FINAL EXAMINATIONS

MAY !4, 2021

INSTRUCTIONS: Answer the following questions in accordance with BAR

examination instructions. Thru your legible handwriting or word processing, give logical and
grammatical presentation of the correct answers, finishing the exam in 3 hours after start, and
uploading the same in your classwork. Those with connectivity problems may have up to 9:00
pm to upload. Researching still for the answers is doing an assignment, not taking a test.
I
Mr. A entered into a lease contract with Mr. B involving one of the latter’s warehouses.
One day, Mr. B, due to financial difficulties, obtained a loan from Mr. A and secured the loan
obligation, by leasing a warehouse in favor of Mr. A. In addition, Mr. B executed a promissory
note in favor of A, wherein prior demand was waived by him.  When Mr. B defaulted on his loan
obligation. Mr. A simply stopped paying rentals due to Mr. B on the ground that legal
compensation had already set in up to the concurrent amount. Furthermore, since there was still a
balance due on the promissory note, Mr. A foreclosed the real estate mortgage over Mr. B’s
property without any prior demand furnished to Mr. B. Aggrieved, Mr. B opposed the
foreclosure due to the lack of prior demand, contending that the waiver of prior demand was
stipulated in the promissory note and not in the mortgage instrument. Mr. B likewise argued that
when Mr. A invoked legal compensation between the unpaid rentals and the loan arrearages,
it amounted to a novation that resulted in the extinguishment of the loan contract between them.
As such, the real estate mortgage, being a mere accessory contract to the principal loan, was
necessarily extinguished. 
(a) May Mr. A validly claim legal compensation? Explain. (4%) 
(b) May Mr. A validly foreclose on the real estate mortgage even without prior demand to Mr.
B? Explain. (3% )
c) Is Mr. B’s claim of novation correct? Explain, (3%) 

II
In 2015, O, the original registered owner of a 300-square meter property covered by
Original Certificate of Title (OCT) No. 0-1234 appointed F as its caretaker. A year after, while
was abroad, F stole the duplicate copy of the said OCT. F then forged a Deed of Absolute Sale
and made it appear that O sold the property to him. Consequently. F was able to have OCT No.
0-1234 cancelled and in lieu thereof a new title. Transfer Certificate of Title (TCT) No. T-4321.
was issued in his name. 
A few months after, F offered the property for sale to X. After conducting the required
due diligence to verify the title of F and finding no occupant in the property during ocular
inspection, X signed the contract of sale, and thereupon, fully paid the purchase price. A few
days later, X was able to obtain TCT No. T 5678 under his name. 
When O discovered F’s fraudulent acts upon his return in 2017 O immediately filed a
complaint for reconveyance against F and X, principally pointing out that F merely forged his
signature in the Deed of Absolute Sale purportedly made in F’s favor and thus, F could not have
validly transferred the title thereof to X. Consequently, he sought the return of the subject
property to him. 
(a) Will the prayer of O for the return of the subject property prosper? Explain. (5%)
(b) Assuming that could no longer recover the subject property in view of X’s registration
thereof in his name, may a claim against the Assurance Fund pursuant to the provisions
of the Property Registration Decree be instituted? Explain. (5%) 
 III
C Corp. entered into a contract with D, Inc. for the construction of the latter’s production
warehouse. In consideration thereof, D, Inc. was obliged to pay C Corp. the amount of
P50,000,000.00 within a period of one (1) month from the time of the project’s completion. To
secure the payment of the said sum, D, Inc. entered into a surety agreement with S Company: 
After more than a month from the completion date of the project, C Corp. remained
unpaid. Claiming that it was suffering from serious financial reverses, D, Inc. asked C Corp. for
an extension of three (3) months to pay the P50,000,000.00 it still owed, to which C Corp.
agreed. However, after more than three (3) months, D, Inc. still refused to pay. Hence, C Corp,
proceeded to collect the above sum from the surety, S Company.
For its part, S Company refused the claim and raised the defense that the extension of
time granted by C Corp. to D. Inc. without its consent released it from liability 
(a) Will the defense of S Company against the claim hold water? Explain. (5%) 
(b) Assuming that S Company instead refused the claim on the ground that Corp. has yet to
exhaust D, Inc.’s property to satisfy the claim before proceeding against it, will this
defense prosper? Explain. (5%) 

IV

Mr. P offered to sell his Manila Polo Club shares to Ms. Q for P2.500,000.00. Ms. Q
accepted on the condition that their agreement will not take effect until after one (1) year. Mr. P
then acceded and both of them shook hands. Excited about the prospect of acquiring Mr. P’s
shares, Ms. Q approached the former and offered to pay him an earnest money equivalent to 1%
of the purchase price, which Mr. P accepted. After one (1) year, Ms. Q approached Mr. P seeking
the enforcement of their agreement, for Mr. P to sell his shares to her. Mr. P refused to honor
their agreement, claiming that the same was covered by the Statute of Frauds because it was not
reduced into writing and hence, unenforceable.  Is the position of Mr. P correct? Explain. (10%) 

V
A and B agreed that the latter shall administer and manage A’s hacienda. The contract
stipulates that B shall have the power to contract the services of laborers to work in the fields,
that he can fix their compensation, and that he can make improvements on the property. Was the
contract one of agency, employment, or for a piece of work? Explain why it is one of these and
why it is neither of the other two. 10 pts.

VI
Claimants Valdez, et.al. were able to prove that their predecessors were the applicants for
titling of subject property since 1906 and that their house was borrowed by petitioner Vicar after
its church and convent were destroyed. They never asked for the return of the house, but they
allowed its free use. The adverse claim of the Vicar of Mt. Provinces came only in 1951 when it
declared the lots for taxation purposes, and applied for registration of title in 1963. Against said
application, claimants Valdez, et al filed their opposition. Did the Vicar’s adverse claim and
possession ripen into title by way of acquisitive prescription? 10 pts.,

VII
A and B entered into a contract of loan without providing that it shall earn interest. When
the obligation became due and demandable, can A, the creditor, demand the payment of interest?
What is the effect of Central Bank Circular No. 905, as amended by Central Bank Circular 796
on your answer it is initially based on Art. 1956 , NCC? 10 pts.

VIII
 Mr. R is the registered owner of a parcel of land located in Cebu City covered by
Transfer Certificate of Title (TCT) No. 1234 issued in 1955. Since his acquisition of the lot. Mr.
R and his family had been in continuous, open, and peaceful possession thereof. Mr. R died in
1980, resulting in the land being transferred in the names of his heirs, i.e., A, B. and C, who
became registered owners thereof as per TCT No. 5678. During the entire time, said land had
never been encumbered or disposed, and that its possession always remained with them. 
Sometime in 1999. A, B, and C wanted to build a concrete fence around the parcel of
land, but they were opposed by Mrs. X, who started claiming ownership over the same property
on the strength of a Deed of Absolute Sale purportedly entered into by her with Mr. R during the
time that he was still alive. Aggrieved, A, B, and C intend to file a complaint for quieting of title
against Mrs. X. 
(a) What are the substantive requisites for the action to prosper? Do they obtain in this
case? Explain. (4%) 
(b) Within what period should A, B, and C file the complaint for quieting of title?
Explain, (3%) 
c) Assuming that B and C are residing abroad, may A. without the knowledge of B and ,
file the complaint for quieting of title on behalf of all the heirs? Explain. (3%) 

IX

X and Y are passengers of a bus owned by A. They had a hearted argument over a seat
resulting in a fight between them causing injuries to X and his subsequent death. His heirs filed
an action for damages against the carrier for failure of the latter to transport X with utmost
diligence. Decide. Suppose in the same incident, the could not avoid rubbernecking and as a
result collided with an incoming bus, resulting in deaths and injuries of the passengers of both
busses. What would be the basis of the claims for damages by the relatives of the victiims? 10
pts.

D borrowed P2000 from C. As a security for the loan, D conveyed to C possession of a

parcel of agricultural land, the entitling the deed as “sangla”. Until the termination of the loan
by payment, the creditor enjoys possession of the land and its fruits, but it would be obliged to
pay taxes and make necessary repairs. Suppose the agreement was not in writing, what would
have been the consequence? In this kind of agreement, can the parties stipulate that if the
borrower defaults in the payment of the loan, the creditor can avail extra-judicial foreclosure?
10 pts.

-Nothing follows-