Cor Jesu College
Law School
Commercial Law Review
FIRST EXAM - 01 April 2023
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pertinent laws, rules, and/or jurisprudence. A mere "yes" or "no" answer without
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shall result in your disqualification.
Item No. 1
Distinguish:
A. Bank deposits and deposit substitutes. (5 points)
Bank deposits can be distinguished from deposit substitutes
in the following way:
bank deposit means the unpaid balance of money or its
equivalent received by a bank in the usual course of
business and for which it has given or is obliged to give
credit to a commercial, checking, savings, time or thrift
account or which is evidenced by its certificate of deposit,
and trust funds while deposit substitutes refer to a form of
obtaining funds from the public, other than deposits,
through the issuance, endorsement or acceptance of debt
instruments for the purpose of re-lending or purchase of
other receivables and obligations.
B. One Person Corporation and Single Proprietorship. (5 points)
A one person corporation can be distinguished from a
single or sole proprietorship in the following ways:
A one person corporation has a single stockholder :who
must be a natural person, trust, or an estate while a sole
proprietorship is a type of business with only one owner
and is not considered a corporation with a separate
personality but it is an extension of the owner .
In a one person corporation, the shareholder has limited
liability while in a sole proprietorship, the sole proprietor
has unlimited liability for the debts of the proprietorship.
Lastly, in a one person corporation, the heirs of the
shareholder can take over the corporation whereas the
single proprietorship dies with the proprietor.
C. Stock Corporation and Non-stock Corporation (5 points)
A stock corporation is distinguished from non-stock
corporation as follows:
A stock corporation has capital stock while a non-stock
corporation does not.
A stock corporation is organized for profit while a non-
stock corporation is not.
In a stock corporation, the profits are distributed to
stockholders through dividends while , in a non-stock
corporation, the profits are not distributed, instead, they are
used in furtherance of the purpose for which they were
organized.
Item No. 2
Explain:
A. Single borrower’s limit. (5 points)
The single borrower’s limit is the total amount of loans,
credit accommodations, and guarantees that a bank may
extend to any person to no more than 25% of the net worth
of such bank, subject to increase under subsection b
thereof. This is also known as the Single Borrower’s Limit
as it intends to limit or restrict a bank’s risk of exposure to
single borrowers by preventing banks from extending large
credit accommodations to one borrower or a group of
related borrowers.
B. In relation to Bangko Sentral ng Pilipinas Act, explain “moral suasion”.
(5 points)
Moral suasion is a qualitative method of credit control,
being used by the central bank. Under this method, the
Central Bank merely uses its moral influence on
commercial banks. It includes the advice, suggestion
request and persuasion with commercial banks to cooperate
with the Central Bank.
Item No. 3
Is disclosure of information on bank accounts in a close bank violative of the Law
on Secrecy of Bank Deposits? (5 points)
No, the disclosure of information on bank accounts in a close
bank is not violative of the Law on Secrecy of Bank Deposits
because there is no more bank deposits to speak of.
By definition, bank deposit means the unpaid balance of money
or its equivalent received by a bank in the usual course of
business. A bank that has been closed does not hold any such
unpaid balance anymore.
Item No. 4
Papa Peso deposited with his peso and dollar accounts with XYZ Bank on 1 April
2023 the following:
Amount of Deposit Time of Deposit
Php200,000.00 9am
US$5,000.00 11am
Php100,000.00 12pm
US$6,000.00 2pm
Php300,000.00 3pm
What type of transaction report, if any, should be reported by XYZ Bank? (5
points)
XYZ Bank must submit a Covered Transaction Report to
the Anti-Money Laundering Council.
Item No. 5
Both the Securities Regulation Code (RA 8799) and the Revised Corporation
Code (RA 11232), unlike its predecessor, require the election of independent
directors in specified instances.
A. State the rule on the number of independent directors of the covered
corporations. (5 points)
The number of independent directors of the board of
directors of corporations vested with public interest
constitute at least 20% of such board.
B. Who are the covered corporations required to elect independent directors?
(5 points)
The following are the covered corporations required to
elect independent ‘directors:
1. corporations covered by the Securities Regulation Code
2. banks and quasi-banks engaged in money service, preneed,
trust and insurance companies, and other financial
intermediaries
3. other corporations engaged in businesses vested with public
interest such as the aforementioned.
Item No. 6
Diana and Piolo are famous personalities in show business who kept their love
affair secret. They use a special instant messaging service which allows them to
see one another’s typing on their own screen as each letter key is pressed. When
Greg, the controller of the service facility, found out their identities, he kept a copy
of all the messages Diana and Piolo sent each other and published them.
A. Is Greg liable for copyright infringement? (5 points)
B. Distinguish plagiarism and copyright infringement. (5 points)
Item No. 7
A Petition for Review on Certiorari under Rule 45 of the Rules of Court
challenging the Resolution2 dated January 4, 2006 of the Court of Appeals (CA) in
CA-G.R. SP No. 90238, entitled "In re: Ex-parte Application for the Issuance of
Freeze Order Against the Monetary Instruments and Properties of Ret. Lt. Gen.
Jacinto C. Ligot, Erlinda Y. Ligot, Paulo Y. Ligot, Riza Y. Ligot, George Y. Ligot,
Miguel Y. Ligot and Edgardo Yambao, Republic of the Philippines, represented by
the Anti Money Laundering Council, applicant” was filed by Petitioner Edgardo T.
Yambao.
Through a letter dated February 1, 2005, the Office of the Ombudsman (OMB)
forwarded to the Anti-Money Laundering Council (AMLC) a copy of the OMB's
complaint for perjury under Art. 183 of the Revised Penal Code and violation of
Republic Act (R.A.) No. 6713 and R.A. No. 3019 against Ret. Lt. Gen. Jacinto C.
Ligot (Gen. Ligot) and members of his immediate family. The OMB recommended
the conduct of further investigation on Gen. Ligot for possible violation of R.A. No.
9160 or the Anti-Money Laundering Act of 2001, as amended. The OMB's
recommendation resulted from its finding that Gen. Ligot and his family had
accumulated wealth that is grossly disproportionate to their income.
According to the OMB, the unexplained wealth of Gen. Ligot is estimated to be at
least P54,001,217.00, which includes, among others, the following:cralawred
Gen. Ligot's undeclared assets - P41,185,583.53
Gen. Ligot's children assets - P 1,744,035.60
Tuition fees and travel expenses - P 2,308,047.87
Edgardo Yambao's assets relative to real properties - P 8,763,550.00
TOTAL UNEXPLAINED WEALTH - P54,001,217.00
For want of any record of the possible legal source of said unexplained wealth, the
OMB ultimately concluded that the same may be presumed to have been acquired
illegally, i.e., proceeds from gifts, shares, benefits, present or percentage for Gen.
Ligot in connection with or transactions between the government and any other
party by reason of his office which he has to intervene under the law.
Taking cue from the OMB's findings, the AMLC conducted its own investigation
and eventually found that apart from real properties, bank accounts and significant
investments were also maintained by Gen. Ligot and his family. The AMLC then
found reasonable grounds to believe that the monetary instruments and properties
in the name of Gen. Ligot and his family, including petitioner, are related to
unlawful activities as defined under Section 3(i) of R.A. No. 9160, as amended, in
relation to Section 3(b) of R.A. No. 3019, as amended.
Consequently, on the strength of AMLC Resolution No. 52, Series of 2005, the
AMLC, through the Office of the Solicitor General (OSG), filed with the CA an
Urgent Ex-parte Application for the issuance of a freeze order against the
monetary instruments and properties of Gen. Ligot, Erlinda, and their children
(Paulo, Riza, George, and Miguel, all surnamed Ligot), and petitioner.
Finding the existence of probable cause that the monetary instruments and
properties enumerated in the ex-parte application are related to an unlawful
activity, the Court of Appeals, through a Resolution dated July 5, 2005, issued a
Freeze Order over the subject monetary instruments. The Freeze Order was
initially valid for 20 days.
Among those covered by the Freeze Order were the following bank accounts and
motor vehicles25 registered in the name of petitioner:
BANK ACCOUNT NO.
Metropolitan Bank and Trust Co. 00012407 (US$ account)
United Overseas Bank Phils. 21072002773
2072001829
Keppel Bank Philippines 3035000914
Citicorp Financial Services 000117966 (US$ account)
& Insurance Brokerage Phils., Inc. 006911804 (US$ account)
MOTOR VEHICLE PLATE NO.
1996 Honda Accord Sedan UFY223
2001 Toyota Hi-Lander XBD 223
2002 Subaru Forester XEB 718
2003 Subaru Forester XHY362
Subsequently, petitioner filed a Motion to Lift Freeze Order Against the Monetary
Instruments and Properties of Edgardo Yambao with Prayer Requests for Setting of
an Oral Argument dated July 22, 2005. The OSG then filed its Consolidated
Comment27 to petitioner's motion.
The OSG also filed an "Urgent Motion for Extension of Effectivity of Freeze
Order," to which petitioner, Gen. Ligot, and the latter's family filed separate
oppositions.
On September 20, 2005, the CA issued a Resolution, the dispositive portion of
which states:cralawred
WHEREFORE, premises considered, the:
(a) Motion to Lift Freeze order Against the Monetary
Instruments and Properties of Edgardo Yambao with
Prayer Requests for Setting of an Oral Argument is
DENIED for lack of merit; and the
(b) Urgent Motion for Extension of Effectivity of
Freeze Order filed by applicant Republic of the
Philippines, through the Office of the Solicitor General,
is GRANTED. As prayed for, the Freeze Order issued
by this Court on July 5, 2005 against the subject bank
accounts, investments, vehicles and the related web
accounts of the respondents, except those that were
already closed as herein-above identified, is
EXTENDED until after all the appropriate
proceedings and/or investigations being conducted are
terminated, conformably with Section 10 of Republic
Act No. 9160, as amended.
SO ORDERED.
An Urgent Motion (to Separate Respondent Edgardo Yambao and to Resolve
Pending Motion to Lift and Set Aside Freeze Order of the Honorable Court), dated
20 September 2005, was thereafter filed by petitioner.
Petitioner also moved for reconsideration of the September 20, 2005 Court of
Appeals’ Resolution. Hence, elevated to the Supreme Court.
A. Explain Freeze Order. (5 points)
B. Distinguish “bank inquiry” and “freeze order”. (5 points)
C. Rule with reason on the above Petition before the Supreme Court. (5
points)
D. Give 5 predicate crimes. (5 points)
Item No. 8
Respondent Interpublic Group of Companies, Inc. (IGC) is a non-resident foreign
corporation duly organized and existing under and by virtue of the laws of the
State of Delaware, United States of America.
The IGC owns 2,999,998 shares or 30% of the total outstanding and voting capital
stock of McCann Worldgroup Philippines, Inc. (McCann), a domestic corporation
duly organized and existing under the laws of the Philippines engaged in the
general advertising business.
In 2006, McCann's Board of Directors declared cash dividends in the total amount
of P205,648,685.02 in favor of its stockholders of record.
On June 15, 2006, McCann withheld a Final Withholding Tax (FWT) at the rate of
35% on IGC's cash dividends and remitted the payment of the FWT in the amount
of P21,593,111.93 to petitioner Commissioner of Internal Revenue (CIR).
On September 27, 2007, the IGC established a Regional Headquarters (RHQ) in
the Philippines. On April 30, 2008, the RHQ was converted into its Regional
Operating Headquarters (ROHQ).
On March 5, 2008, the IGC filed an administrative claim for refund or issuance of
tax credit certificate (TCC) in the amount of P12,338,921.00, representing the
alleged overpaid FWT on dividends paid by McCann to IGC. In the said
administrative claim, the IGC averred that as a non-resident foreign corporation, it
may avail of the preferential FWT rate of 15% on dividends received from a
domestic corporation under Section 28(B)(5)(b) of the Tax Code.
On May 29, 2008, the IGC submitted to CIR additional documents in support of its
administrative claim for refund or issuance of TCC. The CIR failed to act on IGC's
claim for refund or issuance of TCC. This prompted the IGC to file a petition for
review with the CTA on June 16, 2008.
The CIR argued that the IGC, being an unlicensed corporation, has no capacity to
sue in Philippine courts in accordance with the Corporation Code.
A. May IGC, a foreign corporation unlicensed to do business in the
Philippines which collects dividends from the Philippines has capacity to sue
in the Philippine Courts? (5 points)
B. Distinguish foreign corporation from domestic corporation. (5 points)
C. When may a foreign corporation, not licensed to do business in the
Philippines, be allowed to sue or institute legal action in the Philippines? (5
points)
Item No. 9
Sometime in 1995, Terp Construction planned to develop a housing project called
the Margarita Eastville and a condominium called Margarita Plaza.
To finance the projects, Terp Construction, Home Insurance Guaranty Corporation,
and Planters Development Bank (Planters Bank) agreed to raise funds through the
issuance of bonds worth P400 million called the Margarita Project Participation
Certificates (Margarita Bonds).
The three (3) companies entered into a Contract of Guaranty in which they agreed
that:
Terp Construction would sell the Margarita Bonds and convey the funds
generated into an asset pool named the Margarita Asset Pool Formation and
Trust Agreement.
Planters Bank, as trustee, would be the custodian of the assets in the asset
pool with the corresponding obligation to pay the interests and redeem the
bonds at maturity.
Home Insurance Guaranty Corporation, as guarantor, would pay investors
the value of the bond at maturity plus 8.5% interest per year.
Banco Filipino purchased Margarita Bonds for P100 million. It asked for
additional interest other than the guaranteed 8.5% per annum, based on the letters
dated February 3, 1997 and April 8, 1997 written by Terp Construction Senior
Vice President Alberto Escalona (Escalona).
When the Margarita Bonds matured, the funds in the asset pool were insufficient to
pay the bond holders. Pursuant to the Contract of Guaranty, Planters Bank
conveyed the asset pool funds to Home Insurance Guaranty Corporation, which
then paid Banco Filipino interest earnings of 8.5% per year. Banco Filipino,
however, sent Terp Construction a demand letter dated January 31, 2001, alleging
that it was entitled to a 15.5% interest on its investment and that as of July 1, 2001,
it was entitled to a seven percent (7%) remaining unpaid interest of P
18,104,431.33. Terp Construction refused to pay the demanded interest.
Terp Construction filed a Complaint for declaration of nullity of interest, damages,
and attorney's fees against Banco Filipino. It alleged that it only agreed to pay the
seven percent (7%) additional interest on the condition that all the asset pool funds
would be released to Terp Construction for it to pay the additional interest.
However, it could not have paid the additional interest since the funds of the asset
pool were never released to it.
Banco Filipino, on the other hand, alleged that it was induced into buying the
Margarita Bonds after Terp Construction, through its senior vice president's letters,
committed to pay 15.5% interest on a
P50 million bond that Banco Filipino held for a client and 16.5% interest on a P50
million bond it held for another client. It alleged that Terp Construction paid the
additional interest twice during the Margarita Bonds' holding period.
On May 29, 2010, the Regional Trial Court issued a Decision in favor of Terp
Construction. It found that there was no evidence to show that Terp Construction
was obligated to pay the interest differentials, and that the acts of Escalona, the
senior vice president, were not binding on the corporation since they were not
ratified.
The Court of Appeals set aside the Decision of the RTC.
The Court of Appeals also found unmeritorious Terp Construction's defense that
the letters were unauthorized acts of Escalona, its then senior vice president, since
his acts were ratified when Terp Construction paid interest differentials twice to
Banco Filipino during the Margarita Bonds' holding period. Hence, the case was
elevated before the Supreme Court.
Did the Court of Appeals err in ruling that petitioner Terp Construction
Corporation expressly agreed to be bound to respondent Banco Filipino
Savings Mortgage Bank for additional interest in the bonds it purchased? (10
points)
