Evidence Cases

[G.R. NO.
143338 July 29, 2005]

THE CONSOLIDATED BANK AND TRUST CORPORATION (SOLIDBANK), Petitioners, v. DEL MONTE
MOTOR WORKS, INC., NARCISO G. MORALES,1 AND SPOUSE, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari of the Decision2 of the Court of Appeals in CA-G.R. CV No. 16886
entitled, "The Consolidated Bank & Trust Corporation (SOLIDBANK) v. Del Monte Motor Works, Inc., Narciso O.
Morales and Spouse" promulgated on 25 November 1999 and of the Resolution of the appellate court dated
11 May 2000 denying petitioner's motion for reconsideration. Said decision and resolution affirmed the order
dated 28 December 1987 of the Regional Trial Court (RTC), Branch 27, Manila.
The facts of the case are as follows:
On 13 June 1984, petitioner filed before the RTC of Manila a complaint 3 for recovery of sum of money against
respondents, impleading the spouse of respondent Narciso O. Morales (respondent Morales) in order to bind
their conjugal partnership of gains. Petitioner, a domestic banking and trust corporation, alleges therein that
on 23 April 1982, it extended in favor of respondents a loan in the amount of One Million Pesos
(P1,000,000.00) as evidenced by a promissory note executed by respondents on the same date. Under the
promissory note, respondents Del Monte Motor Works, Inc. (respondent corporation) and Morales bound
themselves jointly and severally to pay petitioner the full amount of the loan through twenty-five monthly
installments of P40,000.00 a month with interest pegged at 23% per annum. The note was to be paid in full
by 23 May 1984. As respondents defaulted on their monthly installments, the full amount of the loan became
due and demandable pursuant to the terms of the promissory note. Petitioner likewise alleges that it made
oral and written demands upon respondents to settle their obligation but notwithstanding these demands,
respondents still failed to pay their indebtedness which, as of 09 March 1984, stood at P1,332,474.55.
Petitioner attached to its complaint as Annexes "A," "B," and "C," respectively, a photocopy of the promissory
note supposedly executed by respondents, a copy of the demand letter it sent respondents dated 20 January
1983, and statement of account pertaining to respondents' loan.
On 31 October 1984, petitioner filed an Ex-Parte Motion to Declare the Defendants in Default which was
opposed by the defendants upon the ground that they were never served with copies of the summons and of
petitioner's complaint.
On 23 November 1984, respondent corporation filed before the trial court a manifestation attaching thereto
its answer to petitioner's complaint which states the following:
2 - That it denies generally and specifically the allegations contained in paragraphs 3, 4, 5, 6, 7 and 8 thereof
for lack of knowledge and information sufficient to form a belief as to the truth of the matters therein
alleged, the truth being those alleged in the Special and Affirmative Defenses hereinbelow contained;
3 - ANSWERING FURTHER, and by way of a first special and affirmative defense, defendant herein states that
the promissory note in question is void for want of valid consideration and/or there was no valuable
consideration involved as defendant herein did not receive any consideration at all;
4 - ANSWERING FURTHER, and by way of a second special affirmative defense, defendant herein alleges that
no demand has ever been sent to nor received by herein defendant and if ever demands were made, denies
any liability as averred therein.
5 - ANSWERING FURTHER, and by way of a third special and affirmative defense, defendant herein avers that
the complaint states no cause of action and has no basis either in fact or in law;'
VERIFICATION
I, JEANETTE D. TOLENTINO, of legal age, after having been duly sworn to in accordance with law, depose and
state:
That I am the Controller of Del Monte Motor Works, Inc., one of the defendants in this case.
That for and in behalf of the defendant corporation, I caused the preparation of the above-narrated answer.
That I have read the contents thereof and they are true of my own knowledge.
(SGD) JEANNETTE D. TOLENTINO4
On 06 December 1984, respondent Morales filed his manifestation together with his answer wherein he
likewise renounced any liability on the promissory note, thus:
1. He ADMIT[S] paragraphs 1, 2, and 3 of the complaint with a qualification in paragraph 3 thereof that he
has long been separated from his wife and the system governing their property relations is that of complete
separation of property and not that of conjugal partnership of gain[s];
2. He [DENIES], generally and specifically, the allegations contained in paragraphs 4, 5, 6, 7, and 8 thereof,
for lack of knowledge and information sufficient to form a belief and as to the truth of the matter therein
averred, the truth being those alleged in the Special And Affirmative Defenses hereinbelow pleaded;
SPECIAL AND AFFIRMATIVE DEFENSES
4. He has never signed the promissory note attached to the complaint in his personal and/or individual
capacity as such;
5. That the said promissory note is ineffective, unenforceable and void for lack of valid consideration;
6. That even admitting, argumenti gratia, the validity and execution of the questioned promissory note, still,
defendant herein cannot be bound personally and individually to the said obligations as banking procedures
requires, it being a standard operating procedure of all known banking institution, that to hold a borrower
jointly and severally liable in his official as well as personal capacity, the borrower must sign a Suretyship
Agreement or at least, a continuing guarranty with that of the corporation he represent(s) but which in this
case is wanting;
7. That transaction/obligation in question did not, in any way, redound/inure to the benefit of the conjugal
partnership of gain, as there is no conjugal partnership of gain to speak with, defendant having long been
separated from his wife and their property relation is governed by the system of complete separation of
property, and more importantly, he has never signed the said promissory note in his personal and individual
capacity as such;
VERIFICATION
That I, NARCISO MORALES, after having been duly sworn to in accordance with law, hereby depose and
declare that:
I am one of the named defendant[s] in the above-entitled case;
I have cause[d] the preparation of the foregoing Answer upon facts and figures supplied by me to my
retained counsel; have read each and every allegations contained therein and hereby certify that the same
are true and correct of my own knowledge and information.
(SGD) NARCISO MORALES
Affiant5
On 26 December 1984, the trial court denied petitioner's motion to declare respondents in default and
admitted their respective answers.6
During the trial on the merits of this case, petitioner presented as its sole witness, Liberato A. Lavarino
(Lavarino), then the manager of its Collection Department. Substantially, Lavarino stated that respondents
obtained the loan, subject of this case, from petitioner and due to respondents' failure to pay a single
monthly installment on this loan, petitioner was constrained to send a demand letter to respondents; that as
a result of this demand letter, Jeannette Tolentino (Tolentino), respondent corporation's controller, wrote a
letter to petitioner requesting for some consideration because of the unfavorable business atmosphere then
buffeting their business operation; that Tolentino enclosed to said letter a check with a face value
of P220,020.00 to be discounted by petitioner with the proceeds being applied as partial payment to their
company's obligation to petitioner; that after receipt of this partial payment, respondents' obligation again
became stagnant prompting petitioner to serve respondents with another demand letter which,
unfortunately, was unheeded by respondents. Lavarino also identified the following exhibits for petitioner:
photocopy of the duplicate original of the promissory note attached to the complaint as Exhibit 7 petitioner's
20 January 1983 demand letter marked as Exhibit 8 Tolentino's letter to petitioner dated 10 February 1983
and marked as Exhibit 9 and the 09 March 1984 statement of account sent to respondents marked as
Exhibit 10
On 26 September 1985, petitioner made its formal offer of evidence. However, as the original copy of Exhibit
"A" could no longer be found, petitioner instead sought the admission of the duplicate original of the
promissory note which was identified and marked as Exhibit "E."
The trial court initially admitted into evidence Exhibit "E" and granted respondents' motion that they be
allowed to amend their respective answers to conform with this new evidence. 11
On 30 September 1985, respondent corporation filed a manifestation and motion for reconsideration 12 of the
trial court's order admitting into evidence petitioner's Exhibit "E." Respondent corporation claims that Exhibit
"E" should not have been admitted as it was immaterial, irrelevant, was not properly identified and hearsay
evidence. Respondent corporation insists that Exhibit "E" was not properly identified by Lavarino who
testified that he had nothing to do in the preparation and execution of petitioner's exhibits, one of which was
Exhibit "E." Further, as there were markings in Exhibit "A" which were not contained in Exhibit "E," the latter
could not possibly be considered an original copy of Exhibit "A." Lastly, respondent corporation claims that
the exhibit in question had no bearing on the complaint as Lavarino admitted that Exhibit "E" was not the
original of Exhibit "A" which was the foundation of the complaint and upon which respondent corporation
based its own answer.
Respondent Morales similarly filed a manifestation with motion to reconsider order admitting as evidence
Exhibit "E"13 which, other than insisting that the due execution and genuineness of the promissory note were
not established as far as he was concerned, essentially raised the same arguments contained in respondent
corporation's manifestation with motion for reconsideration referred to above.
On 06 December 1985, the trial court granted respondents' motions for reconsideration. 14 Petitioner moved
for the reconsideration of this order which was denied by the court a quo on 20 December 1985.15
On 26 December 1985, respondents separately filed their motions to dismiss on the similar ground that with
the exclusion of Exhibits "A" and "E," petitioner no longer possessed any proof of respondents' alleged
indebtedness.16
On 08 April 1986, petitioner filed a motion17 praying that the presiding judge, Judge Ricardo D. Diaz, of the
court a quo inhibit himself from this case maintaining that the latter rushed into resolving its motion for
reconsideration of the trial court's order of 06 December 1985 thereby depriving it the opportunity of
presenting proof that the original of Exhibit "A" was delivered to respondents as early as 02 April 1983. Such
haste on the part of the presiding judge, according to petitioner, cast doubt on his objectivity and fairness.
This motion to inhibit was denied by the trial court on 06 August 1987. 18
In an order dated 28 December 1987, 19 the case before the trial court was dismissed, the dispositive portion
of which reads:
WHEREFORE, the instant case against defendants Del Monte Motor Works, Inc. and Narciso O. Morales and
spouse, is hereby DISMISSED, with costs against the plaintiff.
The trial court's finding was affirmed by the Court of Appeals in the assailed decision now before us. The
dispositive portion of the appellate court's decision reads:
WHEREFORE, PREMISES CONSIDERED, the decision of the Regional Trial Court, Manila, Branch 27, dated
December 28, 1987 dismissing plaintiff-appellant['s] complaint is hereby AFFIRMED. Cost against the
plaintiff-appellant.20
Petitioner thereafter filed a motion for reconsideration dated 14 December 1999 which was denied for lack of
merit in a resolution of the Court of Appeals promulgated on 11 May 2000. 21
Aggrieved by the appellate court's ruling, petitioner now seeks redress from this Court imputing the following
errors on the Court of Appeals:
I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT FOUND THAT PRIVATE RESPONDENTS DENIED
THE MATERIAL ALLEGATIONS OF PETITIONER SOLIDBANK'S COMPLAINT, DESPITE THE PRESENCE OF
INDUBITABLE FACTS CLEARLY POINTING TO THE FACT THAT SAID PRIVATE RESPONDENTS ADMITTED THE
GENUINENESS AND DUE EXECUTION OF THE SUBJECT PROMISSORY NOTE.
II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT UPHELD THE EXCLUSION OF EXHIBIT 'E', THE
SECOND ORIGINAL OF THE PROMISSORY NOTE, DESPITE THE FACT THAT THE ORIGINAL OF EXHIBIT 'A'
(XEROX COPY OF THE DUPLICATE ORIGINAL OF THE PROMISSORY NOTE) WAS ACTUALLY IN THE POSSESSION
OF PRIVATE RESPONDENTS, THUS WARRANTING THE ADMISSION OF SECONDARY EVIDENCE.
III
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE TRIAL JUDGE SHOULD
HAVE INHIBITED HIMSELF FROM TAKING COGNIZANCE OF AND FROM TRYING AND DECIDING THE INSTANT
CASE CONSIDERING HIS PERCEIVED AND MANIFEST BIAS AND PARTIALITY IN FAVOR OF THE PRIVATE
RESPONDENTS TO THE GRAVE PREJUDICE OF PETITIONER SOLIDBANK. 22
The petition is meritorious.
In resolving the case against petitioner, the appellate court held that contrary to petitioner's stance,
respondents were able to generally and specifically deny under oath the genuineness and due execution of
the promissory note, thus:
There can be no dispute to the fact that the allegations in the answer (Record, p. 20, 26-27), of both
defendants, they denied generally and specifically under oath the genuineness and due execution of the
promissory note and by way of special and affirmative defenses herein states that he (MORALES) never
signed the promissory note attached to the complaint (Exh. A) in his personal and/or individual capacity.
Moreover, what appears in the record (Record, p. 20) was an admission of paragraphs 1 & 2 but they deny
generally and specifically the rest of the allegations. It would be considered that there is a sufficient
compliance of the requirement of the law for specific denial. 23
We hold otherwise.
The pertinent portion of the Rules of Court on the matter provides:

SEC. 8. How to contest such documents. - When an action or defense is founded upon a written instrument,
copied in or attached to the corresponding pleading as provided in the preceding section, the genuineness
and due execution of the instrument shall be deemed admitted unless the adverse party, under oath,
specifically denies them and sets forth what he claims to be the facts; but the requirement of an oath does
not apply when the adverse party does not appear to be a party to the instrument or when compliance with
an order for an inspection of the original instrument is refused. 24
In the case of Permanent Savings and Loan Bank v. Mariano Velarde,25 this Court held that. . . Respondent also denied any liability on the promissory note as he allegedly did not receive the amount
stated therein, and the loan documents do not express the true intention of the parties. Respondent
reiterated these allegations in his "denial under oath," stating that the "promissory note sued upon,
assuming that it exists and bears the genuine signature of herein defendant, the same does not bind him
and that it did not truly express the real intention of the parties as stated in the defenses'
Respondent's denials do not constitute an effective specific denial as contemplated by law. In the early case
of Songco v. Sellner,26 the Court expounded on how to deny the genuineness and due execution of an
actionable document, viz.:
. . . This means that the defendant must declare under oath that he did not sign the document or that it is
otherwise false or fabricated. Neither does the statement of the answer to the effect that the instrument was
procured by fraudulent representation raise any issue as to its genuineness or due execution. On the
contrary such a plea is an admission both of the genuineness and due execution thereof, since it seeks to
avoid the instrument upon a ground not affecting either. 27
In this case, both the court a quo and the Court of Appeals erred in ruling that respondents were able to
specifically deny the allegations in petitioner's complaint in the manner specifically required by the rules. In
effect, respondents had, to all intents and purposes, admitted the genuineness and due execution of the
subject promissory note and recognized their obligation to petitioner.
The appellate court likewise sustained the ruling of the trial court that the "best evidence rule or primary
evidence must be applied as the purpose of the proof is to establish the terms of the writing - meaning the
alleged promissory note as it is the basis of the recovery of the money allegedly loaned to the defendants
(respondents herein)."28
The "best evidence rule" is encapsulated in Rule 130, Section 3, of the Revised Rules of Civil Procedure which
provides:
Sec. 3. Original document must be produced; exceptions. - When the subject of inquiry is the contents of a
document, no evidence shall be admissible other than the original document itself, except in the following
cases:
(a) When the original has been lost or destroyed, or cannot be produced in court, without bad faith on the
part of the offeror;
(b) When the original is in the custody or under the control of the party against whom the evidence is
offered, and the latter fails to produce it after reasonable notice;
(c) When the original consists of numerous accounts or other documents which cannot be examined in court
without great loss of time and the fact sought to be established from them is only the general result of the
whole; and
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(d) When the original is a public record in the custody of a public officer or is recorded in a public office.
The "best evidence rule," according to Professor Thayer, first appeared in the year 1699-1700 when in one
case involving a goldsmith, Holt, C. J., was quoted as stating that they should take into consideration the
usages of trade and that "the best proof that the nature of the thing will afford is only required." 29 Over the
years, the phrase was used to describe rules which were already existing such as the rule that the terms of a
document must be proved by the production of the document itself, in preference to evidence about the
document; it was also utilized to designate the hearsay rule or the rule excluding assertions made out of
court and not subject to the rigors of cross-examination; and the phrase was likewise used to designate the
group of rules by which testimony of particular classes of witnesses was preferred to that of others. 30
According to McCormick, an authority on the rules of evidence, "the only actual rule that the 'best evidence'
phrase denotes today is the rule requiring the production of the original writing" 31 the rationale being:
(1) that precision in presenting to the court the exact words of the writing is of more than average
importance, particularly as respects operative or dispositive instruments, such as deeds, wills and contracts,
since a slight variation in words may mean a great difference in rights, (2) that there is a substantial hazard
of inaccuracy in the human process of making a copy by handwriting or typewriting, and (3) as respects oral
testimony purporting to give from memory the terms of a writing, there is a special risk of error, greater than
in the case of attempts at describing other situations generally. In the light of these dangers of
mistransmission, accompanying the use of written copies or of recollection, largely avoided through proving
the terms by presenting the writing itself, the preference for the original writing is justified. 32
Bearing in mind that the risk of mistransmission of the contents of a writing is the justification for the "best
evidence rule," we declare that this rule finds no application to this case. It should be noted that respondents
never disputed the terms and conditions of the promissory note thus leaving us to conclude that as far as the
parties herein are concerned, the wording or content of said note is clear enough and leaves no room for
disagreement. In their responsive pleadings, respondents' principal defense rests on the alleged lack of
consideration of the promissory note. In addition, respondent Morales also claims that he did not sign the
note in his personal capacity. These contentions clearly do not question the "precise wording" 33 of the
promissory note which should have paved the way for the application of the "best evidence rule." It was,
therefore, an error for the Court of Appeals to sustain the decision of the trial court on this point.
Besides, the "best evidence rule" as stated in our Revised Rules of Civil Procedure is not absolute. As quoted
earlier, the rule accepts of exceptions one of which is when the original of the subject document is in the
possession of the adverse party. As pointed out by petitioner in its motion to inhibit, had it been given the
opportunity by the court a quo, it would have sufficiently established that the original of Exhibit "A" was in
the possession of respondents which would have called into application one of the exceptions to the "best
evidence rule."
Significantly, and as discussed earlier, respondents failed to deny specifically the execution of the promissory
note. This being the case, there was no need for petitioner to present the original of the promissory note in
question. Their judicial admission with respect to the genuineness and execution of the promissory note
sufficiently established their liability to petitioner regardless of the fact that petitioner failed to present the
original of said note.34
Indeed, when the defendant fails to deny specifically and under oath the due execution and genuineness of a
document copied in a complaint, the plaintiff need not prove that fact as it is considered admitted by the
defendant.35 In the case of Asia Banking Corporation v. Walter E. Olsen & Co., 36 this Court held that Another error assigned by the appellant is the fact that the lower court took into consideration the
documents attached to the complaint as a part thereof, without having been expressly introduced in
evidence. This was no error. In the answer of the defendants there was no denial under oath of the
authenticity of these documents. Under Section 103 of the Code of Civil Procedure, the authenticity and due
execution of these documents must, in that case, be deemed admitted. The effect of this is to relieve the
plaintiff from the duty of expressly presenting such documents as evidence. The court, for the proper
decision of the case, may and should consider, without the introduction of evidence, the facts admitted by
the parties.37
Anent petitioner's allegation that the presiding judge of the court a quo should have inhibited himself from
this case, we resolve this issue against petitioner.
In order for this Court to sustain a charge of partiality and prejudice brought against a judge, there must be
convincing proof to show that he or she is, indeed, biased and partial. Bare allegations are not enough. Bias
and prejudice are serious charges which cannot be presumed particularly if weighed against a judge's sacred
obligation under his oath of office to administer justice without respect to person and do equal right to the
poor and the rich.38 There must be a showing of bias and prejudice stemming from an extrajudicial source
resulting in an opinion in the merits on some basis other than what the judge learned from his participation
in the case.39
In this case, as petitioner failed to proffer any evidence indicating that Judge Diaz was guilty of bias and
prejudice, we affirm the Court of Appeals' holding that there was no cogent reason for him to disqualify
himself from this case.
Finally, Rule 33, Section 1, of the Revised Rules of Civil Procedure states the rule on the effect of judgment on
demurrer to evidence. It reads:
SECTION 1. Demurrer to evidence. - After the plaintiff has completed the presentation of his evidence, the
defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has shown no
right to relief. If his motion is denied, he shall have the right to present evidence. If the motion is granted but
on appeal the order of dismissal is reversed he shall be deemed to have waived the right to present
evidence.
A demurrer to evidence abbreviates judicial proceedings, it being an instrument for the expeditious
termination of an action. Caution, however, must be exercised by the party seeking the dismissal of a case
upon this ground as under the rules, if the movant's plea for the dismissal on demurrer to evidence is
granted and the order of dismissal is reversed on appeal, he loses his right to adduce evidence. If the
defendant's motion for judgment on demurrer to evidence is granted and the order is subsequently reversed
on appeal, judgment is rendered in favor of the adverse party because the movant loses his right to present
evidence.40 The reviewing court cannot remand the case for further proceedings; rather, it should render
judgment on the basis of the evidence presented by the plaintiff. 41
Under the promissory note executed by respondents in this case, they are obligated to petitioner in the
amount of One Million Pesos, this being the amount of loan they obtained on 23 April 1982. In addition, they
also bound themselves to pay the 23% interest per annum on the loan; and a penalty charge of 3% per
annum on the amount due until fully paid. Respondents likewise agreed to pay attorney's fees equivalent to
10% of the total amount due, but in no case less than P200.00, plus costs of suit with both these amounts
bearing a 1% interest per month until paid. Costs against respondents.
WHEREFORE, premises considered, the Court of Appeals' decision dated 25 November 1999 as well as its
Resolution of 11 May 2000, affirming the order of the Regional Trial Court, Manila, Branch 27, dated 28
December 1987, are hereby REVERSED and SET ASIDE. Respondents are ordered to pay One Million Pesos
(P1,000,000.00) plus 23% interest per annum, penalty charge of 3% interest per annum, and 10% of the
amount due as attorney's fees together with a 1% interest per month until fully paid. The sum
of P220,020.00 which was the value of the postdated check given
by respondents to petitioner as partial payment should be deducted from the amount due from respondents.
SO ORDERED.
Puno, J., (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
[G.R. NO. 152881 : August 17, 2004]
ENGR. BAYANI MAGDAYAO, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari filed by petitioner Engr. Bayani Magdayao of the Decision 1 of
the Court of Appeals in CA-G.R. CR No. 20549 affirming the Decision 2 of the Regional Trial Court, Dipolog City,
Branch 8, convicting the petitioner of violation of Batas Pambansa (B.P.) Blg. 22.
The Antecedents
An Information was filed charging petitioner with violation of B.P. Blg. 22 on September 16, 1993, the
accusatory portion of which reads:
On or about September 30, 1991, at Dipolog City, Philippines, and within the jurisdiction of this Honorable
Court, the above-named accused, knowing fully well that he did not have sufficient funds in or credit with the
drawee bank, Philippine National Bank, Dipolog Branch, did then and there willfully, unlawfully and
feloniously make, draw, issue and deliver to one RICKY OLVIS, in payment of his obligation to the latter, PNB
Check No. 399967 dated September 30, 1991 in the amount of SIX HUNDRED THOUSAND PESOS
(P600,000.00), Philippine Currency, which check, however, when presented for payment with PNB-Dipolog
Branch, was dishonored and refused payment for the reason that it was drawn against insufficient funds, and
despite repeated demands made by the private complainant on the accused, the latter, failed to make good
the check's value, to the damage and prejudice of RICKY OLVIS in the aforestated amount.
CONTRARY TO LAW.3
When arraigned, the petitioner, assisted by counsel, entered a plea of not guilty.
When the case for trial was called on June 7, 1995 for the prosecution to adduce its evidence, the petitioner
and his counsel were absent. On motion of the prosecution, the court allowed it to adduce evidence. The
prosecution presented the private complainant, Ricky Olvis, who testified on direct examination that on
September 30, 1991, the petitioner drew and issued to him Philippine National Bank (PNB) Check No. 399967
dated September 30, 1991 in the amount of P600,000.00. The said check was drawn against the latter's
account with the PNB, Dipolog City Branch, and issued in payment of the petitioner's obligation with Olvis.
The latter deposited the check on October 1, 1991 in his account with the BPI-Family Bank, Dipolog City
Branch, but the drawee bank dishonored the check for the reason "Drawn Against Insufficient Funds"
stamped on the dorsal portion of the check. Olvis testified that when informed that his check was
dishonored, the petitioner pleaded for time to pay the amount thereof, but reneged on his promise. Olvis
then filed a criminal complaint against the petitioner for violation of B.P. Blg. 22 on September 4, 1992,
docketed as I.S. No. 92-368. The petitioner again offered to repay Olvis the amount of the obligation by
retrieving the dishonored check and replacing the same with two other checks: one for P400,000.00 and
another forP200,000.00 payable to Olvis. Taking pity on the petitioner, he agreed. He then returned the
original copy of the check to the petitioner, but the latter again failed to make good on his promise and failed
to pay the P600,000.00.
The prosecution wanted Olvis to identify the petitioner as the drawer of the check, but because of the latter's
absence and that of his counsel, the direct examination on the witness could not be terminated. The
prosecution moved that such direct examination of Olvis be continued on another date, and that the
petitioner be ordered to appear before the court so that he could be identified as the drawer of the subject
check. The trial court granted the motion and set the continuation of the trial on June 13, 1997. In the
meantime, the prosecution marked a photocopy of PNB Check No. 399967 as Exhibit "A," and the dorsal
portion thereof as Exhibit "A-1."
After several postponements at the instance of the petitioner, he and his counsel failed to appear before the
court for continuation of trial. They again failed to appear when the case was called for continuation of trial
on November 21, 1995. The prosecution offered in evidence the photocopy of PNB Check No. 399967, which
the court admitted. The trial court, thereafter, issued an Order declaring the case submitted for
decision.4 The petitioner filed a motion for a reconsideration of the Order, which the trial court denied on
January 26, 1996.
The petitioner then filed an Omnibus Supplemental Motion and to Allow Him to Adduce Evidence
alleging, inter alia, that:
h) Despite the absence of the original, with only a xerox copy of the PNB Check worthP600,000.00, and
further stressing that the same was paid, the prosecutor insisted, against the vigorous objection of accused,
in filing the case in Court. Plenty of water passed under the bridge since then; 5
In its Opposition to the said motion, the prosecution averred that it dispensed with the presentation of the
original of the dishonored check because the same had been returned to the petitioner. It also pointed out
that the petitioner failed to object to the presentation of the photocopy of the dishonored check.
In a Special Manifestation, the petitioner insisted that the photocopy of the subject check was inadmissible in
evidence because of the prosecution's failure to produce the original thereof. On July 8, 1996, the trial court
issued an Order denying the petitioner's motion. The petitioner's motion for reconsideration thereon was,
likewise, denied by the trial court.
On January 29, 1996, the trial court rendered judgment convicting the petitioner of the crime charged.
The fallo of the decision reads:
WHEREFORE, finding the guilt of the accused established beyond reasonable doubt, the herein accused,
Engr. Bayani Magdayao is convicted of the crime charged against him for Violation of Batas Pambansa
Bilang 22, as principal by direct participation, and pursuant to Section 1 thereof sentenced to suffer the
penalty of imprisonment for a period of six (6) months of arresto mayor and to pay the costs. The accused is
further ordered to pay the private complainant the sum of P600,000.00 corresponding to his obligation due
to the private offended party.
SO ORDERED.6
On appeal to the Court of Appeals, the petitioner assigned the following errors:
I
THE LOWER COURT ERRED IN CONVICTING THE ACCUSED OF THE CRIME CHARGED SOLELY ON THE BASIS OF
THE FOLLOWING EVIDENCE:
A. MACHINE OR PHOTOSTATIC COPY OF PNB CHECK NO. 399967 DATED SEPTEMBER 30, 1991;
B. WORD "DAIF" AT THE BACK OF THE PHOTOSTATIC COPY OF SAID CHECK;
C. UNCORROBORATED ORAL TESTIMONY OF PRIVATE COMPLAINANT.
II
THE LOWER COURT ERRED IN CONVICTING THE ACCUSED WITHOUT HIM BEING POSITIVELY IDENTIFIED BY
THE COMPLAINANT OR OTHER WITNESS.
III
THE LOWER COURT ERRED WHEN IT RENDERED THE DECISION WITH ALLEGED FINDINGS OF FACTS NOT
SUFFICIENTLY SUPPORTED BY EVIDENCE.
IV
THE LOWER COURT ERRED IN AWARDING CIVIL INDEMNITY TO PRIVATE COMPLAINANT IN THE AMOUNT OF
SIX HUNDRED THOUSAND PESOS.7
On December 21, 2001, the CA rendered judgment affirming the decision of the trial court. The appellate
court also denied the petitioner's motion for reconsideration.
In his petition at bar, the petitioner merely reiterates the errors he ascribed to the RTC in his appeal before
the CA, and prays that the decisions of the trial and appellate courts be set aside.
The Ruling of the Court
The petition has no merit.
On the first three assignments of error, the petitioner avers that the prosecution failed to prove his guilt
beyond reasonable doubt of the crime charged because of the following: (a) the photocopy of PNB Check No.
399967, adduced in evidence by the prosecution, is inadmissible in evidence under Rule 129, Section 1 of
the Revised Rules of Evidence; hence, has no probative weight; b) the prosecution failed to present the BPIFamily Bank teller to testify on the presentment of PNB Check No. 399967 and the dishonor thereof; and (c)
the prosecution failed to prove that it was he who drew and delivered the dishonored check to the private
complainant, and that he was properly notified of the dishonor of the said check. The petitioner also asserts
that there was no legal basis for the award of the amount of P6,000.00 as civil indemnity.
We rule against the petitioner.
Section 1 of B.P. Blg. 22 for which the petitioner was charged, reads:
Section 1. Checks without sufficient funds.' Any person who makes or draws and issues any check to
apply on account or for value, knowing at the time of issue that he does not have sufficient funds in or credit
with the drawee bank for the payment of such in full upon presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit or would have been dishonored for the
same reason had not the drawer without any valid reason, ordered the bank to stop payment, shall be
punished by imprisonment of not less than thirty (30) days but not more than one (1) year or by a fine of not
less than but not more than double the amount of the check which fine shall in no case exceed Two Hundred
Thousand Pesos, or both such fine and imprisonment at the discretion of the court.
To warrant the petitioner's conviction of the crime charged, the prosecution was burdened to prove the
following essential elements thereof:
(1) The making, drawing and issuance of any check to apply for account or for value;
(2) The knowledge of the maker, drawer, or issuer that at the time of issue he does not have sufficient funds
in or credit with the drawee bank for the payment of such check in full upon its presentment; and
cralawlibrary
(3) The subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor
for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment. 8
The gravamen of the offense is the act of making or issuing a worthless check or a check that is dishonored
upon presentment for payment. 9 As to the second element, knowledge on the part of the maker or drawer of
the check of the insufficiency of the funds in or credit with the bank to cover the check upon its presentment
refers to the state of mind of the drawer; hence, it is difficult for the prosecution to prove. The law creates
a prima facie knowledge on the insufficiency of funds or credit, coincidental with the attendance of the two
other elements. As such, Section 2 provides:
SEC. 2. Evidence of knowledge of insufficient funds. - The making, drawing and issuance of a check payment
of which is refused by the drawee because of insufficient funds in or credit with such bank, when presented
within ninety (90) days from the date of the check, shall be prima facie evidence of knowledge of such
insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon,
or makes arrangements for payment in full by the drawee of such check within five (5) banking days after
receiving notice that such check has not been paid by the drawee.
We agree with the petitioner that it was incumbent upon the prosecution to adduce in evidence the original
copy of PNB Check No. 399967 to prove the contents thereof, more specifically the names of the drawer and
endorsee, the date and amount and the dishonor thereof, as well as the reason for such dishonor. Section 3,
Rule 129 of the Revised Rules on Evidence specifically provides that when the subject of inquiry is the
contents of the document, no evidence shall be admissible other than the original thereof. The purpose of
the rule requiring the production by the offeror of the best evidence is the prevention of fraud, because if a
party is in possession of such evidence and withholds it and presents inferior or secondary evidence in its
place, the presumption is that the latter evidence is withheld from the court and the adverse party for a
fraudulent or devious purpose which its production would expose and defeat. 10 As long as the original
evidence can be had, the court should not receive in evidence that which is substitutionary in nature, such as
photocopies, in the absence of any clear showing that the original writing has been lost or destroyed or
cannot be produced in court. Such photocopies must be disregarded, being inadmissible evidence and barren
of probative weight.11
Furthermore, under Section 3(b), Rule 130 of the said Rules, secondary evidence of a writing may be
admitted when the original is in the custody or under the control of the party against whom the evidence is
offered, and the latter fails to produce it after reasonable notice. To warrant the admissibility of secondary
evidence when the original of a writing is in the custody or control of the adverse party, Section 6 of Rule 130
provides that the adverse party must be given reasonable notice, that he fails or refuses to produce the
same in court and that the offeror offers satisfactory proof of its existence:
When original document is in adverse party's custody or control. - If the document is in the custody or under
the control of the adverse party, he must have reasonable notice to produce it. If after such notice and after
satisfactory proof of its existence, he fails to produce the document, secondary evidence may be presented
as in the case of its loss.
The mere fact that the original of the writing is in the custody or control of the party against whom it is
offered does not warrant the admission of secondary evidence. The offeror must prove that he has done all in
his power to secure the best evidence by giving notice to the said party to produce the document. 12 The
notice may be in the form of a motion for the production of the original or made in open court in the
presence of the adverse party or via a subpoena duces tecum, provided that the party in custody of the
original has sufficient time to produce the same. When such party has the original of the writing and does
not voluntarily offer to produce it or refuses to produce it, secondary evidence may be admitted. 13
In this case, Olvis, the private complainant, testified that after the check was dishonored by the drawee bank
for insufficiency of funds, he returned it to the petitioner upon the latter's offer to pay the amount of the
check by drawing and issuing two checks, one for P400,000.00 and the other forP200,000.00. However, the
petitioner still failed to satisfy his obligation to Olvis:
Q
Sometime in the month of May 1991, do you remember that (sic) you have any transaction with the
accused?
chanroblesvirt ualawlibrary
Yes, Sir.
What was the transaction about?
It was about our joint venture in Ipil.
What did the accused in this case issue to you?
He issued me a check worth six hundred thousand pesos (P600,000.00).
If the photostatic copy of the check [would] be presented to you, would you be able to identify it?
Yes, Sir.
chanroblesv irtualawlibrary
Q
I am showing to you a photostatic copy of PNB Dipolog Branch Check # 399967 with a maturity date
on September 30, 1991 in the amount of six hundred thousand pesos (P600,000.00), is this the check issued
to you?
Yes, Sir.
Here is a signature at the bottom corner of this check, whose signature is this?
Bayani Magdayao['s].
Q
In other words, this check was issued for a valuable consideration in connection with the project you
have in Ipil?
Yes, Sir.
What did you do with the check?
I deposited this in BPI-Family Bank, but it was drawn against insufficient fund.
When did you deposit the check?
Sometime in October.
October, what year?
In 1991, Sir.
Within a reasonable period from the maturity date of the check, you caused it to be deposited?
Yes, Sir.
Q
And this check was dishonored by the depository bank, that the account to which it was drawn does
not have sufficient fund, is that indicated in this check?
Yes, Sir.
Where is that indication of dishonor for lack of sufficient fund?
Here, Sir.
INTERPRETER: Witness pointing to the check.

ATTY. CO:
We pray, Your Honor, that the photostatic copy of the check be marked as Exhibit "A." The reason why it was
dishonored, found at the back of this check, indicated as "DAIF" meaning to say: "Drawn Against Insufficient
Fund" be marked as Exhibit "A-1."
Q
After being informed that the check was dishonored by the drawee bank, what did you do?
I went to Magdayao's house and asked for payment but he refused to pay.
When you say Magdayao, are you referring to the accused in this case, Bayani Magdayao?
Yes, Sir.
It appears that this is merely a photostatic copy of the check, where is the original of the check?
A
Magdayao replaced the original check worth six hundred thousand pesos (P600,000.00), and he gave
me another check worth four hundred thousand pesos (P400,000.00) and two hundred thousand pesos
(P200,000.00).
Q
At the time the accused in this case replaced this check worth six hundred thousand (P600,000.00),
was the case already pending before the City Fiscal's Office or before this Honorable Court?
Yes, Sir, it is pending.
Until now the amount of six hundred thousand pesos (P600,000.00) has not been paid to you?
Yes, Sir.14
In his "Motion to Suspend Proceedings" in the trial court, the petitioner admitted that he received the original
copy of the dishonored check from the private complainant 15 and that he caused the non-payment of the
dishonored check.16 The petitioner cannot feign ignorance of the need for the production of the original copy
of PNB Check No. 399967, and the fact that the prosecution was able to present in evidence only a
photocopy thereof because the original was in his possession. In fact, in the Omnibus Supplemental Motion
dated February 8, 1996, and in his Special Manifestation filed on May 28, 1996, the petitioner complained of
the prosecution's violation of the best evidence rule. The petitioner, however, never produced the original of
the check, much less offered to produce the same. The petitioner deliberately withheld the original of the
check as a bargaining chip for the court to grant him an opportunity to adduce evidence in his defense,
which he failed to do following his numerous unjustified postponements as shown by the records.
There was no longer a need for the prosecution to present as witness the employee of the drawee bank who
made the notation at the dorsal portion of the dishonored check 17 to testify that the same was dishonored for
having been drawn against insufficient funds. The petitioner had already been informed of such fact of
dishonor and the reason therefor when Olvis returned the original of the check to him. In fact, as shown by
the testimony of Olvis, the petitioner drew and issued two other separate checks, one for P400,000.00 and
the other for P200,000.00, to replace the dishonored check.
Because of his dilatory tactics, the petitioner failed to adduce evidence to overcome that of the
prosecution's.
The petitioner's contention that Olvis failed to identify him as the drawer of the subject check is nettlesome.
It bears stressing that Olvis was ready to identify the petitioner after his direct examination, but the latter
and his counsel inexplicably failed to appear. The direct examination of Olvis had to be continued to enable
him to point to and identify the petitioner as the drawer of the check. This is shown by the transcript of the
stenographic notes taken during the trial, viz:
ATTY. CO:
Considering that the accused is not present, Your Honor, I would like to manifest that the private offended
party be given the opportunity to identify the accused for purposes of this case. 18
The trial court issued an Order on June 7, 1995, directing the petitioner, under pain of contempt, to appear
before it to enable Olvis to identify him:
After the declaration of the first and only witness for the prosecution, the private prosecutor prayed to set
the case for continuation of the trial, and ordering the defendant to appear to allow the prosecution to
establish his identity.
Set the case for continuation of the trial on June 13, 1995, ordering the accused to appear personally for
purposes of his identification in court under pain of contempt if he fails to comply unjustifiably with this
order. The defense shall be allowed to cross examine the witness for the prosecution if desired, otherwise, his
right of cross-examination shall be considered waived completely.
SO ORDERED.19
The petitioner defied the Order of the court and failed to appear as directed, and as gleaned from the records
(14) June 7, 1995 - The accused and counsel did not appear; hence, the prosecution was allowed to present
its evidence ex-parte. The private complainant was presented to testify in the direct-examination, reserving
the right of cross-examination on the part of the accused, and setting the case for the purpose on June 13,
1995.
(15) June 13, 1995 - The accused did not appear, but the defense counsel requested for a resetting of the
cross-examination to be conducted. The request was granted over the objection of the prosecution, and set
the continuation of the trial to August 31, 1995.
(16) August 31, 1995 - As in previous occasions, the accused did not appear and defense counsel requested
for another resetting, and despite the vigorous opposition by the prosecution, the trial was postponed to
October 3, 1995, with the understanding that if the accused will not appear, it would be taken to mean that
he waived his right to cross-examination and to present evidence in his defense.
(17) October 3, 1995 - Atty. Narciso Barbaso appeared as a new counsel for the accused but requested that
he be allowed to read first the transcript of the direct testimony of the plaintiff's witness to be crossexamined. The request was granted, and the trial was reset to November 21, 1995.
(18) November 21, 1995 - The accused and his counsel both did not appear. The prosecution formally offered
Exh. "A" in evidence, and upon its admission, the prosecution rested its case, and prayed that as stated in
the previous order of the court dated August 31, 1995, the case shall be considered submitted for judgment,
which request was granted.
(19) December 7, 1995 - The defense filed a motion for reconsideration of the order dated November 21,
1995. The court required the defense to file a supplemental motion stating the nature of its evidence to be
presented if allowed to enable the court to determine the merit of the motion for reconsideration, but despite
the lapsed (sic) of the period set by the court, the accused did not comply; hence, the denial of the motion
for reconsideration, and set the case for promulgation of the judgment on February 19, 1996.
(20) Then came the Omnibus Supplemental Motion, etc., by the accused dated February 8, 1996, and by
reason thereof, the promulgation of the judgment set on February 19, 1996, was held in abeyance.
(21) The defense counsel filed a motion to withdraw as counsel for the accused dated February 27, 1996,
and which was granted by the order of the court dated March 1, 1996.
[(22)] May 28, 1996 - A Special Manifestation dated May 21, 1996 in support of the Omnibus Supplemental
Motion filed thru another lawyer appearing as a new counsel for the accused, now under consideration. 20
Contrary to the petitioner's claim, the trial court did not award P6,000.00 as civil indemnity in favor of Olvis;
it ordered the petitioner to pay him P600,000.00, the amount of the subject check. Having failed to pay the
amount of the check, the petitioner is liable therefor and should be ordered to pay the same to the private
complainant in this case.21
On the second assigned error, the petitioner faulted the trial court for imposing a penalty of imprisonment
instead of a penalty of fine, and cites SC Circular No. 12-2000 to bolster his contention. He suggests that
since he is merely a first offender, he should be sentenced to pay a fine double the amount of the check.
The Office of the Solicitor General, on the other hand, objects to the petitioner's plea on the ground that
when the latter drew and issued the dishonored check to the private complainant, he knew that the residue
of his funds in the drawee bank was insufficient to pay the amount thereof.
Considering the facts and circumstances attendant in this case, we find the petitioner's plea to be barren of
merit. Administrative Circular No. 13-2001 provides:
It is, therefore, understood that:
1. Administrative Circular 12-2000 does not remove imprisonment as an alternative penalty for violations of
BP 22;
2. The Judges concerned may, in the exercise of sound discretion, and taking into consideration the peculiar
circumstances of each case, determine whether the imposition of a fine alone would best serve the interest
of justice, or whether forbearing to impose imprisonment would depreciate the seriousness of the offense,
work violence on the social order, or otherwise be contrary to the imperatives of justice;
3. Should only a fine be imposed and the accused be unable to pay the fine, there is no legal obstacle to the
application of the Revised Penal Code on subsidiary imprisonment. 22
The records show that despite the numerous opportunities given to him by the trial court, the petitioner
refused to adduce any evidence in his behalf. Moreover, the Court of Appeals found the petitioner's appeal to
be devoid of merit. Considering the factual milieu in this case, there is every reason for the Court to reject
the plea for a penalty of fine and maintain the penalty of imprisonment the trial court imposed on the
petitioner.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED DUE COURSE. The assailed decision of the
Court of Appeals is AFFIRMED. Costs against the petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, TINGA, and Chico-Nazario, JJ., concur.
G.R. No. 170633
October 17, 2007
MCC INDUSTRIAL SALES CORPORATION, petitioner,

vs.
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 Resolution 2 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 letter 9 addressed to Gregory
Chan, MCC Manager [also the President10 of Sanyo Seiki Stainless Steel Corporation], to
confirm MCC's and Sanyo Seiki's order of220 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. ST2POSTSO40112 containing the terms and conditions of the transaction. MCC sent back by
fax to Ssangyong the invoice bearing the conformity signature 13 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 for110MT covered by Pro Forma Invoice No. ST2-POSTS0401117 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, ST2POSTS0401-1 and ST2-POSTS0401-2), in that the quantity was now
officially 100MTper 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. ST2POSTS080-2.34 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. ST2POSTS080-1, 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 letter 37 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. ST2POSTS0401-1and ST2-POSTS0401-2.
After Ssangyong rested its case, defendants filed a Demurrer to Evidence 40 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 FormaInvoice
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 THEPRO FORMA INVOICES WITH REFERENCE NOS. ST2POSTS0401-1 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 Decision 48 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 certiorari56 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; and
IV Whether the award of actual damages and attorney's fees in favor of Ssangyong is
proper and justified.
-IIt 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. InDevelopment Bank of the
Philippines vs. 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 vs.
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--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
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."
xxxx
(h) "Electronic Document" refers to information or the representation of
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,74unlike 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:
xxxx
(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
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?
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.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:
xxxx
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?
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"?
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.
xxxx
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 Ecommerce Law of 1998. Is that not right?
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 DefensorSantiago 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
imagedividing 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 paperbased 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 computergenerated 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 issuancean 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
Pro forma Invoice dated 17

April 2000 with Contract
No.ST2-POSTS0401-1, ph
otocopy
To show that defendants

contracted with plaintiff for the
delivery of 110 MT of stainless
steel from Korea payable by way of
an irrevocable letter of credit in
favor of plaintiff, among other
conditions.
E-1

No.ST2-POSTS0401, conta
ined in facsimile/thermal
paper faxed by defendants
to plaintiff showing the
printed transmission details
To show that defendants sent their

confirmation of the (i) delivery to it
of the specified stainless steel
products, (ii) defendants' payment
thereof by way of an irrevocable
letter of credit in favor of plaintiff,
on the upper portion of said among other conditions.

paper as coming from
defendant MCC on 26 Apr
00 08:41AM
E-2
Conforme signature of Mr.

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 26 Apr 00 08:41AM
To show that defendants sent their

confirmation of the (i) delivery to it
of the total of 220MT specified
stainless steel products, (ii)
defendants' payment thereof by
way of an irrevocable letter of
credit in favor of plaintiff, among
other conditions.

No.ST2-POSTSO401-2, ph
otocopy
To show that defendants

contracted with plaintiff for
delivery of another 110 MT of
stainless steel from Korea payable
by way of an irrevocable letter of
credit in favor of plaintiff, among
other conditions.
Letter to defendant SANYO

SEIKE dated 20 June
2000,contained in
To prove that defendants were

informed of the date of L/C opening
and defendant's conforme/approval
thereof.
G-1
Signature of defendant
facsimile/thermal paper.
Letter to defendants dated

22 June 2000, original
To prove that defendants were

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

To prove that plaintiff repeatedly

requested defendants for the
agreed opening of the Letters of


Facsimile message to
defendants dated 28 June
2000, photocopy
Letter from defendants

dated 29 June
2000, contained in
MCC on 29 June 00 11:12
AM
M-1
MCC on June 00 11:12 AM


30 June 2000, photocopy
Credit, defendants' failure and

refusal to comply with their
obligations and the problems of
plaintiff is incurring by reason of
defendants' failure and refusal to
open the L/Cs.
To prove that defendants admit of

their liabilities to plaintiff, that they
requested for "more extension" of
time for the opening of the Letter
of Credit, and begging for favorable
understanding and consideration.
To prove that plaintiff reiterated its

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.

06 July 2000, original
Demand letter to
defendants dated 15 Aug
2000, original
To prove that plaintiff was

constrained to engaged services of
a lawyer for collection efforts.
Demand letter to
defendants dated 23 Aug
2000, original
To prove that defendants opened

the 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.
Demand letter to
defendants dated 11 Sept
2000, original
To show defendants' refusal and

failure 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.
Letter from plaintiff

SSANGYONG to defendant
SANYO SEIKI dated 13 April
2000, with fax back from
defendants SANYO
SEIKI/MCC to plaintiff
SSANGYONG,contained in
with back-up photocopy
To prove that there was a perfected

sale and purchase agreement
between the parties for 220 metric
tons of steel products at the price
of US$1,860/ton.
W-1
Conforme signature of
defendant Gregory Chan,
contained in
To prove that defendants, acting

through Gregory Chan, agreed to
the sale and purchase of 220
metric tons of 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.
Pro forma Invoice dated 16 To prove that defendant MCC

August 2000, photocopy
agreed 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-POSTS0801,photocopy
To prove that the present Pro

formaInvoice was the first of 2 pro
formainvoices.
X-3
Conforme signature of
defendant Gregory
Chan,photocopy
To prove that defendant MCC,

acting through Gregory Chan,
agreed to the 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 plaintiff SSANGYONG
dated 22 August
2000, contained in

between plaintiff SSANGYONG and
defendant MCC for the balance of
100 metric tons, apart from the
other order and shipment of 100
metric tons which was delivered by
by defendant MCC.
DD-1
Ref. No. ST2-POSTS080-
1,contained in
DD-2

between plaintiff SSANGYONG and
defendant MCC for the balance of
100 metric tons, apart from the
other order and shipment of 100
metric tons which was delivered by
by defendant MCC.
To prove that defendant MCC,
Gregory Chan, contained in acting through Gregory Chan,
agreed to the sale and purchase of
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.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. ST2POSTS0401-1 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 andbona 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 andST2POSTS080-2 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 "V1," 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 theATTORNEY'S
FEES as awarded by the trial court.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-Martinez, Chico-Nazario, Reyes, JJ., concur.
[G.R. NO. 145842 : June 27, 2008]
EDSA SHANGRI-LA HOTEL AND RESORT, INC., RUFO B. COLAYCO, RUFINO L. SAMANIEGO, KUOK
KHOON CHEN, and KUOK KHOON TSEN, Petitioners, v. BF CORPORATION, Respondent.
[G.R. NO. 145873 : June 27, 2008]
CYNTHIA ROXAS-DEL CASTILLO, Petitioner, v. BF CORPORATION, Respondent.
DECISION
VELASCO, JR., J.:
Before us are these two (2) consolidated petitions for review under Rule 45 to nullify certain issuances of the
Court of Appeals (CA).
In the first petition, docketed as G.R. No. 145842, petitioners Edsa Shangri-la Hotel and Resort, Inc.
(ESHRI), Rufo B. Colayco, Rufino L. Samaniego, Kuok Khoon Chen, and Kuok Khoon Tsen assail the
Decision1 dated November 12, 1999 of the CA in CA-G.R. CV No. 57399, affirming the Decision 2 dated
September 23, 1996 of the Regional Trial Court (RTC), Branch 162 in Pasig City in Civil Case No. 63435 that
ordered them to pay jointly and severally respondent BF Corporation (BF) a sum of money with interests and
damages. They also assail the CA Resolution dated October 25, 2000 which, apart from setting aside an
earlier Resolution3 of August 13, 1999 granting ESHRI's application for restitution and damages against bond,
affirmed the aforesaid September 23, 1996 RTC Decision.
In the second petition, docketed as G.R. No. 145873, petitioner Cynthia Roxas-del Castillo also assails the
aforementioned CA Decision of November 12, 1999 insofar at it adjudged her jointly and severally liable with
ESHRI, et al. to pay the monetary award decreed in the RTC Decision.
Both petitions stemmed from a construction contract denominated as Agreement for the Execution of
Builder's Work for the EDSA Shangri-la Hotel Project 4 that ESHRI and BF executed for the construction of the
EDSA Shangri-la Hotel starting May 1, 1991. Among other things, the contract stipulated for the payment of
the contract price on the basis of the work accomplished as described in the monthly progress billings. Under
this arrangement, BF shall submit a monthly progress billing to ESHRI which would then re-measure the work
accomplished and prepare a Progress Payment Certificate for that month's progress billing. 5
In a memorandum-letter dated August 16, 1991 to BF, ESHRI laid out the collection procedure BF was to
follow, to wit: (1) submission of the progress billing to ESHRI's Engineering Department; (2) following-up of
the preparation of the Progress Payment Certificate with the Head of the Quantity Surveying Department;
and (3) following-up of the release of the payment with one Evelyn San Pascual. BF adhered to the
procedures agreed upon in all its billings for the period from May 1, 1991 to June 30, 1992, submitting for the
purpose the required Builders Work Summary, the monthly progress billings, including an evaluation of the
work in accordance with the Project Manager's Instructions (PMIs) and the detailed valuations contained in
the Work Variation Orders (WVOs) for final re-measurement under the PMIs. BF said that the values of the
WVOs were contained in the progress billings under the section "Change Orders." 6
From May 1, 1991 to June 30, 1992, BF submitted a total of 19 progress billings following the procedure
agreed upon. Based on Progress Billing Nos. 1 to 13, ESHRI paid BF PhP 86,501,834.05. 7
According to BF, however, ESHRI, for Progress Billing Nos. 14 to 19, did not re-measure the work done, did
not prepare the Progress Payment Certificates, let alone remit payment for the inclusive periods covered. In
this regard, BF claimed having been misled into working continuously on the project by ESHRI which gave the
assurance about the Progress Payment Certificates already being processed.
After several futile attempts to collect the unpaid billings, BF filed, on July 26, 1993, before the RTC a suit for
a sum of money and damages.
In its defense, ESHRI claimed having overpaid BF for Progress Billing Nos. 1 to 13 and, by way of
counterclaim with damages, asked that BF be ordered to refund the excess payments. ESHRI also charged BF
with incurring delay and turning up with inferior work accomplishment.
The RTC found for BF
On September 23, 1996, the RTC, on the main finding that BF, as plaintiff a quo, is entitled to the payment of
its claim covered by Progress Billing Nos. 14 to 19 and to the retention money corresponding to Progress
Billing Nos. 1 to 11, with interest in both instances, rendered judgment for BF. The fallo of the RTC Decision
reads:
WHEREFORE, defendants [EHSRI], Ru[f]o B. Colayco, Rufino L. Samaniego, Cynthia del Castillo, Kuok Khoon
Chen, and Kuok Khoon Tsen, are jointly and severally hereby ordered to:
1. Pay plaintiff the sum of P24,780,490.00 representing unpaid construction work accomplishments under
plaintiff's Progress Billings Nos. 14-19;
2. Return to plaintiff the retention sum of P5,810,000.00;
3. Pay legal interest on the amount of P24,780,490.80 representing the construction work accomplishments
under Progress Billings Nos. 14-19 and on the amount of P5,810,000.00 representing the retention sum from
date of demand until their full Payment;
4. Pay plaintiff P1,000,000.00 as moral damages, P1,000,000.00 as exemplary damages, P1,000,000.00 as
attorney's fees, and cost of the suit.8
According to the RTC, ESHRI's refusal to pay BF's valid claims constituted evident bad faith entitling BF to
moral damages and attorney's fees.
ESHRI subsequently moved for reconsideration, but the motion was denied by the RTC, prompting ESHRI to
appeal to the CA in CA-G.R. CV No. 57399.
Pending the resolution of CA-G.R. CV No. 57399, the following events and/or incidents transpired:
(1) The trial court, by Order dated January 21, 1997, granted BF's motion for execution pending appeal.
ESHRI assailed this order before the CA via a petition for certiorari, docketed as CA-G.R. SP No.
43187.9 Meanwhile, the branch sheriff garnished from ESHRI's bank account in the Philippine National Bank
(PNB) the amount of PhP 35 million.
(2) On March 7, 1997, the CA issued in CA-G.R. SP No. 43187 a writ of preliminary injunction enjoining the
trial court from carrying out its January 21, 1997 Order upon ESHRI's posting of a PhP 1 million bond. In a
supplemental resolution issued on the same day, the CA issued a writ of preliminary mandatory injunction
directing the trial court judge and/or his branch sheriff acting under him (a) to lift all the garnishments and
levy made under the enjoined order of execution pending appeal; (b) to immediately return the garnished
deposits to PNB instead of delivering the same to ESHRI; and (c) if the garnished deposits have been
delivered to BF, the latter shall return the same to ESHRI's deposit account.
(3) By a Decision dated June 30, 1997 in CA-G.R. SP No. 43187, the CA set aside the trial court's January 21,
1997 Order. The CA would later deny BF's motion for reconsideration.
(4) Aggrieved, BF filed before this Court a Petition for Review of the CA Decision, docketed as G.R. No.
132655.10 On August 11, 1998, the Court affirmed the assailed decision of the CA with the modification that
the recovery of ESHRI's garnished deposits shall be against BF's bond. 11
We denied the motions for reconsideration of ESHRI and BF.
(5) Forthwith, ESHRI filed, and the CA by Resolution of August 13, 1999 granted, an application for restitution
or damages against BF's bond. Consequently, BF and Stronghold Insurance Co., Inc., the bonding company,
filed separate motions for reconsideration.
On November 12, 1999, in CA-G.R. CV No. 57399, the CA rendered a Decision resolving (1) the aforesaid
motions of BF and its surety and (2) herein petitioners' appeal from the trial court's Decision dated
September 23, 1996. This November 12, 1999 Decision, finding for BF and now assailed in these separate
recourses, dispositively reads:
WHEREFORE, premises considered, the decision appealed from is AFFIRMED in toto. This Court's Resolution
dated 13 August 1999 is reconsidered and set aside, and defendants-appellants' application for restitution is
denied for lack of merit.
SO ORDERED.12
The CA predicated its ruling on the interplay of two main reasons. First, the issues the parties raised in their
respective briefs were, for the most part, factual and evidentiary. Thus, there is no reason to disturb the case
disposition of the RTC, inclusive of its award of damages and attorney's fees and the reasons underpinning
the award. Second, BF had sufficiently established its case by preponderance of evidence. Part of what it had
sufficiently proven relates to ESHRI being remiss in its obligation to re-measure BF's later work
accomplishments and pay the same. On the other hand, ESHRI had failed to prove the basis of its disclaimer
from liability, such as its allegation on the defective work accomplished by BF.
Apropos ESHRI's entitlement to the remedy of restitution or reparation arising from the execution of the RTC
Decision pending appeal, the CA held that such remedy may peremptorily be allowed only if the executed
judgment is reversed, a situation not obtaining in this case.
Following the denial by the CA, per its Resolution 13 dated October 25, 2000, of their motion for
reconsideration, petitioners are now before the Court, petitioner del Castillo opting, however, to file a
separate recourse.
[G.R. NO. 145842]
In G.R. No. 145842, petitioners ESHRI, et al. raise the following issues for our consideration:
I. Whether or not the [CA] committed grave abuse of discretion in disregarding issues of law raised by
petitioners in their appeal [particularly in admitting in evidence photocopies of Progress Billing Nos. 14 to 19,
PMIs and WVOs].
II. Whether or not the [CA] committed grave abuse of discretion in not holding respondent guilty of delay in
the performance of its obligations and, hence, liable for liquidated damages [in view that respondent is guilty
of delay and that its works were defective].
III. Whether or not the [CA] committed grave abuse of discretion in finding petitioners guilty of malice and
evidence bad faith, and in awarding moral and exemplary damages and attorney's fees to respondent.
IV. Whether or not the [CA] erred in setting aside its Resolution dated August 13, 2000. 14
The petition has no merit.
Prefatorily, it should be stressed that the second and third issues tendered relate to the correctness of the
CA's factual determinations, specifically on whether or not BF was in delay and had come up with defective
works, and whether or not petitioners were guilty of malice and bad faith. It is basic that in an appeal
by certiorari under Rule 45, only questions of law may be presented by the parties and reviewed by the
Court.15 Just as basic is the rule that factual findings of the CA, affirmatory of that of the trial court, are final
and conclusive on the Court and may not be reviewed on appeal, except for the most compelling of reasons,
such as when: (1) the conclusion is grounded on speculations, surmises, or conjectures; (2) the inference is
manifestly mistaken, absurd, or impossible; (3) there is grave abuse of discretion; (4) the judgment is based
on a misapprehension of facts; (5) the findings of fact are conflicting; (6) such findings are contrary to the
admissions of both parties; and (7) the CA manifestly overlooked certain relevant evidence and undisputed
facts, that, if properly considered, would justify a different conclusion. 16
In our review of this case, we find that none of the above exceptions obtains. Accordingly, the factual
findings of the trial court, as affirmed by the CA, that there was delay on the part of ESHRI, that there was no
proof that BF's work was defective, and that petitioners were guilty of malice and bad faith, ought to be
affirmed.
Admissibility of Photocopies of Progress Billing Nos. 14 to 19,

PMIs and WVOs
Petitioners fault the CA, and necessarily the trial court, on the matter of the admission in evidence of the
photocopies of Progress Billing Nos. 14 to 19 and the complementing PMIs and the WVOs. According to
petitioners, BF, before being allowed to adduce in evidence the photocopies adverted to, ought to have laid
the basis for the presentation of the photocopies as secondary evidence, conformably to the best evidence
rule.
Respondent BF, on the other hand, avers having complied with the laying-the-basis requirement. Defending
the action of the courts below in admitting into evidence the photocopies of the documents aforementioned,
BF explained that it could not present the original of the documents since they were in the possession of
ESHRI which refused to hand them over to BF despite requests.
We agree with BF. The only actual rule that the term "best evidence" denotes is the rule requiring that the
original of a writing must, as a general proposition, be produced 17 and secondary evidence of its contents is
not admissible except where the original cannot be had. Rule 130, Section 3 of the Rules of Court enunciates
the best evidence rule:
SEC. 3. Original document must be produced; exceptions. - When the subject of inquiry is the contents of a
document, no evidence shall be admissible other than the original document itself, except in the following
cases:
(a) When the original has been lost or destroyed, or cannot be produced in court, without bad faith on the
part of the offeror;
(b) When the original is in the custody or under the control of the party against whom the
evidence is offered, and the latter fails to produce it after reasonable notice; (Emphasis added.)
Complementing the above provision is Sec. 6 of Rule 130, which reads:
SEC. 6. When original document is in adverse party's custody or control. - If the document is in the custody
or under control of the adverse party, he must have reasonable notice to produce it. If after such notice and
after satisfactory proof of its existence, he fails to produce the document, secondary evidence may be
presented as in the case of loss.
Secondary evidence of the contents of a written instrument or document refers to evidence other than the
original instrument or document itself.18 A party may present secondary evidence of the contents of a writing
not only when the original is lost or destroyed, but also when it is in the custody or under the control of the
adverse party. In either instance, however, certain explanations must be given before a party can resort to
secondary evidence.
In our view, the trial court correctly allowed the presentation of the photocopied documents in question as
secondary evidence. Any suggestion that BF failed to lay the required basis for presenting the photocopies of
Progress Billing Nos. 14 to 19 instead of their originals has to be dismissed. The stenographic notes of the
following exchanges between Atty. Andres and Atty. Autea, counsel for BF and ESHRI, respectively, reveal
that BF had complied with the requirements:
ATTY. ANDRES:
During the previous hearing of this case, your Honor, likewise, the witness testified that certain exhibits
namely, the Progress Payment Certificates and the Progress Billings the originals of these documents were
transmitted to ESHRI, all the originals are in the possession of ESHRI since these are internal documents and
I am referring specifically to the Progress Payment Certificates. We requested your Honor, that in order
that plaintiff [BF] be allowed to present secondary original, that opposing counsel first be given
opportunity to present the originals which are in their possession. May we know if they have
brought the originals and whether they will present the originals in court, Your Honor. (Emphasis added.)
ATTY. AUTEA:
We have already informed our client about the situation, your Honor, that it has been claimed by plaintiff
that some of the originals are in their possession and our client assured that, they will try to check.
Unfortunately, we have not heard from our client, Your Honor.
Four factual premises are readily deducible from the above exchanges, to wit: (1) the existence of the
original documents which ESHRI had possession of; (2) a request was made on ESHRI to produce the
documents; (3) ESHRI was afforded sufficient time to produce them; and (4) ESHRI was not inclined to
produce them.
Clearly, the circumstances obtaining in this case fall under the exception under Sec. 3(b) of Rule 130. In
other words, the conditions sine qua non for the presentation and reception of the photocopies of the original
document as secondary evidence have been met. These are: (1) there is proof of the original document's
execution or existence; (2) there is proof of the cause of the original document's unavailability; and (3) the
offeror is in good faith.19 While perhaps not on all fours because it involved a check, what the Court said
in Magdayao v. People, is very much apt, thus:
x x x To warrant the admissibility of secondary evidence when the original of a writing is in the custody or
control of the adverse party, Section 6 of Rule 130 provides that the adverse party must be given reasonable
notice, that he fails or refuses to produce the same in court and that the offeror offers satisfactory proof of its
existence.
xxx
The mere fact that the original of the writing is in the custody or control of the party against whom it is
offered does not warrant the admission of secondary evidence. The offeror must prove that he has done all in
his power to secure the best evidence by giving notice to the said party to produce the document. The notice
may be in the form of a motion for the production of the original or made in open court in the presence of the
adverse party or via a subpoena duces tecum, provided that the party in custody of the original has sufficient
time to produce the same. When such party has the original of the writing and does not voluntarily
offer to produce it or refuses to produce it, secondary evidence may be admitted. 20 (Emphasis
supplied.)
On the Restitution of the Garnished Funds
We now come to the propriety of the restitution of the garnished funds. As petitioners maintain, the CA
effectively, but erroneously, prevented restitution of ESHRI's improperly garnished funds when it nullified its
own August 13, 1999 Resolution in CA-G.R. SP No. 43187. In this regard, petitioners invite attention to the
fact that the restitution of the funds was in accordance with this Court's final and already executory decision
in G.R. No. 132655, implying that ESHRI should be restored to its own funds without awaiting the final
outcome of the main case. For ease of reference, we reproduce what the appellate court pertinently wrote in
its Resolution of August 13, 1999:
BASED ON THE FOREGOING, the Application (for Restitution/Damages against Bond for Execution Pending
Appeal) dated May 12, 1999 filed by [ESHRI] is GRANTED. Accordingly, the surety of [BF], STRONGHOLD
Insurance Co., Inc., is ORDERED to PAYthe sum of [PhP 35 million] to [ESHRI] under its SICI Bond. x x x In
the event that the bond shall turn out to be insufficient or the surety (STRONGHOLD) cannot be made liable
under its bond, [BF], being jointly and severally liable under the bond isORDERED to RETURN the amount
of [PhP 35 million] representing the garnished deposits of the bank account maintained by [ESHRI] with the
[PNB] Shangri-la Plaza Branch, Mandaluyong City. Otherwise, this Court shall cause the implementation of
the Writ of Execution dated April 24, 1998 issued in Civil Case No. 63435 against both [BF], and/or its surety,
STRONGHOLD, in case they should fail to comply with these directives.
SO ORDERED.21
Petitioners' contention on the restitution angle has no merit, for, as may be recalled, the CA, simultaneously
with the nullification and setting aside of its August 13, 1999 Resolution, affirmed, via its assailed November
12, 1999 Decision, the RTC Decision of September 23, 1996, the execution pending appeal of which spawned
another dispute between the parties. And as may be recalled further, the appellate court nullified its August
13, 1999 Resolution on the basis of Sec. 5, Rule 39, which provides:
Sec. 5. Effect of reversal of executed judgment. - Where the executed judgment is reversed totally or
partially, or annulled, on appeal or otherwise, the trial court may, on motion, issue such orders of restitution
or reparation of damages as equity and justice may warrant under the circumstances.
On the strength of the aforequoted provision, the appellate court correctly dismissed ESHRI's claim for
restitution of its garnished deposits, the executed appealed RTC Decision in Civil Case No. 63435 having in
fact been upheld in toto.
It is true that the Court's Decision of August 11, 1998 in G.R. No. 132655 recognized the validity of the
issuance of the desired restitution order. It bears to emphasize, however, that the CA had since then decided
CA-G.R. CV No. 57399, the main case, on the merits when it affirmed the underlying RTC Decision in Civil
Case No. 63435. This CA Decision on the original and main case effectively rendered our decision on the
incidental procedural matter on restitution moot and academic. Allowing restitution at this point would not
serve any purpose, but only prolong an already protracted litigation.
[G.R. NO. 145873]
Petitioner Roxas-del Castillo, in her separate petition, excepts from the CA Decision affirming, in its entirety,
the RTC Decision holding her, with the other individual petitioners in G.R. No. 145842, who were members of
the Board of Directors of ESHRI, jointly and severally liable with ESHRI for the judgment award. She presently
contends:
I. The [CA] erred in not declaring that the decision of the trial court adjudging petitioner personally liable to
respondent void for not stating the factual and legal basis for such award.
II. The [CA] erred in not ruling that as former Director, Petitioner cannot be held personally liable for any
alleged breach of a contract entered into by the corporation.
III. The [cA] erred in not ruling that respondent is not entitled to an award of moral damages.
IV. The [CA] erred in holding petitioner personally liable to respondent for exemplary damages.
V. The [CA] erred in not ruling that respondent is not entitled to any award of attorney's fees. 22
First off, Roxas-del Castillo submits that the RTC decision in question violated the requirements of due
process and of Sec. 14, Article VII of the Constitution that states, "No decision shall be rendered by any court
without expressing therein clearly and distinctly the facts and the law on which it is based."
Roxas-del Castillo's threshold posture is correct. Indeed, the RTC decision in question, as couched, does not
provide the factual or legal basis for holding her personally liable under the premises. In fact, only in the
dispositive portion of the decision did her solidary liability crop up. And save for her inclusion as party
defendant in the underlying complaint, no reference is made in other pleadings thus filed as to her liability.
The Court notes that the appellate court, by its affirmatory ruling, effectively recognized the applicability of
the doctrine on piercing the veil of the separate corporate identity. Under the circumstances of this case, we
cannot allow such application. A corporation, upon coming to existence, is invested by law with a personality
separate and distinct from those of the persons composing it. Ownership by a single or a small group of
stockholders of nearly all of the capital stock of the corporation is not, without more, sufficient to disregard
the fiction of separate corporate personality.23 Thus, obligations incurred by corporate officers, acting as
corporate agents, are not theirs but direct accountabilities of the corporation they represent. Solidary liability
on the part of corporate officers may at times attach, but only under exceptional circumstances, such as
when they act with malice or in bad faith.24 Also, in appropriate cases, the veil of corporate fiction shall be
disregarded when the separate juridical personality of a corporation is abused or used to commit fraud and
perpetrate a social injustice, or used as a vehicle to evade obligations. 25 In this case, no act of malice or like
dishonest purpose is ascribed on petitioner Roxas-del Castillo as to warrant the lifting of the corporate veil.
The above conclusion would still hold even if petitioner Roxas-del Castillo, at the time ESHRI defaulted in
paying BF's monthly progress bill, was still a director, for, before she could be held personally liable as
corporate director, it must be shown that she acted in a manner and under the circumstances contemplated
in Sec. 31 of the Corporation Code, which reads:
Section 31. Directors or trustees who willfully or knowingly vote for or assent to patently unlawful
acts of the corporation or acquire any pecuniary interest in conflict with their duty as such directors
or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons. (Emphasis ours.)
We do not find anything in the testimony of one Crispin Balingit to indicate that Roxas-del Castillo made any
misrepresentation respecting the payment of the bills in question. Balingit, in fact, testified that the
submitted but unpaid billings were still being evaluated. Further, in the said testimony, in no instance was
bad faith imputed on Roxas-del Castillo.
Not lost on the Court are some material dates. As it were, the controversy between the principal parties
started in July 1992 when Roxas-del Castillo no longer sat in the ESHRI Board, a reality BF does not appear to
dispute. In fine, she no longer had any participation in ESHRI's corporate affairs when what basically is the
ESHRI-BF dispute erupted. Familiar and fundamental is the rule that contracts are binding only among parties
to an agreement. Art. 1311 of the Civil Code is clear on this point:
Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in cases where
the rights and obligations are not transmissible by their nature, or by stipulation or by provision of law.
In the instant case, Roxas-del Castillo could not plausibly be held liable for breaches of contract committed
by ESHRI nor for the alleged wrongdoings of its governing board or corporate officers occurring after she
severed official ties with the hotel management.
Given the foregoing perspective, the other issues raised by Roxas-del Castillo as to her liability for moral and
exemplary damages and attorney's fees are now moot and academic.
And her other arguments insofar they indirectly impact on the liability of ESHRI need not detain us any
longer for we have sufficiently passed upon those concerns in our review of G.R. No. 145842.
WHEREFORE, the petition in G.R. No. 145842 is DISMISSED, while the petition in G.R. No. 145873
isGRANTED. Accordingly, the appealed Decision dated November 12, 1999 of the CA in CA-G.R. CV No.
57399 is AFFIRMED with MODIFICATION that the petitioner in G.R. No. 145873, Cynthia Roxas-del Castillo,
is absolved from any liability decreed in the RTC Decision dated September 23, 1996 in Civil Case No. 63435,
as affirmed by the CA.
SO ORDERED.
[G.R. NO. 164326 : October 17, 2008]
SEAOIL PETROLEUM CORPORATION, Petitioners, v. AUTOCORP GROUP and PAUL Y.
RODRIGUEZ, Respondents.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
Decision1 of the Court of Appeals (CA) dated May 20, 2004 in CA-G.R. CV No. 72193, which hadaffirmed in
toto the Decision2 of the Regional Trial Court (RTC) of Pasig City, Branch 157, dated September 10, 2001 in
Civil Case No. 64943.
The factual antecedents, as summarized by the CA, are as follows:
On September 24, 1994, defendant-appellant Seaoil Petroleum Corporation (Seaoil, for brevity) purchased
one unit of ROBEX 200 LC Excavator, Model 1994 from plaintiff-appellee Autocorp Group (Autocorp for short).
The original cost of the unit wasP2,500,000.00 but was increased to P3,112,519.94 because it was paid in 12
monthly installments up to September 30, 1995. The sales agreement was embodied in the Vehicle Sales
Invoice No. A-0209 and Vehicle Sales Confirmation No. 258. Both documents were signed by Francis Yu (Yu
for short), president of Seaoil, on behalf of said corporation. Furthermore, it was agreed that despite delivery
of the excavator, ownership thereof was to remain with Autocorp until the obligation is fully settled. In this
light, Seaoil's contractor, Romeo Valera, issued 12 postdated checks. However, Autocorp refused to accept
the checks because they were not under Seaoil's name. Hence, Yu, on behalf of Seaoil, signed and issued 12
postdated checks for P259,376.62 each with Autocorp as payee.
The excavator was subsequently delivered on September 26, 1994 by Autocorp and was received by Seaoil
in its depot in Batangas.
The relationship started to turn sour when the first check bounced. However, it was remedied when Seaoil
replaced it with a good check. The second check likewise was also good when presented for payment.
However, the remaining 10 checks were not honored by the bank since Seaoil requested that payment be
stopped. It was downhill from thereon.
Despite repeated demands, Seaoil refused to pay the remaining balance ofP2,593,766.20. Hence, on January
24, 1995, Autocorp filed a complaint for recovery of personal property with damages and replevin in the
Regional Trial Court of Pasig. The trial court ruled for Autocorp. Hence, this appeal.
Seaoil, on the other hand, alleges that the transaction is not as simple as described above. It claims that
Seaoil and Autocorp were only utilized as conduits to settle the obligation of one foreign entity named Uniline
Asia (herein referred to as Uniline), in favor of another foreign entity, Focus Point International, Incorporated
(Focus for short). Paul Rodriguez (Rodriguez for brevity) is a stockholder and director of Autocorp. He is also
the owner of Uniline. On the other hand, Yu is the president and stockholder of Seaoil and is at the same time
owner of Focus. Allegedly, Uniline chartered MV Asia Property (sic) in the amount of $315,711.71 from its
owner Focus. Uniline was not able to settle the said amount. Hence, Uniline, through Rodriguez, proposed to
settle the obligation through conveyance of vehicles and heavy equipment. Consequently, four units of
Tatamobile pick-up trucks procured from Autocorp were conveyed to Focus as partial payment. The excavator
in controversy was allegedly one part of the vehicles conveyed to Focus. Seaoil claims that Rodriguez initially
issued 12 postdated checks in favor of Autocorp as payment for the excavator. However, due to the fact that
it was company policy for Autocorp not to honor postdated checks issued by its own directors, Rodriguez
requested Yu to issue 12 PBCOM postdated checks in favor of Autocorp. In turn, said checks would be funded
by the corresponding 12 Monte de Piedad postdated checks issued by Rodriguez. These Monte de Piedad
checks were postdated three days prior to the maturity of the PBCOM checks.
Seaoil claims that Rodriguez issued a stop payment order on the ten checks thus constraining the former to
also order a stop payment order on the PBCOM checks.
In short, Seaoil claims that the real transaction is that Uniline, through Rodriguez, owed money to Focus. In
lieu of payment, Uniline instead agreed to convey the excavator to Focus. This was to be paid by checks
issued by Seaoil but which in turn were to be funded by checks issued by Uniline. x x x 3
As narrated above, respondent Autocorp filed a Complaint for Recovery of Personal Property with Damages
and Replevin4 against Seaoil before the RTC of Pasig City. In its September 10, 2001 Decision, the RTC ruled
that the transaction between Autocorp and Seaoil was a simple contract of sale payable in installments. 5 It
also held that the obligation to pay plaintiff the remainder of the purchase price of the excavator solely
devolves on Seaoil. Paul Rodriguez, not being a party to the sale of the excavator, could not be held liable
therefor. The decretal portion of the trial court's Decision reads, thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Autocorp Group and against defendant Seaoil
Petroleum Corporation which is hereby directed to pay plaintiff:
- P2,389,179.23 plus 3% interest from the time of judicial demand until full payment; and
cralawlibrary
- 25% of the total amount due as attorney's fees and cost of litigation.
The third-party complaint filed by defendant Seaoil Petroleum Corporation against third-party defendant Paul
Rodriguez is hereby DISMISSED for lack of merit.
SO ORDERED.
Seaoil filed a Petition for Review before the CA. In its assailed Decision, the CA dismissed the petition and
affirmed the RTC's Decision in toto.6 It held that the transaction between Yu and Rodriguez was merely
verbal. This cannot alter the sales contract between Seaoil and Autocorp as this will run counter to the parol
evidence rule which prohibits the introduction of oral and parol evidence to modify the terms of the contract.
The claim that it falls under the exceptions to the parol evidence rule has not been sufficiently proven.
Moreover, it held that Autocorp's separate corporate personality cannot be disregarded and the veil of
corporate fiction pierced. Seaoil was not able to show that Autocorp was merely an alter ego of Uniline or
that both corporations were utilized to perpetrate a fraud. Lastly, it held that the RTC was correct in
dismissing the third-party complaint since it did not arise out of the same transaction on which the plaintiff's
claim is based, or that the third party's claim, although arising out of another transaction, is connected to the
plaintiff's claim. Besides, the CA said, such claim may be enforced in a separate action.
Seaoil now comes before this Court in a Petition for Review raising the following issues:
I
Whether or not the Court of Appeals erred in partially applying the parol evidence rule to prove only some
terms contained in one portion of the document but disregarded the rule with respect to another but
substantial portion or entry also contained in the same document which should have proven the true nature
of the transaction involved.
II
Whether or not the Court of Appeals gravely erred in its judgment based on misapprehension of facts when it
declared absence of facts which are contradicted by presence of evidence on record.
III
Whether or not the dismissal of the third-party complaint would have the legal effect ofres judicata as would
unjustly preclude petitioner from enforcing its claim against respondent Rodriguez (third-party defendant) in
a separate action.
IV
Whether or not, given the facts in evidence, the lower courts should have pierced the corporate veil.
The Petition lacks merit. We sustain the ruling of the CA.
We find no fault in the trial court's appreciation of the facts of this case. The findings of fact of the trial court
are conclusive upon this Court, especially when affirmed by the CA. None of the exceptions to this wellsettled rule has been shown to exist in this case.
Petitioner does not question the validity of the vehicle sales invoice but merely argues that the same does
not reflect the true agreement of the parties. However, petitioner only had its bare testimony to back up the
alleged arrangement with Rodriguez.
The Monte de Piedad checks - the supposedly "clear and obvious link" 7 between the documentary evidence
and the true transaction between the parties - are equivocal at best. There is nothing in those checks to
establish such link. Rodriguez denies that there is such an agreement.
Unsubstantiated testimony, offered as proof of verbal agreements which tends to vary the terms of a written
agreement, is inadmissible under the parol evidence rule. 8
Rule 130, Section 9 of the Revised Rules on Evidence embodies the parol evidence rule and states:
SEC. 9. Evidence of written agreements. When the terms of an agreement have been reduced to writing, it is
considered as containing all the terms agreed upon and there can be, between the parties and their
successors-in-interest, no evidence of such terms other than the contents of the written agreement.
However, a party may present evidence to modify, explain or add to the terms of the written agreement if he
puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors-in-interest after the execution of
the written agreement.
The term "agreement" includes wills.
The parol evidence rule forbids any addition to, or contradiction of, the terms of a written agreement by
testimony or other evidence purporting to show that different terms were agreed upon by the parties,
varying the purport of the written contract. 9
This principle notwithstanding, petitioner would have the Court rule that this case falls within the exceptions,
particularly that the written agreement failed to express the true intent and agreement of the parties. This
argument is untenable.
Although parol evidence is admissible to explain the meaning of a contract, it cannot serve the purpose of
incorporating into the contract additional contemporaneous conditions which are not mentioned at all in the
writing unless there has been fraud or mistake. 10 Evidence of a prior or contemporaneous verbal agreement
is generally not admissible to vary, contradict or defeat the operation of a valid contract. 11
The Vehicle Sales Invoice12 is the best evidence of the transaction. A sales invoice is a commercial document.
Commercial documents or papers are those used by merchants or businessmen to promote or facilitate trade
or credit transactions.13 Business forms, e.g., order slip, delivery charge invoice and the like, are commonly
recognized in ordinary commercial transactions as valid between the parties and, at the very least, they
serve as an acknowledgment that a business transaction has in fact transpired. 14 These documents are not
mere scraps of paper bereft of probative value, but vital pieces of evidence of commercial transactions. They
are written memorials of the details of the consummation of contracts. 15
The terms of the subject sales invoice are clear. They show that Autocorp sold to Seaoil one unit Robex 200
LC Excavator paid for by checks issued by one Romeo Valera. This does not, however, change the fact that
Seaoil Petroleum Corporation, as represented by Yu, is the customer or buyer. The moment a party affixes his
or her signature thereon, he or she is bound by all the terms stipulated therein and is subject to all the legal
obligations that may arise from their breach.16
Oral testimony on the alleged conditions, coming from a party who has an interest in the outcome of the
case, depending exclusively on human memory, is not as reliable as written or documentary evidence. 17
Hence, petitioner's contention that the document falls within the exception to the parol evidence rule is
untenable. The exception obtains only where "the written contract is so ambiguous or obscure in terms that
the contractual intention of the parties cannot be understood from a mere reading of the instrument. In such
a case, extrinsic evidence of the subject matter of the contract, of the relations of the parties to each other,
and of the facts and circumstances surrounding them when they entered into the contract may be received
to enable the court to make a proper interpretation of the instrument." 18
Even assuming there is a shred of truth to petitioner's contention, the same cannot be made a basis for
holding respondents liable therefor.
As pointed out by the CA, Rodriguez is a person separate and independent from Autocorp. Whatever
obligations Rodriguez contracted cannot be attributed to Autocorp 19 and vice versa. In fact, the obligation
that petitioner proffers as its defense - under the Lease Purchase Agreement - was not even incurred by
Rodriguez or by Autocorp but by Uniline.
The Lease Purchase Agreement20 clearly shows that the parties thereto are two corporations not parties to
this case: Focus Point and Uniline. Under this Lease Purchase Agreement, it is Uniline, as lessee/purchaser,
and not Rodriguez, that incurred the debt to Focus Point. The obligation of Uniline to Focus Point arose out of
a transaction completely different from the subject of the instant case.
It is settled that a corporation has a personality separate and distinct from its individual stockholders or
members, and is not affected by the personal rights, obligations and transactions of the latter. 21The
corporation may not be held liable for the obligations of the persons composing it, and neither can its
stockholders be held liable for its obligation. 22
Of course, this Court has recognized instances when the corporation's separate personality may be
disregarded. However, we have also held that the same may only be done in cases where the corporate
vehicle is being used to defeat public convenience, justify wrong, protect fraud, or defend crime. 23 Moreover,
the wrongdoing must be clearly and convincingly established. It cannot be presumed. 24
To reiterate, the transaction under the Vehicle Sales Invoice is separate and distinct from that under the
Lease Purchase Agreement. In the former, it is Seaoil that owes Autocorp, while in the latter, Uniline incurred
obligations to Focus. There was never any allegation, much less any evidence, that Autocorp was merely an
alter ego of Uniline, or that the two corporations' separate personalities were being used as a means to
perpetrate fraud or wrongdoing.
Moreover, Rodriguez, as stockholder and director of Uniline, cannot be held personally liable for the debts of
the corporation, which has a separate legal personality of its own. While Section 31 of the Corporation
Code25 lays down the exceptions to the rule, the same does not apply in this case. Section 31 makes a
director personally liable for corporate debts if he willfully and knowingly votes for or assents to patently
unlawful acts of the corporation. Section 31 also makes a director personally liable if he is guilty of gross
negligence or bad faith in directing the affairs of the corporation. 26 The bad faith or wrongdoing of the
director must be established clearly and convincingly. Bad faith is never presumed. 27
The burden of proving bad faith or wrongdoing on the part of Rodriguez was, on petitioner, a burden which it
failed to discharge. Thus, it was proper for the trial court to have dismissed the third-party complaint against
Rodriguez on the ground that he was not a party to the sale of the excavator.
Rule 6, Section 11 of the Revised Rules on Civil Procedure defines a third-party complaint as a claim that a
defending party may, with leave of court, file against a person not a party to the action, called the third-party
defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponent's claim.
The purpose of the rule is to permit a defendant to assert an independent claim against a third party which
he, otherwise, would assert in another action, thus preventing multiplicity of suits. 28 Had it not been for the
rule, the claim could have been filed separately from the original complaint. 29
Petitioner's claim against Rodriguez was fully ventilated in the proceedings before the trial court, tried and
decided on its merits. The trial court's ruling operates as res judicata against another suit involving the same
parties and same cause of action. This is rightly so because the trial court found that Rodriguez was not a
party to the sale of the excavator. On the other hand, petitioner Seaoil's liability has been successfully
established by respondent.
A last point. We reject Seaoil's claim that "the ownership of the subject excavator, having been legally and
completely transferred to Focus Point International, Inc., cannot be subject of replevin and plaintiff [herein
respondent Autocorp] is not legally entitled to any writ of replevin." 30 The claim is negated by the sales
invoice which clearly states that "[u]ntil after the vehicle is fully paid inclusive of bank clearing time, it
remains the property of Autocorp Group which reserves the right to take possession of said vehicle at any
time and place without prior notice." 31
Considering, first, that Focus Point was not a party to the sale of the excavator and, second, that Seaoil
indeed failed to pay for the excavator in full, the same still rightfully belongs to Autocorp. Additionally, as the
trial court found, Seaoil had already assigned the same to its contractor for the construction of its depot in
Batangas.32 Hence, Seaoil has already enjoyed the benefit of the transaction even as it has not complied with
its obligation. It cannot be permitted to unjustly enrich itself at the expense of another.
WHEREFORE, the foregoing premises considered, the Petition is hereby DENIED. The Decision of the Court
of Appeals dated May 20, 2004 in CA-G.R. CV No. 72193 is AFFIRMED.
SO ORDERED.

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[G.R. NO.

143338 July 29, 2005]

The pertinent portion of the Rules of Court on the matter provides:

What was the transaction about?

It was about our joint venture in Ipil.

What did the accused in this case issue to you?

He issued me a check worth six hundred thousand pesos (P600,000.00).

What did you do with the check?

When did you deposit the check?

October, what year?

Where is that indication of dishonor for lack of sufficient fund?

INTERPRETER: Witness pointing to the check.

Yes, Sir, it is pending.

G.R. No. 170633

October 17, 2007

MCC INDUSTRIAL SALES CORPORATION, petitioner,

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

POSTSO401-1 AND ST2-POSTSO401-2, DESPITE THE FACT THAT THE SAME

Rules on Evidence because the respondent sufficiently explained the non-production of

the writing must foremost be an "electronic data message" or an "electronic

Senator Santiago. That is correct.80

Pro forma Invoice dated 17

To show that defendants

Pro forma Invoice dated 17

To show that defendants sent their

on the upper portion of said among other conditions.

Conforme signature of Mr.

To show that defendants sent their

Pro forma Invoice dated 17

To show that defendants

Letter to defendant SANYO

To prove that defendants were

Letter to defendants dated

To prove that defendants were

Letter to defendants dated

To prove that plaintiff repeatedly

Letter to defendants dated

Letter to defendants dated

Letter from defendants

Letter to defendants dated

Letter to defendants dated

Credit, defendants' failure and

To prove that defendants admit of

To prove that plaintiff reiterated its

Letter to defendants dated

To prove that plaintiff was

To prove that defendants opened

To show defendants' refusal and

Letter from plaintiff

To prove that there was a perfected

To prove that defendants, acting

Name of sender MCC

Pro forma Invoice dated 16 To prove that defendant MCC

Notation "1/2", photocopy

To prove that the present Pro forma

Ref. No. ST2-POSTS0801,photocopy

To prove that the present Pro

To prove that defendant MCC,

Letter from defendant MCC

To prove that there was a perfected

Ref. No. ST2-POSTS080-

To prove that there was a perfected

sale and purchase agreement

Significantly, among these documentary evidence presented by respondent, MCC, in its