G.R. No. L-71360 July 16, 1986
DEVELOPMENT INSURANCE CORPORATION, petitioner, vs. INTERMEDIATE APPELLATE COURT and PHILIPPINE UNION REALTY DEVELOPMENT CORPORATION, respondents.

FACTS

Private respondent Philippine Union Realty Development Corporation filed a complaint for recovery of fire insurance proceeds against petitioner Development Insurance Corporation. The trial court declared petitioner in default for failure to file its answer within the reglementary periods, despite being granted an extension. A judgment by default was rendered, awarding the full claimed amount to private respondent. Petitioner’s motion to lift the order of default was denied, and the Intermediate Appellate Court affirmed the trial court’s decision in toto.
Petitioner’s default was due to a clear pattern of neglect. Summons was served on its senior vice-president on June 19, 1980. After missing the original deadline, counsel sought extensions but still filed the answer late on July 26, 1980. The trial court declared petitioner in default on August 25, 1980. Petitioner took no action for two months and only moved to lift the default on October 27, 1980, over a month after the default judgment was issued on September 26, 1980.

ISSUE

1. Whether the trial court correctly declared petitioner in default.
2. Whether the default judgment should be set aside.
3. Whether petitioner has a valid defense on the merits regarding the insurance coverage and the amount of indemnity.

RULING

The Supreme Court affirmed the decision. On procedural grounds, the Court found the default declaration proper. Petitioner’s series of delays, including late filings and prolonged inaction, constituted inexcusable neglect, not mere oversight. The Court distinguished the cited case of Trajano v. Cruz, where default was lifted due to excusable neglect and a valid defense. Here, petitioner demonstrated an intent to delay, and the appellate court correctly noted petitioner lacked a valid defense.
On the substantive insurance claim, the Court rejected petitioner’s defenses as meritless. First, the argument that the policy covered only the building and not its elevators was absurd, as elevators are integral parts of a seven-story building. Second, the claim that the elevators were insured only after the fire was preposterous. Third, the denial of fire damage to the elevators contradicted the arson investigators’ report and petitioner’s own admission in its answer. The factual findings of the lower courts on the extent and valuation of the loss (P508,867.00) were upheld.
Regarding the indemnity amount, petitioner argued for a pro-rata reduction because the building’s alleged value (P5.8 million) exceeded the policy face value (P2.5 million). The Court held this unsubstantiated, as petitioner provided no independent evidence of the higher valuation. The policy was an open policy under Section 60 of the Insurance Code, where the insured amount is ascertainable at loss. The agreed insured value was P2.5 million, and the actual loss was determined to be P508,867.00, which did not exceed the face value. Therefore, private respondent was entitled to the full actual loss. The Court concluded petitioner’s tactics unjustly delayed its obligation for over five years.