BURAT LMT 2019

I
Yeti Export Corporation (YEC), thru its President, negotiated for Yahoo Bank of Manila {YBM) to
issue a letter of credit to course the importation of electronic parts from China to be sold and
distributed to various electronic manufacturing companies in Manila. YBM issued the letter of credit
and forwarded it to its correspondent bank, Yunan Bank (YB) of Beijing, to notify the Chinese
exporters to submit the bill of lading in the name of YBM covering the goods to be exported to Manila
and to pay the Chinese exporters the purchase price upon verification of the authenticity of the
shipping documents.
The electronic parts arrived in the Port of Manila, and YBM released them to the custody of YEC as
an entrustee under a trust receipt. When YEC unpacked the imported parts in its warehouse, it found
that they were not only of inferior quality but also did not fit the descriptions contained in the bill of
lading. YEC refused to pay YBM the amount owed under the trust receipt. YBM thereafter
commenced the following:
(a) Civil suit to hold YB liable for failure to ensure that the electronic parts loaded for exportation in
China corresponded with those described in the bill of lading. Is there any merit in the case against
YB? (2.5%)

SUGGESTED ANSWER:
None. Under a letter of credit transaction, the paying bank is liable to pay the beneficiary upon the latter’s
submission of the stipulated documents and compliance with the terms of the credit regardless of any breach
of contract by the beneficiary to the applicant of the LOC. In other words, the paying bank has no duty to
ensure that the shipped goods correspond to the importation contract for as long as the stipulated documents
are properly submitted. From the foregoing, YB cannot be held liable for failure to ensure that the electronic
parts correspond with the bill of lading. Banks do not deal with goods but only with documents.

(b) Criminal suit against YEC and its President for estafa, and sought the payment of the amount
covered in the trust receipt. The defense of the YEC President is that he cannot be held liable for a
transaction of the corporation, of which he only acted as an officer, and that it is YEC as the principal
that should be held liable under the trust receipt, which was entered into in the name of YEC and
pursuant to YEC's corporate purposes. He cited as his legal ground the "Doctrine of Separate
Juridical Personality." Is the President's contention meritorious? (2.5%)
SUGGESTED ANSWER:
No. It is settled that a corporate officer may be held criminally liable for any acts performed on behalf of
the corporation whenever there is an express provision of law making him so liable. Under the Trust
Receipts Law, the corporate officer responsible for the violation of the same law shall be held criminally
responsible therefor. From the foregoing, YEC’s president cannot validly invoke as defense the doctrine of
separate juridical entity.

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ANOTHER SUGGESTED ANSWER
The President of YEC cannot invoke as a defense the doctrine of separate juridical personality to avoid
criminal liability. The law specifically makes the director, officer or any person responsible for the violation
of the Trust receipt agreement criminally liable precisely for the reason that a Corporation, being a juridical
entity, cannot be the subject of the penalty of imprisonment. Nevertheless, following the same doctrine of
separate legal personality, he cannot be civilly liable there being no showing that he binds with YEC to pay
the loan. Only YEC is liable to pay the loan covered by the letter of credit/trust receipt. Ching vs. Secretary
of Justice, 481 SCRA 609 ( 2006 ) and Section 13 of PD 115

II.
Morgan, a lawyer, received a lot of diving and other water sports equipment as payment of his
professional fees by Dennis, his client in a child custody case. Dennis owned a diving and water sports
dealership in Anilao, Batangas. Morgan decided to name Dennis as entrustee because he did not have
any experience in selling such specialized sports equipment. They executed a trust receipt agreement,
with Morgan as entruster and Dennis as entrustee.
Before the sports equipment could be sold, a strong typhoon hit Batangas. Anilao and other parts of
Batangas experienced power outage. Taking advantage of the total darkness, unidentified thieves
destroyed the padlocks of the establishment of Dennis, and carted off the equipment inside.
Morgan demanded that Dennis pay the value of the stolen equipment, but the latter refused on the
ground that he also had suffered from the effects of the typhoon, and insisted that the cause of the
loss was a fortuitous event or force majeure.
Is the justification of Dennis warranted? Explain your answer. (4%)

SUGGESTED ANSWER
The justification of Dennis is not warranted. Under the trust receipt law, the loss of goods which are the
subject of a trust receipt, pending their disposition, irrespective of whether or not it was due to the fault or
negligence of the entrustee, shall not extinguish the obligation of the entrustee for the value thereof (Pres.
Dec. 115, Sec. 10, January 29, 1973).
ALTERNATIVE ANSWER
The transaction is not really a trust receipt within the ambit of PD 115 since there is no loan component in
the transaction. In a trust receipt, the entruster granted the loan to finance the acquisition of the goods,
which goods are held in trust for the benefit of the entruster pending their disposition. Not being a trust
receipt (where force majeure would not have been a defense), the supposed entrustee 'snot liable for the
loss of the sports equipment following general principle that force majeure exempts the obligor from
liability.

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 III.
Through various acts of graft and bribery, Mayor Ycasiano accumulated a large amount of wealth
which he converted into U.S. dollars and deposited in a Foreign Currency Deposit Unit (FCDU)
account with the Yuen Bank (YB). On a tip given by the secretary of the mayor, the Anti-Money
Laundering Council (AMLC) sent an order to YB to confirm the amount of U.S. dollars that Mayor
Ycasiano had in his FCDU account. YB claims that, under the Foreign Currency Deposit Act (R.A.
No. 6426, as amended), a written permission from the depositor is the only instance allowed for the
examination of FCDU accounts. YB alleges that AMLC on its own cannot order a banking institution
to reveal matters relating to bank accounts.
(a) Is the legal position of YB, in requiring written permission from the depositor, correct? (2.5%)
(b) Does AMLC have the power to order a banking institution to reveal matters relating to bank
accounts? (2.5%)
SUGGESTED ANSWER:
a. No. YB is incorrect in saying that the written permission from the depositor is the only exception to the
examination of foreign currency deposits under R.A. No. 6426. Foreign currency deposits may also be
examined pursuant to a Bank Inquiry Order for violations of Anti-Money Laundering Act, which include
graft and corrupt practices.
SUGGESTED ANSWER:
b. No. As a rule, AMLC does not have that power. The AMLC must first obtain an order from any
competent court before it may inquire into or examine any bank deposit. However, the AMLC may inquire
into a particular deposit or investment even without a court order when the deposits or investments are
related to Hijacking, Kidnapping, Terrorism, Murder, Destructive Arson, and violations of the Dangerous
Drugs Act.

IV.
Flora, a frequent traveller, found a purse concealed between the cushions of a large sofa inside the
VIP lounge in NAIA while she was waiting for her flight to be called. Inside the purse was a very
valuable diamond-studded necklace. She decided not to turn over the purse to the airport
management, and instead to keep it. On her return from her travels, she had a dependable jeweller
appraise the necklace, and the latter told her that the necklace was easily worth at least ₱5,000,000.00
in the open market. To test the appraisal, she pawned the necklace for ₱2,000,000.00. She then
deposited the entire amount in her checking account with Metro Bank. Promptly, Metro Bank
reported the transaction to the Anti-Money Laundering Council (AMLC).
Given that her appropriation of the necklace was theft; may Flora be successfully prosecuted for
money laundering? Explain briefly your answer. (4%)

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SUGGESTED ANSWER:
Flora may not be prosecuted for money laundering. Money laundering is a crime whereby the proceeds of
an unlawful activity are transacted, thereby making it appear that they originated from legitimate sources.
One ways of committing money laundering is if a person knows the cash relates to unlawful activity and
transaction. Under the rules implementing the Anti-Money Laundering Law, however, only qualified theft
(not simple theft) is considered an unlawful activity. In the case presented the theft committed by Flora did
not become qualified because it was no committed with grave abuse of discretion.

V.
Sally was employed as a cashier by a company run by her husband, Ricardo. Ricardo charged Sally
with Estafa/ Qualified Theft due to the latter’s misappropriation of the company’s funds. Sally
allegedly deposited the checks issued by the customers to her personal bank account in Security Bank.
The prosecution presented the testimony of Marasigan, a representative of Security Bank. Marasigan
said that Sally credited the amounts to her personal deposit account. Sally moved to suppress the
testimony of Marasigan on the ground of confidentiality under Republic Act No. 1405.
Is the admission of Marasigan’s testimony violative of RA 1405?

SUGGESTED ANSWER (CASE)

YES.R.A. No. 1405 has two allied purposes. It hopes to discourage private hoarding and at the same time
encourage the people to deposit their money in banking institutions, so that it may be utilized by way of
authorized loans and thereby assist in economic development. Owing to this piece of legislation, the
confidentiality of bank deposits remains to be a basic state policy in the Philippines. Section 2 of the law
institutionalized this policy by characterizing as absolutely confidential in general all deposits of whatever
nature with banks and other financial institutions in the country.
In taking exclusion from the coverage of the confidentiality rule, petitioner in the instant case posits that
the account maintained by respondent with Security Bank contains the proceeds of the checks that she has
fraudulently appropriated to herself and, thus, falls under one of the exceptions in Section 2 of R.A. No.
1405, that the money kept in said account is the subject matter in litigation.
What indeed constitutes the subject matter in litigation in relation to Section 2 of R.A. No. 1405 has been
pointedly and amply addressed in Union Bank of the Philippines v. Court of Appeals, in which the Court
noted that the inquiry into bank deposits allowable under R.A. No. 1405 must be premised on the fact that
the money deposited in the account is itself the subject of the action.
Given this perspective, we deduce that the subject matter of the action in the case at bar is to be determined
from the indictment that charges respondent with the offense, and not from the evidence sought by the
prosecution to be admitted into the records. In the criminal Information filed with the trial court, respondent,
unqualifiedly and in plain language, is charged with qualified theft by abusing petitioners trust and
confidence and stealing cash. The said Information makes no factual allegation that in some material way
involves the checks subject of the testimonial and documentary evidence sought to be suppressed. Neither
do the allegations in said Information make mention of the supposed bank account in which the funds
represented by the checks have allegedly been kept.

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 VI.
The special prosecution panel filed a Request for Issuance of Subpoena Duces Tecum directing the
President of Export and Industry Bank (EIB, formerly Urban Bank) or his/her authorized representative to
produce the Trust Account No. 858 and Savings Account No. 0116-17345-9 of Mr. Egoy, the Petitioner.
In his Motion to Quash, Petitioner claimed that his bank accounts are covered by R.A. No. 1405 (The
Secrecy of Bank Deposits Law) and do not fall under any of the exceptions stated therein. For the
respondent, the law applies only to deposits which strictly means the money delivered to the bank by which
a creditor-debtor relationship is created between the depositor and the bank. Thus, the Trust Account No.
858 should be inquired into, not merely because it falls under the exceptions to the coverage of R.A. 1405,
but because it is not even contemplated therein.
Is a Trust Account covered by the term deposit under R.A. 1405

SUGGESTED ANSWER (Ejercito v. Sandiganbayan)

Respondent People posits that Trust Account No. 8585 may be inquired into, not merely because it falls
under the exceptions to the coverage of R.A. 1405, but because it is not even contemplated therein. For, to
respondent People, the law applies only to "deposits" which strictly means the money delivered to the bank
by which a creditor-debtor relationship is created between the depositor and the bank.
The contention that trust accounts are not covered by the term "deposits," as used in R.A. 1405, by the mere
fact that they do not entail a creditor-debtor relationship between the trustor and the bank, does not lie. An
examination of the law shows that the term "deposits" used therein is to be understood broadly and not
limited only to accounts which give rise to a creditor-debtor relationship between the depositor and the
bank.
The policy behind the law is laid down in Section 1:
SECTION 1. It is hereby declared to be the policy of the Government to give encouragement to the people
to deposit their money in banking institutions and to discourage private hoarding so that the same may be
properly utilized by banks in authorized loans to assist in the economic development of the country.
(Underscoring supplied)
If the money deposited under an account may be used by banks for authorized loans to third persons, then
such account, regardless of whether it creates a creditor-debtor relationship between the depositor and the
bank, falls under the category of accounts which the law precisely seeks to protect for the purpose of
boosting the economic development of the country.
Trust Account No. 858 is, without doubt, one such account. The Trust Agreement between petitioner and
Urban Bank provides that the trust account covers "deposit, placement or investment of funds" by Urban
Bank for and in behalf of petitioner. The money deposited under Trust Account No. 858, was, therefore,
intended not merely to remain with the bank but to be invested by it elsewhere. To hold that this type of
account is not protected by R.A. 1405 would encourage private hoarding of funds that could otherwise be
invested by banks in other ventures, contrary to the policy behind the law.
SECTION 2. All deposits of whatever nature with banks or banking institutions in the Philippines including
investments in bonds issued by the Government of the Philippines, its political subdivisions and its
instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined,

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inquired or looked into by any person, government official, bureau or office, except upon written
permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of
bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the
subject matter of the litigation. (Emphasis and underscoring supplied)
Clearly, therefore, R.A. 1405 is broad enough to cover Trust Account No. 858.
The protection afforded by the law is, however, not absolute, there being recognized exceptions thereto, as
above-quoted Section 2 provides. In the present case, two exceptions apply, to wit: (1) the examination of
bank accounts is upon order of a competent court in cases of bribery or dereliction of duty of public officials,
and (2) the money deposited or invested is the subject matter of the litigation.
Petitioner contends that since plunder is neither bribery nor dereliction of duty, his accounts are not
excepted from the protection of R.A. 1405. Philippine National Bank v. Gancayco holds otherwise:
Cases of unexplained wealth are similar to cases of bribery or dereliction of duty and no reason is seen why
these two classes of cases cannot be excepted from the rule making bank deposits confidential. The policy
as to one cannot be different from the policy as to the other. This policy expresses the notion that a public
office is a public trust and any person who enters upon its discharge does so with the full knowledge that
his life, so far as relevant to his duty, is open to public scrutiny
Indeed, all the above-enumerated overt acts are similar to bribery such that, in each case, it may be said that
"no reason is seen why these two classes of cases cannot be excepted from the rule making bank deposits
confidential."
The crime of bribery and the overt acts constitutive of plunder are crimes committed by public officers, and
in either case the noble idea that "a public office is a public trust and any person who enters upon its
discharge does so with the full knowledge that his life, so far as relevant to his duty, is open to public
scrutiny" applies with equal force.
Plunder being thus analogous to bribery, the exception to R.A. 1405 applicable in cases of bribery must
also apply to cases of plunder.

VII.
(a) Distinguish between the role of a conservator and that of a receiver of a bank. (2.5%)
(b) Explain the close now hear later rule in relations to the Central Bank’s measures to handle banks in
distress. (2.5%)

SUGGESTED ANSWER
(a) Conservator
A bank in distress shall be placed under conservatorship for a period not exceeding one year when it is a
state of continuing inability or unwillingness to maintain a condition of liquidity (State of illiquidity)
adequate to protect the interest of depositors and creditors (Dimaampao)
Conservatorship is terminated when the Monetary Board is satisfied that the bank can continue to operate
on its own. Otherwise the bank shall be placed in receivership.

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Whenever on the basis of the report of the appropriate supervising and examining department, the MB finds
that a bank or quasi-bank is in a state of CONTINUING INABILITY OR UNWILLINGNESS to maintain
a condition of LIQUIDITY deemed adequate to protect its depositors and creditors, the MB may appoint a
conservator to take charge of the assets, liabilities and management thereof.
(a) Receivership
When? The MB may appoint a receiver if the MB finds that a bank or quasi bank:
a. is UNABLE TO PAY its liabilities as they become due in the ordinary course of business provided that
this shall not include inability to pay caused by extraordinary demands induced by financial panic in the
banking community;
b. has INSUFFICIENT REALIZABLE ASSETS, as determined by the BSP, to meet its liabilities; or
c. cannot continue in business without involving PROBABLE LOSSES to its depositors and creditors; or
d. has WILLFULLY VIOLATED a cease and desist order that has become final involving transactions
which amount to fraud or dissipation of bank assets.
The bank may be placed under receivership for a maximum period of 90 days from takeover.
The receiver shall determine within 90 days from takeover, whether the bank may still be rehabilitated or
permitted to resume business. Otherwise, the MB shall now proceed to liquidation.
DISTINGUISH
A conservator is appointed if the bank is in a continuing state of illiquidity (meaning, its assets are more
than liabilities but are not in cash or readily convertible to cash) whereas a receiver is generally appointed
if the bank is insolvent. (DIVINA)
Illiquid is not the same as insolvent
(b)
No prior hearing is necessary in appointing a receiver and in closing the bank. It is enough that subsequent
financial review is provided for. To require such hearing is not only impractical but would tend to defeat
the purpose of the law.
The actions of the Monetary Board shall be final and executory and may not be restrained or set aside by
the court (DIMAAMPAO)
XPN: Petition for Certiorari on the ground GAD

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 VIII.
Explain the fictitious payee rule. Who is liable thereunder? Is there any exception thereto?

SUGGESTED ANSWER
FICTITIOUS-PAYEE RULE (FPR): The instrument is payable to bearer when it is payable to the order of
a fictitious person or non-existing person and such fact was known to the person making it so payable (Sec
9c). In short, the instrument is payable to a fictitious person or NON-EXISTING person.
But does the fictitious payee rule cover a situation where the person really exists, and therefore the
instrument be considered payable to bearer? YES, in the case of ****PNB vs. Spouses Rodriguez, that is,
if the maker DID NOT INTEND him to be the real payee of the instrument
XPN to FPR: COMMERCIAL BAD FAITH EXCEPTION, i.e., if there is bad faith on the part of the
drawee-bank. EG: A check payable to the order of Juan de la Cruz and there is a person with the name of
Juan de la Cruz. But the maker did not intend him to be the payee of the check, hence, it is considered
payable to bearer. It does not require therefore the indorsement of the payee before he can transfer title.
However, if there is bad faith on the part of the drawee bank, then this commercial bad faith exception
would make the instrument no longer payable to bearer but payable to order. So in this case it will require
the indorsement of the payee or indorsee. In PNB vs. Sps Rodriguez: *PNB cannot invoke the fictitious
payee rule because there was fraud on the part of its manager. So the commercial bad faith exception strips
the application of the fictitious-payee rule. Effect? The checks are absolutely payable to order and therefore
requires the indorsements of the payees

ANOTHER SUGGESTED ANSWER

A check payable to the order of an actual and living person may be considered a bearer instrument as long
the drawer did not intend him to be the actual recipient of the proceeds of the instrument. Being a bearer
instrument, it can be negotiated by mere delivery. However, the fictitious payee rule is subject to the
commercial bad faith exception. If there is a showing of commercial bad faith on the part of the drawee
bank, or any transferee of the check for that matter will work to strip it of this defense. Such instrument
shall then be considered an order instrument which cannot be negotiated without endorsement and delivery
of the payee. (PNB vs Spouses Rodriguez; GR No. 170325, September 26, 2008)
In this case however, the lack of knowledge on the part of the payees, however, was not tantamount to a
lack of intention on the part of respondents-spouses that the payees would not receive the checks’ proceeds
The respondents actually intended to pay it to the defrauded employees.
Bank is liable for damages. Poor selection and supervision of employees: failure to demand an indorsement
from the payee.

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 IX
Yolanda executed and signed a promissory note with all the requisites for negotiability being present,
except for the amount which was left blank. She kept the promissory note in her desk and decided to
place the amount at a later date. The indicated payee, Yohann, managed to obtain the promissory
note from Yolanda's desk and filled out the amount for the sum of PhP 10 million, which was the
amount actually lent by him to Yolanda, but excluding the agreed interest. Yohann later endorsed
and delivered the check to Yvette, under circumstances that would constitute the latter to be a holder
in due course.
(a) May Yvette hold Yolanda liable on the note? (2.5%)
(b) Would your answer be the same if the promissory note was actually completed by Yolanda
(including the amount of PhP 10 million), but stolen from her desk by Yohann? Can Yvette enforce
the note against Yolanda? (2.5%)

SUGGESTED ANSWER
(A) No, Yvette cannot hold Yolanda liable. Sec. 15 of the NIL applies in this case and it provides that an
incomplete and undelivered instrument will not, if completed and negotiated without authority, be a valid
contract in the hands of any holder, as against any person whose signature was placed thereon before
delivery. Consequently, an incomplete and undelivered instrument constitutes a real defense which Yolanda
may invoke even against Yvette, a holder in due course.
SUGGESTED ANSWER
(B) No, my answer will not be the same. In case of complete but undelivered instrument, Sec. 16 NIL
creates a prima facie presumption of valid delivery in favor of the payee. However, if the instrument is
further negotiated to a holder in due course, then such presumption becomes conclusive. It therefore
constitutes a personal defense which Yolanda cannot validly invoke against Yvette, a holder in due course.
Consequently, Yvette can enforce the note against Yolanda.

X
Wyatt, an internet entrepreneur, engaged in a sideline business of creating computer programs for
selected clients on a per project basis and for servicing basic computer problems of his friends and
family members. His main job was being an IT consultant at Futurex Co., a local computer company.
Because of his ill-advised investments in the stock market and the fraud perpetrated against him by
his trusted confidante, Wyatt was already drowning in debt, that is, he had far more liabilities than
his entire assets. What legal recourse remained available to Wyatt? Explain your answer. (4%)
SUGGESTED ANSWER
If Wyatt is registered as sole proprietorship, he may file a petition for rehabilitation or voluntary liquidation.
Under FRIA, an insolvent debtor may file a petition for rehabilitation even if the assets are less than
liabilities.The petition should include a rehabilitation plan and nominee for rehabilitation receiver. He can
also file a petition for voluntary liquidation since his liabilities exceed his assets. The objective of

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liquidation is to get discharge, maximize recovery of assets and effect equitable distribution of such assets
based on the rules on concurrence and preference of credit.
If he is not registered as a sole proprietorship, he may only file petition for voluntary liquidation since his
assets are less than liabilities (Section 103 of FRIA). Petition for suspension of payments is not available
as a remedy to an individual debtor not registered as a sole proprietorship

XI.
Hortencio owned a modest grocery business in Laguna. Because of the economic downturn, he
incurred huge financial liabilities. he remained afloat only because of the properties inherited from
his parents who had both come from landed families in laguna. His main creditor was Puresilver
Company (Puresilver), the principal supplier of the merchandise sold in his store. To secure his credit
with Puresilver, he executed a real estate mortgage with a dragnet clause involving his family’s assets
worth several millions of pesos.
Nonetheless, Hortencio, while generally in the black, now faces a situation where he is unable to pay
his liabilities as they fall due in the ordinary course of business. What will you advise him to do to
resolve his dire financial condition? Explain your answer.

SUGGESTED ANSWER
If Hortencio is doing business as a registered sole proprietorship, he can file a petition for rehabilitation.
Under FRIA, a sole proprietorship can now file a petition for rehabilitation. The remedy may be availed of
in case of actual or technical insolvency. In the petition, he can pray for the issuance of a commencement
order which includes a stay order. The stay order, once issued, has the effect of enjoining the enforcement
of claim against Hortencio. If Hortencio is not registered as a sole proprietorship, he can file a petition for
suspension of payments in the city or province in which he has resided for six months prior to the filing of
the petition, a remedy available to an individual debtor who has more assets than liabilities but foresees the
Impossibility of paying his debts when they respectively fall due (Section 94, FRIA)

XII.
Francisco Co, a retired police officer assigned at the Western Police District in Manila, sued Abante
Tonite, a daily tabloid of general circulation and its officers claiming damages because of an allegedly
libelous article petitioners published in the issue of Abante Tonite. The petitioners then moved for
the dismissal and moved to drop Abante Tonite as a defendant by virtue of its being neither a natural
nor a juridical person that could be impleaded as a party in a civil action.
Is it proper to implead Abante Tonite as defendant in the case? (5%)

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SUGGESTED ANSWER (MACASAET V. CO)
Regarding the impleading of Abante Tonite as defendant, the RTC held, viz:
"Abante Tonite" is a daily tabloid of general circulation. People all over the country could buy a copy of
"Abante Tonite" and read it, hence, it is for public consumption. The persons who organized said
publication obviously derived profit from it. The information written on the said newspaper will affect the
person, natural as well as juridical, who was stated or implicated in the news. All of these facts imply that
"Abante Tonite" falls within the provision of Art. 44 (2 or 3), New Civil Code. Assuming arguendo that
"Abante Tonite" is not registered with the Securities and Exchange Commission, it is deemed a corporation
by estoppels considering that it possesses attributes of a juridical person, otherwise it cannot be held liable
for damages and injuries it may inflict to other persons.
CA
Abante Tonite’s newspapers are circulated nationwide, showing ostensibly its being a corporate entity, thus
the doctrine of corporation by estoppel may appropriately apply.
An unincorporated association, which represents itself to be a corporation, will be estopped from denying
its corporate capacity in a suit against it by a third person who relies in good faith on such representation.
There being no grave abuse of discretion committed by the respondent Judge in the exercise of his
jurisdiction, the relief of prohibition is also unavailable.
SC
Nor can we sustain petitioners’ contention that Abante Tonite could not be sued as a defendant due to its
not being either a natural or a juridical person. In rejecting their contention, the CA categorized Abante
Tonite as a corporation by estoppel as the result of its having represented itself to the reading public as a
corporation despite its not being incorporated. Thereby, the CA concluded that the RTC did not gravely
abuse its discretion in holding that the non-incorporation of Abante Tonite with the Securities and Exchange
Commission was of no consequence, for, otherwise, whoever of the public who would suffer any damage
from the publication of articles in the pages of its tabloids would be left without recourse. We cannot
disagree with the CA, considering that the editorial box of the daily tabloid disclosed that basis, nothing in
the box indicated that Monica Publishing Corporation had owned Abante Tonite.

XIII.
Differentiate De facto versus a De Jure Corporation.

SUGGESTED ANSWER
De facto v De Jure Corporation
De jure Corporation - organized in accordance with the requirements of the law
De Facto - a corporation where there exists a flaw in its incorporation.
The requisites for its existence are
A. The existence of a valid law under which it may be incorporated

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B. An attempt in good faith to incorporate or comply with the formalities of the law C.
C. Use of corporate powers

XIV.
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. (4%)

SUGGESTED ANSWER
The exceptions to the Nell doctrine are as follows:
(I) When the buyer expressly or impliedly assumes the liabilities of the seller;
(II) If the sale amounts to a merger or consolidation;
(III) If the sale is entered into fraudulently or made in bad faith;
(IV) If the buyer is merely a continuation of the personality of the seller or the so called business - enterprise
transfer rule

XV.
The SEC, through its Chaiperson, issued on May 20, 2013, SEC Memorandum Circular No. 8 (“SEC-
MC No.8”) entitled, Guidelines on Compliance with the Filipino Foreign Ownership Requirements
Prescribed in the Constitution and/ or Existing Laws by Corporations Engaged in Nationalized and
Partly Nationalized Activities. Section 2 of SEC-MC No. 8 provides:
“All covered corporation shall, at all times, observe the constitutional or statutory ownership
requirement. For purposes of determining compliance therewith, the required percentage of
Filipino ownership shall be applied BOTH (a) the total number of outstanding shares of stock
entitled to vote in the election of directors; and (b) the total number of outstanding shares of stock,
whether or not entitled to vote in the election of directors.”
Given that the Gamboa Decision, which attained finality on 18 October 2012 held that the term
“capital” in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to
vote in the election of directors (only to common shares) and not to the total outstanding capital stock
(common and preferred shares), Atty. Roy impugned the validity of SEC-MC No. 8 for not
conforming to the letter and spirit of the Gamboa Decision. Resolve. (8%)

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SUGGESTED ANSWER (2017 CASE)
To the Court's mind and, as exhaustively demonstrated in the Decision, the dispositive portion of
the Gamboa Decision was in no way modified by the Gamboa Resolution.
The heart of the controversy is the interpretation of Section 11, Article XII of the Constitution, which
provides: "No franchise, certificate, or any other form of authorization for the operation of a public utility
shall be granted except to citizens of the Philippines or to corporations or associations organized under the
laws of the Philippines at least sixty per centum of whose capital is owned by such citizens x x x."
The Gamboa Decision already held, in no uncertain terms, that what the Constitution requires is "[fJull [and
legal] beneficial ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the
voting rights x x x must rest in the hands of Filipino nationals x x x." And, precisely that is what SEC-MC
No. 8 provides, viz.: "x x x For purposes of determining compliance [with the constitutional or statutory
ownership], the required percentage of Filipino ownership shall be applied to BOTH (a) the total number
of outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of
outstanding shares of stock, whether or not entitled to vote x x x."
In construing "full beneficial ownership," the Implementing Rules and Regulations of the Foreign
Investments Act of 1991 (FIA-IRR) provides:
For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is
not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with
appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or
transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.
In turn, "beneficial owner" or "beneficial ownership" is defined in the Implementing Rules and Regulations
of the Securities Regulation Code (SRC-IRR) as:
[A]ny person who, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power (which includes the power to vote or direct the voting of such
security) and/or investment returns or power (which includes the power to dispose of, or direct the
disposition of such security) x x x.
Thus, the definition of "beneficial owner or beneficial ownership" in the SRC-IRR, which is in consonance
with the concept of "full beneficial ownership" in the FIA-IRR, is, as stressed in the Decision, relevant in
resolving only the question of who is the beneficial owner or has beneficial ownership of each "specific
stock" of the public utility company whose stocks are under review. If the Filipino has the voting power of
the "specific stock", i.e., he can vote the stock or direct another to vote for him, or the Filipino has
the investment power over the "specific stock", i.e., he can dispose of the stock or direct another to dispose
of it for him, or both, i.e., he can vote and dispose of that "specific stock" or direct another to vote or dispose
it for him, then such Filipino is the "beneficial owner" of that "specific stock." Being considered Filipino,
that "specific stock" is then to be counted as part of the 60% Filipino ownership requirement under the
Constitution. The right to the dividends, jus fruendi - a right emanating from ownership of that "specific
stock" necessarily accrues to its Filipino "beneficial owner."
Once more, this is emphasized anew to disabuse any notion that the dividends accruing to any particular
stock are determinative of that stock's "beneficial ownership." Dividend declaration is dictated by the
corporation's unrestricted retained earnings. On the other hand, the corporation's need of capital for
expansion programs and special reserve for probable contingencies may limit retained earnings available
for dividend declaration. It bears repeating here that the Court in the Gamboa Decision adopted the

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foregoing definition of the term "capital" in Section 11, Article XII of the 1987 Constitution in express
recognition of the sensitive and vital position of public utilities both in the national economy and for
national security, so that the evident purpose of the citizenship requirement is to prevent aliens from
assuming control of public utilities, which may be inimical to the national interest. This purpose prescinds
from the "benefits"/dividends that are derived from or accorded to the particular stocks held by Filipinos
vis-a-vis the stocks held by aliens. So long as Filipinos have controlling interest of a public utility
corporation, their decision to declare more dividends for a particular stock over other kinds of stock is their
sole prerogative - an act of ownership that would presumably be for the benefit of the public utility
corporation itself. Thus, as explained in the Decision:
In this regard, it would be apropos to state that since Filipinos own at least 60% of the outstanding shares
of stock entitled to vote directors, which is what the Constitution precisely requires, then the Filipino
stockholders control the corporation, i.e., they dictate corporate actions and decisions, and they have all the
rights of ownership including, but not limited to, offering certain preferred shares that may have greater
economic interest to foreign investors - as the need for capital for corporate pursuits (such as expansion),
may be good for the corporation that they own. Surely, these "true owners" will not allow any dilution of
their ownership and control if such move will not be beneficial to them.
Finally, as to how the SEC will classify or treat certain stocks with voting rights held by a trust fund that is
created by the public entity whose compliance with the limitation on foreign ownership under the
Constitution is under scrutiny, and how the SEC will determine if such public utility does, in fact, control
how the said stocks will be voted, and whether, resultantly, the trust fund would be considered as Philippine
national or not - lengthily discussed in the dissenting opinion of Justice Carpio - is speculative at this
juncture. The Court cannot engage in guesswork. Thus, there is need of an actual case or controversy before
the Court may exercise its power of judicial review. The movant's petition is not that actual case or
controversy.
Thus, the discussion of Justice Carpio' s dissenting opinion as to the voting preferred shares created by
respondent PLDT, their acquisition by BTF Holdings, Inc., which appears to be a wholly-owned company
of the PLDT Beneficial Trust Fund (BTF), and whether or not it is respondent PLDT's management that
controls BTF and BTF Holdings, Inc. - all these are factual matters that are outside the ambit of this Court's
review which, as stated in the beginning, is confined to determining whether or not the SEC committed
grave abuse of discretion in issuing SEC-MC No. 8; that is, whether or not SEC-MC No. 8 violated the
ruling of the Court in Gamboa v. Finance Secretary Teves, and the resolution in Heirs of Wilson P.
Gamboa v. Finance Sec. Teves denying the Motion for Reconsideration therein as to the proper
understanding of "capital".
To be sure, it would be more prudent and advisable for the Court to await the SEC's prior determination of
the citizenship of specific shares of stock held in trust - based on proven facts - before the Court proceeds
to pass upon the legality of such determination.
As to whether respondent PLDT is currently in compliance with the Constitutional provision regarding
public utility entities, the Court must likewise await the SEC's determination thereof applying SEC-MC
No. 8. After all, as stated in the Decision, it is the SEC which is the government agency with the competent
expertise and the mandate of law to make such determination.
In conclusion, the basic issues raised in the Motion having been duly considered and passed upon by the
Court in the Decision and no substantial argument having been adduced to warrant the reconsideration
sought, the Court resolves to DENY the Motion with FINALITY.

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WHEREFORE, the subject Motion for Reconsideration is hereby DENIED WITH FINALITY. No further
pleadings or motions shall be entertained in this case. Let entry of final judgment be issued immediately

XVI.
Yenkell Cement Corporation (YCC) is a public corporation whose shares are listed at the PSE. It is
60% owned by Yenkell Holdings Corporation (YHC) and 20% by Yengco Exploration Inc. (YEI).
The remaining 20% is held by the public. YHC is a private non-listed corporation which, in turn, is
60% owned by Yatlas Mines Inc. (YMI), and 40% by Yacnotan Consolidated Inc. (YCI). On August
8, 2008, the Board of Directors of YEI passed a resolution approving the acquisition of 50% and 25%
of the shares held by YMI and YCI, respectively, in the authorized capital stock of YHC.
Yolly, one of the staff members in the office of the Corporate Secretary of YEI, was immediately
asked to type the resolution and file the disclosure with the PSE and the Securities and Exchange
Commission (SEC). Before doing that, she secretly called her brother who works with a stock
brokerage company, to purchase, in the name of Yolly's husband, 5,000 shares in YCC. After the
acquisition was disclosed to the SEC and the PSE, the market price of YCC increased by 50%.
(a) In acquiring 75% of the total capital stock of YHC, should YEI be required to do a mandatory
tender offer? (2.5%)
(b) Can Yolly be held liable for insider trading? (2.5%)

SUGGESTED ANSWER:
a. Yes, YEI should be required to do a mandatory tender offer.
Under Rule 19 (2) of the implementing rules of the SRC, a mandatory tender offer is required when at least
35% of equity shares of a public company is to be acquired. It is also settled that whatever may be the
method by which control of a public company is obtained, either through the direct purchase of its stocks
or through an indirect means, mandatory tender offer applies. In this case, YEI’s acquisition of 75% of
YHC’s shares constitutes an indirect acquisition of 45% of the outstanding equity securities of YCC, thus,
meeting the 35% threshold. Therefore, the indirect acquisition by YEI of 45% of YCC shares is covered by
the mandatory tender offer rule.
SUGGESTED ANSWER:
b. Yes, Yolly can be held liable for insider trading.
The term “insider” includes any person whose relationship to the issuer gives him access to material non-
public information about the issuer or the security. Applying the said definition, Yolly is an insider because
she is a staff member in the office of the Corporate Secretary of YEI and this relationship gives her access
to material non-public information about YEI (the issuer) and its securities. Accordingly, the purchase of
500 shares in YCC by Yolly, an insider, amounts to insider trading

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 XVII
Ysidro, a paying passenger, was on board Bus No. 904 owned and operated by Yatco Transportation
Company (Yatco). He boarded the bus at Munoz, Nueva Ecija with Manila as his final destination.
He was seated on the first row, window seat on the left side of the bus. As the bus was negotiating the
national highway in front of the public market of Gerona, Tarlac, the bus came to a full stop because
of the traffic. The driver of the bus took this opportunity to check on the tires of the bus and to relieve
himself. As he was alighting from the bus to do these, an unidentified man standing along the highway
hurled a huge rock at the left side of the bus and hit Ysidro between his eyes. He lost consciousness
and immediately the driver, with the conductor, drove the bus to bring him to the nearest hospital.
He expired before the bus could reach the hospital.
Ysidro's wife and children brought a civil action to collect damages from Yatco, alleging that as a
common carrier, it was required to exercise extraordinary diligence in ensuring the safety of its
passengers. They contended that, in case of injuries and/or death on the part of any of its passengers,
the common carrier is presumed to be at fault. In its defense, Yatco alleged that it is not an absolute
insurer of its passengers and that Ysidro's death was not due to any defect in the means of transport
or method of transporting passengers, or the negligent acts of its employees. Since the accident was
due to the fault of a stranger over whom the common carrier had no control, or of which it did not
have any prior knowledge to be able to prevent it, the cause of Ysidro's death should be considered
a fortuitous event and not the liability of the common carrier.
(a) Is a common carrier presumed to be at fault whenever there is death or injury to its passengers,
regardless of the cause of death or injury? (2.5%)
(b) What kind of diligence is required of common carriers like Yatco for the protection of its
passengers? (2.5%)
(c) Will your answer be the same as your answer in (b) above, if the assailant was another paying
passenger who boarded the bus and deliberately stabbed Ysidro to death? (2.5%)
SUGGESTED ANSWERS
(a) Is a common carrier presumed to be at fault whenever there is death or injury to its passengers, regardless
of the cause of death or injury? (2.5%) YES. In case of death or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary dilligence. (A 1735 NCC)
(b) What kind of diligence is required of common carriers like Yatco for the protection of its passengers?
(2.5%) Common carrier is bound by law to observe extraordinary diligence in the vigilance over the goods
and the safety of passengers
(c) Will your answer be the same as your answer in (b) above, if the assailant was another paying passenger
who boarded the bus and deliberately stabbed Ysidro to death? (2.5%) No. As a rule, the common carrier
is responsible for injuries suffered by a passenger on account of the willful acts or negligence or other
passengers or of strangers, if the common carrierʼs employees through the exercise of the diligence of a
good father of a family could have prevented or stopped the act

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 XVIII.
Onassis Shipping, Inc. (Onassis) operated passenger vessels and cargo trucks, and offered its services
to the general public. In line with its vision and mission to protect the environment, Go-Green Asia
(Go-Green), an NGO affiliated with Greenpeace, entered into a contract with Onassis whereby
GoGreen would operate with its own crew the MN Dolphin, an ocean-going passenger vessel of
Onassis. While on its way to Palawan carrying Go-Green's invited guests who were international and
local observers desirous of checking certain environmental concerns in the area, the MN Dolphin
encountered high waves and strong winds caused by a typhoon in the West Philippine Sea. The rough
seas led to serious physical injuries to some of the guests.
Discuss the liabilities of Onassis and Go-Green to the passengers of the MN Dolphin. Explain briefly
your answer. (3%) (2017 BAR)

SUGGESTED ANSWER
The contract that Onassis and Greenpeace entered into is a bareboat or demise charter because Greenpeace
was not only given possession of the vessel but also the command and control of the navigation as result of
its authority to hire its own crew who will man the vessel. The bareboat charter effectively converts Onassis
from a common carrier a private carrier (Federal Phoenix Assurance v. Fortune Sea Carrier, Inc. G.R. No.
188118, November 23, 2015). Being a mere lessor and having ceased to be the owner of the vessel with
respect to the navigation, Onassis has no liability to the passengers who contracted with Greenpeace.
Greenpeace is the one liable to the passengers for the injuries they so tamed in the course of the navigation

XIX
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%)
(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%)

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SUGGESTED ANSWER
(a) NO. The “incontestability clause” is a provision in law that after a policy of life insurance made payable
on the death of the insured shall have been in force during the lifetime of the insured for a period of 2 years
from the date of its issue or of its last reinstatement, the insurer cannot prove that the policy is void ab initio
or is rescindable by reason of fraudulent concealment or misrepresentation of the insured or his agent.
(b) YES? The insurer is liable when suicide is committed after the policy has been in force for a period of
two years from the date of issue or its last reinstatement, unless the policy provides a shorter period. (SEC
183,IC)
(POWERPOINT)
GR: The insurer is liable when suicide is committed after the policy has been in force for a period of two
years (at least 2 years) from the date of its issue or its last reinstatement.
XPN: when suicide is committed in the state of insanity, it shall be compensable regardless of the date of
commission (BAR 2018: Insured was diagnosed with psychotic tendency that graduated into extreme
despondency was considered a case of insanity)

XX.
The newly restored Ford Mustang muscle car was just released from the car restoration shop to its
owner, Seth, an avid sportsman. Given his passion for sailing, he needed to go to a round-the-world
voyage with his crew on his brand-new 180-meter yacht. Hearing about his coming voyage, Sean, his
bosom friend, asked Seth if he could borrow the car for his net roadshow. Sean, who had been in
display the restored car of Seth in major cities of the country. Seth agreed and lent the Ford Mustang
to Sean. Seth further expressly allowed Sean to use the car even for his own purposes on special
occasions during his absence from the country. Seth and Sean then went together to Bayad Agad
Insurance Co. (BAIC) to get separate policies for the car in their respective names.
BAIC consults you as its lawyer on whether separate policies could be issued to Seth and Sean in
respect of the same car.
a. What is insurable interest? (2%)
b. Do Seth and Sean have separate insurable interests? Explain briefly your answer
SUGGESTED ANSWER
(a) Insurable interest is that interest which a person is deemed to have in the subject matter of the insured
where he has a relation or connection to it such that the person will derive pecuniary benefit or advantage
from the preservation of the subject matter or will suffer pecuniary loss or damage from its destruction,
termination or injury by the happening of the event insured against it (44 CJS 870).
(b) Seth and Sean have separate insurable interests. Seth's insurable interest is his legal and/or equitable
interest over the vehicle as an owner while Sean's insurable interest is the safety of the vehicle which may
become the basis of liability in case of loss or damage to the vehicle (Malayan Insurance Co., Inc. v.
Philippine First Insurance Co., G.R. No. 184300 July 11, 2012, 676 SCRA 268).

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 XXI.
A distinctive-tasting pastillas is well-known throughout the country as having been developed within
a close-knit women's group in Barangay San Ysmael which is located along a very busy national
highway. Its popularity has encouraged the setting up of several shops selling similar delicacies, with
the most famous product being the pastillas of "Barangay San Ysmael." Eventually, the pastillas of
Aling Yoling under the brand name "Ysmaellas" began to attract national distinction. Aling Yoling
therefore registered it as a copyright with the National Library. Her neighbor, Aling Yasmin,
realizing the commercial value of the brand, started using the term "Ysmaellas" for her pastillas but
used different colors. Aling Yasmin registered the brand name "Ysmaellas" with the Intellectual
Property Office (IPO).
(a) Can Aling Yoling successfully obtain court relief to prohibit Aling Yasmin from using the brand
name "Ysmaellas" in her products on the basis of her (Aling Yoling's) copyright? What is the
difference between registration as a copyright and registration as a trade or brand name? (2.5%)
(b) Can Aling Yasmin seek injunctive relief against Aling Yoling from using the brand name
"Ysmaellas," the latter relying on the doctrine of "prior use" as evidenced by her prior copyright
registration? (2.5%)
(c) Can Aling Yoling seek the cancellation of Aling Yasmin's trademark registration of the brand
name "Ysmaellas" on the ground of "Well Known Brand" clearly evidenced by her (Aling Yoling's)
prior copyright registration, actual use of the brand, and several magazine articles? (2.5%)
a.) No, no court relief can be obtained on the basis of registration as copyright if the other party make use
of the same as trade name. Registration of copyright refers to intellectual creations which are either visual,
written, performed or recreated from the same origin. While trade name to that effect belongs to those
distinctive mark which may either be combination of colors, lines, shapes and letters which intended to
represent or symbolize commercial products or services. By such distinctions as well as the fact of prior
registration of the disputed trade name, Aling Yoling has no cause of action to obtain any court relief.
b.) No, Aling Yasmin can neither seek injunctive relief if Aling Yoling will invoke "prior use" as the latter's
basis. While registration of said trade name was made under the copyright rules, same will not legally affect
the intellectual property right of Aling Yoling over the disputed trade name, as her act of prior registration
satisfy the rules on "prior use" of trade name.
c) Yes, on the basis of actual and prior use of the disputed brand name. Popularity of trade name used for
commercial purposes is a matter of evidence so that Aling Yasmin's trademark registration may not be
given credence and must be cancelled.

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