Civil Law, Mercantile Law, Remedial Law

MCC INDUSTRIAL SALES CORP. v. SSANGYONG CORP. G.R. No. 170633, October 17, 2007 R.A. No. 8792 [Electronic Commerce Act of 2000], Best Evidence Rule, Obligations and Contracts, Sale

FACTS: 

Petitioner MCC is a domestic corporation, engaged in the business of importing and wholesaling stainless steel products, while respondent Ssangyong Corporation, an international trading company with head office in Seoul, South Korea, is one of its suppliers. 

The two corporations conducted business through telephone calls and facsimile or telecopy transmissions. 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.

Ssangyong Manila Office sent, by fax, a letter addressed to Gregory Chan, MCC Manager [also the President 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. 

Chan, on behalf of the corporations, assented and affixed his signature on the conforme portion of the letter.

Ssangyong forwarded to MCC Pro Forma Invoice No. ST2-POSTSO401 containing the terms and conditions of the transaction and idicating that payment for the ordered steel products would be made through an irrevocable letter of credit (L/C) at sight in favor of Ssangyong. 

MCC sent back by fax to Ssangyong the invoice bearing the conformity signature of Chan. 

Accordingly, Ssangyong placed the order with its steel manufacturer, POSCO, in South Korea and paid the same in full.

The order for 220MT of steel was split into two, one for 110MT covered by Pro Forma Invoice No. ST2-POSTS0401-1 and another for 110MT covered by ST2-POSTS0401-2.

When Ssangyong was ready to ship 193.597MT of stainless steel, it requested that the opening of the L/C be facilitated. Chan affixed his signature on the fax transmittal and returned the same, by fax, to Ssangyong.

Considering that no L/C was opened, Ssangyong sent another facsimile letter to MCC stating that its principal in Korea was already in a difficult situation because of the failure of Sanyo Seiki and MCC to open the L/C’s.

Chan requested for an extension of time to open the L/C because MCC was waiting for an additional credit line. 

Ssangyong replied, requesting that it be informed of the date when the L/C would be opened, preferably at the earliest possible time. 

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. 

Another follow-up letter 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.  Consequently, 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. 

Later, Pro Forma Invoice Nos. ST2-POSTS080-1 and ST2-POSTS080-2 were issued and sent via fax to MCC, by Ssangyong, indicating that the quantity was now officially 100MT per invoice and the price was reduced to US$1,700.00 per MT. 

On August 17, 2000, MCC finally opened an L/C with PCIBank for US$170,000.00 covering payment under Pro Forma Invoice No. ST2-POSTS080-2. The goods covered by the said invoice were then shipped to and received by MCC.

MCC requested for a price adjustment of the order stated in Pro Forma Invoice No. ST2-POSTS080-1.

Ssangyong rejected the request, and through counsel, wrote a letter to MCC, 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.

Ssangyong then filed a civil action for damages due to breach of contract against defendants MCC, Sanyo Seiki and Gregory Chan before the RTC of Makati City. 

After Ssangyong rested its case, defendants filed a Demurrer to Evidence alleging that Ssangyong failed to present the original copies of the pro forma invoices on which the civil action was based. 

The court denied the demurrer, ruling that the documentary evidence presented had already been admitted, and their admissibility finds support in R.A. No. 8792, otherwise known as the Electronic Commerce Act of 2000. 

After trial on the merits, the RTC rendered its Decision in favor of Ssangyong. 

On appeal, the CA rendered its Decision affirming the ruling of the trial court. 

The Appellate Court ruled that the copies of the said pro-forma invoices submitted by the appellee are admissible in evidence, and that such facsimile printouts are considered Electronic Documents under the New Rules on Electronic Evidence.

Hence, this petition.

ISSUE: 

  1. Whether the print-out and/or photocopies of facsimile transmissions are electronic evidence and admissible as such;
  1. Whether there was a perfected contract of sale between MCC and Ssangyong, and, if in the affirmative, whether MCC breached the said contract.

RULING:

1.

The Rules on Electronic Evidence 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. 

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.

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. 

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.

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 transmissionAccordingly, 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, 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.

2. 

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 general, contracts are perfected by mere consent, 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.

They are, moreover, obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are present. 

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.

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.

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”).

However, 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.

The Court finds that petitioner knowingly breached its contractual obligation and obstinately refused to pay despite repeated demands from respondent.

Accordingly, the Court awards nominal damages of P200,000.00 to respondent Ssangyong.

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