2008 Civil law I.

Ana Rivera had a husband, a Filipino citizen like her, who was among the passengers on board a commercial jet plane which crashed in the Atlantic Ocean ten(10) years earlier and had never been heard of ever since. Believing that her husband had died, Ana married Adolf Cruz Staedtler, a divorced German national born of a German father and a Filipino mother residing in Stuttgart. To avoid being required to submit the required certificate of capacity to marry from the German Embassy in Manila, Adolf stated in the application for marriage license that he was a Filipino citizen. With the marriage license stating that Adolf was a Filipino, the couple got married in a ceremony officiated by the Parish Priest of Calamba, Laguna in a beach in Nasugbu, Batangas, as the local parish priest refused to solemnize marriages except in his church. Is the marriage valid? Explain fully. (5%)

II. At age 18, Marian found out that she was pregnant. She insured her own life and named her unborn child as her sole beneficiary. When she was already due to give birth, she and her boyfriend Pietro, the father of her
unborn child, were kidnapped in a resort in Bataan where they were vacationing. The military gave chase and after one week, they were found in an abandoned hut in Cavite. Marian and Pietro were hacked with bolos. Marian and the baby she delivered were both found dead, with the babys umbilical cord already cut. Pietro survived. Can Marians baby be the beneficiary of the insurance taken on the life of the mother? (2%) Between Marian and the baby, who is presumed to have died ahead? (1%) Will Pietro, as surviving biological father of the baby, be entitled to claim the proceeds of the life insurance on the life of Marian? (2%)

a) b) c) III.

Roderick and Faye were high school sweethearts. When Roderick was 18 and Faye, 16 years old, they started to live together as husband and wife without the benefit of marriage. When Faye reached 18 years of age, her parents forcibly took her back and arranged for her marriage to Brad . Although Faye lived with Brad after the marriage, Roderick continued to regularly visit Faye while Brad was away at work. During their marriage, Faye gave birth to a baby girl, Laica. When Faye was 25 years old, Brad discovered her continued liaison with Roderick and in one of their heated arguments, Faye shot Brad to death. She lost no time in marrying her true love Roderick, without a marriage license, claiming that they have been continuously cohabiting for more than 5 years. a) b) c)
Was the marriage of Roderick and Faye valid? (2%) What is the filiation status of Laica? (2%) Can Laica bring an action to impugn her own status on the ground that based on DNA results, Roderick is her biological father? (2%) d) Can Laica be legitimated by the marriage of her biological parents? (1%)

IV.

Gianna was born to Andy and Aimee, who at the time of Giannas birth were not married to each other. While Andy was single at that time, Aimee was still in the process of securing a judicial declaration of nullity on her marriage to her ex-husband. Giannas birth certificate, which was signed by both Andy and Aimee, registered the status of Gianna as legitimate, her surname carrying that of Andys, and that her parents were married to each other.
Can a judicial action for correction of entries in Giannas birth certificate be successfully maintained to: i) Change her status from legitimate to illegitimate (1%); and ii) Change her surname from that of Andys to Aimees maiden surname? (1%)

a)

b)

Instead of a judicial action, can administrative proceedings be brought for the purpose of making the above corrections? (2%) c) Assuming that Aimee is successful in declaring her former marriage void, and Andy and Aimee subsequently married each other, would Gianna be legitimated? (1%)

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

a)

Is there any legal obstacle to the legal adoption of Amy by Andrew? To the legal adoption of Sandy by Andrew and Elena? (2%) b) In his old age, can Andrew be legally entitled to claim support from Amy, Jon, Ryan, Vina , Wilma and Sandy assuming that all of them have the means to support him? (1%) c) Can Amy, Jon, Ryan, Vina, Wilma and Sandy legally claim support from each other? (2%) d) Can Jon and Jane legally marry? (1%)

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

a) b)

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

VII.

Anthony bought a piece of untitled agricultural land from Bert. Bert, in turn, acquired the property by forging Carlos signature in a deed of sale over the property. Carlo had been in possession of the property for 8 years, declared it for tax purposes, and religiously paid all taxes due on the property. Anthony is not aware of the defect in Berts title, but has been in actual physical possession of the property from the time he bought it from Bert, who had never been in possession. Anthony has since then been in possession of the property for one year. a)
Can Anthony acquire ownership of the property by acquisitive prescription? How many more years does he have to possess it to acquire ownership? (2%) b) If Carlo is able to legally recover his property, can he require Anthony to account for all the fruits he has harvested from the property while in possession? (2%) c) If there are standing crops on the property when Carlo recovers possession, can Carlo appropriate them? (2%)

VIII. Adam, a building contractor, was engaged by Blas to construct a house on a lot which he (Blas) owns. While digging on the lot in order to lay down the foundation of the house, Adam hit a very hard object. It turned out to be the vault of the old Banco de las Islas Filipinas. Using a detonation device, Adam was able to open the vault containing old notes and coins which were in circulation during the Spanish era. While the notes and coins are no longer legal tender, they were valued at P 100 million because of their historical value and the coins silver and nickel content. The following filed legal claims over the notes and coins: i) Adam, as finder; ii) Blas, as owner of the property where they were found; iii) Bank of the Philippine Islands, as successor-in-interest of the owner of the vault; and iv) The Philippine Government because of their historical value. a) b)
Who owns the notes and coins? (4%) Assuming that either or both Adam and Blas are adjudged as owners, will the notes and coins be deemed part of their absolute community or conjugal partnership of gains with their respective spouses? (2%)

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

deposited on Jessicas and Jennys properties. This pattern of the river swelling, receding and depositing soil and other materials being deposited on the neighbors properties have gone on for many years. Knowing this pattern, Jessica constructed a concrete barrier about 2 meters from her property line and extending towards the river, so that when the water recedes, soil and other materials are trapped within this barrier. After several years, the area between Jessicas property line to the concrete barrier was completely filled with soil, effectively increasing Jessicas property by 2 meters. Jennys property, where no barrier was constructed, also increased by one meter along the side of the river.

a)

Can Jessica and Jenny legally claim ownership over the additional 2 meters and one meter, respectively, of land deposited along their properties? (2%) b) If Jessicas and Jennys properties are registered, will the benefit of such registration extend to the increased area of their properties? (2%) c) Assume the two properties are on a cliff adjoining the shore of Laguna Lake. Jessica and Jenny had a hotel built on the properties. They had the earth and rocks excavated from the properties dumped on the adjoining shore, giving rise to a new patch of dry land. Can they validly lay claim to the patch of land? (2%)

X. Arthur executed a will which contained only: (i) a provision disinheriting his daughter Bernice for running off with a married man, and (ii) a provision disposing of his share in the family house and lot in favor of his other children Connie and Dora. He did not make any provisions in favor of his wife Erica, because as the will stated, she would anyway get of the house and lot as her conjugal share. The will was very brief and straightforward and both the above provisions were contained in page 1, which Arthur and his instrumental witness, signed at the bottom. Page 2 contained the attestation clause and the signatures, at the bottom thereof, of the 3 instrumental witnesses which included Lambert, the driver of Arthur; Yoly, the family cook, and Attorney Zorba, the lawyer who prepared the will. There was a 3rd page, but this only contained the notarial acknowledgement. The attestation clause stated the will was signed on the same occasion by Arthur and his instrumental witnesses who all signed in the presence of each other, and the notary public who notarized the will. There are no marginal signatures or pagination appearing on any of the 3 pages. Upon his death, it was discovered that apart from the house and lot, he had a P 1million account deposited with ABC Bank. a) b) c) d) XI .
John and Paula, British citizens at birth, acquired Philippine citizenship by naturalization after their marriage. During their marriage the couple acquired substantial landholdings in London and in Makati. Paula bore John three children, Peter, Paul and Mary. In one of their trips to London, the couple executed a joint will appointing each other as their heirs and providing that upon the death of the survivor between them the entire estate would go to Peter and Paul only but the two could not dispose of nor divide the London estate as long as they live. John and Paula died tragically in the London Subway terrorist attack in 2005. Peter and Paul filed a petition for probate of their parents will before a Makati Regional Trial Court. Was Erica preterited? (1%) What other defects of the will, if any, can cause denial of probate? (2%) Was the disinheritance valid? (1%) How should the house and lot, and the cash be distributed? (1%)

a) b) c)

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

XII.

Ernesto, an overseas Filipino worker, was coming home to the Philippines after working for so many years in the Middle East. He had saved P100,000 in his savings account in Manila which he intended to use to start a business in his home country. On his flight home, Ernesto had a fatal heart attack. He left behind his widowed mother, his common-law wife and their twin sons. He left no will, no debts, no other relatives and no other properties except the money in his savings account. Who are the heirs entitled to inherit from him and how much should each receive? (3%)

XIII. Raymond, single, named his sister Ruffa in his will as a devisee of a parcel of land which he owned. The will imposed upon Ruffa the obligation of preserving the land and transferring it, upon her death, to her illegitimate daughter Scarlet who was then only one year old. Raymond later died, leaving behind his widowed mother, Ruffa and Scarlet. a)
Is the condition imposed upon Ruffa to preserve the property and to transmit it upon her death to Scarlet, valid? (1%) b) If Scarlet predeceases Ruffa, who inherits the property? (2%) c) If Ruffa predeceases Raymond, can Scarlet inherit the property directly from Raymond? (2%)

XIV. Stevie was born blind. He went to school for the blind, and learned to read in Braille language. He speaks English fluently. Can he: a) b) c) XV. Eduardo was granted a loan by XYZ Bank for the purpose of improving a building which XYZ leased from him. Eduardo, executed the promissory note (PN) in favor of the bank, with his friend Recardo as cosignatory. In the PN, they both acknowledged that they are individually and collectively liable and waived the need for prior demand. To secure the PN, Recardo executed a real estate mortgage on his own property. When Eduardo defaulted on the PN, XYZ stopped payment of rentals on the building on the ground that legal compensation had set in. Since there was still a balance due on the PN after applying the rentals, XYZ foreclosed the real estate mortgage over Recardos property. Recardo opposed the foreclosure on the ground that he is only a co-signatory; that no demand was made upon him for payment, and assuming he is liable, his liability should not go beyond half the balance of the loan. Further, Recardo said that when the bank invoked compensation between the rentals and the amount of the loan, it amounted to a new contract or novation, and had the effect of extinguishing the security since he did not give his consent (as owner of the property under the real estate mortgage) thereto.
Make a will? (1%) Act as a witness to a will? (1%) In either of the above instances, must the will be read to him? (1%)

a) b) c)

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

XVI . Dux leased his house to Iris for a period of 2 years, at the rate of P25,000.00 monthly, payable annually in advance. The contract stipulated that it may be renewed for another 2-year period upon mutual agreement of the parties. The contract also granted Iris the right of first refusal to purchase the property at any time during the lease, if Dux decides to sell the property at the same price that the property is offered for sale to a third party. Twenty-three months after execution of the lease contract, Dux sold the house to his mother for P2 million. Iris claimed that the sale was a breach of her right of first refusal. Dux said there was no breach because the property was sold to his mother who is not a third party. Iris filed an action to rescind the sale and to compel Dux to sell the property to her at the same price. Alternatively, she asked the court to extend the lease for another 2 years on the same terms. a) Can Iris seek rescission of the sale of the property to Duxs mother? (3%) b) Will the alternative prayer for extension of the lease prosper? (2%)

XVII.
Felipe borrowed $100 from Gustavo in 1998, when the Phil P - US$ exchange rate was P56 US$1. On March 1, 2008, Felipe tendered to Gustavo a cashiers check in the amount of P4,135 in payment of his US$ 100 debt, based on the Phil P US$ exchange rate at that time. Gustavo accepted the check, but forgot to deposit it until Sept. 12, 2008. His bank refused to accept the check because it had become stale. Gustavo now wants Felipe to pay him in cash the amount of P5,600. Claiming that the previous payment was not in legal tender, and that there has been extraordinary deflation since 1998, and therefore, Felipe should pay him the value of the debt at the time it was incurred. Felipe refused to pay him again, claiming that Gustavo is estopped from raising the issue of legal tender, having accepted the check in March, and that it was Gustavos negligence in not depositing the check immediately that caused the check to become stale.

a) b) c)

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

XVIII. AB Corp. entered into a contract with XY Corp. whereby the former agreed to construct the research and laboratory facilities of the latter. Under the terms of the contract, AB Corp. agreed to complete the facility in 18 months, at the total contract price of P10 million. XY Corp. paid 50% of the total contract price, the balance to be paid upon completion of the work. The work

started immediately, but AB Corp. later experienced work slippage because of labor unrest in his company. AB Corps employees claimed that they are not being paid on time; hence, the work slowdown. As of the 17th month, work was only 45% completed. AB Corp. asked for extension of time, claiming that its labor problems is a case of fortuitous event, but this was denied by XY Corp. When it became certain that the construction could not be finished on time, XY Corp. sent written notice canceling the contract, and requiring AB Corp. to immediately vacate the premises. a) b) c)
Can the labor unrest be considered a fortuitous event? (1%) Can XY Corp. unilaterally and immediately cancel the contract? (2%) Must AB Corp. return the 50% downpayment? (2%)

XIX. Juliet offered to sell her house and lot, together with all the furniture and appliances therein, to Dehlma. Before agreeing to purchase the property, Dehlma went to the Register of Deeds to verify Juliets title. She discovered that while the property was registered in Juliets name under the Land Registration Act, as amended by the Property Registration Decree, it was mortgaged to Elaine to secure a debt of P80,000. Wanting to buy the property, Dehlma told Juliet to redeem the property from Elaine, and gave her an advance payment to be used for purposes of releasing the mortgage on the property. When the mortgage was released, Juliet executed a Deed of Absolute Sale over the property which was duly registered with the Registry of Deeds, and a new TCT was issued in Dehlmas name. Dehlma immediately took possession over the house and lot and the movables therein. Thereafter, Dehlma went to the Assessors Office to get a new tax declaration under her name. She was surprised to find out that the property was already declared for tax purposes in the name of XYZ Bank which had foreclosed the mortgage on the property before it was sold to her. XYZ Bank was also the purchaser in the foreclosure sale of the property. At that time, the property was still unregistered but XYZ Bank registered the Sheriffs Deed of Conveyance in the day book of the Register of Deeds under Act. 3344 and obtained a tax declaration in its name. a) b) c)
Was Dehlma a purchaser in good faith? (2%) Who as between Dehlma and XYZ Bank has a better right to the house and lot? (2%) Who owns the movables inside the house? (2%)

2008 Bar Examinations Taxation Exam Questions In January 1970, Juan Gonzales bought one hectare of agricultural land in Laguna for P100,000. This property has a current fair market value of P10 million in view of the construction of a concrete road traversing the property. Juan Gonzales agreed to exchange his agricultural lot in Laguna for a one-half hectare residential property located in Batangas, with a fair market value of P10 million, owned by Alpha Corporation, a domestic corporation engaged in the purchase and sale of real property. Alpha Corporation acquired the property in 2007 for P9 million. 1. What is the nature of real properties exchanged for tax purposes - capital asset or ordinary asset? Explain. ( 3% ) 2. Is Juan Gonzales subject to income tax on the exchange of property? If so, what is the tax based and rate? Explain. ( 3% ) 3. Is Alpha Corporation subject to income tax on the exchange of property? If so, what is the tax base and rate? Explain. ( 3% ) II Jose Cerna, Filipino citizen, married to Maria Cerna, died in a vehicular accident in NLEX on July 10, 2007. The spouses owned, among others, a 100-hectare agricultural land in Sta. Rosa, Laguna with current fair market value of P20 million, which was subject to matter of a Joint Venture Agreement about to be implemented with Star Land Corporation ( SLC ), a well-known real estate development company. He bought the said real property for P2 million fifty years ago. On January 5,2008, the administrator of the estate and SLC jointly announced their big plans to start conversion and development of the agricultural lands in Sta. Rosa, Laguna, into first-class residential and commercial centers. As a result, the prices of real properties in the locality have doubled. The administrator of the Estate of Jose Cernan filed the estate tax return on January 9, 2008, by including in the gross estate the real property at P2 million. After 9 months, the BIR issued deficiency estate tax assessment, by valuing the real property at P40 million. A ) Is the BIR correct in valuing the real property at P40 million? Explain. ( 3% ) B ) If you disagree, what is the correct value to used for estate tax purposes? Explain. ( 3% ) III DEF Corporation is wholly owned subsidiary of DEF, Inc., California, USA. Starting December 15, 2004, DEF Corporation paid annual royalties to DEF, Inc., for the use of the latter's software, for which the former, as with holding agent of the government, withheld and remitted to the BIR the 15% final tax based on the gross royalty payments. The withholding tax return was filed and tax remitted to the BIR on January 10 of the following year. On April 10, 2007 DEF Corporation filed written claim for tax credit with the BIR, arising from erroneously paid income taxes covering the years 2004 and 2005. The following day, DEF Corporation filed a petition for review with the court of Tax Appeals involving the tax credit claim for 2004 and 2005. 1. As a BIR lawyer handling the case, would you raise the defense of prescription in your answer to the claim for tax credit? Explain. ( 4% ) 2. Can the BIR lawyer raise the defense that DEF Corporation is not the proper party to file

such claim for tax credit? Explain. ( 3% ) IV JKL Corporation is a domestic corporation engaged in the importation and sale of motor vehicles in the Philippines and is duly registered with the Subic Bay Metropolitan Authority ( SBMA ). In December 2007, it imported several second-hand motor vehicles from Japan and Korea, which it stores in a warehouse in Subic Bay. It sold these motor vehicles in April 2008, to persons residing in the customs territory. 1. Are the importations of motor vehicles from abroad subject to customs duties and value added taxes? Explain. ( 4% ) 2. if they are taxable, when must the duties and taxes be paid? What are the bases for and purposes of computing customs duties and VAT? To whom must the duties and VAT be paid? Explain. ( 3% ) V Maria Suerte, a Filipino citizen, purchased a lot in Makati City in 1980 at a price of P1 million. Said property has been leased to MAS Corporation, a domestic corporation engaged in manufacturing paper products, owned 99% by Maria Suerte. In October 2007, EIP Corporation, a real estate developer, expressed its desire to buy the Makati property at its fair market value P300 million, payable as follows : (a) P60 million down payment; and (b) balance, payable equally in twenty four (24) monthly consecutive installments. Upon the advice of a tax lawyer, Maria Suerte exchanged her Makati property for shares of stock of MAS Corporation. A BIR ruling, confirming the tax-free exchange of property for shares of stock, was secured from the BIR National Office and a Certificate Authorizing Registration was issued by the Revenue District Officer (RDO) where the property was located. Subsequently, she sold her entire stock holdings in MAS Corporation to EIP Corporation for P300 million. In view of the tax advice, Maria Suerte paid only the capital gains tax of P29,895,000 ( P100,000 x 5% plus P298,900,00 x 10% ), instead of the corporate income tax of P104,650,00 ( 35% on P299 million gain from sale of real property ). After evaluating the capital gains tax payment, the RDO wrote a letter to Maria Suerte, Slating that she commited tax evasion. Is the contention of the RDO tenable? Or was it tax avoidance that Maria Suerte had resorted to? Explain. ( 6% ) VI While driving his car to Baquio last month, Pedro Asuncion, together with his wife Assunta, and only son Jaime, met an accident that caused the instantaneous death of Jaime. The following day, Assunta also died in the hospital. The spouses and their son had the following assets and liabilities at the time of death : Assunta Conjugal Jaime

Exclusive

Exclusive

Cash Cars Land Residential House Mortgage Payable Funeral Expenses

P10,000,000.00 P1,200,00.00 P2,000,000.00 500,000.00 5,000,000.00 2,000,000.00 4,000,000.00 2,500,000.00 300,000.00

1. Is the Estate of Jaime Asuncion liable for estate tax? Explain. ( 4% ) 2. Is vanishing deduction applicable to the Estate of Assunta Asuncion? Explain ( 4% ) VII After examining the books and records of EDS Corporation, the 2004 final assessment notice, showing basic tax of P1,000,000 deficiency interest of P400,000 and due date for payment of April 30, 2007, but without the demand letter, was mailed and released by the BIR on April 15, 2007. The registered letter, containing the tax assessment, was received by the EDS Corporation on April 25, 2007 1. What is an assessment notice? What are the requisites of a valid assessment? Explain ( 3% ) 2. As tax lawyer of EDS Corporation, what legal defense(s) would you raised against the assessment? Explain. ( 3% ). VIII The City of Manila enacted an ordinance, imposing a 5% tax on gross receipts on rentals of space in privately-owned public markets. BAT Corporation questioned the validity of the ordinance, stating that the tax is an income tax, which cannot be imposed by the city government. Do you agree with the position of BAT Corporation? Explain. ( 5% ) IX William Antonio imported into the Philippines a luxury car worth US$100,00. This car was, however, declared only for US$20,000 and corresponding customs duties and taxes were paid thereon. Subsequently, the Collector of Customs discovered the underdeclaration and he initiated forfeiture proceedings of the imported car.

1. may the Collector of Customs declare the imported car forfeited in favor of the government? Explain. ( 3% ) 2. Are forfeiture proceedings of goods illegally imported criminal in nature? Explain ( 3% ) X John McDonald, a U.S. Citizen residing in Makati City, bought shares of stock of a domestic corporation whose shares are listed and traded in the Philippine Stock Exchange at the price of P2 million Yesterday, he sold the shares of stock through his favorite Makati stockbroker at a gain of P200,000. 1. Is John McDonald subject to Philippine Income Tax on the sale of his shares through his stockbroker? Is he liable for any other tax? Explain. ( 3% ) 2. If John McDonald deriectly sold the shares to his best friend, who is another U.S. Citizen residing in Makati, at a gain of P200,000. Is he liable for Philippine Income Tax? If so, what is the ntax base and rate? ( 3% ) XI Pedro Manalo, A Filipino citizen residing in Makati City, owns a vacation house and lot in San Francisco, California, U.S.A, which he acquired in 2000 for P15 million. On January 10, 2006 he sold said real property to Juan Mayaman, another Filipino citizen residing in Quezon City, for P20 million. On February 9, 2006 Manalo filed the capital gains tax return and paid P1.2 million representing 6% capital gain tax. Since Manalo did not derive any ordinary income, no income tax returnn was filed by him for 2006. After the tax audit conducted in 2007, the BIR officer assessed Manalo for deficiency income tax computed as follows: P5 million ( P20 million less P 15 million ) x 35% = P1.75 million, without the capital gains tax paid being allowed as tax credit. Manalo consulted a real estate broker who said that the P1.2 million capital gains tax should be credited from P1.75 million deficiency income tax. 1. Is the BIR officer's tax assessment correct? Explain. ( 3% ) 2. If you were hired by Manalo as his tax consultant, what advice would you give him to protect his interest? Explain. ( 3% ) XII Greenhills Condominium Corporation incorporated in 2001 is a non-stock, non profit association of unit owner in Greenhills Tower, San Juan City. To be able to reduce the association dues being collected from the unit owners, the Board of Directors of the corporation agreed to lease part of the ground floor of the condominium building to DEF Saving Bank for P120,000 a month or P1.44 million for the year, starting January 2007. 1. Is the non-stock, non-profit association liable for value added tax in 2007? If your answer is in the negative, is it liable for another kind of business tax? (4%) 2. Will the association be liable for value added tax in 2008 if it increases the rental to

P150,000 a month beginning January 2008? Explain. (3%) XIII MNO Corporation was organized on July 1, 2006, to engage in trading of school supplies, with principal place of business in Cubao, Quezon City. Its book of account and income statement showing gross sales as follows: July 1, 2006 to December 31, 2006 P 5,0000,000. January 1, 2007 to June 30, 2007 P 10,000,000.

July 1, 2007 to December 31, 2007 P 15,000,000. Since MNO Corporation adopted fiscal year ending June 30 as its taxable year for income tax purpose, it paid its 2% business tax for fiscal year ending June 30, 2007 based on gross dales of P15 million. However, the Quezon City Treasurer assessed the corporation for deficiency business tax for 2007 based on gross sales of P25 million alleging that local business taxes shall be computed based on calendar year. 1. Is the position of the city treasurer tenable? Explain. (3%) 2. May the deficiency business tax be paid in installments without surcharge and interest? Explain. (3%) XIV Spouses Jose San Pedro and Clara San Pedro, both Filipino citizens, are the owners of a residential house and lot in Quezon City. After the recent wedding of their son, Mario, to Maria, the spouses donated said real property to them. At the time of donation, the real property has a fair market value of P2 million. 1. Are Mario and Maria subject to income tax the value of the real property donated to them? Explain. (4%) 2. b) Are Jose and Clara subject to donor's tax? If so, how much is the taxable gift of each spouse and what rate shall be applied to the gift? Explain. (4%) XV In 2007, spouses Renato and Judy Garcia opened peso and dollar deposits at the Philippine branch of the Hong Kong Bank in Manila. Renato is an overseas worker in Hong Kong while Judy lives and works in Manila. During the year, the bank paid interest income of P10,000 on the peso deposit and USS1,000 on the dollar deposit. The bank withheld final income tax equivalent to 20% of the entire interest income and remitted the same to the BIR. 1. Are the interest incomes on the bank deposits of spouses Renato and Judy Garcia subject to income tax? Explain. (4%)

2. Is the bank correct in withholding the 20% final tax on the entire interest income? Explain. (3%) NOTHING FOLLOWS.

2008 Bar Examination Mercantile / Commercial Law

BAR EXAMINATION 2008 MERCANTILE LAW

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

INSTRUCTIONS This questionnaire consists of fourteen (19) numbers contained in nine (9) pages. Read each question very carefully. Answer legibly, clearly and concisely. Start each number on a separate page; an answer to a subquestion under the same number may be written continuously on the same page and on the immediately succeeding pages until completed. Do not repeat the question. You will be given credit for your knowledge of legal doctrine and for the quality of your legal reasoning. A mere Yes or No answer without any corresponding discussion will not be given any credit. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE GOOD LUCK!!!

Signed DANTE O. TINGA Chairperson

2008 Bar Examination Committee

PLEASE CHECK THE NUMBER OF PAGES IN THIS SET WARNING: NOT FOR SALE OR UNAUTHORIZED USE MERCANTILE LAW I X corporation entered into a contract with PT Contruction Corp. for the latter to construct and build a sugar mill within six (6) months. They agreed that in case of delay, PT Construction Corp. will pay X Corporation P100,000 for every day of delay. To ensure payment of the agreed amount of damages, PT Construction Corp. secured from Atlantic Bank a confirmed and irrevocable letter of credit which was accepted by X Corporation in due time. One week before the expiration of the six (6) month period, PT Construction Corp. requested for an extension of time to deliver claiming that the delay was due to the fault of X Corporation. A controversy as to the cause of the delay which involved the workmanship of the building ensued. The controversy remained unresolved. Despite the controversy, X Corporation presented a claim against Atlantic Bank by executing a draft against the letter of credit. 1. Can Atlantic Bank refuse payment due to the unresolved controversy? Explain. (3%) 2. Can X Corporation claim directly from PT Construction Corp.? Explain. (3%) II Tom Cruz obtained a loan of P 1 Million from XYZ Bank to finance his purchase of 5,000 bags of fertilizer. He executed a trust receipt in favor of XYZ Bank over the 5,000 bags of fertilizer. Tom Cruz withdrew the 5,000 bags from the warehouse to be transported to Lucena City where his store was located. On the way, armed robbers took from Tom Cruz the 5,000 bags of fertilizer. Tom Cruz now claims that his obligation to pay the loan to XYZ Bank is extinguished because the loss was not due to his fault. Is Tom Cruz correct? Explain. (4%)

III 1. As a rule under the Negotiable Instruments Law, a subsequent party may hold a prior party liable but not vice-versa. Give two (2) instances where a prior party may hold a subsequent party liable. (2%) 2. How does the shelter principle embodied in the Negotiable Instruments Law operate to give the rights of a holder-in-due course to a holder who does not have the status of a holder-in-due course? Briefly explain. (2%) IV AB Corporation drew a check for payment to XY Bank. The check was given to an officer of AB Corporation who was instructed to deliver it to XY Bank. Instead, the officer, intending to defraud the Corporation, filled up the check by making himself as the payee and delivered it to XY Bank for deposit to his personal account. AB Corporation come to know of the officers fraudulent act after he absconded. AB Corporation asked XY Bank to recredits its amount. XY Bank refused. 1. If you were the judge, what issues would you consider relevant to resolve the case? Explain (3%) 2. How would you decide the case? Explain. (2%) V Pancho drew a check to Bong and Gerard jointly. Bong indorsed the check and also forged Gerards endorsement. The payor bank paid the check and charged Panchos account for the amount of the check. Gerard received nothing from the payment. 1. Pancho asked the payor bank to recredit his account. Should the bank comply? Explain fully. (3%) 2. Based on the facts, was Pancho as drawerdischarged on the instrument? Why?(2%) VI On January 1, 2000, Antonio Rivera secured a life insurance from SOS Insurance Corp. for P1 Million with Gemma Rivera, his adopted daughter, as the beneficiary. Antonio Rivera died on March 4, 2005 and in the police investigation, it was ascertained that Gemma Rivera participated as an accessory in the killing of Antonio Rivera. Can SOS Insurance Corp. avoid

liability by setting up as a defense the participation of Gemma Rivera in the killing of Antonio Rivera? Discuss with reasons. (4%) VII Terrazas de Patio Verde, a condominium building, has a value of P50 Million. The owner insured the building against fire with three (3) insurance companies for the following amounts: Northern Insurance Corp. - P20 Million Southern Insurance Corp. - P30 Million Eastern Insurance Corp. - P50 Million

1. Is the owners taking of insurance for the building with three (3) insurers valid? Discuss. (3%) 2. The building was totally razed by fire. If the owner decides to claim from Eastern Insurance Corp. only P50 Million, will the claim prosper? Explain. (2%) VIII City Railways, Inc. (CRI) provides train services, for a fee, to commuters from Manila to Calamba, Laguna. Commuters are required to purchase tickets and then proceed to designated loading ang unloading facilities to board the train. Ricardo Santos purchased a ticket for Calamba and entered the station. While waiting, he had an altercation with the security guard of CRI leading to a fistfight. Ricardo Santos fell on the railway just as a train was entering the station. Ricardo Santos was run over by the train. He died. In the action for damages filed by the heirs of Ricardo Santos, CRI interposed lack of cause of action, contending that the mishap occurred before Ricardo Santos boarded the train and that it was not guilty of negligence. Decide.(5%) IX On October 30, 2007, M/V Pacific, a Philippine registered vessel owned by Cebu Shipping Company (CSC), sank on her voyage from Hong Kong to Manila. Empire Assurance Company (Empire) is the insurer of the lost cargoes loaded on board the vessel which were consigned to Debenhams Company. After it indemnified Debenhams, Empire as subrogee filed an

action for damages against CSC. 1. Assume that the vessel was seaworthy. Before departing, the vessel was advised by the Japanese Meteorological Center that it was safe to travel to its destination. But while at sea, the vessel received a report of a typhoon moving within its general path. To avoid the typhoon, the vessel changed its course. However, it was still at the fringe of the typhoon when it was repeatedly hit by huge waves, foundered and eventually sank. The captain and the crew were saved except three (3) who perished. Is CSC liable to Empire? What principle of maritime law is applicable? Explain. (3%) 2. Assume the vessel was not seaworthy as in fact its hull had leaked, causing flooding in the vessel. Will your answer be the same? Explain. (2%) 3. Assume the facts in question (b). Can the heirs of the three (3) crew members who perished recover from CSC? Explain fully. (3%) X Nelson owned and controlled Sonnel Construction Company. Acting for the company, Nelson contracted the construction of a building. Without first installing a protective net atop the sidewalks adjoining the construction site, the company proceeded with the construction work. One day a heavy piece of lumber fell from the building. It smashed a taxicab which at that time had gone offroad and onto the sidewalk in order to avoid the traffic. The taxicab passenger died as a result. 1. Assume that the company had no more account and property in its name. As counsel for the heirs of the victim, whom will you sue for damages, and what theory will you adopt? (3%) 2. If you were the counsel for Sonnel Construction, how would you defend your client? What would be your theory? (2%) 3. Could the heirs hold the taxicab owner and driver liable? Explain. (2%) XI 1. Since February 8, 1935, the legislature has not passed even a single law creating a private corporation. What provision of the Constitution precludes the passage of such a law? (3%) 2. May the composition of the board of directors of the National Power Corporation (NPC) be validly reduced to three (3)? explain your

answer fully. (2%) XII Pedro owns 70% of the subscribed capital stock of a company which owns an office building. Paolo and Juan own the remaining stock equally between them. Paolo also owns a security agency, a janitorial company and a catering business. In behalf of the office building company, Paolo engaged his companies to render their services to the office building. Are the service contracts valid? Explain. (4%) XIII Grand Gas Corporation, a publicity listed company, discover after extensive drilling a rich deposit of natural gas along the coast of Antique. For five (5) months, the company did not disclose the discovery so that it could quitely and cheaply acquire neighboring land and secure mining information to the Securities and Exchange Commission, all the directors and key officer of the company bought shares went up. The directors and officer sold their shares at huge profits. 1. What provision of the Securities Regulation Code (SRC) did they violate, if any? Explain. (4%) 2. Assuming that the employees of the establishment handling the printing work of Grand Gas Corporation saw the exploration reports which were mistakenly sent to their establishment together with other materials to be printed. They too bought shares in the company at low prices and later sold them at huge profits. Will they be liable for violation of the SRC? Why? (3%) XIV Ace Cruz subscribed to 100,000 shares of stock of JP Development Corporation, which has a par value of P1 per share. He paid P25,000 and promised to pay the balance before December 31, 2008. JP Development Corporation declared a cash dividend on October 15, 2008, payable on December 1, 2008. 1. For how many shares is Ace Cruz entitled to be paid cash dividends? Explain. (2%) 2. On December 1, 2008, can Ace Cruz compel JP Development Corporation to issue to him the stock certificate corresponding to the

P25,000 paid by him? (2%) XV Eloise, an accomplished writer, was hired by Petong to write a bimonthly newspaper column for Diario de Manila, a newly-established newspaper of which Petong was the editor-in-chief. Eloise was to be paid P1,000 for each column that was published. In the course of two months, Eloise submitted three columns which, after some slight editing, were printed in the newspaper. However, Diario de Manila proved unprofitable and closed only after two months. Due to the minimal amounts involved, eloise chose not to pursue any claim for payment from the newspaper, which was owned by New Media Enterprises. Three years later, Eloise was planning to publish an anthology of her works, and wanted to include the three columns that appeared in the Diario de Manila in her anthology. She asks for your legal advice: 1. Does Eloise have to secure authorization from New Media Enterprises to be able to publish her Diario de Manila columns in her own anthology? Explain fully. (4%) 2. Assume that New Media Enterprises plans to publish Eloises columns in its own anthology entitled, The Best of Diaro de Manila:. Eloise wants to prevent the publication of her columns in that anthology since she was never paid by the newspaper. Name one irrefutable legal arguments Eloise could cite to enjoin New Media Enterprises from including her columns in its anthology. (2%) XVI In 1999, Mocha Warm, an American musician, had a hit rap single called Warm Warm Honey which he himself composed and performed. The single was produced by a California record company, Galactic Records. Many noticed that some passages from Warm Warm Honey sounded eerily similar to parts Unde Hassle, a 1978 hit song by the British rock band Majesty. A copyright infringement suit was filed in the United States against Mocha Warm by Majesty. It was later settled out of court, with Majesty receiving attribution as co-author of Warm Warm Honey as well as a share in the royalties. By 2002, Mocha Warm was nearing bankruptcy and he sold his economic rights over Warm Warm Honey to Galactic Records for $10,000

In 2008, Planet Films a Filipino movie producing company, commissioned DJ Chef Jean, a Filipino musician, to produce an original re-mix of Warm Warm Honey for use in one of its latest films, Astig!. DJ Chef Jean remixed Warm Warm Honey with salsa beat and interspersed as well a recital of a poetic stanza by John Blake, a 17th century Scottish poet. DJ Chef Jean died shortly after submitting the remixed Warm Warm Honey to Planet Films. Prior to the release of Astig!, Mocha Warm learns of the remixed Warm Warm Honey and demands that he be publicity identified as the author of the remixed song in all the CD covers and publicity releases of Planet Films. 1. Who are the parties or entities entitled to be credited as author of the remixed Warm Warm Honey? Reason out your answer. (3%) 2. Who are the particular parties or entities who exercise copyright over the remixed Warm Warm Honey? Explain. (3%) XVII On January 1, 2008, Al obtained a loan of P10,000 from Bob to be paid on January 30,2008, secured by a chattel mortgage on a Toyota motor car. On February 1, 2008, Al obtained another loan of P10,000 from Bob to be paid on February 15, 2008. he secured this by executing a chattel mortgage on a Honda motorcycle. On the due date of the first loan Al failed to pay. Bob foreclosed the chattel mortgage but the car was bidded for P6,000 only. Al also failed to pay the second loan due on February 15, 2008. Bob filed an action for collection of sum money. Al filed a motion to dismiss claiming that Bob should first cforeclosed the mortgage on the Honda motorcycle before he can file the action for sum of money. Decide with reasons. (4%) XVIII 1. Can a distressed corporation file a petition for corporate rehabilitation after the dismissal of its earlier petition for insolvency? Why? (2%) 2. Can the corporation file a petition for rehabilitation first, and after it is dismissed file a petition for insolvency? Why? (2%) 3. Explain the key phrase equality is equity in corporate rehabilitation proceedings. (2%) XIX Industry Bank, which has a net worth of P1 Billion, extended a loan to Celestial Properties Inc. amounting to P270 Million. The loan was secured by a mortgage over a vast commercial lot in the Fort Bonifacio Global City,

appraised at P350 Million. After audit, the Bangko Sentral ng Pilipinas gave notice that the loan to Celestial Properties exceeded the single borrowers limit of 25% of the banks net worth under a recent BSP Circular. In light of other previous similar violations of the credit limit requirement, the BSP advised Industry Bank to reduce the amount of the loan to Celestial Properties under pain of severe sanctions. When Industry Bank informed Celestial Properties that it intended to reduce the loan by P50 Million, Celestial Properties countered that the bank should first release a part of the collateral worth P50 Million. Industry Bank rejected the counter-proposal, and reffered the matter to you as counsel. How would you advise Industry Bank to proceed, with its best interest in mind? (5%) NOTHING FOLLOWS.

2009 BAR EXAMINATION QUESTION CIVIL LAW

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

INSTRUCTIONS This questionnaire is in TWO (2) PARTS: Part I with ten (10) questions (numbered I to X), contained in five (5) pages; and Part II with ten (10) questions (numbered XI-XX), contained in five (5) pages, for a total number of ten (10) pages. Write your answers to Part I and Part II in the corresponding portions indicated in the booklet. Begin your answer to each numbered question on a separate page; an answer to a subquestion under the same number may be written continuously on the same page and succeeding pages until completed. Answer the questions directly and concisely. Do not repeat the questions. Write legibly. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE. GOOD LUCK! ANTONIO EDUARDO B. NACHURA CHAIRPERSON 2009 BAR EXAMINATIONS COMMITTEE PLEASE CHECK THAT THIS SET CONTAINS ELEVEN (11) PAGES (INCLUDING THIS PAGE). WARNING: NOT FOR SALE OR UNAUTHORIZED USE PART I I TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false. Explain your answer in not more than two (2) sentences. (5%) [a] The doctrine of processual presumption allows the court of the forum to presume that the

foreign law applicable to the case is the same as the local or domestic law. [b] In reserva troncal, all reservatarios (reservees) inherit as a class and in equal shares regardless of their proximity in degree to the prepositus. [c] An oral partnership is valid. [d] An oral promise of guaranty is valid and binding. [e] A dead child can be legitimated. II Dr. Lopez, a 70-year old widower, and his son Roberto both died in a fire that gutted their home while they were sleeping in their air-conditioned rooms. Robertos wife, Marilyn, and their two children were spared because they were in the province at the time. Dr. Lopez left an estate worth P20M and a life insurance policy in the amount of P1M with his three children --- one of whom is Roberto --- as beneficiaries. Marilyn is now claiming for herself and her children her husbands share in the estate left by Dr. Lopez, and her husbands share in the proceeds of Dr. Lopezs life insurance policy. Rule on the validity of Marilyns claims with reasons. (4%) III In December 2000, Michael and Anna, after obtaining a valid marriage license, went to the Office of the Mayor of Urbano, Bulacan, to get married. The Mayor was not there, but the Mayors secretary asked Michael and Anna and their witnesses to fill up and sign the required marriage contract forms. The secretary then told them to wait, and went out to look for the Mayor who was attending a wedding in a neighboring municipality. When the secretary caught up with the Mayor at the wedding reception, she showed him the marriage contract forms and told him that the couple and their witnesses were waiting in his office. The Mayor forthwith signed all the copies of the marriage contract, gave them to the secretary who returned to the Mayors office. She then gave copies of the marriage contract to the parties, and told Michael and Anna that they were already married. Thereafter, the couple lived together as husband and wife, and had three sons. [a] Is the marriage of Michael and Anna valid, voidable, or void? Explain your answer. (3%) [b] What is the status of the three children of Michael and Anna? Explain your answer. (2%) [c] What property regime governs the properties acquired by the couple? Explain. (2%) IV Harry married Wilma, a very wealthy woman. Barely five (5) years into the marriage, Wilma

fell in love with Joseph. Thus, Wilma went to a small country in Europe, became a naturalized citizen of that country, divorced Harry, and married Joseph. A year thereafter, Wilma and Joseph returned and established permanent residence in the Philippines. [a] Is the divorce obtained by Wilma from Harry recognized in the Philippines? Explain your answer. (3%) [b] If Harry hires you as his lawyer, what legal recourse would you advise him to take? Why? (2%) [c] Harry tells you that he has fallen in love with another woman, Elizabeth, and wants to marry her because, after all, Wilma is already married to Joseph. Can Harry legally marry Elizabeth? Explain. (2%) V Four children, namely: Alberto, Baldomero, Caridad, and Dioscoro, were born to the spouses Conrado and Clarita de la Costa. The childrens birth certificates were duly signed by Conrado, showing them to be the couples legitimate children. Later, one Edilberto de la Cruz executed a notarial document acknowledging Alberto and Baldomero as his illegitimate children with Clarita. Edilberto died leaving substantial properties. In the settlement of his estate, Alberto and Baldomero intervened claiming shares as the deceaseds illegitimate children. The legitimate family of Edilberto opposed the claim. Are Alberto and Baldomero entitled to share in the estate of Edilberto? Explain. (4%) VI On December 1, 2000, Dr. Juanito Fuentes executed a holographic will, wherein he gave nothing to his recognized illegitimate son, Jay. Dr. Fuentes left for the United States, passed the New York medical licensure examinations, resided therein, and became a naturalized American citizen. He died in New York in 2007. The laws of New York do not recognize holographic wills or compulsory heirs. [a] Can the holographic will of Dr. Fuentes be admitted to probate in the Philippines? Why or why not? (3%) [b] Assuming that the will is probated in the Philippines, can Jay validly insist that he be given his legitime? Why or why not? (3%) VII Ramon Mayaman died intestate, leaving a net estate of P10,000,000.00. Determine how much each heir will receive from the estate: [a] If Ramon is survived by his wife, three full-blood brothers, two half-brothers, and one

nephew (the son of a deceased full-blood brother)? Explain. (3%) [b] If Ramon is survived by his wife, a half-sister, and three nephews (sons of a deceased fullblood brother)? Explain. (3%) VIII Jude owned a building which he had leased to several tenants. Without informing his tenants, Jude sold the building to Ildefonso. Thereafter, the latter notified all the tenants that he is the new owner of the building. Ildefonso ordered the tenants to vacate the premises within thirty (30) days from notice because he had other plans for the building. The tenants refused to vacate, insisting that they will only do so when the term of their lease shall have expired. Is Ildefonso bound to respect the lease contracts between Jude and his tenants? Explain your answer. (3%) IX Before migrating to Canada in 1992, the spouses Teodoro and Anita entrusted all their legal papers and documents to their nephew, Atty. Tan. Taking advantage of the situation, Atty. Tan forged a deed of sale, making it appear that he had bought the couples property in Quezon City. In 2000, he succeeded in obtaining a TCT over the property in his name. Subsequently, Atty. Tan sold the same property to Luis, who built an auto repair shop on the property. In 2004, Luis registered the deed of conveyance, and title over the property was transferred in his name. In 2006, the spouses Teodoro and Anita came to the Philippines for a visit and discovered what had happened to their property. They immediately hire you as lawyer. What action or actions will you institute in order to vindicate their rights? Explain fully. (4%) X Rommels private car, while being driven by the regular family driver, Amado, hits a pedestrian causing the latters death. Rommel is not in the car when the incident happened. [a] Is Rommel liable for damages to the heirs of the deceased? Explain. (2%) [b] Would your answer be the same if Rommel was in the car at the time of the accident? Explain. (2%) *** END OF PART I *** PART II XI TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false. Explain your answer in not more than two (2) sentences. (5%)

[a] A clause in an arbitration contract granting one of the parties the power to choose more arbitrators than the other renders the arbitration contract void. [b] If there is no marriage settlement, the salary of a spouse in an adulterous marriage belongs to the conjugal partnership of gains. [c] Acquisitive prescription of a negative easement runs from the time the owner of the dominant estate forbids, in a notarized document, the owner of the servient estate from executing an act which would be lawful without the easement. [d] The renunciation by a co-owner of his undivided share in the co-owned property in lieu of the performance of his obligation to contribute to taxes and expenses for the preservation of the property constitutes dacion en pago. [e] A person can dispose of his corpse through an act inter vivos. XII Emmanuel and Margarita, American citizens and employees of the U.S. State Department, got married in the African state of Kenya where sterility is a ground for annulment of marriage. Thereafter, the spouses were assigned to the U.S. Embassy in Manila. On the first year of the spouses tour of duty in the Philippines, Margarita filed an annulment case against Emmanuel before a Philippine court on the ground of her husbands sterility at the time of the celebration of the marriage. [a] Will the suit prosper? Explain your answer. (3%) [b] Assume Emmanuel and Margarita are both Filipinos. After their wedding in Kenya, they come back and take up residence in the Philippines. Can their marriage be annulled on the ground of Emmanuels sterility? Explain. (3%) XIII Rafael, a wealthy bachelor, filed a petition for the adoption of Dolly, a one-year old foundling who had a severe heart ailment. During the pendency of the adoption proceedings, Rafael died of natural causes. The Office of the Solicitor General files a motion to dismiss the petition on the ground that the case can no longer proceed because of the petitioners death. [a] Should the case be dismissed? Explain. (2%) [b] Will your answer be the same if it was Dolly who died during the pendency of the adoption proceedings? Explain. (2%) XIV Rodolfo, married to Sharon, had an illicit affair with his secretary, Nanette, a 19-year old girl, and begot a baby girl, Rona. Nanette sued Rodolfo for damages: actual, for hospital and other

medical expenses in delivering the child by caesarean section; moral, claiming that Rodolfo promised to marry her, representing that he was single when, in fact, he was not; and exemplary, to teach a lesson to like-minded Lotharios. [a] If you were the judge, would you award all the claims of Nanette? Explain. (3%) [b] Suppose Rodolfo later on acknowledges Rona and gives her regular support, can he compel her to use his surname? Why or why not? (2%) [c] When Rona reaches seven (7) years old, she tells Rodolfo that she prefers to live with him, because he is better off financially than Nanette. If Rodolfo files an action for the custody of Rona, alleging that he is Ronas choice as custodial parent, will the court grant Rodolfos petition? Why or why not? (2%) XV Sarah had a deposit in a savings account with Filipino Universal Bank in the amount of five million pesos (P5,000,000.00). To buy a new car, she obtained a loan from the same bank in the amount of P1,200,000.00, payable in twelve monthly installments. Sarah issued in favor of the bank post-dated checks, each in the amount of P100,000.00, to cover the twelve monthly installment payments. On the third, fourth and fifth months, the corresponding checks bounced. The bank then declared the whole obligation due, and proceeded to deduct the amount of one million pesos (P1,000,000.00) from Sarahs deposit after notice to her that this is a form of compensation allowed by law. Is the bank correct? Explain. (4%) XVI Marciano is the owner of a parcel of land through which a river runs out into the sea. The land had been brought under the Torrens System, and is cultivated by Ulpiano and his family as farmworkers therein. Over the years, the river has brought silt and sediment from its sources up in the mountains and forests so that gradually the land owned by Marciano increased in area by three hectares. Ulpiano built three huts on this additional area, where he and his two married children live. On this same area, Ulpiano and his family planted peanuts, monggo beans and vegetables. Ulpiano also regularly paid taxes on the land, as shown by tax declarations, for over thirty years. When Marciano learned of the increase in the size of the land, he ordered Ulpiano to demolish the huts, and demanded that he be paid his share in the proceeds of the harvest. Marciano claims that under the Civil Code, the alluvium belongs to him as a registered riparian owner to whose land the accretion attaches, and that his right is enforceable against the whole world. [a] Is Marciano correct? Explain. (3%) [b] What rights, if any, does Ulpiano have against Marciano? Explain. (3%) XVII

Rosario obtained a loan of P100,000.00 from Jennifer, and pledged her diamond ring. The contract signed by the parties stipulated that if Rosario is unable to redeem the ring on due date, she will execute a document in favor of Jennifer providing that the ring shall automatically be considered full payment of the loan. [a] Is the contract valid? Explain. (3%) [b] Will your answer to [a] be the same if the contract stipulates that upon failure of Rosario to redeem the ring on due date, Jennifer may immediately sell the ring and appropriate the entire proceeds thereof for herself as full payment of the loan? Reasons. (3%) XVIII The Ifugao Arms is a condominium project in Baguio City. A strong earthquake occurred which left huge cracks in the outer walls of the building. As a result, a number of condominium units were rendered unfit for use. May Edwin, owner of one of the condominium units affected, legally sue for partition by sale of the whole project? Explain. (4%) XIX In 1972, Luciano de la Cruz sold to Chua Chung Chun, a Chinese citizen, a parcel of land in Binondo. Chua died in 1990, leaving behind his wife and three children, one of whom, Julian, is a naturalized Filipino citizen. Six years after Chuas death, the heirs executed an extrajudicial settlement of estate, and the parcel of land was allocated to Julian. In 2007, Luciano filed suit to recover the land he sold to Chua, alleging that the sale was void because it contravened the Constitution which prohibits the sale of private lands to aliens. Julian moved to dismiss the suit on grounds of pari delicto, laches and acquisitive prescription. Decide the case with reasons. (4%) XX [a] If Ligaya, a Filipino citizen residing in the United States, files a petition for change of name before the District Court of New York, what law shall apply? Explain. (2%) [b] If Henry, an American citizen residing in the Philippines, files a petition for change of name before a Philippine court, what law shall apply? Explain. (2%) *** END OF PART II *** RETURN THIS QUESTIONNAIRE WITH YOUR BOOKLET

2009 BAR EXAMINATION QUESTION TAXATION

13 September 2009

2 P.M. 5 P.M.

INSTRUCTIONS This questionnaire is in TWO (2) PARTS: Part I with ten (10) questions (numbered I to X), contained in six (6) pages; and Part II with ten (10) questions (numbered XI-XX), contained in five (5) pages, for a total number of eleven (11) pages. Write your answers to Part I and Part II in the corresponding portions indicated in the booklet. Begin your answer to each numbered question on a separate page; an answer to a subquestion under the same number may be written continuously on the same page and succeeding pages until completed. Answer the questions directly and concisely. Do not repeat the questions. Write legibly. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE. GOOD LUCK! ANTONIO EDUARDO B. NACHURA CHAIRPERSON 2009 BAR EXAMINATIONS COMMITTEE PLEASE CHECK THAT THIS SET CONTAINS TWELVE (12) PAGES (INCLUDING THIS PAGE). WARNING: NOT FOR SALE OR UNAUTHORIZED USE PART I I TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false. Explain your answer in not more than two (2) sentences. (5%) [a] A law that allows taxes to be paid either in cash or in kind is valid. [b] When the financial position of the taxpayer demonstrates a clear inability to pay the tax, the Commissioner of Internal Revenue may validly compromise the tax liability. [c] The doctrine of equitable recoupment allows a taxpayer whose claim for refund has prescribed to offset tax liabilities with his claim of overpayment. [d] A law imposing a tax on income of religious institutions derived from the sale of religious

articles is valid. [e] A false return and a fraudulent return are one and the same. II Enumerate the four (4) inherent limitations on taxation. Explain each item briefly. (4%) III Melissa inherited from her father a 300-square-meter lot. At the time of her fathers death on March 14, 1995, the property was valued at P720,000.00. On February 28, 1996, to defray the cost of the medical expenses of her sick son, she sold the lot for P600,000.00, on cash basis. The prevailing market value of the property at the time of the sale was P3,000.00 per square meter. [a] Is Melissa liable to pay capital gains tax on the transaction? If so, how much and why? If not, why not? (4%) [b] Is Melissa liable to pay Value Added Tax (VAT) on the sale of the property? If so, how much and why? If not, why not? (4%) IV International Technologies, Inc. (ITI) filed a claim for refund for unutilized input VAT with the Court of Tax Appeals (CTA). In the course of the trial, ITI engaged the services of an independent Certified Public Accountant (CPA) who examined the voluminous invoices and receipts of ITI. ITI offered in evidence only the summary prepared by the CPA, without the invoices and the receipts, and then submitted the case for decision. Can the CTA grant ITIs claim for refund based only on the CPAs summary? Explain. (4%) V Jessie brought into the Philippines a foreign-made luxury car, and paid less than the actual taxes and duties due. Due to the discrepancy, the Bureau of Customs instituted seizure proceedings and issued a warrant of seizure and detention. The car, then parked inside a pay parking garage, was seized and brought by government agents to a government impounding facility. The Collector of Customs denied Jessies request for the withdrawal of the warrant. Aggrieved, Jessie filed against the Collector a criminal complaint for usurpation of judicial functions on the ground that only a judge may issue a warrant of search and seizure. [a] Resolve with reasons Jessies criminal complaint. (4%)

[b] Would your answer be the same if the luxury car was seized while parked inside the garage of Jessies residence? Why or why not? (4%) VI The Sangguniang Bayan of the Municipality of Sampaloc, Quezon, passed an ordinance imposing a storage fee of ten centavos (P0.10) for every 100 kilos of copra deposited in any bodega within the Municipalitys jurisdiction. The Metropolitan Manufacturing Corporation (MMC), with principal office in Makati, is engaged in the manufacture of soap, edible oil, margarine, and other coconut oil-based products. It has a warehouse in Sampaloc, Quezon, used as storage space for the copra purchased in Sampaloc and nearby towns before the same is shipped to Makati. MMC goes to court to challenge the validity of the ordinance, demanding the refund of the storage fees it paid under protest. Is the ordinance valid? Explain your answer. (4%) VII Kenya International Airlines (KIA) is a foreign corporation, organized under the laws of Kenya. It is not licensed to do business in the Philippines. Its commercial airplanes do not operate within Philippine territory, or service passengers embarking from Philippine airports. The firm is represented in the Philippines by its general agent, Philippine Airlines (PAL), a Philippine corporation. KIA sells airplane tickets through PAL, and these tickets are serviced by KIA airplanes outside the Philippines. The total sales of airline tickets transacted by PAL for KIA in 1997 amounted to P2,968,156.00. The Commissioner of Internal Revenue assessed KIA deficiency income taxes at the rate of 35% on its taxable income, finding that KIAs airline ticket sales constituted income derived from sources within the Philippines. KIA filed a protest on the ground that the P2,968,156.00 should be considered as income derived exclusively from sources outside the Philippines since KIA only serviced passengers outside Philippine territory. Is the position of KIA tenable? Reasons. (4%) VIII The City of Manila enacted Ordinance No. 55-66 which imposes a municipal occupation tax on persons practicing various professions in the city. Among those subjected to the occupation tax were lawyers. Atty. Mariano Batas, who has a law office in Manila, pays the ordinance-imposed occupation tax under protest. He goes to court to assail the validity of the ordinance for being discriminatory. Decide with reasons. (3%) IX Republic Power Corporation (RPC) is a government-owned and controlled corporation engaged

in the supply, generation and transmission of electric power. In 2005, in order to provide electricity to Southern Tagalog provinces, RPC entered into an agreement with Jethro Energy Corporation (JEC), for the lease of JECs power barges which shall be berthed at the port of Batangas City. The contract provides that JEC shall own the power barges and the fixtures, fittings, machinery, and equipment therein, all of which JEC shall supply at its own cost, and that JEC shall operate, manage and maintain the power barges for the purpose of converting the fuel of RPC into electricity. The contract also stipulates that all real estate taxes and assessments, rates and other charges, in respect of the power barges, shall be for the account of RPC. In 2007, JEC received an assessment of real property taxes on the power barges from the Assessor of Batangas City. JEC sought reconsideration of the assessment on the ground that the power barges are exempt from real estate taxes under Section 234 [c] of R.A. 7160 as they are actually, directly and exclusively used by RPC, a government-owned and controlled corporation. Furthermore, even assuming that the power barges are subject to real property tax, RPC should be held liable therefor, in accordance with the terms of the lease agreement. Is the contention of JEC correct? Explain your answer. (4%) X ABCD Corporation (ABCD) is a domestic corporation with individual and corporate shareholders who are residents of the United States. For the 2nd quarter of 1983, these U.S.based individual and corporate stockholders received cash dividends from the corporation. The corresponding withholding tax on dividend income --- 30% for individual and 35% for corporate non-resident stockholders ---was deducted at source and remitted to the BIR. On May 15, 1984, ABCD filed with the Commissioner of Internal Revenue a formal claim for refund, alleging that under the RP-US Tax Treaty, the deduction withheld at source as tax on dividends earned was fixed at 25% of said income. Thus, ABCD asserted that it overpaid the withholding tax due on the cash dividends given to its non-resident stockholders in the U.S. The Commissioner denied the claim. On January 17, 1985, ABCD filed a petition with the Court of Tax Appeals (CTA) reiterating its demand for refund. [a] Does ABCD Corporation have the legal personality to file the refund on behalf of its nonresident stockholders? Why or why not? (3%) [b] Is the contention of ABCD Corporation correct? Why or why not? (3%) *** END OF PART I *** PART II XI

Raffy and Wena, husband and wife, are both employed by XXX Corporation. After office hours, they jointly manage a coffee shop at the ground floor of their house. The coffee shop is registered in the name of both spouses. Which of the following is the correct way to prepare their income tax return? Write the letter only. DO NOT EXPLAIN YOUR ANSWER. (2%) [a] Raffy will declare as his income the salaries of both spouses, while Wena will declare the income from the coffee shop. [b] Wena will declare the combined compensation income of the spouses, and Raffy will declare the income from the coffee shop. [c] All the income will be declared by Raffy alone, because only one consolidated return is required to be filed by the spouses. [d] Raffy will declare his own compensation income and Wena will declare hers. The income from the coffee shop shall be equally divided between them. Each spouse shall be taxed separately on their corresponding taxable income to be covered by one consolidated return for the spouses. [e] Raffy will declare his own compensation income and Wena will declare hers. The income from the coffee shop shall be equally divided between them. Raffy will file one income tax return to cover all the income of both spouses, and the tax is computed on the aggregate taxable income of the spouses. XII YYY Corporation engaged the services of the Manananggol Law Firm in 2006 to defend the corporations title over a property used in the business. For the legal services rendered in 2007, the law firm billed the corporation only in 2008. The corporation duly paid. YYY Corporation claimed this expense as a deduction from gross income in its 2008 return, because the exact amount of the expense was determined only in 2008. Is YYYs claim of deduction proper? Reasons. (4%) XIII In 1999, Xavier purchased from his friend, Yuri, a painting for P500,000.00. The fair market value (FMV) of the painting at the time of the purchase was P1-million. Yuri paid all the corresponding taxes on the transaction. In 2001, Xavier died. In his last will and testament, Xavier bequeathed the painting, already worth P1.5-million, to his only son, Zandro. The will also granted Zandro the power to appoint his wife, Wilma, as successor to the painting in the event of Zandros death. Zandro died in 2007, and Wilma succeeded to the property. [a] Should the painting be included in the gross estate of Xavier in 2001 and thus, be subject to estate tax? Explain. (3%)

[b] Should the painting be included in the gross estate of Zandro in 2007 and thus, be subject to estate tax? Explain. (3%) [c] May a vanishing deduction be allowed in either or both of the estates? Explain. (3%) XIV Emiliano Paupahan is engaged in the business of leasing out several residential apartment units he owns. The monthly rental for each unit ranges from P8,000.00 to P10,000.00. His gross rental income for one year is P1,650,000.00. He consults you on whether it is necessary for him to register as a VAT taxpayer. What legal advice will you give him, and why? (4%) XV Miguel, a citizen and resident of Mexico, donated US$1,000.00 worth of stocks in Barack Motors Corporation, a Mexican company, to his legitimate son, Miguelito, who is residing in the Philippines and about to be married to a Filipino girlfriend. Mexico does not impose any transfer tax of whatever nature on all gratuitous transfers of property. [a] Is Miguel entitled to claim a dowry exclusion? Why or why not? (3%) [b] Is Miguel entitled to the rule of reciprocity in order to be exempt from the Philippine donors tax? Why or why not? (3%) XVI Ernesto, a Filipino citizen and a practicing lawyer, filed his income tax return for 2007 claiming optional standard deductions. Realizing that he has enough documents to substantiate his profession-connected expenses, he now plans to file an amended income tax return for 2007, in order to claim itemized deductions, since no audit has been commenced by the BIR on the return he previously filed. Will Ernesto be allowed to amend his return? Why or why not? (4%) XVII A final assessment notice was issued by the BIR on June 13, 2000, and received by the taxpayer on June 15, 2000. The taxpayer protested the assessment on July 31, 2000. The protest was initially given due course, but was eventually denied by the Commissioner of Internal Revenue in a decision dated June 15, 2005. The taxpayer then filed a petition for review with the Court of Tax Appeals (CTA), but the CTA dismissed the same. [a] Is the CTA correct in dismissing the petition for review? Explain your answer. (4%) [b] Assume that the CTAs decision dismissing the petition for review has become final. May the Commissioner legally enforce collection of the delinquent tax? Explain. (4%) XVIII

A taxpayer received an assessment notice from the BIR on February 3, 2009. The following day, he filed a protest, in the form of a request for reinvestigation, against the assessment and submitted all relevant documents in support of the protest. On September 11, 2009, the taxpayer, apprehensive because he had not yet received notice of a decision by the Commissioner on his protest, sought your advice. What remedy or remedies are available to the taxpayer? Explain. (4%) XIX Johnny transferred a valuable 10-door commercial apartment to a designated trustee, Miriam, naming in the trust instrument Santino, Johnnys 10-year old son, as the sole beneficiary. The trustee is instructed to distribute the yearly rentals amounting to P720,000.00. The trustee consults you if she has to pay the annual income tax on the rentals received from the commercial apartment. [a] What advice will you give the trustee? Explain. (3%) [b] Will your advice be the same if the trustee is directed to accumulate the rental income and distribute the same only when the beneficiary reaches the age of majority? Why or why not? (3%) XX Masarap Food Corporation (MFC) incurred substantial advertising expenses in order to protect its brand franchise for one of its line products. In its income tax return, MFC included the advertising expense as deduction from gross income, claiming it as an ordinary business expense. Is MFC correct? Explain. (3%) *** END OF PART II *** RETURN THIS QUESTIONNAIRE WITH YOUR BOOKLET

2009 BAR EXAMINATION QUESTION MERCANTILE LAW

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

INSTRUCTIONS This questionnaire is in TWO (2) PARTS: Part I with ten (10) questions (numbered I to X), contained in six (6) pages; and Part II with ten (10) questions (numbered XI-XX), contained in seven (7) pages, for a total number of thirteen (13) pages. Write your answers to Part I and Part II in the corresponding portions indicated in the booklet. Begin your answer to each numbered question on a separate page; an answer to a subquestion under the same number may be written continuously on the same page and succeeding pages until completed. Answer the questions directly and concisely. Do not repeat the questions. Write legibly. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE. GOOD LUCK! ANTONIO EDUARDO B. NACHURA CHAIRPERSON 2009 BAR EXAMINATIONS COMMITTEE PLEASE CHECK THAT THIS SET CONTAINS FOURTEEN (14) PAGES (INCLUDING THIS PAGE). WARNING: NOT FOR SALE OR UNAUTHORIZED USE PART I I TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false. Explain your answer in not more than two (2) sentences. (5%)

[a] The Denicola Test in intellectual property law states that if design elements of an article reflect a merger of aesthetic and functional considerations, the artistic aspects of the work cannot be conceptually separable from the utilitarian aspects; thus, the article cannot be copyrighted. [b] If the Ombudsman is convinced that there is a violation of law after investigating a complaint alleging illicit bank deposits of a public officer, the Ombudsman may order the bank concerned to allow in camera inspection of bank records and documents. [c] Even if the seller and the buyer in a sale in bulk violate the Bulk Sales Law, the sale would still be valid. [d] Dividends on shares of stocks can only be declared out of unrestricted retained earnings of the corporation. [e] A bank under receivership can still grant new loans and accept new deposits. II Atlantis Realty Corporation (ARC), a local firm engaged in real estate development, plans to sell one of its prime assets --- a three-hectare land valued at about P100-million. For this purpose, the board of directors of ARC unanimously passed a resolution approving the sale of the property for P75-million to Shangrila Real Estate Ventures (SREV), a rival realty firm. The resolution also called for a special stockholders meeting at which the proposed sale would be up for ratification. Atty. Edric, a stockholder who owns only one (1) share in ARC, wants to stop the sale. He then commences a derivative suit for and in behalf of the corporation, to enjoin the board of directors and the stockholders from approving the sale. [a] Can Atty. Edric, who owns only one (1) share in the company, initiate a derivative suit? Why or why not? (2%) [b] If such a suit is commenced, would it constitute an intra-corporate dispute? If so, why and where would such a suit be filed? If not, why not? (2%) [c] Will the suit prosper? Why or why not? (3%) III Armando, a resident of Manila, borrowed P3-million from Bernardo, offering as security his 500 shares of stock worth P1.5million in Xerxes Corporation, and his 2007 BMW sedan, valued at P2-million. The mortgage on the shares of stock was registered in the Office of the Register of Deeds of Makati City where Xerxes Corporation has its principal office. The mortgage on the car was registered in the Office of the Register of Deeds of Manila. Armando executed a single Affidavit of Good Faith, covering both mortgages. Armando defaulted on the payment of his obligation; thus, Bernardo foreclosed on the two chattel mortgages. Armando filed suit to nullify the foreclosure and the mortgages, raising the following issues:

[a] The execution of only one Affidavit of Good Faith for both mortgages invalidated the two mortgages; (2%) and [b] The mortgage on the shares of stocks should have been registered in the Office of the Register of Deeds of Manila where he resides, as well as in the stock and transfer book of Xerxes Corporation. (3%) Rule on the foregoing issues with reasons. [c] Assume that Bernardo extrajudicially foreclosed on the mortgages, and both the car and the shares of stock were sold at public auction. If the proceeds from such public sale should be P1million short of Armandos total obligation, can Bernardo recover the deficiency? Why or why not? (2%) IV Antarctica Life Assurance Corporation (ALAC) publicly offered a specially designed insurance policy covering persons between the ages of 50 to 75 who may be afflicted with serious and debilitating illnesses. Quirico applied for insurance coverage, stating that he was already 80 years old. Nonetheless, ALAC approved his application. Quirico then requested ALAC for the issuance of a cover note while he was trying to raise funds to pay the insurance premium. ALAC granted the request. Ten days after he received the cover note, Quirico had a heart seizure and had to be hospitalized. He then filed a claim on the policy. [a] Can ALAC validly deny the claim on the ground that the insurance coverage, as publicly offered, was available only to persons 50 to 75 years of age? Why or why not? (2%) [b] Did ALACs issuance of a cover note result in the perfection of an insurance contract between Quirico and ALAC? Explain. (3%) V Cecilio is planning to put up a grocery store in the subdivision where he and his family reside. To promote this proposed business venture, he told his wife and three children to send out promotional text messages to all the residents in the subdivision. Cecilios family members did as instructed, and succeeded in reaching, through text messages, more than 80% of the residents in the subdivision. Is Cecilio habitually engaged in commerce even if the grocery store has yet to be established? Explain your answer. (3%) VI Lorenzo drew a bill of exchange in the amount of P100,000.00 payable to Barbara or order, with his wife, Diana, as drawee. At the time the bill was drawn, Diana was unaware that Barbara is Lorenzos paramour.

Barbara then negotiated the bill to her sister, Elena, who paid for it for value, and who did not know who Lorenzo was. On due date, Elena presented the bill to Diana for payment, but the latter promptly dishonored the instrument because, by then, Diana had already learned of her husbands dalliance. [a] Was the bill lawfully dishonored by Diana? Explain. (3%) [b] Does the illicit cause or consideration adversely affect the negotiability of the bill? Explain. (3%) VII Global Transport Services, Inc. (GTSI) operates a fleet of cargo vessels plying interisland routes. One of its vessels, MV Dona Juana, left the port of Manila for Cebu laden with, among other goods, 10,000 television sets consigned to Romualdo, a TV retailer in Cebu. When the vessel was about ten nautical miles away from Manila, the ship captain heard on the radio that a typhoon which, as announced by PAG-ASA, was on its way out of the country, had suddenly veered back into Philippine territory. The captain realized that MV Dona Juana would traverse the storms path, but decided to proceed with the voyage. True enough, the vessel sailed into the storm. The captain ordered the jettison of the 10,000 television sets, along with some other cargo, in order to lighten the vessel and make it easier to steer the vessel out of the path of the typhoon. Eventually, the vessel, with its crew intact, arrived safely in Cebu. [a] Will you characterize the jettison of Romualdos TV sets as an average? If so, what kind of an average, and why? If not, why not? (3%) [b] Against whom does Romualdo have a cause of action for indemnity of his lost TV sets? Explain. (3%) VIII Maharlikang Pilipino Banking Corporation (MPBC) operates several branches of Maharlikang Pilipino Rural Bank in Eastern Visayas. Almost all the branch managers are close relatives of the members of the Board of Directors of the corporation. Many undeserving relatives of the branch managers were granted loans. In time, the branches could not settle their obligations to depositors and creditors. Receiving reports of these irregularities, the Supervising and Examining Department (SED) of the Monetary Board prepared a detailed report (SED Report) specifying the facts and the chronology of events relative to the problems that beset MPBC rural bank branches. The report concluded that the bank branches were unable to pay their liabilities as they fell due, and could not possibly continue in business without incurring substantial losses to its depositors and creditors. [a] May the Monetary Board order the closure of the MPBC rural banks relying only on the SED Report, without need of an examination? Explain. (3%)

[b] If MPBC hires you as lawyer because the Monetary Board has forbidden it from carrying on its business due to its imminent insolvency, what action will you institute to question the Monetary Boards order? Explain. (3%) IX When is there an ultra vires act on the part of [a] the corporation; [b] the board of directors; and [c] the corporate officers. (3%) X What are the so-called exempt securities under the Securities Regulation Code? (2%) *** END OF PART I ***

PART II XI TRUE or FALSE. Answer TRUE if the statement is true, or FALSE if the statement is false. Explain your answer in not more than two (2) sentences. (5%) [a] A loan agreement which provides that the debtor shall pay interest at the rate determined by the banks branch manager violates the disclosure requirement of the Truth in Lending Act. [b] Under the Warehouse Receipts Law, a warehouseman loses his lien upon the goods when he surrenders possession thereof. [c] The Howey Test states that there is an investment contract when a person invests money in a common enterprise and is led to expect profits primarily from the efforts of others. [d] A document, dated July 15, 2009, that reads: Pay to X or order the sum of P5,000.00 five days after his pet dog, Sparky, dies. Signed Y. is a negotiable instrument. [e] A bank is bound to know its depositors signature is an inflexible rule in determining the liability of a bank in forgery cases. XII Gaudencio, a store owner, obtained a P1-million loan from Bathala Financing Corporation (BFC). As security, Gaudencio executed a Deed of Assignment of Receivables, assigning 15 checks received from various customers who bought merchandise from his store. The checks were duly indorsed by Gaudencios customers. The Deed of Assignment contains the following stipulation:

If, for any reason, the receivables or any part thereof cannot be paid by the obligors, the ASSIGNOR unconditionally and irrevocably agrees to pay the same, assuming the liability to pay, by way of penalty, three percent (3%) of the total amount unpaid, for the period of delay until the same is fully paid. When the checks became due, BFC deposited them for collection, but the drawee banks dishonored all the checks for one of the following reasons: account closed, payment stopped, account under garnishment, or insufficiency of funds. BFC wrote Gaudencio notifying him of the dishonored checks, and demanding payment of the loan. Because Gaudencio did not pay, BFC filed a collection suit. In his defense, Gaudencio contended that [a] BFC did not give timely notice of dishonor (of the checks); and [b] considering that the checks were duly indorsed, BFC should proceed against the drawers and the indorsers of the checks. Are Gaudencios defenses tenable? Explain. (5%) XIII Ciriaco leased a commercial apartment from Supreme Building Corporation (SBC). One of the provisions of the one-year lease contract states: 18. x x x The LESSEE shall not insure against fire the chattels, merchandise, textiles, goods and effects placed at any stall or store or space in the leased premises without first obtaining the written consent of the LESSOR. If the LESSEE obtains fire insurance coverage without the consent of the LESSOR, the insurance policy is deemed assigned and transferred to the LESSOR for the latters benefit. Notwithstanding the stipulation in the contract, without the consent of SBC, Ciriaco insured the merchandise inside the leased premises against loss by fire in the amount of P500,000.00 with First United Insurance Corporation (FUIC). A day before the lease contract expired, fire broke out inside the leased premises, damaging Ciriacos merchandise. Having learned of the insurance earlier procured by Ciriaco, SBC demanded from FUIC that the proceeds of the insurance policy be paid directly to it, as provided in the lease contract. Who is legally entitled to receive the insurance proceeds? Explain. (4%) XIV XXX Corporation (XXX) and its sister company, YYY Corporation (YYY), are both under judicial receivership. The receiver has the option to sell all or substantially all of the properties of YYY to XXX, or simply merge the two corporations. Under either option, the requirements under the Corporation Code have to be complied with.

The receiver seeks your advice on whether the Bulk Sales Law will apply to either, or both, options. What will your advice be? Explain. (4%) XV After disposing of his last opponent in only two rounds in Las Vegas, the renowned Filipino boxer Sonny Bachao arrived at the Ninoy Aquino International Airport met by thousands of hero-worshipping fans and hundreds of media photographers. The following day, a colored photograph of Sonny wearing a black polo shirt embroidered with the 2-inch Lacoste crocodile logo appeared on the front page of every Philippine newspaper. Lacoste International, the French firm that manufactures Lacoste apparel and owns the Lacoste trademark, decided to cash in on the universal popularity of the boxing icon. It reprinted the photographs, with the permission of the newspaper publishers, and went on a world-wide blitz of print commercials in which Sonny is shown wearing a Lacoste shirt alongside the phrase Sonny Bachao just loves Lacoste. When Sonny sees the Lacoste advertisements, he hires you as lawyer and asks you to sue Lacoste International before a Philippine court: [a] For trademark infringement in the Philippines because Lacoste International used his image without his permission; (2%) [b] For copyright infringement because of the unauthorized use of the published photographs; (2%) and [c] For injunction in order to stop Lacoste International from featuring him in their commercials. (2%) Will these actions prosper? Explain. [d] Can Lacoste International validly invoke the defense that it is not a Philippine company and, therefore, Philippine courts have no jurisdiction? Explain. (2%) XVI On September 15, 2007, XYZ Corporation issued to Paterno 800 preferred shares with the following terms: The Preferred Shares shall have the following rights, preferences, qualifications, and limitations, to wit: 1. The right to receive a quarterly dividend of One Per Centum (1%), cumulative and participating; 2. These shares may be redeemed, by drawing of lots, at any time after two (2) years from date of issue, at the option of the Corporation; x x x.

Today, Paterno sues XYZ Corporation for specific performance, for the payment of dividends on, and to compel the redemption of, the preferred shares, under the terms and conditions provided in the stock certificates. Will the suit prosper? Explain. (3%) XVII Philippine Palaces Realty (PPR) had been representing itself as a registered broker of securities, duly authorized by the Securities and Exchange Commission (SEC). On October 6, 1996, PPR sold to spouses Leon and Carina one (1) timeshare of Palacio del Boracay for US$7,500.00. However, its Registration Statement became effective only on February 11, 1998 after the SEC issued a resolution declaring that PPR was authorized to sell securities, including timeshares. On March 30, 1998, Leon and Carina wrote PPR rescinding their purchase agreement and demanding the refund of the amount they paid, because the Palacio del Boracay timeshare was sold to them by PPR without the requisite license or authority from the SEC. PPR contended that the grant of the SEC authority had the effect of ratifying the purchase agreement (with Leon and Carina) of October 6, 1996. Is the contention of PPR correct? Explain. (3%) XVIII Triple A Corporation (Triple A) was incorporated in 1960, with 500 founders shares and 78 common shares as its initial capital stock subscription. However, Triple A registered its stock and transfer book only in 1978, and recorded merely 33 common shares as the corporations issued and outstanding shares. [a] In 1982, Juancho, the sole heir of one of the original incorporators filed a petition with the Securities and Exchange Commission (SEC) for the registration of his property rights over 120 founders shares and 12 common shares. The petition was supported by a copy of the Articles of Incorporation indicating the incorporators initial capital stock subscription. Will the petition be granted? Why or why not? (3%) [b] On May 6, 1992, a special stockholders meeting was held. At this meeting, what would have constituted a quorum? Explain. (3%) [c] What is a stock and transfer book? (1%) XIX One of the passenger buses owned by Continental Transit Corporation (CTC), plying its usual route, figured in a collision with another bus owned by Universal Transport, Inc. (UTI). Among those injured inside the CTC bus were: Romeo, a stow away; Samuel, a pickpocket then in the act of robbing his seatmate when the collision occurred; Teresita, the bus drivers mistress who usually accompanied the driver on his trips for free; and Uriel, holder of a free riding pass he won in a raffle held by CTC.

[a] Will a suit for breach of contract of carriage filed by Romeo, Samuel, Teresita, and Uriel against CTC prosper? Explain. (3%) [b] Do Romeo, Samuel, Teresita, and Uriel have a cause of action for damages against UTI? Explain. (3%) [c] What, if any, are the valid defenses that CTC and UTI can raise in the respective actions against them? Explain. (3%) XX Under the Securities Regulation Code, what is the Margin Trading Rule? (2%) *** END OF PART II *** RETURN THIS QUESTIONNAIRE WITH YOUR BOOKLET

2010 BAR EXAMINATION QUESTION

CIVIL LAW 8 A.M. 12 NN. INSTRUCTIONS There is only one Examiner in Civil Law. Hence, the following questionnaire consists of only ONE PART with sixteen (16) questions (numbered I to XVI), contained in eleven (11) pages. Begin your answer to each numbered question on a separate page; an answer to a sub-question/s under the same number may be written continuously on the same page and succeeding pages until completed. Answer the questions directly and concisely. Do not repeat the question. Write legibly. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE GOOD LUCK!!! _____________________________________ CONCHITA CARPIO MORALES CHAIRPERSON 2010 BAR EXAMINATIONS COMMITTEE

12 September 2010

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

PAGE).

WARNING: NOT FOR SALE OR UNAUTHORIZED USE CIVIL LAW I True or False. a. Under Article 26 of the Family Code, when a foreign spouse divorces his/her Filipino spouse, the latter may re-marry by proving only that the foreign spouse has obtained a divorce against her or him abroad. (1%) b. X, a widower, died leaving a will stating that the house and lot where he lived cannot be partitioned for as long as the youngest of his four children desires to stay there. As coheirs and co-owners, the other three may demand partition anytime. (1%) II Multiple choice. a. A had a 4-storey building which was constructed by Engineer B. After five years, the building developed cracks and its stairway eventually gave way and collapsed, resulting to injuries to some lessees. Who should the lessees sue for damages? (1%) 1. A, the owner 2. B, the engineer 3. both A & B b. O, owner of Lot A, learning that Japanese soldiers may have buried gold and other treasures at the adjoining vacant Lot B belonging to spouses X & Y, excavated in Lot B where she succeeded in unearthing gold and precious stones. How will the treasures found by O be divided? (1%) 1. 100% to O as finder 2. 50% to O and 50% to the spouses X and Y 3. 50% to O and 50% to the state 4. None of the above c. A executed a Deed of Donation in favor of B, a bachelor, covering a parcel of land valued at P1 million. B was, however, out of the country at the time. For the donation to be valid, (1%) 1. B may e-mail A accepting the donation. 2. The donation may be accepted by Bs father with whom he lives. 3. B can accept the donation anytime convenient to him.

4. Bs mother who has a general power of attorney may accept the donation for him. 5. None of the above is sufficient to make Bs acceptance valid d. A executed a 5-page notarial will before a notary public and three witnesses. All of them signed each and every page of the will. One of the witnesses was B, the father of one of the legatees to the will. What is the effect of B being a witness to the will? (1%) 1. The will is invalidated 2. The will is valid and effective 3. The legacy given to Bs child is not valid III Define, Enumerate or Explain. (2% each) a. What is the difference between "guaranty" and "suretyship"? b. Define quasi tort. Who are the persons liable under quasi torts and what are the defenses available to them? c. Give at least two reasons why a court may assume jurisdiction over a conflict of laws case. IV Spouses B and G begot two offsprings. Albeit they had serious personality differences, the spouses continued to live under one roof. B begot a son by another woman. G also begot a daughter by another man. a. If G gives the surname of B to her daughter by another man, what can B do to protect their legitimate children's interests? Explain. (5%) b. If B acquiesces to the use of his surname by Gs daughter by another man, what is/are the consequence/s? Explain. (5%) V G filed on July 8, 2000 a petition for declaration of nullity of her marriage to B. During the pendency of the case, the couple entered into a compromise agreement to dissolve their absolute community of property. B ceded his right to their house and lot and all his shares in two business firms to G and their two children, aged 18 and 19. B also opened a bank account in the amount of P3 million in the name of the two children to answer for their educational expenses until they finish their college degrees. For her part, G undertook to shoulder the day-to-day living expenses and upkeep of the children. The Court approved the spouses agreement on September 8, 2000.

a. Suppose the business firms suffered reverses, rendering G unable to support herself and the children. Can G still ask for support pendente lite from B? Explain. (3%) b. Suppose in late 2004 the two children had squandered the P3 million fund for their education before they could obtain their college degrees, can they ask for more support from B? Explain. (3%) VI Gigolo entered into an agreement with Majorette for her to carry in her womb his baby via in vitro fertilization. Gigolo undertook to underwrite Majorettes pre-natal expenses as well as those attendant to her delivery. Gigolo would thereafter pay Majorette P2 million and, in return, she would give custody of the baby to him. After Majorette gives birth and delivers the baby to Gigolo following her receipt of P2 million, she engages your services as her lawyer to regain custody of the baby. a. What legal action can you file on behalf of Majorette? Explain. (2.5%) b. Can Gigolo demand from Majorette the return of the P2 million if he returns the baby? Explain. (2.5%) c. Who of the two can exercise parental authority over the child? Explain. (2.5%) d. Is the child entitled to support and inheritance from Gigolo? Explain. (2.5%) VII G and B were married on July 3, 1989. On March 4, 2001, the marriage, which bore no offspring, was declared void ab initio under Article 36 of the Family Code. At the time of the dissolution of the marriage, the couple possessed the following properties:

a house and lot acquired by B on August 3, 1988, one third (1/3) of the purchase price (representing downpayment) of which he paid; one third (1/3) was paid by G on February 14, 1990 out of a cash gift given to her by her parents on her graduation on April 6, 1989; and the balance was paid out of the spouses joint income; and an apartment unit donated to B by an uncle on June 19, 1987.

a. Who owns the foregoing properties? Explain. (5%) b. If G and B had married on July 3, 1987 and their marriage was dissolved in 2007, who owns the properties? Explain. (5%) VIII Spouses Rex and Lea bore two children now aged 14 and 8. During the subsistence of their marriage, Rex begot a child by another woman. He is now 10 years of age. On Leas discovery of Rexs fathering a child by another woman, she filed a petition for legal separation which was granted.

Rex now wants to adopt his illegitimate child. a. Whose consent is needed for Rexs adoption of his illegitimate child? (2.5%) b. If there was no legal separation, can Rex still adopt his illegitimate child? Explain. (2.5%) IX Eighteen-year old Filipina Patrice had a daughter out of wedlock whom she named Laurie. At 26, Patrice married American citizen John who brought her to live with him in the United States of America. John at once signified his willingness to adopt Laurie. Can John file the petition for adoption? If yes, what are the requirements? If no, why? (5%) X In 1997, B and G started living together without the benefit of marriage. The relationship produced one offspring, Venus. The couple acquired a residential lot in Paraaque. After four (4) years or in 2001, G having completed her 4-year college degree as a fulltime student, she and B contracted marriage without a license. The marriage of B and G was, two years later, declared null and void due to the absence of a marriage license. a. If you were the judge who declared the nullity of the marriage, to whom would you award the lot? Explain briefly. (3%) b. Is Venus legitimate, illegitimate, or legitimated? Explain briefly. (3%) XI The spouses Peter and Paula had three (3) children. Paula later obtained a judgment of nullity of marriage. Their absolute community of property having been dissolved, they delivered P1 million to each of their 3 children as their presumptive legitimes. Peter later re-married and had two (2) children by his second wife Marie. Peter and Marie, having successfully engaged in business, acquired real properties. Peter later died intestate. a. Who are Peters legal heirs and how will his estate be divided among them? (5%) b. What is the effect of the receipt by Peters 3 children by his first marriage of their presumptive legitimes on their right to inherit following Peters death? (5%) XII On May 5, 1989, 16-year old Rozanno, who was issued a student permit, drove to school a car, a gift from his parents. On even date, as his class was scheduled to go on a field trip, his teacher requested him to accommodate in his car, as he did, four (4) of his classmates because the van

rented by the school was too crowded. On the way to a museum which the students were scheduled to visit, Rozanno made a wrong maneuver, causing a collision with a jeepney. One of his classmates died. He and the three (3) others were badly injured. a. Who is liable for the death of Rozannos classmate and the injuries suffered by Rozanno and his 3 other classmates? Explain. (2%) b. How about the damage to the jeepney? Explain. (2%) c. Under the same facts, except the date of occurrence of the incident, this time in mid1994, what would be your answer? Explain. (2%) XIII Franz was the owner of Lot E which was surrounded by four (4) lots one of which Lot C he also owned. He promised Ava that if she bought Lot E, he would give her a right of way in Lot C. Convinced, Ava bought Lot E and, as promised, Franz gave her a right of way in Lot C. Ava cultivated Lot E and used the right of way granted by Franz. Ava later found gainful employment abroad. On her return after more than 10 years, the right of way was no longer available to her because Franz had in the meantime sold Lot C to Julia who had it fenced. a. Does Ava have a right to demand from Julia the activation of her right of way? Explain. (2.5%) b. Assuming Ava opts to demand a right of way from any of the owners of Lots A, B, and D, can she do that? Explain. (2.5%) XIV Primo owns a pet iguana which he keeps in a man-made pond enclosed by a fence situated in his residential lot. A typhoon knocked down the fence of the pond and the iguana crawled out of the gate of Primos residence. N, a neighbor who was passing by, started throwing stones at the iguana, drawing the iguana to move toward him. N panicked and ran but tripped on something and suffered a broken leg. Is anyone liable for Ns injuries? Explain. (4%) XV A, B, and C entered into a partnership to operate a restaurant business. When the restaurant had gone past break-even stage and started to garner considerable profits, C died. A and B continued the business without dissolving the partnership. They in fact opened a branch of the restaurant, incurring obligations in the process. Creditors started demanding for the payment of their

obligations. a. Who are liable for the settlement of the partnerships obligations? Explain? (3%) b. What are the creditors recourse/s? Explain. (3%) XVI X was the owner of an unregistered parcel of land in Cabanatuan City. As she was abroad, she advised her sister Y via overseas call to sell the land and sign a contract of sale on her behalf. Y thus sold the land to B1 on March 31, 2001 and executed a deed of absolute sale on behalf of X. B1 fully paid the purchase price. B2, unaware of the sale of the land to B1, signified to Y his interest to buy it but asked Y for her authority from X. Without informing X that she had sold the land to B1, Y sought X for a written authority to sell. X e-mailed Y an authority to sell the land. Y thereafter sold the land on May 1, 2001 to B2 on monthly installment basis for two years, the first installment to be paid at the end of May 2001. Who between B1 and B2 has a better right over the land? Explain. (5%) NOTHING FOLLOWS.

010 BAR EXAMINATION QUESTION

TAXATION LAW 12 September 2010 2 P.M 5 P.M.

INSTRUCTIONS This questionnaire is in TWO (2) PARTS: Part I with nine (9) questions (numbered I to IX), contained in five (5) pages; and Part II with nine (9) questions (numbered X to XVIII), contained in six (6) pages, for a total number of eleven (11) pages. Write your answers to Part I and Part II in the corresponding portions indicated in the booklet. Begin your answer to each numbered question on a separate page; an answer to a sub-question/s under the same number may be written continuously on the same page and succeeding pages

until completed. Answer the questions directly and concisely. Do not repeat the question. Write legibly. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE GOOD LUCK!!! _____________________________________ CONCHITA CARPIO MORALES CHAIRPERSON 2010 BAR EXAMINATIONS COMMITTEE

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

WARNING: NOT FOR SALE OR UNAUTHORIZED USE

CIVIL LAW PART I I True or False. a. In civil cases involving the collection of internal revenue taxes, prescription is construed strictly against the government and liberally in favor of the taxpayer. (1%) b. In criminal cases involving tax offenses punishable under the National Internal Revenue Code (NIRC), prescription is construed strictly against the government. (1%) c. In criminal cases where the Court of Tax Appeals (CTA) has exclusive original jurisdiction, the right to file a separate civil action for the recovery of taxes may be reserved. (1%) d. Proceedings before the CTA in the exercise of its exclusive original jurisdiction are in the nature of trial de novo. (1%) e. Judgments, resolutions or orders of the Regional Trial Court in the exercise of its original jurisdiction involving criminal offenses arising from violations of the NIRC are appealable to the CTA, which shall hear the cases en banc. (1%) II

a. b. c. d.

What is the "all events test"? Explain briefly. (2%) What is the "immediacy test"? Explain briefly. (2%) What is the "rational basis" test? Explain briefly. (2%) What is the effect of the execution by a taxpayer of a "waiver of the statute of limitations" on his defense of prescription? (2%) e. What is the basis for the computation of business tax on contractors under the Local Government Code? (2%) f. How are retiring businesses taxed under the Local Government Code? (2%) III Mirador, Inc., a domestic corporation, filed its Annual Income Tax Return for its taxable year 2008 on April 15, 2009. In the Return, it reflected an income tax overpayment of P1,000,000.00 and indicated its choice to carry-over the overpayment as an automatic tax credit against its income tax liabilities in subsequent years. On April 15, 2010, it filed its Annual Income Tax Return for its taxable year 2009 reflecting a taxable loss and an income tax overpayment for the current year 2009 in the amount of P500,000.00 and its income tax overpayment for the prior year 2008 of P1,000,000.00. In its 2009 Return, the corporation indicated its option to claim for refund the total income tax overpayment of P1,500,000.00 Choose which of the following statements is correct. a. Mirador, Inc. may claim as refund the total income tax overpayment of P1,500,000.00 reflected in its income tax return for its taxable year 2009; b. It may claim as refund the amount of P500,000.00 representing its income tax overpayment for its taxable year 2009; or c. No amount may be claimed as refund. Explain the basis of your answer. (5%) IV On March 10, 2010, Continental, Inc. received a preliminary assessment notice (PAN) dated March 1, 2010 issued by the Commissioner of Internal Revenue (CIR) for deficiency income tax for its taxable year 2008. It failed to protest the PAN. The CIR thereupon issued a final assessment notice (FAN) with letter of demand on April 30, 2010. The FAN was received by the corporation on May 10, 2010, following which or on May 25, 2010, it filed its protest against it. The CIR denied the protest on the ground that the assessment had already become final and executory, the corporation having failed to protest the PAN. Is the CIR correct? Explain. (5%)

V Does the Court of Appeals have the power to review compromise agreements forged by the Commissioner of Internal Revenue and a taxpayer? Explain. (5%) VI Based on the Affidavit of the Commissioner of Internal Revenue (CIR), an Information for failure to file income tax return under Section 255 of the National Internal Revenue Code (NIRC) was filed by the Department of Justice (DOJ) with the Manila Regional Trial Court (RTC) against XX, a Manila resident. XX moved to quash the Information on the ground that the RTC has no jurisdiction in view of the absence of a formal deficiency tax assessment issued by the CIR. Is a prior assessment necessary before an Information for violation of Section 255 of the NIRC could be filed in court? Explain. (4%) VII What are the conditions that must be complied with before the Court of Tax Appeals may suspend the collection of national internal revenue taxes? (3%) VIII What is the rule on appeal from decisions of the Collector of Customs in protest and seizure cases? When is the decision of the Collector of Customs appealable to the Court of Tax Appeals? Explain. (5%) IX On May 15, 2009, La Manga Trading Corporation received a deficiency business tax assessment of P1,500,000.00 from the Pasay City Treasurer. On June 30, 2009, the corporation contested the assessment by filing a written protest with the City Treasurer. On October 10, 2009, the corporation received a collection letter from the City Treasurer, drawing it to file on October 25, 2009 an appeal against the assessment before the Pasay Regional Trial Court (RTC). a. Was the protest of the corporation filed on time? Explain. (3%) b. Was the appeal with the Pasay RTC filed on time? Explain. (3%) PART II X

True or False. (1% each) a. Gains realized by the investor upon redemption of shares of stock in a mutual fund company are exempt from income tax. b. A corporation can claim the optional standard deduction equivalent to 40% of its gross sales or receipts, as the case may be. c. Premium payment for health insurance of an individual who is an employee in an amount of P2,500 per year may be deducted from gross income if his gross salary per year is not more than P250,000. d. The Tax Code allows an individual taxpayer to pay in two equal installments, the first installment to be paid at the time the return is filed, and the second on or before July 15 of the same year, if his tax due exceeds P2,000. e. An individual taxpayer can adopt either the calendar or fiscal period for purposes of filing his income tax return. f. The capitalization rules may be resorted to by the BIR in order to compel corporate taxpayers to declare dividends to their stockholders regularly. g. Informers reward is subject to a final withholding tax of 10%. h. A non-resident alien who stays in the Philippines for less than 180 days during the calendar year shall be entitled to personal exemption not to exceed the amount allowed to citizens of the Philippines by the country of which he is subject or citizen. XI Are the following transactions subject to VAT? If yes, what is the applicable rate for each transaction. State the relevant authority/ies for your answer. a. Construction by XYZ Construction Co. of concrete barriers for the Asian Development Bank in Ortigas Center to prevent car bombs from ramming the ADB gates along ADB Avenue in Mandaluyong City. (3%) b. Call Center operated by a domestic enterprise in Makati that handles exclusively the reservations of a hotel chain which are all located in North America. The services are paid for in US$ and duly accounted for with the Bangko Sentral ng Pilipinas. (3%) c. Sale of orchids by a flower shop which raises its flowers in Tagaytay. (3%) XII Ferremaro, Inc., a manufacturer of handcrafted shoes, maintains its principal office in Cubao, Quezon City. It has branches/sales offices in Cebu and Davao. Its factory is located in Marikina City where most of its workers live. Its principal office in Quezon City is also a sales office. Sales of finished products for calendar year 2009 in the amount of P10 million were made at the following locations: i) ii) Cebu branch Davao branch 25% 15%

iii) Quezon City branch 60% Total 100%

Where should the applicable local taxes on the shoes be paid? Explain. (3%) XIII XYZ Shipping Corporation is a branch of an international shipping line with voyages between Manila and the West Coast of the U.S. The companys vessels load and unload cargoes at the Port of Manila, albeit it does not have a branch or sales office in Manila. All the bills of lading and invoices are issued by the branch office in Makati which is also the companys principal office. The City of Manila enacted an ordinance levying a 2% tax on gross receipts of shipping lines using the Port of Manila. Can the City Government of Manila legally impose said levy on the corporation? Explain. (3%) XIV A inherited a two-storey building in Makati from his father, a real estate broker in the 60s. A group of Tibetan monks approached A and offered to lease the building in order to use it as a venue for their Buddhist rituals and ceremonies. A accepted the rental of P1 million for the whole year. The following year, the City Assessor issued an assessment against A for non-payment of real property taxes. Is the assessor justified in assessing As deficiency real property taxes? Explain. (3%) XV Don Sebastian, single but head of the family, Filipino, and resident of Pasig City, died intestate on November 15, 2009. He left the following properties and interests: P 800,000 1,500,000 2,000,000 500,000 1,000,000

House and lot (family home) in Pasig Vacation house and lot in Florida, USA Agricultural land in Naic, Cavite which he inherited from his father Car which is being used by his brother in Cavite Proceeds of life insurance where he named his estate as

irrevocable beneficiary Household furnitures and appliances Claims against a cousin who has assets of P10,000 and liabilities of P100,000 Shares of stock in ABC Corp, a domestic enterprise The expenses and charges on the estate are as follows: Funeral Expenses Legal fees for the settlement of the estate Medical expenses of last illness Claims against the estate P 250,000 500,000 600,000 300,000 1,000,000 100,000 100,000

The compulsory heirs of Don Sebastian approach you and seek your assistance in the settlement of his estate for which they have agreed to the above-stated professional fees. Specifically, they request you to explain and discuss with them the following questions. You oblige: a. What are the properties and interests that should be included in the computation of the gross estate of the decedent? Explain. (2.5%) b. What is the net taxable estate of the decedent? Explain. (2.5%) c. When is the due date for filing and payment of the applicable tax return and tax? Are these dates extendible? If so, under what conditions or requirements? (2.5%) d. If X, one of the compulsory heirs, renounces his share in the inheritance in favor of the other co-heirs, is there any tax implication of Xs renunciation? What about the other coheirs? (2.5%) XVI A is a travelling salesman working full time for Nu Skin Products. He receives a monthly salary plus 3% commission on his sales in a Southern province where he is based. He regularly uses his own car to maximize his visits even to far flung areas. One fine day a group of militants seized his car. He was notified the following day by the police that the marines and the militants had a bloody encounter and his car was completely destroyed after a grenade hit it. A wants to file a claim for casualty loss. Explain the legal basis of your tax advice. (3%) XVII In 2009, Caruso, a resident Filipino citizen, received dividend income from a U.S.-based corporation which owns a chain of Filipino restaurants in the West Coast, U.S.A. The dividend remitted to Caruso is subject to U.S. withholding tax with respect to a non-resident alien like Caruso.

a. What will be your advice to Caruso in order to lessen the impact of possible double taxation on the same income? (3%) b. Would your answer in A. be the same if Caruso became a U.S. immigrant in 2008 and had become a non-resident Filipino citizen? Explain the difference in treatment for Philippine income tax purposes. (3%) XVIII ABC, a domestic corporation, entered into a software license agreement with XYZ, a nonresident foreign corporation based in the U.S. Under the agreement which the parties forged in the U.S., XYZ granted ABC the right to use a computer system program and to avail of technical know-how relative to such program. In consideration for such rights, ABC agreed to pay 5% of the revenues it receives from customers who will use and apply the program in the Philippines. Discuss the tax implication of the transaction. (5%) NOTHING FOLLOWS.

2010 BAR EXAMINATION QUESTION

MERCANTILE LAW 12 September 2010 INSTRUCTIONS There is only one Examiner in Mercantile Law. Hence, the following questionnaire consists of only ONE PART with nineteen (19) questions (numbered I to XIX) contained in eleven (11) pages. Begin your answer to each numbered question on a separate page; an answer to a sub-question/s under the same number may be written continuously on the same page and succeeding pages until completed. Answer the questions directly and concisely. Do not repeat the question. Write legibly. HAND IN YOUR NOTEBOOK WITH THIS QUESTIONNAIRE GOOD LUCK!!! _____________________________________ CONCHITA CARPIO MORALES CHAIRPERSON 2010 BAR EXAMINATIONS COMMITTEE 8 A.M. 12 NN.

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

WARNING: NOT FOR SALE OR UNAUTHORIZED USE MERCANTILE LAW I Briefly describe the following types of banks: (2% each) a. b. c. d. e. universal bank commercial bank thrift bank rural bank cooperative bank II a. How do you characterize the legal relationship between a commercial bank and its safety deposit box client? (2%) b. Is a stipulation in the contract for the use of a safety deposit box relieving the bank of liability in connection with the use thereof valid? (2%) c. Differentiate "bank deposits" from "deposit substitutes." (2%) d. Why are banks required to maintain reserves against their deposits and deposit substitutes? State one of three purposes for these reserves. (2%) III Ozamis Paper Corporation secured loans from ABC Universal Bank in the aggregate principal amount of P100 million, evidenced by several promissory notes, and secured by a continuing guaranty of its principal stockholder Menandro at P45 million; and a real estate mortgage over certain parcels of land owned by Marquez. The corporation defaulted and the bank extra-judicially foreclosed on the real estate mortgage. The bank, which was the sole bidder for P75 million, won the award. a. Can the bank sue Marquez for the deficiency of P25 million? Explain. (2%) b. If the bank opts to file an action for collection against the corporation, can it afterwards institute a real action to foreclose the mortgage? Explain. (2%) c. Can the bank foreclose on the pledged shares of Marquez and recover the deficiency from the corporation? Explain. (2%)

IV Andante Realty, a marketing company that promotes and facilitates sales of real property through leverage marketing, solicits investors who are required to be a Business Center Owner (BCO) by paying an enrollment fee of $250. The BCO is then entitled to recruit two other investors who pay $250 each. The BCO receives $90 from the $250 paid by each of his recruits and is credited a certain amount for payments made by investors through the initial efforts of his Business Center. Once the accumulated amount reaches $5,000, the same is used as down payment for the real property chosen by the BCO. a. Does this multi-level marketing scheme constitute an "investment contract" under the Securities Regulation Code? Define an "investment contract." (2%) b. What procedure must be followed under the Securities Regulation Code to authorize the sale or offer for sale or distribution of an investment contract? (2%) c. What are the legal consequences of failure to follow this procedure? (2%) V Venezia is a famous international fashion chain with outlets in Makati, Ortigas, and Manila. It has complied with the minimum capitalization required under the Retail Trade Nationalization Act and carries on retail business worth more than $3 million for each of its outlets. As its Manila outlet is not doing very well, it decides to sell all of its business there consisting of remaining inventory, furniture and fixtures and other assets to its competitor. a. Venezias Manila outlet constitutes one-third (1/3) of its total business. Should it comply with the requirements of the Bulk Sales Law? Why or why not? (2%) b. If instead of selling its Manila outlet, Venezia merely mortgages its assets there, would it need to comply with the requirements of the Bulk Sales Law? (2%) c. What are the legal consequences of a failure to comply with the requirements of the Bulk Sales Law? (2%) VI a. What contractual stipulations are required in all technology transfer agreements? (2%) b. Enumerate three (3) stipulations that are prohibited in technology transfer agreements. (3%) c. Can an article of commerce serve as a trademark and at the same time enjoy patent and copyright protection? Explain and give an example. (2%) VII Union Mines, Inc. has total assets of P60 million with 210 stockholders holding at least 100 shares each. The company has two principal stockholders, ABC which owns 60% of the shares of stock, and

XYZ which owns 17%. ABC in turn is owned to the extent of 21.31% by Acme, Inc.; 29.69% by Golden Boy, Inc.; 9% by XYZ; and the rest by individual stockholders. None of the parties is a publicly-listed company. XYZ now proposes to buy Acmes and Golden Boys shares in ABC, which would give it direct control of ABC and indirect control of Union Mines. Is the proposed acquisition by XYZ subject to the mandatory tender offer rule? Why or why not? What is a tender offer and when is it mandatory? (5%) VIII Marlon deposited with LYRIC Bank a money market placement of P1 million for a term of 31 days. On maturity date, one claiming to be Marlon called up the LYRIC Bank account officer and instructed him to give the managers check representing the proceeds of the money market placement to Marlons girlfriend Ingrid. The check, which bore the forged signature of Marlon, was deposited in Ingrids account with YAMAHA Bank. YAMAHA Bank stamped a guaranty on the check reading: "All prior endorsements and/or lack of endorsement guaranteed." Upon presentment of the check, LYRIC Bank funds the check. Days later, Marlon goes to LYRIC Bank to collect his money market placement and discovers the foregoing transactions. Marlon thereupon sues LYRIC Bank which in turn files a third-party complaint against YAMAHA Bank. Discuss the respective rights and liabilities of the two banks. (5%) IX Your client Dianne approaches you for legal advice on putting up a medium-sized restaurant business that will specialize in a novel type of cuisine. As Dianne feels that the business is a little risky, she wonders whether she should use a corporation as the business vehicle, or just run it as a single proprietorship. She already has an existing corporation that is producing meat products profitably and is also considering the alternative of simply setting up the restaurant as a branch office of the existing corporation. a. Briefly explain to your client what you see as the legal advantages and disadvantages of using a separate corporation, a single proprietorship, or a branch of an existing corporation for the proposed restaurant business. (3%) b. If you advise your client to use a corporation, what officer positions must the corporation at least have? (2%) c. What particular qualifications, if any, are these officers legally required to possess under

the Corporation Code? (2%) X To secure a loan of P10 million, Mario mortgaged his building to Armando. In accordance with the loan arrangements, Mario had the building insured with First Insurance Company for P10 million, designating Armando as the beneficiary. Armando also took an insurance on the building upon his own interest with Second Insurance Company for P5 million. The building was totally destroyed by fire, a peril insured against under both insurance policies. It was subsequently determined that the fire had been intentionally started by Mario and that in violation of the loan agreement, he had been storing inflammable materials in the building. a. How much, if any, can Armando recover from either or both insurance companies? (2%) b. What happens to the P10 million debt of Mario to Armando? Explain. (3%) XI Enrique obtained from Seguro Insurance Company a comprehensive motor vehicle insurance to cover his top of the line Aston Martin. The policy was issued on March 31, 2010 and, on even date, Enrique paid the premium with a personal check postdated April 6, 2010. On April 5, 2010, the car was involved in an accident that resulted in its total loss. On April 10, 2010, the drawee bank returned Enriques check with the notation "Insufficient Funds." Upon notification, Enrique immediately deposited additional funds with the bank and asked the insurer to redeposit the check. Enrique thereupon claimed indemnity from the insurer. Is the insurer liable under the insurance coverage? Why or why not? (3%) XII AA entered into a contract with BB for the latter to transport ladies wear from Manila to France with transhipment via Taiwan. Somehow the goods were not loaded in Taiwan on time, hence, these arrived in France "off-season." AA was only paid for onehalf (1/2) the value by the buyer. AA claimed damages from BB. BB invoked prescription as a defense under the Carriage of Goods by Sea Act. Considering the "loss of value" of the ladies wear as claimed by AA, is BBs defense tenable? Explain. (3%) XIII Paolo, the owner of an ocean-going vessel, offered to transport the logs of Constantino from

Manila to Nagoya. Constantino accepted the offer, not knowing that the vessel was manned by an irresponsible crew with deep-seated resentments against Paolo, their employer. Constantino insured the cargo of logs against both perils of the sea and barratry. The logs were improperly loaded on one side, thereby causing the vessel to tilt on one side. On the way to Nagoya, the crew unbolted the sea valves of the vessel causing water to flood the ship hold. The vessel sank. Constantino tried to collect from the insurance company which denied liability, given the unworthiness of both the vessel and its crew. Constantino countered that he was not the owner of the vessel and he could therefore not be responsible for conditions about which he was innocent. a. Is the insurance company liable? Why or why not? (3%) b. What is "barratry" in marine insurance? (2%) XIV When OCCIDENTAL Bank folded up due to insolvency, Manuel had the following separate deposits in his name: P200,000 in savings deposit; P250,000 in time deposit; P50,000 in a current account; P1 million in a trust account; and P3 million in money market placement. Under the Philippine Deposit Insurance Corporation Act, how much could Manuel recover? Explain. (2%) XV While vacationing in Boracay, Valentino surreptitiously took photographs of his girlfriend Monaliza in her skimpy bikini. Two weeks later, her photographs appeared in the Internet and in a national celebrity magazine. Monaliza found out that Valentino had sold the photographs to the magazine and, adding insult to injury, uploaded them to his personal blog on the Internet. a. Monaliza filed a complaint against Valentino for damages based on, among other grounds, violation of her intellectual property rights. Does she have any cause of action? Explain. (2%) b. Valentinos friend Francesco stole the photographs and duplicated them and sold them to a magazine publication. Valentino sued Francesco for infringement and damages. Does Valentino have any cause of action? Explain. (2%) c. Does Monaliza have any cause of action against Francesco? Explain. (2%) XVI An importer of Christmas toys loaded 100 boxes of Santa Claus talking dolls aboard a ship in Korea bound for Manila. With the intention of smuggling one-half of his cargo, he took a bill of

lading for only 50 boxes. On the voyage to Manila, 50 boxes were jettisoned to save the more precious cargo. a. Is the importer entitled to receive any indemnity for average? Explain. (2%) b. What are the types of averages in marine commerce? (3%) XVII The Supreme Court has held that fraud is an exception to the "independence principle" governing letters of credit. Explain this principle and give an example of how fraud can be an exception. (3%) XVIII For years, Y has been engaged in the parallel importation of famous brands, including shoes carrying the foreign brand MAGIC. Exclusive distributor X demands that Y cease importation because of his appointment as exclusive distributor of MAGIC shoes in the Philippines. Y counters that the trademark MAGIC is not registered with the Intellectual Property Office as a trademark and therefore no one has the right to prevent its parallel importation. a. Who is correct? Why? (2%) b. Suppose the shoes are covered by a Philippine patent issued to the brand owner, what would your answer be? Explain. (2%) XIX Dr. Nobel discovered a new method of treating Alzheimers involving a special method of diagnosing the disease, treating it with a new medicine that has been discovered after long experimentation and field testing, and novel mental isometric exercises. He comes to you for advice on how he can have his discoveries protected. Can he legally protect his new method of diagnosis, the new medicine, and the new method of treatment? If no, why? If yes, how? (4%) NOTHING FOLLOWS.