G.R. No. 170633 - MCC INDUSTRIAL SALES CORPORATION v.

SSANGYONG CORPORATION

THIRD DIVISION
[G.R. NO. 170633 : October 17, 2007]
MCC INDUSTRIAL SALES CORPORATION, Petitioner, v. SSANGYONG
CORPORATION, Respondents.

DECISION

NACHURA, J.:

Before the Court is a Petition for Review on Certiorari of the Decision1 of the
Court of Appeals in CA-G.R. CV No. 82983 and its Resolution2 denying the
motion for reconsideration thereof.

Petitioner MCC Industrial Sales (MCC), a domestic corporation with office at

Binondo, Manila, is engaged in the business of importing and wholesaling
stainless steel products.3 One of its suppliers is the Ssangyong Corporation
(Ssangyong),4 an international trading company5 with head office in Seoul,
South Korea and regional headquarters in Makati City, Philippines.6 The two
corporations conducted business through telephone calls and facsimile or
telecopy transmissions.7 Ssangyong would send the pro forma invoices
containing the details of the steel product order to MCC; if the latter conforms
thereto, its representative affixes his signature on the faxed copy and sends
it back to Ssangyong, again by fax.8

On April 13, 2000, Ssangyong Manila Office sent, by fax, a letter9 addressed
to Gregory Chan, MCC Manager [also the President10 of Sanyo Seiki Stainless
Steel Corporation], to confirm MCC's and Sanyo Seiki's order of 220 metric
tons (MT) of hot rolled stainless steel under a preferential rate
of US$1,860.00 per MT. Chan, on behalf of the corporations, assented and
affixed his signature on the conforme portion of the letter.11

On April 17, 2000, Ssangyong forwarded to MCC Pro Forma Invoice No. ST2-
POSTSO40112 containing the terms and conditions of the transaction. MCC
sent back by fax to Ssangyong the invoice bearing the conformity
signature13 of Chan. As stated in the pro forma invoice, payment for the
ordered steel products would be made through an irrevocable letter of credit
(L/C) at sight in favor of Ssangyong.14 Following their usual practice, delivery
of the goods was to be made after the L/C had been opened.

In the meantime, because of its confirmed transaction with MCC, Ssangyong

placed the order with its steel manufacturer, Pohang Iron and Steel
Corporation (POSCO), in South Korea15 and paid the same in full.
Because MCC could open only a partial letter of credit, the order for 220MT of
steel was split into two,16 one for 110MT covered by Pro Forma Invoice
No. ST2-POSTS0401-117 and another for 110MT covered by ST2-
POSTS0401-2,18 both dated April 17, 2000.

On June 20, 2000, Ssangyong, through its Manila Office, informed Sanyo Seiki
and Chan, by way of a fax transmittal, that it was ready to ship 193.597MT of
stainless steel from Korea to the Philippines. It requested that the opening of
the L/C be facilitated.19 Chan affixed his signature on the fax transmittal and
returned the same, by fax, to Ssangyong.20

Two days later, on June 22, 2000, Ssangyong Manila Office informed Sanyo
Seiki, thru Chan, that it was able to secure a US$30/MT price adjustment on
the contracted price of US$1,860.00/MT for the 200MT stainless steel, and
that the goods were to be shipped in two tranches, the first 100MT on that
day and the second 100MT not later than June 27, 2000. Ssangyong reiterated
its request for the facilitation of the L/C's opening.21

Ssangyong later, through its Manila Office, sent a letter, on June 26, 2000, to
the Treasury Group of Sanyo Seiki that it was looking forward to receiving the
L/C details and a cable copy thereof that day.22 Ssangyong sent a separate
letter of the same date to Sanyo Seiki requesting for the opening of the L/C
covering payment of the first 100MT not later than June 28, 2000.23 Similar
letters were transmitted by Ssangyong Manila Office on June 27, 2000.24 On
June 28, 2000, Ssangyong sent another facsimile letter to MCC stating that
its principal in Korea was already in a difficult situation25 because of the failure
of Sanyo Seiki and MCC to open the L/C's.

The following day, June 29, 2000, Ssangyong received, by fax, a letter signed
by Chan, requesting an extension of time to open the L/C because MCC's credit
line with the bank had been fully availed of in connection with another
transaction, and MCC was waiting for an additional credit line.26 On the same
date, Ssangyong replied, requesting that it be informed of the date when the
L/C would be opened, preferably at the earliest possible time, since its Steel
Team 2 in Korea was having problems and Ssangyong was incurring
warehousing costs.27 To maintain their good business relationship and to
support MCC in its financial predicament, Ssangyong offered to negotiate with
its steel manufacturer, POSCO, another US$20/MT discount on the price of
the stainless steel ordered. This was intimated in Ssangyong's June 30, 2000
letter to MCC.28 On July 6, 2000, another follow-up letter29 for the opening of
the L/C was sent by Ssangyong to MCC.
However, despite Ssangyong's letters, MCC failed to open a letter of
credit.30 Consequently, on August 15, 2000, Ssangyong, through counsel,
wrote Sanyo Seiki that if the L/C's were not opened, Ssangyong would be
compelled to cancel the contract and hold MCC liable for damages for breach
thereof amounting to US$96,132.18, inclusive of warehouse expenses, related
interests and charges.31

Later, Pro Forma Invoice Nos. ST2-POSTS080-132 and ST2-POSTS080-

233 dated August 16, 2000 were issued by Ssangyong and sent via fax to MCC.
The invoices slightly varied the terms of the earlier pro forma invoices (ST2-
POSTSO401, ST2-POSTS0401-1 and ST2-POSTS0401-2), in that the
quantity was now officially 100MT per invoice and the price was reduced
to US$1,700.00 per MT. As can be gleaned from the photocopies of the said
August 16, 2000 invoices submitted to the court, they both bear the
conformity signature of MCC Manager Chan.

On August 17, 2000, MCC finally opened an L/C with PCIBank for
US$170,000.00 covering payment for 100MT of stainless steel coil under Pro
Forma Invoice No. ST2-POSTS080-2.34 The goods covered by the said
invoice were then shipped to and received by MCC.35

MCC then faxed to Ssangyong a letter dated August 22, 2000 signed by Chan,
requesting for a price adjustment of the order stated in Pro Forma Invoice No.
ST2-POSTS080-1, considering that the prevailing price of steel at that time
was US$1,500.00/MT, and that MCC lost a lot of money due to a recent
strike.36

Ssangyong rejected the request, and, on August 23, 2000, sent a demand
letter37 to Chan for the opening of the second and last L/C of US$170,000.00
with a warning that, if the said L/C was not opened by MCC on August 26,
2000, Ssangyong would be constrained to cancel the contract and hold MCC
liable for US$64,066.99 (representing cost difference, warehousing expenses,
interests and charges as of August 15, 2000) and other damages for breach.
Chan failed to reply.

Exasperated, Ssangyong through counsel wrote a letter to MCC, on September

11, 2000, canceling the sales contract under ST2-POSTS0401-1 /ST2-
POSTS0401-2, and demanding payment of US$97,317.37 representing
losses, warehousing expenses, interests and charges.38
Ssangyong then filed, on November 16, 2001, a civil action for damages due
to breach of contract against defendants MCC, Sanyo Seiki and Gregory Chan
before the Regional Trial Court of Makati City. In its complaint,39 Ssangyong
alleged that defendants breached their contract when they refused to open
the L/C in the amount of US$170,000.00 for the remaining 100MT of steel
under Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2.

After Ssangyong rested its case, defendants filed a Demurrer to

Evidence40 alleging that Ssangyong failed to present the original copies of
the pro forma invoices on which the civil action was based. In an Order dated
April 24, 2003, the court denied the demurrer, ruling that the documentary
evidence presented had already been admitted in the December 16, 2002
Order41 and their admissibility finds support in Republic Act (R.A.) No. 8792,
otherwise known as the Electronic Commerce Act of 2000. Considering that
both testimonial and documentary evidence tended to substantiate the
material allegations in the complaint, Ssangyong's evidence sufficed for
purposes of a prima facie case.42

After trial on the merits, the RTC rendered its Decision43 on March 24, 2004,
in favor of Ssangyong. The trial court ruled that when plaintiff agreed to sell
and defendants agreed to buy the 220MT of steel products for the price of
US$1,860 per MT, the contract was perfected. The subject transaction was
evidenced by Pro Forma Invoice Nos. ST2-POSTS0401 -1 and ST2-
POSTS0401-2, which were later amended only in terms of reduction of
volume as well as the price per MT, following Pro Forma Invoice Nos. ST2-
POSTS080-1 and ST2-POSTS080-2. The RTC, however, excluded Sanyo
Seiki from liability for lack of competent evidence. The fallo of the decision
reads:

WHEREFORE, premises considered, Judgment is hereby rendered ordering

defendants MCC Industrial Sales Corporation and Gregory Chan, to pay
plaintiff, jointly and severally the following:

1) Actual damages of US$93,493.87 representing the outstanding principal

claim plus interest at the rate of 6% per annum from March 30, 2001.

2) Attorney's fees in the sum of P50,000.00 plus P2,000.00 per counsel's

appearance in court, the same being deemed just and equitable considering
that by reason of defendants' breach of their obligation under the subject
contract, plaintiff was constrained to litigate to enforce its rights and recover
for the damages it sustained, and therefore had to engage the services of a
lawyer.

3) Costs of suit.

No award of exemplary damages for lack of sufficient basis.

SO ORDERED.44

On April 22, 2004, MCC and Chan, through their counsel of record, Atty. Eladio
B. Samson, filed their Notice of Appeal.45 On June 8, 2004, the law office of
Castillo Zamora & Poblador entered its appearance as their collaborating
counsel.

In their Appeal Brief filed on March 9, 2005,46 MCC and Chan raised before
the CA the following errors of the RTC:

I. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING THAT

APPELLANTS VIOLATED THEIR CONTRACT WITH APPELLEE

A. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING THAT

APPELLANTS AGREED TO PURCHASE 200 METRIC TONS OF STEEL PRODUCTS
FROM APPELLEE, INSTEAD OF ONLY 100 METRIC TONS.

1. THE HONORABLE COURT A QUO PLAINLY ERRED IN ADMITTING IN

EVIDENCE THE PRO FORMA INVOICES WITH REFERENCE NOS. ST2 -
POSTS0401-1 AND ST2-POSTS0401-2.

II. THE HONORABLE COURT A QUO PLAINLY ERRED IN AWARDING ACTUAL

DAMAGES TO APPELLEE.

III. THE HONORABLE COURT A QUO PLAINLY ERRED IN AWARDING

ATTORNEY'S FEES TO APPELLEE.

IV. THE HONORABLE COURT A QUO PLAINLY ERRED IN FINDING APPELLANT

GREGORY CHAN JOINTLY AND SEVERALLY LIABLE WITH APPELLANT MCC.47

On August 31, 2005, the CA rendered its Decision48 affirming the ruling of the
trial court, but absolving Chan of any liability. The appellate court ruled,
among others, that Pro Forma Invoice Nos. ST2-POSTS0401-1 and ST2-
POSTS0401-2 (Exhibits "E", "E-1" and "F") were admissible in evidence,
although they were mere facsimile printouts of MCC's steel orders.49 The
dispositive portion of the appellate court's decision reads:
WHEREFORE, premises considered, the Court holds:

(1) The award of actual damages, with interest, attorney's fees and costs
ordered by the lower court is hereby AFFIRMED.

(2) Appellant Gregory Chan is hereby ABSOLVED from any liability.

SO ORDERED.50

A copy of the said Decision was received by MCC's and Chan's principal
counsel, Atty. Eladio B. Samson, on September 14, 2005.51 Their collaborating
counsel, Castillo Zamora & Poblador,52 likewise, received a copy of the CA
decision on September 19, 2005.53

On October 4, 2005, Castillo Zamora & Poblador, on behalf of MCC, filed a

motion for reconsideration of the said decision.54 Ssangyong opposed the
motion contending that the decision of the CA had become final and executory
on account of the failure of MCC to file the said motion within the reglementary
period. The appellate court resolved, on November 22, 2005, to deny the
motion on its merits,55 without, however, ruling on the procedural issue
raised.

Aggrieved, MCC filed a Petition for Review on Certiorari 56 before this Court,
imputing the following errors to the Court of Appeals:

THE COURT OF APPEALS DECIDED A LEGAL QUESTION NOT IN ACCORDANCE

WITH JURISPRUDENCE AND SANCTIONED A DEPARTURE FROM THE USUAL
AND ACCEPTED COURSE OF JUDICIAL PROCEEDINGS BY REVERSING
THE COURT A QUO'S DISMISSAL OF THE COMPLAINT IN CIVIL CASE NO. 02-
124 CONSIDERING THAT:

I. THE COURT OF APPEALS ERRED IN SUSTAINING THE ADMISSIBILITY IN

EVIDENCE OF THE PRO-FORMA INVOICES WITH REFERENCE NOS. ST2-
POSTSO401-1 AND ST2-POSTSO401-2, DESPITE THE FACT THAT THE SAME
WERE MERE PHOTOCOPIES OF FACSIMILE PRINTOUTS.

II. THE COURT OF APPEALS FAILED TO APPRECIATE THE OBVIOUS FACT

THAT, EVEN ASSUMING PETITIONER BREACHED THE SUPPOSED CONTRACT,
THE FACT IS THAT PETITIONER FAILED TO PROVE THAT IT SUFFERED ANY
DAMAGES AND THE AMOUNT THEREOF.
III. THE AWARD OF ACTUAL DAMAGES IN THE AMOUNT OF US$93,493.87 IS
SIMPLY UNCONSCIONABLE AND SHOULD HAVE BEEN AT LEAST REDUCED, IF
NOT DELETED BY THE COURT OF APPEALS.57

In its Comment, Ssangyong sought the dismissal of the petition, raising the
following arguments: that the CA decision dated 15 August 2005 is already
final and executory, because MCC's motion for reconsideration was filed
beyond the reglementary period of 15 days from receipt of a copy thereof,
and that, in any case, it was a pro forma motion; that MCC breached the
contract for the purchase of the steel products when it failed to open the
required letter of credit; that the printout copies and/or photocopies of
facsimile or telecopy transmissions were properly admitted by the trial court
because they are considered original documents under R.A. No. 8792; and
that MCC is liable for actual damages and attorney's fees because of its
breach, thus, compelling Ssangyong to litigate.

The principal issues that this Court is called upon to resolve are the following:

I - Whether the CA decision dated 15 August 2005 is already final and

executory;

II - Whether the print-out and/or photocopies of facsimile transmissions are

electronic evidence and admissible as such;

III - Whether there was a perfected contract of sale between MCC and
Ssangyong, and, if in the affirmative, whether MCC breached the said
contract; andcralawlibrary

IV - Whether the award of actual damages and attorney's fees in favor of

Ssangyong is proper and justified.

-I-

It cannot be gainsaid that in Albano v. Court of Appeals,58 we held that receipt

of a copy of the decision by one of several counsels on record is notice to all,
and the period to appeal commences on such date even if the other counsel
has not yet received a copy of the decision. In this case, when Atty. Samson
received a copy of the CA decision on September 14, 2005, MCC had only
fifteen (15) days within which to file a motion for reconsideration conformably
with Section 1, Rule 52 of the Rules of Court, or to file a Petition for Review
on Certiorari in accordance with Section 2, Rule 45. The period should not be
reckoned from September 29, 2005 (when Castillo Zamora & Poblador
received their copy of the decision) because notice to Atty. Samson is deemed
notice to collaborating counsel.

We note, however, from the records of the CA, that it was Castillo Zamora &
Poblador, not Atty. Samson, which filed both MCC's and Chan's Brief and Reply
Brief. Apparently, the arrangement between the two counsels was for the
collaborating, not the principal, counsel to file the appeal brief and subsequent
pleadings in the CA. This explains why it was Castillo Zamora & Poblador which
filed the motion for the reconsideration of the CA decision, and they did so on
October 5, 2005, well within the 15-day period from September 29, 2005,
when they received their copy of the CA decision. This could also be the reason
why the CA did not find it necessary to resolve the question of the timeliness
of petitioner's motion for reconsideration, even as the CA denied the same.

Independent of this consideration though, this Court assiduously reviewed the

records and found that strong concerns of substantial justice warrant the
relaxation of this rule.

In Philippine Ports Authority v. Sargasso Construction and Development

Corporation,59 we ruled that:

In Orata v. Intermediate Appellate Court, we held that where strong

considerations of substantive justice are manifest in the petition, this Court
may relax the strict application of the rules of procedure in the exercise of its
legal jurisdiction. In addition to the basic merits of the main case, such a
petition usually embodies justifying circumstance which warrants our heeding
to the petitioner's cry for justice in spite of the earlier negligence of counsel.
As we held in Obut v. Court of Appeals:

[W]e cannot look with favor on a course of action which would place the
administration of justice in a straight jacket for then the result would be a
poor kind of justice if there would be justice at all. Verily, judicial orders, such
as the one subject of this petition, are issued to be obeyed, nonetheless a
non-compliance is to be dealt with as the circumstances attending the case
may warrant. What should guide judicial action is the principle that a party-
litigant is to be given the fullest opportunity to establish the merits of his
complaint or defense rather than for him to lose life, liberty, honor or property
on technicalities.

The rules of procedure are used only to secure and not override or frustrate
justice. A six-day delay in the perfection of the appeal, as in this case, does
not warrant the outright dismissal of the appeal. In Development Bank of the
Philippines v. Court of Appeals, we gave due course to the petitioner's appeal
despite the late filing of its brief in the appellate court because such appeal
involved public interest. We stated in the said case that the Court may exempt
a particular case from a strict application of the rules of procedure where the
appellant failed to perfect its appeal within the reglementary period, resulting
in the appellate court's failure to obtain jurisdiction over the case. In Republic
v. Imperial, Jr., we also held that there is more leeway to exempt a case from
the strictness of procedural rules when the appellate court has already
obtained jurisdiction over the appealed case. We emphasize that:

[T]he rules of procedure are mere tools intended to facilitate the attainment
of justice, rather than frustrate it. A strict and rigid application of the rules
must always be eschewed when it would subvert the rule's primary objective
of enhancing fair trials and expediting justice. Technicalities should never be
used to defeat the substantive rights of the other party. Every party-litigant
must be afforded the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities.60

Moreover, it should be remembered that the Rules were promulgated to set

guidelines in the orderly administration of justice, not to shackle the hand that
dispenses it. Otherwise, the courts would be consigned to being mere slaves
to technical rules, deprived of their judicial discretion. Technicalities must take
a backseat to substantive rights. After all, it is circumspect leniency in this
respect that will give the parties the fullest opportunity to ventilate the merits
of their respective causes, rather than have them lose life, liberty, honor or
property on sheer technicalities.61

The other technical issue posed by respondent is the alleged pro forma nature
of MCC's motion for reconsideration, ostensibly because it merely restated the
arguments previously raised and passed upon by the CA.

In this connection, suffice it to say that the mere restatement of arguments

in a motion for reconsideration does not per se result in a pro forma motion.
In Security Bank and Trust Company, Inc. v. Cuenca,62 we held that a motion
for reconsideration may not be necessarily pro forma even if it reiterates the
arguments earlier passed upon and rejected by the appellate court. A movant
may raise the same arguments precisely to convince the court that its ruling
was erroneous. Furthermore, the pro forma rule will not apply if the
arguments were not sufficiently passed upon and answered in the decision
sought to be reconsidered.
- II -

The second issue poses a novel question that the Court welcomes. It provides
the occasion for this Court to pronounce a definitive interpretation of the
equally innovative provisions of the Electronic Commerce Act of 2000 (R.A.
No. 8792) vis - Ã -vis the Rules on Electronic Evidence.

Although the parties did not raise the question whether the original facsimile
transmissions are "electronic data messages" or "electronic documents" within
the context of the Electronic Commerce Act (the petitioner merely assails as
inadmissible evidence the photocopies of the said facsimile transmissions), we
deem it appropriate to determine first whether the said fax transmissions are
indeed within the coverage of R.A. No. 8792 before ruling on whether the
photocopies thereof are covered by the law. In any case, this Court has ample
authority to go beyond the pleadings when, in the interest of justice or for the
promotion of public policy, there is a need to make its own findings in order
to support its conclusions.63

Petitioner contends that the photocopies of the pro forma invoices presented
by respondent Ssangyong to prove the perfection of their supposed contract
of sale are inadmissible in evidence and do not fall within the ambit of R.A.
No. 8792, because the law merely admits as the best evidence the original fax
transmittal. On the other hand, respondent posits that, from a reading of the
law and the Rules on Electronic Evidence, the original facsimile transmittal of
the pro forma invoice is admissible in evidence since it is an electronic
document and, therefore, the best evidence under the law and the Rules.
Respondent further claims that the photocopies of these fax transmittals
(specifically ST2-POSTS0401-1 and ST2-POSTS0401-2) are admissible
under the Rules on Evidence because the respondent sufficiently explained the
non-production of the original fax transmittals.

In resolving this issue, the appellate court ruled as follows:

Admissibility of Pro Forma

Invoices; Breach of Contract
by Appellants

Turning first to the appellants' argument against the admissibility of the Pro
Forma Invoices with Reference Nos. ST2-POSTS0401-1 and ST2-POSTS0401-
2 (Exhibits "E", "E-1" and "F", pp. 215-218, Records), appellants argue that
the said documents are inadmissible (sic) being violative of the best evidence
rule.

The argument is untenable.

The copies of the said pro-forma invoices submitted by the appellee are
admissible in evidence, although they are mere electronic facsimile printouts
of appellant's orders. Such facsimile printouts are considered Electronic
Documents under the New Rules on Electronic Evidence, which came into
effect on August 1, 2001. (Rule 2, Section 1 [h], A.M. No. 01-7-01-SC).

"(h) 'Electronic document' refers to information or the representation of

information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which
is received, recorded, transmitted, stored, processed, retrieved or produced
electronically. It includes digitally signed documents and any printout or
output, readable by sight or other means, which accurately reflects the
electronic data message or electronic document. For purposes of these Rules,
the term 'electronic document' may be used interchangeably with 'electronic
data message'.

An electronic document shall be regarded as the equivalent of an original

document under the Best Evidence Rule, as long as it is a printout or output
readable by sight or other means, showing to reflect the data accurately. (Rule
4, Section 1, A.M. No. 01-7-01-SC)

The ruling of the Appellate Court is incorrect. R.A. No. 8792,64 otherwise
known as the Electronic Commerce Act of 2000, considers an electronic data
message or an electronic document as the functional equivalent of a written
document for evidentiary purposes.65 The Rules on Electronic
Evidence66 regards an electronic document as admissible in evidence if it
complies with the rules on admissibility prescribed by the Rules of Court and
related laws, and is authenticated in the manner prescribed by the said
Rules.67 An electronic document is also the equivalent of an original document
under the Best Evidence Rule, if it is a printout or output readable by sight or
other means, shown to reflect the data accurately.68

Thus, to be admissible in evidence as an electronic data message or to be

considered as the functional equivalent of an original document under the Best
Evidence Rule, the writing must foremost be an "electronic data message" or
an "electronic document."

The Electronic Commerce Act of 2000 defines electronic data message and
electronic document as follows:

Sec. 5. Definition of Terms. For the purposes of this Act, the following terms
are defined, as follows:

xxx

c. "Electronic Data Message" refers to information generated, sent, received

or stored by electronic, optical or similar means.

xxx

f. "Electronic Document" refers to information or the representation of

information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which
is received, recorded, transmitted, stored, processed, retrieved or produced
electronically.

The Implementing Rules and Regulations (IRR) of R.A. No. 8792,69 which was
signed on July 13, 2000 by the then Secretaries of the Department of Trade
and Industry, the Department of Budget and Management, and then Governor
of the Bangko Sentral ng Pilipinas, defines the terms as:

Sec. 6. Definition of Terms. For the purposes of this Act and these Rules,
the following terms are defined, as follows:

xxx

(e) "Electronic Data Message" refers to information generated, sent, received

or stored by electronic, optical or similar means, but not limited to, electronic
data interchange (EDI), electronic mail, telegram, telex or telecopy.
Throughout these Rules, the term "electronic data message" shall be
equivalent to and be used interchangeably with "electronic document."

xxx

(h) "Electronic Document" refers to information or the representation of

information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which
is received, recorded, transmitted, stored, processed, retrieved or produced
electronically. Throughout these Rules, the term "electronic document" shall
be equivalent to and be used interchangeably with "electronic data message."

The phrase "but not limited to, electronic data interchange (EDI), electronic
mail, telegram, telex or telecopy" in the IRR's definition of "electronic data
message" is copied from the Model Law on Electronic Commerce adopted by
the United Nations Commission on International Trade Law
(UNCITRAL),70 from which majority of the provisions of R.A. No. 8792 were
taken.71 While Congress deleted this phrase in the Electronic Commerce Act
of 2000, the drafters of the IRR reinstated it. The deletion by Congress of the
said phrase is significant and pivotal, as discussed hereunder.

The clause on the interchangeability of the terms "electronic data message"

and "electronic document" was the result of the Senate of the Philippines'
adoption, in Senate Bill 1902, of the phrase "electronic data message" and the
House of Representative's employment, in House Bill 9971, of the term
"electronic document."72 In order to expedite the reconciliation of the two
versions, the technical working group of the Bicameral Conference Committee
adopted both terms and intended them to be the equivalent of each one.73 Be
that as it may, there is a slight difference between the two terms. While "data
message" has reference to information electronically sent, stored or
transmitted, it does not necessarily mean that it will give rise to a right or
extinguish an obligation,74 unlike an electronic document. Evident from the
law, however, is the legislative intent to give the two terms the same
construction.

The Rules on Electronic Evidence promulgated by this Court defines the said
terms in the following manner:

SECTION 1. Definition of Terms. - For purposes of these Rules, the following

terms are defined, as follows:

xxx

(g) "Electronic data message" refers to information generated, sent, received

or stored by electronic, optical or similar means.

(h) "Electronic document" refers to information or the representation of

information, data, figures, symbols or other modes of written expression,
described or however represented, by which a right is established or an
obligation extinguished, or by which a fact may be proved and affirmed, which
is received, recorded, transmitted, stored, processed, retrieved or produced
electronically. It includes digitally signed documents and print-out or output,
readable by sight or other means, which accurately reflects the electronic data
message or electronic document. For purposes of these Rules, the term
"electronic document" may be used interchangeably with "electronic data
message."

Given these definitions, we go back to the original question: Is an original

printout of a facsimile transmission an electronic data message or electronic
document?cra lawlibrary

The definitions under the Electronic Commerce Act of 2000, its IRR and the
Rules on Electronic Evidence, at first glance, convey the impression
that facsimile transmissions are electronic data messages or electronic
documents because they are sent by electronic means. The expanded
definition of an "electronic data message" under the IRR, consistent with the
UNCITRAL Model Law, further supports this theory considering that the
enumeration "xxx [is] not limited to, electronic data interchange (EDI),
electronic mail, telegram, telex or telecopy." And to telecopy is to send a
document from one place to another via a fax machine.75

As further guide for the Court in its task of statutory construction, Section 37
of the Electronic Commerce Act of 2000 provides that

Unless otherwise expressly provided for, the interpretation of this Act shall
give due regard to its international origin and the need to promote uniformity
in its application and the observance of good faith in international trade
relations. The generally accepted principles of international law and
convention on electronic commerce shall likewise be considered.

Obviously, the "international origin" mentioned in this section can only refer
to the UNCITRAL Model Law, and the UNCITRAL's definition of "data
message":

"Data message" means information generated, sent, received or stored by

electronic, optical or similar means including, but not limited to, electronic
data interchange (EDI), electronic mail, telegram, telex or telecopy.76

is substantially the same as the IRR's characterization of an "electronic data

message."
However, Congress deleted the phrase, "but not limited to, electronic data
interchange (EDI), electronic mail, telegram, telex or telecopy," and replaced
the term "data message" (as found in the UNCITRAL Model Law ) with
"electronic data message." This legislative divergence from what is assumed
as the term's "international origin" has bred uncertainty and now impels the
Court to make an inquiry into the true intent of the framers of the law. Indeed,
in the construction or interpretation of a legislative measure, the primary rule
is to search for and determine the intent and spirit of the law.77 A construction
should be rejected that gives to the language used in a statute a meaning that
does not accomplish the purpose for which the statute was enacted, and that
tends to defeat the ends which are sought to be attained by the enactment.78

Interestingly, when Senator Ramon B. Magsaysay, Jr., the principal author of

Senate Bill 1902 (the predecessor of R.A. No. 8792), sponsored the bill on
second reading, he proposed to adopt the term "data message" as formulated
and defined in the UNCITRAL Model Law.79 During the period of amendments,
however, the term evolved into "electronic data message," and the phrase
"but not limited to, electronic data interchange (EDI), electronic mail,
telegram, telex or telecopy" in the UNCITRAL Model Law was deleted.
Furthermore, the term "electronic data message," though maintaining its
description under the UNCITRAL Model Law, except for the aforesaid deleted
phrase, conveyed a different meaning, as revealed in the following
proceedings:

xxx

Senator Santiago. Yes, Mr. President. I will furnish a copy together with the
explanation of this proposed amendment.

And then finally, before I leave the Floor, may I please be allowed to go back
to Section 5; the Definition of Terms. In light of the acceptance by the good
Senator of my proposed amendments, it will then become necessary to add
certain terms in our list of terms to be defined. I would like to add a definition
on what is "data," what is "electronic record" and what is an "electronic record
system."

If the gentleman will give me permission, I will proceed with the proposed
amendment on Definition of Terms, Section 5.

Senator Magsaysay. Please go ahead, Senator Santiago.

Senator Santiago. We are in Part 1, short title on the Declaration of Policy,
Section 5, Definition of Terms.

At the appropriate places in the listing of these terms that have to be defined
since these are arranged alphabetically, Mr. President, I would like to insert
the term DATA and its definition. So, the amendment will read: "DATA" MEANS
REPRESENTATION, IN ANY FORM, OF INFORMATION OR CONCEPTS.

The explanation is this: This definition of "data" or "data" as it is now

fashionably pronounced in America - - the definition of "data" ensures that our
bill applies to any form of information in an electronic record, whether these
are figures, facts or ideas.

So again, the proposed amendment is this: "DATA" MEANS

REPRESENTATIONS, IN ANY FORM, OF INFORMATION OR CONCEPTS.

Senator Magsaysay. May I know how will this affect the definition of "Data
Message" which encompasses electronic records, electronic writings and
electronic documents?cra lawlibrary

Senator Santiago. These are completely congruent with each other. These are
compatible. When we define "data," we are simply reinforcing the definition of
what is a data message.

Senator Magsaysay. It is accepted, Mr. President.

Senator Santiago. Thank you. The next term is "ELECTRONIC RECORD." The
proposed amendment is as follows:

"ELECTRONIC RECORD" MEANS DATA THAT IS RECORDED OR STORED ON

ANY MEDIUM IN OR BY A COMPUTER SYSTEM OR OTHER SIMILAR DEVICE,
THAT CAN BE READ OR PERCEIVED BY A PERSON OR A COMPUTER SYSTEM
OR OTHER SIMILAR DEVICE. IT INCLUDES A DISPLAY, PRINTOUT OR OTHER
OUTPUT OF THAT DATA.

The explanation for this term and its definition is as follows: The term
"ELECTRONIC RECORD" fixes the scope of our bill. The record is the data. The
record may be on any medium. It is electronic because it is recorded or stored
in or by a computer system or a similar device.

The amendment is intended to apply, for example, to data on magnetic strips

on cards or in Smart cards. As drafted, it would not apply to telexes or
faxes, except computer-generated faxes, unlike the United Nations
model law on electronic commerce. It would also not apply to regular
digital telephone conversations since the information is not recorded. It would
apply to voice mail since the information has been recorded in or by a device
similar to a computer. Likewise, video records are not covered. Though when
the video is transferred to a website, it would be covered because of the
involvement of the computer. Music recorded by a computer system on a
compact disc would be covered.

In short, not all data recorded or stored in digital form is covered. A computer
or a similar device has to be involved in its creation or storage. The term
"similar device" does not extend to all devices that create or store data in
digital form. Although things that are not recorded or preserved by or in a
computer system are omitted from this bill, these may well be admissible
under other rules of law. This provision focuses on replacing the search for
originality proving the reliability of systems instead of that of individual
records and using standards to show systems reliability.

Paper records that are produced directly by a computer system such as

printouts are themselves electronic records being just the means of intelligible
display of the contents of the record. Photocopies of the printout would be
paper record subject to the usual rules about copies, but the original printout
would be subject to the rules of admissibility of this bill.

However, printouts that are used only as paper records and whose computer
origin is never again called on are treated as paper records. In that case, the
reliability of the computer system that produces the record is irrelevant to its
reliability.

Senator Magsaysay. Mr. President, if my memory does not fail me, earlier, the
lady Senator accepted that we use the term "Data Message" rather than
"ELECTRONIC RECORD" in being consistent with the UNCITRAL term of "Data
Message." So with the new amendment of defining "ELECTRONIC RECORD,"
will this affect her accepting of the use of "Data Message" instead of
"ELECTRONIC RECORD"?cra lawlibrary

Senator Santiago. No, it will not. Thank you for reminding me. The term I
would like to insert is ELECTRONIC DATA MESSAGE in lieu of "ELECTRONIC
RECORD."
Senator Magsaysay. Then we are, in effect, amending the term of the
definition of "Data Message" on page 2A, line 31, to which we have no
objection.

Senator Santiago. Thank you, Mr. President.

xxx

Senator Santiago. Mr. President, I have proposed all the amendments that I
desire to, including the amendment on the effect of error or change. I will
provide the language of the amendment together with the explanation
supporting that amendment to the distinguished sponsor and then he can feel
free to take it up in any session without any further intervention.

Senator Magsaysay. Before we end, Mr. President, I understand from the

proponent of these amendments that these are based on the Canadian E-
commerce Law of 1998. Is that not right?cra lawlibrary

Senator Santiago. That is correct.80

Thus, when the Senate consequently voted to adopt the term "electronic data
message," it was consonant with the explanation of Senator Miriam Defensor-
Santiago that it would not apply "to telexes or faxes, except computer-
generated faxes, unlike the United Nations model law on electronic
commerce." In explaining the term "electronic record" patterned after the E-
Commerce Law of Canada, Senator Defensor-Santiago had in mind the term
"electronic data message." This term then, while maintaining part of the
UNCITRAL Model Law's terminology of "data message," has assumed a
different context, this time, consonant with the term "electronic record" in the
law of Canada. It accounts for the addition of the word "electronic" and the
deletion of the phrase "but not limited to, electronic data interchange (EDI),
electronic mail, telegram, telex or telecopy." Noteworthy is that the Uniform
Law Conference of Canada, explains the term "electronic record," as drafted
in the Uniform Electronic Evidence Act, in a manner strikingly similar to Sen.
Santiago's explanation during the Senate deliberations:

"Electronic record" fixes the scope of the Act. The record is the data. The
record may be any medium. It is "electronic" because it is recorded or stored
in or by a computer system or similar device. The Act is intended to apply, for
example, to data on magnetic strips on cards, or in smart cards. As drafted, it
would not apply to telexes or faxes (except computer-generated faxes), unlike
the United Nations Model Law on Electronic Commerce. It would also not apply
to regular digital telephone conversations, since the information is not
recorded. It would apply to voice mail, since the information has been
recorded in or by a device similar to a computer. Likewise video records are
not covered, though when the video is transferred to a Web site it would be,
because of the involvement of the computer. Music recorded by a computer
system on a compact disk would be covered.

In short, not all data recorded or stored in "digital" form is covered. A

computer or similar device has to be involved in its creation or storage. The
term "similar device" does not extend to all devices that create or store data
in digital form. Although things that are not recorded or preserved by or in a
computer system are omitted from this Act, they may well be admissible under
other rules of law. This Act focuses on replacing the search for originality,
proving the reliability of systems instead of that of individual records, and
using standards to show systems reliability.

Paper records that are produced directly by a computer system, such as

printouts, are themselves electronic records, being just the means of
intelligible display of the contents of the record. Photocopies of the printout
would be paper records subject to the usual rules about copies, but the
"original" printout would be subject to the rules of admissibility of this Act.

However, printouts that are used only as paper records, and whose computer
origin is never again called on, are treated as paper records. See subsection
4(2). In this case the reliability of the computer system that produced the
record is relevant to its reliability.81

There is no question then that when Congress formulated the term "electronic
data message," it intended the same meaning as the term "electronic record"
in the Canada law. This construction of the term "electronic data message,"
which excludes telexes or faxes, except computer-generated faxes, is in
harmony with the Electronic Commerce Law's focus on "paperless"
communications and the "functional equivalent approach"82 that it espouses.
In fact, the deliberations of the Legislature are replete with discussions on
paperless and digital transactions.

Facsimile transmissions are not, in this sense, "paperless," but verily are
paper-based.

A facsimile machine, which was first patented in 1843 by Alexander Bain,83 is

a device that can send or receive pictures and text over a telephone line. It
works by digitizing an image dividing it into a grid of dots. Each dot is either
on or off, depending on whether it is black or white. Electronically, each dot is
represented by a bit that has a value of either 0 (off) or 1 (on). In this way,
the fax machine translates a picture into a series of zeros and ones (called a
bit map) that can be transmitted like normal computer data. On the receiving
side, a fax machine reads the incoming data, translates the zeros and ones
back into dots, and reprints the picture.84 A fax machine is essentially an
image scanner, a modem and a computer printer combined into a highly
specialized package. The scanner converts the content of a physical document
into a digital image, the modem sends the image data over a phone line, and
the printer at the other end makes a duplicate of the original
document.85 Thus, in Garvida v. Sales, Jr.,86 where we explained the
unacceptability of filing pleadings through fax machines, we ruled that:

A facsimile or fax transmission is a process involving the transmission and

reproduction of printed and graphic matter by scanning an original copy, one
elemental area at a time, and representing the shade or tone of each area by
a specified amount of electric current. The current is transmitted as a signal
over regular telephone lines or via microwave relay and is used by the receiver
to reproduce an image of the elemental area in the proper position and the
correct shade. The receiver is equipped with a stylus or other device that
produces a printed record on paper referred to as a facsimile.

x x x A facsimile is not a genuine and authentic pleading. It is, at best, an

exact copy preserving all the marks of an original. Without the original, there
is no way of determining on its face whether the facsimile pleading is genuine
and authentic and was originally signed by the party and his counsel. It may,
in fact, be a sham pleading.87

Accordingly, in an ordinary facsimile transmission, there exists an

original paper-based information or data that is scanned, sent through a
phone line, and re-printed at the receiving end. Be it noted that in enacting
the Electronic Commerce Act of 2000, Congress intended virtual or
paperless writings to be the functional equivalent and to have the same legal
function as paper-based documents.88 Further, in a virtual or paperless
environment, technically, there is no original copy to speak of, as all direct
printouts of the virtual reality are the same, in all respects, and are considered
as originals.89 Ineluctably, the law's definition of "electronic data message,"
which, as aforesaid, is interchangeable with "electronic document," could not
have included facsimile transmissions, which have an original paper-
based copy as sent and a paper-based facsimile copy as received. These two
copies are distinct from each other, and have different legal effects. While
Congress anticipated future developments in communications and computer
technology90 when it drafted the law, it excluded the early forms of
technology, like telegraph, telex and telecopy (except computer-generated
faxes, which is a newer development as compared to the ordinary fax machine
to fax machine transmission), when it defined the term "electronic data
message."

Clearly then, the IRR went beyond the parameters of the law when it adopted
verbatim the UNCITRAL Model Law's definition of "data message," without
considering the intention of Congress when the latter deleted the phrase "but
not limited to, electronic data interchange (EDI), electronic mail, telegram,
telex or telecopy." The inclusion of this phrase in the IRR offends a basic tenet
in the exercise of the rule-making power of administrative agencies. After all,
the power of administrative officials to promulgate rules in the implementation
of a statute is necessarily limited to what is found in the legislative enactment
itself. The implementing rules and regulations of a law cannot extend the law
or expand its coverage, as the power to amend or repeal a statute is vested
in the Legislature.91 Thus, if a discrepancy occurs between the basic law and
an implementing rule or regulation, it is the former that prevails, because the
law cannot be broadened by a mere administrative issuance an administrative
agency certainly cannot amend an act of Congress.92 Had the Legislature
really wanted ordinary fax transmissions to be covered by the mantle of the
Electronic Commerce Act of 2000, it could have easily lifted without a bit of
tatter the entire wordings of the UNCITRAL Model Law.

Incidentally, the National Statistical Coordination Board Task Force on the

Measurement of E-Commerce,93 on November 22, 2006, recommended a
working definition of "electronic commerce," as "[a]ny commercial transaction
conducted through electronic, optical and similar medium, mode,
instrumentality and technology. The transaction includes the sale or purchase
of goods and services, between individuals, households, businesses and
governments conducted over computer-mediated networks through the
Internet, mobile phones, electronic data interchange (EDI) and other channels
through open and closed networks." The Task Force's proposed definition is
similar to the Organization of Economic Cooperation and Development's
(OECD's) broad definition as it covers transactions made over any network,
and, in addition, it adopted the following provisions of the OECD definition:
(1) for transactions, it covers sale or purchase of goods and services; (2) for
channel/network, it considers any computer-mediated network and NOT
limited to Internet alone; (3) it excludes transactions received/placed using
fax, telephone or non-interactive mail; (4) it considers payments done online
or offline; and (5) it considers delivery made online (like downloading of
purchased books, music or software programs) or offline (deliveries of
goods).94

We, therefore, conclude that the terms "electronic data message" and
"electronic document," as defined under the Electronic Commerce Act of 2000,
do not include a facsimile transmission. Accordingly, a facsimile
transmission cannot be considered as electronic evidence. It is not the
functional equivalent of an original under the Best Evidence Rule and is not
admissible as electronic evidence.

Since a facsimile transmission is not an "electronic data message" or an

"electronic document," and cannot be considered as electronic evidence by
the Court, with greater reason is a photocopy of such a fax transmission not
electronic evidence. In the present case, therefore, Pro Forma Invoice
Nos. ST2-POSTS0401-1 and ST2-POSTS0401 - 2 (Exhibits "E" and "F"),
which are mere photocopies of the original fax transmittals, are not
electronic evidence, contrary to the position of both the trial and the appellate
courts.

- III -

Nevertheless, despite the pro forma invoices not being electronic evidence,
this Court finds that respondent has proven by preponderance of evidence the
existence of a perfected contract of sale.

In an action for damages due to a breach of a contract, it is essential that the

claimant proves (1) the existence of a perfected contract, (2) the breach
thereof by the other contracting party and (3) the damages which he/she
sustained due to such breach. Actori incumbit onus probandi. The burden of
proof rests on the party who advances a proposition affirmatively.95 In other
words, a plaintiff in a civil action must establish his case by a preponderance
of evidence, that is, evidence that has greater weight, or is more convincing
than that which is offered in opposition to it.96

In general, contracts are perfected by mere consent,97 which is manifested by

the meeting of the offer and the acceptance upon the thing and the cause
which are to constitute the contract. The offer must be certain and the
acceptance absolute.98 They are, moreover, obligatory in whatever form they
may have been entered into, provided all the essential requisites for their
validity are present.99 Sale, being a consensual contract, follows the general
rule that it is perfected at the moment there is a meeting of the minds upon
the thing which is the object of the contract and upon the price. From that
moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.100

The essential elements of a contract of sale are (1) consent or meeting of the
minds, that is, to transfer ownership in exchange for the price, (2) object
certain which is the subject matter of the contract, and (3) cause of the
obligation which is established.101

In this case, to establish the existence of a perfected contract of sale between

the parties, respondent Ssangyong formally offered in evidence the
testimonies of its witnesses and the following exhibits:

Exhibit Description Purpose

E Pro forma Invoice dated 17 To show that defendants contracted

April 2000 with Contract with plaintiff for the delivery of 110
No. ST2-POSTS0401- MT of stainless steel from Korea
1, photocopy payable by way of an irrevocable letter
of credit in favor of plaintiff, among
other conditions.

E-1 Pro forma Invoice dated 17 To show that defendants sent their
April 2000 with Contract confirmation of the (i) delivery to it of
No. ST2- the specified stainless-steel products,
POSTS0401, contained in (ii) defendants' payment thereof by way
facsimile/thermal paper faxed of an irrevocable letter of credit in
by defendants to plaintiff favor of plaintiff, among other
showing the printed conditions.
transmission details on the
upper portion of said paper as
coming from defendant MCC
on 26 Apr 00 08:41AM

E-2 Conforme signature of Mr. To show that defendants sent their

Gregory Chan, contained in confirmation of the (i) delivery to it of
facsimile/thermal paper faxed the total of 220MT specified stainless
by defendants to plaintiff steel products, (ii) defendants' payment
showing the printed thereof by way of an irrevocable letter
transmission details on the
 upper portion of said paper as of credit in favor of plaintiff, among
coming from defendant MCC other conditions.
on 26 Apr 00 08:41AM

F Pro forma Invoice dated 17 To show that defendants contracted

April 2000 with Contract with plaintiff for delivery of another
No. ST2-POSTSO401- 110 MT of stainless steel from Korea
2, photocopy payable by way of an irrevocable letter
of credit in favor of plaintiff, among
other conditions.

G Letter to defendant SANYO To prove that defendants were

SEIKE dated 20 June informed of the date of L/C opening
2000, contained in and defendant's conforme/approval
facsimile/thermal paper thereof.

G-1 Signature of defendant

Gregory Chan, contained in
facsimile/thermal paper.

H Letter to defendants dated 22 To prove that defendants were

June 2000, original informed of the successful price
adjustments secured by plaintiff in
favor of former and were advised of the
schedules of its L/C opening.

I Letter to defendants dated 26 To prove that plaintiff repeatedly

June 2000, original requested defendants for the agreed

J Letter to defendants dated 26 opening of the Letters of Credit,

June 2000, original defendants' failure and refusal to
comply with their obligations and the
K Letter to defendants dated 27
problems of plaintiff is incurring by
June 2000, original
reason of defendants' failure and
L Facsimile message to
refusal to open the L/Cs.
defendants dated 28 June
2000, photocopy

M Letter from defendants dated To prove that defendants admit of their

29 June 2000, contained in liabilities to plaintiff, that they
facsimile/thermal paper faxed requested for "more extension" of time
by defendants to plaintiff for the opening of the Letter of Credit,
showing the printed and begging for favorable
transmission details on the understanding and consideration.
upper portion of said paper as
coming from defendant MCC
on 29 June 00 11:12 AM
M-1 Signature of defendant
Gregory Chan, contained in
facsimile/thermal paper faxed
by defendants to plaintiff
showing the printed
transmission details on the
upper portion of said paper as
coming from defendant MCC
on June 00 11:12 AM

N Letter to defendants dated 29

June 2000, original

O Letter to defendants dated 30 To prove that plaintiff reiterated its

June 2000, photocopy request for defendants to L/C opening
after the latter's request for extension of
time was granted, defendants' failure
and refusal to comply therewith
extension of time notwithstanding.

P Letter to defendants dated 06

July 2000, original

Q Demand letter to defendants To prove that plaintiff was constrained

dated 15 Aug 2000, original to engaged services of a lawyer for
collection efforts.

R Demand letter to defendants To prove that defendants opened the

dated 23 Aug 2000, original first L/C in favor of plaintiff, requested
for further postponement of the final
L/C and for minimal amounts, were
urged to open the final L/C on time, and
were informed that failure to comply
will cancel the contract.

S Demand letter to defendants To show defendants' refusal and failure

dated 11 Sept 2000, original to open the final L/C on time, the
cancellation of the contract as a
consequence thereof, and final demand
upon defendants to remit its
obligations.

W Letter from plaintiff To prove that there was a perfected sale

SSANGYONG to defendant and purchase agreement between the
SANYO SEIKI dated 13 April parties for 220 metric tons of steel
2000, with fax back from products at the price of US$1,860/ton.
defendants SANYO
 SEIKI/MCC to plaintiff
SSANGYONG, contained in
facsimile/thermal paper with
back-up photocopy

W-1 Conforme signature of To prove that defendants, acting

defendant Gregory Chan, through Gregory Chan, agreed to the
contained in facsimile/thermal sale and purchase of 220 metric tons of
paper with back-up photocopy steel products at the price of
US$1,860/ton.

W-2 Name of sender MCC To prove that defendants sent their

Industrial Sales Corporation conformity to the sale and purchase
agreement by facsimile transmission.

X Pro forma Invoice dated 16 To prove that defendant MCC agreed

August 2000, photocopy to adjust and split the confirmed
purchase order into 2 shipments at 100
metric tons each at the discounted price
of US$1,700/ton.

X-1 Notation "1/2", photocopy To prove that the present Pro forma
Invoice was the first of 2 pro forma
invoices.

X-2 Ref. No. ST2-POSTS080- To prove that the present Pro

1, photocopy forma Invoice was the first of 2 pro
forma invoices.

X-3 Conforme signature of To prove that defendant MCC, acting

defendant Gregory through Gregory Chan, agreed to the
Chan, photocopy sale and purchase of the balance of 100
metric tons at the discounted price of
US$1,700/ton, apart from the other
order and shipment of 100 metric tons
which was delivered by plaintiff
SSANGYONG and paid for by
defendant MCC.

DD Letter from defendant MCC to To prove that there was a perfected sale
plaintiff SSANGYONG dated and purchase agreement between
22 August 2000, contained in plaintiff SSANGYONG and defendant
facsimile/thermal paper with MCC for the balance of 100 metric
back-up photocopy tons, apart from the other order and
shipment of 100 metric tons which was
delivered by plaintiff SSANGYONG
and paid for by defendant MCC.
DD-1 Ref. No. ST2-POSTS080- To prove that there was a perfected sale
1, contained in and purchase agreement between
facsimile/thermal paper with plaintiff SSANGYONG and defendant
back-up photocopy MCC for the balance of 100 metric
tons, apart from the other order and
shipment of 100 metric tons which was
delivered by plaintiff SSANGYONG
and paid for by defendant MCC.

DD-2 Signature of defendant To prove that defendant MCC, acting

Gregory Chan, contained in through Gregory Chan, agreed to the
facsimile/thermal paper with sale and purchase of the balance of 100
back-up photocopy metric tons, apart from the other order
and shipment of 100 metric tons which
was delivered by plaintiff Ssangyong
and paid for by defendant MCC.102

Significantly, among these documentary evidence presented by respondent,

MCC, in its petition before this Court, assails the admissibility only of Pro
Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2 (Exhibits
"E" and "F"). After sifting through the records, the Court found that these
invoices are mere photocopies of their original fax transmittals. Ssangyong
avers that these documents were prepared after MCC asked for the splitting
of the original order into two, so that the latter can apply for an L/C with
greater facility. It, however, failed to explain why the originals of these
documents were not presented.

To determine whether these documents are admissible in evidence, we apply

the ordinary Rules on Evidence, for as discussed above we cannot apply the
Electronic Commerce Act of 2000 and the Rules on Electronic Evidence.

Because these documents are mere photocopies, they are simply secondary
evidence, admissible only upon compliance with Rule 130, Section 5, which
states, "[w]hen the original document has been lost or destroyed, or cannot
be produced in court, the offeror, upon proof of its execution or existence and
the cause of its unavailability without bad faith on his part, may prove its
contents by a copy, or by a recital of its contents in some authentic document,
or by the testimony of witnesses in the order stated." Furthermore, the offeror
of secondary evidence must prove the predicates thereof, namely: (a) the loss
or destruction of the original without bad faith on the part of the
proponent/offeror which can be shown by circumstantial evidence of routine
practices of destruction of documents; (b) the proponent must prove by a fair
preponderance of evidence as to raise a reasonable inference of the loss or
destruction of the original copy; and (c) it must be shown that a diligent
and bona fide but unsuccessful search has been made for the document in the
proper place or places. It has been held that where the missing document is
the foundation of the action, more strictness in proof is required than where
the document is only collaterally involved.103

Given these norms, we find that respondent failed to prove the existence of
the original fax transmissions of Exhibits E and F, and likewise did not
sufficiently prove the loss or destruction of the originals. Thus, Exhibits E and
F cannot be admitted in evidence and accorded probative weight.

It is observed, however, that respondent Ssangyong did not rely merely on

Exhibits E and F to prove the perfected contract. It also introduced in evidence
a variety of other documents, as enumerated above, together with the
testimonies of its witnesses. Notable among them are Pro Forma Invoice
Nos. ST2-POSTS080-1 and ST2-POSTS080-2 which were issued by
Ssangyong and sent via fax to MCC. As already mentioned, these invoices
slightly varied the terms of the earlier invoices such that the quantity was now
officially 100MT per invoice and the price reduced to US$1,700.00 per MT.
The copies of the said August 16, 2000 invoices submitted to the court bear
the conformity signature of MCC Manager Chan.

Pro Forma Invoice No. ST2-POSTS080-1 (Exhibit "X"), however, is a mere

photocopy of its original. But then again, petitioner MCC does not assail the
admissibility of this document in the instant petition. Verily, evidence not
objected to is deemed admitted and may be validly considered by the court in
arriving at its judgment.104 Issues not raised on appeal are deemed
abandoned.

As to Pro Forma Invoice No. ST2-POSTS080-2 (Exhibits "1-A" and "2-C"),

which was certified by PCIBank as a true copy of its original,105 it was, in fact,
petitioner MCC which introduced this document in evidence. Petitioner MCC
paid for the order stated in this invoice. Its admissibility, therefore, is not open
to question.

These invoices (ST2-POSTS0401, ST2-POSTS080-1 and ST2-POSTS080-

2), along with the other unchallenged documentary evidence of respondent
Ssangyong, preponderate in favor of the claim that a contract of sale was
perfected by the parties.
This Court also finds merit in the following observations of the trial court:

Defendants presented Letter of Credit (Exhibits "1", "1-A" to "1-R") referring

to Pro Forma Invoice for Contract No. ST2POSTS080-2, in the amount of
US$170,000.00, and which bears the signature of Gregory Chan, General
Manager of MCC. Plaintiff, on the other hand, presented Pro Forma Invoice
referring to Contract No. ST2-POSTS080-1, in the amount of US$170,000.00,
which likewise bears the signature of Gregory Chan, MCC. Plaintiff accounted
for the notation "1/2" on the right upper portion of the Invoice, that is, that it
was the first of two (2) pro forma invoices covering the subject contract
between plaintiff and the defendants. Defendants, on the other hand, failed
to account for the notation "2/2" in its Pro Forma Invoice (Exhibit "1-A").
Observably further, both Pro Forma Invoices bear the same date and details,
which logically mean that they both apply to one and the same transaction.106

Indeed, why would petitioner open an L/C for the second half of the
transaction if there was no first half to speak of?

The logical chain of events, as gleaned from the evidence of both parties,
started with the petitioner and the respondent agreeing on the sale and
purchase of 220MT of stainless steel at US$1,860.00 per MT. This initial
contract was perfected. Later, as petitioner asked for several extensions to
pay, adjustments in the delivery dates, and discounts in the price as originally
agreed, the parties slightly varied the terms of their contract, without
necessarily novating it, to the effect that the original order was reduced to
200MT, split into two deliveries, and the price discounted to US$1,700 per MT.
Petitioner, however, paid only half of its obligation and failed to open an L/C
for the other 100MT. Notably, the conduct of both parties sufficiently
established the existence of a contract of sale, even if the writings of the
parties, because of their contested admissibility, were not as explicit in
establishing a contract.107 Appropriate conduct by the parties may be
sufficient to establish an agreement, and while there may be instances where
the exchange of correspondence does not disclose the exact point at which
the deal was closed, the actions of the parties may indicate that a binding
obligation has been undertaken.108

With our finding that there is a valid contract, it is crystal-clear that when
petitioner did not open the L/C for the first half of the transaction (100MT),
despite numerous demands from respondent Ssangyong, petitioner breached
its contractual obligation. It is a well-entrenched rule that the failure of a buyer
to furnish an agreed letter of credit is a breach of the contract between buyer
and seller. Indeed, where the buyer fails to open a letter of credit as stipulated,
the seller or exporter is entitled to claim damages for such breach. Damages
for failure to open a commercial credit may, in appropriate cases, include the
loss of profit which the seller would reasonably have made had the transaction
been carried out.109

- IV -

This Court, however, finds that the award of actual damages is not in accord
with the evidence on record. It is axiomatic that actual or compensatory
damages cannot be presumed, but must be proven with a reasonable degree
of certainty.110 In Villafuerte v. Court of Appeals,111 we explained that:

Actual or compensatory damages are those awarded in order to compensate

a party for an injury or loss he suffered. They arise out of a sense of natural
justice and are aimed at repairing the wrong done. Except as provided by law
or by stipulation, a party is entitled to an adequate compensation only for such
pecuniary loss as he has duly proven. It is hornbook doctrine that to be able
to recover actual damages, the claimant bears the onus of presenting before
the court actual proof of the damages alleged to have been suffered, thus:

A party is entitled to an adequate compensation for such pecuniary loss

actually suffered by him as he has duly proved. Such damages, to be
recoverable, must not only be capable of proof, but must actually be proved
with a reasonable degree of certainty. We have emphasized that these
damages cannot be presumed and courts, in making an award must point out
specific facts which could afford a basis for measuring whatever compensatory
or actual damages are borne.112

In the instant case, the trial court awarded to respondent Ssangyong

US$93,493.87 as actual damages. On appeal, the same was affirmed by the
appellate court. Noticeably, however, the trial and the appellate courts, in
making the said award, relied on the following documents submitted in
evidence by the respondent: (1) Exhibit "U," the Statement of Account dated
March 30, 2001; (2) Exhibit "U-1," the details of the said Statement of
Account); (3) Exhibit "V," the contract of the alleged resale of the goods to a
Korean corporation; and (4) Exhibit "V-1," the authentication of the resale
contract from the Korean Embassy and certification from the Philippine
Consular Office.
The statement of account and the details of the losses sustained by
respondent due to the said breach are, at best, self-serving. It was respondent
Ssangyong itself which prepared the said documents. The items therein are
not even substantiated by official receipts. In the absence of corroborative
evidence, the said statement of account is not sufficient basis to award actual
damages. The court cannot simply rely on speculation, conjecture or
guesswork as to the fact and amount of damages, but must depend
on competent proof that the claimant had suffered, and on evidence of, the
actual amount thereof.113

Furthermore, the sales contract and its authentication certificates, Exhibits "V"
and "V-1," allegedly evidencing the resale at a loss of the stainless steel
subject of the parties' breached contract, fail to convince this Court of the
veracity of its contents. The steel items indicated in the sales contract114 with
a Korean corporation are different in all respects from the items ordered by
petitioner MCC, even in size and quantity. We observed the following
discrepancies:

List of commodities as stated in Exhibit "V":

COMMODITY: Stainless Steel HR Sheet in Coil, Slit Edge

SPEC: SUS304 NO. 1

SIZE/Q'TY:

2.8MM X 1,219MM X C 8.193MT

3.0MM X 1,219MM X C 7.736MT

3.0MM X 1,219MM X C 7.885MT

3.0MM X 1,219MM X C 8.629MT

4.0MM X 1,219MM X C 7.307MT

4.0MM X 1,219MM X C 7.247MT

4.5MM X 1,219MM X C 8.450MT

4.5MM X 1,219MM X C 8.870MT

5.0MM X 1,219MM X C 8.391MT

6.0MM X 1,219MM X C 6.589MT

6.0MM X 1,219MM X C 7.878MT

6.0MM X 1,219MM X C 8.397MT

TOTAL: 95.562MT115
List of commodities as stated in Exhibit "X" (the invoice that was not paid):

DESCRIPTION: Hot Rolled Stainless Steel Coil SUS 304

SIZE AND QUANTITY:

2.6 MM X 4' X C 10.0MT

3.0 MM X 4' X C 25.0MT

4.0 MM X 4' X C 15.0MT

4.5 MM X 4' X C 15.0MT

5.0 MM X 4' X C 10.0MT

6.0 MM X 4' X C 25.0MT

TOTAL: 100MT116

From the foregoing, we find merit in the contention of MCC that Ssangyong
did not adequately prove that the items resold at a loss were the same items
ordered by the petitioner. Therefore, as the claim for actual damages was not
proven, the Court cannot sanction the award.

Nonetheless, the Court finds that petitioner knowingly breached its contractual
obligation and obstinately refused to pay despite repeated demands from
respondent. Petitioner even asked for several extensions of time for it to make
good its obligation. But in spite of respondent's continuous accommodation,
petitioner completely reneged on its contractual duty. For such inattention and
insensitivity, MCC must be held liable for nominal damages. "Nominal
damages are 'recoverable where a legal right is technically violated and must
be vindicated against an invasion that has produced no actual present loss of
any kind or where there has been a breach of contract and no substantial
injury or actual damages whatsoever have been or can be
shown.'"117 Accordingly, the Court awards nominal damages of P200,000.00
to respondent Ssangyong.

As to the award of attorney's fees, it is well settled that no premium should

be placed on the right to litigate and not every winning party is entitled to an
automatic grant of attorney's fees. The party must show that he falls under
one of the instances enumerated in Article 2208 of the Civil Code. 118 In the
instant case, however, the Court finds the award of attorney's fees proper,
considering that petitioner MCC's unjustified refusal to pay has compelled
respondent Ssangyong to litigate and to incur expenses to protect its rights.

WHEREFORE, PREMISES CONSIDERED, the appeal is PARTIALLY

GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 82983
is MODIFIED in that the award of actual damages is DELETED. However,
petitioner is ORDERED to pay respondent NOMINAL DAMAGES in the
amount of P200,000.00, and the ATTORNEY'S FEES as awarded by the trial
court.

SO ORDERED.

Ynares-Santiago, J., Chairperson, Austria-Martinez, Chico-Nazario,

Reyes, JJ., concur.