Case Digest for Caltex vs Palomar 18 SCRA 247

G.R. No. L-19650

Caltex Philippines, Inc., petitioner-appellee
Vs.
Enrico Palomar, in his capacity as The Postmaster General, respondent-appellant

FACTS:
In the year 1960, Caltex Philippines conceived and laid the ground work for a
promotional scheme calculated to drum up patronage for its oil products. The contest was
entitled Caltex Hooded Pump Contest, which calls for participants to estimate the actual
number of liters as hooded gas pump at each Caltex station will dispense during a specific
period.
Foreseeing the extensive use of the mails not only as amongst the media for
publicizing the contest but also for the transmission of communications, representations
were made by Caltex with the postal authorities for the contest to be cleared in advance for
mailing. This was formalized in a letter sent by Caltex to the Post master General, dated
October 31, 1960, in which Caltex, thru its counsel, enclosed a copy of the contest rules and
endeavored to justify its position that the contest does not violate the The Anti-Lottery
Provisions of the Postal Law.
Unfortunately, the Palomar, the acting Postmaster General denied Caltexs request
stating that the contest scheme falls within the purview of the Anti-lottery Provision and
ultimately, declined Clatexs request for clearance.
Caltex sought reconsideration, stressing that there being no consideration involved in
part of the contestant, the contest was not commendable as a lottery. However, the
Postmaster General maintained his view that the contest involves consideration, or even it
does not involve any consideration it still falls as Gift Enterprise, which was equally
banned by the Postal Law.
ISSUE:
1. 1.

Whether the petition states a sufficient cause of action for declaratory relief?

2. 2.
Whether or not the scheme proposed by Caltex the appellee is within the
coverage of the prohibitive provisions of the Postal Law?
HELD:
I.
By express mandate of Section 1 of Rule 66 of the old Rules of Court which deals with
the applicability to invoke declaratory relief which states: Declaratory relief is available to
person whose rights are affected by a statute, to determine any question of construction or

validity arising under the statute and for a declaration of rights thereunder.
In amplification, conformably established jurisprudence on the matter, laid down certain
conditions:
1. 1.

There must be a justiciable controversy.

2. 2.

The controversy must be between persons whose interests are adverse.

3. 3.
The party seeking declaratory relief must have a legal interest in the
controversy.
4. 4.

The issue involved must be ripe for judicial determination.

With the appellees bent to hold the contest and the appellants threat to issue a fraud order if
carried out, the contenders are confronted by an ominous shadow of imminent and inevitable
litigation unless their differences are settled and stabilized by a declaration. And, contrary to
the insinuation of the appellant, the time is long past when it can rightly be said that merely
the appellees desires are thwarted by its own doubts, or by the fears of others which
admittedly does not confer a cause of action. Doubt, if any there was, has ripened into a
justiciable controversy when, as in the case at bar, it was translated into a positive claim of
right which is actually contested.
Construction

Is the art or process of discovering and expounding the meaning and intention of the
authors of the law with respect to its application to a given case, where that intention is
rendered doubtful, amongst others, by reason of the fact that the given case is not explicitly
provided for in the law.
It is not amiss to point out at this juncture that the conclusion we have herein just reached is
not without precedent. In Liberty Calendar Co. vs. Cohen, 19 N.J., 399, 117 A. 2d., 487,
where a corporation engaged in promotional advertising was advised by the county
prosecutor that its proposed sales promotion plan had the characteristics of a lottery, and
that if such sales promotion were conducted, the corporation would be subject to criminal
prosecution, it was held that the corporation was entitled to maintain a declaratory relief
action against the county prosecutor to determine the legality of its sales promotion plan.
II.
Is the Contest Scheme a Lottery?
Lottery

Extends to all schemes for the distribution of prizes by chance

e.g. policy playing, gift exhibitions, prize concerts, raffles and fairs as well as various forms of
gambling.
Three Essential Elements:
1. 1.

Consideration

2. 2.

Prize

3. 3.

3. Chance

No, according to the Supreme Court, the contest scheme is not a lottery but it
appears to be more of a gratuitous distribution since nowhere in the rules is any
requirements that any fee be paid, any merchandise be bought, any services be rendered, or
any value whatsoever be given for the privilege to participate. Since, a prospective
contestant has to do is go to a Caltex Station, request for the entry form which is available on
demand and accomplish and submit the same for the drawing of the winner. Because of this,
the contest fails to exhibit any discernible consideration which would brand it as a lottery.
Moreover, the law does not condemn the gratuitous distribution of property by chance, if no
consideration is derived directly or indirectly from the party receiving the chance, but it does
condemn as criminal scheme in which a valuable consideration of some kind is paid directly
or indirectly for the chance to draw a prize.
Is the scheme, as sales promotion which would benefit the sponsor in the way of
increased patronage be considered as a consideration and thus violates the Postal
Law?
No, the required element of consideration does not consist of the benefit derived by
the sponsors of the contest. The true test lies on whether or not the participant pays a
valuable consideration for the chance of winning and not whether or not those conducting
the enterprise receiver something of value for the distribution of the prize.
Is the Contest Scheme a Gift Enterprise?
Even if the term Gift Enterprise is not yet defined explicitly, there appears to be a
consensus among lexicographers and standard authorities that the term is common applied
to a sporting artifice of under which goods are sold for their market value but by way of
inducement to purchase the product, the purchaser is given a chance to win a prize.
And thus, the term of gift enterprise cannot be established in the case at bar since
there is not sale of anything to which the chance offered is attached as an inducement to the
purchaser. The contest is open to all qualified contestant irrespective of whether or not they
buy the appellees products.
The lesson that we derive from this state of the pertinent jurisprudence is that every
case must be resolved upon the particular phraseology of the applicable statutory
provision. It is only logical that the term under a construction should be accorded no other
meaning than that which is consistent with the nature of the word associated therewith.
In the end, the Supreme Court ruled out that under the prohibitive provision of the Postal
Law, gift enterprise and similar schemes therein contemplated are condemnable only if, like
lotteries, they involve the element of consideration. Finding non in the contest, it was ruled
out that the appellee may not be denied the use of the mails for the purpose thereof.