2007 bar questions and suggested answers (LABOR LAW AND SOCIAL LEGISLATION)

Labor and Social Legislation -I(5 Points) a. What is the principle of codetermination? The principle of co-determination refers to the right of workers to participate in policy and decision-making processes directly affecting their rights and benefits, without intruding into matters of management prerogatives. (PAL v. NLRC, G.R. No. 85985, August 13, 1993). b. What, if any, is the basis under the Constitution for adopting it? Article XII (On Social Justice and Human Rights), Sec. 3, par. 2 provides, among others, that workers shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. - II (5 Points) a. Discuss the statutory restrictions on the employment of minors? Under Article 139 of the Labor Code, as amended, it is prohibited to employ minors in hazardous, or deleterious and immoral undertakings. It also prescribes that no child below 15 shall be employed unless he works directly under his parents or guardians and his work does not interfere with his schooling; those between 15 and 18 shall comply with appropriate DOLE regulations. b. May a house help be assigned to non-household work? Alternative Answer:

No. Under Article 145 of the Labor Code, no househelper shall be assigned to work in a commercial, industrial or agricultural enterprise at a wage salary rate lower than that provided for agricultural or non-agricultural workers as described herein. Alternative Answer: Yes, provided that he/she receives a salary not lower than that provided for non-agricultural workers. - III (5 Points) a. Discuss the types of illegal recruitment under the Labor Code. Types of illegal recruitment under the Labor Code are: 1. Recruitment by a non-licensee. 2. Simple illegal recruitment is committed by a licensee against one or two persons only. (People v. Sadiosa, G.R. No. 107084, May 15, 1988). 3. Large scale or qualified recruitment which is committed against three or more persons, individually or as a group. 4. Illegal recruitment is qualified as economic sabotage when done by a syndicate or where it is committed in large scale. b. In initiating actions against alleged illegal recruiters, may the Secretary of Labor and Employment issue search and arrest warrants? No, the Secretary of DOLE, not being a judge, cannot issue a search or arrest warrants. Under Article III, Section 2 of the 1987 Constitution, it is only judges, and no other, who may issue warrants of arrest and search. (Salazar v. Achacoso, G.R. No. 81510, March 14, 1990).

- IV (5 Points) Explain a. The Globe Doctrine. The Globe Doctrine refers to the method of determining the will or desire of the employee which is an important factor in determining the appropriate bargaining unit. The best way to determine such preference is through referendum or plebiscite. (Globe Machine & Stamping Company, 3 NLRB 294 [1937]). b. The Community of Interest Rule. Alternative Answer: The Community of Interest Rule states that the employees within an appropriate bargaining unit must have commonality of collective bargaining interests as well as substantial mutual interests in terms of employment and working conditions as evidenced by the type of work they perform. (San Miguel Corporation v. Laguesma, G.R. No. 100485, September 21, 1984). Alternative Answer: Under the Community of Interest Rule, groups having substantial similarity of work and duties or similarity of working conditions shall constitute the appropriate bargaining unit. (Rothenberg, Labor Relations, pages 490491.) -V(5 Points) May non-lawyers appear before the NLRC or Labor Arbiter? May they charge attorney's fee for such appearance provided it is charged against union funds and in an amount freely agreed upon by the parties? Discuss fully. Yes, non-lawyers may appear before the Commission or any

Labor 1. If they

Arbiter represent themselves;

only: or

2. If they represent their own legitimate labor organization or members thereof; or 3. If they are duly accredited by a Legal Aid Office which is DOJ or IBP-recognized. Non-lawyers may not charge attorneys fees though charged against the union funds and agreed upon. Attorneys fees presuppose the existence of an attorney-client relationship. (PAFLU v. BISCOM, G.R. No. L-23959, November 29, 1971). - VI (5 Points) Procedurally, how do you stay a decision, award or order of the Labor Arbiter? Discuss fully. Alternative Answer: By filing for injunction within ten (10) calendar days from the receipt of the decision on the grounds of grave abuse, intrinsic fraud, on pure questions of law and/or serious, erroneous factual findings causing grave or irreparable damage, and such other grounds under Article 223 of the Labor Code, as amended. Alternative Answer: Except for the reinstatement aspect, it is stayed by filing an appeal within ten (10) calendar days from the receipt, subject to the posting of an appeal bond if there is a monetary award. - VII (5 Points)

a. May the NLRC or the courts take jurisdictional cognizance over compromise agreements/settlements involving labor matters? Alternative Answer: Article 227 provides that any compromise agreement involving labor matters entered into by the parties with the assistance of the DOLE shall be final and binding upon the parties, except in cases of non-compliance or, if based on fraud, when misrepresentation or coercion is present. Alternative Answer: Yes, provided the compromise settlement was executed with the assistance of the BLR or the regional office of the DOLE as required by Article 227 of the Labor Code. The execution of a compromise settlement is only valid with the assistance of the BLR or the regional office of the DOLE. (Mindoro Lumber and Hardware v. Bacay, et.al. G.R. No. 158753, June 8, 2005). b. How sacrosanct are statements/data made at conciliation proceedings in the Department of Labor and Employment? What is the philosophy behind your answer? Under Article 223, statements made at conciliation proceedings are privileged communications that can neither be used as evidence nor can conciliators testify on any matters taken up in the proceedings. The philosophy is to ascertain the truth about the controversy which the parties may be afraid to divulge if the revelations can be utilized against them later on. - VIII (5 Points) Discuss in full the jurisdiction over the civil and criminal aspects of a case involving an unfair labor practice for which a charge is pending with the Department of Labor and Employment.

Jurisdiction over unfair labor practices which are also criminal offenses initially lies with the Labor Arbiters. No criminal prosecutions can be instituted without final judgment that an unfair labor practice has in fact been committed. The administrative findings are neither binding in the criminal case nor available as evidence of guilt, but merely prove procedural compliance. In a labor dispute involving national interest, the Secretary of Labor under Article 263 (g) may take cognizance of the civil or administrative aspect of the labor case, depriving the Labor Arbiter from taking cognizance of the unfair labor practice case. After the finality of judgment finding ULP, the criminal aspect can be instituted before the prosecutor. - IX (5 Points) Discuss the legal requirements of a valid strike. It must comply with the purpose and means test which means that both the purpose and the means to carry out the strike must be legal. The purpose must be based solely on bargaining deadlock (economic) and/or unfair labor practice (political). The means to carry out the strike should also be legal where there should be no illegal acts committed in the course of the strike. -X(5 Points) Discuss briefly the instances when non-compliance by the employer with a reinstatement order of an illegally dismissed employee is allowed. When reinstatement is no longer feasible due to strained employer-employee relationship, bona fide closure of business, valid abolition of position, health and/or age

reasons, separation pay in lieu of reinstatement may be allowed. - XI (5 Points) a. A rule, when is retirement due? As a rule, optional retirement is due at the age of 60 and compulsory retirement at the age of 65, with at least 5 years of service (R.A. 7641) or as may be provided for in the CBA or company retirement program. b. When is retirement due for underground miners? Optional retirement is due for underground miners upon reaching the age of 50 years or more and compulsory retirement at age of 60 provided he has serve at least 5 years as such. (R.A. 8558). - XII (5 Points) a. How do you execute a labor judgment which, on appeal, had become final and executory? Discuss fully. By filing a motion for execution and serving a writ of execution to be served by the sheriff or such law enforcement agency as may be deputized by the DOLE or NLRC. It may also be issued motu propio by the Labor Arbiter. (Articles 223 and 224, Labor Code). b. Cite two instances when an order of execution may be appealed. 1. When execution becomes impossible or unjust, it may be modified or altered on appeal to harmonize the same with justice and the facts (Torres v. NLRC, G.R. No. 107014, April 12, 2000) 2. Supervening events may warrant modification in the execution of the judgment as when reinstatement is no

longer possible because position was abolished as a costcutting measure due to losses. (Abalos v. Philex Mining Corp., G.R. No. 140374, November 27, 2002) 3. Where the writ is found defective, exceeds or varies the award and/or is irregularly issues. (DBP v. Union Bank, G.R. No. 155838, January 13, 2004; Metrobank v. CA, G.R. No. 110147, April 17, 2001) 4. Where there is wrongful computation of the award. - XIII (5 Points) May a decision of the Labor Arbiter which has become final and executory be novated through a compromise agreement of the parties? Compromise agreement is encouraged and authorized by law. Hence, they may be made even when the judgment is final and executory. (Jesalva v. Bautista, 105 Phil 348, 24 March 1959) The validity of the agreement is determined by the compliance with the requisites and principles of contract, and not by the time it was entered into. As provided by the law on contract, a valid compromise must have the following elements: (1) the consent of the parties to the compromise; (2) an object certain that is the subject matter of the compromise, and (3) the cause of the obligation that is established. (Magbanua v. Uy, G.R. No. 161003, May 05, 2005) - XIV (5 Points) AB, single and living-in with CD (a married man), is pregnant with her fifth child. She applied for maternity leave but her employer refused the application because she is not married. Who is right? Decide.

While the maternity leave is rightfully denied, the employers reason is misplaced. The SSS law does not require marriage for entitlement. However, since AB is already pregnant with her fifth child, she can no longer claim for maternity leave benefits. - XV (5 Points) Some officers and rank-and-file members of the union staged an illegal strike. Their employer wants all the strikers dismissed. As the lawyer, what will you advise the employer? Discuss fully. There is no wholesale dismissal of strikers even if the strike was declared illegal. Under Article 264 of the Labor Code, mere participation of a worker in an illegal strike shall not constitute sufficient ground for termination. Union officers, however, who knowingly engaged in an illegal strike are deemed to have lost their employment status. For a worker or union member to suffer loss of employment, he must have knowingly participated in the commission of illegal act during the strike. (CCBPI Postmix Workers Union v. NLRC, G.R. No. 114521, November 27, 1998; International Container Terminal Services, Inc., v. NLRC, G.R. NO. 115452, December 21, 1996). - XVI (5 Points) A carpenter is employed by a private university in Manila. Is the carpenter a regular or a casual employee? Discuss fully. Alternative Answer The carpenter is a casual employee. Under the reasonable casual connection rule, the carpenters work is not usually necessary and desirable in the usual trade or business of the employer university.

Alternative Answer If the employment of the carpenter is occasional or sporadic and brief in nature, his employment us casual, because the work he is performing is not in the usual course of the schools trade or business. However, if the carpenter has rendered services for at least one year, whether continuous or broken, he becomes a regular employee by operation of law, with respect to the activity for which he is employed. His employment shall continue while such activity exists. (Article 280, Labor Code; See also Philippine Geothermal, Inc., v. NLRC, G.R. Nos. 82643-67, August 30, 1990; Kimberly Independent Labor Union, etc. v. Drilon, G.R. Nos. 77629 and 78791, May 9, 1990). - XVII (5 Points) P.D. 1508 requires the submission of disputes before the Barangay Lupong Tagapamayapa prior to the filing of cases with the courts or other government bodies. May this decree be used to defeat a labor case filed directly with the Labor Arbiter? Discuss fully. Labor disputes are the exception to P.D. 1508 (Montoya v. Escayo, G.R. 82211-12, March 21, 1989). Under Article 226, motions to dismiss before the Labor Arbiter are only allowed on grounds to dismiss before the Labor Arbiter are only allowed on grounds of lack of jurisdiction, improper venue and bar by prior judgment or prescription is not a valid ground to defeat the labor case. - XVIII (5 Points) Inday was employed by mining company X to perform laundry service at its staffhouse. While attending to her assigned task, she slipped and hit her back on a stone.

Unable to continue with her work, she was permitted to go on leave for medication, but thereafter she was not allowed to return to work. She filed a complaint for illegal dismissal but her employer X contended that Inday was not a regular employee but a mere househelp. Decide. Inday is a regular employee because she performs work that is usually necessary and desirable in the business of the mining company. Services rendered in a staff house of a company within the premises of a company cannot be considered as household work. (Apex Mining Company, Inc., v. NLRC., G.R. No. 94951, April 22, 1991). - XIX (5 Points) Cite five grounds for disciplinary action by the Philippine Overseas Employment Administration (POEA) against overseas workers. Pre-Employment Stage: 1. Using false information or documents for job application; 2. Unjustified refusal to depart for overseas assignment. Employment Stage: 1. Commission of a criminal offense punishable by Philippine or host country laws; 2. Unjustifiable breach of POEA contract; 3. Embezzlement of company funds; 4. Embezzlement of money or property of fellow workers entrusted for delivery to relatives in the Philippines; 5. Violation of the religions or sacred practices of host country; 6. Drunkenness and disorder; 7. Desertion or abandonment of work; 8. Immoral activities, including prostitution; 9. Illegal gambling; 10. Drug addiction;

11. Creating trouble at the worksite or in the vessel; 12. Initiating or joining a strike or work stoppage where the host country prohibits the same; 13. Mutiny - XX (5 Points) AB, a non-resident American, seeks entry to the country to work as Vice-President of a local telecommunications company. You are with the Department of Labor and Employment (DOLE). What permit, if any, can the DOLE issue so that AB can assume as Vice-President in the telecommunications company? Discuss fully. AB must secure an employment permit and employment registration certificate from the DOLE, who shall issue it after determining that there is no other person in the Philippines who is competent, able or willing to do work for which the alien is hired. NOTHING FOLLOWS

Taxation Law
I. (5%) What is the nature of the taxing power of the provinces, municipalities and cities? How will the local government units be able to exercise their taxing powers? The taxing power of local governments is not an inherent power but one delegated under the Philippine Constitution (1987 Constitution, Article X; Manila Electric Co., v. Province of Laguna, G.R. No. 131359, May 5, 1999; Mactan Cebu International Airport Authority v. Marcos, G.R. No. 120082, September 11, 1996; Basco v. PAGCOR, G.R. No. 150947, July 15, 2003). II. (10%) The Local Government Code took effect on January 1, 1992. PLDT's legislative franchise was granted sometime before 1992. Its franchise provides that PLDT will only pay 3% franchise tax in lieu of all taxes. The legislative franchises of Smart and Globe Telecoms were granted in 1998. Their legislative franchises state that they will pay only 5% franchise tax in lieu of all taxes. The Province of Zamboanga del Norte passed an ordinance in 1997 that imposes a local franchise tax on all telecommunication companies operating within the province. The tax is 50% of 1% of the gross annual receipts of the preceding calendar year based on the incoming

receipts, or jurisdiction.

receipts

realized,

within

territorial

Is the ordinance valid? Are PLDT, Smart and Globe liable to pay franchise taxes? Reason briefly. The ordinance is valid as it was passed pursuant to the powers of provinces and cities to impose taxes on businesses with franchises under the Local Government Code (LGC). The LGC, which took effect on January 1, 1992, withdrew tax exemptions or incentives previously enjoyed by all persons, except certain entities. (Section 193, LGC) PLDT is liable to pay the local franchise taxes because its legislative franchise was granted by Congress prior to the passage of the LGC. Thus, the provision of the LGC withdrawing tax exemptions or incentives applies to PLDT. Smart and Globe are exempt from the local franchise taxes imposed by the province since their respective legislative franchises were granted in 1998, or after the enactment of the LGC. Therefore, with respect to Smart and Globe, the withdrawal of tax exemptions or incentives under the :GC was superseded by the legislative franchise requiring payment of the 5% franchise tax in lieu of all taxes. (PLDT v. City of Davao, G.R. No. 143867, August 22, 2001 and March 25, 2003). III. (5%) What kind of taxes, fees and charges are considered as National Internal Revenue Taxes under the National Internal Revenue Code (NIRC)? National Internal Revenue Taxes are national taxes which the Bureau of Internal Revenue shall collect under the National

Internal 1. 2. 3. 4. 5. 6. 7. Other collect.

Revenue Code (NIRC, Section 2). These are: Income Tax; Estate and Donors Taxes; Value-Added Tax; Other Percentage Taxes; Excise Taxes; Documentary Stamp Tax; and taxes that may be imposed which the BIR shall IV. (10%)

XYZ Corporation, an export oriented company, was able to secure a Bureau of Internal Revenue (BIR) ruling in June 2005 that exempts from tax the importation some of its raw materials. The ruling is of first impression, which means the interpretations made by the Commissioner of Internal Revenue is one without established precedents. Subsequently, however, the BIR issued another ruling which in effect would subject to tax such kind of importation. XYZ Corporation is concerned that said ruling may have a retroactive effect, which means that all their importations done before the issuance of the second ruling could be subject to tax. a. What is BIR ruling?

A BIR ruling is an administrative interpretation of the Revenue Law as applied and implemented by the Bureau. They can be relied upon by taxpayers and are valid until otherwise determined by the courts or modified or revoked by a subsequent ruling or opinion. They are accorded great weight and respect, but not binding on the courts. (Commission v. Ledesma, L-17509, January 30, 1970). b. What is required to make a BIR ruling of first impression

valid

one?

A BIR ruling of first impression, to be a valid ruling, must be issued within the scope of authority granted to the Commissioner of Internal Revenue, and not contravene any law or decision of the Supreme Court. (Michelle J. Lhuiller v. CIR, G.R. No. 150947, July 15, 2003; Sec. 7, NIRC) c. Does a BIR ruling have a retroactive effect, considering the principle that tax exemptions should be interpreted strictly against the taxpayer? A BIR ruling cannot be given retroactive effect if it would be prejudicial to the taxpayer. Section 246 of the NIRC provides for retroactive effect in the following cases: 1. Where the taxpayer deliberately mis-states or omits material facts from his return or any document required of him by the Bureau of Internal Revenue; 2. Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the rulings is based; or 3. Where the taxpayer acted in bad faith (Section 246, NIRC). V. (10%) ABC Corporation sold a real property in Malolos, Bulacan to XYZ Corporation. The property has been classified as residential and with a zonal valuation of P1, 000 per square meter. The capital gains tax was paid based on the zonal value. The Revenue District Officer (RDO), however, refused to issue the Certificate Authorizing Registration for the reason that based on his ocular inspection the property should have a higher zonal valuation determined by the Commissioner of Internal Revenue because the area is already a commercial area. Accordingly, the RDO wanted

to make a recomputation of the taxes due by using the fair market value appearing in a nearby bank's valuation list which is practically double the existing zonal value. The RDO also wanted to assess a donor's tax on the difference between the selling price based on the zonal value and the fair market value appearing in a nearby bank's valuation list. a. Does the RDO have the authority or discretion to unilaterally use the fair market value as the basis for determining the capital gains tax and not the zonal value as determined by the Commissioner of Internal Revenue? Reason briefly. The RDO has no discretion. The only value that can be applied is the zonal value as fixed and determined by the Commissioner. (Section 6[E], NIRC). b. Should the difference in the supposed taxable value be legally subject to donor's tax? Reason briefly. By applying the fixed zonal value, there should be no difference in the taxable value and the declared value that might be subject of a donors tax. However, assuming that such a difference may exist, the variance in price may raise a legal presumption of an intended donation. A demand gift arises only if tax is avoided as a result of selling property at a price lower than its fair market value. In a sale subject to 6% capital gains tax, the tax is always based on the gross selling price or fair market value whichever is higher. This means, therefore, that the deemed gift provision under the Tax Code will not apply because the 6% capital gains tax can be applied to the higher value. VI. (5%)

Z is a Filipino immigrant living in the United States for more than 10 years. He is retired and he came back to the Philippines as a balikbayan. Every time he comes to the Philippines, he stays here for about a month. He regularly receives a pension from his former employer in the United States, amounting to US$1, 000 a month. While in the Philippines, with his pension pay from his former employer, he purchased three condominium units in Makati which he is renting out for P15, 000 a moth each. a. Does the US$1, 000 pension become taxable because he is now residing in the Philippines? Reason briefly. Alternative Answer: No, the US$1,000 pension is excluded from gross income because it is received by a Filipino resident or non-resident from a foreign private institution which under Section 32(B) (6) of the NIRC is excluded from gross income. Alternative Answer: No, the US$1,000 pension is excluded from gross income because it is derived from sources outside of the Philippines by a non-resident citizen. He may only be taxed for income from sources within the Philippines. (Section 42[A][3] in relation to Section 23, NIRC) b. Is his purchase of the three condominium units subject to any tax? Reason briefly. Alternative Answer: Yes, the purchase of the 3 condominium units is subject to: 1. Documentary stamp tax (payable by either seller or purchaser) (Section 196, NIRC); 2. Local transfer tax imposed under the Local Government Code (Sec. 134, LGC) 3. Value added tax, if Z purchased the units from real estate developers and/or real estate lessors; and

4. Income tax, either capital gains tax or regular income tax, depending on whether the condominium is regarded as a capital asset or an ordinary asset of the seller Alternative Answer: Strictly speaking, purchase is not a taxable event under the Internal Revenue Code, except for the requirement of documentary stamp tax in the case of real property. (Sec. 196, NIRC) c. Will Z be liable to pay income tax on the P45,000 monthly income? Reason briefly. Yes, Z shall be liable to pay income tax since he is now a taxpayer engaged in the business of leasing real property (Section 42[A][4], NIRC) VII. (5%) Antonia Santos, 30 years old, gainfully employed, is the sister of Edgardo Santos. She died in an airplane crash. Edgardo is a lawyer and he negotiated with the airline company and insurance company and they were able to a agree total settlement of P10 Million. This is what Antonia would have earned as somebody who was gainfully employed. Edgardo was her only heir. a. Is the P10 Million subject to estate tax? Reason briefly. No, the P10.0 million does not form part of Antonias taxable estate. It is either damages or compensation arising from the death of Antonia. (Sec. 32[b][4], Chapter VI, NIRC as amended by RA 8424) b. Should Edgardo report the P10 Million as his income being Antonia's only heir? Reason briefly. No, the P10.0 million settlement need not be reported by

Edgardo since the amount qualified as compensation for personal injuries which is excluded from gross income. (Section 32[B][4] of the NIRC) VIII. (5%) Nutrition Chippy Corporation gives all its employees (rank and file, supervisors and managers) one sack of rice every month valued at P800 per sack. During an audit investigation made by the Bureau of Internal Revenue (BIR), the BIR assessed the company for failure to withhold the corresponding withholding tax on the amount equivalent to the one sack of rice received by all the employees, contending that the sack of rice is considered as additional compensation for the rank and file employees and additional fringe benefit for the supervisions and managers. Therefore, the value of the one sack of rice every month should be considered as part of the compensation of the rank and file subject to tax. For the supervisors and managers, the employer should be the one assessed pursuant to Section 33 (a) of the NIRC. Is there a legal basis for the assessment made by the BIR? Explain your answer. No, the monthly sack of rice not exceeding P1,000.00 for the rank and file employees is a de minimis benefit not subject to tax. The rice is a privilege the employer furnishes his employees, of relatively small value, offered to promote the health, goodwill, contentment or efficiency of his employees. (Revenue Regulations No. 02-98, [April 17. 1998]; BIR Ruling No. 023-02 [June 21, 2002] citing Section 2.78[A], Revenue Regulations No. 2-98 & Section 33, 1997 TRA as implemented by Revenue Regulations No. 3-98 as amended) IX. (10%)

Weber Realty Company which owns a three-hectare land in Antipolo entered into a Joint Venture Agreement (JVA) with Prime Development Company for the development of said parcel of land. Weber Realty as owner of the land contributed the land to the Joint Venture and Prime Development agreed to develop the same into a residential subdivision and construct residential houses thereon. They agreed that they would divide the lots between them. a. Does the JVA entered into by and between Weber and Prime create a separate taxable entity? Explain briefly. Alternative Answer: No, since the arrangement between Weber Realty Co. and Prime Development Co. is for the purpose of understanding a construction project, there is no separate taxable entity pursuant to Section 22[B[ of the NIRC. Alternative Answer: Yes, but only for purposes of the Value Added Tax, a joint venture for the construction project resulted in the creation of a separate taxable entity. It is not subject to income tax pursuant to Section 22[B[ of the NIRC. b. Are the allocation and distribution of the saleable lots to Weber and prime subject to income tax and to expanded withholding tax? Explain briefly. No, the allocation of saleable lots to Weber and Prime is not subject to income tax and the expanded withholding tax. There is no income realized in the distribution of property, but merely a return of capital. c. Is the sale by Weber or Prime of their respective shares in the saleable lots to third parties subject to income tax and to expanded withholding tax? Explain briefly.

Yes, the sale by Weber and Prime of their respective shares results in the realization of income subject to income tax and expanded withholding tax. X. (10%) Noel Santos is a very bright computer science graduate. He was hired by Hewlett Packard. To entice him to accept the offer for employment, he was offered the arrangement that part of is compensation would be an insurance policy with a face value of P20 Million. The parents of Noel are made the beneficiaries of the insurance policy. a. Will the proceeds of the insurance form part of the income of the parents of Noel and be subject to income tax? Reason briefly. No, under the law, the proceeds of life insurance policies paid to the heirs or beneficiaries upon the death of the insured are excluded from gross income. (Sec. 32[B][1], NIRC) b. Can the company deduct from its gross income the amount of the premium? Briefly. Yes, the premiums paid are deductible business expenses, provided the employer is not the beneficiary. The premiums constitute ordinary and necessary expenses of the company. (Section 36[A][4] and Section 34[A], NIRC) XI. (5%) The Congregation of the Mary Immaculate donated a land a dormitory building located along Espaa St. in favor of the Sisters of the Holy Cross, a group of nuns operating a free clinic and high school teaching basic spiritual values. Is the donation subject to donor's tax? Reason Briefly.

The donation is not subject to donors tax. Gifts made in favor of educational and/or charitable or religious institutions shall be exempt from the donors tax provided that not more than 30% of said gifts shall be used by such donee for administration purposes. (Section 101[A][3]; Commissioner of Internal Revenue v. Court of Appeals, Court of Tax Appeals and Ateneo de Manila University, G.R. No. 115349, April 18, 1997). XII. (5%) Remedios, a resident citizen, died on November 10, 2006. She died leaving three condominium units in Quezon City valued at P5 Million each. Rodolfo was her only heir. He reported her death on December 5, 2006 and filed the estate tax, he asked the Commissioner of Internal Revenue to give him one year to pay the estate tax due. The Commissioner approved the request for extension of time provided that the estate tax be computed on the basis of the value of the property at the time of payment of the tax. a. Does the Commissioner of Internal Revenue have the power to extend the payment of estate tax? If so, what are the requirements to allow such extension? Yes, the Commissioner may extend the payment of the tax subject to the following conditions: 1. Timely payment would impose undue hardship upon the estate or the heirs; 2. Posting of a bond exceeding double the amount of the tax may be required by the Commissioner; 3. The extension shall not exceed 2 years in case of extrajudicial settlement of the estate or 5 years in case of judicial settlement. (Sec. 91, NIRC)

b. Does the condition that the basis of the estate tax will be the value at the time of the payment have legal basis? Reason briefly. No. The value of the gross estate shall be determined at the time of death of the decedent. (Sections 85 and 90[A][1], NIRC) XIII. (5%) ABC Corporation won a tax refund case for P50 Million. Upon execution of the judgement and when trying to get the tax Credit Certificates (TCC) representing the refund, the Bureau of Internal Revenue (BIR) refused to issue the TCC on the basis of the fact that the corporation is under audit by the BIR and it has a potential tax liability. Is there a valid justification for the BIR to withhold the issuance of the TCC? Explain your answer briefly. There is no valid justification to withhold the TCC. Offsetting of the amount of TCC against a potential tax liability is not allowed because both obligations are not yet fully liquidated. TCC has been determined as to its amount while the deficiency tax is yet to be determined through the completion of the audit. (Philex Mining Corporation v. Commissioner of Internal Revenue, Court of Appeals, and Court of Tax Appeals, G.R. No. 125704, August 28, 1998) NOTHING FOLLOWS.

Remedial Law
-I10% a. What are the rules on the recognition and enforcement of foreign judgments in our courts? (6%) The rules on the recognition and enforcement of foreign judgments in our courts are as follows: 1. In the case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title to the thing. (Rule 39, Section 48[a], Rules of Court) 2. In case of a judgment or final order against a person, the judgment or final order is presumptive evidence against of a right as between the parties and their successors in interest by a subsequent title. (Rule 39, Section 48[b], Rules of Court) 3. In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, or fraud, or clear mistake of law or fact. (Rule 39, Section 48, last paragraph, Rules of Court) b. Can a foreign arbitral award be enforced in the Philippines under those rules? Explain briefly. (2%) No. Foreign arbitral awards are not enforced like foreign court judgments under Rule 39 of the Rules of Court, but they can be enforced under Section 44 (RA 9285, Alternative Dispute Resolution Act of 2004) A foreign arbitral award, when confirmed by the RTC, shall be enforced in the same manner as final and executory decisions of courts of the Philippines. Said law provides that the case shall be filed with the Regional Trial Court as a special proceeding, and if the 1958 New York Convention on the Recognition and Enforcement of Foreign Judgments is not applicable, the court may, on grounds of comity and reciprocity, recognize a

non-convention

award

as

convention

award.

c. How about a global injunction issued by a foreign court to prevent dissipation of funds against a defendant therein who has assets in the Philippines? Explain briefly. (2%) Yes, a global injunction also known as the Mareva injunction, should be considered as an order of a foreign court. Therefore, the rule on recognition and enforcement of foreign judgments under Rule 39 must apply. (Asiavest Merchant Bankers v. CA, G.R. No. 110263, July 20, 2001) However, to prevent dissipation of funds, the action to enforce must be accompanied with an application for preliminary injuction. - II 10% True or False. If the answer is false, explain your answer briefly. a. The surviving parties rule bars Maria from testifying for the claimant as to what the deceased Jose had said to her, in a claim filed by Pedro against the estate of Jose (3%) FALSE. For the survivor disqualification rule of the Dead Man Statute to apply, one of the requisites is that the witness being offered is either a party plaintiff, or his assignor or a person in whose behalf a case is prosecuted. (Rule 130, Section 23, Rules of Court). Hence, Maria, being a mere witness who does not fall within the prohibition, is not barred from testifying. (Section 23, Rule 130, Rules of Court; Razon v. Intermediate Appellate Court, G.R. Nos. 74306 and 74315, March 16, 1992). b. A defendant who has been declared in default can avail of a petition for relief from the judgment subsequently rendered in the case. (3%)

FALSE. A petition for relief is an equitable remedy that can be availed of only if the assailed judgment has been entered for being final and executory. (Sections 1 and 3, Rule 38, Rules of Court; Aboitiz International Forwarders, Inc., v. Court of Appeals, G.R. No. 142272, May 2, 2006 and other cases) c. A motion is pleading. (2%) FALSE. A motion is not a pleading. A motion is an application for relief other than by a pleading (Section 1, Rule 15, 1997 Rules of Civil Procedure), except that in summary procedure when a prohibited motion to dismiss is filed, the court may treat the same as a pleading. Pleadings are the written statements of the respective claims and defenses on the parties submitted to the court for appropriate judgment. (Section 1, Rule 6, 1997 Rules of Civil Procedure) d. A counterclaim is pleading. (2%) TRUE. A counterclaim is a pleading because it is claim submitted to the court for appropriate judgment. (Section 1, Rule 6, 1997 Rules of Civil Procedure). It is any claim which a defending party may have against an opposing party. (Section 6, Rule 6, 1997 Rules of Civil Procedure). - III 10% 1. What is the hearsay rule? (5%)

The hearsay rule is that a witness can testify only to those facts which he knows of his personal knowledge; that is, those which are derived from his own perception, except as otherwise provided in the rules. (Section 36, Rule 130, Rules of Court). Moreover, hearsay evidence also includes all assertions though derived from personal knowledge, where the adverse party is not given an opportunity to crossexamine. (Section 36, Rule 130, Rules of Court)

2. In relation to the hearsay rule, what do the following rules of evidence have in common? (5%) 1. The rule on statements that are part of the res gestae; 2. The rule on dying declarations; 3. The rule on admissions against interest. Statements that are part of the res gestae (Section 42, Rule 130, Rules of Court), dying declarations (Section 37, Rule 130, Rules of Court) and admissions against interest (Section 38, Rule 130, Rules of Court) are all exceptions to the hearsay rule. - IV 10% Husband H files a petition for declaration of nullity of marriage before the RTC of Pasig City. Wife W files a petition for habeas corpus before the RTC of Pasay City, praying for custody over their minor child. H files a motion to dismiss the wife's petition on the ground of the pendency of the other case. Rule. The husbands motion to dismiss his wifes petition for habeas corpus, should be granted because the case for nullity of marriage constitutes litis pendentia. The custody of the minor child and the action for nullity of the marriage are not separate causes of action. Judgment on the issue of custody in the nullity of marriage case before the Pasig RTC, regardless of which party would prevail, would constitute res judicata on the habeas corpus case before the Pasay RTC since the former has jurisdiction over the parties and the subject matter. (Yu v. Yu, G.R. No. 164915, March 10, 2006; Section 1[e], Rule 16, 1997 Rules of Civil Procedure; Section 2, Rule 102, Rules of Court). The evidence to support the petition for nullity necessarily involves evidence of fitness to

take custody of the child as the court in the nullity proceedings has a duty under the Family Code to protect the bets interest of the child. -V10% a. Distinguish the effects of the filling of a demurrer to the evidence in a criminal case and its filing in a civil case. (5%) The effects of filing of a demurrer to the evidence in a criminal case. (Section 23, Rule 119, 2000 Rules of Criminal Procedure) are different from the effects of the filing of a demurrer in a civil case (Rule 33, 1997 Rules of Civil Procedure), as follows: 1. In a civil case, after the plaintiff has completed the presentation of his evidence, the defendant may move for dismissal on the ground that based on the facts and the law, the plaintiff has shown no right to relief. If the demurrer is denied, the movant shall have the right to present evidence. If the demurrer is granted but on appeal the order of dismissal is reversed, the movant shall be deemed to have waived the right to present evidence. (Section 1, Rule 33, 1997 Rules of Civil Procedure). 2. In criminal cases, after the prosecution has rested its case, the court may dismiss the action on the ground of insufficiency of evidence (1) on its own initiative after giving the prosecution an opportunity to be heard or (2) upon demurrer to evidence filed by the accused with or without leave of court. If the court denies the demurrer to evidence filed with leave of court, the accused may adduce evidence in his defense. When the demurrer to evidence is filed without leave of

court, the accused waives his right to present evidence and submits the case for judgment on the basis of the evidence for the prosecution. The motion for leave of court to file demurrer to evidence shall specifically state its grounds and shall be filed within a non-extendible period of five (5) days from its receipt. If the leave of court is granted, the accused shall file the demurrer to evidence within a non-extendible period of ten (10) days from notice. The prosecution may oppose the demurrer to evidence within a similar period from its receipt. The order denying the motion for leave of court to file demurrer to evidence or the demurrer itself shall not be reviewable by appeal or certiorari before the judgment. (Section 23, Rule 119, 2000 Rules of Criminal Procedure) b. What is reverse trial and when may it be resorted to? Explain briefly. (5%) A reverse trial is a trial where the accused presents his evidence first before the prosecution submits its evidence. It may be resorted to when the accused admits the act or omission charged in the complaint or information but interposes a lawful or affirmative defense. (Section 11[e], Rule 119, 2000 Rules of Criminal Procedure; People v. Palabarica, G.R. No. 129285, May 7, 2001; Section 7, Speedy Trial Act) In civil cases, the reverse trial may be resorted to by agreement of the parties or when the defendant sets up an affirmative defense. - VI 10%

(a) On his way home, a member of the Caloocan City police force witnesses a bus robbery in Pasay City and effects the arrest of the suspect. Can he bring the suspect to Caloocan City for booking since that is where his station is? Explain briefly. (5%) No. Under the Rules on Criminal Procedure, it is the duty of officer executing the warrant to arrest the accused and to deliver him to the nearest police station or jail without unnecessary delay. This rule equally applies to situations of warrantless arrest. (Section 3, Rule 113, Rules of Court) (b) In the course of serving a search warrant, the police finds an unlicensed firearm. Can the police take the firearm even if it is not covered by the search warrant? If the warrant is subsequently quashed, is the police required to return the firearm? Explain briefly. (5%) Yes. The police can take the unlicensed firearm even if it was not covered by the search warrant following the judicial precedent that prohibited articles may be seized for as long as the search warrant is valid. (People v. Cruz, G.R. No. 76728, August 30, 1988; People v. Mendi, G.R. Nos. 11297881, February 19, 2001). If the warrant is subsequently quashed, the police are not required to return the firearm because it is unlicensed. It can, in fact, be ordered forfeited by the court. The search warrant does not refer to the unlicensed firearm. - VII 10% a. B files a petition for cancellation of the birth certificate of her daughter R on the ground of falsified material entries there in made by B's husband as the informant. The RTC sets the case for hearing and directs the publications of the order once a week for three

consecutive weeks in a newspaper of general circulation. Summons was served on the Civil Registrar but there was no appearance during the hearing. The RTC granted the petition. R filed a petition for annulment of judgment before the Court of Appeals, saying that she was not notified of the petition and hence, the decision was issued in violation of due process. B opposed saying that the publication of the court order was sufficient compliance with due process. Rule. (5%) Alternative Answer: Jurisdiction of the court over a petition for the cancellation of a birth certificate requires reasonable notice to all interested parties and also publication of the order once a week for three consecutive weeks in a newspaper of general circulation. (Section 4, Rule 108 Ceruila v. Delantar, G.R. No. 140305, December 9, 2005). In this case, publication of the order is insufficient because R, a directly concerned party, was not given reasonable notice, hence, denied due process. The lower court, therefore, did not acquire jurisdiction. Accordingly, the petition for annulment of judgment before the Court of Appeals should be granted. Alternative Answer: In the cases of Republic v. Kho, G.R. No. 170340, 29 June 2007; Alba v. Court of Appeals, G.R. No. 164041, July 29, 2005; and Barco v. Court of Appeals, G.R. No. 120587, January 20, 2004, the court held that publication of the order of hearing under Section4 of Rule 108 cured the failure to implead an indispensable party. The court said that a petition for correction is an action in rem, an action against a thing and not against a person. The decision on the petition binds not only the parties thereto but the whole world. An in rem proceeding is validated essentially through publication. Publication is notice to the whole world that the proceeding has for its object to bar indefinitely all who might be minded

to make an objection of any sort against the right sought to be established. It is the publication of such notice that brings in the whole world as a party in the case and vests the court with jurisdiction to hear and decide it. b. G files a complaint for recovery of possession and damage against F. in the course of the trial, G marked his evidence but his counsel failed to file a formal offer of evidence. F then presented in evidence tax declarations in the name of his father to establish that his father is a coowner of the property. The court ruled in favor of F, saying that G failed to prove sole ownership of the property in the face of F's evidence. Was the court correct? Explain briefly. (5%) The court shall consider no evidence which has not been formally offered. The trial court rendered judgment considering only the evidence offered by F. The offer is necessary because it is the duty of the judge to rest his findings of fact and his judgment only and strictly upon the evidence offered by the parties at the trial (People v. Pecardal, G.R. No. 71381, November 24, 1986) and because the purpose for which the evidence is offered must be specified. (Section 34, Rule 1, Rules of Court.) However, there have been exceptional instances when the Court allowed exhibited documents which were not offered by duly identified by testimony and incorporated in the records of the case. (People v. Mate, L-34754, March 21, 1981). - VIII 10% a. X files an unlawful detainer case against Y before the appropriate Metropolitan Trial Court. In his answer, Y avers as a special and affirmative defense that he is a tenant of X's deceased father in whose name the property remains registered. What should the court do? Explain

briefly.

(5%)

The court should proceed to hear the case under the Rules of Summary Procedure. Unlawful detainer refers to actual physical possession, not ownership. Defendant Y, who is in actual possession, is the real party in interest. (Lao v. Lao, G.R. No. 149599, May 11, 2005) It does not matter if her is a tenant of the deceased father of the plaintiff, X, or that Xs father is the registered owner of the property. His term expired. He merely continues to occupy the property by mere tolerance and he can be evicted upon mere demand. (People v. Court of Appeals, G.R. No. 14364, June 3, 2004). b. The heirs of H agree among themselves that they will honor the division of H's estate as indicated in her Last Will and Testament. To avoid the expense of going to court in a Petition for Probate of the Will, can they instead execute an Extrajudicial Settlement Agreement among themselves? Explain briefly. (5%) No. The law states that no will shall pass either real or personal property unless it is proved and allowed in accordance with the Rules of Court. (Article 838, Civil Code; Lopez v. Gonzaga, G.R. No. L-18788, January 30, 1964). This probate of the will is mandatory. (Guevarra v. Guevarra, G.R. No.L-48840, December 29, 1943.) - IX 10% L was charged with illegal possession of shabu before the RTC. Although bail was allowable under his indictment, he could not afford to post bail, and so he remained in detention at the City Jail. For various reasons ranging from the promotion of the Presiding Judge, to the absence of the trial prosecutor, and to the lack of the notice to the City Jail Warden, the arraignment of L was postponed

nineteen times over a period of two years. Twice during that period, L's counsel filed motions to dismiss, invoking the right of the accused to a speedy trial. Both motions were denied by the RTC. Can L file a petition for mandamus? Reason briefly. Yes, L can file a petition for mandamus, invoking the right to a speedy trial. (Section 3, Rule 65, 1997 Rules of Civil Procedure) The numerous and unreasonable postponements displayed an abusive exercise of discretion. (Lumanlaw v. Peralta, G.R. No. 164953, February 13, 2006) -X10% a. RC filed a complaint for annulment of the foreclosure sale against Bank V. in its answer, Bank V set up a counter claim for actual damages and litigation expenses. RC filed a motion to dismiss the counterclaim on the ground the Bank V's Answer with Counterclaim was not accompanied by a certification against forum shopping. Rule. (5%) The motion to dismiss the counterclaim should be denied. A certification against forum shopping should not be required in a compulsory counterclaim because it is not an initiatory pleading. (Section 5, Rule 7, 1991 Rules of Civil Procedure; Carpio v. Rural Bank of Sto. Tomas [Batangas], Inc., G.R. No. 153171, May 4, 2006) b. A files a case against B. While awaiting decision on the case, A goes to the United States to work. Upon her return to the Philippines, seven years later, A discovers that a decision was rendered by the court in her favor a few months after she had left. Can a file a motion for execution of the judgment? Explain briefly. (5%) No. A cannot file a motion for execution of the judgment

seven years after the entry of the judgment. She can only do that within five (5) years from entry of judgment. However, she can file a case for revival of the judgment, which can be done before it is barred by the statute of limitations. (Section 6, Rule 39, 1997 Rules of Civil Procedure) which is within ten (10) years from the date of finality of the judgment. (Macias v. Lim, G.R. No. 139284, June 4, 2004) NOTHING FOLLOWS.

Political and Public International Law

-I(10 points) True or False. Briefly explain your answer. (a) For purposes of communication and instruction, the official languages of the Philippines are English and Filipino, until otherwise Alternative Answer: The statement is false. Article XIV, Section 7 of the 1987 Constitution provides that for purposes of communication and instruction, the official languages of the Philippines are Filipino and, until otherwise provided by law, English. Thus, while Filipino will always be an official language, Congress may, by law, remove English as the other official language. Hence, the statement is false as the continuation of English as an official language is subject to the control and discretion of Congress. Alternative Answer: The statement is true. To be more precise, however, what is only to remain as official until otherwise provided by law is English. Filipino will always be an official language under the Charter. (b) The 1987 Constitution has increased the scope of academic freedom recognized under the previous Constitution. Alternative Answer: The statement is true. The 1987 Constitution provides that academic freedom shall be enjoyed in all institutions of

higher learning. This is more expansive in scope than the 1973 Constitution which stated that: All institutions of higher learning shall enjoy academic freedom. While the 1973 Charter suggests that academic freedom was institutional in the sense that it belonged to the colleges and universities, the present Charter gives the guaranty to all other components of the institution, including faculty and possibly students. Alternative Answer: The statement is false. The scope of academic freedom remains the same. Article XIV, Section 5 (2) of the Constitution provides that academic freedom shall be enjoyed in all institutions of higher learning. As held in U.P. Board of Regents v. Court of Appeals, G.R. No. 134629, August 31, 1999, This (provision) is nothing new. The 1935 and the 1973 Constitution likewise provided for academic freedom or, more precisely, for the institutional autonomy of universities and institutions of higher learning. -II(10 points) The City Mayor issues an Executive Order declaring that the city promotes responsible parenthood and upholds natural family planning. He prohibits all hospitals operated by the city from prescribing the use of artificial methods of contraception, including condoms, pills, intrauterine devices and surgical sterilization. As a result, poor women in his city lost their access to affordable family planning programs. Private clinics, however, continue to render family planning counsel and devices to paying clients. (a) Is the Executive Order in any way constitutionally infirm? Explain. Alternative Answer: The Executive Order is constitutionally infirm. Under the

1987 Constitution, the State shall defend the right of spouses to establish a family in accordance with their religious convictions and the demands of responsible parenthood. (Art. XV, Sec. 3[1]). By upholding natural family planning and prohibiting city hospitals from prescribing artificial methods of contraception, the Mayor is imposing his religious beliefs on spouses who rely on the services of city hospitals. This clearly violates the above section of the Constitution. Moreover, the 1987 Constitution states that no person shall be denied the equal protection of the laws. (Art. III, Sec. 1). The Constitution also provides that the state shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for all. (Art. II, Section 9). The loss of access of poor city women to family planning programs is discriminatory and creates suspect classification. It also goes against the demands of social justice as enshrined in the immediately preceding provision. Alternative Answer: Yes. It constitutes an invalid exercise of police power and violates substantive due process by depriving people of the means to control their reproductive processes. Moreover, since the national government has not outlawed the use of artificial methods of contraception, then it would be against national policies. In addition, the Mayor cannot issue such Executive Order without an underlying ordinance. (Moday v, Court of Appeals, G.R. No. 107916, February 20, 1997) Besides, the action of the Mayor may be in violation of a persons right to privacy. (b) Is the Philippines in breach of any obligation under international law? Explain.

Alternative Answer: The Philippines might be in breach of its obligations under the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) of which the country is a signatory. Under the CEDAW, State Parties shall take all appropriate measures to eliminate discrimination against women in the field of health care in order to ensure, on basis of equality of men and women, access to health care services, including those related to family planning (Article 12, Section 1) Women shall likewise have access to adequate health care facilities, including information, counseling and services in family planning. (Article 14, Section 2[b]). (c) May the Commission on Human Rights order the Mayor to stop the implementation of the Executive Order? Explain. Alternative Answer: No, the power of the Commission on Human Rights (CHR) is limited to fact-finding investigations. Thus, it cannot issue an order to desist against the mayor, inasmuch as the order prescinds from an adjudicatory power that CHR does not possess. (Simon v. Commission on Human Rights, G.R. No. 100150, January 5, 1994; Cario v. Commission on Human Rights, G.R. No. 96681, December 2, 1991.) - III (10 Points) Lawrence is a Filipino computer expert based in Manila who invented a virus that destroys all the files stored in a computer. Assume that in May 2005, this virus spread all over the world and caused $50 million in damage to property in the United States, and that in June 2005, he was criminally charged before United States courts under their anti-hacker law. Assume that in July 2005, the

Philippines adopted its own anti-hacker law, to strengthen existing sanctions already provided against damage to property. The United States has requested the Philippines to extradite him to US courts under the RP-US Extradition Treaty. a. Is the Philippines under an obligation to extradite Lawrence? State the applicable rule and its rationale. Alternative Answer: The Philippine is under no obligation to extradite Lawrence. Under the principle of dual or double criminality, the crime must be punishable in both the requesting and requested states to make it extraditable. In this case, only the United States had anti-hacker law at the time of the commission of the crime in May 2005. The rational for the principle of dual criminality rests in part on the basic principle of reciprocity and in part of the maxim nulla poena sine lege. (LA Shearer, 1971 Extradition in International Law, Manchester University Press, Manchester, p. 137.) b. Assume that the extradition request was made after the Philippines adopted its anti-hacker legislation. Will that change your answer? Alternative Answer: It will not change my answer as the rule is that the crime must be punishable in both countries at the time of the commission of the offense. Since there was yet no such crime in the Philippines at the time when the acts complained of were done, in so far as the Philippines is concerned, Lawrence did not commit any crime. Alternative Answer: Yes, it will change my answer if a crime like malicious mischief could be considered the equivalent of the antihacker law and is punishable in both countries at the time of the request for extradition.

- IV (10 points) In 1993, historians confirmed that during World War II, "comfort women" were forced into serving the Japanese military. These women were either abducted or lured by false promises of jobs as cooks or waitresses, and eventually forced against their will to have sex with Japanese soldiers on a daily basis during the course of the war, and often suffered from severe beatings and venereal diseases. The Japanese government contends that the "comfort stations" were run as "onsite military brothels" (or prostitution houses) by private operators, and not by the Japanese military. There were many Filipina "comfort women." a. Name at least one basic principle or norm of international humanitarian law that was violated by the Japanese military in the treatment of the "comfort women." Alternative Answer: The Japanese military violated jus cogens norms of international law concerning war crimes, crimes against humanity like white slavery, sexual slavery and trafficking in women. Alternative Answer: The principle of military necessity was violated. It prohibits the use of any measure that is not absolutely necessary for the purposes of the war. Military necessity is governed by several constraints: An attack or action must be intended to help in the military defeat of the enemy, it must be an attack on a military objective and the harm caused to civilians or civilian property must be proportional and not excessive in relation to the concrete and direct military advantage anticipated. Having to force women of the enemy

state to serve the sexual needs of the soldiers is not absolutely necessary for the conduct of the war. b. The surviving Filipina "comfort women" demand that the Japanese government apologize and pay them compensation. However, under the 1951 San Francisco Peace Agreement -the legal instrument that ended the state of war between Japan and the Allied Forces -all the injured states, including the Philippines, received war reparations and, in return, waived all claims against Japan arising from the war. Is that a valid defense? Alternative Answer: No, that is not a valid defense. Even if it could be argued that the Philippines, by signing said Peace Agreement had the right as a state to bring further claims, it had no authority to waive the individual right to reparations vested directly in its nationals who were victims of sexual slavery. The Philippines can only validly waive its right to recovery of reparations for injuries to the state. Moreover, there is no defense for the violation of jus cogens norms. Alternative Answer: No. The claim is being made by the individuals, not by the State and it is recognized that individuals may also be subjects of international law apart from the state. Further, the San Francisco Peace Agreement could not be interposed as a valid defense as this could not have been contemplated therein. The use of comfort women was only confirmed long after that Agreement. Moreover, Article 17 (3) of the New Civil Code provides that prohibitive laws concerning persons, their acts or property, and those which have for their object public order, policy and good customs, shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country.

c. The surviving Filipina "comfort women" sue the Japanese government for damages before Philippine courts. Will that case prosper? Alternative Answer: The case will not prosper in view of the doctrine of sovereign immunity from suit. However, a person who feels aggrieved by the acts of a foreign sovereign can ask his own government to espouse his cause through diplomatic channels. The comfort women can request the Philippine government, through the Department of Foreign Affairs, to espouse its claims against the Japanese government. (Holy See v. Rosario, G.R. No. 101949, December 1, 1994). The sovereign authority of a State to settle the claims of its national against foreign countries has repeatedly been recognized. This may be made without the consent of the nationals or even without consultation without them. (Dames and Moore v. Regan, 433 U.S. 654, [1981]) Alternative Answer: No. since the Philippines is a signatory to that Agreement, courts may not entertain a suit since that has been waived by the State. Moreover, it can be argued that there was no state action since the prostitution houses were being run by private operators, without the control or supervision of the Japanese government. (Southeast Case, United States v. Wilhelm List, Nuremberg Case No. 7, 1949). -V(10 points) The Destilleria Felipe Segundo is famous for its 15-year old rum, which it has produced and marketed successfully for the past 70 years. Its latest commercial advertisement uses the line: "Nakalikim ka na ba ng kinse anyos?" Very soon, activist groups promoting women's and children's rights were up in arms against the advertisement.

a. All advertising companies in the Philippines have formed an association, the Philippine Advertising Council, and have agreed to abide by all the ethicalguidelines and decisions by the Council. In response to the protests, the Council orders the pull-out of the "kinse anyos" advertising campaign. Can Destilleria Felipe Segundo claim that its constitutional rights are thus infringed? Alternative Answer: No, Destillera Felipe Segundo may not claim that its constitutional rights, particularly freedom of expression, have been infringed. The constitutional guarantee of freedom of speech is a guarantee only against abridgment by the government and does not apply to private parties. (People v. Marti, G.R. No. 81561, January 18, 1991). Moreover, Destillera freely joined the Philippine Advertising Council and is therefore bound by the ethical guidelines and decisions of that council. Alternative Answer: No. Constitutional rights can be validly restricted to promote good morals. Moreover, what is being exercised is commercial expression which does not enjoy the same extent of freedom as political or artistic speech. (Central Hudson Gas & Electric v. PSC, 447 U.S. 557 [1980]). The order for the withdrawal comes not from the State but from a private group of advertisers which is not within the coverage of the Bill of Rights. b. One of the militant groups, the Amazing Amazonas, call on all government-owned and controlled corporations (GOCC) to boycott any newspaper, radio or TV station that carries the "kinse anyos" advertisements. They call on all government nominees in sequestered corporations to block any advertising funds allocated for any such newspaper, radio or TV station. Can the GOCCs and sequestered corporations validly comply?

Alternative Answer: They may comply with such call as these entities may institute certain measures to promote a socially desirable end, namely, the prevention of the exploitation and abuse of women, especially those who are not yet of age. Alternative Answer: The GOCCs and sequestered corporations may not be compelled to boycott or block advertising funds for media companies carrying the said advertisements. These companies may have existing contracts with the media companies concerned and non-compliance may result in breach that will open them to possible suits. - VI (10 points) True or False. Briefly explain your answer. a. An amendment to the Constitution shall be valid upon a vote of three-fourths of all the Members of the Congress. The statement is false. The Congress, acting as a constitutional assembly, may by vote of its membership only propose amendments to the Constitution. It is ratification by the people that validates the amendment. b. All public officers and employees shall take an oath to uphold and defend the Constitution. The statement is true as under Section 40 of the Administrative Code of 1987 (Executive Order No. 292), it is provided that all public officers and employees of the government, including every member of the armed forces shall, before entering upon discharge of his duties, take an oath or affirmation to uphold and defend the Constitution. - VII - (10 Points) Batas Pambansa 880, the Public Assembly Law of 1985, regulates the conduct of all protest rallies in the

Philippines. a. Salakay, Bayan! held a protest rally and planned to march from Quezon City to Luneta in Manila. They received a permit from the Mayor of Quezon City, but not from the Mayor of Manila. They were able to march in Quezon City and up to the boundary separating it from the City of Manila. Three meters after crossing the boundary, the Manila Police stopped them for posing a danger to pubHc safety. Was this a valid exercise of police power? Alternative Answer: Yes, the authorities are given the power to stop marchers who do not possess a permit. However, mere exercise of the right to peaceably assemble is not considered as a danger to public safety. They could have been asked to disperse peacefully, but it should not altogether be characterized as posing a danger to public safety. (Bayan v. Ermita, G.R. No. 169848, April 25, 2006; David v. Arroyo, G.R. No. 171390, May 3, 2006). Alternative Answer: No, this is not a valid exercise of police power. Police power has been defined as the power of promoting public welfare by restraining and regulating the use of liberty and property. (City of Manila v. Laguio, G.R. No. 118127, April 12, 2005). It is principally the Legislature that exercises the power but it may be delegated to the President and administrative agencies. Local government units exercise the power under the general welfare clause. In this case, if Salakay applied for a permit from the city government, the application must be approved or denied within two (2) working days from the date it was filed, failing which, the permit shall be deemed granted. (Section 16, B.P. Blg. 880). Even without a permit, the law does not provide for outright stopping of the march if the demonstrators, for

example, were marching peacefully without impeding traffic. b. The security police of the Southern Luzon Expressway spotted a caravan of 20 vehicles, with paper banners taped on their sides and protesting graft and corruption in government. They were driving at 50 kilometers per hour in a 40-90 kilometers per hour zone. Some banners had been blown off by the wind, and posed a hazard to other motorists. They were stopped by the security police. The protesters then proceeded to march instead, sandwiched between the caravan vehicles. They were also stopped by the security force. May the security police validly stop the vehicles and the marchers? Alternative Answer: Yes, the security police may stop the vehicles and the marchers but only to advise the leaders to secure their banners so that it will not pose a hazard to others. They may not be prevented from heading to their destination. The marchers may also be ordered to ride the vehicles so as not to inconvenience other uses of the Expressway. Alternative Answer: Yes. While the protesters possess the right to freely express themselves, their actuations may pose a safety risk to other motorists and therefore be the subject of regulation. The security police may undertake measures to prevent any hazard to other motorists but not altogether prevent the exercise of the right. So, to that extent, while the protesters maybe asked to remove the banners which pose hazard to other motorists and prevent them from using the expressway as a venue for their march, the security force may not prevent them from proceeding to where they might want to go. - VIII - (10 Points)

The Provincial Governor of Bataan requested the Department of Budget and Management (DBM) to release its Internal Revenue Allocation (IRA) of P100 million for the current budget year. However, the General Appropriations Act provided that the IRA may be released only if the province meets certain conditions as determined by an Oversight Council created by the President. a. Is this requirement valid? No, this requirement is not valid. Under the 1987 Constitution, it is provided that local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them. As held in the case of Alternative Center for Organizational Reforms and Development, et.al. v. Zamora, G.R. No. 144256 (June 08, 2005), a basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the national internal revenue. The Local Government Code specifies further that the release shall be made directly to the LGU concerned within five (5) days after every quarter of the year and shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose. b. The Provincial Governor is a party-mate of the President. May the Bataan Representative instead file a petition to compel the DBM to release the funds? Alternative Answer: Yes, the Bataan representative may file a petition to compel the release of funds as a suit may lie against a public officer to compel the performance of a ministerial function or a duty required by law. Alternative Answer: Yes. A congressman from a particular LGU may validly have standing to demand that IRA for his province be released in

accordance with the Constitution and the Local Government Code. As a representative of his province, he has a responsibility towards his constituencies who can expect no less than faithful compliance with the Constitution. Moreover, the issue presented could be characterized as involving transcendental importance to the people and the local government units which had been guaranteed greater local autonomy. - IX - (10 Points) The Department of Education (DepEd) requires that any school applying for a tuition fee increase must, as a condition for the increase, offer full tuition scholarships to students from low-income families. The Sagrada Familia Elementary School is a Catholic school and has applied for a tuition fee increase. Under this regulation by the DepEd, it will end up giving tuition scholarships to a total of 21 students next year. At a cost of P50,OOO per student, the school will lose a total of P1.05 million for next year. a. Is this DepEd requirement valid? No. It constitutes deprivation of property without due process of law. The law is confiscatory as it unduly shifts the burden of providing for the welfare of the poor to the private sector. The objective may be laudable but the means would be arbitrary and unreasonable. (Quezon City v. Judge Ericta, G.R. No. 34195, June 24, 1983). b. If instead the DepEd requires a full tuition scholarship for the highest ranking students in each grade, determined solely on the basis of academic grades and rank, will the DepEd requirement be valid? Alternative Answer: No. It would make a difference in my answer as this would still constitute a deprivation of property without due process of law. (Balacuit v. CFI, G.R. no. 38429, June 30, 1988).

Alternative Answer: Yes. Here, the matter may be considered as a reasonable regulation exacted from those who seek some form of accommodation from the government. (Telebap v. COMELEC, G.R. No. 132922, April 21, 1998). In exchange for what they get as a concession from the State, these institutions may be required to shoulder part of the cost of promoting quality education for deserving citizens. - X -(10 Points) The Supreme Court has provided a formula for allocating seats for party-list representatives. a. The twenty percent allocation - the combined number of all party-Iist congressmen shall not exceed twenty percent of the total membership of the House of Representatives, including those elected under the party list; Section 5(2), Article VI of the Constitution, as implemented by R.A. No. 7941. The purpose is to assure that there will be at least a guaranteed portion of the House of Representatives reserved for the party-list members. The legislative policy is to promote the election of party-list representatives in order to enable Filipinos belonging to the marginalized and underrepresented sectors to contribute legislation that would benefit them. b. The two percent threshold - only those parties garnering a minimum of two percent of the total valid votes cast for the party-list system are "qualified" to have a seat in the House of Representatives; R.A. No. 7941. This is to ensure that the party-list organizations at least represents a significant portion of those voting for the party-list system that they at least have

a substantial constituency which must, at the minimum, not be less than two percent (2%) of the total number of those casting their votes for party-list organizations. c. The three-seat limit - each qualified party, regardless of the number of votes it actually obtained, is entitled to a maximum of three seats; that is, one "qualifying" and two additional seats; and R.A. No. 7941. This is to prevent any dominant party-list organization from having a monopoly of the seats for the party-list system. Since the objective of the party-list system is to enable other groups who might otherwise have difficulty getting to Congress through the traditional system of elections, then the system developed to accommodate them must be fair and equitable enough to afford better odds to as many groups as possible. d. The first-party rule - additional seats which a qualified party is entitled to shall be determined in relation to the total number of votes garnered by the party with the highest number of votes. R.A. No. 7941. The party-list system is predicated, among others, on proportional representation. Thus, there is need to reflect the same in relation to the total number of votes obtained. Accordingly, the first party must not be placed on the same footing as the others who obtained less votes. The votes obtained by first placer would be the reckoning point for the computation of additional seats or members for the remaining organizations who got at least two percent (2%) of the votes cast for the party-list system. (Veterans Federation Party v. COMELEC, G.R. No. 136781, October 6, 2000). For each of these rules, state the constitutional or legal basis, if any, and the purpose. NOTHING FOLLOWS.

Mercantile Law
I. (10%) R issued a check for P1M which he used to pay S for killing his political enemy. Reason briefly in (a), (b) and (c). a. Can the check be considered a negotiable instrument? Yes, the check can be considered a negotiable instrument. In ascertaining the character of the instrument, the primordial and only consideration is its compliance with Section 1 of the Negotiable Instruments Law. Since the problem states that a check has been issues, we presume that it has all the other terms mandated under Section 1, and if it was issued payable to order or bearer, then it is a negotiable instrument. b. Does S have a cause of action against R in case of dishonor by the drawee bank? No, S does not have a cause of action against R in case of dishonor by the drawee bank. There is still an underlying contractual relationship between S and R, evidenced by the check, and needs a valid consideration to support it. Under Section 28 of the Negotiable Instruments Law, such illegality of consideration is a defense against immediate parties but not against a holder in due course (i.e., personal defense). The consideration for the issuance of the check, as between S and R, is void involving as it does the killing of the political enemy of R. c. If S negotiated the check to T, who accepted it in good faith and for value, may R be held secondarily liable by T? R may be held secondarily liable by T. T enjoys the presumption being a holder in due course because every

holder is deemed prima facie to be a holder in due course. (Section 59, Negotiable Instruments Law), especially since he took the check in good faith and for value. Section 57 of the Negotiable Instruments Law states , A holder in due course holds the instrument free from any defect of title of prior parties and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon. II. (10%) Alex deposited goods for which Billy, warehouseman, issued a negotiable warehouse receipt wherein the goods were deliverable to Alex or order. Alex negotiated the receipt to Caloy. Thereafter, Dario, a creditor secured judgment against Alex and served notice of levy over the goods on the warehouseman. a. To whom should the warehouseman deliver the goods upon demand? The warehouseman should deliver the goods to Caloy. The goods cannot be attached by garnishment or otherwise, or levied upon, unless the receipt be first surrendered to the warehouseman, or its negotiation is enjoined. (Section 25, Warehouse Receipts Law) b. Would you answer be the same if the warehouseman issued a non-negotiable warehouse receipt? Reason briefly. No. The non-negotiable warehouse receipt does not confer upon the transferee the direct obligation of the warehouseman to hold possession of the goods for him. (Section 42, Warehouse Receipts Law). In such case, the law provides that when a non-negotiable warehouse receipt is transferred to Caloy, he only gets such title to the goods as

Alex had and also a right to notify the warehouseman to hold the goods for Caloys account. Prior to such notice, Caloys claim can be defeated by a levy of execution upon the goods by a creditor of Alex. III. (5%) Diana and Piolo are famous personalities in showbusiness who kept their love affair secret. They use a special instant messaging service which allows them to see one another's typing on their own screen as each letter key is pressed. When Greg, the controller of the service facility, found out their identities, he kept a copy of all the messages Diana and Piolo sent each other and published them. Is Greg liable for copyright infringement? Reason briefly. Yes, Greg is guilty of copyright infringement. The instant messages of Diana and Piolo are deemed to constitute letters (Section 172.1[d], Intellectual Property Code) which are protected by the sole fact of their creation irrespective of their mode or form of expression, as well as their content, quality, and purpose. (Section 172.2[d], Intellectual Property Code). For copyright to exist, it must be found in a tangible medium, usually in written form, which is fulfilled by the instant messages. Under the Electronic Commerce Act, whenever the law requires certain contracts or acts to be in writing to be valid and enforceable, then such requirement is deemed fulfilled when they are in the form of an electronic document. The instant messages are deemed to be in writing under the Electronic Commerce Act for they are in digital form or constitute electronic documents. IV. (10%)

Alfredo took out a policy to insure his commercial building against fire. The broker for the insurance company agreed to give a 15-day credit within which to pay the insurance premium. Upon delivery of the policy on May 15, 2006, Alfredo issued a postdated check payable on May 30, 2006. On May 28, 2006, a fire broke out and destroyed the building owned by Alfredo.Reason briefly in (a), (b) and (c). a. May Alfredo recover on the insurance policy? Yes, Alfredo can recover on the insurance policy. Although Section 77 of the Insurance Code provides that in fire insurance, payment of premium is necessary for validity of the policy (also known as cash and carry provision), nonetheless, the rule has been modified by the decisions of the Supreme Court after the promulgation of the Insurance Code. Thus, in UCPB General Insurance v. Masagana Telemart, G.R. No. 137172, April 4, 2001, it was held that the insured should be allowed to recover on losses sustained even when premium was paid after the fact of loss, provided payment was received by the insurer during the credit period given to the insured. (See also South Sea Surety v. Court of Appeals, G.R. No. 102253, June 2, 1995; American Home Assurance v. Chua, G.R. No. 130421, June 28, 1999) where the Supreme Court ruled that is the check payment for premium was received by the insurer prior to the loss or within the credit period, the insured was allowed to recover. b. Would your answer in (a) be the same if it was found that the proximate cause of the fire was an explosion and that fire was but the immediate cause of loss and there is no excepted peril under the policy? Yes, recovering under an insurance contract is allowed if the cause of the loss was either the proximate or the immediate cause as long as an expected peril was not the proximate cause of the loss. (Section 86, Insurance Code of the

Philippines.) The fire being the immediate cause for the loss of the commercial building, would warrant recovery under the policy. c. If the fire was found to have been caused by Alfredo's own negligence, can he still recover on the policy? Yes, he can still recover. The doctrine of contributory negligence does not in any way apply to rights under a contract of insurance, unless it is a case of willful act. (Section 87, Insurance Code of the Philippines) V. (5%) C contracted D to renovate his commercial building. D ordered construction materials from E and received delivery thereof. The following day, C went to F Bank to apply for a loan to pay the construction materials. As security for the loan, C was made to execute a trust receipt. One year later, after C failed to pay the balance on the loan, F Bank charged him with violation of the Trust Receipts Law. a. What is a Trust Receipt? A trust receipt is a security transaction intended to aid financing importers or dealers in merchandise by allowing them to obtain delivery of the goods under certain covenants. (Section 4, Trust Receipts Law). It is a document executed between the entrustor and the entrustee, under which the goods are released to the latter who binds himself to hold the goods in trust, or to sell or dispose of the goods with the obligations to turn over the proceeds to the entrustor to the extent of the entrustees obligation to him, or if unsold, to return the goods. b. Will the case against C prosper? Reason briefly. No. It is not covered by the Trust Receipts Law. In

Consolidated Bank v. Court of Appeals, G.R. No. 114286, April 19, 2001, where debtor received goods subject of trust receipt before trust receipt itself was entered into, it was held that the transaction in question was a simple loan. Colinares v. Court of Appeals, G.R. No. 90828, September 5, 2000 held that the Trust Receipts Law does not seek to enforce payment of loan, rather it punishes dishonesty and abuse of confidence in handling of money or goods to the prejudice of another regardless of whether the latter is the owner. VI. (5%) Discuss the trust fund doctrine The Trust Fund Doctrine refers to the principle that the capital stock, property and other assets of the corporation are regarded as equity in trust for payment of corporate creditors. This doctrine is the underlying principle in the procedure for the distribution of capital assets, embodied in Corporation Code, which allows the distribution of corporate capital only in three instances: (1) amendment of the Articles of Incorporation to reduce the authorized capital stock, (2) purchase of redeemable shares by the corporation, regardless of the existence of unrestricted retained earnings, and (3) dissolution and eventual liquidation of the corporation. Furthermore, the doctrine is articulated in Section 41 on the power of a corporation to acquire its own shares and in Section 122 on the prohibition against the distribution of corporate assets and property unless the stringent requirements therefore are complied with. (Ong Yong v. Tiu, G.R. No. 144476, April 8, 2003) VII. (10%)

In a stockholder's meeting, S dissented from the corporate act converting preferred voting shares to non-voting shares. Thereafter, S submitted his certificates of stock for notation that his shares are dissenting. The next day, S transferred his shares to T to whom new certificates were issued. Now, T demands from the corporation the payment of the value of his shares. a. What is the meaning of a stockholder's appraisal right? It is the right of a stockholder to withdraw from the corporation and demand in writing, payment of the fair value of his shares after registering his dissent from certain specified corporate acts involving fundamental changes in corporate structures provided that the corporation has sufficient unrestricted retained earnings. (Section 81, Commercial Code of the Philippines) b. Can T exercise the right of appraisal? Reason briefly. No. If shares represented by the certificates bearing such notation are transferred, and the certificates consequently cancelled, the rights of the transferor as a dissenting stockholder shall cease and the transferee shall have all the rights of a regular stockholder. (Section 86, Corporation Code). T cannot exercise the right of appraisal because the certificates containing the notation of Ss dissent have been canceled. Upon such cancellation, Ss rights as a dissenting stockholder have ceased. In such a case, a new certificate without notation will be issued to T, who will be treated as a regular stockholder. VIII. (10%) Due to growing financial difficulties, Z Bank was unable to finish construction of its 21-storey building on a prime lot located in Makati City. Inevitably, the Bangko Sentral ordered the closure of Z Bank and consequently placed it

under receivership. In a bid to save the bank's property investment, the President of Z Bank entered into a financing agreement with a group of investors for the completion of the construction of the 21-storey building in exchange for a ten year lease and the exclusive option to purchase the building. a. Is the act of the President valid? Why or why not? Alternative Answer: No, the act of the President is not valid. Receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way. (Villanueva v. CA, G.R. No. 114870, May 26, 1995). More importantly, under the New Central Bank Act, when a bank had been placed under receivership by the Bangko Sentral ng Pilipinas, and especially in this case where it has been ordered to be closed, the conservator, or in this case the receiver, effectively replaces the Board of Directors in exercising corporate powers. Alternative Answer: Under the Corporation Law, the acts of the President do not fall within his apparent authority, and do not bind the corporation without prior authority of the Board of Directors, which under Section 23 of the Corporation Code is the sole repository of corporate powers. b. Will a suit to enforce the exclusive right of the investors to purchase the property prosper? Reason briefly. The suit will not prosper. The appointment of a receiver operates to suspend the authority of the bank and its directors and officers over its property and effects, such authority being reposed in the receiver. The receivership is equivalent to an injunction to restrain the bank officers from intermeddling with the property of the bank in any way. (Abacus Real Estate Development Center, Inc. v. The Manila

Banking Corporation, G.R. No. 162279, April 6, 2005, citing Villanueva v. Court of Appeals, G.R. No. 114870, May 26, 1995). IX. (5%) On December 4, 2003, RED Corporation executed a real estate mortgage in favor of BLUE Bank. RED Corporation defaulted in the payment of its loan. Consequently, on June 4, 2004, BLUE Bank extrajudicially foreclosed the property. Being the highest bidder in the auction sale conducted, the Bank was issued a Certificate of Sale which was registered on August 4, 2004. Does RED Corporation still have the right to redeem the property as of September 14, 2007? Reason briefly. No. RED corporation has only one (1) year from the auction sale to redeem the property. (Section 6, Act No. 3135; Section 47, General Banking Law of 2000). Instead, RED Corporation allowed three (3) years to lapse. RED Corporation should be deemed to have waived its right to redeem the property. X. (5%) Name at least five (5) predicate crimes to money laundering. The predicate crimes to money laundering are: 1. Kidnapping for ransom; 2. Violations of the Dangerous Drug Act; 3. Violations of the Anti-Graft and Corrupt Practices Act; 4. Plunder 5. Robbery and Extortion; 6. Jueteng and Masiao; 7. Piracy on the high seas;

8. Qualified Theft; 9. Swindling; 10. Smuggling; 11. Violations of the Electronic Commerce Act of 2000; 12. Hijacking, destructive arson, murder, and the other acts of terrorists against non-combatant persons and similar targets; 13. Fraudulent practices punished by the Securities Regulation Code of 2000; and 14. Felonies or offenses of a similar nature that are punishable under the penal laws of other countries. XI. (10%) Two vessels figured in a collision along the Straits of Guimaras resulting in considerable loss of cargo. The damaged vessels were safely conducted to the Port of Iloilo. Passenger A failed to file a maritime protest. B. a non-passenger but a shipper who suffered damage to his cargo, likewise did not file a maritime protest at all. a. What is a maritime protest? A maritime protest is a written confirmation that must be formally lodged before a competent authority, by the captain or master of the innocent vessel, which has figured in a collision or shipwreck, within 25 hours upon arrival at the nearest port, failure of which bars recovery for loss or damage, no matter how meritorious the claim may be. (Article 835, Code of Commerce) b. Can A and B successfully maintain an action to recover losses and damages arising from the collision? Reason briefly. A, being a passenger, cannot maintain the action to recover losses without a prior protest. B can recover because the lack of protest will not prejudice such actions to recover damage

caused to persons or cargo whose owners were not on board the vessel at the time of collision. (Article 836, Code of Commerce). XII. (5%) Seeking to streamline its operations and to bail out its losing ventures, the stockholders of X Corporation unanimously adopted a proposal to sell substantially all of the machineries and equipment used in and out its manufacturing business and to sink the proceeds of the sale for the expansion of its cargo transport services. a. Would the transaction be covered by the provisions of the Bulk Sales Law? Alternative Answer: Under a decision of the Court of Appeals (People v. Wong, G.R. No. 9776-R, March 26, 1954), it was held that the transaction can not be covered by the Bulk Sales Law, which only covers merchants who are engaged in the sale of goods and merchandise. A manufacturing concern is not considered to be a merchant business, more so when it is pursued as part of another service business, in this case the cargo transport services. Alternative Answer: When it comes to the sale of all or substantially all of the machineries and equipment, which under the Bulk Sales Law is separate type of bulk sale apart from the sale of goods or merchandise in the ordinary course of business, such transactions are still covered by the Bulk Sales Law. b. How would X Corporation effect a valid sale? Alternative Answer: X Corporation must comply with Sections 3, 4 and 5 of the Bulk Sales Law, namely: (1) deliver sworn statement of the

names and addresses of all the creditors to whom the vendor or mortgagor may be indebted together with the amount of indebtedness due or owing to each of the said creditors; (2) apply the purchase or mortgage money to the pro-rata payment of bona fide claims of the creditors and (3) make full detailed history of the stock of goods, wares , merchandise, provisions or materials, in bulk, and notify every creditor at least ten (10) days before transferring possession. Alternative Answer: Important corporate acts or contracts must be pursued under the direction of the Board of Directors is embodied in Section 23 of the Corporation Code. Even the sale of all or substantially all of its assets requires the prior approval of the board of directors and the ratification of stockholders owning or representing at least two-thirds (2/3) of its outstanding capital stock (Section 40, Corporation Code of the Philippines) Under the Bulk Sales Law, X Corporations should either: (a) get the waiver of all its creditors as required under the Bulk Sales Law; or (b) if such waiver cannot be obtained, comply with the requirements under the Bulk Sales Law to prepare and give copy of the sworn certification not only of the assets being disposed of, but also the proper listing of the existing creditors of X Corporation, and thereafter to apply the proceeds of the sale proportionately to all the listed creditors. Otherwise, the sale may be vulnerable to being challenged to be fraudulent and void under the Bulk Sales Law. (Islamic Directorate of the Philippines v. Court of Appeals, G.R. No. 117897, May 14, 1997). XIII. (10%)

a. What are the preferred claims that shall be satisfied first from the assets of an insolvent corporation? After debtors assets have been liquidated, unless a composition has been agreed upon by the debtors creditors, debtors obligation shall be paid in the following order: 1. Article 2241 New Civil Code Specific movable property. 2. Article 2242 Specific immovable property 3. Preferred claims under Article 2244 In the order named. 4. Article 2245 New Civil Code Common credits shall be paid pro-rata. N.B. A comprehensive answer for XIII (A) would impose an unreasonable memorization of the codal provisions. b. How shall the remaining non-preferred creditors share in the estate of the insolvent corporation above? The remaining credits do not enjoin any preference. Hence, these creditors shall be paid pro-rata. (Articles 2244 and 2251[2], Civil Code) NOTHING FOLLOWS