23. RIZAL SURETY V CA AND TRANSWORLD KNITTING MILLS (2000) Doctrine: Art.1377 CC.

The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. Facts: 1. Rizal Surety issued a fire insurance policy on buildings owned by Transworld Knitting Mills for August 14 1980 March 13 1981 for P1.5M 2. These were also insured to New India Assurance Co. 3. A fire broke out partly damaging the four-span building mentioned in the policy and destroyed a two-storey bldg behind said four-span bldg containing fun and amusements machines and spare parts 4. Transworld filed insurance claims against Rizal Surety and New India to no avail. Transworld then filed an action for collection of money and damages against the insurance companies. 5. Case against New India dismissed; Rizal surety made to pay. 6. Rizal Surety argues that the fire insurance covers only the four-span building which was partly burned but not the two-storey annex building. 7. Transworld: the two-storey building is not an annex but forms an integral part of the four-span building ISSUE: Whether the stipulation including property "xxx contained and/or stored during the currency of this Policy in the premises occupied by them forming part of the buildings situate (sic) within own Compound xxx" to the coverage of the policy covers the two-storey building. (YES.) HELD: a. The insurance policy did not limit its coverage to the 4-span building as the stipulations provided that for property to be deemed covered, 2 requirements must concur: 1) properties contained/stored in areas occupied by Transworld and 2) areas form part of the building described in the policy (4-span bldg) b. The lower court and CA established as fact that the two-storey building is not merely an annex but adjoined and intercommunicated with the first span of the lofty area and forms integral part of it. c. The two-storey building already existing when insurance contract was constituted, Rizal Surety should have specifically excluded it had they intended not to have it covered. d. Art.1377 CC: The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. Rationale: 'insured usually has no voice in the selection or arrangement of the words employed and that the language of the contract is selected with great care and deliberation by experts and legal advisers employed by, and acting exclusively in the interest of, the insurance company.' Digest by: Justa Aurea G. Bautista (A2015)