COMMERCIAL (75.

5/100) – WE NEED TO PUSH THIS TO 80% BUT GOOD

ENOUGH!

1. While vacationing in Boracay, Valentino surreptitiously took photographs of his girlfriend

Monaliza in her skimpy bikini. Two weeks later, her photographs appeared in the Internet and in
a national celebrity magazine. Monaliza found out that Valentino had sold the photographs to the
magazine and, adding insult to injury, uploaded them to his personal blog on the Internet.

a. Monaliza filed a complaint against Valentino for damages based on, among other
grounds, violation of her intellectual property rights. Does she have any cause of action?
Explain. (2.5%)

Yes, Monaliza has a valid cause of action for damages not for violation of her
intellectual property rights but for violation of her rights to privacy.

Under the Data Privacy Act, pictures, photographs and other personal and sensitive
information that are shared to others without the consent of the person is a violation
of the data privacy act. Further, under the Intellectual Property Law, photographs
are considered copyrightable works from the moment of its creation.

Here, Monaliza’s photographs wearing a skimpy bikini that was taken by Valentino
and sold it to magazine without her consent is a violation data privacy act not of her
intellectual property rights. Also, copyright infringement will be filed not by the
subject of the photograph but from the creator.

Hence, considering that Monaliza’s privacy was violated, the filing of complaint
against Valentino for damages is proper.

COMMENT:

1. Your answer is correct, but we need to be precise with the legal basis. You should have
quoted “Unauthorized Disclosure” of personal information under the Data Privacy Act.
That is the provision that was violated by Valentino.

2. We need to clean up the application part of our answer. We must make it concise and
easy to read. We must also make sure that our grammar is correct.

SAMPLE ANSWER:

Yes, Monaliza has a valid cause of action for damages, not for violation of intellectual
property rights, but for violation of her right to privacy.
Under the Data Privacy Act, any personal information controller or personal information
processor or any of its officials, employees or agents, who discloses to a third party
personal information, without the consent of the data subject, shall he subject to
imprisonment. Further, a personal information is an information whether recorded in a
material form or not, from which the identity of an individual is apparent or can be
reasonably and directly ascertained by the entity holding the information, or when put
together with other information would directly and certainly identify an individual.
Further, under the Intellectual Property Law, photographs are considered copyrightable
works from the moment of its creation.

Here, Valentino’s act of photographing Monaliza wearing a skimpy bikini and selling the
photographs to magazine publications, without her consent is a violation data privacy act,
but not of the intellectual property law. Hence, considering that Monaliza’s privacy was
violated, the filing of complaint against Valentino for damages is proper.

b. Valentino’s friend Francesco stole the photographs and duplicated them and sold them to a
magazine publication. Valentino sued Francesco for infringement and damages. Does Valentino
have any cause of action? Explain. (2.5%)

Yes, Valentino have a cause of action for infringement and damages.

Under the Intellectual Property Law, photographs are considered copyrightable works
from the moment of its creation.

Here, Valentino who took the photographs were stolen by his friend Francesco and
duplicated them and sold to a magazine publication.

Thus, being the creator of the photographs, he has a right cause of action for infringement
and damages.

COMMENT:

1. This needs a BETTER application.

2. Grammar must be corrected.

SAMPLE ANSWER:

Yes, Valentino has a cause of action for infringement and damages.

Under the Intellectual Property Law, artistic creations, such as photographs, are
considered copyrightable works from the moment of its creation. Further, an owner of the
copyright has the exclusive right to carry out, authorize, or prevent the reproduction of the
work or substantial portion of the work.

Here, Valentino was the copyright owner of the photographs that he captured. However,
these were stolen, duplicated, and sold by Francisco without his consent. Thus, being the
creator of the photographs, he has a right cause of action for infringement and damages.

SCORE:

4/5

2. On September 25, 2013, Danny Marcial (Danny) procured an insurance on his life with a face
value of P5,000,000.00 from RN Insurance Company (RN), with his wife Tina Marcial(Tina) as
sole beneficiary. On the same day, Danny issued an undated check to RN for the full amount of
the premium. On October 1, 2013, RN issued the policy covering Danny’s life insurance. On
October 5, 2013, Danny met a tragic accident and died. Tina claimed the insurance benefit, but
RN was quick to deny the claim because at the time of Danny’s death, the check was not yet
encashed and therefore the premium remained unpaid. Is RN correct? Will your answer be the
same if the check is dated October 15, 2013? (5%)

a. Yes, RN’s contention is not correct.

Under the insurance law, payment of the premium will give rise to the enforcement of the
contract of insurance against the insurer. In addition, case law dictates that even if the
check had not been encashed it will retroact from the time the check was issued.

Here, Danny issued an undated check to RN for the full amount of the premium on
September 25, 2013 after which RN issued the insurance policy on Danny’s life insurance
of October 1, 2013 and Danny died on October 5, 2013. So, from the issuance of the check
on September 25, 2013, the contract of insurance is enforceable against the insurer RN.

Thus, RN’s contention is untenable.

b. If the check is dated October 15, 2013, RN’s contention is correct.

Under the insurance law, payment of the premium will give rise to the enforcement of the
contract of insurance against the insurer. In addition, case law dictates that even if the
check had not been encashed it will retroact from the time the check was issued.
Here, Danny issued the check on October 15, 2013, however, Danny met an accident and
died on October 5, 2013. Thus, the contract of insurance is enforceable against the insurer
RN only in October 15, 2013.

Thus, RN’s contention is untenable.

COMMENT:

Good answers!

SCORE:
5/5

3. Sid used to be the majority stockholder and President of Excellent Corporation (Excellent).
When Meridian Co., Inc. (Meridian), a local conglomerate, took over control and ownership of
Excellent, it brought along its team of officers. Sid thus became a minority stockholder and a
minority member of the Board of Directors. Excellent, being the leading beverage manufacturer
in the country, became the monopoly when Meridian's own beverage business was merged with
Excellent's, thereby making Excellent virtually the only beverage manufacturer in the country.
Left out and ignored by the management, Sid became a fiscalizer of sorts, questioning during the
Board meetings the direction being pursued by Excellent's officers.

Ultimately, Sid demanded the inspection of the books and other corporate records of Excellent.
The management refused to comply, saying that his right as a minority stockholder has been
much reduced.

State under what conditions may Sid properly assert his right to inspect the books and other
corporate records of Excellent. Explain your answer. (5%)

Sid being a minority stockholder has the right to inspect the books and other corporate
records of Excellent.

Under the Revised Corporation Code provides that a minority stockholder has the right to
inspect the books and other corporate records.

Here, Sid was a minority stockholder and as such, he can assert his right to inspect the
books and other corporate records of Excellent as being provided for under the Revised
Corporation Code.

Thus, Sid as minority stockholder can still assert his rights.

COMMENT:

1. “Under the Revised Corporation Code provides” is grammatically incorrect.

Remove the word “provides.”
2. Good answer!

SCORE:

5/5

4. CCC Car, Inc. obtained a loan from BBB Bank, which fund was used to import ten (10) units
of Mercedes Benz S class vehicles. Upon arrival of the vehicles and before release of said
vehicles to CCC Car, Inc., X and Y, the President and Treasurer, respectively, of CCC Car, Inc.
signed the Trust Receipt to cover the value of the ten (10) units of Mercedes Benz S class
vehicles after which, the vehicles were all delivered to the Car display room of CCC Car, Inc.
Sale of the vehicles were slow, and it took a month to dispose of the ten (10) units. CCC Car,
Inc. wanted to be in business and to save on various documentations required by the bank,
decided that instead of turning over the proceeds of the sales, CCC Car, Inc. used the proceeds to
buy another ten (10) units of BMW 3 series.

a. Is the action of CCC Car, Inc. legally justified? Explain your answer. (2.5%)

Yes, the action of CCC Car, Inc is legally justified.

Under the Revised Corporation Code, one of the general powers of the corporation
is the right to purchase which are reasonably and necessary in the lawful business of
the corporation.

Here, although the proceeds of the sales were not turned over by CCC Car, Inc, the
usage of the proceeds are reasonably and necessary in achieving the primary
purpose of the business of the corporation.

Thus, the action of CCC Car, Inc was legally justified.

COMMENT:

GOODS

b. Will the corporate officers of CCC Car, Inc. be held liable under the circumstances?
Explain your answer. (2.5%)

No, the corporate officers of CCC Car, Inc. will not be held liable.
 Case law provides that a corporation has a separate and distinct legal personality
from the stockholders and officers of the corporation.

Here, CCC Car, Inc. did not turn-over the proceeds of the sales to the company or
the officers of the corporation and his actions are separate and distinct from that of
the officers.

Thus, the corporate officers of CCC Car, Inc. cannot be held liable.

COMMENT:

GOODS

SCORE:

5/5

5. Stable Insurance Co. (SIC) and St. Peter Manufacturing Co. (SPMC) have had a long-standing
insurance relationship with each other; SPMC secures the comprehensive fire insurance on its
plant and facilities from SIC. The standing business practice between them has been to allow
SPMC a credit period of 90 days from the renewal of the policy within which to pay the
premium.
Soon after the new policy was issued and before premium payments could be made, a fire gutted
the covered plant and facilities to the ground. The day after the fire, SPMC issued a manager's
check to SIC for the fire insurance premium, for which it was issued a receipt; a week later
SPMC issued its notice of loss.

SIC responded by issuing its own manager's check for the amount of the premiums SPMC had
paid, and denied SPMC's claim on the ground that under the "cash and carry" principle
governing fire insurance, no coverage existed at the time the fire occurred because the insurance
premium had not been paid.

Is SPMC entitled to recover for the loss from SIC? (5%)

Yes, SPMC is entitled to recover for the loss from SIC.
Under the insurance law, the payment of premiums will enforce the contract of insurance
against the insurer.
Here, there was a standing business practice between SIC and SPMC allowing the later a
credit period of 90 days from the renewal of the policy within which to pay the premium.
The grant of the credit period did not violate the cash and carry principle governing fire
insurance.
Thus, SPMC can still be entitled to recover from the loss from the insurer, SIC.
COMMENT:
1. Almost good. However, we should have stated that Stable is estopped from denying
the claim of SPMC, because SPMC relied in good faith with the standing business
practice.
SCORE:
4/5

6. Raymond invested his money in securities issued by the Philippine government, through his
bank. Subsequently, the Bureau of Internal Revenue asked his bank to disclose his investments.
His bank refused the request for disclosure on the ground that the investments are confidential
under the Secrecy of Bank Deposits Law (Republic Act No. 1405, as amended).
Is the bank's refusal justified? Defend your answer. (2.5%)
Yes, the bank’s refusal was justified.

Under the Secrecy of Bank Deposits Law, bank deposits in local currency including
financial investments in bank are confidential in nature, thus the consent of the
depositor.

Here, Raymond had invested his money in securities issued by the Philippine
government in the bank and the BIR cannot ask the bank to disclose his investments
without the consent of the investor/depositor.

Hence, the bank can refuse the request of the BIR.

COMMENT:

GOOD

B. First Bank received an order of garnishment over a client's peso and dollar deposits in
First Bank. Should First Bank comply with that order? Explain. (2.5%)
Yes, the First Bank should comply with the order.
Under the Secrecy of Bank Deposits Law, bank deposits in local currency including
financial investments in bank are confidential in nature, thus the consent of the
 depositor. In addition, case law provides that a court order like garnishment over
the deposit is an exception to the rule.

Here, First Bank had received an order of garnishment from the court over a
client’s peso and dollar deposits.

Thus, First Bank must comply with the order.

COMMENT:
1. Why is it an exception to the rule? Because there is no real inquiry in such a case, and
if existence of the deposit is disclosed the disclosure is purely incidental to the
execution process.
SCORE:
4.5/5

7. Ybarra is the registered shareholder of 500 shares in Yakal Inc., of which only 50% has been
paid up, but for which the corporation had erroneously issued a covering certificate of stock for
the entire 500 shares. Ybarra sells the entire 500 shares for cash pursuant to a notarized Deed of
Sale in favor of Ynchon, and which certificate was duly endorsed and delivered. When Ynchon
presented the Deed of Sale and the endorsed certificate of stock, as well as proof of payment to
the Bureau of Internal Revenue (BIR) of the tax due on the sale of shares, the Corporate
Secretary of Yakal Inc. refused to register the sale on the ground of lack of written authority
from Ybarra to cancel the certificate and have the shares registered in the name of Ynchon.

(a) Does Ynchon have a cause of action to file a petition for mandamus to compel the
corporation to register the 500 shares in his name in the corporation books? (2.5%)

No, Ynchon does not have a cause of action to file a petition for mandamus.

Under the Revised Corporation Code, the corporation has a separate and distinct
personality from that of the stockholders and officers of the corporation.

Here, the act of Ybarra selling his entire 500 shares for cash in favor of Ynchon is a
transaction separate and distinct from the corporation.

Thus, the filing of petition for mandamus to compel the corporation to register the
500 shares in the name of Ynchon in the corporation books will not prosper.

COMMENT:
 1. He has a cause of action. Case law dictates that a person who has purchased stock, and
who desires to be recognized as a stockholder, for the purpose of voting, must secure
such a standing by having the transfer recorder upon the books. If the transfer is not duly
made upon request, he has, as his remedy, to compel it to be made.
(b) Who is liable to pay the remaining unpaid 50% balance - Ybarra or Ynchon? (2.5%)

Ybarra will pay the remaining unpaid 50% balance.

Ybarra is the shareholder of the 500 shares of which 50% has already been paid
thus the other 50% will shouldered by him.

COMMENT:

1. Where’s the legal basis? We must always answer using the ALAC method,
unless the question only asks for an enumeration or definition.
2. The answer is correct, but please provide your basis.

SCORE:

2/5

8. Nautica Shipping Lines (Nautica) bought a second-hand passenger ship from Japan. It
modified the design of the bulkhead of the deck of the ship to accommodate more passengers.
The ship sunk with its passengers in Tablas Strait due to heavy rains brought by the monsoon.
The heirs of the passengers sued Nautica for its liability as a common carrier based on the
reconfiguration of the bulkhead which may have compromised the stability of the ship. Nautica
raised the defense that the monsoon is a fortuitous event and, at most, its liability is prescribed by
the Limited Liability Rule. Decide with reasons. (5%)
Nautica Shipping Lines can be held liable for the death of the passengers.
Case law dictates that once a ship had been modified, the ship becomes unseaworthy.
Here, Nautica bough a second-hand passenger ship from Japan and made a modification
on the design of the bulkhead of the deck of the ship to accommodate more passengers. The
act of reconfiguring the bulkhead might compromise the unseaworthiness of the ship.
Thus, Nautica can be held liable for the death of the passengers.
COMMENT:
1. We did not address the issues: (1) whether the limited liability rule applies, and (2)
whether the monsoon is a fortuitous event.
 2. To answer both issues, the limited liability rule does not apply if the carrier was
negligent. Here, the shipping line was negligent, because it modified the design of
the bulkhead of the deck of the ship to accommodate more passengers. Thus, the
ship’s stability was compromised. Also, even if the monsoon is a fortuitous event, the
carrier can be held liable if it was negligent.
SCORE:
2/5
9. Rudy is a fine arts student in a university. He stays in a boarding house with Bernie as his
roommate. During his free time, Rudy would paint and leave his finished works lying around the
boarding house. One day, Rudy saw one of his works -an abstract painting entitled Manila
Traffic Jam - on display at the university cafeteria. The cafeteria operator said he purchased the
painting from Bernie who represented himself as its painter and owner.
Rudy and the cafeteria operator immediately confronted Bernie. While admitting that he did not
do the painting, Bernie claimed ownership of its copyright since he had already registered it in
his name with the National Library as provided in the Intellectual Property Code.
Who owns the copyright to the painting? Explain. (5%)
The ownership of the painting belongs to Rudy.
Under the Intellectual Property Code, ownership to literary and artistic works arises from
the moment of its creation.
Here, the painting is considered as an artistic works owned from the moment it was
created. Registration by Bernie in the National Library will not cure the defect.
Thus, the painting is owned by Rudy being the creator.
COMMENT:
GOOD
SCORE:
5/5
10. Super Biology Corporation (Super Biology) invented and patented a miracle medicine for the
cure of AIDS. Being the sole manufacturer, Super Biology sold the medicine at an exorbitant
price. Because of the sudden prevalence of AIDS cases in Metro Manila and other urban areas,
the Department of Health (DOH) asked Super Biology for a license to produce and sell the AIDS
medicine to the public at a substantially lower price. Super Biology, citing the huge costs and
expenses incurred for research and development, refused.
Assuming you are asked your opinion as the legal consultant of the DOH, discuss how you will
resolve the matter. (5%)
The DOH can use the invention without the consent of the owner.
Under the patent law, the government can use the invention for as long as it affects public
interest which includes among others public health. Also, the government can use the drugs
and medicines if there is a national emergency.
Here, there was a sudden prevalence of AIDS cases affecting the Metro Manila and other
urban areas which is considered a national emergency.
Thus, the government through the DOH can use the invention without the consent of the
owner.
COMMENT:
GOOD
SCORE:
5/5

11. On June 21, 2008, Yate took out a life insurance policy on her life in the amount of PhP 10
million and named her husband Vandy and daughter as joint irrevocable beneficiaries. Before the
policy was issued and the premiums were paid, Yate underwent a medical checkup with a
physician accredited by the insurer, and the only result found was that she was suffering from
high blood pressure. Yate was previously diagnosed by a private physician of having breast
cancer which she did not disclose to the insurer in her application, nor to the insurer's accredited
physician because by then, she was told that she was already cancer-free after undergoing
surgery which removed both her breasts. She was later diagnosed with psychotic tendency that
graduated into extreme despondency. She was found dead hanging in her closet 36 months after
the issuance of the policy. The police authorities declared it to be a case of suicide. The policy
did not include suicide as an excepted risk.

(a) Can the insurer raise the issue of failure to disclose that she had cancer as a cause for
denying the claim of the beneficiaries? (2.5%)

Yes, the insurer can raise the issue of failure to disclose that the insured had cancer
for the denial of the claim of the beneficiaries.

Under the insurance law, the life insurance policy is not contestable after two years
from issuance date regardless if there was misrepresentation or concealment.

Here, there was a misrepresentation made by Yate that aside from high blood
pressure she also has a breast cancer which she did not disclose to her insurer upon
her application.
 Hence, the insurer can raise the issue of failure to disclose before the two-year
incontestability clause of the insurance law.

COMMENT:

1. Wrong understanding of the law.

2. The misrepresentation was discovered AFTER the two-year period. Thus, the heirs
can claim, as the contract of insurance is now incontestable.

(b) Are the beneficiaries entitled to receive the proceeds of the life insurance
notwithstanding the fact that the cause of death was suicide? (2.5%)

No, the beneficiaries are not entitled to the proceeds of the life insurance.

Under the insurance law, if the cause of death is suicide, the proceeds of the life
insurance will entitle the beneficiaries is the suicide was done two-years before the
issuance date of the insurance.

Here, it can be inferred from the given case that the suicide was done after two-
years from the issuance date of the policy.

Thus, the beneficiaries are not entitled to receive the proceeds of the life insurance
from the insurer.

COMMENT:

1. Wrong understanding of the law.

2. If the suicide happened within the two-year period, the heirs cannot claim the
proceeds. If it happened after the two-year period, they can claim.

SCORE:

2/5

12. MS Brewery Corporation (MS) is a manufacturer and distributor of the popular beer "MS
Lite." It faces stiff competition from BA Brewery Corporation (BA) whose sales of its own beer
product, "BA Lighter," has soared to new heights. Meanwhile, sales of the "MS Lite" decreased
considerably. The distribution and marketing personnel of MS later discovered that BA has
stored thousands of empty bottles of "MS Lite" manufactured by MS in one of its warehouses.
MS filed a suit for unfair competition against BA before the Regional Trial Court (RTC).
Finding a connection between the dwindling sales of MS and the increased sales of BA, the RTC
ruled that BA resorted to acts of unfair competition to the detriment of MS. Is the RTC correct?
Explain. (5%)
No, the RTC was not correct in ruling that BA resorted to acts of unfair competition.
Unfair competition arises if the elements are present; a. that there exist a confusing
similarity of the general appearances of the goods and b. that there was an intent to deceive
the public or defraud the competitor.
Here, the strategy made by BA Brewery Corporation in storing thousand of empty bottles
of MS Lite did not equate of deceiving the public or defrauding his competitor MS Brewery
Corporation.
Hence, the RTC was incorrect in ruling that BA resorted to acts of unfair competition.
COMMENT:
GOODS
SCORE:
5/5
13. Henry is a board director in XYZ Corporation. For being the "fiscalizer" in the Board, the
majority of the board directors want him removed and his shares sold at auction, so he can no
longer participate even in the stockholders' meetings. Henry approaches you for advice on
whether he can be removed as board director and stockholder even without cause. What is your
advice? Explain "amotion" and the procedure in removing a director. (5%)
My advice to Henry is to question the validity of his removal.
Under the revised corporation code, the removal of a director can prosper upon votes of
the stockholder owning 2/3 of the outstanding capital stock at a special meeting called for
that purpose. Provided, that a notice was given to the stockholders prior to the conduct of
the special meeting called for the purpose of removing the director.
Here, the removal of Henry from his position as board of director is an amotion and the
required vote of his removal must be from the stockholders owning 2/3 of the outstanding
capital stock. Also, there was no prior notice to the stockholders for the conduct of the
special meeting called for the purpose of removing Henry.
Hence, the removal of Henry from the board can be questioned due to its invalidity.
COMMENT:
Good!
SCORE:
5/5
14. From his first term in 2007, Congressman Abner has been endorsing his pork barrel
allocations to Twin Rivers in exchange for a commission of 40% of the face value of the
allocation. Twin Rivers is a non-governmental organization whose supporting papers, after audit,
were found by the Commission on Audit to be fictitious. Other than to prepare and submit
falsified papers to support the encashment of the pork barrel checks, Twin Rivers does not
appear to have done anything on the endorsed projects and Congressman Abner likewise does
not appear to have bothered to monitor the progress of the projects he endorsed. The
congressman converted most of the commissions he generated into US dollars, and deposited
these in a foreign currency account with Banco de Plata (BDP).
Based on amply-supported tips given by a congressman from another political party, the Anti-
Money Laundering Council sent BDP an order: (1) to confirm Cong. Abner's deposits with the
bank and to provide details of these deposits; and (2) to hold all withdrawals and other
transactions involving the congressman's bank accounts.
As counsel for BDP, would you advise the bank to comply with the order? (5%)
Yes, BDP has to comply with the order of the Anti-Money Laundering Council.
Under the Anti-Money Laundering Act, money laundering is the source of the money was
from illegal activities.
Here, the conversion of Congressman Abner of the commission which he generated from
his pork barrel allocations into US Dollars and deposited them in a foreign currency
account with Banco de Plata (BDP) wherein the source of the money was due to the graft
and corrupt practice undertaken by Twin Rivers which benefited Congressman Abner is a
violation of the Anti-Money Laundering Act.
Thus, as counsel of BDP I will command him to comply with the order of the AMLC.
COMMENT:
1. We did not tackle the proper issues. There were two in this question: (1) can the AMLC
inquire into the deposit accounts without violating the Bank Secrecy Law, and (2) can
AMLC freeze these accounts without a court order?
SAMPLE:
No, BDP does not have to comply with the order of the AMLC.
Case law dictates that a deposit account can only be inquired into if there is a court order.
Further, it dictates that a freeze order can only be issued by the Court of Appeals.
Here, BDP does not have to comply with the order of the AMLC, since the AMLC was not
able to secure a court order.
SCORE:
2/5
15. Jinggy went to Kluwer University (KU) in Germany for his doctorate degree (Ph.D.). He
completed his degree with the highest honors in the shortest time. When he came back, he
decided to set-up his own graduate school in his hometown in Zamboanga. After seeking free
legal advice from his high-flying lawyer-friends, he learned that the Philippines follows the
territoriality principle in trademark law, i.e., trademark rights are acquired through valid
registration in accordance with the law. Forth with, Jinggy named his school the Kluwer
Graduate School of Business of Mindanao and immediately secured registration with the Bureau
of Trademarks. KU did not like the unauthorized use of its name by its top alumnus no less. KU
sought your help. What advice can you give KU? (5%)
KU can file for civil and administrative charges against Jinggy.
Under the trademark law, a foreign corporation who is not doing business in the Philippine
may file an action for civil and administrative charges against the cancellation or
infringement of trademark.
Here, Jinggy had secured the registration with the Bureau of Trademarks, however, the
usage of the mark was without KU’s authority.
Thus, KU can file for civil and administrative charges against Jinggy.
COMMENT:
GOOD
SCORE:
5/5

16. AA entered into a contract with BB for the latter to transport ladies wear from Manila to
France with transhipment via Taiwan. Somehow the goods were not loaded in Taiwan on time,
hence, these arrived in France "off-season." AA was only paid for one-half (1/2) the value by the
buyer.

AA claimed damages from BB. BB invoked prescription as a defense under the Carriage of
Goods by Sea Act. Considering the "loss of value" of the ladies wear as claimed by AA, is BB’s
defense tenable? Explain. (5%)

The defense of BB is not tenable.

Under the Carriage of Goods by Sea Act, once the shipment was loaded into the ship and
upon issuance of the bill of lading from the carrier to the shipper there is a presumption
that the goods will be delivered on time.

Here, there was of contract between AA and BB which both parties must abide to and any
violation of the contract may necessitate the filing of damages.

Hence, BB’s defense of prescription is not tenable.

COMMENT:

1. The legal basis is incorrect. Also, your answer is not responsive to the question. The
question is “is BB’s defense tenable?” Thus, you should have answered with a “Yes”
or “No.”
2. The correct legal basis is the 1-year prescriptive period only applies if the goods
were not delivered or were delivered in a damaged or deteriorated condition. It does
not apply to damages as a result of delay in the delivery of the same.

SCORE:

2/5

17. Cecilio is planning to put up a grocery store in the subdivision where he and his family
reside. To promote this proposed business venture, he told his wife and three children to send out
promotional text messages to all the residents in the subdivision. Cecilio’s family members did
as instructed, and succeeded in reaching, through text messages, more than 80% of the residents
in the subdivision.

Is Cecilio habitually engaged in commerce even if the grocery store has yet to be established?
Explain your answer. (5%)

No. Cecilio is not yet engage in commerce.

Under, the law on contract of sale, there is a contract if there is a meeting of minds between
parties upon the thing which is object of the contract and upon the price.

Here, there was meeting of minds between the parties because there was no valid object
and no price consideration was involved.

Thus, Cecilio is not yet engage in commerce.

COMMENT:
1. This is Commercial Law. Do not use the provisions of the Civil Code to answer this
question. This may get you 0/5 or 1/5 in the Bar.

The proper legal basis for this is the Code of Commerce, which provides that legal
presumption of habitually engaging in commerce shall exist from the moment the person
who intends to engage therein announces through circulars, newspapers, handbills, posters
exhibited to the public, or in any other manner whatsoever an establishment which has for
its object some commercial operation. Thus, Cecilio already engaged in commerce by
sending the text messages.

SCORE:

2/5

18. A, B, C, D, E are all duly elected members of the Board of Directors of XYZ Corporation. F,
the general manager, entered into a supply contract with an American firm. The contract was
duly approved by the Board of Directors. However, with the knowledge and consent of F, no
deliveries were made to the American firm. As a result of the non-delivery of the promised
supplies, the American firm incurred damages. The American firm would like to file a suit for
damages. Can the American firm sue:

a. The members of the Board of Directors individually, because they approved the
transaction? (2.5%)

The members of the Board of Directors will not be held liable for damages.

Case law dictates that the act of a member of the Board is not personal and which
are necessary in the conduct of the business of the corporation excludes them from
liability.

Here, the members of the Board approved the contract entered into by F which is
reasonably necessary in the conduct of XYZ Corporation.

Hence, the members of the BOD cannot be held liable for damages.

COMMENT:

1. Use the business judgment rule to answer this question.

SAMPLE:

No, the members of the Board of Directors will not be held liable for damages.
 Under the existing jurisprudence, the "business judgment rule" simply means that
"the SEC and the courts are barred from intruding into business judgments of
corporations, when the same are made in good faith.

Here, the members of the Board approved the contract entered into by F which is
reasonably necessary in the conduct of XYZ Corporation.

Hence, the members of the BOD cannot be held liable for damages.

b. The corporation? (2.5%)

Yes. XYZ Corporation is liable for damages.

Case law dictates that a corporation is liable for damages when an officer or
employee of a corporation acted on behalf of the corporation not on their personal
capacities.

Here, the members of the BOD and F acted on behalf of XYZ Corporation by
entering into a supply contract with an American firm.

Hence, XYZ Corporation can be held liable for damages.

COMMENT:

ALL GOOD!

c. F, the general manager, personally, because the non-delivery was with his knowledge and
consent? (2.5%)

Yes. F, the general manager is liable for damages.

Case law dictated that when an employee acted on his personal capacities, he can be held
liable for damages even if he acted on behalf of the corporation.

Here, F has a personal knowledge and consented to the non-delivery of supplies to the
American firm.

Thus, because of the non-delivery of the promised supplies F can be held liable damages.

COMMENT:

ALL GOOD
 SCORE:

6.5/7.5

19. Under the Nell Doctrine, so called because it was first pronounced by the Supreme Court in
the 1965 ruling in Nell v. Pacific Farms, Inc. (15 SCRA 415), the general rule is that where one
corporation sells or otherwise transfers all of its assets to another corporation, the latter is not
liable for the debts and liabilities of the transferor.
State the exceptions to the Nell Doctrine. (2.5%)
Case law provides for the exceptions to the Nell Doctrine which include the assumption of
the debts and liabilities by the transferee and that the transfer amounts to continuation of
the business of the transferor.
SCORE:
2.5/2.5
20. In an action for collection of a sum of money, the Regional Trial Court (RTC) of Makati City
issued a decision finding D-Securities, Inc. liable to Rehouse Corporation for P10,000,000.00.
Subsequently, the writ of execution was issued but returned unsatisfied because D-Securities had
no more assets to satisfy the judgment. Rehouse moved for an Alias Writ of Execution against
Fairfield Bank (FB), the parent company of D-Securities. FB opposed the motion on the grounds
that it is a separate entity and that it was never made a party to the case. The RTC granted the
motion and issued the Alias Writ of Execution. In its Resolution, the RTC relied on the following
facts: 499,995 out of the 500,000 outstanding shares of stocks of D-Securities are owned by FB;
FB had actual knowledge of the subject matter of litigation as the lawyers who represented D-
Securities are also the lawyers of FB. As an alter ego, there is no need for a finding of fraud or
illegality before the doctrine of piercing the veil of corporate fiction can be applied.
The RTC ratiocinated that being one and the same entity in the eyes of the law, the service of
summons upon D-Securities has bestowed jurisdiction over both the parent and wholly-owned
subsidiary. Is the RTC correct? (5%)
No. The RTC is not correct.
D-Securities is a separate and distinct legal entity from Fairfield Bank.
Here, although D-Securities is a subsidiary of FB, the service of summons to D-Securities is
not service of summon to the parent company.
Hence, the RTC contention is incorrect.
COMMENT:
1. Where is the legal basis?
SAMPLE:
No. The RTC is not correct.
Case law dictates that each corporation has a separate and distinct personality from its
directors, officers, and stockholders and other corporations.
Here, although D-Securities is a subsidiary of FB, the service of summons to D-Securities is
not a service of summons to the parent company, since they are different and separate
corporations.
Hence, the RTC contention is incorrect.

SCORE:
2/5