COMMERCIAL AND TAXATION LAWS BAR QUESTIONS 2026

1.                 Enrique purchased a subdivision unit from Everstone Realty Corporation. He fully paid the purchase price after entering into a loan as well as executing a mortgage over the same unit with Money Bank. Thereafter, Money Bank assigned the loan and mortgage over the unit to Vault Bank, whose President was Jan. However, Everstone Realty Corporation, Money Bank, and Vault Bank were all dissolved. Inasmuch as the title over the same unit has not been released in favor of Enrique despite full payment of the purchase price, Enrique sued Jan for the release of the title over the unit and damages. Will the action prosper? Explain.

 

2.                 I&U Corp. is a holding company engaged in diverse businesses, including the distribution of petroleum products, with assets in the Philippines worth at least PHP 10 billion. In June 2025, I&U Corp. entered into a Share Purchase Agreement for the purchase of all the shares of stock in KJ BVI, a corporation established under the laws of British Virgin Islands, which has an interest in KJ Holding Company. KJ Holding Company in turn owns two domestic companies involved in shipping and logistics, which have combined assets in the Philippines with a value of at least PHP 6 billion. I&U Corp. fully paid the purchase price for the subject shares and assumed control of KJ BVI.

 

The general counsel of I&U Corp. issued a legal opinion in June 2026 that the acquisition of all the shares of stock in KJ BVI is valid. The general counsel argued that the acquisition is valid since the directors and shareholders of I&U Corp. and KJ BVI have duly consented to the acquisition and that the acquisition is not likely to result in a lessening of competition within the Philippine market because there are no existing horizontal overlaps or vertical relations that exist between the parties. Is the transaction valid? Explain.

 

3.                 Forever Young Corporation (FYC) and Africa Solutions, Inc. (ASI) entered into a Share Swap Agreement. Pursuant to this agreement, the directors and shareholders representing at least 2/3 of the outstanding capital stock of ASI voted for the decrease of its authorized capital stock, as appearing in the Articles of Incorporation. The Securities and Exchange Commission (SEC) approved the reduction.  

 

However, some shareholders of ASI questioned the decrease and argued that the SEC erred when it did not afford said shareholders notice and hearing and when it approved the reduction even without the approval of all of ASI’s shareholders. Did the SEC err? Explain. 

 

4.                 St. Charbel’s Foundation (Foundation) is a non-stock corporation organized in accordance with Philippine laws, comprising of five voting members and trustees. Two of them are Filipino priests, one is a Filipino lawyer residing in the United States, and the remaining two are Nigerian missionaries residing in the Philippines. The Filipino priests are the president and corporate secretary of the Foundation.

 

The Foundation agreed to establish an incorporated partnership with Hayes and Ryan, who are American citizens. Pursuant to said agreement, the Foundation, Hayes, and Ryan established a stock corporation under Philippine laws named Pio, Inc. The primary purpose of Pio, Inc. is to sell low-cost housing units to the marginalized sectors of society. The Foundation owns and controls 60% of the outstanding capital stock of Pio, Inc., while the remaining 40% is registered in the names of Hayes and Ryan.  

 

Pio, Inc. bought a parcel of land in Payatas, Quezon City, where the socialized housing project shall be implemented. Is the purchase by Pio, Inc. of the parcel of land an ultra vires act? Explain.

 

5.                 Stela contributed PHP 4 million, while Barbie and Choco contributed PHP 1 million each for their partnership. Zia is an industrial partner and did not contribute any capital. The group agreed on the following: (a) their partnership equities shall be 1/2 for Stela and the remaining 1/2 shall be shared equally by Barbie, Choco, and Zia; and (b) Barbie and Zia are exempt from any share in the liabilities and the losses. Unfortunately, the partnership went bankrupt and lost all its assets. The creditors, Glen and Froilan, secured a judgment against the partnership and the partners in the amount of PHP 3 million. Should Barbie and Zia be held liable to Glen and Froilan? Explain. 

 

6.                 SakayNa, Inc., a corporation engaged in pre-arranged transportation services for a fee using an online-enabled platform, connects passengers with drivers who use their own vehicles to transport them. Sarah, a passenger, was connected by SakayNa, Inc. to Manny. On the way to their destination, they were involved in an accident, and Sarah suffered serious injuries. Sarah sued SakayNa, Inc. for breach of contract of carriage for being a common carrier. Is SakayNa, Inc. liable for breach of contract of carriage as a common carrier? Explain.

 

7.                 Vanessa and Carlo, who have been together since 2015, agreed to marry sometime in 2020. On January 26, 2017, Vanessa took out an insurance policy on the life of Carlo, with Longlife Insurance Company. In the insurance application, Vanessa misrepresented that Carlo was in perfect health, although she was fully aware that he had asthma. On March 21, 2019, or more than two years after Vanessa took out the policy, Carlo figured in a vehicular accident and perished. A few days after Carlo was buried, Vanessa filed an insurance claim with Longlife Insurance Company. Should Longlife Insurance Company pay Vanessa? Explain.

 

8.                 After 15 years of marriage, Cocoy and Cacai filed a Petition for Legal Separation. The court granted their Petition. Three months after the decree of legal separation, Cocoy insured the life of Cacai. If Cacai dies, can Cocoy recover from the insurance company? Explain.

 

9.                 In a criminal case for plunder pending before the Sandiganbayan, the Special

Prosecution Panel filed a Request for the Issuance of Subpoena Duces Tecum directing the president of Money Bank or his authorized representative to produce Trust Account No. 123, together with (a) account opening documents; (b) confirmation advice; (c) various manager’s checks; (d) trust agreement; and (e) ledger, all belonging to Luz, who was neither charged nor an accused in the case.  

 

 Luz opposed the issuance of the subpoena and moved to quash the same claiming that the trust account is covered under the Secrecy of Bank Deposits Law and does not fall under any of the exceptions stated therein. She further argued that any information about her trust account that was obtained illegally is inadmissible as evidence. Are the contentions of Luz tenable? Explain.

 

10.             Francheska deposited in her current account with Money Bank the amount of PHP 400,000.00 everyday, from Monday to Friday, or a total of PHP 2 million in five banking days. Money Bank reported the deposit transactions of Francheska as suspicious transactions to the Anti-Money Laundering Council (AMLC). Upon receiving the report, the AMLC ordered Money Bank to freeze Francheska’s account because the source of funds was doubtful or suspicious. After receiving such order, Money Bank immediately froze the account of Francheska. Is Money Bank correct in freezing Francheska’s account? Explain.

 

11.             Dynamite Communications, Inc. (Dynamite) sells mobile phone applications. Its website also permits a prospective consumer to listen to a 20-second portion of a song by clicking the “pre-listening function” before downloading the ringback tone. PINOYSCAP, an association of copyright owners of musical works who grants licenses to their works, demanded Dynamite to secure the necessary performance licenses and pay the appropriate royalties since some of the ringback tones are part of their repertoire of copyrighted works. Dynamite did not secure the licenses and refused to pay royalties and asserted that the “pre-listening function” of its website does not constitute public performance. Does the use of sample ringtones in the “pre-listening function” on Dynamite’s website constitute public performance? Explain. 

 

12.             Spring Corp. manufactures dairy products using the trademark Top Tip Dairy Products. Top Tip New Zealand Ltd. is a New Zealand corporation with a licensed Philippine branch office. It produces cigarettes using its registered trademark “TOP TIP” which mark is registered with the Philippine Intellectual Property Office (IPO) since 2005 but marketed in the Philippines since 2000. Top Tip Dairy Products of Spring Corp. has been in use since 1999 but registered as a trademark in 2007.  

 

Top Tip New Zealand Ltd. sued Spring Corp. for unfair competition and claimed that Spring Corp. used the Top Tip trademark on its dairy products to ride on the popularity and established reputation of the former’s Top Tip trademark for cigarettes. Top Tip New Zealand maintains that this causes confusion, deception, and mistake on the purchasing public. On the other hand, Spring Corp. averred that its dairy products were totally unrelated to Top Tip cigarettes for which the trademark was registered with the IPO. It insisted that it never attempted to pass off their dairy products as being the same as Top Tip cigarettes. Is Spring Corp. liable for unfair competition? Explain.

 

13.             Grand Hotel Corp. encountered financial difficulties and incurred cash flow problems. Even though it still had more assets than liabilities, it filed a Petition for Corporate Rehabilitation with Prayer for the Issuance of a Stay Order before the Regional Trial Court (RTC), as it foresaw the impossibility of meeting its maturing obligations to its creditors when they fall due. Its creditors were several banks, with Banko Savings, Inc. being its major creditor. In its proposed rehabilitation plan, Grand Hotel Corp. sought the restructuring of all its outstanding loans, submitting that the interest payments on the same be pegged at a uniform escalating rate of 7% per annum for five years. Banko Savings opposed the Petition and insisted on a 10% per annum interest rate.  

 

The RTC appointed a Receiver who prepared and recommended a rehabilitation plan. The RTC approved Grand Hotel’s rehabilitation plan as recommended by the Receiver, finding the same to be feasible, realistic, and practical since it is based on Grand Hotel’s ability to pay and the creditors’ perceived cost of money.  

 

Banko Savings argues that the approved rehabilitation plan did not give due regard to its interests as a secured creditor and despite it being a majority creditor in view of the imposition of a fixed interest rate and the extended loan repayment period. Is the RTC correct in approving the rehabilitation plan? Explain.

 

14.             The corporate secretary of Super Solutions Corp. circulated the Minutes of the Special Meeting of the Board (Minutes) which contained the approved resolutions. He used the software “Contractsign Professional” to generate the signatures of the directors who attended the meeting. Contractsign Professional sent emails to the directors of Solutions Corp. with the minutes to be signed by them using electronic signatures added from a stored copy of their signature or generated automatically by the software.  

 

Mr. Firma, a director, followed the instructions of the software, including verification of his signature, and filled in his electronic signature on the Minutes. Contractsign Professional then provided Mr. Firma a certificate of completion, which included the date and time of signing, as well as the IP address of Mr. Firma. A week later, however, Mr. Firma denied signing the Minutes and maintained that his electronic signature was not valid as he needed to affix his original wet ink signature by hand. Mr. Firma then questioned the authenticity of the Minutes. Is Mr. Firma correct? Explain.  

 

15.             ChenYang Electric Distribution Company, a corporation organized and existing under the laws of China, wants to incorporate a corporation in the

Philippines that will engage in the business of distribution of electricity in Mindanao. ChenYang claims that it can own such corporation up to 100% because it is not a public utility. Is ChenYang correct? Explain.

 

16.             The Philippine Amusement and Gaming Corporation (PAGCOR) issued its

Philippine Offshore Gaming Operators (POGO) Rules and Regulations (Rules). Under these Rules, a POGO may be given an Offshore Gaming License either Philippine-based operators or offshore-based operators. 

 

Offshore-based operators are corporations organized in any foreign country which must engage the services of PAGCOR-accredited local gaming agents and/or service providers for its offshore gaming operations within the Philippines. In the case of these offshore-based operators, the placing of bets must occur outside the Philippines; the players must not be Filipino citizens, or within the Philippines; and the payment of the prize must also occur outside of the Philippines.

 

The Bureau of Internal Revenue (BIR) issued a Revenue Memorandum Circular (RMC) entitled "Taxation of Taxpayers Engaged in Philippine Offshore Gaming Operations," which recognized that online activity is sufficient to constitute doing business in the Philippines, and clarified that offshore-based POGOs are also subject to the regular corporate income tax or to the 5% preferential tax rate under the PAGCOR charter, whichever is applicable.  

 

Johann, the CEO of Worldwide Wealth Gaming Corporation (WWGC), a PAGCOR-licensed offshore gaming operator, argues that the BIR RMC violated the fundamental principle of situs of taxation under Philippine laws, and that companies like WWGC are only liable to pay taxes on income received from sources within the Philippines. He also maintains that its offshore operator income was not derived from sources within the Philippines since 100% of its operations are located abroad. Is Johann correct? Explain.

   

17.          Paolo entered into a Contract to Sell with Suga Land, Inc. (Suga Land) for the purchase of a three-bedroom penthouse located in Rockwell, Makati. Under the Contract to Sell, Paolo agreed to pay Suga Land an initial downpayment of PHP 1 million and 29 subsequent installments of PHP 1 million per month.  

 

After paying the initial downpayment and 14 monthly installments to Suga Land, Paolo and his spouse encountered marital difficulties that led to their temporary separation. Paolo decided to assign his rights under the Contract to Sell to Andres for a total consideration of PHP 15 million via a Deed of Assignment of Rights with Assumption of Liability and gave 50% of the PHP 15 million proceeds to his wife.

 

 Upon presentation of a notarized Deed of Assignment of Rights with Assumption of Liability to Suga Land, Andres was informed that a 6% capital gains tax must first be paid by Paolo to the Bureau of Internal Revenue (BIR) before Suga Land can recognize the assignment and record Andres as the new buyer in its system database. Should Paolo pay the 6% capital gains tax to the BIR? Explain.

 

18.          The City of Makati assessed and collected 1% tax based on preceding year’s gross sales from all business establishments selling liquor, wine, spirits, and beer pursuant to Section 15 (Tax on Wholesalers, Distributors, or Dealers) or Section 17 (Tax on Retailers) pursuant to the new Makati Revenue Code. At the same time, the

City of Makati imposed a business tax pursuant to Section 21 of the new Makati Revenue Code as a condition for the renewal of business licenses for the year 2026. Section 21 of the new Makati Revenue Code stated:

 

“Section 21. Tax on Business Subject to the Excise, Value-Added or Percentage Taxes under the NIRC - On any of the following businesses and articles of commerce subject to the excise, value-added or percentage taxes under the National Internal Revenue Code, hereinafter referred to as NIRC, as amended, a tax of 50% of 1% per annum on the gross sales or receipts of the preceding calendar year is hereby imposed:

 

A) On [a] person who sells goods and services in the course of trade or businesses; x x x PROVIDED, that all registered businesses in the City of Makati already paying the aforementioned tax shall be exempted from payment thereof.”

 

On January 5, 2026, Platinum Grocery, Inc. (Platinum) paid the 1% tax as a retailer under Section 17 of the new Makati Revenue Code. To secure its 2026 business permit renewal, Platinum reluctantly paid under protest the assessed business tax under Section 21 of the new Makati Revenue Code. Platinum was advised by the Business Permit and Licensing Office that it can file a protest or refund pursuant to the relevant provisions of the Local Government Code. Is the assessment and collection of business tax under Section 21 of the new Makati Revenue Code valid? Explain.

 

19.          Ramel was assessed by the Bureau of Internal Revenue (BIR) Pasig for deficiency income taxes of PHP 300 million, inclusive of penalties amounting to PHP 100 million. In filing his protest requesting for reinvestigation, Ramel raised, among others, that the Formal Assessment Notice recently issued by the BIR was null and void as the previous examiner handling the said tax audit was already reassigned to BIR Taguig and the current replacement examiner was not included in the Letter of Authority issued by the BIR last year. Two weeks ago, the BIR Regional Director denied the said protest letter. One week ago, the BIR Regional Director issued a writ of garnishment against all of Ramel’s bank accounts.  

 

Ramel, through counsel, then filed a Petition for Review with an Urgent Motion to Suspend Collection of Tax with the Court of Tax Appeals (CTA) Division. The CTA Division then issued a Resolution suspending the collection of tax provided that Ramel files a cash bond amounting to PHP 200 million or surety bond equivalent to PHP 300 million pursuant to Section 11 of the CTA Law, which provides:

 

“No appeal taken to the CTA from the decision of the Commissioner of Internal Revenue . . .  shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his     tax     liability        as         provided      by      existing law: Provided, however, . . . the Court at any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than double the amount with the Court.”  

 

 Was the CTA Division correct in requiring a cash or surety bond from Ramel? Explain.

 

20.          Renoer Housing, Inc. (RHI) constructed a ten-unit apartment beside Maharlika University. The management of RHI wishes to rent out each apartment unit for PHP 20,000.00 per month. Maharlika University wanted to rent 10 units from January 1, 2027 to December 31, 2027 for an aggregate rental of PHP 200,000.00 per month. Are the rentals subject to 12% value added tax? Explain.