G.R. No. 75605 and G.R. No. 76399, January 22, 1993.
RAFAEL (REX) VERENDIA, petitioner, vs. COURT OF APPEALS and FIDELITY & SURETY CO. OF THE PHILIPPINES, respondents. (G.R. No. 75605)

FIDELITY & SURETY CO. OF THE PHILIPPINES, INC., petitioner, vs. RAFAEL VERENDIA and THE COURT OF APPEALS, respondents. (G.R. No. 76399)

FACTS

Fidelity and Surety Insurance Company of the Philippines (Fidelity) issued Fire Insurance Policy No. F-18876 covering Rafael Verendia’s residential building for P385,000.00, effective June 23, 1980 to June 23, 1981, with Monte de Piedad & Savings Bank as beneficiary. Verendia also insured the same building with two other companies: Country Bankers Insurance for P56,000.00 and Development Insurance for P400,000.00. The building was completely destroyed by fire on December 28, 1980. Fidelity refused payment, prompting Verendia to file a complaint. Fidelity defended that the policy was avoided due to over-insurance and that Verendia maliciously represented that the building was leased to a certain Roberto Garcia under a contract dated June 25, 1980, when actually it was leased to a Marcelo Garcia. The trial court ruled in favor of Fidelity, finding Verendia violated the policy by failing to inform Fidelity of his other insurance coverages. The Intermediate Appellate Court reversed, finding no misrepresentation on the lease and that Fidelity waived the requirement for notice of other insurance by its conduct. Fidelity filed a motion for extension to file a motion for reconsideration, which was granted, and later filed its motion for reconsideration. Verendia moved to expunge the motion for reconsideration, arguing the motion for extension was filed out of time. The appellate court denied Verendia’s motion to expunge and later denied Fidelity’s motion for reconsideration. Verendia filed G.R. No. 75605 challenging the denial of his motion to expunge. Fidelity filed G.R. No. 76399 seeking review of the appellate court’s decision on the merits. The Supreme Court consolidated the petitions.

ISSUE

1. Whether Fidelity’s motion for extension of time to file a motion for reconsideration was filed on time, making the appellate court’s decision still subject to review. (Procedural Issue)
2. Whether the contract of lease submitted by Verendia constitutes a false declaration forfeiting his benefits under the insurance policy. (Substantive Issue)
3. Whether Fidelity, by submitting a subrogation receipt in evidence, agreed to settle Verendia’s claim for the amount stated therein. (Substantive Issue)

RULING

1. On the procedural issue (G.R. No. 75605), the Supreme Court dismissed Verendia’s petition. The motion for extension was filed and granted before June 30, 1986, the effective date of the strict prohibition against such motions as established in Habaluyas Enterprises, Inc. vs. Japson. Therefore, the appellate court’s decision remained reviewable.
2. On the substantive issues (G.R. No. 76399), the Supreme Court granted Fidelity’s petition, reversed the appellate court’s decision, and reinstated the trial court’s decision. The Court found that Verendia presented a false declaration to support his claim. The evidence showed the lease contract was signed by “Robert Garcia,” but investigation revealed the building had “no occupant” and Roberto Garcia was renting elsewhere. Robert Garcia later executed an affidavit stating his signature was forged. Verendia admitted at trial it was signed by Marcelo Garcia, but failed to adequately explain the discrepancy. This fraudulent lease contract, used to support the claim and potentially inflate the property’s value, violated Section 13 of the policy, which forfeits all benefits if any false declaration is made in support of a claim. The contract being one of adhesion and of utmost good faith (uberrimae fidei), Verendia’s actions forfeited his benefits.
3. The subrogation receipt, though a Fidelity form, was unsigned by any Fidelity representative, incomplete, and stated Verendia received P142,685.77, which he demonstrably had not received as he sued for the full policy amount. Its presentation in evidence did not prove a mutual settlement agreement had been reached or enforced.