Article 9

CALTEX vs. PALOMAR

FACTS:

In 1960, Caltex conducted a contest entitled “Caltex Hooded Pump Contest, wherein one had to estimate the
actual number of liters a hooded gas pump at each Caltex station will dispense in a specific period. Its purpose was
to encourage patronage for its oil products.

The contest mechanics involved no fee or consideration and no purchase of Caltex products to be made. Instead,
entry forms are available upon request at each Caltex station where a sealed can will be provided for the deposit
of accomplished entry stubs.

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. On October 31, 1960, Caltex sent a formal letter to the Post master General
that contained a copy of the contest rules and mechanics, justifying its position that the contest does not violate
the “The Anti-Lottery Provisions of the Postal Law”.

 However, Palomar, the acting Postmaster General denied Caltex’s request stating that the contest scheme falls
within the scope of the Anti-lottery Provision and declined Caltex’s request for clearance.

On December 7, 1960, 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. Moreover, he did not only deny the request of Caltex but
also threatened that if the contest was conducted, a fraud order shall be issued.

As a result, Caltex filled the petition for declaratory relief.

Caltex argued that their contest is not a lottery; that under prevailing jurisprudence, lottery consists of the
following elements:

a. consideration;

b. prize;

c. chance

Furthermore, Caltex insists that their contest is not a lottery because the first element, consideration, is missing.
Said element is missing because participants are not required to pay anything – there’s no consideration on the
part of the participants.
Palomar assailed the petition as he argued that the same is not proper. He insisted that he was merely applying the
law and that there is no legal issue at all; that there is no need for the courts to call for a construction on the
statute in question.

ISSUES:

1. Whether the petition states a sufficient cause of action for declaratory relief;
2. Whether the proposed "Caltex Hooded Pump Contest" violates the Postal Law.
HELD:

1. Yes. The petition is proper.

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:

A. There must be a justiciable controversy.

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

Construction of a law is in order if what is in issue is an inquiry into the intended meaning of the words used in a
certain law. As defined in Black’s Law Dictionary: 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.

2. 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.