G.R. No. 76399 - Verendia vs. Court of Appeals

Case Summary (G.R. No. 76399)

Relevant Insurance Policies and Incident

Verendia had three active fire insurance policies at the time of the fire that destroyed the residential building on December 28, 1980: Fidelity’s policy for P385,000, The Country Bankers Insurance for P56,000, and The Development Insurance for P400,000. Fidelity was notified of the fire loss but refused to pay its policy amount, prompting Verendia to file a complaint for damages, legal interest, attorney’s fees, and litigation expenses.

Fidelity’s Defense and Trial Court Decision

Fidelity’s defense included allegations of over-insurance and that Verendia made a false representation regarding the lease of the insured building, claiming it was leased to Roberto Garcia when actually Marcelo Garcia was the lessee. The trial court ruled in favor of Fidelity, holding that Verendia violated a policy condition requiring disclosure of other insurance coverages.

Intermediate Appellate Court Reversal

On appeal, the Intermediate Appellate Court reversed the trial court, finding no misrepresentation about the lease since the lease contract was signed by Marcelo Garcia using Roberto Garcia’s name. The court also ruled that Fidelity waived the notice requirement about other insurance policies through its conduct in attempting settlement. Fidelity received the appellate decision but filed a late motion for extension of time to file a motion for reconsideration and a subsequent motion for reconsideration, raising procedural issues on timeliness.

Legal Issue on Extension of Time for Motion for Reconsideration

The Supreme Court examined whether Fidelity’s motion for extension of time to file a motion for reconsideration was legally permissible. Prior jurisprudence held that pendency of a motion for extension does not suspend the running of the appeal period. Although the Rules of Court do not expressly prohibit motions for extension to file motions for reconsideration, this Court’s later decision in Habaluyas Enterprises, Inc. vs. Japson strictly forbids such extensions after May 30, 1986. Since Fidelity’s motion was filed before this cutoff, the issue on timeliness remained relevant but did not resolve the case.

Jurisdictional and Review Limitations

Under Rule 45, the Supreme Court’s review is limited to errors of law, and findings of fact by the appellate court are binding except in specific instances such as grave abuse of discretion or misapprehension of facts. Because of conflicting factual findings between trial and appellate courts, especially concerning the validity of the lease contract, the Court found it necessary to re-examine the evidence.

Examination of the Lease Contract and Evidence

The lease contract was allegedly signed on June 25, 1980 by Robert (Roberto) Garcia, but police investigation revealed the building was unoccupied during the fire, and Roberto Garcia was renting elsewhere. Roberto later denied signing the lease, asserting forgery of his signature. Verendia admitted during trial that Marcelo Garcia, Roberto’s cousin, actually signed the lease under Roberto’s name and paid rent. However, Verendia offered no explanation for this deception.

Implications of False Declaration under Insurance Contract

The Court emphasized that insurance contracts are contracts of indemnity governed by the principle of utmost good faith (uberrimae fidei). The fraudulent lease contract constituted a false declaration under Section 13 of the insurance policy, which unambiguously provides for forfeiture of all policy benefits if the claim is supported by any false declaration or fraudulent means. Because Verendia presented a fabricated lease to support his claim, he forfeited his right to recover under the policy.

Waiver of Policy Conditions and Burden of Proof

There was no evidence that Fidelity waived Section 13’s forfeiture provision. Insurance contracts being contracts of adhesion are generally construed in favor of the insured, but the proven fraud obliged strict construction against Verendia. Fidelity did not waive the false declaration clause, and Verendia failed to justify or rebut Fidelity’s findings.

Alleged Settlement Based on Subrogation Receipt

Verendia contended Fidelity’s submission of a subrogation receipt in evidence i

Case Syllabus (G.R. No. 76399)

Background and Parties Involved

The case comprises two consolidated petitions involving Rafael (Rex) Verendia as petitioner and respondent, and Fidelity & Surety Insurance Company of the Philippines (Fidelity) as both petitioner and respondent at different stages.
Subject matter concerns a fire insurance policy, No. F-18876, issued by Fidelity, covering Verendia’s residential building at Tulip Drive, Beverly Hills, Antipolo, Rizal.
The policy was effective from June 23, 1980, to June 23, 1981, with coverage amounting to ₱385,000.00.
Monte de Piedad & Savings Bank was named as beneficiary under the Fidelity policy.
Verendia also carried insurance on the same property with two other companies: Country Bankers Insurance for ₱56,000.00 and Development Insurance for ₱400,000.00.
The insured property was completely destroyed by fire on December 28, 1980, during the force of all three insurance policies.

Procedural History

Verendia notified Fidelity of the loss; however, Fidelity refused to pay under the policy.
Verendia filed a complaint for payment of the policy amount, legal interest, attorney’s fees, and litigation expenses with the Court of First Instance of Quezon City.
Monte de Piedad was later included as an "unwilling defendant."
Fidelity answered claiming avoidance of the policy due to over-insurance and alleged misrepresentation regarding the lessee of the property.
The trial court ruled in favor of Fidelity on May 24, 1983, citing breach of policy paragraph 3 concerning the nondisclosure of other insurance policies.
On appeal, the Intermediate Appellate Court reversed the decision on March 31, 1986, holding no misrepresentation occurred concerning the lease and that Fidelity waived the right to enforce nondisclosure of other insurance policies.
Fidelity’s delayed motion for extension of time to file a motion for reconsideration and subsequent motion for reconsideration sparked procedural challenges.
Verendia’s motion to expunge Fidelity's motion for reconsideration was denied.
Both parties subsequently filed separate petitions for review with the Supreme Court, which were consolidated.

Jurisdictional and Procedural Issues on the Motion for Extension of Time

The Court first examined whether Fidelity’s motion for extension of time to file a motion for reconsideration was legally permissible and timely.
Established jurisprudence states that the pendency of a motion for extension does not suspend the running of the reglementary period.
Prior to the Supreme Court Resolution in Habaluyas Enterprises, Inc. v. Japson, motions for extension of time to move for reconsideration could be entertained, but this was later proscribed starting June 1, 1986.
Fidelity’s motion was filed and granted before the Habaluyas ruling took full effect.
The Court determined that the procedural irregularity did not bar the Supreme Court’s review of the main issues.

Issues for Review: Veracity of Lease Contract and Effect of Subrogation Receipt

The Supreme Court identified two main issues:
1. Whether the lease contract submitted by Verendia to support his claim under the fire insurance policy was a false declaration that would forfeit his benefits under Section 13 of the policy.
2. Whether Fidelity, by submitti