JURISTS BAR REVIEW CENTER™

2019 MERCANTILE LAW MOCK BAR EXAMINATION

22 June 2019 8 am to 12 noon

INSTRUCTIONS

1. This questionnaire is in TWO (2) PARTS: Part I with ten (10) questions (numbered I to X),
contained in 4 pages; and Part II with nine (9) questions (numbered XI-XIX), contained in 3 pages,
for a total number of 7 pages. Check the number of pages and make sure it has the correct number
of pages and their proper numbers.

All the items have to be answered within four (4) hours. You may write on the Questionnaire for
notes relating to the questions.

Read each question very carefully and write your answers in your Bar Examination Notebook in the
same order the questions are posed. Write your answers only on the front of every sheet in your
Notebook. If not sufficient, then start with the back page of the first sheet and thereafter. In your
answers, use the numbering system in the questionnaire.

2. Answer the Essay questions legibly, clearly, and concisely. Start each number on a separate
page. An answer to a sub-question under the same number may be written continuously on the
same page and the immediately succeeding pages until completed.

Your answer should demonstrate your ability to analyze the facts, apply the pertinent laws and
jurisprudence, and arrive at a sound or logical conclusion. Always support your answer with the
pertinent laws, rules, jurisprudence, and the facts.

A mere "Yes" or "No" answer without any corresponding explanation or discussion will not be given
full credit. Thus, always briefly but fully explain your answers although the question does not
expressly ask for an explanation. Do not re-write or repeat the question in your Notebook.

3. Make sure you do not write your name or any extraneous note/s or distinctive marking/s on your
Notebook that can serve as an identifying mark/s (such as names that are not in the given
questions, prayers, or private notes to the Examiner). Writing, leaving, or making any distinguishing
or identifying mark in the exam Notebook is considered cheating and can disqualify you.

YOU CAN BRING HOME THE QUESTIONNAIRE

PART I

Pursuant to an order of the Monetary Board, the PDIC was designated as receiver of
Cosmopolitan Bank.

a) May the PDIC later on recommend the rehabilitation of Cosmopolitan Bank?

Prior to the appointment of the PDIC as receiver, the board of directors of the bank
had entered into an agreement with ServiceSure Corporation for providing security and

Jurists Mock Bar Examinations in Mercantile Law. © 2019 by Jurists Review Center Inc. Copying, dissemination,
storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc.
is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the
appropriate complaint with the Bar Confidant’s Office and IBP.
Page 1 of 7
maintenance staff to the bank. The PDIC carefully studied the contract and determined
that the fees payable to ServiceSure were excessive. The PDIC thus revoked the Bank’s
agreement with Service Sure.

b) Did the PDIC have the power to revoke the agreement?

II

You are the general counsel of Tripolitan Bank. NBI agents come to your bank
head office. They bear an authorization from the Anti-Terrorism Council and a written order
from the Court of Appeals authorizing them to inquire into and gather information about the
bank accounts of Dragan Tankov, a suspected terrorist, pursuant to the Human Security
Act. You verify the NBI agents’ documents and find them to be authentic. Dragan Tankov
has two bank accounts with Tripolitan Bank: (a) a Philippine Peso deposit in the amount of
P50 million and (b) a US Dollar deposit in the amount of US$1 million. As the general
counsel of the bank, would you disclose and allow the inquiry into these bank deposits by
the NBI agents? Explain.

III

A special stockholder’s meeting of Allies Bank was set for 27 May 2008 in order for
the stockholders to vote on whether they would approve the proposed merger of Allies
Bank with Bank of the Philippine Archipelago. In connection therewith, proxies were
required to be submitted on or before 17 May 2008 and the proxy validation was slated for
22 May 2008. The proxy validation on 22 May was undertaken by Allies Bank’s corporate
secretary Atty. Tuscan. Sunshine Holdings Inc., a minority Allies Bank stockholder, filed
with the Securities and Exchange Commission an urgent petition seeking to restrain Atty.
Tuscan from validating proxies in favor of Boris Reyes and other Allies Bank executives on
the ground of fraud and serious irregularities. Does the SEC have jurisdiction over the
petition? Explain.

IV

Romulus drew and issued to Argus a BPI check for P500,000 payable to the order of
Argus. While in Argus’ office drawer, the check was stolen by Paco Patagotago, Argus’
close friend and classmate, who used a skeleton key to open the drawer. Paco forged the
indorsement of Argus. Paco then indorsed and deposited the check with his bank account
in RCBC. RCBC forwarded the check to the drawee bank BPI, stamping on the back of the
check, “all prior indorsements or lack of indorsements guaranteed.” BPI did not return the
check to RCBC within 24 hours, so RCBC considered the check good and credited the
amount of P500,000 to the bank account of Paco. BPI’s clearing account was debited with
P500,000 and RCBC’s clearing account was credited with P500,000. Correspondingly,
Romulus’ BPI checking account was debited P500,000. Paco withdrew the P500,000 from
his RCBC account and disappeared. The theft and forgery was later discovered by Argus
who promptly advised Romulus. Romulus promptly informed BPI who promptly informed
RCBC. RCBC could no longer locate Paco.

Jurists Mock Bar Examinations in Mercantile Law. © 2019 by Jurists Review Center Inc. Copying, dissemination,
storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc.
is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the
appropriate complaint with the Bar Confidant’s Office and IBP.
Page 2 of 7
 a) Can Argus demand that Romulus issue a replacement check in the amount of
P500,000 to him or that Romulus pay him P500,000?

b) Can Romulus demand that BPI recredit his checking account for P500,000?

c) Assuming that BPI recredits Romulus’ checking account, can it recover the
P500,000 from RCBC?

Simon gave his nephew, Alvin, a negotiable promissory note to pay his fees for the
pre-bar review. The amount and payee was left blank because Alvin is still scouting for a
review school, but Simon instructed Alvin that once he has chosen the school to put the
name of the school as payee and the assessed fee as the amount of the note. However, in
breach of trust, Alvin placed his name as the payee, and placed the amount of P = 50,000.
Thereafter, Alvin negotiated the note to Dave who acquired it in good faith and for value.
Dave negotiated the note to Wil for value but who has knowledge of the infirmity. When the
note matured, Wil presented the note for payment, but Simon set up against Wil the
defense that the instrument was completed in breach of trust. Can Will enforce the note
against Simon? Explain.

VI

Acme Corporation is known for its “wash-your-car-while-you-shop” business. This

involves washing the car of a person in the parking lot while the car owner is shopping in
the mall. Acme corporation, through its officers, markets a franchise wherein a person can
become a franchisee of the business. The franchisees do not need to operate the business
as Acme will manage the franchises for the franchisees under an accompanying
management contract and give to the franchisee his proportionate share of the income.

Many persons bought the franchise and accompanying management contract from
Acme. However Acme failed to remit the corresponding shares of the profits to the
franchisees. You were hired as a lawyer for several disgruntled franchisees and you
discovered that the franchise and management contracts were not registered as securities
with the SEC.

a) Are the franchise agreements and the corresponding management contracts

considered as securities?
b) Are the officers of Acme Corporation criminally liable?

VII

Mr. X bought a vintage World War II warship which he converted into a passenger
vessel, the Queen Donna. On its maiden voyage, it collided with a brand new vessel of
Juan Carlos and it sank. Juan Carlos sued Mr X for recovery of damages. Mr. X interposed
the defense that his liability was extinguished by the loss of the Queen Donna. It was
proven during trial that the Queen Donna lacked equipment necessary for safe navigation.
Is Mr. X liable?

Jurists Mock Bar Examinations in Mercantile Law. © 2019 by Jurists Review Center Inc. Copying, dissemination,
storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc.
is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the
appropriate complaint with the Bar Confidant’s Office and IBP.
Page 3 of 7
 VIII

The Spouses Steiner entered into a contract with Acme Group Inc. (AGI), a
construction company, to design and construct a 5-storey commercial/residential building
for a price of P15 million in accordance with the specifications attached to the construction
contract. The President of AGI was Jan Giri. Giri materially revised and deviated from the
specifications and structural plan of the building in order to reduce costs without notice to or
approval of the Spouses Steiner. The Spouses Steiner filed a complaint for damages
against AGI and Jan Giri before the Construction Industry Arbitration Commission, which
rendered a decision holding Giri jointly and severally liable with AGI for damages to the
Spouses Steiner. On appeal to the Court of Appeals, Giri argued that he cannot be jointly
and severally held liable with AGI as it would violate the doctrine of separate juridical
personality of a corporation. Is Giri’s argument correct? Explain.

IX

Acme Corporation registered its mark “Hyena” for sports shoes and socks. It did not
use its mark for any of its products during the first 6 years after its registration.

a) Will Acme Corporation automatically lose its registration?

b) Can Acme Corporation retain protection over its mark?

Mr. Koh, in his capacity as President of Tong Trading, Inc., executed a trust receipt
in favor of Wang Bank to secure the importation by his company of certain goods. Tong
Trading was able to sell the goods but failed to apply the proceeds thereof to its loan with
the Bank. Can the Bank file a case for estafa against Mr. Koh even if he signed the trust
receipt as an officer of Tong Trading?

Jurists Mock Bar Examinations in Mercantile Law. © 2019 by Jurists Review Center Inc. Copying, dissemination,
storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc.
is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the
appropriate complaint with the Bar Confidant’s Office and IBP.
Page 4 of 7
 PART II

XI

Malakas Department Store had an existing fire insurance coverage over its
department store issued by ABC Insurance Company. The fire insurance policy was good
for one year. ABC Insurance Company had been the insurer of Malakas for several years.
The practice between Malakas and ABC Insurance was that Malakas was granted a 60-day
credit term (that is, 60 days from the expiration of the policy) for the payment of the
premiums to renew the policy. The fire policy expired on 22 May 2006. On 25 May 2006
ABC Insurance called up Malakas and informed the latter that it was cancelling and no
longer renewing the policy. On 12 June 2006 a fire razed the Malakas Department Store to
the ground. Two days later Malakas filed a notice of loss and claim upon the policy. ABC
denied the claim stating that (a) the policy had already been cancelled and that (b) the fire
policy was not valid and binding since the premiums to renew the policy had not been paid.
May Malakas recover against ABC Insurance on the fire policy?

XII

Joson was appointed General Manager of M2M Inc. His appointment was supported
by an undated Secretary’s Certificate stating that the Board of Directors of M2M Inc. had
conducted a meeting where Joson was appointed as one of its corporate officers with the
designation or title of General Manager. M2M Inc.’s by-laws provide that “the corporate
officers are: Chairman, President, one or more Vice-President(s), Treasurer, and Secretary;
provided that its Board of Directors may, from time to time, appoint such other officers as it
may determine to be necessary or proper.”

Joson was later terminated as General Manager M2M Inc. Feeling aggrieved, Joson
filed a complaint for illegal dismissal against M2M Inc. before the Labor Arbiter. M2M Inc.
argued that the Labor Arbiter has no jurisdiction to hear the case considering that Joson is
a corporate official of M2M Inc. Thus the case involved an intra-corporate controversy and
hence the jurisdiction thereof is with the RTC.

Is it the Labor Arbiter or the RTC which has jurisdiction over Joson's complaint for
illegal dismissal?

XIII

On March 17, 2004, the SEC sent V Bank a letter, informing it that it qualifies as a
public company. The SEC said that V Bank has assets exceeding P50,000,000.00 and has
395,998 shareholders. Thus, it is required to comply with the reportorial requirements set
forth in Section 17.1 of the SRC.

V Bank claimed that it is not a public company under the SRC because its shares
can be owned only by a specific group of people, particularly, World War II veterans and
their widows, orphans and compulsory heirs, and is not open to the investing public in
general.

Jurists Mock Bar Examinations in Mercantile Law. © 2019 by Jurists Review Center Inc. Copying, dissemination,
storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc.
is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the
appropriate complaint with the Bar Confidant’s Office and IBP.
Page 5 of 7
 a) Under the SRC, when is a corporation considered a public company?
b) In the case at bar, is the argument of V Bank correct? Why?

XIV

Professor Sanchez Roman lectures before bar reviewees of Oracle Review Center
on the field of Special Commercial Laws. In the course of his lectures, Prof. Roman gives
to the reviewees hand-outs on the contents of his lectures. The handouts contain the
warning that they are for the exclusive use of Oracle bar reviewees and should not be
disseminated without Prof. Roman’s express written consent. No copies of his handouts
have been registered and deposited with the National Library and the Supreme Court
library. One of the Oracle reviewees, Roco Laurentis, uploads without Prof. Roman’s
consent his handouts to the website, www.scribd.com, where they can be viewed and
downloaded by anyone who visits the website. What crime or crimes, if any, did Roco
Laurentis commit?

XV

Mr. Warren Bates is a director of Infinity Semiconductor Inc. (ISI), a local electronics
company with factories in China, whose shares are listed and traded in the Philippine Stock
Exchange. ISI’s products are mostly manufactured in China and exported to the United
States. On 1 April 2019, while the US and China are embroiled in a trade war, Mr. Bates
bought 100 million shares of ISI for ₱1 per share or a total of ₱100 million. On 1 August
2019 the US and China announced that they have settled their trade dispute. The next day
the market price of ISI shares rises to ₱2 per share. Mr. Bates immediately sells the 100
million shares for ₱200 million earning a cool profit of ₱100 million.

a) Is Mr. Bates liable for insider trading?

b) May ISI run after the P100 million profit of Mr. Bates?

XVI

A.M. Trucking, a small company, operates two trucks for hire on selective basis. It
caters to only a few customers, and its trucks do not make regular or scheduled trips. It
does not even have a certificate of public convenience. On one occasion, Reynaldo
contracted AM to transport, for a fee, 100 sacks of rice from Manila to Baguio City.
However AM failed to deliver the cargo, because its truck was carnapped in the parking lot
of a restaurant in Tarlac City while the driver was having lunch. Reynaldo seeks to recover
from AM the value of the rice but AM contends that it is not liable as a common carrier and
even granting that it is a common carrier, the loss of the rice was due to a fortuitous cause.
May Reynaldo recover the value of the rice from AM?

XVII

T Shipping, Co. insured all of its vessels with R Insurance, Co. The insurance
policies stated that the insurer shall answer for all damages due to perils of the sea. One of

Jurists Mock Bar Examinations in Mercantile Law. © 2019 by Jurists Review Center Inc. Copying, dissemination,
storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc.
is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the
appropriate complaint with the Bar Confidant’s Office and IBP.
Page 6 of 7
the insured's ship, the MV Dona Priscilla, ran aground in the Panama Canal when its
engine pipes leaked and the oil seeped into the cargo compartment. The leakage was
caused by the extensive mileage that the ship had accumulated. May the insurer be made
to answer for the damage to the cargo and the ship?

XVIII

Yana and Peter entered into an agreement whereby the latter was to give Yana a
P4.2 million PCIB manager’s check in exchange for an Equitable Bank manager’s check
(which had been bought by Yana) in the amount of P4 million, payable to the order of
David. Yana gave the Equitable Bank manager’s check (which was crossed) to Ranigo for
him to give to Peter when they would meet. Ranigo allegedly lost the Equitable Bank
manager’s check while waiting for Peter who did not show up. Yana never got the PCIB
manager’s check. Meanwhile Peter (who had gotten hold of the Equitable manager’s
check) negotiated the check to David who was unaware of what had transpired. Yana
sued David for the return of the Equitable Bank manager’s check. She alleges that David
should return the manager’s check which was obtained by fraud or theft from her. Who
between Yana and David has a better right to the manager’s check?

XIX

Upon learning that his nephew Lex Magtanggol had passed the 2018 bar exam, Tito
Magtanggol called up Lex through his iPhone and told him, “Because of the pride that you
have brought to our clan, I donate to you ₱500,000!” Lex texted back (also through his
iPhone), “Thanks, Uncle Tito! That’s so generous of you!” Tito texted back, “You’re
welcome Attorney!”

However Tito died the next day, leaving behind an estate with an estimated value of
P500 million.

a) May Lex successfully file a money claim for the donation in the proceedings for
the settlement of Tito’s estate?

b) Assume that instead of calling up Lex, Tito had texted his message to Lex.
Would your answer be the same?

-oOo-

Jurists Mock Bar Examinations in Mercantile Law. © 2019 by Jurists Review Center Inc. Copying, dissemination,
storage, use, modification, uploading, and downloading without the express written consent of Jurists Review Center Inc.
is strictly prohibited and shall be subjected to criminal prosecution and administrative charges, including the
appropriate complaint with the Bar Confidant’s Office and IBP.
Page 7 of 7