VII.

ELECTRONIC COMMERCE ACT

1. MCC INDUSRTRIAL SALES CORP. VS. SSANGYONG CORP.
FACTS: Petitioner is engaged in the business of importing and wholesaling stainless steel products. One of its
suppliers is the respondent, an international trading company with head office in Seoul, South Korea and
regional headquarters in Makati City, Philippines. The two corporations conducted business through telephone
calls and facsimile or telecopy transmissions. Respondent would send the pro forma invoices containing the
details of the steel product order to petitioner; if the latter conforms thereto, its representative affixes his
signature on the faxed copy and sends it back to the respondent, again by fax.

Respondent filed a civil action for damages due to breach of contract against petitioner before the Regional Trial
Court of Makati City. In its complaint, respondent alleged that defendants breached their contract when they
refused to open the letter of credit in the amount of US$170,000.00 for the remaining 100MT of steel under Pro
Forma Invoice Nos. ST2-POSTS0401-1 and ST2-POSTS0401-2.

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

Issue: Whether the print-out and/or photocopies of facsimile transmissions are electronic evidence and
admissible as such?

Held: 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.
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 Implementing Rules and Regulations (IRR) of R.A. No. 8792 defines the “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.

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), from which majority of the
provisions of R.A. No. 8792 were taken. 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.

2. Vidallon-Magtolis vs. Salud

A.M. No. CA-05-20-P; September 9, 2005
Facts: Respondent is charged and held liable for offenses on inefficiency and incompetence of official duty;
conduct grossly prejudicial to the best interest of the service; and directly and indirectly having financial and
material interest in an official transaction considering his undue interest in the service of the order of release
and actual release of Melchor Lagua.
Lagua was found guilty of homicide and was then detained at the Bureau of Prisons National Penitentiary in
Muntinlupa City. Lagua’s petition for bond was approved in a Resolution where the appellate court directed the
issuance of an order of release in favor of Lagua. The resolution was brought to the office of Atty. Madarang,
Division Clerk of Court, for promulgation.
Respondent served the resolution and order of release of Lagua at the National Penitentiary, where Lagua was
detained for homicide.
Meanwhile, Atty. Madarang received a call from a certain Melissa Melchor, who introduced herself as Lagua’s
relative, asking how much more they had to give to facilitate Lagua’s provisional liberty, and that they sought
the help of a certain Rhodora Valdez of RTC Pasig, but was told that they still had a balance. When Atty.
Madarang was able to get the mobile number of respondent, he represented himself as Lagua’s relative and
exchanged text messages with said respondent for a possible pay-off for the Lagua’s provisional liberty. Atty.
Madarang later discovered that the respondent did not properly serve the copies of the Resolution and Order
of Release upon the accused-appellant and his counsel. but gave them to a certain Art Baluran, allegedly Lagua’s
relative.
Later on, Complainant called the respondent to her office. When confronted, the respondent denied extorting
or receiving money for Lagua’s release, or in any other case. He, however, admitted serving the copies of
resolution and order of release intended for Lagua and his counsel to Art Baluran. Complainant then lodged the
complaint against the respondent in a Letter dated November 14, 2003.
Issue: Whether or not the admission of text messages as evidence constitutes a violation of right to privacy of
the accused?
Held: No. The respondent’s claim that the admission of the text messages as evidence against him constitutes
a violation of his right to privacy is unavailing. Text messages have been classified as “ephemeral electronic
communication” under Section 1(k), Rule 2 of the Rules on Electronic Evidence, and “shall be proven by the
testimony of a person who was a party to the same or has personal knowledge thereof.” Any question as to the
admissibility of such messages is now moot and academic, as the respondent himself, as well as his counsel,
already admitted that he was the sender of the first three messages on Atty. Madarang’s cell phone.
This was also the ruling of the Court in the recent case of Zaldy Nuez v. Elvira Cruz-Apao. In that case, the Court,
in finding the respondent therein guilty of dishonesty and grave misconduct, considered text messages
addressed to the complainant asking for a million pesos in exchange for a favorable decision in a case pending
before the CA. The Court had the occasion to state: The text messages were properly admitted by the Committee
since the same are now covered by Section 1(k), Rule 2 of the Rules on Electronic Evidence, which provides:
“Ephemeral electronic communication” refers to telephone conversations, text messages … and other electronic
forms of communication the evidence of which is not recorded or retained.”

VIII. DATA PRIVACY ACT (CONCEPTS ONLY)

IX. FRIA
1. BPI savings Bank, Inc. vs. St. Michael Medical Center, Inc. GR No. 205469, Mar. 25, 2015
Facts: Spouses Virgilio and Yolanda Rodil (Sps. Rodil) are the owners and sole proprietors of St. Michael
Diagnostic and Skin Care Laboratory Services and Hospital (St. Michael Hospital). With a vision to upgrade St.
Michael Hospital into a modern, well-equipped and full service tertiary 11-storey hospital, Sps. Rodil...
incorporated SMMCI, with which entity they planned to eventually consolidate St. Michael Hospital's
operations.
In 2004, construction of a new hospital building on the adjoining properties commenced. To finance the costs
of construction, SMMCI applied for a loan with petitioner BPI Family Savings Bank secured by a Real Estate
Mortgage... after suffering financial losses due to problems with the first building contractor, Sps. Rodil
temporarily deferred the original construction plans for the 11-storey hospital building and, instead, engaged
the services of another contractor for the completion of the remaining structural works of the unfinished
building.
The lack of funds for the finishing works of the 3rd, 4th and 5th floors, however, kept the new building from
becoming completely functional and, in turn, hampered the plans for the physical transfer of St. Michael
Hospital's operations to SMMCI. As of 2006, SMMCI was still neither operational nor earning revenues. Hence,
it was only able to pay the interest on its BPI Family loan from the income of St. Michael Hospital.
BPI Family demanded immediate payment of the entire loan obligation and, soon after, filed a petition for
extrajudicial foreclosure of the real properties covered by the mortgage. SMMCI filed a Petition for Corporate
Rehabilitation before the RTC, with prayer for the issuance of a Stay Order as it foresaw the impossibility of
meeting its obligation to BPI Family. SMMCI claimed that it had to defer the construction of the projected 11-
storey hospital building due to the problems it had with its first contractor as well as the rise of the cost of
construction materials. In its proposed Rehabilitation Plan, SMMCI merely sought for BPI Family (a) to defer
foreclosing on the mortgage and (b) to agree to a moratorium of at least two (2) years during which SMMCI
either through St. Michael Hospital or its successor will retire all other obligations. After which, SMMCI can then
start servicing its loan obligation to the bank under a mutually acceptable restructuring agreement.
Finding the Rehabilitation Petition to be sufficient in form and substance, the RTC issued a Stay Order. CA
affirmed the RTC's approval of the Rehabilitation Plan
Issues:
Whether or not the CA correctly affirmed SMMCI's Rehabilitation Plan as approved by the RTC.
Ruling:
No. The petition is meritorious. Rehabilitation assumes that the corporation has been operational but for some
reasons like economic crisis or mismanagement had become distressed or insolvent, i.e., that it is generally
unable to pay its debts as they fall due in the ordinary course of business or has liability that are greater than its
assets. Thus, the basic issues in rehabilitation proceedings concern the viability and desirability of continuing
the business operations of the distressed corporation, all with a view of effectively restoring it to a state of
solvency or to its former healthy financial condition through the adoption of a rehabilitation plan.
It cannot be said that the petitioning corporation, SMMCI, had been in a position of successful operation and
solvency at the time the Rehabilitation Petition was filed on 2010. While it had indeed "commenced business"
through the preparatory act of opening a credit line with BPI Family to finance the construction of a new hospital
building for its future operations, SMMCI itself admits that it has not formally operated nor earned any income
since its incorporation. This simply means that there exists no viable business concern to be restored.
The Court observes that SMMCI could not have even complied with the form and substance of a proper
rehabilitation petition, and submit its accompanying documents, among others, the required financial
statements of a going concern.
This defect is not negated by the submission of the financial documents pertaining to St. Michael Hospital, which
is a separate and distinct entity from SMMCI. While the CA gave considerable weight to St. Michael Hospital's
supposed "profitability," as explicated in its own financial statements, as well as the feasibility study conducted
by Mrs. Alibangbang, in affirming the RTC, it has unwittingly lost sight of the essential fact that SMMCI stands
as the sole petitioning debtor in this case; as such, its rehabilitation should have been primarily examined from
the lens of its own financial history. While SMMCI claims that it would absorb St. Michael Hospital's operations,
there was dearth of evidence to show that a merger was already agreed upon between them.
The CA even disregarded the fact that SMMCI's Rehabilitation Plan failed to comply with the fundamental
requisites outlined in Section 18, Rule 3 of the Rules, particularly, that of a material financial commitment to
support the rehabilitation and an accompanying liquidation analysis.
A material financial commitment becomes significant in gauging the resolve, determination, earnestness and
good faith of the distressed corporation in financing the proposed rehabilitation plan. This commitment may
include the voluntary undertakings of the stockholders or the would-be investors of the debtor-corporation
indicating their readiness, willingness and ability to contribute funds or property to guarantee the continued
successful operation of the debtor corporation during the period of rehabilitation
Again, the financial records of St. Michael Hospital, being a separate and distinct entity whose merger with
SMMCI only exists in the realm of probability, cannot be taken as a substitute to fulfill the requirement. What
remains pertinent are the financial statements of SMMCI for it solely stands as the debtor to be rehabilitated,
or liquidated in this case.

-TO BE CONTINUED-