SYLLABUS FOR THE 2022 BAR EXAMINATIONS

MERCANTILE LAW

I. INSURANCE (P.D. No. 162, as amended by R.A. No. 10607)

A. Basic concepts
 Uberrimae Fidae Contracts
o One of perfected good faith not for the insured alone; Utmost
good faith
 Elements:
o Existence of an insurable interest
o Risk of loss
o Assumption of risks
o Scheme to distribute losses
o Payment of premiums
 Mere submission of the application without the corresponding
approval of the policy does not result to the perfection of the contract
of insurance.
 Delivery is not necessary for perfection.
 Mere delay in acceptance of the insurance application will not result in
a binding contract. (Eternal gardens case: fixing the date of effectivity)
Case: applicant died before he received the acceptance of application. No perfected contract of
insurance. Family can demand return of the premium paid.

1. What may be insured

2. Insurable interest
 Life Insurance – life and health of himself, spouse and of children;
depends wholly or in part of education or support, or whom he has a
pecuniary interest; person under a legal obligation to him for the
payment of money or respecting property or services; any person upon
whose life any estate or interest vested in him depends.
o Test is whether the person is interested in the preservation of
the insured life despite the insurance.
o Friendship (jowa) alone is not the insurable interest
contemplated in life insurance.
o Decree of legal separation does not remove the insurable
interest of the spouse over the other.

 Insurable Interest in Property is any interest therein, or liability in

respect thereof, and it may consist in:
o An existing interest
o An inchoate interest founded on an existing interest
o Expectancy coupled with an existing interest

o Test is if he derives pecuniary benefit or advantage from its

preservation or would suffer pecuniary loss, damage or
prejudice by its destruction whether he has or has no title in, or
lien upon, or possession of the property.
o Existence of insurable interest is a matter of public policy.
Hence, principle of estoppel cannot be invoked

3. Double insurance and over insurance

4. No fault, suicide, and incontestability clauses

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 B. Perfection of the insurance contract
 Perfected the moment there is meeting of the minds with respect to
object and cause or consideration: Cognition Theory.

C. Rights and obligations of parties

D. Rescission of insurance contracts

II. TRANSPORTATION LAW

A. Common carriers
1. Concept
2. Common carrier vs. private carrier
3. Diligence required
B. Obligations and liabilities
1. Vigilance over goods
2. Safety of passengers
C. Defenses available to a common carrier
1. Proof of negligence
2. Due diligence in the selection and supervision of
employees
3. Fortuitous event
4. Contributory negligence
5. Doctrine of last clear chance
D. Extent of liability
1. Recoverable damages
2. Stipulations limiting liability
3. Limitations under the Warsaw Convention

III. CORPORATION LAW (Provisions of B.P. Blg. 68, as amended by

R.A. No. 11232)

A. General principles
1. Nationality of corporations
a. Control Test – engaged in business, reserved for Filipinos,
in whole or in part, nationalized activities;
b. Grandfather rule
c. Place of incorporation – nationality is determined by the
state of incorporation. Regardless of the nationality of the
SH; not engaged in economic reserve, for filipino

Case: Roy vs Herbosa

Capital is limited on refers to shares with voting rights. Do not include, non-voting shares. 60% of the voting
shares must be owned by the Filipino.
Control – corporate setting – if they have the ability and right to elect directors

Gamboa Vs Teves:
60-40, mirrored

Roy vs herbosa: SRC compliant with Consti? Sc there is nothing: enough 60% of outstanding capital stock
are owned by Filipinos

Need not be all the time 60-40 in all types of share (Common shares, voting shares, non-voting shares), what
is material is the 60% are filipinos.
Illustration: 100k – common (100%) fil; 100k – voting (60k fil, 40 foreign); 100k-non voting (80k fore)

Do not include non-voting. 200k (common and voting); 100% fil + 60 fil owned= 160k/200k = more than
60%, thus, fil owned)

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What is the rationale, why 60-40 need not reflect in all the shares?
Preferred shares can be hybrid debts-equity. Holders are preferred shares are considered
stockholders of the corp – like holders of common shares – but they are also creditors as they are
preferred in dividends, and corp has surplus profit has to pay the obligation on the pref shares.
They can be given as preference as dividends but it only applies if the corp is in the position to
declare their dividends/surplus profit.

2. Doctrine of separate juridical personality

 Emanates from the attribute of a corporation that it is an artificial
being in that the corporation has a legal personality separate and
distinct from the stockholders, directors, and officers composing it.
Case:
Pacific Tree House? Vs CA:
Parent company is distinct and separate from its subsidiary company. Liabilities cannot be enforced to the
parent company.

Zambarano vs Phl Carpet Manufacturing: when parent company closes, is the subsidiary company required
to absorb the employees of the formers? No. They are separate legal companies. The subsidiary comp was set
up long before the termination of employment such that it could not be said that the subsidiary was set up to
evade the parent company’s liabilities. This is true even if the parent company transferred its assets to the
subsidiary because settled is the rile that generally, where one corporation sells or otherwise transfers all its
assets to another corporation for value, the latter is not, by the fact alone, liable for the debts and liabilities of
the transferor.

Gr: Buyer corp is not liable to the obligations of the seller comp.

Nisce vs Equitable: No basis to enjoin the foreclosure of mortgage. When the investor has a claim against a
subsidiary of another corp which subsequently became the acquired corp in a merger, the claim against the
subsidiary cannot be the subject of legal set-off against the loan obtained by the investor against the surviving
corp because the fact that a corp owns almost all of the stocks of another corp, taken alone, is not sufficient to
justify their being treated as one entity.
You cannot disregard the separate legal personality.

Maricalum vs Florentino: A subsidiary company’s separate corporate personality must be disregarded only
when the evidence shows that such separate personality was being used by its parent or holding corp to
perpetrate a fraud of evade an existing obligation. Concomitantly, employees of a corp have no cause of action
for labor-related claims against another unaffiliated corp, which does not exercise control over them.
 Legal Consequence of Doctrine ff separate legal entity
o Properties registered in the name of the corporation are owned
by its entity separate and distinct from its stockholders.
 GR, directors, officer, or agents of a corp cannot be held personally
liable for the obligation incurred by the corporation, unless it can be
shown that such DOA is guilty of gross negligence of bad faith or
committed an unlawful act, and that the same was clearly and
convincingly proven.
Case: Symex Security vs rivera 2019
Officer cannot be held liable to the obligation of the corp, unless he acted in bad faith or gross negligence.
Nothing in the acts of the chairman and president can be gleamed that they acted in bad faith. Corp is guilty
of illegal dismissal, but not the pres and chair.

 Moral Damages; GR corp cannot claim, however, they can when they are victim of
defamation. Besmirched Reputation.
 Tortious Act: Meralco case: Moral damages may also be awarded in case of tortious act
act against the corp. Negligence of bank ee where checks were dishonored when in fact
there is sufficient fund, corp may claim damages.
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 3. Doctrine of piercing the corporate veil
- The Court disregards the existence of the corporate entity so a claimant can reach the assets
of a corporate insider (DSO).
Concurrence of 3 elements to pierce the corporate veil:
 Control – Complete Domination of finances, policy, and business practices
 Breach of Duty - Such control must have been used by defendant to commit fraud or wrong
 Control and Breach of Duty must have proximately caused the injury or unjust loss
complained of

Case: Rosales vs New ANJH: Mere ownership by a single stockholder of all or nearly all of the
capital stock of the corp does not. Y itself justify piercing the corp veil. Nonetheless, in this case,
other circumstances show that the buyer of the assets of the proprietor employer is none other that
his alter ego.

Does the doctrine apply to nonstock non-profit corp and natural persons?
 Yes. SC held that a person can be held personally liable under the alter ego theory if the
evidence shows that the person controlling the corp did in facts exercise control even
though there was no stock ownership. The equitable character of the remedy permits a
court to look ot the substance of the organization and its decision is not controlled by the
statutory framework under which the corp was formed and operated.

Reverse Piercing of Corp Veil

 Plaintiff seeks to reach the assets of the corp to satisfy the claims against the corp insider.
Corporation is liable for the debt of shareholders or members.

Application
 Defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of
an existing obligation
 Fraud cases or when corp entity is used to justify a wrong, protect fraud, or defend a crime
 Alter ego cases

B. De facto corporations versus corporations by estoppel

 Classification of corpo according to legal status
 De jure: fulfilled all the requirements mandated by law and can successfully resist a suit by the
state to challenge its existence.
 De facto: organized with colorable compliance with the requirements of a valid law. Its
existence cannot be inquired into collaterally. Direct attack by the State through a quo warranto
proceeding
o Filing of Art of Incorp and issuance of Cert of Incorp are essential for the existence of a de
facto corp
o Stockholder of DFC are not liable as general partners. Liable only to the extent of their
subscription to the corp.
o
 By estoppel: exists when two or more persons assume to act as a corp knowing it to be without
authority to do so. They are liable as general partners for all debts, liabilities, and damages
incurred or arising as a result thereof: provided, that when such ostensible corp is sued on any
transaction entered by it as a corporation or any tort committed by it as such, it shall not be
allowed to use its lack of corporate personality as a defense. Anyone who assumes an obligation
to an ostensible corp as such cannot resist performance thereof on the ground that there was in
fact no corp.
 Lack of legal personality is not a defense
 Who cannot invoke estopple? Does not apply against a person who
takes no part except to subscribe for stock in the proposed corp whc
 By prescription: one which has exercised corporate powers for an indefinite period without
interference on the part of the sovereign power (roman catholic)
 Elements:
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 o Existence of a valid law under which it may be incorporated
o Attempt in good faith to incorporate; and
o Actual use or exercise in good faith of corporate powers

C. Corporate Powers
 Doctrine of Apparent Authority – is determined by the acts of the
principal and not by the acts of the agent. As applied to corporations,
the doctrine provides that “a corp is estopped from denying the officer’s
authority if it knowingly permits such officer to act within the scope of an
apparent authority, and it holds him out to the public as possessing the power
to do those acts. (Agro food case 2021)
Case: Terp vs BFS: although an officer or agent acts without or in excess of his actual authority, if he
acts within the scope of an apparent authority with which the corp has clothed him, by holding him
our or permitting him to appear as having such authority, the corp is bound in favor of person who
dealt with him in good faith.

Ph Race Horse: while in the absence of a charter or bylaw provision to the contrary the president is
presumed to have authority; the questioned act should still be within the domain of the general
objectives of the company’s business and within the scope of his or her usual duties. DAA will not
apply if the transaction is not related to the purposes of the corp.

1. How powers are exercised

a. Ultra vires doctrine – whether acts are in furtherance of business
 3 types –
 UVA illegal per se cannot be ratified.

b. Trust fund doctrine – provides that subscriptions to the capital stock of a corporation
constitute a fund to which the creditors have a right to look for the satisfaction of their claims
- TFD is not limited to the stockholder’s subscriptions. It encompasses not only the capital
stock but also other property and assets generally regarded in equity as a trust fund for the
payment of corporate debts.
- Yong vs Tiu: Rescission of a subscription agreement is not one of the instances when the
distribution of capital assets and property of the corp is allowed. The TFD provides that
subscriptions to the capital stock of a corp constitute a fund to which the creditors have a
right to look for the satisfaction of their claims.
- May the corporate creditors enforce payment of the unpaid subscription? YES. To make out
a prima facie case in a suit against stockholders of an insolvent corporation to compel them
to contribute to the payment of its debts by making good the balances upon the
subscriptions, it is only necessary to establish that the stockholders have not in good faith
paid the par value of the stocks of the corp. (Halley vs Printwell)not material
- PNB vs Sawmill: SC said that the assignee in an insolvency can maintain an action upon
any unpaid stock subscription in order to realize assets for the payment of its debts. In case
of insolvency, all unpaid stock subscription became payable on demand and are
immediately recoverable. The implication is that the creditor cannot collect the unpaid
subscription unless there is an insolvency proceeding involving the corp.
- Caguioa:Enano-Bote vs Alvarez: The Court recognize teo instances when the creditor is
allowed to maintain an action upon any unpaid subscriptions based on the TFD: (1) where
the debtor corporation released the subscriber to its capital stock from the obligation of
paying for their shares, in whole or in part, without a valuable consideration, or
fraudulently, to the prejudice of creditors; and (2) where the debtor corp is insolvent or has
been dissolved without providing for the payment of its creditors. In this case, no filing of
insolvency nor condonation of unpaid subscription

D. Board of directors and trustees

- The BOD or Trustees shall exercise the corporate powers, conduct all business, and control
all properties of the corp. Corp acts must be approved by the BOD otherwise, such acts are
generally not binding on the corp.
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 1. Basic principles
a. Doctrine of centralized management
b. Business judgment rule – Courts are barred from intruding
into the business judgements of the corp when the same are
made in good faith. LAso, STH cannot interfer with the
board in conduction the business affairs of the corp.
XPN is if it contrary to law

2. Tenure and qualifications of directors or trustees

 The moment the director loses his share, he is not entitled to continue
his term of one year. He must have full ownership of the shares, legal
and beneficial title.
 Bylaws may enlarge the share of ownership requirement provided that
it is not intended to deprive minority representation; under the code,
addtl quali of D or T may be prescribed
 If 15 needed, 11 only, all of them are automatically. Highest number of
votes. Pwede din less, as long as may quorum, as long as it can transact
business

3. Election and removal of directors or trustees

 Emergency Quorum – no election is held? Meeting should be
adjourned, outgoing directors shall serve in a hold-over capacity.

4. Duties, responsibilities and liabilities for unlawful acts

 A Director, officer, or trustee may be held personally liable in the
following cases:
a. Knowingly voting for or assenting to patently unlawful acts
of the corp
b. Gross negligence or bad faith in directing the affairs of the
corp
c. Acquiring any personal or pecuniary interest in conflict
with his duty as director or trustee or officer resulting in
damage to the corp
d. He consents to the issuance of watered stocks or who,
having knowledge thereof, does not forthwith file with the
corp secretary his written objection thereto;
e. He agrees to hold himself personally liable with the corp
f. He is made, by a specific provision of law, to personally
answer for his corporate action

E. Stockholders and members

1. Rights and obligations of stockholders and members
a. Doctrine of equality of shares – shares have the same rights
and privileges unless otherwise classified by the articles of
incorporation.
2. Participation in management
a. Proxy
 A stockholder disqualified to vote under the RCC or the bylaws of the
corp may be appointed proxy as long as he has the legal capacity.
 If the sth is a natural person, the proxy will be in the form of a board
reso authorizing another person to exercise the sth’s voting rights in
the corp.
 In writing, signed, and filed by the sth or member; valid only for the
meeting.
b. Voting trust – an agreement where 1 or more stockholders
of a stock corp confer upon a trustee/s the right to vote and
other rights pertaining to the shares for a period generally
not exceeding five years at any time.

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 c. Cases when stockholders’ action is required
i. By a majority vote
ii. By a two-thirds vote
iii. By cumulative voting
3. Proprietary rights – economic benefits that accrue to his shares
a. Right to dividends
b. Right to inspect
 Defenses against persons demanding examination and inspection of
corp records?
o Improper use of infor
o Acting in bad faith
o Person demanding has no authority to inspect or is prohibited
o Purpose of inspection is not germane to his interest as sth
o Rights not exercised during reasonable hours on a business day
o Subj matter of inspect is protected info under laws
c. Pre-emptive right
d. Right of first refusal
4. Remedial rights
a. Appraisal Right
b. Pre-emptive right –
c. Right to inspect
d. Right to copy of the financial statements of the company
e. Right to file a derivative suit

5. Intra-corporate disputes (individual vs. representative vs.

derivative suits)
F. Capital structure
1. Shares of stock
a. Nature of shares of stock
b. Consideration for shares of stock
c. Watered stock
d. Situs of the shares of stock
e. Classes of shares of stock
2. Certificate of stock
a. Nature of the certificate
b. Uncertificated shares
c. Negotiability; requirements for valid transfer of stocks
d. Issuance
e. Lost or destroyed certificates
3. Disposition and encumbrance of shares
a. Sale of shares
b. Allowable restrictions on the sale of shares

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 c. Requisites of a valid transfer
d. Involuntary dealings
G. Dissolution and liquidation
1. Modes of dissolution
a. Voluntary and involuntary dissolution
2. Methods of liquidation
H. Other corporations
1. Close corporations
2. Non-stock corporations
3. Foreign corporations
a. What constitutes “doing business”
b. Necessity of a license to do business
c. Requisites for issuance of a license
d. Resident agent
e. Personality to sue and suability
4. One-person corporations
I. Mergers and consolidations
1. Concept
2. Effects and limitations

IV. INTELLECTUAL PROPERTY CODE (R.A. No. 8293; exclude implementing

rules and regulations)

A. Patents
1. Patentable vs. non-patentable inventions
2. Ownership of a patent
3. Grounds for cancellation of a patent
4. Patent infringement
B. Trademarks
1. Marks vs. collective marks vs. trade names
2. Acquisition of ownership
a. Concept of actual use
b. Effect of registration
3. Well-known marks
4. Rights conferred by registration
5. Cancellation of registration
6. Trademark infringement
7. Unfair competition
C. Copyrights
1. Copyrightable works
2. Non-copyrightable works
3. Rights conferred by copyright
4. Ownership of a copyright
5. Limitations on copyright
6. Doctrine of fair use
7. Copyright infringement

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 V. ANTI-MONEY LAUNDERING ACT (R.A. No. 9160, as amended)

A. Covered institutions and their obligations

B. Covered and suspicious transactions
C. Safe harbor provision
D. When is money laundering committed (including predicate crimes)
E. Authority to inquire into bank deposits
F. Freezing and forfeiture

VI. ELECTRONIC COMMERCE ACT (R.A. No. 8792)

 Principles:
Functional Equivalence –
Technology Neutral Principle – it will not favor one tech over the other. But it shall fall under Elect
docu
Media Neutral –
Non- Discrimination – ecomm does not say that people shall prefer computer-based docu; di
naman sinasabi na wag na mag paper-based docu

A. Legal recognition of electronic data messages, documents, and signatures

 E-signature:
o A method is used to identify the party sought to be bound
o The method is reliable and appropriate for the purpose for
which the ED was generated or communicated
o It is necessary to have the executed or provided the electronic
document
o The other party is authorized and able to verify the e-sig
 SOURCE is importante to identify if it is a ED/EDM. If made in
computer, ECmm; if from a paper and scanned/faxed – not ecom

B. Presumption relating to electronic signatures

 E-sig is the signature of the person to whom it correlates
 Esign was affixed with the intention of signing or approving the ED

C. Admissibility and evidential weight of electronic data message or

electronic document
 For evidentiary purposes, an ED or EDm shall be the FUNCTIONAL
EQUIVALENT of a written document under existing laws

D. Obligation of confidentiality

VII. FINANCIAL REHABILITATION, INSOLVENCY, LIQUIDATION and

SUSPENSION OF PAYMENTS (R.A. No. 10142, FR Rules [A.M. No. 12-12-11-SC],
and FLSP Rules [A.M. No.15-04-06-SC])

A. Basic concepts
1. Rehabilitation
2. Insolvent
3. Liquidation
4. Suspension of payments
B. Modes of rehabilitation
1. Court-supervised rehabilitation
a. Voluntary vs. involuntary
b. Commencement order (including stay order)
c. Rehabilitation receiver and management committee
d. Determination of claims
e. Rehabilitation plan

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 f. Creditor approval and confirmation
g. Failure of rehabilitation
2. Pre-negotiated rehabilitation
a. How initiated
b. Period and effect of approval
3. Out-of-Court or Informal Restructuring Agreement or
Rehabilitation Plan
a. Minimum requirements
b. Standstill period
c. Cram down effect
C. Liquidation
1. Voluntary liquidation vs. involuntary liquidation vs.
conversion

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 2. Procedure
a. Liquidation order; effects
3. Determination of claims
D. Suspension of payments; suspension of payment order

- NOTHING FOLLOWS -

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