G.R. No. 171238 ; February 2, 2011
F.A.T. KEE COMPUTER SYSTEMS, INC., Petitioner, vs. ONLINE NETWORKS INTERNATIONAL, INC., Respondent.

FACTS

Petitioner F.A.T. Kee Computer Systems, Inc. (FAT KEE) and respondent Online Networks International, Inc. (ONLINE) are domestic corporations engaged in selling computer equipment. ONLINE filed a Complaint for Sum of Money against FAT KEE, alleging that in November 1997, it sold computer printers to FAT KEE for a purchase price of US$136,149.43, as evidenced by Invoice Nos. 4680, 4838, 5090, and 5096. The invoices stipulated a 28% per annum interest on overdue accounts and a 25% attorney’s fee for collection suits. ONLINE claimed that FAT KEE, through its President Frederick Huang, Jr., later offered to pay its US dollar obligations in Philippine pesos at an exchange rate of ₱40:US$1, which ONLINE accepted. The computed amount was ₱5,445,977.20. FAT KEE made partial payments totaling ₱2,502,033.06 between March and May 1998, leaving a balance of ₱2,943,944.14 as of May 12, 1998. ONLINE applied a 28% interest for three months, resulting in a total due of ₱3,012,636.17. After FAT KEE made additional payments of ₱2,256,541.12, a balance of ₱756,095.05 remained. Despite demands, FAT KEE failed to pay, prompting ONLINE to file the case, seeking payment of the principal balance plus 28% interest, attorney’s fees, and costs.
FAT KEE answered, denying any agreement to pay in US dollars or at the ₱40:US$1 rate. It claimed the dollar-denominated invoices were unilaterally prepared by ONLINE and that the amount owing was only ₱5,067,925.34, as per a Statement of Account (SOA) dated December 9, 1997, sent by ONLINE. FAT KEE asserted it had fully paid its obligations based on this SOA, using an exchange rate of ₱34:US$1 derived from the peso amounts stated for some invoices in the SOA. It prayed for the complaint’s dismissal and sought attorney’s fees via counterclaim.
During trial, ONLINE presented witnesses (Peter Jeoffrey Goco, James Payoyo, and Sonia Magpili) who testified that the parties agreed to a ₱40:US$1 conversion rate after negotiations, following a meeting on January 15, 1998, where ONLINE initially proposed splitting payment (50% in US dollars, 50% in pesos at ₱41:US$1). They admitted no written confirmation of this agreement was executed. FAT KEE presented President Frederick Huang, Jr., who testified that no agreement on payment in dollars or a specific exchange rate was reached, and that the ₱34:US$1 rate was computed from the SOA. He stated ONLINE instructed the dollar-denominated purchase order due to currency fluctuations.
The Regional Trial Court (RTC) dismissed ONLINE’s complaint, finding no meeting of the minds on the exchange rate. The Court of Appeals reversed the RTC, ruling that the parties agreed to a ₱40:US$1 rate. FAT KEE filed the present Petition for Review on Certiorari.

ISSUE

Whether the Court of Appeals erred in reversing the RTC and finding that the parties agreed to settle FAT KEE’s US dollar obligation at an exchange rate of ₱40:US$1.

RULING

The Supreme Court granted the petition, reversed the Court of Appeals Decision, and reinstated the RTC Decision dismissing the complaint. The Court held that no agreement on the ₱40:US$1 exchange rate was proven. The evidence showed FAT KEE consistently denied agreeing to such a rate and instead relied on the ₱34:US$1 rate implied from ONLINE’s own SOA. ONLINE’s witnesses admitted no written confirmation existed, and their testimonies were inconsistent and insufficient to establish a clear agreement. The Court emphasized that the burden of proof lies with the plaintiff (ONLINE) to prove its claim by preponderance of evidence, which it failed to do. The absence of a meeting of the minds on the essential term of the exchange rate meant no valid consent was given, and thus, no enforceable agreement arose. The Court also noted that factual findings of the trial court are generally binding, and the Court of Appeals improperly substituted its own assessment of the evidence. Therefore, ONLINE’s claim for the unpaid balance based on the ₱40:US$1 rate lacked merit.