TRANSPORTATION LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: LIMITED LIABILITY RULE

QUESTION NO. 1:

Toni, a copra dealer, loaded 1,000 sacks of copra on board the vessel M/V Tonichi (a common
carrier engaged in coastwise trade owned by Ichi) for shipment from Puerto Galera to Manila.
The cargo did not reach Manila because the vessel capsized and sank with all its cargo.
When Toni sued Ichi for damages based on breach of contract, the latter invoked the limited
liability rule
What do you understand of the rule invoked by Ichi? Are there exceptions to the limited
liability rule?

SUGGESTED ANSWER:

By limited liability rule is meant that the liability of a ship owner for damages in case of loss is
limited to the value of the vessel involved. His other properties cannot be reached by the parties
entitled to damages. Yes. When the ship owner of the vessel involved is guilty of negligence, the
limited liability rule does not apply. In such case, the ship owner is liable to the full extent of
the damages sustained by the aggrieved parties.

TRANSPORTATION LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: LIABILITY OF CARRIERS

QUESTION NO. 2:

Mariter, a paying bus passenger, was hit above her left eye by a stone hurled at the bus by an
unidentified bystander as the bus was speeding through the National Highway. The bus owners
personnel lost no time in bringing Mariter to the provincial hospital where she was confined and
treated.
Mariter wants to sue the bus company for damages and seeks your advice whether she can
legally hold the bus company liable?

SUGGESTED ANSWER:

Mariter cannot legally hold the bus company liable. There is no showing that any such incident
previously happened so as to impose an obligation on the part of the personnel of the bus
company to warn the passengers and to take the necessary precaution. Such hurling of a stone
constitutes fortuitous event in this case. The bus company is not an insurer.

COMMERCIAL LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: INSURANCE:
- NO FAULT INDEMNITY CLAUSE
-CONFIRMING AND NOTIFYING
-CO- INSURANE AND RE-INSURANCE

QUESTION NO. 3:

What is your understanding of a no fault indemnity clause found in an insurance policy?

Distinguish co-insurance from re-insurance. In letters of credit in banking transactions,
distinguish the liability of a confirming bank from a notifying bank.

SUGGESTED ANSWER:

Under the no fault indemnity clause any claim for the death or injury of any passenger or third
party shall be paid without the necessity of proving fault or negligence of any kind. The
indemnity in respect of any one person shall not exceed P15,000, provided they are under oath,
the following proofs shall be sufficient: Police report of the accident; and Death certificate and
evidence sufficient to establish the proper payee; or Medical report and evidence of medical or
hospital disbursement in respect of which refund is claimed. Claim may be made against one
motor vehicle only. Co-insurance is the percentage in the value of the insured property which the
insured himself assumes or undertakes to act as insurer to the extent of the deficiency in the
insurance of the insured property. In case of loss or damage, the insurer will be liable only for
such proportion of the loss or damage as the amount of insurance bears to the designated
percentage of the full value of the property insured. Reinsurance is where the insurer procures a
third party, called the reinsurer, to insure him against liability by reason of such original
insurance. Basically, a reinsurance is an insurance against liability which the original insurer may
incur in favor of the original insured. In case anything wrong happens to the letter of credit, a
confirming bank incurs liability for the amount of the letter of credit, while a notifying bank does
not incur any liability.

COMMERCIAL LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: INSURABLE INTEREST

QUESTION NO. 4:

In a civil suit, the Court ordered Benjie to pay Nat P500, 000. To execute the judgment, the
sheriff levied upon Benjies registered property (a parcel of land and the building thereon), and
sold the same at public auction to Nat, the highest bidder. The latter, on March 18, 1992,
registered with the Register of Deeds the certificate of sale issued to him by the sheriff.
Meanwhile, on January 27, 1993, Benjie insured with Garapal Insurance for P1 M the same
building that was sold at public auction to Nat. Benjie failed to redeem the property by March
18, 1993.
On March 19, 1993, a fire razed the building to the ground. Garapal Insurance refused to make
good its obligation to Benjie under the insurance contract.
Is Garapal Insurance legally justified in refusing payment to Benjie?
Is Nat entitled to collect on the insurance policy?

SUGGESTED ANSWER:

Yes. At the time of the loss, Benjie was no longer the owner of the property insured as he failed
to redeem the property. The law requires in property insurance that a person can recover the
proceeds of the policy if he has insurable interest at the time of the issuance of the policy and
also at the time when the loss occurs. At the time of fire, Benjie no longer had insurable interest
in the property insured.
No. While at the time of the loss he has insurable interest in the building, as he was the owner
thereof, Nat did not have any interest in the policy. There was no automatic transfer clause in the
policy that would give him such interest in the policy.

COMMERCIAL LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: DE FACTO CORPORATION

QUESTION NO. 5:

A corporation was created by a special law. Later, the law creating it was declared invalid. May
such corporation claim to be a de facto corporation?

SUGGESTED ANSWER:

No. a private corporation may be created only under the Corporation Code. Only public
corporation may be created under a special law.
Where a private corporation is created under a special law, there is no attempt at a valid
incorporation. Such corporation cannot claim a de facto status.

COMMERCIAL LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: TRADEMARK

QUESTION NO. 6:

Laberge, Inc. manufactures and markets after-shave lotion, shaving cream, deodorant, talcum
powder and toilet soap, using the trademark PRUT, which is registered with the Philippine
Patent Office. Laberge does not manufacture briefs and underwear and these items are not
specified in the certificate of registration.
JG, who manufactures briefs and underwear, wants to know whether, under our laws, he can use
and register the trademark PRUTE for his merchandise. What is your advice?

SUGGESTED ANSWER:

Yes. The trademark registered in the name of Laberge, Inc. covers only aftershave lotion, shaving
cream, deodorant, talcum powder and toilet soap. It does not cover briefs and underwear.
The limit of the trademark is stated in the certificate issued to Laberge, Inc.
It does include briefs and underwear which are different products protected by Laberges
trademark.
JG can register the trademark PRUTE to cover its briefs and underwear.

COMMERCIAL LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: COPYRIGHT

QUESTION NO. 7:

The Victoria Hotel chain reproduces videotapes, distributes the copies thereof to its hotels and
makes them available to hotel guests for viewing in the hotel guest rooms. It charges a separate
normal fee for the use of the videotape player.
Can the Victoria Hotel be enjoined for infringing copyrights and held liable for damages?
Would it make any difference if Victoria Hotel does not charge any fee for the use of the
videotape?

SUGGESTED ANSWER:

Yes. Victoria Hotel has no right to use such video tapes in its hotel business without the consent
of the creator/owner of the copyright.
No. The use if the videotapes is for business and not merely for home consumption.

COMMERCIAL LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: PREFERENTIAL LIEN

QUESTION NO. 8

Gigi obtained a loan from JOJO Corporation, payable in installments. Gigi executed a chattel
mortgage in favor of JOJO whereby she transferred in favor of JOJO, its successors and assigns,
all her title, rights xxx to a vessel of which GIGI is the absolute owner. The chattel mortgage
was registered with the Philippine Coast Guard pursuant to PD No. 1521. Gigi defaulted and had
a total accountability of P3 M. But JOJO could not foreclose the mortgage on the vessel because
it sank during a typhoon.
Meanwhile, Lutang Corporation which rendered salvage for refloating the vessel sued Gigi.
Whose lien should be given preference, that of JOJ or of Lutang?

SUGGESTED ANSWER:

Lutang Corporations lien should be given preference. The lien of JOJO by virtue of a loan on
bottomry was extinguished when the vessel sank. Under such loan on bottomry JOJO acted not
only as creditor but also as insurer. JOJOs right to recover the amount of the loan is predicated
on the safe arrival of the vessel at the port of destination. The right was lost when the vessel
sank.

COMMERCIAL LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: SECRECY OF BANK DEPOSITS

QUESTION NO. 9:

Miguel, a special customs agent is charged before the Ombudman with having acquired property
out of proportion to his salary, in violation of the Anti-Graft and Corrupt Practices Act. The
Ombudsman issued a subpoena duces tecum to the Banco de Cinco commanding its
representative to furnish the Ombudsman records of transactions by or in the name of Miguel, his
wife and children. A second subpoena was issued expanding the first by including the production
of records of friends of Miguel in said bank and in all its branches and extension offices,
specifically naming them.
Miguel moved to quash the subpoenas arguing that they violate the Law on Secrecy of Bank
Deposits. In addition, he contends that the subpoenas are in the nature of fishing expedition or
general warrants and are constitutionally impermissible with respect to private individuals who
are not under investigation.
Is Miguels contention tenable?

SUGGESTED ANSWER:

No. Miguels contention is not tenable. The inquiry into illegally acquired property extends to
cases where such property is concealed by being held by or recorded in the name of other
persons. To sustain Miguels theory and restrict the inquiry only to property held by or in the
name of the government who illegally acquire property an easy means of evading prosecution.
All they have to do would be to simply place the property in the name of persons other than their
spouses and children.

COMMERCIAL LAW 1994 BAR QUESTIONS

LUBAY, ANGELA A.
TOPIC: INSURANCE- RIGHT TO RESCIND

QUESTION NO. 10:

On September 23, 1990, Tan took a life insurance policy from Philam. The policy was issued on
November 6, 1990. He died on April 26, 1992 of hepatoma. The insurance company denied the
beneficiaries claim and rescinded the policy by reason of alleged misrepresentation and
concealment of material facts made by Tan in his application. It returned the premiums paid.
The beneficiaries contend that the company had no right to rescind the contract as rescission
must be done during the lifetime of the insured within 2 years and prior to the commencement
of the action.
Is the contention of the beneficiaries tenable?

SUGGESTED ANSWER:

No. The incontestability clause does not apply. The insured died within less than 2 years from the
issuance of the policy on September 23, 1990. The insured died on April 26, 1992, or less than 2
years from September 23, 1990.
The right of the insurer to rescind is only lost if the beneficiary has commenced an action on the
policy. There is no such action in this case.