DAY 3 (AM) Mercantile Law Flashcards
I. Claude, the registered stockholder of 1 000 shares in ABC Corp., pledged the shares to Conrad by endorsement in blank of the covering stock certificates and, execution of a Deed of Assignment of Shares of Stock, intended as collateral for a loan of Php 1.0 Million that was also supported by a separate promissory note.
I. (1) Under these facts, is there a valid pledge of the shares of stock to Conrad?
(A) No, because shares of stock are intangible personal properties whose possession cannot be delivered and, hence, cannot be the subject of a pledge.
(B) No, because the pledge of shares of stock requires double registration with the Register of Deeds of the principal place of business of the corporation and of the residence of the pledgor.
(C) Yes, because endorsement and delivery of the certificates of stock is equivalent to the transfer of possession of the covered shares to the pledgee.
(D) Yes, because the execution of the Deed of Assignment of Shares of Stock is equivalent to a lawful pledge of the shares of stock.
(D) Yes, because the execution of the Deed of Assignment of Shares of Stock is equivalent to a lawful pledge of the shares of stock.
(Lopez v. Court of Appeals, G.R. No. L-33157, June 29, 1982)
I. Claude, the registered stockholder of 1 000 shares in ABC Corp., pledged the shares to Conrad by endorsement in blank of the covering stock certificates and, execution of a Deed of Assignment of Shares of Stock, intended as collateral for a loan of Php 1.0 Million that was also supported by a separate promissory note.
I. (2) After Claude defaulted on the loan, Conrad sought to have the shares registered in his name in the books of the corporation. If you are the Corporate Secretary of ABC Corporation, would you register the shares in the name of Conrad without any written instruction from Claude?
(A) Yes, since the endorsement and delivery of the certificates of stock executed by Claude constitute the legal authority to cancel the shares in his name and to place them in Conrad’s name.
(B) Yes, since the execution of the Deed of Assignment by Claude would constitute the legal authority to cancel the shares in his name and place them in Conrad’s name.
(C) No, because corporate officers can only take direct instructions from the registered owners on the proper disposition of shares registered in their names.
(D) No, because the corporation has a primary lien on the shares covering the unpaid subscription.
None of the answers is correct. The pledge must be foreclosed (Article 2112, New Civil Code of the Philippines). Conrad cannot just appropriate the shares of stock (Article 2088, New Civil Code of the Philippines).
[Note: (D) could have been the correct answer if the facts stated that there are unpaid subscriptions because under Section 63 of the Corporation Code, the corporation may refuse the transfer if it holds unpaid claim on the subscribed shares (See China Banking Corp. v. CA and Valle Verde Country Club, G.R. No. 117604, March 26, 1997)].
II. A foreign delegation of businessmen and investment bankers called on your law firm to discuss the possibilities of investing in various projects in the Philippines, and wanted your thoughts on certain issues regarding foreign investments in the Philippines.
II. (1)The delegation has been told about the Foreign Investments Act of 1991, as amended (FIA ‘91), and they asked what exactly is the law’s essential thrust regarding foreign investments in Philippine business and industries.
You replied that FIA ‘91 essentially reflects __________.
(A) the “Filipino First Policy”
(B) the “Foreign Investments Positive Lists” concept
(C) the “Foreign Investments Negative Lists” concept
(D) the “Control Test” concept
(E) all of the above
(C) the “Foreign Investments Negative Lists” concept
(Section 7 of the Foreign Investments Act)
II. A foreign delegation of businessmen and investment bankers called on your law firm to discuss the possibilities of investing in various projects in the Philippines, and wanted your thoughts on certain issues regarding foreign investments in the Philippines.
II. (2) The delegation asked: “Aside from Filipino citizens, what entities would fall under the definition of “Philippine National” under FIA ‘91?”
You replied that the definition of “Philippine national” under FIA ‘91 covers __________. (1%)
(A) domestic partnerships wholly composed of Filipino citizens
(B) domestic corporations 60% of whose capital stock, outstanding and entitled to vote, are owned and held by Filipino citizens
(C) foreign corporations considered as doing business in the Philippines under the Corporation Code, 100% of whose capital stock, outstanding and entitled to vote, are wholly-owned by Filipino citizens
(D) all of the above, because the law considers the juridical personality, whether domestic or foreign, as a mere medium; the test of nationality is on the individuals who control the medium
(E) none of the above, because the term Philippine national can only cover individuals and not juridical entities
(D) All of the above, because the law considers the juridical personality, whether domestic or foreign, as a mere medium; the test of nationality is on the individuals who control the medium
(Section 3(a) of the Foreign Investments Act)
II. A foreign delegation of businessmen and investment bankers called on your law firm to discuss the possibilities of investing in various projects in the Philippines, and wanted your thoughts on certain issues regarding foreign investments in the Philippines.
II. (3) The delegation heard that foreigners can invest up to 100% of the equity in “export oriented enterprises” and you were asked exactly what the term covers.
You replied that an “export oriented enterprise” under FIA ‘91 is an enterprise that __________.
(A) only engages in the export of goods and services, and does not sell goods or services to the domestic market
(B) exports consistently at least 40% of its goods or services, and sells at least 60% of the rest to the domestic market
(C) exports consistently at least 60% of the goods or services produced, and sells at least 40% of the rest to the domestic market
(D) exports consistently at least 60% of its goods or services produced, and can sell goods or services to the domestic market
(E) none of the above
(E) none of the above
(Section 3(e) of the Foreign Investments Act)
II. A foreign delegation of businessmen and investment bankers called on your law firm to discuss the possibilities of investing in various projects in the Philippines, and wanted your thoughts on certain issues regarding foreign investments in the Philippines.
II. (4) As a last question and by way of a concrete example, a delegation member finally inquired - which of the following corporations or businesses in the Philippines may it invest in and up to what extent?
(A) A lifestyle magazine publication corporation, up to 40% equity
(B) An advertising corporation, up to 100% equity
(C) A commercial bank, up to 60o/o equity
(D) A jeepney manufacturing corporation, up to 100% equity
(E) A real estate development corporation, up to 60% equity
(D) A jeepney manufacturing corporation, up to 100% equity
(Section 7 of Foreign Investments Act)
III. Dennis subscribed to 10,000 shares of XYZ Corporation with a par value of P100 per share. However, he paid only 25% of the subscription or Php 250,000.00. No call has been made on the unpaid subscription.
How many shares is Dennis entitled to vote at the annual meeting of the stockholders of XYZ?
(A) 10,000 shares
(B) 2,500 shares
(C) 100 shares
(D) 0 shares
(E) None of the above
(A) 10,000 shares
(Sections 24 and 71 of the Corporation Code)
IV. ABC Corp. issued redeemable shares. Under the terms of the issuance, the shares shall be redeemed at the end of 10 years from date of issuance, at par value plus a premium of 10%.
Choose the correct statement relating to these redeemable shares.
(A) ABC Corp. would need unrestricted retained earnings to be able tore deem the shares.
(B) Corporations are not allowed to issue redeemable shares; thus, the issuance by ABC Corp. is ultra vires.
(C) Holders of redeemable shares enjoy a preference over creditors.
(D) ABC Corp. may redeem the shares at the end of 10 years without need for unrestricted retained earnings provided that, after the redemption, there are sufficient assets to cover its debts.
(E) All of the above are incorrect.
(D) ABC Corp. may redeem the shares at the end of 10 years without need for unrestricted retained earnings provided that, after the redemption, there are sufficient assets to cover its debts.
(Section 8 of Corporation Code; Republic Planters Bank v. Agana, G.R. No. 51765, March 3, 1997)
V. Arnold, representing himself as an agent of Brian for the sale of Brian’s car, approached Dennis who appeared interested in buying the car. At Arnold’s prodding, Dennis issued a crossed check payable to Brian for Php 25,000.00 on the understanding that the check would only be shown to Brian as evidence of Dennis’ good faith and interest in buying the car. Instead, Arnold used the check to pay for the medical expenses of his wife in Brian’s clinic after Brian, a doctor, treated her.
Is Brian a holder in due course (HIDC)?
(A) Yes, Brian is a HIDC because he was the payee of the check and he received it for services rendered.
(B) Yes, Brian is a HIDC because he did not need to go behind the check that was payable to him.
(C) No, Brian is not a HIDC because Dennis issued the check only as evidence of good faith and interest in buying the car.
(D) No, Brian is not a HIDC because Brian should have been placed on notice: the check was crossed in his favor and Arnold was not the drawer.
(E) No, Brian is not a HIDC because the requisite consideration to Dennis was not present.
(D) No, Brian is not a HIDC because Brian should have been placed on notice: the check was crossed in his favor and Arnold was not the drawer.
(Vicente R. de Ocampo & Company v. Gatchalian, G.R. No. L-15126, November 3, 1961)
VI. Gawsengsit Corp. is a corporation incorporated in Singapore. It invested in Bumblebee Corp., a Philippine corporation, by acquiring 30% of its shares. As a result, Gawsengsit Corp. nominated 30% of the directors of Bumblebee Corp., all of whom are Singaporeans and officers of Gawsengsit Corp.
Choose the correct statement relating to Gawsengsit Corp.
(A) Gawsengsit Corp. is doing business in the Philippines and requires alicense from the Securities and Exchange Commission (SEC).
(B) Gawsengsit Corp. is not doing business in the Philippines by its mere investment in a Philippine corporation and does not need a license from the SEC.
(C) Gawsengsit Corp. has to appoint a resident agent in the Philippines.
(D) Gawsengsit Corp. cannot elect directors in Bumblebee Corp.
(E) All the above choices are incorrect.
(D) Gawsengsit Corp. cannot elect directors in Bumblebee Corp.
(Sections 36(7) and 62(2) of the Corporation Code; Section 52 of the General Banking Law)
VII. The BIR assessed ABC Corp. for deficiency income tax for taxable year2010 in the amount of Php 26,731,208.00, inclusive of surcharge and penalties.
The BIR can __________.
(A) run after the directors and officers of ABC Corp. to collect the deficiency tax and their liability will be solidary
(B) run after the stockholders of ABC Corp. and their liability will be joint
(C) run after the stockholders of ABC Corp. and their liability will be solidary
(D) run after the unpaid subscriptions still due to ABC Corp., if any
(E) none of the above choices is correct
(D) run after the unpaid subscriptions still due to ABC Corp., if any
(Halley v. Printwell, G.R. No. 157549, May 30, 2011)
VIII. Anton imported perfumes from Taiwan and these were released to him by the bank under a trust receipt. While the perfumes were in Anton’s warehouse, thieves broke in and stole all of them.
Who will shoulder the loss of the stolen perfumes?
(A) The loss of the perfumes will be borne by the bank in whose behalf the perfumes were held in trust.
(B) Anton will bear the loss.
(C) The exporter can hold both the bank and Anton liable for the loss.
(D) The exporter from whom Anton bought the perfumes will bear the loss.
(E) No one bears the loss for an unforeseen event.
(B) Anton will bear the loss.
(Section 10 of the Trust Receipts Law; Rosario Textile Mills Corporation v. Home Bankers Savings and Trust Company, G.R. No. 137232, June 29, 2005)
IX. A bank may acquire real property __________.
(A) by purchase at a public sale of properties levied to satisfy tax delinquencies
(B) by purchase from a real estate corporation in the ordinary course of the bank’s business
(C) through dacion en pago in satisfaction of a debt in favor of the bank
(D) in exchange for the purchase of shares of stocks of the bank
(E) All of the above.
(F) None of the above.
(B) by purchase from a real estate corporation in the ordinary course of the bank’s business
(C) through dacion en pago in satisfaction of a debt in favor of the bank
(D) in exchange for the purchase of shares of stocks of the bank
(Sections 36(7) and 62(2) of the Corporation Code; Section 52 of the General Banking Law)
X. Under the Anti-Money Laundering Act, a depositor’s bank account may be frozen __________.
(A) by the bank when the account is the subject of a suspicious or covered transaction report
(B) by the Anti-Money Laundering Council (AMLC) when the account belongs to a person already convicted of money laundering
(C) by the Regional Trial Court, upon ex parte motion by the AMLC, in a criminal prosecution for money laundering pending before it
(D) by the Court of Appeals motu proprio in an appeal from a judgment of conviction of a criminal charge for money laundering
(E) in none of the above
(E) in none of the above
(Section 10 of the Anti-Money Laundering Act)
XI. Unknown to the other four proponents, Enrico (who had been given the task of attending to the Articles of Incorporation of the proposed corporation, Auto Mo, Ayos Ko) misappropriated the filing fees and never filed the Articles of Incorporation with the Securities and Exchange Commission (SEC). Instead, he prepared and presented to the proposed incorporators a falsified SEC certificate approving the Articles. Relying on the falsified SEC certificate, the latter began assuming and discharging corporate powers.
Auto Mo, Ayos Ko is a __________.
(A) de jure corporation
(B) de facto corporation
(C) corporation by estoppel
(D) general partnership
(E) none of the above
(C) corporation by estoppel
[Note: The last sentence of the given problem is unclear as to whether the term “latter” refers to Enrico or to the incorporators. As such, it is necessary to qualify the answer depending on the meaning given to the term “latter”.
If the term “latter” refers to Enrico, the correct answer is E (Sections 20 and 21 of the Corporation Code)]
