Caltex vs Palomar

18 SRA 247 29 September 1966 CASTRO, J.

Art. II – Legal Value
PETITIONER RESPONDENT
CALTEX (PHILIPPINES), INC., ENRICO PALOMAR, in his capacity as
THE POSTMASTER GENERAL
SUMMARY
Caltex Philippines Inc. conceived a promotional contest called "Caltex Hooded Pump
Contest" for all motor vehicle owners and/or licensed drivers. The mechanics of the
contest is for the participant to estimate how many liters a hooded gas pump at each
of the station will dispense in a given specified period. The contest does not require
any fees or consideration or purchase from the gasoline station of any product in
order to join. Because the contest involved, local, regional, and national level, Caltex
saw the need of using the postal mail in distributing information and communicating
them to people, they requested from the postal authorities for the contest to be
cleared in advanced for mailing. Postmaster General Enrico Palomar denied the
request saying the contest falls within rules of The Anti-Lottery Provisions of the
Postal Law. Caltex petitioned the matter to the court and was ruled favourably.
According to the court, the contest is not considered a lottery because it lacked the
element of “consideration” since no payment, purchase, or anything in return is asked
from the participants. (Elements of Lottery: Consideration, Prize, Chance). Palomar
appealed the issue to the Supreme Court. The Supreme Court ruled in favour of
Caltex saying the contest does not violate the Postal Law.
FACTS
1. In 1960, Caltex Philippines Inc. started a promotional scheme called "Caltex
Hooded Pump Contest". Participants will estimate the actual number of liters a
hooded gas pump at each Caltex station will dispense during a specified
period. To join, no fees or consideration, nor purchase of Caltex products
were required.
2. Employees of the company, dealers, advertising agency, and their immediate
families are not allowed to join and made open only among all motor vehicle
owners and/or licensed drivers.
3. The contest involved “Dealer Contest”(station level), “Regional Contest”, and
“National Contest”
4. Caltex foreseeing the extensive use of the mails not only as amongst the
media for publicizing the contest but also for the transmission of
communications, requested for representations were made with the postal
authorities for the contest to be cleared in advance for mailing.
5. Palomar, the Postmaster General denied Caltex’s request for clearance on the
grounds that the contest scheme falls within the purview of “The Anti-Lottery
 Provisions of the Postal Law”.
6. Caltex invoked judicial consideration, and petitioned the issue to court,
stressing that there being involved no consideration on the part of any
contestant, the contest was not, under controlling authorities, condemnable as
a lottery.
7. The court then ruled in favour of Caltex saying it does not violate the Postal
Law and that Postmaster General had no right to bar the public distribution of
the contest rules through mails.
8. Respondent, Palomar, appealed the case to the Supreme Court.
ISSUES RULING
1. WON the petition states a
sufficient cause of action for YES
declaratory relief (interpretation of
the law)

2. WON proposed "Caltex Hooded NO

Pump Contest" violates the Postal
Law
RATIONALE
1. 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 - 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.

2. 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.Chance

The contest is not a lottery. 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.

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.

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.
Disposition
The Supreme Court ruled out that Caltex Philippines Inc. may not be denied the use
of the mails for the purpose of the said contest.