Go vs. East Oceanic Leasing and Finance Corporation

A decision of a trial court that fails to state clearly and distinctly the facts and the law on which it is based violates Section 14, Article VIII of the Constitution and deprives the losing party of due process, rendering the decision void; consequently, where a consolidated decision resolves only the issues in one case while completely omitting discussion of the issues in the consolidated companion case, the decision is void insofar as the latter is concerned.

Armando Go obtained a loan of P14,062,888.00 from East Oceanic Leasing and Finance Corporation on March 22, 1995, for the purpose of upgrading his bus fleet, as recommended by Theodore Sy, then East Oceanic's Managing Director. Go issued six post-dated checks drawn from his Development Bank of the Philippines account to cover the monthly installments, but all were dishonored upon presentment due to his account being garnished. With an outstanding balance of P2,814,054.84, East Oceanic filed a collection suit with prayer for preliminary attachment against Go. Meanwhile, East Oceanic also filed a separate damages suit against Sy for his alleged false report regarding the purpose of Go's loan. The two cases were subsequently consolidated.

• On March 22, 1995, petitioner Armando Go obtained a loan of P14,062,888.00 from respondent East Oceanic Leasing and Finance Corporation, payable in monthly installments of P169,287.00 until fully paid, as evidenced by a Promissory Note executed on the same day.
• The loan application was approved based on the report and recommendation of Theodore Sy, then East Oceanic's Managing Director, which specified that the purpose of the loan was for the upgrading of the bus fleet and 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, covering the monthly installments and additional amounts.
• All six checks were dishonored by the DBP upon presentment for payment with the reason "Account Under Garnished" stamped at the back of the checks and as shown by the check return slips.
• East Oceanic duly informed Go of the dishonor of the checks and demanded that he make good or pay the same, but Go failed to do so.
• By reason of the dishonored checks, Go's loan became due and demandable with an outstanding balance of P2,814,054.84, excluding interest and other charges, based on a Statement of Account dated January 24, 1996.
• In his Answer with Counterclaim in the collection case, Go argued that the Promissory Note is void for failure to comply with the mandatory requirements set up by the Bangko Sentral ng Pilipinas and Supreme Court decisions, rendering the interests and charges null and void, and requested proper accounting to determine the actual amount owed.
• While the collection case was pending, East Oceanic filed a Complaint for Damages against Sy, alleging that the corporation suffered a loss in the amount of P3,000,000.00 due to Sy's false report and recommendation pertaining to the real purpose of Go's loan application, which was allegedly to pay off an existing loan to Sto. Niño de Cebu Finance Corporation, as well as Go's financial status.
• The Pre-Trial Order enumerated issues for both the collection case and the damages case, including whether plaintiff (East Oceanic) is entitled to its claim against defendant Armando Go, and whether defendant Armando Go is liable to plaintiff for damages.

• The assailed RTC Decision is void for having no basis in fact and in law as regards his civil liability to East Oceanic.
• The RTC Decision is contrary to law because it failed to cite any factual and/or legal basis as to his civil liability to East Oceanic.
• The RTC violated the constitutional mandate of Section 14, Article VIII of the Constitution and Section 1, Rule 36 of the Rules of Court requiring decisions to state clearly and distinctly the facts and law on which they are based.

• Procedural Issues: Whether the Regional Trial Court complied with the constitutional and statutory requirements of stating clearly and distinctly the facts and law on which its decision in the collection case is based.
• Substantive Issues: Whether the RTC Decision is void for failure to resolve the issues in the collection case despite the consolidation of the two cases.

• Procedural: The Court held that the RTC failed to comply with Section 14, Article VIII of the Constitution and Section 1, Rule 36 of the Rules of Court. The assailed Decision contained absolutely no discussion of the RTC's ruling in the collection case (Civil Case No. CEB-18366), particularly on how it arrived at its conclusion finding Go liable to pay P2,814,054.84 plus interest. While the RTC resolved all issues it enumerated, these pertained exclusively to the damages case (Civil Case No. CEB-21918) against Sy, despite the pre-trial order listing issues for both cases. The Court found that the RTC failed to include in its listing and resolution the issues relating to the collection case, thereby rendering the decision void insofar as the collection case is concerned.
• Substantive: The Court granted the petition, reversed and set aside the RTC Decision and Order insofar as Civil Case No. CEB-18366 is concerned, and remanded the case to the RTC for further proceedings. The Court emphasized that the constitutional requirement is a paramount component of due process, and the RTC's failure 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. The Court noted that under Rule 45, its jurisdiction is limited to questions of law, and thus it could not rule on the amount of Go's liability but only on the validity of the decision.

• Clear and Distinct Statement of Facts and Law — Under Section 14, Article VIII of the Constitution and Section 1, Rule 36 of the Rules of Court, no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. In this case, the Court applied this doctrine to invalidate the RTC's decision in the collection case because it contained no analysis of the evidence or legal basis for the liability imposed on the petitioner.
• Due Process in Judicial Decisions — Faithful adherence to the requirements of Section 14, Article VIII is a paramount component of due process and fair play. 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. A decision that does not clearly state the facts and law leaves the parties in the dark and is prejudicial to the losing party, who is unable to pinpoint possible errors for review.
• Rule 45 Limited Jurisdiction — The Supreme Court's jurisdiction in a petition for review on certiorari under Rule 45 is limited to resolving only questions of law, and the Court cannot rule on the amount of liability when the decision is void for lack of factual and legal basis.

• "Faithful adherence to the requirements of Section 14, Article VIII of the Constitution is indisputably a paramount component of due process and fair play. It is likewise demanded by the due process clause of the Constitution. 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."
• "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 the 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 precisely prejudicial to the losing party, who is unable to pinpoint the possible errors of the court for review by a higher tribunal."

• Yao v. Court of Appeals, 398 Phil. 86 (2000) — Cited as controlling precedent emphasizing that parties to litigation should be informed of factual and legal reasons for the court's conclusions, and that failure to state facts and law clearly violates due process.
• Tan v. Ramirez, 640 Phil. 370 (2010) — Cited in relation to Administrative Circular No. 1 requiring judges to make complete findings of facts and scrutinize legal aspects of cases.

• Section 14, Article VIII of the 1987 Constitution — Mandates that no decision shall be rendered without expressing clearly and distinctly the facts and law on which it is based; cited as the primary constitutional basis for invalidating the RTC decision.
• Section 1, Rule 36 of the Rules of Court — Requires that a judgment or final order determining the merits of the case be in writing, personally prepared by the judge, and state clearly and distinctly the facts and law on which it is based.
• Section 1, Rule 45 of the Rules of Court — Provides that a petition for review on certiorari shall raise only questions of law; cited to explain why the Court could not rule on the amount of Go's liability and could only resolve the validity of the RTC decision.