also stipulates that all real estate taxes and assessments,rates and other charges, in respect of the power barges, shall be for the account of RPC.

    In 2007, JEC received an assessment of real property taxes on the power barges from theAssessor of Batangas City. JEC sought reconsideration of the assessment on the ground that thepower barges are exempt from real estate taxes under Section 234 [c] of R.A. 7160 as they areactually, directly and exclusively used by RPC, a government-owned and controlledcorporation. Furthermore, even assuming that the power barges are subject to real property tax,RPC should be held liable therefor, in accordance with the terms of the lease agreement.

    Is the contention of JEC correct? Explain your answer. (4%)

    X

    ABCD Corporation (ABCD) is a domestic corporation with individual and corporateshareholders who are residents of the United States. For the 2nd quarter of 1983, these U.S.-based individual and corporate stockholders received cash dividends from the corporation. Thecorresponding withholding tax on dividend income --- 30% for individual and 35% for corporatenon-resident stockholders ---was deducted at source and remitted to the BIR.

    On May 15, 1984, ABCD filed with the Commissioner of Internal Revenue a formal claim forrefund, alleging that under the RP-US Tax Treaty, the deduction withheld at source as tax ondividends earned was fixed at 25% of said income. Thus, ABCD asserted that it overpaid thewithholding tax due on the cash dividends given to its non-resident stockholders in the U.S. TheCommissioner denied the claim.

    On January 17, 1985, ABCD filed a petition with the Court of Tax Appeals (CTA) reiterating itsdemand for refund.

    [a] Does ABCD Corporation have the legal personality to file the refund on behalf of its non-resident stockholders? Why or why not? (3%)

    [b] Is the contention of ABCD Corporation correct? Why or why not? (3%)

    *** END OF PART I ***

    PART II

    XI

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    Raffy and Wena, husband and wife, are both employed by XXX Corporation. After office hours,they jointly manage a coffee shop at the ground floor of their house. The coffee shop isregistered in the name of both spouses. Which of the following is the correct way to preparetheir income tax return? Write the letter only. DO NOT EXPLAIN YOUR ANSWER. (2%)

    [a] Raffy will declare as his income the salaries of both spouses, while Wena will declare theincome from the coffee shop.

    [b] Wena will declare the combined compensation income of the spouses, and Raffy will declarethe income from the coffee shop.

    [c] All the income will be declared by Raffy alone, because only one consolidated return isrequired to be filed by the spouses.

    [d] Raffy will declare his own compensation income and Wena will declare hers. The income

    from the coffee shop shall be equally divided between them. Each spouse shall be taxedseparately on their corresponding taxable income to be covered by one consolidated return forthe spouses.

    [e] Raffy will declare his own compensation income and Wena will declare hers. The incomefrom the coffee shop shall be equally divided between them. Raffy will file one income taxreturn to cover all the income of both spouses, and the tax is computed on the aggregate taxableincome of the spouses.

    XII

    YYY Corporation engaged the services of the Manananggol Law Firm in 2006 to defend thecorporations title over a property used in the business. For the legal services rendered in 2007,the law firm billed the corporation only in 2008. The corporation duly paid.

    YYY Corporation claimed this expense as a deduction from gross income in its 2008 return,because the exact amount of the expense was determined only in 2008. Is YYYs claim ofdeduction proper? Reasons. (4%)

    XIII

    In 1999, Xavier purchased from his friend, Yuri, a painting for P500,000.00. The fair marketvalue (FMV) of the painting at the time of the purchase was P1-million. Yuri paid all the

    corresponding taxes on the transaction. In 2001, Xavier died. In his last will and testament,Xavier bequeathed the painting, already worth P1.5-million, to his only son, Zandro. The willalso granted Zandro the power to appoint his wife, Wilma, as successor to the painting in theevent of Zandros death. Zandro died in 2007, and Wilma succeeded to the property.

    [a] Should the painting be included in the gross estate of Xavier in 2001 and thus, be subject toestate tax? Explain. (3%)

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    [b] Should the painting be included in the gross estate of Zandro in 2007 and thus, be subject toestate tax? Explain. (3%)

    [c] May a vanishing deduction be allowed in either or both of the estates? Explain. (3%)

    XIV

    Emiliano Paupahan is engaged in the business of leasing out several residential apartment unitshe owns. The monthly rental for each unit ranges from P8,000.00 to P10,000.00. His gross rentalincome for one year is P1,650,000.00. He consults you on whether it is necessary for him toregister as a VAT taxpayer. What legal advice will you give him, and why? (4%)

    XV

    Miguel, a citizen and resident of Mexico, donated US$1,000.00 worth of stocks in BarackMotors Corporation, a Mexican company, to his legitimate son, Miguelito, who is residing in thePhilippines and about to be married to a Filipino girlfriend. Mexico does not impose any transfer

    tax of whatever nature on all gratuitous transfers of property.

    [a] Is Miguel entitled to claim a dowry exclusion? Why or why not? (3%)

    [b] Is Miguel entitled to the rule of reciprocity in order to be exempt from the Philippine donorstax? Why or why not? (3%)

    XVI

    Ernesto, a Filipino citizen and a practicing lawyer, filed his income tax return for 2007 claimingoptional standard deductions. Realizing that he has enough documents to substantiate his

    profession-connected expenses, he now plans to file an amended income tax return for 2007, inorder to claim itemized deductions, since no audit has been commenced by the BIR on the returnhe previously filed. Will Ernesto be allowed to amend his return? Why or why not? (4%)

    XVII

    A final assessment notice was issued by the BIR on June 13, 2000, and received by the taxpayeron June 15, 2000. The taxpayer protested the assessment on July 31, 2000. The protest wasinitially given due course, but was eventually denied by the Commissioner of Internal Revenuein a decision dated June 15, 2005. The taxpayer then filed a petition for review with the Court ofTax Appeals (CTA), but the CTA dismissed the same.

    [a] Is the CTA correct in dismissing the petition for review? Explain your answer. (4%)

    [b] Assume that the CTAs decision dismissing the petition for review has become final. Maythe Commissioner legally enforce collection of the delinquent tax? Explain. (4%)

    XVIII

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    A taxpayer received an assessment notice from the BIR on February 3, 2009. The following day,he filed a protest, in the form of a request for reinvestigation, against the assessment andsubmitted all relevant documents in support of the protest. On September 11, 2009, the taxpayer,apprehensive because he had not yet received notice of a decision by the Commissioner on his

    protest, sought your advice.

    What remedy or remedies are available to the taxpayer? Explain. (4%)

    XIX

    Johnny transferred a valuable 10-door commercial apartment to a designated trustee, Miriam,naming in the trust instrument Santino, Johnnys 10-year old son, as the sole beneficiary. Thetrustee is instructed to distribute the yearly rentals amounting to P720,000.00. The trusteeconsults you if she has to pay the annual income tax on the rentals received from the commercialapartment.

    [a] What advice will you give the trustee? Explain. (3%)

    [b] Will your advice be the same if the trustee is directed to accumulate the rental income anddistribute the same only when the beneficiary reaches the age of majority? Why or why not?(3%)

    XX

    Masarap Food Corporation (MFC) incurred substantial advertising expenses in order to protectits brand franchise for one of its line products. In its income tax return, MFC included theadvertising expense as deduction from gross income, claiming it as an ordinary business

    expense. Is MFC correct? Explain. (3%)

    *** END OF PART II ***

    RETURN THIS QUESTIONNAIRE WITH YOUR BOOKLET

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    2009 BAR EXAMINATION QUESTION

    MERCANTILE LAW

    20 September 2009 8 A.M. - 12 NN.

    INSTRUCTIONS

    This questionnaire is in TWO (2) PARTS: Part I with ten (10) questions (numbered I to X),contained in six (6) pages; and Part II with ten (10) questions (numbered XI-XX), contained inseven (7) pages, for a total number of thirteen (13) pages.

    Write your answers to Part I and Part II in the corresponding portions indicated in the booklet.

    Begin your answer to each numbered question on a separate page; an answer to a subquestionunder the same number may be written continuously on the same page and succeeding pagesuntil completed.

    Answer the questions directly and concisely. Do not repeat the questions. Write legibly.

    HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE.

    GOOD LUCK!

    ANTONIO EDUARDO B. NACHURACHAIRPERSON

    2009 BAR EXAMINATIONS COMMITTEE

    PLEASE CHECK THAT THIS SET CONTAINS FOURTEEN (14) PAGES (INCLUDINGTHIS PAGE).

    WARNING: NOT FOR SALE OR UNAUTHORIZED USE

    PART I

    I

    TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false.Explain your answer in not more than two (2) sentences. (5%)

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    [a] The Denicola Test in intellectual property law states that if design elements of an articlereflect a merger of aesthetic and functional considerations, the artistic aspects of the work cannotbe conceptually separable from the utilitarian aspects; thus, the article cannot be copyrighted.

    [b] If the Ombudsman is convinced that there is a violation of law after investigating a complaint

    alleging illicit bank deposits of a public officer, the Ombudsman may order the bank concernedto allow in camera inspection of bank records and documents.[c] Even if the seller and the buyer in a sale in bulk violate the Bulk Sales Law, the sale wouldstill be valid.

    [d] Dividends on shares of stocks can only be declared out of unrestricted retained earnings ofthe corporation.

    [e] A bank under receivership can still grant new loans and accept new deposits.

    II

    Atlantis Realty Corporation (ARC), a local firm engaged in real estate development, plans to sellone of its prime assets --- a three-hectare land valued at about P100-million. For this purpose, theboard of directors of ARC unanimously passed a resolution approving the sale of the property forP75-million to Shangrila Real Estate Ventures (SREV), a rival realty firm. The resolution alsocalled for a special stockholders meeting at which the proposed sale would be up for ratification.

    Atty. Edric, a stockholder who owns only one (1) share in ARC, wants to stop the sale. He thencommences a derivative suit for and in behalf of the corporation, to enjoin the board of directorsand the stockholders from approving the sale.

    [a] Can Atty. Edric, who owns only one (1) share in the company, initiate a derivative suit? Whyor why not? (2%)

    [b] If such a suit is commenced, would it constitute an intra-corporate dispute? If so, why andwhere would such a suit be filed? If not, why not? (2%)

    [c] Will the suit prosper? Why or why not? (3%)

    III

    Armando, a resident of Manila, borrowed P3-million from Bernardo, offering as security his 500shares of stock worth P1.5million in Xerxes Corporation, and his 2007 BMW sedan, valued at

    P2-million. The mortgage on the shares of stock was registered in the Office of the Register ofDeeds of Makati City where Xerxes Corporation has its principal office. The mortgage on thecar was registered in the Office of the Register of Deeds of Manila. Armando executed a singleAffidavit of Good Faith, covering both mortgages.

    Armando defaulted on the payment of his obligation; thus, Bernardo foreclosed on the twochattel mortgages. Armando filed suit to nullify the foreclosure and the mortgages, raising thefollowing issues:

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    [a] The execution of only one Affidavit of Good Faith for both mortgages invalidated the twomortgages; (2%) and

    [b] The mortgage on the shares of stocks should have been registered in the Office of theRegister of Deeds of Manila where he resides, as well as in the stock and transfer book of Xerxes

    Corporation. (3%)

    Rule on the foregoing issues with reasons.

    [c] Assume that Bernardo extrajudicially foreclosed on the mortgages, and both the car and theshares of stock were sold at public auction. If the proceeds from such public sale should be P1-million short of Armandos total obligation, can Bernardo recover the deficiency? Why or whynot? (2%)

    IV

    Antarctica Life Assurance Corporation (ALAC) publicly offered a specially designed insurancepolicy covering persons between the ages of 50 to 75 who may be afflicted with serious anddebilitating illnesses. Quirico applied for insurance coverage, stating that he was already 80years old. Nonetheless, ALAC approved his application.

    Quirico then requested ALAC for the issuance of a cover note while he was trying to raise fundsto pay the insurance premium. ALAC granted the request. Ten days after he received the covernote, Quirico had a heart seizure and had to be hospitalized. He then filed a claim on the policy.

    [a] Can ALAC validly deny the claim on the ground that the insurance coverage, as publiclyoffered, was available only to persons 50 to 75 years of age? Why or why not? (2%)

    [b] Did ALACs issuance of a cover note result in the perfection of an insurance contractbetween Quirico and ALAC? Explain. (3%)

    V

    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 outpromotional text messages to all the residents in the subdivision. Cecilios family members didas instructed, and succeeded in reaching, through text messages, more than 80% of the residentsin the subdivision.

    Is Cecilio habitually engaged in commerce even if the grocery store has yet to be established?Explain your answer. (3%)

    VI

    Lorenzo drew a bill of exchange in the amount of P100,000.00 payable to Barbara or order, withhis wife, Diana, as drawee. At the time the bill was drawn, Diana was unaware that Barbara isLorenzos paramour.

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    Barbara then negotiated the bill to her sister, Elena, who paid for it for value, and who did notknow who Lorenzo was. On due date, Elena presented the bill to Diana for payment, but thelatter promptly dishonored the instrument because, by then, Diana had already learned of herhusbands dalliance.

    [a] Was the bill lawfully dishonored by Diana? Explain. (3%)

    [b] Does the illicit cause or consideration adversely affect the negotiability of the bill? Explain.(3%)

    VII

    Global Transport Services, Inc. (GTSI) operates a fleet of cargo vessels plying interislandroutes. One of its vessels, MV Dona Juana, left the port of Manila for Cebu laden with, amongother goods, 10,000 television sets consigned to Romualdo, a TV retailer in Cebu.When the vessel was about ten nautical miles away from Manila, the ship captain heard on theradio that a typhoon which, as announced by PAG-ASA, was on its way out of the country, hadsuddenly veered back into Philippine territory. The captain realized that MV Dona Juana wouldtraverse the storms path, but decided to proceed with the voyage. True enough, the vessel sailedinto the storm. The captain ordered the jettison of the 10,000 television sets, along with someother cargo, in order to lighten the vessel and make it easier to steer the vessel out of the path ofthe typhoon. Eventually, the vessel, with its crew intact, arrived safely in Cebu.

    [a] Will you characterize the jettison of Romualdos TV sets as an average? If so, what kind ofan average, and why? If not, why not? (3%)

    [b] Against whom does Romualdo have a cause of action for indemnity of his lost TV sets?

    Explain. (3%)

    VIII

    Maharlikang Pilipino Banking Corporation (MPBC) operates several branches of MaharlikangPilipino Rural Bank in Eastern Visayas. Almost all the branch managers are close relatives of themembers of the Board of Directors of the corporation. Many undeserving relatives of the branchmanagers were granted loans. In time, the branches could not settle their obligations todepositors and creditors.

    Receiving reports of these irregularities, the Supervising and Examining Department (SED) of

    the Monetary Board prepared a detailed report (SED Report) specifying the facts and thechronology of events relative to the problems that beset MPBC rural bank branches. The reportconcluded that the bank branches were unable to pay their liabilities as they fell due, and couldnot possibly continue in business without incurring substantial losses to its depositors andcreditors.

    [a] May the Monetary Board order the closure of the MPBC rural banks relying only on the SEDReport, without need of an examination? Explain. (3%)

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    [b] If MPBC hires you as lawyer because the Monetary Board has forbidden it from carrying onits business due to its imminent insolvency, what action will you institute to question theMonetary Boards order? Explain. (3%)

    IX

    When is there an ultra vires act on the part of [a] the corporation; [b] the board of directors; and[c] the corporate officers. (3%)

    X

    What are the so-called exempt securities under the Securities Regulation Code? (2%)

    *** END OF PART I ***

    PART II

    XI

    TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false.Explain your answer in not more than two (2) sentences. (5%)

    [a] A loan agreement which provides that the debtor shall pay interest at the rate determined bythe banks branch manager violates the disclosure requirement of the Truth in Lending Act.

    [b] Under the Warehouse Receipts Law, a warehouseman loses his lien upon the goods when he

    surrenders possession thereof.

    [c] The Howey Test states that there is an investment contract when a person invests money in acommon enterprise and is l