2017 (Mercantile Law) Bar Exam Questions: Question 3

[Answer/discuss the question below, or see 2017 bar exam Mercantile Law Instructions; Also check the other 2017 Mercantile Law Questions:124567891011, and 12; See also 2017 Bar Exam: Information, Discussions, Tips, Questions and Results]

-III-

A.

Data Realty, Inc. (ORI) was engaged in realty development. The family of Matteo owned 100°/o of the capital stock of ORI. Matteo was also the President and Chairman of the Board of Directors. Other members of Matteo’s family held the major positions in ORI. Because of a nasty takeover fight with D&E Realty Co., Inc. (D&E), another realty developer, for the control of a smaller realty company with vast landholdings, ORI and D&E engaged in an expensive litigation that eventually led to a money judgment being rendered in favor of D&E.

Meantime, ORI, facing inability to pay its liabilities as they fall due but still holding substantial assets, filed a petition for voluntary rehabilitation. Trying to beat the consequences of rehabilitation proceedings, D&E moved in the trial court for the issuance of a writ of execution. The trial court also happened to be the rehabilitation court. The writ of execution was issued.

Serving the writ of execution, Merto, the court sheriff who had just passed his Credit Transactions subject in law school, garnished Matteo’s bank accounts, and levied his real properties, including his house and lot in Makati.

Are the garnishment and levy of Matteo’s assets lawful and proper? Explain your answer. (4%)

B.

Sid used to be the majority stockholder and President of Excellent Corporation (Excellent). When Meridian Co., Inc. (Meridian), a local conglomerate, took over control and ownership of Excellent, it brought along its team of officers. Sid thus became a minority stockholder and a minority member of the Board of Directors. Excellent, being the leading beverage manufacturer in the country, became the monopoly when Meridian’s own beverage business was merged with Excellent’s, thereby making Excellent virtually the only beverage manufacturer in the country.

Left out and ignored by the management, Sid became a fiscalizer of sorts, questioning during the Board meetings the direction being pursued by Excellent’s officers.

Ultimately, Sid demanded the inspection of the books and other corporate records of Excellent. The management refused to comply, saying that his right as a minority stockholder has been much reduced.

State under what conditions may Sid properly assert his right to inspect the books and other corporate records of Excellent. Explain your answer. (3%)

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