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Statutory construction: Definition, Concept, Purpose

Caltex v Palomar
GR No L-19650

Date of Promulgation: Sept 29, 1966
Ponente: Castro J.
Petition: Review
Petitioner: Caltex Inc.
Respondent: Enrico Palomar in his capacity as Postmaster General

In 1960, Caltex crafted a promotional scheme called “Caltex Hooded Pump Contest.” In the
contest, whoever participant correctly estimates the actual number of liters a hooded gas pump
at Caltex station, wins. The contest is open to everybody.

Caltex wanted to use the mail system as a medium not only for publicizing the contest, but also
for communicating to the participants. They made representations at the postal authorities, but
the postmaster opined that the scheme falls within the purview of Sec 1954, 1982, 1983 of the
Revised Admin Code (Postal Law section). The said provisions condemns as absolutely non-
mailable “any lottery, gift enterprise, or scheme for the distribution of money, or of any real or
personal property by lot, chance, or drawing in any kind.” Postmaster General Palomar warned
Caltex that he would issue fraud orders should it attempt to send their materials through mail.

Caltex then filed for a petition for declaratory relief , which was granted. This is a an appeal by
the Postmaster General.

1. WON the petition states a sufficient cause of action – YES
2. WON the proposed contest violates the Postal Law – NO

1. Caltex‟s assertion of its claim to the use of mails for its proposed contest, and the
challenge thereto by the postal authorities, spawned a live controversy. There is an
active antagonistic assertion of a legal rights on one side, and a denial thereof on the
other, concerning a real issue. There is thus a sufficient cause of action for declaratory
relief on the part of Caltex, especially because there is a positive claim of right which
is actually contested.

The appellant‟s claim that there is no question of construction since the law is clear,
cannot be entertained. 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 doubtful, by reason of the fact that
the given case is not explicitly provided for in the law. WON the scheme is within the
coverage of the Postal Law requires an inquiry into the intended meaning of the words

2. To determine if the proposed contest violates the law, the meaning of the terms used
must first be interpreted.

According to the ruling in El Debate v Topacio, the Court has held that the term
“lottery” extends to all schemes for the distribution of prizes by chance, such as policy
playing, gift exhibition, prize concerts, raffles at fairs, and various forms of gambling.
The three essential elements of a lottery are: consideration, prize, and chance.

The second and third elements are obviously present in the proposed contest. The
question is whether there is an element of consideration. Consideration is any
requirement imposed on the participants, in order to join the game, that would tend to
benefit the company.

In the case at bar, there is no requirement that any fee be paid, nor any merchandise
be bought, in order to participate. All the participants have to do is to go to any Caltex
station. They need not buy any Caltex product nor pay any fee in order to play the
game. Hence, the proposed contest cannot be construed as lottery.

Postmaster invokes the second non-mailable item found in the Postal law, which is
“gift enterprise.” While an all-embracing concept of the term is yet to be spelled out in
explicit words, there appears to be a consensus among lexicographers and standard
authorities that the term is commonly applied to a sporting artifice of under which
goods are sold for their market value but by way of inducement each purchaser is
given a chance to win a prize. The term does not embrace the proposed scheme since
there is no sale of anything to which chance offered is attached as an inducement to
the purchaser.

For the sake of argument, assuming that the proposed scheme is embraced by the
category of “gift enterprise,” it would not strengthen the Postmaster‟s stand. This is
because equally impressive authorities state that a gift enterprise comes within the
prohibitive statutes only if it exhibits the tripartite elements of prize, chance, and

The apparent conflict of opinions is explained by the fact that the specific statutory
provisions relied upon are not identical. In some cases, the terms „lottery‟ and „gift
enterprise‟ are used interchangeably; in others, the necessity for the element of
consideration or chance has been specifically eliminated by a statute. The lesson
here is that every case must be resolved upon the particular phraseology of the
applicable statutory provision.

Taking this cue, in the Postal Law, the term in question is used in association with the
word "lottery". With the meaning of lottery settled, and consonant to the well-known
principle of legal hermeneutics noscitur a sociis, 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. Hence, if lottery is prohibited only if it
involves a consideration, so also must the term "gift enterprise" be so construed.
Significantly, there is not in the law the slightest indicium of any intent to eliminate that
element of consideration from the "gift enterprise" therein included.
This conclusion firms up in the light of the mischief sought to be remedied by the law,
resort to the determination thereof being an accepted extrinsic aid in statutory
construction. Mail fraud orders, it is axiomatic, are designed to prevent the use of the
mails as a medium for disseminating printed matters which on grounds of public policy
are declared non-mailable. As applied to lotteries, gift enterprises and similar
schemes, justification lies in the recognized necessity to suppress their tendency to
inflame the gambling spirit and to corrupt public morals. Since in gambling it is
inherent that something of value be hazarded for a chance to gain a larger amount, it
follows ineluctably that where no consideration is paid by the contestant to participate,
the reason behind the law can hardly be said to obtain.