FIRST DIVISION

[G.R. No. 88709. February 11, 1992.]

NICOS INDUSTRIAL CORPORATION, JUAN COQUINCO and CARLOS

COQUINCO , petitioners, vs. THE COURT OF APPEALS, VICTORINO P.
EVANGELISTA, in his capacity as Ex-O cio Sheriff of Bulacan,
UNITED COCONUT PLANTERS BANK, MANUEL L. CO, GOLDEN STAR
INDUSTRIAL CORPORATION, and THE REGISTER OF DEEDS FOR THE
PROVINCE OF BULACAN , respondents.

Manuel T. Ubarra for petitioners.

Encanto, Mabugat & Associates for UCPB.
Mangalidan and Bermas Law Office for private respondents.
Federico Reyes for Manuel L. Co.

SYLLABUS

1. CONSTITUTIONAL LAW; BILL OF RIGHTS; DUE PROCESS; DECISIONS

MUST STATE CLEARLY AND DISTINCTLY THE FACTS AND LAW ON WHICH IT IS
BASED. — 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 justi cation 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.
2. ID.; ID.; ID.; ID.; EXCEPTIONS. — 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."
(Mendoza v. Court of First Instance, 51 SCRA 369 AT 375). As for the minute
resolutions of this Court, we have already observed in Borromeo v. Court of Appeals,
186 SCRA 1 at 5 that — The Supreme Court disposes of the bulk of its cases by minute
resolutions and decrees them as nal 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 led 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. . . . 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.
3. ID.; ID.; ID.; ID.; APPLICABLE WHERE ORDER OF DISMISSAL A JUDGMENT
CD Technologies Asia, Inc. © 2019 cdasiaonline.com
 ON THE MERITS. — As it is settled that an order dismissing a case for insu cient
evidence is a judgment on the merits, (Nepomuceno v. Commission on Elections, 126
SCRA 472 at 478) 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 insu ciency 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.
4. REMEDIAL LAW; SUPREME COURT, NOT TRIER OF FACTS; CASE AT BAR.
— It is not the normal function of this Court to rule on a demurrer to the evidence in the
rst 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 nd that the respondent court did not have an adequate basis for
such examination because of the insu ciency 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.

DECISION

CRUZ , J : p

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 a rmed 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 led by the petitioners before the Regional Trial Court of
CD Technologies Asia, Inc. © 2019 cdasiaonline.com
 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, led 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 o cio 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 testi ed at three separate hearings. They also submitted 21 exhibits. On April 30,
1986, Golden Star and Evangelista led 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 E. Dantes
considered it submitted for resolution and on June 6, 1986, issued the following —
ORDER

Acting on the "Demurrer to Evidence" dated April 30, 1986 led by defendants
Victorino P. Evangelista and Golden Star Industrial Corporation to which plaintiff
and other defendants did not le 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 o cers and stockholders of the plaintiff Nicos
Industrial Corporation ". . . 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 or the responsible
o cials of the corporation, in breach of the trust reposed upon them by the
stockholders . . ." a subject matter not within the competent jurisdiction of the
Court, the court finds the same to be impressed with merit.prLL

CD Technologies Asia, Inc. © 2019 cdasiaonline.com

 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 con ning 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 rst 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 o cers 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-simpli cation 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
CD Technologies Asia, Inc. © 2019 cdasiaonline.com
 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 justi cation 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. LLjur

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 nal 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 led
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.
xxx xxx xxx

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 insu cient 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 insu ciency 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.
Signi cantly, 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
CD Technologies Asia, Inc. © 2019 cdasiaonline.com
 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 concludes 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. cdll

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 justi ed 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.
I n 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 ndings 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, 1 0 Justice Jose Y. Feria
nevertheless expressed the misgiving that "the tendency would be to follow the line of
least resistance by just adopting the ndings 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 ndings 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 , 1 1 which is the latest
decision of the Court on the issue now before us, we categorically required:
. . . 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.
CD Technologies Asia, Inc. © 2019 cdasiaonline.com
 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 ndings 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 ndings 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 a rmed
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 awed 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. LLphil

It is not the normal function of this Court to rule on a demurrer to the evidence in
the rst 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 nd that the respondent court did not have an adequate basis for
such examination because of the insu ciency 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, 1 2 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 ndings, 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
CD Technologies Asia, Inc. © 2019 cdasiaonline.com
 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, C.J., Griño-Aquino and Medialdea, JJ., concur.

Footnotes
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. — . . .

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 a rmance 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 ndings of fact and pronouncements of law which have been
adopted as basis for the affirmance. . .
10. Sec. 40. Form of decision in appealed cases. — Every decision or nal resolution of a
court in appealed cases shall clearly and distinctly state the ndings of fact and the
conclusions of law on which it is based which may be contained in the decision or nal
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.

CD Technologies Asia, Inc. © 2019 cdasiaonline.com