LEONIDES C. PENGSON, PETITIONER, VS. THE INTERMEDIATE APPELLATE COURT, REYNOLDS PHILIPPINE CORPORATION, WILLIAM W. DUNCAN, JR., PACIFIC MERCHANDISING CORPORATION AND SHERIFF OF …

Pengson versus Intermediate Appellate Court

The Case

This is a petition filed by Leonides C. Pengson against the Intermediate Appellate Court, Reynolds Philippine Corporation, William W. Duncan, Junior, Pacific Merchandising Corporation, and the Sheriff of Quezon City. Pengson had sued in the Court of First Instance of Rizal for declaration of nullity and inefficacy of sale, or rescission of sale and mortgage, with damages. The trial court decided in his favor, but the Intermediate Appellate Court reversed. The case matters because it teaches the limits of an appellate court's fact-finding duty, and it shows how the Supreme Court treats a decision that is sketchy on the facts.

Procedural History

Pengson filed suit in the Court of First Instance of Rizal against Reynolds Philippine Corporation and others. The trial court rendered judgment for Pengson. Reynolds Philippine Corporation appealed to the Court of Appeals, whose successor, the Intermediate Appellate Court, reversed the trial court. Pengson then filed this petition with the Supreme Court, praying that the decision of the Intermediate Appellate Court be reversed and another entered affirming that of the trial court, or, alternatively, that a writ of mandamus be issued commanding the Intermediate Appellate Court to make complete findings of facts.

Facts

Pacific Merchandising Corporation, called PMC, owned shares in Aluminum Products, called Alpro, amounting to ninety-six percent of its capital holdings. PMC was indebted to Reynolds Philippine Corporation, called Reynolds, in the sum of more than 800,000 pesos, and its Alpro shares were pledged with Reynolds as collateral for that loan. Because PMC needed money, it decided to sell its Alpro shares to Leonides C. Pengson, the deed of sale being Exhibit A. Among other things, Pengson assumed the obligation of PMC to Reynolds, which amount was reduced from more than 800,000 pesos to only 500,000 pesos.

Since the certificates covering the shares were then held by Reynolds in pledge as security for PMC's obligation, Reynolds' consent to the sale with assumption had to be obtained. As security for the payment to Reynolds of the 500,000 pesos in five annual installments, the first installment being 125,000 pesos, Pengson mortgaged to Reynolds a parcel of land. Pengson paid the first installment of 125,000 pesos in three installments and a bit late, but the next installments which fell due were not paid despite demands. Consequently, Reynolds foreclosed by considering all unpaid installments due and demandable.

The trial court held that the sale had been rendered ineffective by Reynolds' refusal and failure to deliver the certificates subject of the sale, and that the mortgage and the promissory note embodied therein were likewise rendered ineffective. It declared the sale and the mortgage ineffective, declared the foreclosure and the public auction sale void, ordered the Register of Deeds to reinstate the title and cancel the mortgage encumbrance, ordered Reynolds to return 125,300 pesos to Pengson, and ordered Reynolds to pay 5,000 pesos in attorney's fees and the costs. The Intermediate Appellate Court reversed, holding that Reynolds was not a party to the contract of sale between PMC and Pengson and had no obligation to surrender the certificates of stocks, and ordered Pengson's estate to pay Reynolds 255,494.16 pesos plus interest, 951.98 pesos in stipulated interest, 239 pesos as expenses for the foreclosure proceeding, and ten percent of the amount due as stipulated attorney's fees.

Issues

• Whether or not the Intermediate Appellate Court erred in reversing the decision of the trial court.
• Whether or not the Intermediate Appellate Court should be ordered to make complete findings of facts such as those made by the trial court.

Applicable Provisions

The decision does not quote any statutory provision. It rests on the rule governing the contents of a decision of an appellate court, which requires complete findings of fact. The Court applied that rule when it found the appellate decision sketchy on the facts.

Ruling

On the alternative prayer, the Court found it impressed with merit. The decision of the appellate court in respect of the facts is indeed sketchy compared to the facts stated in the decision of the trial court which is found in the Record on Appeal. The deficiency of the appellate court's decision is made more manifest by the extensive factual statements made by private respondent Reynolds in its Opposition to Petition to Review on Certiorari.

Because the facts were incomplete, the Court did not resolve the merits of the principal issue. Instead, it returned the case to the Intermediate Appellate Court, ordering it to make complete findings of fact and, on the basis thereof, to render another decision. The Court also ordered the Intermediate Appellate Court to scrutinize more closely the legal aspects of Exhibit A and its conclusion that Reynolds was not a party to the contract of sale between Pengson and PMC, in the light of Reynolds' foreclosure of the mortgage executed by Pengson to secure the payment of PMC's debt to Reynolds.

Doctrine

An appellate court's decision must contain complete findings of fact. A decision that is sketchy on the facts, compared to the trial court's decision in the Record on Appeal, is deficient and cannot stand as a proper basis for review. When the appellate court's factual findings are incomplete, the Supreme Court will return the case and order that court to make complete findings of fact and render another decision on the basis thereof. The appellate court must also scrutinize the legal aspects of the contracts involved, including whether a party was truly a stranger to the contract of sale, in the light of the foreclosure of the mortgage executed to secure the payment of the debt.

Disposition

The case was returned to the Intermediate Appellate Court, which was ordered to make complete findings of fact and render another decision, and to scrutinize more closely the legal aspects of Exhibit A and its conclusion that Reynolds was not a party to the contract of sale, with no costs.

Remember This

Memorize this line: an appellate decision that is sketchy on the facts is deficient, and the Supreme Court will return the case for complete findings of fact. Examiners use this case to test the requirement of complete findings of fact in appellate decisions and the remedy of remand when those findings are lacking.