Tariff and Customs Code: Violation of Customs Laws (2004)

The Collector of Customs ordered the seizure and forfeiture of new electronic appliances shipped by TON Corp. from Hongkong for violation of customs laws because they were falsely declared as used office equipment and then undervalued for purposes of customs duties. TON filed a complaint before the MM Regional Trial Court for replevin, alleging that the Customs officials erred in the classification and valuation of its shipment, as well as in the issuance of the warrant of seizure. The Collector moved to dismiss the suit for lack of jurisdiction on the part of the trial court. Should the Collector’s motion be granted or denied? Reason briefly. (5%)

SUGGESTED ANSWER:

The Collector’s motion should be granted. Under Section 602(g) of the Tariff and Customs Code, the Bureau of Customs has exclusive original jurisdiction over seizure and forfeiture cases under the tariff and customs laws.

NOTE: (This question is outside the coverage of the Bar Examinations. It is therefore recommended that whatever answer made by the candidate should be given full credit.)

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Power of the State: Regulating of Domestic Trade (2004)

In its exercise of police power and business regulation, the legislature of LVM State passed a law prohibiting aliens from engaging in domestic timber trade. Violators including dummies would, after proper trial, be fined and imprisoned or deported. Mrs. BC, a citizen of LVM but married to ZC, an alien merchant of PNG, filed suit to invalidate the law or exempt from its coverage their timber business.

She contended that the law is, inter alia, gravely oppressive and discriminatory. It violated the Universal Declaration of Human Rights (UDHR) passed in 1948 by the United Nations, of which LVM is a member, she said, as well as the reciprocity provisions of the World Trade Organization (WTO) Agreement of 1994, of which PNG and LVM are parties. Aside from denying them equal protection, according to BC, the law will also deprive her family their livelihood without due process nor just compensation. Assuming that the legal system of LVM is similar to ours, would Mrs. BC’s contention be tenable or not? Reason briefly. (5%)

SUGGESTED ANSWER:

Mrs. BC’s contention is not tenable. First, the UDHR does not purport to limit the right of states (like LVM) to regulate domestic trade.  Second, the WTO Agreement involves international trade between states or governments, not domestic trade in timber or other commodities. Third, nationality is an accepted norm for making classifications that do not run counter to the equal protection of law clause of the Constitution. Fourth, there is no impairment of due process here because violators of the law will be punished only after “proper trial.” Fifth, the issue of “just compensation” does not arise, because the property of Mrs. BC is not being expropriated. On the contrary, as a citizen of LVM, Mrs. BC is freely allowed to engage in domestic timber trade in LVM.

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Political Law; WTO (1999)

Government plans to impose an additional duty on imported sugar on top of the current tariff rate. The intent is to ensure that the landed cost of sugar shall not be lower than P800 per bag. This is the price at which locally produced sugar would be sold in order to enable sugar producers to realize reasonable profits. Without this additional duty, the current low price of sugar in the world market will surely pull the domestic price to levels lower than the cost to producer domestic sugar – a situation that could spell the demise of the Phil sugar industry. a) Discuss the validity of this proposal to impose an additional levy on imported sugar (3%) b) Would the proposal be consistent with the tenets of the World Trade Organization (WTO)? (3%)

Recommendation: Since the subject matter of these two (2) questions is not included within the scope of the Bar Questions in Mercantile Law, it is suggested that whatever answer is given by the examinee, or the lack of answer should be given full credit. If the examinee gives a good answer, he should be given additional credit.

SUGGESTED ANSWER:

a) The proposal to impose an additional duty on imported sugar on top of the current tariff rate is valid, not being prohibited by the Constitution. It would enable producers to realize reasonable profits, and would allow the sugar industry of the country to survive.

b) No. The proposal would not be consistent with the tenets of the WTO which call for the liberalization of trade. However, such proposal may be acceptable within the allowable period under the WTO for adjustment of the local industry

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Government Deregulation vs. Privatization of an Industry (2004)

What is the difference between government deregulation and the privatization of an industry? Explain briefly. (2%)

SUGGESTED ANSWER:

Government deregulation is the relaxation or removal of regulatory constraints on firms or individuals, with a view to promoting competition and market-oriented approaches toward pricing, output, entry, and other related economic decisions.

Privatization of an industry refers to the transfer of ownership and control by the government of assets, firms and operations in an industry to private investors.

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Four ACID Problems of Philippine Judiciary (2006)

In several policy addresses extensively covered by media since his appointment on December 21, 2005, Chief Justice Artemio V. Panganiban vowed to leave a judiciary characterized by “four Ins” and to focus in solving the “four ACID” problems that corrode the administration of justice in our country. Explain this “four Ins” and “four ACID” problems.

SUGGESTED ANSWER:

Upon assuming his office, Chief Justice Panganiban vowed to lead a judiciary characterized by the “four Ins:” Integrity, Independence, Industry and Intelligence; one that is morally courageous to resist influence, interference, indifference and insolence. He envisions a judiciary that is impervious to the plague of undue influence brought about by kinship, relationship, friendship and fellowship. He calls on the judiciary to battle the “Four ACID” problems corroding our justice system:

(1) limited access to justice by the poor;

(2) corruption;

(3) incompetence; and

(4) delay in the delivery of quality judgments. The judicial department should discharge its functions with transparency, accountability and dignity.

(NOTA BENE: It is respectfully suggested that all Bar Candidates receive a 2.5% bonus for the above question regardless of the answer)

2. The Chief Justice also said that the judiciary must “safeguard the liberty” and “nurture the prosperity” of our people. Explain this philosophy. Cite Decisions of the Supreme Court implementing each of these twin beacons of the Chief Justice. (2.5%)

SUGGESTED ANSWER:

The Chief Justice’s philosophy “Safeguarding Liberty, Nurturing Prosperity” embodies the Supreme Court’s approach in decision-making in the exercise of its constitutional power of judicial review which provides: In cases involving liberty, the scales of justice should weight heavily against government and in favor of the poor, the oppressed, the marginalized, the dispossessed and the weak; and that laws and action that restrict fundamental rights come to the court “with a heavy presumption against their constitutional validity. On the other hand, as a general rule, the Supreme Court must adopt a deferential or respectful attitude towards actions taken by the governmental agencies that have primary responsibility for the economic development of the country; and only when an act has been clearly made or executed with grave abuse of discretion does the Court get involved in policy issues.

Decisions implementing the “safeguarding of liberty” in-clude those involving the constitutionality of Presidential Proclamation No. 1017 (David v. Arroyo, G.R. No. 171390, May 3, 2006); the validity of Calibrated Pre-emptive Response (CPR) and B.P. Big. 880 or the Public Assembly Act (Bayan v. Ermita, G.R. No. 169848, April 25, 2006); and the legality of Executive Order No. 464 and the President’s exercise of Execu-tive Privilege (Senate of the Philippines v. Ermita, G.R. No. 169777, April 20, 2006).

On the other hand, cases that relate to “nurturing the prosperity” of the people include the question the constitutionality of the Mining Law (La Bugal-B’Laan v. Ramos, G.R. No. 127882, Dec. 1, 2004) and the WTO Agreement (Tanada v. Angara, G.R. 118295, May 2,1997).

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Energy Regulatory Commission: Jurisdiction & Power (2004)

CG, acustomer, sued MERALCO in the MM Regional Trial Court to disclose the basis of the computation of the purchased power adjustment (PPA). The trial court ruled it had no jurisdiction over the case because, as contended by the defendant, the customer not only demanded a breakdown of MERALCO’s bill with respect to PPA but questioned as well the imposition of the PPA, a matter to be decided by the Board of Energy, the regulatory agency which should also have jurisdiction over the instant suit. Is the trial court’s ruling correct or not? Reason briefly. (5%)

SUGGESTED ANSWER:

The trial court’s ruling is correct. As held in Manila Electric Company v. Court of Appeals, 271SCRA 417 (1997), the Board of Energy had the power to regulate and fix power rates to be charged by franchised electric utilities like MERALCO. In fact pursuant to Executive Order No. 478 (April 17, 1998), this power has been transferred to the Energy Regulatory Board (now the Energy Regulatory Commission). Under Section 43(u) of the Electric Power Industry Reform Act of 2001, the Energy Regulatory Commission has original and exclusive jurisdiction over all cases contesting power rates.

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Usury Law (199_)

Borrower obtained a loan from a money lending enterprise for which he issued a promissory note undertaking to pay at the end of a period of 30 days the principal plus interest at the rate 5.5% per month plus 2% per annum as service charge.

On maturity of the loan, borrower failed to pay the principal debt as well as the stipulated interest and service charge. Hence, he was sued.

1 How would you dispose of the issues raised by the borrower?

2 That the stipulated interest rate is excessive and unconscionable? (3%)

3 Is the interest rate usurious? (3%)

Recommendation: Since the subject matter of these two (2) questions is not included within the scope of the Bar Questions in Mercantile Law, it is suggested that whatever answer is given by the examinee, or the lack of answer should be given full credit. If the examinee gives a good answer, he should be given additional credit.

SUGGESTED ANSWER:

a. The rate of interest of 5.5% per month is excessive and unconscionable.

b. The interest cannot be considered usurious. The Usury Law has been suspended in its application, and the interest rates are made “floating.”

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Trans-Shipment; Bill of Lading; Binding Contract (1993)

JRT Inc entered into a contract with C Co of Japan to export anahaw fans valued at $23,000. As payment thereof, a letter of credit was issued to JRT by the buyer. The letter of credit required the issuance of an on-board bill of lading and prohibited the transshipment. The President of JRT then contracted a shipping agent to ship the anahaw fans through O Containers Lines, specifying the requirements of the letter of credit. However, the bill of lading issued by the shipping lines bore the notation “received for shipment” and contained an entry indicating transshipment in Hongkong. The President of JRT personally received and signed the bill of lading and despite the entries, he delivered the corresponding check in payment of the freight. The shipment was delivered at the port of discharge but the buyer refused to accept the anahaw fans because there was no on-board bill of lading, and there was transshipment since the goods were transferred in Hongkong from MV Pacific, the feeder vessel, to MV Oriental, a mother vessel. JRT argued that the same cannot be considered transshipment because both vessels belong to the same shipping company. 1) Was there transshipment? Explain 2) JRT further argued that assuming that there was transshipment, it cannot be deemed to have agreed thereto even if it signed the bill of lading containing such entry because it was made known to the shipping lines from the start that transshipment was prohibited under the letter of credit and that, therefore, it had no intention to allow transshipment of the subject cargo. Is the argument tenable? Reason.

SUGGESTED ANSWER:

1) Yes. Transshipment is the act of taking cargo out of one ship and loading it in another. It is immaterial whether or not the same person, firm, or entity owns the two vessels. (Magellan v CA 201 s 102)

2) No. JRT is bound by the terms of the bill of lading when it accepted the bill of lading with full knowledge of its contents which included transshipment in Hongkong. Acceptance under such circumstances makes the bill of lading a binding contract. (Magellan v Ca 201 s 102)

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Registered Owner; Conclusive Presumption (1990)

Johnny owns a Sarao jeepney. He asked his neighbor Van if he could operate the said jeepney under Van’s certificate of public convenience. Van agreed and, accordingly, Johnny registered his jeepney under Van name. On June 10, 1990, one of the passenger jeepneys operated by Van bumped Tomas. Tomas was injured and in due time, he filed a complaint for damages against Van and his driver for the injuries he suffered. The court rendered judgment in favor of Tomas and ordered Van and his driver, jointly and severally, to pay Tomas actual and moral damages, attorney’s fees, and costs.

The Sheriff levied on the jeepney belonging to Johnny but registered in the name of Van. Johnny filed a 3rd party claim with the Sheriff alleging ownership of the jeepney levied upon and stating that the jeepney was registered in the name of Van merely to enable Johnny to make use of Van’s certificate of public convenience. May the Sheriff proceed with the public auction of Johnny’s jeepney. Discuss with reasons.

SUGGESTED ANSWER:

Yes, the Sheriff may proceed with the auction sale of Johnny’s jeepney. In contemplation of law as regards the public and third persons, the vehicle is considered the property of the registered operator (Santos v Sibug 104 S 520)

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Prior Operator Rule (2003)

Bayan Bus Lines had been operating satisfactorily a bus service over the route Manila to Tarlac and vice versa via the McArthur Highway. With the upgrading of the new North Expressway, Bayan Bus Lines service became seemingly inadequate despite its efforts of improving the same. Pasok Transportation, Inc., now applies for the issuance to it by the Land Transportation Franchising and Regulatory Board of a certificate of public convenience for the same Manila-Tarlac-Manila route. Could Bayan Bus Lines, Inc., invoke the “prior operator” rules against Pasok Transportation, Inc.? Why? (6%)

SUGGESTED ANSWER:

(per Dondee) No, Bayan Bus Lines, Inc., cannot invoke the “prior operator” rules against Pasok Transportation, Inc. because such “Prior or Old Operator Rule” under the Public Service Act only applies as a policy of the law of the Public Service Commission to issue a certificate of public convenience to a second operator when prior operator is rendering sufficient, adequate and satisfactory service, and who in all things and respects is complying with the rule and regulation of the Commission. In the facts of the case at bar, Bayan Bus Lines service became seemingly inadequate despite its efforts of improving the same. Hence, in the interest of providing efficient public transport services, the use of the ‘prior operator’ and the ‘priority of filing’ rules shall is untenable n this case.

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Maritime Commerce; Bareboat (2003)

For the transportation of its cargo from the Port of Manila to the Port of Kobe, Japan, Osawa & Co., chartered “bareboat” M/V Ilog of Karagatan Corporation. M/V Ilog met a sea accident resulting in the loss of the cargo and the death of some of the seamen manning the vessel. Who should bear the loss of the cargo and the death of the seamen? Why? (4%)

SUGGESTED ANSWER:

(per Dondee) Osawa and Co. shall bear the loss because under a demise or bareboat charter, the charterer (Osawa & Co.) mans the vessel with his own people and becomes, in effect, the owner for the voyage or service stipulated, subject to liability for damages caused by negligence.

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Kabit System; Agent of the Registered Owner (2005)

Procopio purchased an Isuzu passenger jeepney from Enteng, a holder of a certificate of public convenience for the operation of public utility vehicle plying the Calamba-Los Baños route. While Procopio continued offering the jeepney for public transport services, he did not have the registration of the vehicle transferred in his name. Neither did he secure for himself a certificate of public convenience for its operation. Thus, per the records of the Land Transportation Franchising and Regulatory Board, Enteng remained its registered owner and operator. One day, while the jeepney was traveling southbound, it collided with a ten-wheeler truck owned by Emmanuel. The driver of the truck admitted responsibility for the accident, explaining that the truck lost its brakes.

Procopio sued Emmanuel for damages, but the latter moved to dismiss the case on the ground that Procopio is not the real party in interest since he is not the registered owner of the jeepney.  Resolve the motion with reasons. (3%)

SUGGESTED ANSWER:

The motion to dismiss should be denied because Procopio, as the real owner of the jeepney, is the real party in interest. Procopio falls under the Kabit system. However, the legal restriction as regards the Kabit system does not apply in this case because the public at large is not deceived nor involved. (Lim v. Court of Appeals, G.R. No. 125817, January 16, 2002, citing Baliwag Transit v. Court of Appeals, G.R. No. 57493, January 7, 1987)

In any event, Procoprio is deemed to be “the agent” of the registered owner. (First Malayan Leasing v. Court of Appeals, G.R. No. 91378, June 9,1992; and “F” Transit Co., Inc. v. NLRC, G.R. Nos, 88195-96, January 27, 1994)

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Kabit System (2005)

Discuss the “kabit system” in land transportation and its legal consequences. (2%)

SUGGESTED ANSWER:

The kabit system is an arrangement where a person granted a certificate of public convenience allows other persons to operate their motor vehicles under his license, for a fee or percentage of their earnings (Lim v. Court of Appeals and Gonzalez, G.R, No. 125817, January 16, 2002, citing Baliwag Trannit v. Court of Appeals, G.R. No. 57493, January 7, 1987) The law enjoining the kabit system aims to identify the person responsible for an accident in order to protect the riding public. The policy has no force when the public at large is neither deceived nor involved.

The law does not penalize the parties to a kabit agreement. But the kabit system is contrary to public policy and therefore void and inexistent. (Art. 1409[1], Civil Code)

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Common vs. Private Carrier; Defenses (2002)

Name two (2) characteristics which differentiate a common carrier from a private carrier. (3%).

SUGGESTED ANSWER:

Two (2) characteristics that differentiate a common carrier from a private carrier are:

1 A common carrier offers its service to the public; a private carrier does not.

2 A common carrier is required to observe extraordinary diligence; a private carrier is not so required.

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Common Carriers; Liability for Loss (1991)

Alejandor Camaling of Alegria, Cebu, is engaged in buying copra, charcoal, firewood, and used bottles and in reselling them in Cebu City. He uses 2 big Isuzu trucks for the purpose; however, he has no certificate of public convenience or franchise to do business as a common carrier. On the return trips to Alegria, he loads his trucks with various merchandise of other merchants in Alegria and the neighboring municipalities of Badian and Ginatilan. He charges them freight rates much lower than the regular rates. In one of the return trips, which left Cebu City at 8:30 p.m. 1 cargo truck was loaded with several boxes of sardines, valued at P100th, belonging to one of his customers, Pedro Rabor. While passing the zigzag road between Carcar and Barili, Cebu, which is midway between Cebu City and Alegria, the truck was hijacked by 3 armed men who took all the boxes of sardines and kidnapped the driver and his helper, releasing them in Cebu City only 2 days later.

Pedro Rabor sought to recover from Alejandro the value of the sardines. The latter contends that he is not liable therefore because he is not a common carrier under the Civil Code and, even granting for the sake of argument that he is, he is not liable for the occurrence of the loss as it was due to a cause beyond his control. If you were the judge, would you sustain the contention of Alejandro?

SUGGESTED ANSWER:

If I were the Judge, I would hold Alejandro as having engaged as a common carrier. A person who offers his services to carry passengers or goods for a fee is a common carrier regardless of whether he has a certificate of public convenience or not, whether it is his main business or incidental to such business, whether it is scheduled or unscheduled service, and whether he offers his services to the general public or to a limited few (De Guzman v CA GR 47822 27Dec1988)

I will however, sustain the contention of Alejandro that he is not liable for the loss of the goods. A common carrier is not an insurer of the cargo. If it can be established that the loss, despite the exercise of extraordinary diligence, could not have been avoided, liability does not ensue against the carrier. The hijacking by 3 armed men of the truck used by Alejandro is one of such cases (De Guzman v CA GR 47822 27Dec1988).

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