MCC INDUSTRIAL SALES CORPORATION vs. SSANGYONG CORPORATION G.R. No. 170633 October 17, 2007

Facts:

MCC Industrial Sales (MCC), a domestic corporation engaged in the business of importing and wholesaling stainless steel products and one of its supplier Ssangyong Corporation (Ssangyong), 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.

On April 13, 2000, 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 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.

Because MCC could open only a partial letter of credit, the order for 220MT of steel was split into two,one for110MT covered by Pro Forma Invoice No. ST2-POSTS0401-1 and another for 110MT covered by ST2-POSTS0401-2,both dated April 17, 2000.
            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, 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 trial on the merits, the RTC rendered its Decision on March 24, 2004, in favor of Ssangyong.

On appeal, the CA rendered its Decision 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

Issue:

Whether or not the Court of Appeals erred in sustaining the admissibility in evidence of the pro-forma invoices despite the fact that the same were mere photocopies of facsimile printouts.

Held:

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 isto send a document from one place to another via a fax machine.

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.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. 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 anoriginal 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 technology 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. 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. 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,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).

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 transmissioncannot 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.