2011 Bar Examination for Commercial Law (3) A writes a PN in favor of his creditor, B. It sa s!

"#$%&ect to m o'tion, I 'romise to 'a B Ph'1 (illion or his order or )ive Ph'1 (illion worth of cement or to a$thori*e him to sell m ho$se worth Ph'1 (illion. #i)ned, A." Is the note ne)otia%le+ (A) No, %eca$se the exercise of the o'tion to 'a lies with A, the ma,er and de%tor. (B) No, because it authorizes the sale of collateral securities in case the note is not paid at maturity. (C) Yes, because the note is really payable to B or his order, the other provisions bein merely optional. (!) Yes, because an election to re"uire somethin to be done in lieu of payment of money does not affect ne otiability. (#) ( ma,es a PN that states! "I, (, 'romise to 'a Ph'-,000.00 to B or %earer. #i)ned, (." ( ne)otiated the note % deliver to B, B to N, and N to .. B had ,nown that ( was %an,r$'t when ( iss$ed the note. /ho wo$ld %e lia%le to .+ (A) $ and N since they may be assumed to %no& of $'s ban%ruptcy (B) N, %ein) .0s immediate ne)otiator of a %earer note (C) B, $, and N, bein indorsers by delivery of a bearer note (!) B, havin %no&n of $'s ban%ruptcy (() A ne)otia%le instr$ment can %e indorsed % wa of a restrictive indorsement, which 'rohi%its f$rther ne)otiation and constit$tes the indorsee as a)ent of the indorser. As a)ent, the indorsee has the ri)ht, amon) others, to (A) demand payment of the instrument only. (B) notify the dra&er of the payment of the instrument. (C) receive 'a ment of the instr$ment. (!) instruct that payment be made to the dra&ee. ()) 1nder the Ne)otia%le Instr$ments Law, a si)nat$re % 'roc$ration o'erates as a notice that the a)ent has %$t a limited a$thorit to si)n. 2h$s, a 'erson who ta,es a %ill that is drawn, acce'ted, or indorsed % 'roc$ration is d$t 3%o$nd to in4$ire into the extent of the a)ent0s a$thorit % ! (A) e*aminin the a ent+s special po&er of attorney. (B) examinin) the %ill to determine the extent of s$ch a$thorit . (C) as%in the a ent about the e*tent of such authority. (!) as%in the principal about the e*tent of such authority. (,-) 1nder the Ne)otia%le Instr$ments Law, if the holder has a lien on the instr$ment which arises either from a contract or % im'lication of law, he wo$ld %e a holder for val$e to the extent of (A) his successor's interest. (B) his predecessor's interest. (C) the lien in his favor. (!) the amount indicated on the instrument's face. (,3) 5 exec$ted a PN with a face val$e of Ph'-0,000.00, 'a a%le to the order of 6. 6 indorsed the note to 7, to whom 6 owed Ph'80,000.00. If 5 has no defense at all a)ainst 6, for how m$ch ma 7 collect from 5+ (A) .hp/-,---.--, as he is a holder for value to the e*tent of the difference bet&een Y's debt and the value of the note. (B) .hp3-,---.--, as he is a holder for value to the e*tent of his lien. (C) Ph'-0,000.00, %$t with the o%li)ation to hold Ph'20,000.00 for 60s %enefit. (!) None, as 0's remedy is to run after his debtor, Y. (,1) P sold to ( 10 )rams of sha%$ worth Ph'-,000.00. As he had no mone at the time of the sale, ( wrote a PN 'romisin) to 'a P or his order Ph'-,000. P then indorsed the note to 5 9who did not ,now a%o$t the sha%$:, and 5 to

6. 1na%le to collect from P, 6 then s$ed 5 on the note. 5 set $' the defense of ille)alit of consideration. Is he correct+ (A) No, since 2, bein a subse"uent indorser, &arrants that the note is valid and subsistin . (B) No, since 5, a )eneral indorser, warrants that the note is valid and s$%sistin). (C) Yes, since a void contract does not ive rise to any ri ht. (!) Yes, since the note &as born of an ille al consideration &hich is a real defense. (,() A holder in d$e co$rse holds the instr$ment free from an defect of title of 'rior 'arties and free from defenses availa%le to 'rior 'arties amon) themselves. An exam'le of s$ch a defense is 3 (A) fra$d in ind$cement. (B) duress amountin to for ery. (C) fraud in esse contractus. (!) alteration. (/,) 2 #hi''in), Co. ins$red all of its vessels with ; Ins$rance, Co. 2he ins$rance 'olicies stated that the ins$rer shall answer for all dama)es d$e to 'erils of the sea. .ne of the ins$red0s shi', the (< =ona Priscilla, ran a)ro$nd in the Panama Canal when its en)ine 'i'es lea,ed and the oil see'ed into the car)o com'artment. 2he lea,a)e was ca$sed % the extensive milea)e that the shi' had acc$m$lated. (a the ins$rer %e made to answer for the dama)e to the car)o and the shi'+ (A) Yes, because the insurance policy covered any or all dama e arisin from perils of the sea. (B) Yes, since there appears to have been no fault on the part of the shipo&ner and shipcaptain. (C) No, since the pro*imate cause of the dama e &as the breach of &arranty of sea&orthiness of the ship. (!) No, since the 'roximate ca$se of the dama)e was d$e to ordinar $sa)e of the shi', and th$s not d$e to a 'eril of the sea. (//) 5 has %een a lon)3time ho$sehold hel'er of 7. 50s h$s%and, 6, has also %een 70s lon)3time driver. (a 7 ins$re the lives of %oth 5 and 6 with 7 as %eneficiar + (A) Yes, since 2 and Y render services to 0. (B) No, since 2 and Y have no pecuniary interest on the life of 0 arisin from their employment &ith him. (C) No, since 7 has no 'ec$niar interest in the lives of 5 and 6 arisin) from their em'lo ment with him. (!) Yes, since 2 and Y are 0+s employees. (/3) 5 is the holder of an instr$ment 'a a%le to him 95: or his order, with 6 as ma,er. 5 then indorsed it as follows! "#$%&ect to no reco$rse, 'a to 7. #i)ned, 5." /hen 7 went to collect from 6, it t$rned o$t that 60s si)nat$re was for)ed. 7 now s$es 5 for collection. /ill it 'ros'er+ (A) Yes, because 2, as a conditional indorser, &arrants that the note is enuine. (B) 6es, %eca$se 5, as a 4$alified indorser, warrants that the note is )en$ine. (C) No, because 2 made a "ualified indorsement. (!) No, because a "ualified indorsement does not include the &arranty of enuineness. (/#) A %ill of exchan)e has 2 for its drawee, 1 as drawer, and > as holder. /hen > went to 2 for 'resentment, > learned that 2 is onl 1- ears old. > wants to recover from 1 %$t the latter insists that a notice of dishonor m$st first %e made, the instr$ment %ein) a %ill of exchan)e. Is he correct+ (A) Yes, since a notice of dishonor is essential to char in the dra&er. (B) No, since 4 can &aive the re"uirement of notice of dishonor. (C) No, since > can treat 1 as ma,er d$e to the minorit of 2, the drawee. (!) Yes, since in a bill of e*chan e, notice of dishonor is at all times re"uired. (/1) An ins$red, who )ains ,nowled)e of a material fact alread after the effectivit of the ins$rance 'olic , is not

o%li)ed to div$l)e it. 2he reason for this is that the test of concealment of material fact is determined (A) at the time of the issuance of the policy. (B) at any time before the payment of premium. (C) at the time of the payment of the premium. (!) at an time %efore the 'olic %ecomes effective. (/5) 2, the ca'tain of (< =on Alan, while aslee' in his ca%in, dreamt of an Intensit ? earth4$a,e alon) the 'ath of his shi'. .n wa,in) $', he immediatel ordered the shi' to ret$rn to 'ort. 2r$e eno$)h, the earth4$a,e and ts$nami str$c, three da s later and his shi' was saved. /as the deviation 'ro'er+ (A) Yes, because the deviation &as made in ood faith and on a reasonable round for believin that it &as necessary to avoid a peril. (B) No, %eca$se no reasona%le )ro$nd for avoidin) a 'eril existed at the time of the deviation. (C) No, because 4 relied merely on his supposed ift of prophecy. (!) Yes, because the deviation too% place based on a reasonable belief of the captain. (/() 5, drawee of a %ill of exchan)e, wrote the words! "Acce'ted, with 'romise to ma,e 'a ment within two da s. #i)ned, 5." 2he drawer 4$estioned the acce'tance as invalid. Is the acce'tance valid+ (A) 6es, %eca$se the acce'tance is in realit a clear assent to the order of the drawer to 'a . (B) Yes, because the form of the acceptance is really immaterial. (C) No, because the acceptance must be a clear assent to the order of the dra&er to pay. (!) No, because the document must not e*press that the dra&ee &ill perform his promise &ithin t&o days. (3-) =, de%tor of C, wrote a PN 'a a%le to the order of C. C0s %rother, (, misre'resentin) himself as C@s a)ent, o%tained the note from =, then ne)otiated it to N after for)in) C0s si)nat$re. N indorsed it to E, who indorsed it to >, a holder in d$e co$rse. (a > recover from E+ (A) No, since the for ery of C's si nature results in the dischar e of 6. (B) 6es, since onl the for)ed si)nat$re is ino'erative and E is %o$nd as indorser. (C) No, since the si nature of C, the payee, &as for ed. (!) Yes, since the si nature of C is immaterial, he bein the payee. (3,) A material alteration of an instr$ment witho$t the assent of all 'arties lia%le thereon res$lts in its avoidance, E5CEP2 a)ainst a (A) prior indorsee. (B) subse"uent acceptor. (C) s$%se4$ent indorser. (!) prior acceptor. (33) B %orrowed Ph'1 million from L and offered to him his B(/ car worth Ph'1 (illion as collateral. B then exec$ted a PN that reads! "I, B, 'romise to 'a L or %earer the amo$nt of Ph'1 (illion and to ,ee' m B(/ car 9loan collateral: free from an other enc$m%rance. #i)ned, B." Is this note ne)otia%le+ (A) Yes, since it is payable to bearer. (B) Yes, since it contains an unconditional promise to pay a sum certain in money. (C) No, since the promise to 7ust pay a sum of money is unclear. (!) No, since it contains a 'romise to do an act in addition to the 'a ment of mone . (31) 8f the dra&er and the dra&ee are the same person, the holder may present the instrument for payment &ithout need of a previous presentment for acceptance. 8n such a case, the holder treats it as a (A) non9ne otiable instrument. (B) PN .

(C) letter of credit. (!) chec%. (35) = draws a %ill of exchan)e that states! ".ne month from date, 'a to B or his order Ph'100,000.00. #i)ned, =." 2he drawee named in the %ill is E. B ne)otiated the %ill to (, ( to N, N to ., and . to P. =$e to non3acce'tance and after 'roceedin)s for dishonor were made, P as,ed . to 'a , which . did. >rom whom ma . recover+ (A) B, bein the payee (B) N, as indorser to : (C) 6, bein the dra&ee (!) !, %ein) the drawer (3)) E received )oods from 2 for dis'la and sale in E0s store. E was to t$rn over to 2 the 'roceeds of an sale and ret$rn the ones $nsold. 2o doc$ment their a)reement, E exec$ted a tr$st recei't in 2@s favor coverin) the )oods. /hen E failed to t$rn over the 'roceeds from his sale of the )oods or ret$rn the ones $nsold des'ite demand, he was char)ed in co$rt for estafa. E moved to dismiss on the )ro$nd that his lia%ilit is onl civil. Is he correct+ (A) No, since he committed fraud &hen he promised to pay for the oods and did not. (B) No, since his %reach of the tr$st recei't a)reement s$%&ects him to %oth civil and criminal lia%ilit for estafa. (C) Yes, since 6 cannot be char ed &ith estafa over oods covered a trust receipt. (!) Yes, since it &as merely a consi nment sale and the buyer could not pay. (3-) 2he a$thori*ed alteration of a wareho$se recei't which does not chan)e its tenor renders the wareho$seman lia%le accordin) to the terms of the recei't (A) in its ori inal tenor if the alteration is material. (B) in its ori)inal tenor. (C) as altered if there is fraud. (!) as altered. (3,) An a)reement %indin) $'on the holder to extend the time of 'a ment or to 'ost'one the holder0s ri)ht to enforce the instr$ment res$lts in the dischar)e of the 'art secondaril lia%le $nless made with the latter0s consent. 2his a)reement refers to one which the holder made with the (A) 'rinci'al de%tor. (B) principal creditor. (C) secondary creditor. (!) secondary debtor. (3/) 1'on exec$tion of a tr$st recei't over )oods, the 'art who is o%li)ed to release s$ch )oods and who retains sec$rit interest on those )oods, is called the (A) holder. (B) shipper. (C) entrustee. (!) entr$stor. (33) 5, wareho$seman, sent a text messa)e to 6, to whom 5 had iss$ed a wareho$se recei't for 60s -00 sac,s of corn, notif in) him of the d$e date and time to settle the stora)e fees. 2he messa)e stated also that if 6 does not settle the wareho$se char)es within 10 da s, he will advertise the )oods for sale at a '$%lic a$ction. /hen 6 i)nored the demand, 5 sold 100 sac,s of corn at a '$%lic a$ction. >or 5@s fail$re to com'l with the stat$tor re4$irement of written notice to satisf his lien, the sale of the 100 sac,s of corn is (A) voidable. (B) rescissible. (C) unenforceable. (!) void. (33) .n A$ne 1, 2011, 5 mailed to 6 Ins$rance, Co. his a''lication for life ins$rance, with 'a ment for - ears of 'remi$m enclosed in it. .n A$l 21, 2011, the ins$rance com'an acce'ted the a''lication and mailed, on the same da , its acce'tance 'l$s the cover note. It reached 50s residence on A$)$st 11, 2011. B$t, as it ha''ened, on

A$)$st B, 2011, 5 fi)$red in a car accident. Ce died a da later. (a 50s heirs recover on the ins$rance 'olic + (A) Yes, since under the Co nition 4heory, the insurance contract &as perfected upon acceptance by the insurer of 2's application. (B) No, since there is no privity of contract bet&een the insurer and 2+s heirs. (C) No, since 5 had no ,nowled)e of the ins$rer0s acce'tance of his a''lication %efore he died. (!) Yes, since under the $anifestation 4heory, the insurance contract &as perfected upon acceptance of the insurer of 2's application. (3#) A %ill of exchan)e has = as drawer, E as drawee and > as 'a ee. 2he %ill was then indorsed to D, D to C, and C to I. I, the c$rrent holder 'resented the %ill to E for acce'tance. E acce'ted %$t, as it later t$rned o$t, = is a fictitio$s 'erson. Is E freed from lia%ilit + (A) No, since % acce'tin), E admits the existence of the drawer. (B) No, since by acceptin , 6 &arrants that he is solvent. (C) Yes, if 6 &as not a&are of that fact at the time of acceptance. (!) Yes, since a bill of e*chan e &ith a fictitious dra&er is void and ine*istent. (31) =$e to his de%t to C, = wrote a PN which is 'a a%le to the order of C. C0s %rother, (, misre'resentin) himself as a)ent of C, o%tained the note from =. ( then ne)otiated the note to N after for)in) the si)nat$re of C. (a N enforce the note a)ainst =+ (A) Yes, since ! is the principal debtor. (B) No, since the si)nat$re of C was for)ed. (C) No, since it is C &ho can enforce it, the note bein payable to the order of C. (!) Yes, since !, as ma%er, is primarily liable on the note. (#-) (, the ma,er, iss$ed a PN to P, the 'a ee which states! "I, (, 'romise to 'a P or order the amo$nt of Ph'1 (illion. #i)ned, (." P ne)otiated the note % indorsement to N, then N to . also % indorsement, and . to E, a)ain % indorsement. B$t %efore . indorsed the note to E, .0s wife wrote the fi)$re "2" on the note after "Ph'1" witho$t .0s ,nowled)e, ma,in) it a''ear that the note is for Ph'12 (illion. >or how m$ch is . lia%le to E+ (A) .hp, $illion since it is the ori inal tenor of the note. (B) .hp, $illion since he &arrants that the note is enuine and in all respects &hat it purports to be. (C) .hp,/ $illion since he &arrants his solvency and that he has a ood title to the note. (!) Ph'12 (illion since he warrants that the note is )en$ine and in all res'ects what it '$r'orts to %e. (#/) Notice of dishonor is not re4$ired to %e made in all cases. .ne instance where s$ch notice is not necessar is when the indorser is the one to whom the instr$ment is s$''ose to %e 'resented for 'a ment. 2he rationale here is that the indorser (A) alread ,nows of the dishonor and it ma,es no sense to notif him of it. (B) is bound to ma%e the acceptance in all cases. (C) has no reason to e*pect the dishonor of the instrument. (!) must be made to account for all his actions. (#3) >or a constr$ctive total loss to exist in marine ins$rance, it is re4$ired that the 'erson ins$red relin4$ish his interest in the thin) ins$red. 2his relin4$ishment m$st %e (A) act$al. (B) constructive first and if it fails, then actual. (C) either actual or constructive. (!) constructive.

(#)) /hich of the followin) indorsers ex'ressl warrants in ne)otiatin) an instr$ment that 1: it is )en$ine and tr$eF 2: he has a )ood title to itF 8: all 'rior 'arties have ca'acit to ne)otiateF and B: it is valid and s$%sistin) at the time of his indorsement+ (A) 4he irre ular indorser. (B) 4he re ular indorser. (C) 2he )eneral indorser. (!) 4he "ualified indorser. (1-) /here the ins$rer was made to 'a the ins$red for a loss covered % the ins$rance contract, s$ch ins$rer can r$n after the third 'erson who ca$sed the loss thro$)h s$%ro)ation. /hat is the %asis for conferrin) the ri)ht of s$%ro)ation to the ins$rer+ (A) 4heir e*press stipulation in the contract of insurance. (B) 2he e4$ita%le assi)nment that res$lts from the ins$rer@s 'a ment of the ins$red. (C) 4he insured+s formal assi nment of his ri ht to indemnification to the insurer. (!) 4he insured+s endorsement of its claim to the insurer. (13) >or)er of %ills of exchan)e ma %e s$%divided into, a: for)er of an indorsement on the %ill and %: for)er of the drawer0s si)nat$re, which ma either %e with acce'tance % the drawee, or (A) &ith acceptance but the bill is paid by the dra&ee. (B) &ithout acceptance but the bill is paid by the dra&er. (C) witho$t acce'tance %$t the %ill is 'aid % the drawee. (!) &ith acceptance but the bill is paid by the dra&er. (13) If an ins$rance 'olic 'rohi%its additional ins$rance on the 'ro'ert ins$red witho$t the ins$rer0s consent, s$ch 'rovision %ein) valid and reasona%le, a violation % the ins$red (A) reduces the value of the policy. (B) avoids the 'olic . (C) offsets the value of the policy &ith the additional insurances+s value. (!) forfeits premiums already paid. (1#) 5 fo$nd a chec, on the street, drawn % 6 a)ainst ABC Ban,, with 7 as 'a ee. 5 for)ed 70s si)nat$re as an indorser, then indorsed it 'ersonall and delivered it to =E> Ban,. 2he latter, in t$rn, indorsed it to ABC Ban, which char)ed it to the 6@s acco$nt. 6 later s$ed ABC Ban, %$t it set $' the for)er as its defense. /ill it 'ros'er+ (A) No, since the payee's si nature has been for ed. (B) No, since Y+s remedy is to run after the for er, 2. (C) Yes, since for ery is only a personal defense. (!) 6es, since ABC Ban, is %o$nd to ,now the si)nat$re of 6, its client. (1)) Perils of the shi', $nder marine ins$rance law, refer to loss which in the ordinar co$rse of events res$lts from (A) nat$ral and inevita%le actions of the sea. (B) natural and ordinary actions of the sea. (C) unnatural and inevitable actions of the sea. (!) unnatural and ordinary actions of the sea. (5,) Can a drawee who acce'ts a materiall altered chec, recover from the holder and the drawer+ (A) No, he cannot recover from either of them. (B) Yes from both of them. (C) Yes but only from the dra&er. (!) Yes but only from the holder. (5/) 2he r$le is that the intentional cancellation of a 'erson secondaril lia%le res$lts in the dischar)e of the latter. /ith res'ect to an indorser, the holder0s ri)ht to cancel his si)nat$re is! (A) &ithout limitation. (B) not limited to the case &here the indorsement is necessary to his title.

(C) limited to the case where the indorsement is not necessar to his title. (!) limited to the case &here the indorsement is necessary to his title. (53) 5, in the hos'ital for ,idne d sf$nction, was a%o$t to %e dischar)ed when he met his friend 6. 5 told 6 the reason for his hos'itali*ation. A month later, 5 a''lied for an ins$rance coverin) serio$s illnesses from ABC Ins$rance, Co., where 6 was wor,in) as Cor'orate #ecretar . #ince 5 had alread told 6 a%o$t his hos'itali*ation, he no lon)er answered a 4$estion re)ardin) it in the a''lication form. /o$ld this constit$te concealment+ (A) 6es, since the 'revio$s hos'itali*ation wo$ld infl$ence the ins$rer in decidin) whether to )rant 50s a''lication. (B) No, since Y may be re arded as ABC+s a ent and he already %ne& of 2+s previous hospitalization. (C) Yes, it &ould constitute concealment that amounts to misrepresentation on 2's part. (!) No, since the previous illness is not a material fact to the insurance covera e. (5#) 5 exec$ted a PN in favor of 6 % wa of accommodation. It sa s! "Pa to 6 or order the amo$nt of Ph'-0,000.00. #i)ned, 5." 6 then indorsed the note to 7, and 7 to 2. /hen 2 so$)ht collection from 6, the latter co$ntered as indorser that there sho$ld have %een a 'resentment first to the ma,er who dishonors it. Is 6 correct+ (A) No, since 6 is the real de%tor and th$s, there is no need for 'resentment for 'a ment and dishonor % the ma,er. (B) Yes, since as an indorser &ho is secondarily liable, there must first be presentment for payment and dishonor by the ma%er. (C) No, since the absolute rule is that there is no need for presentment for payment and dishonor to hold an indorser liable. (!) Yes, since the secondary liability of Y and 0 &ould only arise after presentment for payment and dishonor by the ma%er. (5)) 2 delivers two refri)erators to the wareho$se of / who then iss$es a ne)otia%le recei't $nderta,in) the deliver of the refri)erators to "2 or %earer." 2 entr$sted the recei't to B for safe,ee'in) onl . B ne)otiated it, however, to > who %o$)ht it in )ood faith and for val$e. /ho is entitled to the deliver of the refri)erators+ (A) 4, since he is the real o&ner of the refri erators. (B) >, since he is a '$rchaser in )ood faith and for val$e. (C) B, since 4 entrusted the receipt to him. (!) ;, since he has as a &arehouseman a lien on the oods. ((/) A )ro$' of (ala sians wanted to invest in the Phili''ines@ ins$rance %$siness. After ne)otiations, the a)reed to or)ani*e ">I(A Ins$rance Cor'." with a )ro$' of >ili'ino %$sinessmen. >I(A wo$ld have a PhP-0 (illion 'aid $' ca'ital, PhPB0 (illion of which wo$ld come from the >ili'ino )ro$'. All cor'orate officers wo$ld %e >ili'inos and ? o$t of its 103mem%er Board of =irectors wo$ld %e >ili'inos. Can >I(A o'erate an ins$rance %$siness in the Phili''ines+ (A) No, since an ins$rance com'an m$st have at least PhPG- (illion 'aid3$' ca'ital. (B) Yes, since there is substantial compliance &ith our nationalization la&s respectin paid9up capital and <ilipino dominated Board of !irectors. (C) Yes, since <8$A+s paid up capital more than meets the country+s nationalization la&s. (!) No, since an insurance company should be ,--= o&ned by <ilipinos. ((3) 5, creditor of 6, o%tained a &$d)ment in his favor in connection with 60s $n'aid loan to him. 2he co$rt0s sheriff then levied on the )oods that 6 stored in 20s wareho$se, for

which the latter iss$ed a wareho$se recei't. A month %efore the lev , however, 7 %o$)ht the wareho$se recei't for val$e. /ho has a %etter ri)ht over the )oods+ (A) 4, bein the &arehouseman &ith a lien on the oods (B) 7, %ein) a '$rchaser for val$e of the wareho$se recei't (C) 2, bein Y+s 7ud ment creditor (!) Y, bein the o&ner of the oods ((#) A PN states, on its face! "I, 5, 'romise to 'a 6 the amo$nt of Ph' -,000.00 five da s after com'letion of the on3 )oin) constr$ction of m ho$se. #i)ned, 5." Is the note ne)otia%le+ (A) Yes, since it is payable at a fi*ed period after the occurrence of a specified event. (B) No, since it is 'a a%le at a fixed 'eriod after the occ$rrence of an event which ma not ha''en. (C) Yes, since it is payable at a fi*ed period or determinable future time. (!) No, since it should be payable at a fi*ed period before the occurrence of a specified event. ((1) P sold to ( a 'air of )ec,o 9t$,o: for Ph'-0,000.00. ( then iss$ed a PN to P 'romisin) to 'a the mone within H0 da s. 1n,nown to P and (, a law was 'assed a month %efore the sale that 'rohi%its and declares void an a)reement to sell )ec,o in the co$ntr . If 5 ac4$ired the note in )ood faith and for val$e, ma he enforce 'a ment on it+ (A) No, since the law declared void the contract on which the PN was fo$nded. (B) No, since it &as not 2 &ho bou ht the ec%o. (C) Yes, since he is a holder in due course of a note &hich is distinct from the sale of ec%o. (!) Yes, since he is a holder in due course and . and $ &ere not a&are of the la& that prohibited the sale of ec%o. ((5) P a$thori*ed A to si)n a %ill of exchan)e in his 9P@s: name. 2he %ill reads! "Pa to B or order the s$m of Ph'1 million. #i)ned, A 9for and in %ehalf of P:." 2he %ill was drawn on P. B indorsed the %ill to C, C to =, and = to E. (a E treat the %ill as a PN + (A) No, because the instrument is payable to order and has been indorsed several times. (B) 6es, %eca$se the drawer and drawee are one and the same 'erson. (C) No, because the instrument is a bill of e*chan e. (!) Yes, because A &as only an a ent of .. ((() 7 wrote o$t an instr$ment that states! "Pa to 5 the amo$nt of Ph'1 (illion for collection onl . #i)ned, 7." 5 indorsed it to his creditor, 6, to whom he owed Ph'1 million. 6 now wants to collect and satisf 50s de%t thro$)h the Ph'1 million on the chec,. (a he validl do so+ (A) Yes, since the indorsement to Y is for .hp, $illion. (B) No, since 0 is not a party to the loan bet&een 2 and Y. (C) No, since 5 is merel an a)ent of 7, his onl ri)ht %ein) to collect. (!) Yes, since 2 o&ed Y .hp, $illion. (()) 5 #hi''in), Co., ins$red its vessel (< =on 2eodoro for Ph'100 (illion with ABC Ins$rance, Co. thro$)h 2, an a)ent of 5 #hi''in). =$rin) a vo a)e, the vessel accidentall ca$)ht fire and s$ffered dama)es estimated at Ph'?0 (illion. 2 'ersonall informed ABC Ins$rance that 5 #hi''in) was a%andonin) the shi'. Later, ABC ins$rance denied 5 #hi''in)@s claim for loss on the )ro$nd that a notice of a%andonment thro$)h its a)ent was im'ro'er. Is ABC Ins$rance ri)ht+ (A) Yes, since 2 >hippin should have ratified its a ent+s action. (B) No, since 2, as a)ent of 5 #hi''in) who 'roc$red the ins$rance, can also )ive notice of a%andonment for his 'rinci'al.

(C) Yes, since only the a ent of 2 >hippin relayed the fact of abandonment. (!) No, since in the first place, the dama e &as more than ? of the ship's value. (),) 00238?30001 D, a )rocer )oods s$''lier, sold 100 sac,s of rice to C who 'romised to 'a once he has sold all the rice. C meantime delivered the )oods to /, a wareho$seman, who iss$ed a wareho$se recei't. /itho$t the ,nowled)e of D and /, C ne)otiated the recei't to P who ac4$ired it in )ood faith and for val$e. P then claimed the )oods from /, who released them. After the rice was loaded on a shi' %o$nd for (anila, D invo,es his ri)ht to sto' the )oods in transit d$e to his $n'aid lien. /ho has a %etter ri)ht to the rice+ (A) @8AB4 AN>;6@ P, since he has s$'erior ri)hts as a '$rchaser for val$e and in )ood faith. (B) ., re ardless of &hether or not he is a purchaser for value and in ood faith. (C) A, since as an unpaid seller, he has the ri ht of stoppa e in transitu. (!) ;, since it appears that the &arehouse char es have not been paid. ()/) In a si)nat$re % 'roc$ration, the 'rinci'al is %o$nd onl in case the a)ent acted within the act$al limits of his a$thorit . 2he si)nat$re of the a)ent in s$ch a case o'erates as notice that he has (A) a "ualified authority to si n. (B) a limited a$thorit to si)n. (C) a special authority to si n. (!) full authority to si n. ()3) In ret$rn for the 20 ears of faithf$l service of 5 as a ho$sehel'er to 6, the latter 'romised to 'a Ph'100,000.00 to 5@s heirs if he 95: dies in an accident % fire. 5 a)reed. Is this an ins$rance contract+ (A) Yes, since all the elements of an insurance contract are present. (B) Yes, since 2+ services may be re arded as the consideration. (C) No, since 6 act$all made a conditional donation in 5@s favor. (!) No, since it is in fact an innominate contract bet&een 2 and Y. ()3) A %ill of exchan)e states on its face! ".ne 91: month after si)ht, 'a to the order of (r. ; the amo$nt of Ph'-0,000.00, char)ea%le to the acco$nt of (r. #. #i)ned, (r. 2." (r. #, the drawee, acce'ted the %ill $'on 'resentment % writin) on it the words "I shall 'a Ph'80,000.00 three 98: months after si)ht." (a he acce't $nder s$ch terms, which varies the command in the %ill of exchan)e+ (A) 6es, since a drawee acce'ts accordin) to the tenor of his acce'tance. (B) No, since, once he accepts, a dra&ee is liable accordin to the tenor of the bill. (C) Yes, provided the dra&er and payee a ree to the acceptance. (!) No, since he is bound as dra&ee to accept the bill accordin to its tenor. ()#) (a the indorsee of a PN indorsed to him "for de'osit" file a s$it a)ainst the indorser+ (A) 6es, as lon) as the indorser received val$e for the restrictive indorsement. (B) Yes, as lon as the indorser received value for the conditional indorsement. (C) Yes, &hether or not the indorser received value for the conditional indorsement. (!) Yes, &hether or not the indorser received value for the restrictive indorsement. ()1) 5 iss$ed a chec, in favor of his creditor, 6. It reads! " Pa to 6 the amo$nt of #even 2ho$sand C$ndred Pesos 9Ph'G00,000.00:. #i)ned, 5". /hat amo$nt sho$ld %e constr$ed as tr$e in s$ch a case+

(A: Ph'G00,000.00. (B) .hp5--.--. (C) .hp5,---.--. (!) .hp5--,,--.--. ()5) #hi'owner 5, in a''l in) for a marine ins$rance 'olic from ABC, Co., stated that his vessel $s$all sails middle of A$)$st and with normall 100 tons of car)o. It t$rned o$t later that the vessel de'arted on the first wee, of #e'tem%er and with onl 10 tons of car)o. /ill this avoid the 'olic that was iss$ed+ (A) Yes, because there &as breach of implied &arranty. (B) No, because there &as no intent to breach an implied &arranty. (C) Yes, because it relates to a material representation. (!) No, %eca$se there was onl re'resentation of intention. ())) P a$thori*ed A to si)n a ne)otia%le instr$ment in his 9P@s: name. It reads! "Pa to B or order the s$m of Ph'1 million. #i)ned, A 9for and in %ehalf of P:." 2he instr$ment shows that it was drawn on P. B then indorsed to C, C to =, and = to E. E then treated it as a %ill of exchan)e. Is 'resentment for acce'tance necessar in this case+ (A) No, since the drawer and drawee are the same 'erson. (B) No, since the bill is non9ne otiable, the dra&er and dra&ee bein the same person. (C) Yes, since the bill is payable to order, presentment is re"uired for acceptance. (!) Yes, in order to hold all persons liable on the bill.

200H Bar Examination for Commercial Law I< ACAC publicly offered a specially desi ned insurance policy coverin persons bet&een the a es of #- to 5# &ho may be afflicted &ith serious and debilitatin illnesses. Duirico applied for insurance covera e, statin that he &as already (- years old. Nonetheless, ACAC approved his application. Duirico then re"uested ACAC for the issuance of a cover note &hile he &as tryin to raise funds to pay the insurance premium. ACAC ranted the re"uest. 4en days after he received the cover note, Duirico had a heart seizure and had to be hospitalized. Be then filed a claim on the policy. a. Can ACAC validly deny the claim on the round that the insurance covera e, as publicly offered, &as available only to persons #- to 5# years of a eE ;hy or &hy notE (/=) b. !id ACAC+s issuance of a cover note result in the perfection of an insurance contract bet&een Duirico and ACACE 6*plain. (3=) <I Corenzo dre& a bill of e*chan e in the amount of .,--,---.-- payable to Barbara or order, &ith his &ife, !iana, as dra&ee. At the time the bill &as dra&n, !iana &as una&are that Barbara is Corenzo+s paramour. Barbara then ne otiated the bill to her sister, 6lena, &ho paid for it for value, and &ho did not %no& &ho Corenzo &as. :n due date, 6lena presented the bill to !iana for payment, but the latter promptly dishonored the instrument because, by then, !iana had already learned of her husband+s dalliance. a. ;as the bill la&fully dishonored by !ianaE 6*plain. (3=) b. !oes the illicit cause or consideration adversely affect the ne otiability of the billE 6*plain. (3=) 5I 2;1E or >AL#E. Ans&er 4@F6 if the statement is true, or <AC>6 if the statement is false. 6*plain your ans&er in not more than t&o (/) sentences. (#=) a. A loan a reement &hich provides that the debtor shall pay interest at the rate determined by the ban%+s branch mana er violates the disclosure re"uirement of the 4ruth in Cendin Act. b. Fnder the ;arehouse @eceipts Ca&, a &arehouseman loses his lien upon the oods &hen he surrenders possession thereof. c. 4he Howey Test states that there is an investment contract &hen a person invests money in a common enterprise and is led to e*pect profits primarily from the efforts of others. d. A document, dated Guly ,#, /--), that readsH "Pay to X or order the sum of P5,000.00 five days after his pet dog, Sparky, dies. Signed Y." is a ne otiable instrument. e. IA ban% is bound to %no& its depositor+s si natureI is an infle*ible rule in determinin the liability of a ban% in for ery cases. 5II Aaudencio, a store o&ner, obtained a .,9million loan from Bathala <inancin Corporation (B<C). As security, Aaudencio e*ecuted a I!eed of Assi nment of @eceivables,I assi nin ,# chec%s received from various customers &ho bou ht merchandise from his store. 4he chec%s &ere duly indorsed by Aaudencio+s customers. 4he !eed of Assi nment contains the follo&in stipulationH " f, for any reason, the re!eiva"#es or any part thereof !annot "e paid "y the o"#igors, the $SS %&'( un!onditiona##y and irrevo!a"#y agrees to pay the same, assuming the #ia"i#ity to pay, "y way of pena#ty, three per!ent )*+, of the tota# amount unpaid, for the period of de#ay unti# the same is fu##y paid." ;hen the chec%s became due, B<C deposited them for collection, but the dra&ee ban%s dishonored all the chec%s for one of the follo&in reasonsH Iaccount closed,I Ipayment stopped,I Iaccount under arnishment,I or Iinsufficiency of funds.I B<C &rote Aaudencio notifyin him of the dishonored

chec%s, and demandin payment of the loan. Because Aaudencio did not pay, B<C filed a collection suit. 8n his defense, Aaudencio contended that JaK B<C did not ive timely notice of dishonor (of the chec%s)L and JbK considerin that the chec%s &ere duly indorsed, B<C should proceed a ainst the dra&ers and the indorsers of the chec%s. Are Aaudencio+s defenses tenableE 6*plain. (#=) 5III Ciriaco leased a commercial apartment from >upreme Buildin Corporation (>BC). :ne of the provisions of the one9year lease contract statesH "-.. / / / The 01SS11 sha## not insure against fire the !hatte#s, mer!handise, te/ti#es, goods and effe!ts p#a!ed at any sta## or store or spa!e in the #eased premises without first o"taining the written !onsent of the 01SS'(. f the 01SS11 o"tains fire insuran!e !overage without the !onsent of the 01SS'(, the insuran!e po#i!y is deemed assigned and transferred to the 01SS'( for the #atter2s "enefit." Not&ithstandin the stipulation in the contract, &ithout the consent of >BC, Ciriaco insured the merchandise inside the leased premises a ainst loss by fire in the amount of .#--,---.-- &ith <irst Fnited 8nsurance Corporation (<F8C). A day before the lease contract e*pired, fire bro%e out inside the leased premises, dama in Ciriaco+s merchandise. Bavin learned of the insurance earlier procured by Ciriaco, >BC demanded from <F8C that the proceeds of the insurance policy be paid directly to it, as provided in the lease contract. ;ho is le ally entitled to receive the insurance proceedsE 6*plain. (3=)

200?

II 4om Cruz obtained a loan of . , $illion from 2Y0 Ban% to finance his purchase of #,--- ba s of fertilizer. Be e*ecuted a trust receipt in favor of 2Y0 Ban% over the #,--- ba s of fertilizer. 4om Cruz &ithdre& the #,--- ba s from the &arehouse to be transported to Cucena City &here his store &as located. :n the &ay, armed robbers too% from 4om Cruz the #,--- ba s of fertilizer. 4om Cruz no& claims that his obli ation to pay the loan to 2Y0 Ban% is e*tin uished because the loss &as not due to his fault. 8s 4om Cruz correctE 6*plain. (3=) III a. As a rule under the Ne otiable 8nstruments Ca&, a subse"uent party may hold a prior party liable but not vice9versa. Aive t&o (/) instances &here a prior party may hold a subse"uent party liable. (/=) b. Bo& does the Ishelter principleI embodied in the Ne otiable 8nstruments Ca& operate to ive the ri hts of a holder9in9due course to a holder &ho does not have the status of a holder9in9due courseE Briefly e*plain. (/=) I< AB Corporation dre& a chec% for payment to 2Y Ban%. 4he chec% &as iven to an officer of AB Corporation &ho &as instructed to deliver it to 2Y Ban%. 8nstead, the officer, intendin to defraud the Corporation, filled up the chec% by ma%in himself as the payee and delivered it to 2Y Ban% for deposit to his personal account. AB Corporation come to %no& of the officer's fraudulent act after he absconded. AB Corporation as%ed 2Y Ban% to recredits its amount. 2Y Ban% refused. a. 8f you &ere the 7ud e, &hat issues &ould you consider relevant to resolve the caseE 6*plain (3=) b. Bo& &ould you decide the caseE 6*plain. (/=) < .ancho dre& a chec% to Bon and Aerard 7ointly. Bon indorsed the chec% and also for ed Aerard's endorsement. 4he payor ban% paid the chec% and char ed .ancho's account for the amount of the chec%. Aerard received nothin from the payment. a. .ancho as%ed the payor ban% to recredit his account. >hould the ban% complyE 6*plain fully. (3=) b. Based on the facts, &as .ancho as dra&erdischar ed on the instrumentE ;hyE(/=) <I :n Ganuary ,, /---, Antonio @ivera secured a life insurance from >:> 8nsurance Corp. for ., $illion &ith Aemma @ivera, his adopted dau hter, as the beneficiary. Antonio @ivera died on $arch 3, /--# and in the police investi ation, it &as ascertained that Aemma @ivera participated as an accessory in the %illin of Antonio @ivera. Can >:> 8nsurance Corp. avoid liability by settin up as a defense the participation of Aemma @ivera in the %illin of Antonio @iveraE !iscuss &ith reasons. (3=) <II 4errazas de .atio Merde, a condominium buildin , has a value of .#- $illion. 4he o&ner insured the buildin a ainst fire &ith three (3) insurance companies for the follo&in amountsH Northern 8nsurance Corp. 9 ./- $illion >outhern Corp. a. 8nsurance 9 .3- $illion 9 .#- $illion

a.

b. c.

Assume that the vessel &as sea&orthy. Before departin , the vessel &as advised by the Gapanese $eteorolo ical Center that it &as safe to travel to its destination. But &hile at sea, the vessel received a report of a typhoon movin &ithin its eneral path. 4o avoid the typhoon, the vessel chan ed its course. Bo&ever, it &as still at the frin e of the typhoon &hen it &as repeatedly hit by hu e &aves, foundered and eventually san%. 4he captain and the cre& &ere saved e*cept three (3) &ho perished. 8s C>C liable to 6mpireE ;hat principle of maritime la& is applicableE 6*plain. (3=) Assume the vessel &as not sea&orthy as in fact its hull had lea%ed, causin floodin in the vessel. ;ill your ans&er be the sameE 6*plain. (/=) Assume the facts in "uestion (b). Can the heirs of the three (3) cre& members &ho perished recover from C>CE 6*plain fully. (3=)

6astern 8nsurance Corp.

8s the o&ner's ta%in of insurance for the buildin &ith three (3) insurers validE !iscuss. (3=) b. 4he buildin &as totally razed by fire. 8f the o&ner decides to claim from 6astern 8nsurance Corp. only .#- $illion, &ill the claim prosperE 6*plain. (/=) I5 :n :ctober 3-, /--5, $NM .acific, a .hilippine re istered vessel o&ned by Cebu >hippin Company (C>C), san% on her voya e from Bon Oon to $anila. 6mpire Assurance Company (6mpire) is the insurer of the lost car oes loaded on board the vessel &hich &ere consi ned to !ebenhams Company. After it indemnified !ebenhams, 6mpire as subro ee filed an action for dama es a ainst C>C.

200G I. @ issued a chec% for .,$ &hich he used to pay > for %illin his political enemy. a. Can the chec% be considered a ne otiable instrumentE b. !oes >. have a cause of action a ainst @ in case of dishonor by the dra&ee ban%E c. 8f > ne otiated the chec% to 4, &ho accepted it in ood faith and for value, may @ be held secondarily liable by 4E @eason briefly in (a), (b) and (c). II. Ale* deposited oods for &hich Billy, &arehouseman, issued a ne otiable &arehouse receipt &herein the oods &ere deliverable to Ale* or order. Ale* ne otiated the receipt to Caloy. 4hereafter, !ario, a creditor secured 7ud ment a ainst Ale* and served notice of levy over the oods on the &arehouseman. a. 4o &hom should the &arehouseman deliver the oods upon demandE b. ;ould you ans&er be the same if the &arehouseman issued a non9ne otiable &arehouse receipt I<. Alfredo too% out a policy to insure his commercial buildin a ainst fire. 4he bro%er for the insurance company a reed to ive a ,#9day credit &ithin &hich to pay the insurance premium. Fpon delivery of the policy on $ay ,#, /--1, Alfredo issued a postdated chec% payable on $ay 3-, /--1. :n $ay /(, /--1, a fire bro%e out and destroyed the buildin o&ned by Alfredo. a. $ay Alfredo recover on the insurance policyE b. ;ould your ans&er in (a) be the same if it &as found that the pro*imate cause of the fire &as an e*plosion and that fire &as but the immediate cause of loss and there is no e*cepted peril under the policyE c. 8f the fire &as found to have been caused by Alfredo's o&n ne li ence, can he still recover on the policyE @eason briefly in (a), (b) and (c). <. C contracted ! to renovate his commercial buildin . ! ordered construction materials from 6 and received delivery thereof. 4he follo&in day, C &ent to < Ban% to apply for a loan to pay the construction materials. As security for the loan, C &as made to e*ecute a trust receipt. :ne year later, after C failed to pay the balance on the loan, < Ban% char ed him &ith violation of the 4rust @eceipts Ca&. a. ;hat is a 4rust @eceiptE b. ;ill the case a ainst C prosperE @eason briefly.

200I 9 88 9 !iscuss the le al conse"uences &hen a ban% honors a for ed chec%. #= 9 888 9 Gun &as about to leave for a business trip. As his usual practice, he si ned several blan% chec%s. Be instructed @uth, his secretary, to fill them as payment for his obli ations. @uth filled one chec% &ith her name as payee, placed .3-,---.-thereon, endorsed and delivered it to $arie. >he accepted the chec% in ood faith as payment for oods she delivered to @uth. 6ventually, @uth re retted &hat she did and apolo ized to Gun. 8mmediately he directed the dra&ee ban% to dishonor the chec%. ;hen $arie encashed the chec%. it &as dishonored. ,. 8s Gun liable to $arieE #= /. >upposin the chec% &as stolen &hile in @uth's possession and a thief filled the blan% chec%, endorsed and delibvered it to $arie in payment for the oods he purchased from her, is Gun liable to $arie if the chec% is dishonoredE #= 9M9 4he .eninsula 8nsurance Company offered to insure <rancis' brand ne& car a ainst all ris%s in the sum of ., $illion for , year. 4he policy &as issued &ith the premium fi*ed at .1-,---.-- payable in 1 months. <rancis only paid the first t&o months installments. !espite demands, he failed to pay the subse"uent installments. <ive months after the issuance of the policy, the vehicle &as carnapped. <rancis filed &ith the insurance company a claim for its value. Bo&ever, the company denied his claim on the round that he failed to pay the premium resultin in the cancellation of the policy. Can <rancis recover from the .eninsula 8nsurance CompanyE #= 9 M8 9 ,. 8n several policy addresses e*tensively covered by media since his appointment on !ecember /,, /--#, Chief Gustice Artemio M. .an aniban vo&ed to leave a 7udiciary characterized by Ifour 8nsI and to focus in solvin the Ifour AC8!I problems that corrode the administration of 7ustice in our country. 6*plain this Ifour 8nsI and Ifour AC8!I problems. /.#= /. 4he Chief Gustice also said that the 7udiciary must Isafe uard the libertyI and Inurture the prosperityI of our people. 6*plain this philosophy. Cite !ecisions of the >upreme Court implementin each of these t&in beacons of the Chief Gustice. /.#= 9 M88 9 ,. ;hat is a mutual insurance company or associationE /.#= /. !istin uish bet&een the role of a conservator and that of a receiver of a ban%. /.#= 9 82 9 4he Blue >tar Corporation filed &ith the @e ional 4rial Court a petition for rehabilitation on the round that it foresa& the impossibility of payin its obli ations as they fall due. <indin the petition sufficient in form and substance, the court issued an :rder appointin a rehabilitation receiver and stayin the enforcement of all claims a ainst the corporation. ;hat is the rationale for the >tay :rderE #= 929 ,. ;hat acts or omissions are penalized under the 4rust @eceipts Ca&E /.#= /. 8s lac% of intent to defraud a bar to the prosecution of these acts or omissionsE /.#=