NICOS INDUSTRIAL CORPORATION, JUAN COQUINCO AND CARLOS COQUINCO, PETITIONERS, VS. THE COURT OF APPEALS, VICTORINO P. EVANGELISTA, IN HIS CAPACITY AS EX-OFFICIO SHERIFF OF BULACA…

We are asked once again to interpret the constitutional provision
that no decision shall be rendered by any court without stating therein clearly
and distinctly the facts and the law on which it is based,^[1] this
time in connection with an order of the trial court sustaining a demurrer to
the evidence.^[2]
The order has been affirmed by the respondent Court of Appeals,^[3]
and the appellant has come to this Court in this petition for review on certiorari,
invoking the said provision and alleging several reversible errors.

In the complaint filed by the petitioners before the Regional
Trial Court of Bulacan, it was alleged that on January 24, 1980, NICOS
Industrial Corporation obtained a loan of P2,000,000.00 from private respondent
United Coconut Planters Bank and to secure payment thereof executed a real estate mortgage on two parcels
of land located at Marilao, Bulacan. The mortgage was foreclosed for the supposed non-payment of the loan,
and the sheriff’s sale was held on July 11, 1983, without re-publication of the
required notices after the original date for the auction was changed without
the knowledge or consent of the mortgagor. UCPB was the highest and lone bidder and the mortgaged lands were sold
to it for P3,558,547.64. On August 29,
1983, UCPB sold all its rights to the properties to private respondent Manuel
Co, who on the same day transferred them to Golden Star Industrial Corporation,
another private respondent, upon whose
petition a writ of possession was issued to it on November 4, 1983. On September 6, 1984, NICOS and the other
petitioners as chairman of its board of directors and its executive
vice-president, respectively, filed their action for “annulment of
sheriff’s sale, recovery of possession, and damages, with prayer for the
issuance of a preliminary prohibitory and
mandatory injunction.”

Golden Star and Victorino P. Evangelista, as ex officio
sheriff of Bulacan, moved to dismiss the complaint on the grounds of lack of
jurisdiction, prescription, estoppel, and regularity of the sheriff’s
sale. Co denied the allegations of the
plaintiffs and, like the other defendants, counterclaimed for damages. In its answer with counterclaim, UCPB
defended the foreclosure of the mortgage for failure of NICOS to pay the loan
in accordance with its promissory note and insisted that the sheriff’s sale had
been conducted in accordance with the statutory requirements.

The plaintiffs presented two witnesses, including petitioner
Carlos Coquinco, who testified at three separate hearings. They also submitted 21 exhibits. On April 30, 1986, Golden Star and
Evangelista filed a 7-page demurrer to the evidence where they argued that the
action was a derivative suit that came under the jurisdiction of the Securities
and Exchange Commission; that the mortgage had been validly foreclosed; that
the sheriff’s sale had been held in accordance
with Act 3135; that the notices had been duly published in a newspaper of
general circulation; and that the opposition to the writ of possession had not
been filed on time. No opposition to
the demurrer having been submitted despite notice thereof to the parties. Judge Nestor F. Dantes considered it
submitted for resolution and on June 6, 1986, issued the following –

O R D E R

Acting on the “Demurrer to Evidence” dated April 30, 1986
filed by defendants Victorino P. Evangelista and Golden Star Industrial
Corporation to which plaintiff and other
defendants did not file their comment/opposition and it appearing from the very
evidence adduced by the plaintiff that the Sheriff’s Auction Sale conducted on
July 11, 1983 was in complete accord with the requirements of Section 3, Act
3135 under which the auction sale was appropriately held and conducted and it
appearing from the allegations in paragraph 13 of the plaintiff’s pleading and
likewise from plaintiff Carlos Coquinco’s own testimony that his cause is
actually against the other officers and stockholders of the plaintiff Nicos
Industrial Corporation “x x x for the purpose of protecting the
corporation and its stockholders, as well as their own rights and interests in
the corporation, and the corporate assets, against the fraudulent acts and
devices of the responsible officials of the corporation, in breach of the trust
reposed upon them by the stockholders x x x” a subject
matter not within the competent jurisdiction of the Court, the court finds the same
to be impressed with merit.

WHEREFORE, plaintiff’s complaint is hereby dismissed. The Defendant’s respective counterclaims are
likewise dismissed.

The Writ of Preliminary
Injunction heretofore issued is dissolved and set aside.

It is this order that is now assailed by the petitioners on the
principal ground that it violates the aforementioned constitutional
requirement. The petitioners claim that
it is not a reasoned decision and does not clearly and distinctly explain how
it was reached by the trial court. They
also stress that the sheriff’s sale was irregular because the notices thereof
were published in a newspaper that did not have general circulation and that
the original date of the sheriff’s sale had been changed without its consent,
the same having been allegedly given by a person not authorized to represent
NICOS. It is also contended that the
original P2 million loan had already been paid and that if there was indeed a
second P2 million loan also secured by the real estate mortgage, it was for
UCPB to prove this, as well as its allegation that NICOS had defaulted in the
payment of the first quarterly installment on the first loan.

The petitioners complain that there was no analysis of their
testimonial evidence or of their 21 exhibits, the trial court merely confining
itself to the pronouncement that the sheriff’s sale was valid and that it had
no jurisdiction over the derivative suit. There was therefore no adequate factual or legal basis for the decision
that could justify its review and affirmance by the Court of Appeals.

Rejecting this contention, the respondent court held:

In their first assignment of error, appellants faults the court for
its failure to state clearly and distinctly the facts and the law on which the
order of dismissal is based, as required by Section 1, Rule 36, of the Rules of
Court and the Constitution.

An order granting a demurrer to the evidence is in fact an
adjudication on the merits and consequently the requirements of Section 1, Rule
36, is applicable. We are not however
prepared to hold that there is a reversible omission of the requirements of the
rule in the Order appealed from, it appearing from a reading thereof that there
is substantial reference to the facts and the law on which it is based.

The Order which adverts to the Demurrer to the Evidence expressly
referred to the evidence adduced by the plaintiff as showing that the Sheriff’s
auction sale conducted on July 11, 1983, was in complete accord with the
requisites of Section 3, Act 3135 under which the auction sale was apparently
held and conducted. It likewise makes reference to the allegations
in paragraph 13 of plaintiff’s pleadings and plaintiff Carlos Coquinco’s own
testimony that the case is actually against the other officers and stockholders
of plaintiff NICOS Industrial Corporation and concludes rightly or wrongly,
that the subject matter thereof is not
within the competent jurisdiction of the Court.

We hold that the order
appealed from as framed by the court a quo while leaving much to
be desired, substantially complies with the rules.

This Court does not agree. The questioned order is an over-simplification of the issues and
violates both the letter and spirit of Article VIII, Section 14, of the
Constitution.

It is a requirement of due process that the parties to a
litigation be informed of how it was decided, with an explanation of the
factual and legal reasons that led to the conclusions of the court. The court cannot simply say that judgment is
rendered in favor of X and against Y and just leave it at that without any
justification whatsoever for its action. The losing party is entitled to know why he lost, so he may appeal to a
higher court, if permitted, should he believe that the decision should be
reversed. A decision that does not clearly
and distinctly state the facts and the law on which it is based leaves the
parties in the dark as to how it was reached and is especially prejudicial to
the losing party, who is unable to pinpoint the possible errors of the court
for review by a higher tribunal.

It is important to observe at this point that the constitutional provision does not apply to
interlocutory orders, such as one granting a motion for postponement or
quashing a subpoena, because it “refers only to decisions on the merits
and not to orders of the trial court resolving incidental matters.”^[4]
As for the minute resolutions of this Court, we have already observed in
Borromeo v. Court of Appeals^[5] that
–

The Supreme Court disposes of the bulk of its cases by minute
resolutions and decrees them as final and executory, as where a case is
patently without merit, where the issues raised are factual in nature, where
the decision appealed from is supported
by substantial evidence and is in accord with the facts of the case and the
applicable laws, where it is clear from the records that the petitions were
filed merely to forestall the early execution of judgment and for
non-compliance with the rules. The
resolution denying due course or dismissing a petition always gives the legal
basis.

x   x x

The Court is not duty bound to render signed decisions all the
time. It has ample discretion to
formulate decisions and/or minute resolutions, provided a legal basis is given,
depending on its evaluation of a case.

The order in the
case at bar does not come under either of the above exceptions. As it is settled that an order dismissing a
case for insufficient evidence is a judgment on the merits,^[6] it is
imperative that it be a reasoned decision clearly and distinctly stating
therein the facts and the law on which it is based.

It may be argued that a dismissal based on lack of jurisdiction
is not considered a judgment on the merits and so is not covered by the
aforecited provision. There is no
quarrel with this established principle. However, the rule would be applicable only if the case is dismissed on
the sole ground of lack of jurisdiction and not when some other additional
ground is invoked.

A careful perusal of the challenged order will show that the
complaint was dismissed not only for lack of jurisdiction but also because of
the insufficiency of the evidence to prove the invalidity of the sheriff’s
sale. Regarding this second ground, all
the trial court did was summarily conclude “from the very evidence adduced
by the plaintiff” that the sheriff’s sale “was in complete accord
with the requirements of Section 3, Act 3135.” It did not bother to
discuss what that evidence was or to explain why it believed that the legal
requirements had been observed. Its
conclusion was remarkably threadbare. Brevity is doubtless an admirable trait, but it should not and cannot be
substituted for substance. As the
ruling on this second ground was unquestionably a judgment on the merits, the
failure to state the factual and legal basis thereof was fatal to the order.

Significantly, the respondent court found that the trial court
did have jurisdiction over the case after all. This made even more necessary the factual and legal explanation for the
dismissal of the complaint on the ground that the plaintiff’s evidence was
insufficient.

In People v. Escober,^[7] the
trial court in a decision that covered only one and a half pages, single
spaced, found the defendant guilty of murder and sentenced him to death. Holding that the decision violated the
constitutional requirement, the Court observed through then Associate Justice
Marcelo B. Fernan:

The above-quoted decision falls short of this standard. The inadequacy stems primarily from the
respondent judge’s tendency to generalize
and to form conclusions without detailing the facts from which such conclusions
are deduced. Thus, he concluded
that the material allegations of the Amended Information were the facts without
specifying which of the testimonies or the exhibits supported this conclusion. He rejected the testimony of
accused-appellant Escober because it was allegedly replete with contradictions
without pointing out what these contradictions consist of or what “vital
details” Escober could have recalled as a credible witness. He also found the crime to be attended by
the aggravating circumstances of cruelty, nighttime, superior strength,
treachery, in band, “among others” but did not particularly state the
factual basis for such findings.

While it is true that the case before us does not involve the life
or liberty of the defendant, as in Escober, there is still no reason for the
constitutional short-cut taken by the trial judge. The properties being litigated are not of inconsequential value;
they were sold for three and a half million pesos in 1983 and doubtless have
considerably appreciated since then, after more than eight years. These facts alone justified a more careful
and thorough drafting of the order, to fully inform the parties and the courts
that might later be called upon to review it of the reasons why the demurrer to
the evidence was sustained and the complaint dismissed.

In Romero v. Court of Appeals,^[8] the
Court, somewhat reluctantly, approved a memorandum decision of the Court of
Appeals consisting of 4 pages, single-spaced, which adopted by reference the
findings of fact and conclusions of law of the Court of Agrarian
Relations. While holding that the
decision could be considered substantial compliance with PD 946, Section 18,^[9]
and BP 129, Section 40,^[10]
Justice Jose Y. Feria nevertheless expressed the misgiving that “the
tendency would be to follow the line of least resistance by just adopting the
findings and conclusions of the lower court without thoroughly studying the
appealed case.”

Obviously, the order now being challenged cannot qualify as a
memorandum decision because it was not issued by an appellate court reviewing
the findings and conclusions of a lower court. We note that, contrary to the impression of the respondent court, there
is not even an incorporation by reference of the evidence and arguments of the
parties, assuming this is permitted. No
less importantly, again assuming arguendo that such reference is allowed
and has been made, there is no immediate accessibility to the incorporated
matters so as to insure their convenient examination by the reviewing
court. In Francisco v. Permskul,^[11]
which is the latest decision of the Court on the issue now before us, we
categorically required:

x x x Although only incorporated by reference in the memorandum decision of the regional trial court,
Judge Balita’s decision was nevertheless available to the Court of
Appeals. It is this circumstance, or
even happenstance, if you will, that has validated the memorandum decision
challenged in this case and spared it from constitutional infirmity.

That same circumstance is what will move us now to lay down the
following requirement, as a condition for the proper application of Section 40
of BP Blg. 129. The memorandum
decision, to be valid, cannot incorporate the findings of fact and the conclusions
of law of the lower court only by remote reference, which is to say that
the challenged decision is not easily and immediately available to the person
reading the memorandum decision. For
the incorporation by reference to be allowed, it must provide for direct
access to the facts and the law being adopted, which must be contained in a
statement attached to the said decision. In other words, the memorandum decision authorized under Section
40 of BP Blg. 129 should actually embody the findings of fact and conclusions
of law of the lower court in an annex attached to and made an indispensable
part of the decision.

It is expected that this requirement will allay the suspicion that
no study was made of the decision of the lower court and that its decision was
merely affirmed without a proper examination of the facts and the law on which
it was based. The proximity at
least of the annexed statement should suggest that such an examination has been
undertaken. It is, of course, also understood
that the decision being adopted should, to begin with, comply with Article
VIII, Section 14 as no amount of incorporation or adoption will rectify its
violation.

In Escober, the Court observed that the flawed decision
“should have been remanded to the court a quo for the
rendition of a new judgment” but decided nevertheless to decide the case
directly, the records being already before it and in deference to the right of
the accused to a speedy trial as guaranteed by the Bill of Rights. However, we are not so disposed in the case
now before us.

It is not the normal function of this Court to rule on a demurrer
to the evidence in the first instance; our task comes later, to review the
ruling of the trial court after it is examined by the Court of Appeals and,
when proper, its decision is elevated to us. In the present case, we find that the respondent court did not have an
adequate basis for such examination because of the insufficiency of the
challenged order. It must also be noted
that we deal here only with property rights and, although we do not mean to
minimize them, they do not require the same urgent action we took in Escober,
which involved the very life of the accused. All things considered, we feel that the proper step is to remand this case
to the court a quo for a revision of the challenged order in
accordance with the requirements of the Constitution.

Review by the Court of the other issues raised, most of which are
factual, e.g., the allegation of default in the payment of the loan, the
existence of a second loan, the nature of the newspaper where the notices of
the sale were published, the authority of the person consenting to the
postponement of the sale, etc., is impractical and unnecessary at this time. These matters should be discussed in detail
in the revised order to be made by the trial court so that the higher courts
will know what they are reviewing when the case is appealed.

In one case,^[12] this
Court, exasperated over the inordinate length of a decision rife with
irrelevant details, castigated the trial judge for his “extraordinary
verbiage.” Kilometric decisions without much substance must be avoided, to
be sure, but the other extreme, where substance is also lost in the wish to be
brief, is no less unacceptable either. The ideal decision is that which, with welcome economy of words, arrives
at the factual findings, reaches the legal conclusions, renders its ruling and,
having done so, ends.

WHEREFORE, the challenged decision of the Court of Appeals
is SET ASIDE for lack of basis. This
case is REMANDED to the Regional Trial Court of Bulacan, Branch 10, for
revision, within 30 days from notice, of the Order of June 6, 1986, conformably
to the requirements of Article VIII, Section 14, of the Constitution, subject
to the appeal thereof, if desired, in accordance with law. It is so ordered.

Narvasa, (Chairman), Griño-Aquino,
and Medialdea, JJ., concur.

^[1]
1987 Constitution, Article VIII, Section 14.

^[2]
Rollo, p. 9.

^[3]
Ibid., p. 43.

^[4]
Mendoza v. Court of First Instance, 51 SCRA 369 at 375.

^[5]
186 SCRA 1 at 5.

^[6]
Nepomuceno v. Commission on
Elections, 126 SCRA 472 at 478.

^[7]
157 SCRA 541 at 555.

^[8]
147 SCRA 183 at 194.

^[9]
Sec. 18. Appeals. –     x          x          x

All cases of the Court of Agrarian
Relations now pending before the Court of Appeals shall remain in the Divisions
to which they have been assigned, and shall be within sixty (60) days from the
effectivity of this Decree. Provided,
however, That if the decision or order be an affirmance in toto
of the dispositive conclusion of the judgment appealed from, then the Court of
Appeals may, instead of rendering an extended opinion, indicate clearly the
trial court’s findings of fact and pronouncements of law which have been
adopted as basis for the affirmance. x
x x

^[10]
Sec. 40. Form of decision in
appealed cases. – Every decision or final resolution of a court in appealed
cases shall clearly and distinctly state the findings of fact and the
conclusions of law on which it is based which may be contained in the decision
or final resolution itself, or adopted by reference from those set forth in the
decision, order or resolution appealed therefrom.

^[11]
173 SCRA 335.

^[12]
People v. Molina, 184 SCRA 597.