ARMANDO GO, PETITIONER, V. EAST OCEANIC LEASING AND FINANCE CORPORATION, RESPONDENT.

Armando Go versus East Oceanic Leasing and Finance Corporation

The Case

This is a petition for review on certiorari brought by Armando Go against East Oceanic Leasing and Finance Corporation, arising from a consolidated collection case and damages case decided by the Regional Trial Court of Cebu City. Go borrowed money from East Oceanic, his checks were dishonored, and the corporation sued him for the unpaid balance. The trial court rendered a single decision covering both consolidated cases, but its discussion addressed only the damages case against a co-defendant and said nothing about how it arrived at Go's liability in the collection case. The Supreme Court's decision matters because it enforces the constitutional and procedural duty of every court to state clearly and distinctly the facts and the law on which its judgment is based, and it declares a decision void, as to a party, when that duty is breached.

Procedural History

East Oceanic filed a complaint for collection of a sum of money with prayer for preliminary attachment against Go before the Regional Trial Court of Cebu City, docketed as the collection case. While that case was pending, East Oceanic filed a separate complaint for damages against Theodore Sy, its former Managing Director, docketed as the damages case. On motion, and finding the evidence in the collection case pertinent to the damages case, the trial court ordered the two cases consolidated.

The Regional Trial Court then rendered a single decision disposing of both cases. It ordered Sy to pay actual damages, attorney's fees, and litigation expenses, and it ordered Go to pay the sum of 2,814,054.84 pesos plus six percent interest computed from the filing of the complaint. Go moved for reconsideration, arguing that the decision cited no factual or legal basis for his civil liability. The trial court denied the motion. Go then went directly to the Supreme Court by petition for review on certiorari under Rule 45, since the assailed decision and order were rendered by the trial court in the exercise of its original jurisdiction.

Facts

On March 22, 1995, Armando Go obtained a loan from East Oceanic in the amount of 14,062,888 pesos, payable in monthly installments of 169,287 pesos until fully paid, as evidenced by a promissory note he executed that same day. His loan application had been approved on the basis of the report and recommendation of Theodore Sy, then East Oceanic's Managing Director, which stated that the purpose of the loan was the upgrading of the bus fleet and the replacement of old units of Oriental Bus Lines, a bus company owned by Go.

Go subsequently issued six post-dated checks in favor of East Oceanic, all drawn from his account at the Development Bank of the Philippines, Ormoc Branch. All the checks were dishonored upon presentment, with the reason "Account Under Garnished" stamped at the back of the checks and shown in the check return slips. East Oceanic informed Go of the dishonor and demanded that he make good or pay the checks, but he failed to do so. Because of the dishonored checks, Go's loan became due and demandable, with an outstanding balance of 2,814,054.84 pesos, excluding interest and other charges, based on a statement of account dated January 24, 1996.

East Oceanic then sued Go for collection. In his answer with counterclaim, Go argued that the promissory note was void for failure to comply with the mandatory requirements set by the Bangko Sentral ng Pilipinas and the decisions of the Supreme Court applying and interpreting the same, so that the interests and charges contained therein were null and void. He asked for a proper accounting of his loan to determine what he actually owed. East Oceanic later sued Sy for damages, claiming a loss of 3,000,000 pesos due to Sy's false report and recommendation on the real purpose of Go's loan application and on his financial status. The trial court consolidated the two cases.

Issues

• Whether or not the decision of the Regional Trial Court is void for having no basis in fact and in law as regards Armando Go's civil liability to East Oceanic in the collection case.

Applicable Provisions

Section 14, Article VIII of the Constitution provides:

No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating the basis therefor.

This is the constitutional standard the trial court failed to meet, and its breach is what renders the decision void as to Go in the collection case.

Section 1, Rule 36 of the Rules of Court provides:

Section 1. Rendition of judgments and final orders. A judgment or final order determining the merits of the case shall be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts and the law on which it is based, signed by him, and filed with the clerk of court.

This rule mirrors the constitutional mandate and supplies the procedural test for a valid judgment on the merits.

Section 1, Rule 45 of the Rules of Court provides:

A party desiring to appeal by certiorari from a judgment, final order or resolution of the Court of Appeals, the Sandiganbayan, the Court of Tax Appeals, the Regional Trial Court or other courts, whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition may include an application for a writ of preliminary injunction or other provisional remedies and shall raise only questions of law, which must be distinctly set forth.

This defines the Court's jurisdiction in this case, limited to questions of law, which is why the Court could not itself fix the amount of Go's liability.

Ruling

The Court granted the petition. On the sole issue, it held that the trial court's decision is void insofar as the collection case is concerned. The Court reviewed the record and found that the trial court had failed to clearly and distinctly state the facts and the law on which it based its ruling on Go's civil liability. There was absolutely no discussion in the assailed decision as to the collection case, particularly on how the trial court arrived at its conclusion finding Go liable for 2,814,054.84 pesos plus six percent interest.

The Court observed that the trial court listed the issues it resolved, but those issues pertained exclusively to the damages case, even though it was tasked to decide all the issues in both the damages case and the collection case. The trial court omitted from its listing, and failed to resolve, the issues in the collection case that were expressly set out in the pre-trial order, including whether East Oceanic was entitled to its claim against Go, whether Go was liable for damages, whether East Oceanic was entitled to the writ of attachment, and whether East Oceanic was liable to Go on his counterclaim. The assailed decision contained neither an analysis of the evidence of East Oceanic and Go on the outstanding balance of the loan nor a reference to any legal basis for the conclusion on Go's civil liability.

The Court grounded its ruling on the constitutional command, quoting Section 14, Article VIII of the Constitution, and on Section 1, Rule 36 of the Rules of Court. It also invoked Administrative Circular Number 1 dated January 28, 1988, which required all judges to make complete findings of facts in their decisions, scrutinize closely the legal aspects of the case in the light of the evidence presented, and avoid the tendency to generalize and to form conclusions without detailing the facts from which such conclusions are deduced. Citing Yao versus Court of Appeals, the Court stressed that the parties to a litigation should be informed of how it was decided, with an explanation of the factual and legal reasons that led to the conclusions of the court, and that a decision which does not clearly and distinctly state the facts and the law leaves the parties in the dark and is precisely prejudicial to the losing party, who is unable to pinpoint the possible errors of the court for review by a higher tribunal. By failing this standard, the trial court deprived Go of his right to due process, since he was not accorded a fair opportunity to be heard by a fair and responsible magistrate.

Finally, the Court noted that its jurisdiction under Rule 45 is limited to resolving only questions of law, so it could not rule on the amount of Go's liability to East Oceanic. It therefore remanded the case to the trial court for further proceedings, to allow that court to come up with a decision in the collection case that fully complies with Section 14, Article VIII of the Constitution, taking into consideration the evidence on record and its ruling in the damages case.

Doctrine

Every decision of a court must express clearly and distinctly the facts and the law on which it is based, as required by Section 14, Article VIII of the Constitution and Section 1, Rule 36 of the Rules of Court. A decision that does not state the factual and legal bases for its conclusions, particularly as to a party's liability, is void as to that party for violating the right to due process. A judgment cannot simply award a sum in favor of one party and against another without justification, because the losing party is entitled to know why he lost so that he may appeal and pinpoint the possible errors of the court. Where a trial court consolidates two cases and renders a single decision, it must resolve the issues of both cases; resolving only the issues of one case, and omitting the issues of the other as defined in the pre-trial order, leaves the decision void as to the omitted case. On appeal by certiorari under Rule 45, the Supreme Court is limited to questions of law and cannot itself determine the amount of a party's liability; the proper remedy is to reverse and set aside the defective decision and remand the case for further proceedings and for the rendition of judgment in accordance with the constitutional mandate.

Disposition

The petition was granted; the trial court's decision and order, insofar as the collection case is concerned, were reversed and set aside, and the records were remanded to the Regional Trial Court for further proceedings and for the rendition of judgment in accordance with Section 14, Article VIII of the Constitution.

Remember This

Memorize this line: a decision that does not clearly and distinctly state the facts and the law on which it is based is void for violating due process, and the losing party is entitled to know why he lost. Examiners use this case in remedial law and constitutional law questions on the requisites of a valid judgment under Section 14, Article VIII and Section 1, Rule 36, and on the proper remedy of remand when the Supreme Court, on a Rule 45 petition limited to questions of law, cannot itself resolve the facts.