Facts: In 1960, the petitioner, Caltex (Philippines) Inc.

, launched a promotional
scheme called "Caltex Hooded Pump Contest" which calls for participants to
estimate the actual number of liters a hooded gas pump of each Caltex Station
will dispense within a specific period. Such contest is open to all motor vehicle
owners and/or licensed drivers. There is no required fee or consideration, and
there is no need for the contestants to purchase the products of Caltex. The
forms are available upon request at each Caltex Station and there is a sealed
can where accomplished entry stubs may be deposited. Then, seeing the
extensive use of mails for publicizing and transmission of communication
purposes, Caltex sent representatives to the postal authorities for advance
clearing for the use of mails for the contest. But then, the Postmaster General,
Enrico Palomar, denied the request of Caltex in view of Sections 1954 (a), 1982
and 1983 of the Revised Administrative Code. The aforesaid sections prohibits
the use of mail conveying any information concerning non-mailable schemes,
such as lottery, gift enterprise, or similar scheme. Consequently, Caltex invoked
a judicial intervention by filing a petition of declaratory relief against the
Postmaster General, ordering the Postmaster General to allow the petitioner to
use the mails to bring the contest to the attention of the public and that the
aforesaid contest is not violative of the Postal Law.

Issue:
Whether or not the scheme proposed by Caltex is within the coverage of the
prohibitive provisions of the Postal Law inescapably requires an inquiry into the
intended meaning of the words used therein.

Held:
No. Caltex may be granted declaratory relief, even if Enrico Palomar simply
applied the clear provisions of the law to a given set of facts as embodied in the
rules of the contest. For, 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 is not explicitly provided for in the law.

In this case, the prohibitive provisions of the Postal Law inescapably required an
inquiry into the intended meaning of the words used therein. Also, the Court is
tasked to look beyond the fair exterior, to the substance, in order to unmask the
real element that the law is seeking to prevent or prohibit.

JUN 16
Case Digest for Caltex vs Palomar 18 SCRA 247
BY IAMFREAKGEEK ON JUNE 16, 2013

G.R. No. L-19650

Caltex Philippines, Inc., petitioner-appellee

 Vs.

Enrico Palomar, in his capacity as The Postmaster General, respondent-appellant

Click Here for the Full Text of the case

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 Caltex’s request
stating that the contest scheme falls within the purview of the Anti-lottery Provision and
ultimately, declined Clatex’s 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. Whether the petition states a sufficient cause of action for declaratory relief?
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. There must be a justiciable controversy.

 2. The controversy must be between persons whose interests are adverse.
3. The party seeking declaratory relief must have a legal interest in the controversy.
4. The issue involved must be ripe for judicial determination.

With the appellee’s bent to hold the contest and the appellant’s 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 appellee’s “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. Consideration
2. Prize
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 appellee’s 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.

FACTS:

Caltex conceived a promotional scheme which will increase its patronage for oil products
called “Caltex Hooded Pump Contest.” The contest calls for participants to estimate the
number of liters a hooded gas pump at each Caltex station will dispense during a specified
period. To participate, entry forms are only needed which can be made available upon
request at each Caltex station. No fee is required to be paid nor purchase has to be made
prior to participating. Foreseeing the extensive use of mails to publicize the promotional
scheme, Caltex made representations with the postal authorities to secure advanced
clearance for mailing. Caltex, through its counsel, posited that the contest does not violate
anti-lottery provisions of the Postal Law. The Postmaster General Palomar declined the grant
of the requested clearance. Caltex sought a reconsideration. Palomar maintained that if the
contest was pursued, a fraud order will be issued against Caltex. Thus, this case at bar.
ISSUES:

1. Whether or not the petition states a sufficient cause of action for declaratory relief
2. Whether or not the proposed contest violates the Postal Law

RULINGS:

The Court held that the petition states a sufficient cause of action for declaratory relief since
it qualifies for the 4 requisites on invoking declaratory relief available to any person whose
rights are affected by a statute to determine any question of construction or validity. To the
petitioner, the construction hampers or disturbs its freedom to enhance its business while to
the respondent, suppression of the petitioner’s proposed contest believed to transgress the
law he has sworn to uphold and enforce is an unavoidable duty.

Likewise, using the rules of Statutory Construction in discovering the meaning and intention
of the authors in a case clouded with doubt as to its application, it was held that the
promotional scheme does not violate the Postal Law in that it does not entail lottery or gift
enterprise. Using the principle “noscitur a sociis’, the term under construction shall be
understood by the words preceding and following it. Thus, using the definitions of lottery and
gift enterprise which both has the requisites of prize, chance and consideration, the promo
contest does not clearly violate the Postal Law because of lack of consideration.