CasES for tom intro to law 04-07-14.docx

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-19650 September 29, 1966

CALTEX (PHILIPPINES), INC.,petitioner-appellee,vs.ENRICO PALOMAR, in his capacity as THE POSTMASTER GENERAL,respondent-appellant.

Office of the Solicitor General for respondent and appellant.Ross, Selph and Carrascoso for petitioner and appellee.

CASTRO, J.:

In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex) conceivedand laid the groundwork for a promotional scheme calculated to drum up patronage for its oilproducts. Denominated "Caltex Hooded Pump Contest", it calls for participants therein toestimate the actual number of liters a hooded gas pump at each Caltex station will dispenseduring a specified period. Employees of the Caltex (Philippines) Inc., its dealers and itsadvertising agency, and their immediate families excepted, participation is to be openindiscriminately to all "motor vehicle owners and/or licensed drivers". For the privilege toparticipate, no fee or consideration is required to be paid, no purchase of Caltex productsrequired to be made. Entry forms are to be made available upon request at each Caltexstation where a sealed can will be provided for the deposit of accomplished entry stubs.

A three-staged winner selection system is envisioned. At the station level, called "DealerContest", the contestant whose estimate is closest to the actual number of liters dispensedby the hooded pump thereat is to be awarded the first prize; the next closest, the second;and the next, the third. Prizes at this level consist of a 3-burner kerosene stove for first; athermos bottle and a Ray-O-Vac hunter lantern for second; and an Everready Magnet-liteflashlight with batteries and a screwdriver set for third. The first-prize winner in each stationwill then be qualified to join in the "Regional Contest" in seven different regions. The winningstubs of the qualified contestants in each region will be deposited in a sealed can from whichthe first-prize, second-prize and third-prize winners of that region will be drawn. The regionalfirst-prize winners will be entitled to make a three-day all-expenses-paid round trip to Manila,accompanied by their respective Caltex dealers, in order to take part in the "NationalContest". The regional second-prize and third-prize winners will receive cash prizes of P500

and P300, respectively. At the national level, the stubs of the seven regional first-prizewinners will be placed inside a sealed can from which the drawing for the final first-prize,second-prize and third-prize winners will be made. Cash prizes in store for winners at thisfinal stage are: P3,000 for first; P2,000 for second; Pl,500 for third; and P650 as consolationprize for each of the remaining four participants.

Foreseeing the extensive use of the mails not only as amongst the media for publicizing thecontest but also for the transmission of communications relative thereto, representationswere made by Caltex with the postal authorities for the contest to be cleared in advance for


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mailing, having in view sections 1954(a), 1982 and 1983 of the Revised Administrative Code,the pertinent provisions of which read as follows:

SECTION 1954.Absolutely non-mailable matter. No matter belonging to any ofthe following classes, whether sealed as first-class matter or not, shall be importedinto the Philippines through the mails, or to be deposited in or carried by the mails of

the Philippines, or be delivered to its addressee by any officer or employee of theBureau of Posts:

Written or printed matter in any form advertising, describing, or in any mannerpertaining to, or conveying or purporting to convey any information concerning anylottery, gift enterprise, or similar scheme depending in whole or in part upon lot orchance, or any scheme, device, or enterprise for obtaining any money or property ofany kind by means of false or fraudulent pretenses, representations, or promises.

"SECTION 1982. Fraud orders.Upon satisfactory evidence that any person orcompany is engaged in conducting any lottery, gift enterprise, or scheme for thedistribution of money, or of any real or personal property by lot, chance, or drawing of

any kind, or that any person or company is conducting any scheme, device, orenterprise for obtaining money or property of any kind through the mails by means offalse or fraudulent pretenses, representations, or promises, the Director of Posts mayinstruct any postmaster or other officer or employee of the Bureau to return to theperson, depositing the same in the mails, with the word "fraudulent" plainly written orstamped upon the outside cover thereof, any mail matter of whatever class mailed byor addressed to such person or company or the representative or agent of suchperson or company.

SECTION 1983. Deprivation of use of money order system and telegraphic transferservice.The Director of Posts may, upon evidence satisfactory to him that anyperson or company is engaged in conducting any lottery, gift enterprise or schemefor the distribution of money, or of any real or personal property by lot, chance, or

drawing of any kind, or that any person or company is conducting any scheme,device, or enterprise for obtaining money or property of any kind through the mails bymeans of false or fraudulent pretenses, representations, or promise, forbid the issueor payment by any postmaster of any postal money order or telegraphic transfer tosaid person or company or to the agent of any such person or company, whethersuch agent is acting as an individual or as a firm, bank, corporation, or association ofany kind, and may provide by regulation for the return to the remitters of the sumsnamed in money orders or telegraphic transfers drawn in favor of such person orcompany or its agent.

The overtures were later formalized in a letter to the Postmaster General, dated October 31,1960, in which the Caltex, thru counsel, enclosed a copy of the contest rules and

endeavored to justify its position that the contest does not violate the anti-lottery provisions ofthe Postal Law. Unimpressed, the then Acting Postmaster General opined that the schemefalls within the purview of the provisions aforesaid and declined to grant the requestedclearance. In its counsel's letter of December 7, 1960, Caltex sought a reconsideration of theforegoing stand, stressing that there being involved no consideration in the part of anycontestant, the contest was not, under controlling authorities, condemnable as a lottery.Relying, however, on an opinion rendered by the Secretary of Justice on an unrelated caseseven years before (Opinion 217, Series of 1953), the Postmaster General maintained hisview that the contest involves consideration, or that, if it does not, it is nevertheless a "gift


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enterprise" which is equally banned by the Postal Law, and in his letter of December 10,1960 not only denied the use of the mails for purposes of the proposed contest but as wellthreatened that if the contest was conducted, "a fraud order will have to be issued against it(Caltex) and all its representatives".

Caltex thereupon invoked judicial intervention by filing the present petition for declaratory

relief against Postmaster General Enrico Palomar, praying "that judgment be rendereddeclaring its 'Caltex Hooded Pump Contest' not to be violative of the Postal Law, andordering respondent to allow petitioner the use of the mails to bring the contest to theattention of the public". After issues were joined and upon the respective memoranda of theparties, the trial court rendered judgment as follows:

In view of the foregoing considerations, the Court holds that the proposed 'CaltexHooded Pump Contest' announced to be conducted by the petitioner under the rulesmarked as Annex B of the petitioner does not violate the Postal Law and therespondent has no right to bar the public distribution of said rules by the mails.

The respondent appealed.

The parties are now before us, arrayed against each other upon two basic issues: first,whether the petition states a sufficient cause of action for declaratory relief; and second,whether the proposed "Caltex Hooded Pump Contest" violates the Postal Law. We shall takethese up in seriatim.

1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which was theapplicable legal basis for the remedy at the time it was invoked, declaratory relief is availableto any person "whose rights are affected by a statute . . . to determine any question ofconstruction or validity arising under the . . . statute and for a declaration of his rightsthereunder" (now section 1, Rule 64, Revised Rules of Court). In amplification, this Court,conformably to established jurisprudence on the matter, laid down certain conditions sinequa non therefor, to wit: (1) there must be a justiciable controversy; (2) the controversy must

be between persons whose interests are adverse; (3) the party seeking declaratory reliefmust have a legal interest in the controversy; and (4) the issue involved must be ripe for

judicial determination (Tolentino vs. The Board of Accountancy, et al., G.R. No. L-3062,September 28, 1951; Delumen, et al. vs. Republic of the Philippines, 50 O.G., No. 2, pp. 576,578-579; Edades vs. Edades, et al., G.R. No. L-8964, July 31, 1956). The gravamen of theappellant's stand being that the petition herein states no sufficient cause of action fordeclaratory relief, our duty is to assay the factual bases thereof upon the foregoing crucible.

As we look in retrospect at the incidents that generated the present controversy, a number ofsignificant points stand out in bold relief. The appellee (Caltex), as a business enterprise ofsome consequence, concededly has the unquestioned right to exploit every legitimatemeans, and to avail of all appropriate media to advertise and stimulate increased patronage

for its products. In contrast, the appellant, as the authority charged with the enforcement ofthe Postal Law, admittedly has the power and the duty to suppress transgressions thereof particularly thru the issuance of fraud orders, under Sections 1982 and 1983 of the Revised

Administrative Code, against legally non-mailable schemes. Obviously pursuing its rightaforesaid, the appellee laid out plans for the sales promotion scheme hereinbefore detailed.To forestall possible difficulties in the dissemination of information thereon thru the mails,amongst other media, it was found expedient to request the appellant for an advanceclearance therefor. However, likewise by virtue of his jurisdiction in the premises andconstruing the pertinent provisions of the Postal Law, the appellant saw a violation thereof in


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the proposed scheme and accordingly declined the request. A point of difference as to thecorrect construction to be given to the applicable statute was thus reached. Communicationsin which the parties expounded on their respective theories were exchanged. The confidencewith which the appellee insisted upon its position was matched only by the obstinacy withwhich the appellant stood his ground. And this impasse was climaxed by the appellant'sopen warning to the appellee that if the proposed contest was "conducted, a fraud order will

have to be issued against it and all its representatives."

Against this backdrop, the stage was indeed set for the remedy prayed for. The appellee'sinsistent assertion of its claim to the use of the mails for its proposed contest, and thechallenge thereto and consequent denial by the appellant of the privilege demanded,undoubtedly spawned a live controversy. The justiciability of the dispute cannot be gainsaid.There is an active antagonistic assertion of a legal right on one side and a denial thereof onthe other, concerning a real not a mere theoretical question or issue. The contendersare as real as their interests are substantial. To the appellee, the uncertainty occasioned bythe divergence of views on the issue of construction hampers or disturbs its freedom toenhance its business. To the appellant, the suppression of the appellee's proposed contestbelieved to transgress a law he has sworn to uphold and enforce is an unavoidable duty.With the appellee's bent to hold the contest and the appellant's threat to issue a fraud ordertherefor if carried out, the contenders are confronted by the ominous shadow of an imminentand inevitable litigation unless their differences are settled and stabilized by a tranquilizingdeclaration (Pablo y Sen, et al. vs. Republic of the Philippines, G.R. No. L-6868, April 30,1955). And, contrary to the insinuation of the appellant, the time is long past when it canrightly be said that merely the appellee's "desires are thwarted by its own doubts, or by thefears of others" which admittedly does not confer a cause of action. Doubt, if any therewas, has ripened into a justiciable controversy when, as in the case at bar, it was translatedinto a positive claim of right which is actually contested (III Moran, Comments on the Rules ofCourt, 1963 ed., pp. 132-133, citing: Woodward vs. Fox West Coast Theaters, 36 Ariz., 251,284 Pac. 350).

We cannot hospitably entertain the appellant's pretense that there is here no question of

construction because the said appellant "simply applied the clear provisions of the law to agiven set of facts as embodied in the rules of the contest", hence, there is no room fordeclaratory relief. The infirmity of this pose lies in the fact that it proceeds from theassumption that, if the circumstances here presented, the construction of the legal provisionscan be divorced from the matter of their application to the appellee's contest. This is notfeasible. Construction, verily, is the art or process of discovering and expounding themeaning 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 thegiven case is not explicitly provided for in the law (Black, Interpretation of Laws, p. 1). This isprecisely the case here. Whether or not the scheme proposed by the appellee is within thecoverage of the prohibitive provisions of the Postal Law inescapably requires an inquiry intothe intended meaning of the words used therein. To our mind, this is as much a question ofconstruction or interpretation as any other.

Nor is it accurate to say, as the appellant intimates, that a pronouncement on the matter athand can amount to nothing more than an advisory opinion the handing down of which isanathema to a declaratory relief action. Of course, no breach of the Postal Law has as yetbeen committed. Yet, the disagreement over the construction thereof is no longer nebulousor contingent. It has taken a fixed and final shape, presenting clearly defined legal issuessusceptible of immediate resolution. With the battle lines drawn, in a manner of speaking, thepropriety nay, the necessity of setting the dispute at rest before it accumulates theasperity distemper, animosity, passion and violence of a full-blown battle which looms ahead


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(III Moran, Comments on the Rules of Court, 1963 ed., p. 132 and cases cited), cannot butbe conceded. Paraphrasing the language in Zeitlin vs. Arnebergh 59 Cal., 2d., 901, 31 Cal.Rptr., 800, 383 P. 2d., 152, cited in 22 Am. Jur., 2d., p. 869, to deny declaratory relief to theappellee in the situation into which it has been cast, would be to force it to choose betweenundesirable alternatives. If it cannot obtain a final and definitive pronouncement as towhether the anti-lottery provisions of the Postal Law apply to its proposed contest, it would

be faced with these choices: If it launches the contest and uses the mails for purposesthereof, it not only incurs the risk, but is also actually threatened with the certain imposition,of a fraud order with its concomitant stigma which may attach even if the appellee willeventually be vindicated; if it abandons the contest, it becomes a self-appointed censor, orpermits the appellant to put into effect a virtual fiat of previous censorship which isconstitutionally unwarranted. As we weigh these considerations in one equation and in thespirit of liberality with which the Rules of Court are to be interpreted in order to promote theirobject (section 1, Rule 1, Revised Rules of Court) which, in the instant case, is to settle,and afford relief from uncertainty and insecurity with respect to, rights and duties under a lawwe can see in the present case any imposition upon our jurisdiction or any futility orprematurity in our intervention.

The appellant, we apprehend, underrates the force and binding effect of the ruling we handdown in this case if he believes that it will not have the final and pacifying function that adeclaratory judgment is calculated to sub serve. At the very least, the appellant will bebound. But more than this, he obviously overlooks that in this jurisdiction, "Judicial decisionsapplying or interpreting the law shall form a part of the legal system" (Article 8, Civil Code ofthe Philippines). In effect, judicial decisions assume the same authority as the statute itselfand, until authoritatively abandoned, necessarily become, to the extent that they areapplicable, the criteria which must control the actuations not only of those called upon toabide thereby but also of those in duty bound to enforce obedience thereto. Accordingly, weentertain no misgivings that our resolution of this case will terminate the controversy at hand.

It is not amiss to point out at this juncture that the conclusion we have herein just reached isnot 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 countyprosecutor that its proposed sales promotion plan had the characteristics of a lottery, andthat if such sales promotion were conducted, the corporation would be subject to criminalprosecution, it was held that the corporation was entitled to maintain a declaratory reliefaction against the county prosecutor to determine the legality of its sales promotion plan. In

pari materia, see also: Bunis vs. Conway, 17 App. Div. 2d., 207, 234 N.Y.S. 2d., 435; Zeitlinvs. Arnebergh, supra; Thrillo, Inc. vs. Scott, 15 N.J. Super. 124, 82 A. 2d., 903.

In fine, we hold that the appellee has made out a case for declaratory relief.

2. The Postal Law, chapter 52 of the Revised Administrative Code, using almost identicalterminology in sections 1954(a), 1982 and 1983 thereof, supra, condemns as absolutely non-mailable, and empowers the Postmaster General to issue fraud orders against, or otherwisedeny the use of the facilities of the postal service to, any information concerning "any lottery,gift enterprise, or scheme for the distribution of money, or of any real or personal property bylot, chance, or drawing of any kind". Upon these words hinges the resolution of the secondissue posed in this appeal.

Happily, this is not an altogether untrodden judicial path. As early as in 1922, in "El Debate",Inc. vs. Topacio, 44 Phil., 278, 283-284, which significantly dwelt on the power of the postal


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authorities under the abovementioned provisions of the Postal Law, this Court declared that

While countless definitions of lottery have been attempted, the authoritative one forthis jurisdiction is that of the United States Supreme Court, in analogous caseshaving to do with the power of the United States Postmaster General, viz.: The term

"lottery" extends to all schemes for the distribution of prizes by chance, such aspolicy playing, gift exhibitions, prize concerts, raffles at fairs, etc., and various formsof gambling. The three essential elements of a lottery are: First, consideration;second, prize; and third, chance. (Horner vs. States [1892], 147 U.S. 449; PublicClearing House vs. Coyne [1903], 194 U.S., 497; U.S. vs. Filart and Singson [1915],30 Phil., 80; U.S. vs. Olsen and Marker [1917], 36 Phil., 395; U.S. vs. Baguio [1919],39 Phil., 962; Valhalla Hotel Construction Company vs. Carmona, p. 233, ante.)

Unanimity there is in all quarters, and we agree, that the elements of prize and chance aretoo obvious in the disputed scheme to be the subject of contention. Consequently as theappellant himself concedes, the field of inquiry is narrowed down to the existence of theelement of consideration therein. Respecting this matter, our task is considerably lightenedinasmuch as in the same case just cited, this Court has laid down a definitive yard-stick inthe following terms

In respect to the last element of consideration, the law does not condemn thegratuitous distribution of property by chance, if no consideration is derived directly orindirectly from the party receiving the chance, but does condemn as criminalschemes in which a valuable consideration of some kind is paid directly or indirectlyfor the chance to draw a prize.

Reverting to the rules of the proposed contest, we are struck by the clarity of the language inwhich the invitation to participate therein is couched. Thus

No puzzles, no rhymes? You don't need wrappers, labels or boxtops? You don't have

to buy anything? Simply estimate the actual number of liter the Caltex gas pump withthe hood at your favorite Caltex dealer will dispense from to , and win valuableprizes . . . ." .

Now here in the said rules is any requirement that any fee be paid, any merchandise bebought, any service be rendered, or any value whatsoever be given for the privilege toparticipate. A prospective contestant has but to go to a Caltex station, request for the entryform, which is available on demand, and accomplish and submit the same for the drawing ofthe winner. Viewed from all angles or turned inside out, the contest fails to exhibit anydiscernible consideration, which would brand it as a lottery. Indeed, even as we head thestern injunction, "look beyond the fair exterior, to the substance, in order to unmask the realelement and pernicious tendencies which the law is seeking to prevent" ("El Debate", Inc. vs.

Topacio, supra, p. 291), we find none. In our appraisal, the scheme does not only appear tobe, but actually is, a gratuitous distribution of property by chance.

There is no point to the appellant's insistence that non-Caltex customers who may buyCaltex products simply to win a prize would actually be indirectly paying a consideration forthe privilege to join the contest. Perhaps this would be tenable if the purchase of any Caltexproduct or the use of any Caltex service were a pre-requisite to participation. But it is not. Acontestant, it hardly needs reiterating, does not have to buy anything or to give anything ofvalue. 1awphl.nt


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Off tangent, too, is the suggestion that the scheme, being admittedly for sales promotion,would naturally benefit the sponsor in the way of increased patronage by those who will beencouraged to prefer Caltex products "if only to get the chance to draw a prize by securingentry blanks". The required element of consideration does not consist of the benefit derivedby the proponent of the contest. The true test, as laid down in People vs. Cardas, 28 P. 2d.,99, 137 Cal. App. (Supp.) 788, is whether the participant pays a valuable consideration for

the chance, and not whether those conducting the enterprise receive something of value inreturn for the distribution of the prize. Perspective properly oriented, the standpoint of thecontestant is all that matters, not that of the sponsor. The following, culled from Corpus JurisSecundum, should set the matter at rest:

The fact that the holder of the drawing expects thereby to receive, or in fact doesreceive, some benefit in the way of patronage or otherwise, as a result of thedrawing; does not supply the element of consideration. Griffith Amusement Co. vs.Morgan, Tex. Civ. App., 98 S.W., 2d., 844" (54 C.J.S., p. 849).

Thus enlightened, we join the trial court in declaring that the "Caltex Hooded Pump Contest"proposed by the appellee is not a lottery that may be administratively and adversely dealtwith under the Postal Law.

But it may be asked: Is it not at least a "gift enterprise, or scheme for the distribution ofmoney, or of any real or personal property by lot, chance, or drawing of any kind", which isequally prescribed? Incidentally, while the appellant's brief appears to have concentrated onthe issue of consideration, this aspect of the case cannot be avoided if the remedy hereinvoked is to achieve its tranquilizing effect as an instrument of both curative and preventive

justice. Recalling that the appellant's action was predicated, amongst other bases, uponOpinion 217, Series 1953, of the Secretary of Justice, which opined in effect that a scheme,though not a lottery for want of consideration, may nevertheless be a gift enterprise in whichthat element is not essential, the determination of whether or not the proposed contest wanting in consideration as we have found it to be is a prohibited gift enterprise, cannotbe passed over sub silencio.

While an all-embracing concept of the term "gift enterprise" is yet to be spelled out in explicitwords, there appears to be a consensus among lexicographers and standard authorities thatthe term is commonly applied to a sporting artifice of under which goods are sold for theirmarket value but by way of inducement each purchaser is given a chance to win a prize (54C.J.S., 850; 34 Am. Jur., 654; Black, Law Dictionary, 4th ed., p. 817; Ballantine, LawDictionary with Pronunciations, 2nd ed., p. 55; Retail Section of Chamber of Commerce ofPlattsmouth vs. Kieck, 257 N.W., 493, 128 Neb. 13; Barker vs. State, 193 S.E., 605, 56 Ga.

App., 705; Bell vs. State, 37 Tenn. 507, 509, 5 Sneed, 507, 509). As thus conceived, theterm clearly cannot embrace the scheme at bar. As already noted, there is no sale ofanything to which the chance offered is attached as an inducement to the purchaser. Thecontest is open to all qualified contestants irrespective of whether or not they buy theappellee's products.

Going a step farther, however, and assuming that the appellee's contest can beencompassed within the broadest sweep that the term "gift enterprise" is capable of beingextended, we think that the appellant's pose will gain no added comfort. As stated in theopinion relied upon, rulings there are indeed holding that a gift enterprise involving an awardby chance, even in default of the element of consideration necessary to constitute a lottery,is prohibited (E.g.: Crimes vs. States, 235 Ala 192, 178 So. 73; Russell vs. Equitable Loan &Sec. Co., 129 Ga. 154, 58 S.E., 88; State ex rel. Stafford vs. Fox-Great Falls Theater


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Corporation, 132 P. 2d., 689, 694, 698, 114 Mont. 52). But this is only one side of the coin.Equally impressive authorities declare that, like a lottery, a gift enterprise comes within theprohibitive statutes only if it exhibits the tripartite elements of prize, chance and consideration(E.g.: Bills vs. People, 157 P. 2d., 139, 142, 113 Colo., 326; D'Orio vs. Jacobs, 275 P. 563,565, 151 Wash., 297; People vs. Psallis, 12 N.Y.S., 2d., 796; City and County of Denver vs.Frueauff, 88 P., 389, 394, 39 Colo., 20, 7 L.R.A., N.S., 1131, 12 Ann. Cas., 521; 54 C.J.S.,

851, citing: Barker vs. State, 193 S.E., 605, 607, 56 Ga. App., 705; 18 Words and Phrases,perm. ed., pp. 590-594). The apparent conflict of opinions is explained by the fact that thespecific statutory provisions relied upon are not identical. In some cases, as pointed out in 54C.J.S., 851, the terms "lottery" and "gift enterprise" are used interchangeably (Bills vs.People, supra); in others, the necessity for the element of consideration or chance has beenspecifically eliminated by statute. (54 C.J.S., 351-352, citing Barker vs. State, supra; State exrel. Stafford vs. Fox-Great Falls Theater Corporation, supra). The lesson that we derive fromthis state of the pertinent jurisprudence is, therefore, that every case must be resolved uponthe particular phraseology of the applicable statutory provision.

Taking this cue, we note that in the Postal Law, the term in question is used in associationwith the word "lottery". With the meaning of lottery settled, and consonant to the well-knownprinciple of legal hermeneutics noscitur a sociis which Opinion 217 aforesaid also reliedupon although only insofar as the element of chance is concerned it is only logical that theterm under a construction should be accorded no other meaning than that which isconsistent with the nature of the word associated therewith. Hence, if lottery is prohibitedonly 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 thatelement 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, resortto the determination thereof being an accepted extrinsic aid in statutory construction. Mailfraud orders, it is axiomatic, are designed to prevent the use of the mails as a medium fordisseminating 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 corruptpublic morals (Com. vs. Lund, 15 A. 2d., 839, 143 Pa. Super. 208). Since in gambling it isinherent that something of value be hazarded for a chance to gain a larger amount, it followsineluctably that where no consideration is paid by the contestant to participate, the reasonbehind the law can hardly be said to obtain. If, as it has been held

Gratuitous distribution of property by lot or chance does not constitute "lottery", if it isnot resorted to as a device to evade the law and no consideration is derived, directlyor indirectly, from the party receiving the chance, gambling spirit not being cultivatedor stimulated thereby. City of Roswell vs. Jones, 67 P. 2d., 286, 41 N.M., 258." (25Words and Phrases, perm. ed., p. 695, emphasis supplied).

we find no obstacle in saying the same respecting a gift enterprise. In the end, we arepersuaded to hold that, under the prohibitive provisions of the Postal Law which we haveheretofore examined, gift enterprises and similar schemes therein contemplated arecondemnable only if, like lotteries, they involve the element of consideration. Finding none inthe contest here in question, we rule that the appellee may not be denied the use of themails for purposes thereof.


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Recapitulating, we hold that the petition herein states a sufficient cause of action fordeclaratory relief, and that the "Caltex Hooded Pump Contest" as described in the rulessubmitted by the appellee does not transgress the provisions of the Postal Law.

ACCORDINGLY, the judgment appealed from is affirmed. No costs.

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 Caltexs request

stating that the contest scheme falls within the purview of the Anti-lottery Provision andultimately, 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
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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 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.

- 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,


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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


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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.

epublic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 97973 January 27, 1992

SPOUSES GAUVAIN and BERNARDITA BENZONAN, petitioners,vs.COURT OF APPEALS, BENITO SALVANI PE and DEVELOPMENT BANK OF THEPHILIPPINES, respondents.

G.R. No. 97998 January 27, 1992


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DEVELOPMENT BANK OF THE PHILIPPINES, petitioner,vs.COURT OF APPEALS and BENITO SALVANI PE, respondents.

Ruben E. Agpalo for Sps. Gauvain and Bernardita Benzonan.

Vicente R. Acsay for Benito Salvani Pe.

Thomas T. Jacobo for DBP.

GUTIERREZ, JR., J .:

This is a petition to review the August 31, 1990 decision of the Court of Appeals whichsustained the right of respondent Benito Salvani Pe to repurchase a parcel of land foreclosedby petitioner Development Bank of the Philippines (DBP) and sold to petitioners Gauvain andBernardita Benzonan.

Respondent Pe is a businessman in General Santos City who owns extensive commercialand agricultural properties. He is the proprietor of the firm "Dadiangas B.P. Trading." One ofthe properties he acquired through free patents and miscellaneous sales from the Bureau ofLands is a 26,064 square meters parcel covered by Free Patent No. 46128 issued onOctober 29, 1969. OCT No. P-2404 was issued on November 24, 1969.

On February 24, 1970 or barely three months after he acquired the land, the respondentmortgaged the lot in question, together with another lot covered by TCT No. 3614 and somechattels to secure a commercial loan of P978,920.00 from the DBP. The lot was developedinto a commercial-industrial complex with ricemill and warehouse facilities, a solar drier, anoffice and residential building, roadway, garden, depository, and dumping grounds for

various materials.

When the private respondent failed to pay his loan after more than seven years had passed,DBP foreclosed the mortgage on June 28, 1977. On that date, the total obligation amountedto P1,114,913.34. DBP was the highest bidder. Certificates of sale were issued in its f vor; P452,995.00 was for the two lots and P108,450.00 for the chattels. Thecertificate covering the disputed lot was registered with the Registry of Deeds on January 24,1978.

After the foreclosure sale, respondent Pe leased the lot and its improvements from DBP forP1,500.00 a month. Part of the property was also leased by DBP to the then National Grains

Authority.

The respondent failed to redeem the property within the one year period. On September 24,1979 DBP sold the lot to the petitioner for P1,650,000.00 payable in quarterly amortizationsover a five year period. The petitioners occupied the purchased lot and introduced furtherimprovements worth P970,000.00.

On July 12, 1983, claiming that he was acting within the legal period given to him torepurchase, respondent Pe offered in writing to repurchase the lot for P327,995.00. DBP


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The petitioners-spouses in G.R. No. 97973 raise the following "legal issues, reasons, orerrors" allegedly committed by the Court of Appeals, to wit:

1. The Court of Appeals erred in holding that conversion and use of the landin question to industrial or commercial purposes, as a result of which it couldno longer be used for cultivation, and the fact that respondent Pe has vast

holdings whose motive in seeking to repurchase the property is to continuethe business or for speculation or greater profits did not deprive him of theright to repurchase under Sec. 119 of CA 141, and, as a result, in ignoring ordisregarding Pe's admissions and undisputed facts establishing suchcircumstances, contrary to what this Court held in Santana v.Marias,94SCRA 853 [1979], Vargas v.Court of Appeals, 91 SCRA 195 [1979]and Simeon v.Pea, 36 SCRA 610 [1970].

2. Assuming, arguendo, that respondent Pe still had the right to repurchasethe land under Sec. 119 of CA 141, the Court of Appeals erred in notcounting the 5-year period from the date of foreclosure sale on June 18, 1977or at the very most from its registration on January 24, 1978, in accordancewith the prevailing doctrinal law at the time as enunciated in Mongev.Angeles, 101 Phil. 561 [1957],Oliva v.Lamadrid, 21 SCRA 737 [1967]and Tupas v.Damasco, 132 SCRA 593 [1984], pursuant to which Pe's rightto repurchase already expired.

3. The Court of Appeals erred in applying retroactively the ruling in Belisariov.Intermediate Appellate Court,165 SCRA 101 [1988], which held that the 5-year period is counted from the date after the one-year period to redeemforeclosed homestead expired, to the foreclosure of the land in question in1977, as its retroactive application revived Pe's lost right of repurchase anddefeated petitioners' right of ownership that already accrued under the thenprevailing doctrinal law.

4. Assuming, arguendo, that respondent Pe had the right to repurchase theland in question and assuming, further, that the 5-year period is to becounted from the consolidation of ownership after the expiration of the one-year period to redeem, the Court of Appeals erred in not holding that themere filing of an action for repurchase without tendering or depositing therepurchase price did not satisfy the requirements of repurchase, Pe's failureto make the tender or deposit even up to the present being confirmatory ofspeculative motive behind his attempt to repurchase.

5. Assuming, finally, that respondent Pe is entitled to repurchase theproperty, the Court of Appeals erred in not holding that petitioners arepossessors in good faith, similar to a vendee a retro,entitled (a) to

reimbursement of necessary and useful expenses under Article 1616 of theCivil Code as held in Calagan v.CFI of Davao,95 SCRA 498 [1980] andin Lee v.Court of Appeals,68 SCRA 196 [1975]; and (b) to refund of allamounts paid by them by reason of the sale of the property in their favor,including interest payments, in both instances with right of retention. (RolloofG.R. No. 97973, pp. 14-16)

In G.R No. 97998, DBP limited its petition to the value of the repurchase price and the natureof the contract between the parties. It framed the issues as follows:


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1. The Court of Appeals erred in not holding that Section 31 ofCommonwealth Act No. 459 as amended is not applicable in the instant caseto determine the repurchase price contrary to decisions of the HonorableSupreme Court in the following cases: DBP v.Jimenez, et al.(36 SCRA 426)and DBP v.Mirang (66 SCRA 141).

2. The Court of Appeals erred in not holding that the law between thecontracting parties are the terms and conditions embodied in the contractsigned by them. (Rolloof G.R. No. 97998, p. 12)

We find merit in the petitions.

The determination of the main issues raised by the petitioners calls for the proper applicationof Section 119 of CA 141 as amended which provides: "Every conveyance of land acquiredunder the free patent or homestead provisions, when proper, shall be subject to repurchaseby the applicant, his widow, or legal heirs, within a period of five years from the date ofconveyance."

There is no dispute over the fact that the Government awarded the land to respondent Pe sothat he could earn a living by farming the land. Did respondent Pe lose his right torepurchase the subject agricultural lot under the aforequoted law considering its conversionfor industrial or commercial purposes? The evidence relating to the conversion is sufficientlyestablished and yet was not properly appreciated by the respondent court.

Only three months after getting the free patent and the original certificate of title over thesubject lot, it was mortgaged by respondent Pe to get a commercial loan of nearly P1 millionfrom DBP. Pe spent the proceeds of the loan to construct permanent improvements on thelot for his rice-mill and other businesses, i.e.,two warehouse buildings; administration-residential building; perimeter fence; solar and concrete drier; shed; machine shop; dirtykitchen; and machineries and equipments such as ricemill (TSN, August 13, 1984, pp. 173-174). The entire lot has been converted to serve commercial and industrial purposes. The

testimony of petitioners Gauvain Benzonan on this score has not been successfullychallenged, viz:

Q. Out of this 2.6 hectares land area, how much of this isdevoted to the solar drier construction?

A. The solar drier is about one thousand (1,000) squaremeters . . . ah no, about six thousand (6,000) square meters.

Q. What about the area occupied by the warehouse and thericemill complex?

A. The warehouse and ricemill complex is occupying aboutone and a half (1 1/2) hectares.

Q. What about the area occupied by the residence as well asthe roadways?

A. It covers about another half of a hectare again, Sir.


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It might be well to note that the underlying principle of Section 119 ofCommonwealth Act No. 141 is to give the homesteader or patentee everychance to preserve for himself and his family the land that the State hadgratuitously given to him as a reward for his labor in cleaning and cultivatingit. (Simeon v. Pea, 36 SCRA 617). As found by the Court of Appeals, themotive of the petitioners in repurchasing the lots in question being one for

speculation and profit, the same therefore does not fall within the purpose,spirit and meaning of said section.

and in Santana et al.v.Marias,94 SCRA 853, 861-862 [1979] to wit:

In Simeon v.Peawe analyzed the various cases previously decided, andarrived at the conclusion that the plain intent, the raison d' etre,of Section119, C.A. No. 141 ". . . is to give the homesteader or patentee every chanceto preserve for himself and his family the land that the state had gratuitouslygiven to him as a reward for his labor in cleaning and cultivating it." In thesame breath, we agreed with the trial court, in that case, that "it is in thissense that the provision of law in question becomes unqualified andunconditional. And in keeping with such reasons behind the passage of thelaw, its basic objective is to promote public policy, that is, to provide homeand decent living for destitutes, aimed at promoting a class of independentsmall landholders which is the bulwark of peace and order.

As it was in Simeon v.Pea,respondent Marias' intention in exercising theright of repurchase "is not for the purpose of preserving the same within thefamily fold," but "to dispose of it again for greater profit in violation of the law'spolicy and spirit." The foregoing conclusions are supported by the trial court'sfindings of fact already cited, culled from evidence adduced. Thusrespondent Marias was 71 years old and a widower at the time of the sale in1956; that he was 78 when he testified on October 24, 1963 (or over 94years old today if still alive); that . . . he was not living on the property when

he sold the same but was residing in the poblacion attending to a hardwarestore, and that the property was no longer agricultural at the time of the sale,but was a residential and commercial lot in the midst of many subdivisions.The profit motivation behind the effort to repurchase was conclusively shownwhen the then plaintiff's counsel, in the case below, Atty. Loreto Castillo, inhis presence, suggested to herein petitioners' counsel, Atty. Rafael Dinglasan". . . to just add to the original price so the case would be settled." Moreover,

Atty. Castillo manifested in court that an amicable settlement was possible,for which reason he asked for time "within which to settle the terms thereof'"and that "the plaintiff . . . Mr. Marias, has manifested to the Court that if thedefendants would be willing to pay the sum of One Peso and Fifty Centavos(P1.50) per square meter, he would be willing to accept the offer and dismissthe case."

Our decisions were disregarded by the respondent court which chose to adopt a Court ofAppeals ruling in Lim, et al.v.Cruz, et al.,CA-G.R. No. 67422, November 25, 1983 that themotives of the homesteader in repurchasing the land are inconsequential" and that it doesnot matter even "when the obvious purpose is for selfish gain or personal aggrandizement."


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The other major issue is when to count the five-year period for the repurchase by respondentPe whether from the date of the foreclosure sale or from the expiration of the one yearperiod to redeem the foreclosed property.

The respondent court ruled that the period of repurchase should be counted from theexpiration of the one year period to redeem the foreclosed property. Since the one year

period to redeem expired on January 24, 1979 and he filed Case No. 280 on October 4,1983 to enforce his right to repurchase the disputed property, the Court of Appeals held thatPe exercised his right to repurchase within the five-year period provided by Section 119 ofCA 141 as amended.

The respondent court cited Belisario, et al., v.Intermediate Appellate Court, et al., 165 SCRA101, 107 [1988] where we held:

. . . In addition, Section 119 of Commonwealth Act 141 provides that everyconveyance of land acquired under the free patent or homestead patentprovisions of the Public Land Act, when proper, shall be subject torepurchase by the applicant, his widow or legal heirs within the period of five

years from the date of conveyance. The five-year period of redemption fixedin Section 119 of the Public Land Law of of the one-year period ofrepurchase allowed in an extrajudicial foreclosure. (Manuel v. PNB, et al.,101 Phil. 968) Hence, petitioners still had five (5) homestead sold atextrajudicial foreclosure begins to run from the day after the expiration yearsfrom July 22, 1972 (the expiration of the redemption period under Act 3135)within which to exercise their right to repurchase under the Public Land Act.

As noted by the respondent court, the 1988 case of Belisarioreversed the previous rulings ofthis Court enunciated in Monge, et al., v.Angeles, et al., 101 Phil. 563 [1957] and Tupasv.Damasco, et al., 132 SCRA 593 [1984] to the effect that the five year period of repurchaseshould be counted from the date of conveyance or foreclosure sale. The petitioners,however, urge that Belisarioshould only be applied prospectively or after 1988 since it

established a new doctrine.

We sustain the petitioners' position. It is undisputed that the subject lot was mortgaged toDBP on February 24, 1970. It was acquired by DBP as the highest bidder at a foreclosuresale on June 18, 1977, and then sold to the petitioners on September 29, 1979.

At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amendedwas that enunciated in Monge and Tupas cited above. The petitioners Benzonan andrespondent Pe and the DBP are bound by these decisions for pursuant to Article 8 of theCivil Code "judicial decisions applying or interpreting the laws or the Constitution shall form apart of the legal system of the Philippines." But while our decisions form part of the law of theland, they are also subject to Article 4 of the Civil Code which provides that "laws shall have

no retroactive effect unless the contrary is provided." This is expressed in the familiar legalmaximlex prospicit, non respicit,the law looks forward not backward. The rationale againstretroactivity is easy to perceive. The retroactive application of a law usually divests rights thathave already become vested or impairs the obligations of contract and hence, isunconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]).

The same consideration underlies our rulings giving only prospective effect to decisionsenunciating new doctrines. Thus, we emphasized in People v.Jabinal, 55 SCRA 607 [1974]". . . when a doctrine of this Court is overruled and a different view is adopted, the new


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doctrine should be applied prospectively and should not apply to parties who had relied onthe old doctrine and acted on the faith thereof."

There may be special cases where weighty considerations of equity and social justice willwarrant a retroactive application of doctrine to temper the harshness of statutory law as itapplies to poor farmers or their widows and orphans. In the present petitions, however, we

find no such equitable considerations. Not only did the private respondent apply for freeagricultural land when he did not need it and he had no intentions of applying it to the noblepurposes behind the law, he would now repurchase for only P327,995.00, the propertypurchased by the petitioners in good faith for P1,650,000.00 in 1979 and which, because ofimprovements and the appreciating value of land must be worth more than that amount now.

The buyers in good faith from DBP had a right to rely on our rulingsin Mongeand Tupaswhen they purchased the property from DBP in 1979 or thirteen (13)years ago. Under the rulings in these two cases, the period to repurchase the disputed lotgiven to respondent Pe expired on June 18, 1982. He failed to exercise his right. His lostright cannot be revived by relying on the 1988 case of Belisario. The right of petitioners overthe subject lot had already become vested as of that time and cannot be impaired by theretroactive application of the Belisario ruling.

Considering our above findings, we find no need to resolve the other issues raised by thepetitioners in their petitions.

WHEREFORE, the questioned decision of the respondent court is hereby REVERSED andSET ASIDE. The complaint for repurchase under Section 119 of Commonwealth Act No. 141as amended is DISMISSED. No pronouncement as to costs.

Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.

1. CIVIL LAW; PUBLIC LAND ACT (C.A. NO. 141); MORTGAGE OF

PUBLIC LANDS; REDEMPTION; NOT ALLOWED WHERE THE INTENTION

OF THE MORTGAGOR WAS NOT FOR THE PURPOSE OF PRESERVING

THE SAME WITHIN THE FAMILY FOLD; CASE AT BAR. Only three

months after getting the free patent and the original certificate of title

over the subject lot, it was mortgaged by respondent Pe to get acommercial loan of nearly P1 million from DBP. Pe spent the proceeds

of the loan to construct permanent improvements on the lot. The entire

lot has been converted to serve commercial and industrial purposes.

The records show that it was never the intention of respondent Pe to


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utilize the land, given to him for free by the Government, for

agricultural purposes. He was not the kind of poor farmer for whom

homesteads and free patents were intended by the law. In the light of

the records of these cases, we rule that respondent Pe cannotrepurchase the disputed property without doing violence to everything

that CA No. 141 (as amended) stands for.

2. ID.; ID.; ID.; ID.; PURPOSE AND BASIC OBJECTIVE. The

underlying principle of Section 119 of Commonwealth Act No. 141 is to

give the homesteader or patentee every chance to preserve for himself

and his family the land that the State had gratuitously given to him as a

reward for his labor in cleaning and cultivating it. (Simeon v. Pea, 36

SCRA 617 cited in Vargas v.Court of Appeals, 91 SCRA 195, 200,

[1979]). Its basic objective is to promote public policy, that is, to provide

home and decent living for destitutes, aimed at promoting a class of

independent small landholders which is the bulwark of peace and

order. Santana, et al. v. Marias, 94 SCRA 753, 861-862 [1979].

3. ID.; ID.; ID.; ID.; FIVE-YEAR PERIOD COMMENCES FROM DATE

OF CONVEYANCE OR FORECLOSURE SALE PURSUANT TO MONGE (101

Phil. 563) AND TUPAZ (132 SCRA 593) CASES; DOCTRINE IN BELISARIO

CASE (165 SCRA 101) REVERSING THE RULING IN THE MONGE AND

TUPAZ CASES; NOT APPLICABLE TO CASE AT BAR. As noted by the

respondent court, the 1988 case of Belisarioreversed the previous

rulings of this Court enunciated in Monge, et al., v. Angeles, et al., 101

Phil. 563 [1957] and Tupas v. Damasco, et al., 132 SCRA 593 [1984] to

the effect that the five year period of repurchase should be counted

from the date of conveyance or foreclosure sale. The petitioners,

however, urge that Belisarioshould only be applied prospectively or

after 1988 since it established a new doctrine. We sustain the


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petitioners' position. It is undisputed that the subject lot was mortgaged

to DBP on February 24, 1970. It was acquired by DBP as the highest

bidder at a foreclosure sale on June 18, 1977, and then sold to the

petitioners on September 29, 1979. At that time, the prevailingjurisprudence interpreting section 119 of R.A. 141 as amended was that

enunciated in Mongeand Tupascited above.

The petitioners Benzonan and respondent Pe and the DBP are bound by

these decisions for pursuant to Article 8 of the Civil Code "judicial

decisions applying or interpreting the laws or the Constitution shall

form a part of the legal system of the Philippines." But while our

decisions form part of the law of the land, they are also subject to

Article 4 of the Civil Code which provides that "laws shall have no

retroactive effect unless the contrary is provided." This is expressed in

the familiar legal maxim lex prospicit, non respicit, the law looks forward

not backward. The rationale against retroactivity is easy to perceive. The

retroactive application of a law usually divests rights that have already

become vested or impairs the obligations of contract and hence, isunconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same

consideration underlies our rulings giving only prospective effect to

decisions enunciating new doctrines. Thus, we emphasized in People v.

Jabinal, 55 SCRA 607 [1974] ". . . when a doctrine of this Court is

overruled and a different view is adopted, the new doctrine should be

applied prospectively and should not apply to parties who had relied on

the old doctrine and acted on the faith thereof.

5. ID.; ID.; ID.; ID.; ID.; ID.; ABSENCE OF EQUITABLE

CONSIDERATIONS TO WARRANT RETROACTIVE APPLICATION OF

BELISARIO DOCTRINE. There may be special cases where weighty

considerations of equity and social justice will warrant a retroactive


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application of doctrine to temper the harshness of statutory law as it

applies to poor farmers or their widows and orphans. In the present

petitions, however, we find no such equitable considerations. Not only

did the private respondent apply for free agricultural land when he didnot need it and he had no intentions of applying it to the noble

purposes behind the law, he would now repurchase for only

P327,995.00, the property purchased by the petitioners in good faith for

P1,650,000.00 in 1979 and which, because of improvements and the

appreciating value of land must be worth more than that amount now.

6. ID.; ID.; ID.; VESTED RIGHTS OF BUYERS IN GOOD FAITH

SHOULD NOT BE IMPAIRED. The buyers in good faith from DBP had

a right to rely on our rulings in Mongeand Tupaswhen they purchased

the property from DBP in 1979 or thirteen (13) years ago. Under the

rulings in these two cases, the period to repurchase the disputed lot

given to respondent Pe expired on June 18, 1982. He failed to exercise

his right. His lost right cannot be revived by relying on the 1988 case

of Belisario. The right of petitioners over the subject lot had alreadybecome vested as of that time and cannot be impaired by the

retroactive application of the Belisarioruling.

Republic of the PhilippinesSUPREME COURT

Manila


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EN BANC

G.R. No. L-31589 July 31, 1970

LOURDES BARRERA, plaintiff,vs.

LEON BARRERA and FIDELA ANDRES BARRERA, defendants, RE CONTEMPTCATOLICO, respondent.

R E S O L U T I O N

FERNANDO, J.:

This Court is faced with a question of the most unique kind. Respondent Judge AlfredoCatolico of the Court of First Instance of Cavite was cited for contempt and asked why nodisciplinary action should be taken against him for hurling the accusation that this Court had

delegated to its Clerk a power which under the Rules of Court appertained to its ChiefJustice, an accusation made in the context of an explicit avowal that he was in no mood toaccord recognition and respect to a binding decision of this Court, which for him wasobsolete and no longer authoritative. Such an attitude betrayed a refusal to apply the law asinterpreted by this tribunal. He could not bring himself to abide by a settled doctrine. Giventhe opportunity to explain both in a memorandum and in an oral argument, he remainedadamant and obdurate. It was apparent he was not averse to disciplinary action being visitedon his conduct. He leaves us no choice. We find him in contempt.

It all started innocently enough in a letter dated September 8, 1969, received by us two daysthereafter. Counsel for the plaintiff in Barrera v. Barrera, a civil case pending in the Court ofFirst Instance of Cavite1requested "that the Court of First Instance of Cavite, Branch 111,

presided over by the Hon. Judge Alfredo Catolico be authorized to continue with the hearing ofthe above-entitled case pursuant to Section 3, Rule 22 of the Rules of Court." 2Why such requestwas made was explained by counsel in these words: "The said case is pending trial. The plaintiffhas one more witness to present and thereafter, she intends to rest her case. Unfortunately, onMay 22, 1969, when this case was set for hearing, the presiding Judge of the Court of FirstInstance of Cavite, the Hon. Judge Jose B. Jimenez, was appointed as District Judge for theCourt of First Instance of Manila, and on said date, he did not hold court session. Because of this,the trial of this case was left pending, and it was only in the month of July when it was reset forhearing on August 6, 1969. However, on this date, this case was not again heard because thenew Presiding Judge did not arrive due to bad weather."

Under our resolution of September 12, 1969, the aforesaid letter was referred to theDepartment of Justice. The then Undersecretary of Justice, now the Solicitor General Felix

Q. Antonio, referred the matter to respondent judge whose comments were received by theDepartment of Justice in an indorsement of October 22, 1969. After pointing out that the firstday of trial on the merits of the case in Barrera v. Barrera having been held on August 21,1968, there had elapsed by then the period of fourteen months, far beyond the three-monthlimit as set forth in the Rules of Court, he continued: "When the undersigned Presiding Judgeassumed his duties as such, he found no written authority by the Honorable Chief Justice ofthe Supreme Court extended to this branch for it to be able to continue trying the case byreceiving evidence yet to be presented, seasonably, adjourning and transferring continuationof the trial, and finally thereafter, adjudging the case. Considering the express provision of


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Rule 22 of the Rules of Court on the subject of adjournments and postponements, sameneed not be interpreted or construed for indeed, the Court can only apply its clear andexpress provisions; and that upon the lapse of three months from the first day of trial on themerits, the trial judge lost control of the same, and may not continue trying the same for theonly thing possible to be done is to dismiss the case.'3

That policy he adopted, notwithstanding his awareness of our ruling in Barrueco v.Abeto,4as is evident from his comments. Thus: "This is the only conceivable way of complyingwith the express provision of Rule 22 of the Rules of Court. Indeed, this same provision wasincorporated in the original rules of court of 1940. In an identical case submitted for ruling by theHon. Supreme Court, Barrueco v. Abeto, 71 Phil. 7, Justice Laurel who penned the decisioninterpreted the same to be of directory character rather than mandatory." 5Clearly then, he wasnot disposed to yield obedience. What the Court had said, he would blithely ignore. So hiscomments would indicate: "Way back in 1941 where throughout the Philippines there were fewthousands of cases undecided beyond 90 days, the said decision of the Supreme Court could bewell-sustained according to the facts then existing; but, could that ruling be sustained now wherethroughout the Philippines there are pending cases with a dormancy of between four months toseventeen years reaching the awful number of almost 100,000 cases be justified in itsobservance as directory when according to the present circumstances and the policy adopted by

the same Supreme Court in incorporating this provision in its Rules of Court the idea is to makejudges, decide cases as fast as possible within 90 days rather than allowing cases with adormancy reaching up to 17 years? 6

In the meanwhile, he would follow his own interpretation contrary to what was decided by thisCourt: "It is submitted that under the said rule, not even the Chief Justice of the SupremeCourt could validly, legally and morally extend power to the trial Judge to reacquire control ofthe case tantamount to reacquiring jurisdiction of the subject matter when the said writtenauthority is extended far beyond the three months limit in the said Rule 22 of the Rules ofCourt, for indeed, it is elementary, and it has been reiterated time and again by the Hon.Tribunal that when it comes to time or period in order that it could be extended, the petitionfor extension should be filed before its expiration or there is nothing that could beextended."7

Not content with such an attitude that breathes of defiance, he would impute a delegation ofsuch authority by the Chief Justice of this Court to its Clerk with this unfounded assertion:"Further, the clerk of court of the Supreme Court had been extending this power to theundersigned trial judge upon petition of counsel for the plaintiff to continue trying the casewhere the same has already been dismiss 'without prejudice' and where there is no morecase to continue, for indeed, the counsel for the plaintiff has not as yet secured thereconsideration of the said order of dismissal previous to the granting of power to continuetrying and handling the case by the undersigned trial judge. Another question that croppedup as a consequence of the above observation is as to whether the phrase 'by authority ofthe Chief Justice" has given enough legal power and authority to the said employee of theSupreme Court to in turn give power and authority to the undersigned trial judge to continue

trying the case even if it has already been dismissed."

8

Pursuing the same line, he continued thus: "In one case, it was the same clerk of court whoinformed the undersigned trial judge that by resolution of the Supreme Court he isempowered to continue trying the case until finished. In this case, could the Supreme Courtas a body validly and legally authorize the undersigned trial judge to continue handling acase pending in this Court which was not brought to the appellate jurisdiction of the Hon.Supreme Court either by appeal or by certiorari? Can the Supreme Court take cognizance ofa case pending before the Court of First Instance without the benefit of appeal or certiorari?


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If this could be done, could the Supreme Court order the trial judge to continue a case whichwas already dismissed and not existing anymore where the counsel for the plaintiff has notfiled a motion to set side an order of dismissal or has not filed any petition for certiorari to theSupreme Tribunal for the review of said order?"9

The closing portion of his comments let no doubt as to his determination to adhere to the

policy adopted by him contrary to the ruling in the Abeto case: "The above considerationsand questions are hereby humbly submitted to the Hon. Department of Justice for itsconsideration in the sanguine belief and expectation that something be done tending toremedy the nebulous situation wherein the undersigned trial Judge is found not only by theclear and express provisions of Sec. 3 of Rule 22 of the Rules of Court but also by the rulingof the highest tribunal of the land in the Abeto case and in the letters written by the Clerk ofthe Supreme Court extending authority to the undersigned trial judge to continue handling allthese cases even if dismissals have already been ordered and no petition for the settingaside of the order or no certiorari has been presented for the review thereof and wherefactually, there is no case to continue." 10

In our resolution of November 12, 1969, his comments being sent to us by the thenUndersecretary of Justice on November 3 of that month, he was given the opportunity toexplain in writing not later than November 24, and to appear personally before the Court onNovember 26, to show cause why he should not be dealt with for contempt. His explanationwas filed on November 24. It was apparent that further reflection did not occasion a changeof heart. As set forth therein: "It may not be amiss to state in this connection, that your hereinrespondent is at a loss for really he cannot ascertain who is the offended party in thisproceeding. Is it the Hon. Tribunal as a whole or the Chief Justice of the Supreme Court, orthe deputy clerk of court? Indeed, there is no written charge by anybody or specific personseeking the institution of a contempt proceeding against your herein respondent."11

This is how he would answer his question: "If it is the Hon. Tribunal as a whole who might bethe offended party your herein respondent would be at a loss to understand how he couldincur the responsibilities attached to a contempt of court proceeding when he has not

disobeyed any order of the Supreme Court. If it is the Hon. Chief Justice of the SupremeCourt who might be the offended party in this case, it is respectfully submitted that therespondent judge might not be subjected to contempt proceeding for expressing his honestopinion which happens to be different from the highly respected one of the Hon. ChiefJustice of the Supreme Court, and if there is any error in this case it might be one whereinterpretation of law rather than a deliberate misstatement of facts as specified in thecommunication of the deputy clerk of court. And if it is the deputy clerk of court who has beenwriting all these letters to your herein respondent who might be considering himself as anoffended party and has initiated this contempt of court proceeding your herein respondent,with all humility, submits the fact that he cannot be made respondent in a contempt of courtproceeding just because of an erroneous communication written by the said deputy clerk ofcourt and may your humble respondent be allowed to say that he cannot be charged withcontempt of court because of the erroneous letters of a deputy clerk of court who might wantto exert a personality higher than that of your herein respondent, and finally, if these were thecase, let your humble respondent say with Dolores Ibarruri as follows: [Better to die on one'sfeet than to live on one's knees.]." 12

Then two days later, on November 26, respondent Judge argued his case in a manner thaterased any lingering doubt as to his being obsessed with the conviction that nothing said ordone by him could in no wise be objectionable, a position maintained with all the obstinacy athis command. He could not be reconciled to the thought that our Clerk when speaking forthis Court was performing a duty to which lower court judges would do well to pay heed. It


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was even more apparent that while, making much of his refusal to believe that the orderreceived by him proceeded from a source not authorized to do so, in itself an unfoundedcharge that this Court was recreant to its responsibility not to allow any one to usurp itsauthority, he was acting in accordance with a fixed and resolute determination not to bebound by the Barrueco doctrine. For him, it was no longer in force. It did not matter that thisCourt had not so decreed. He could not bring himself to accord it deference. So his acts and

words did indicate. What other alternative is there then than to fund him guilty of contempt?

It is to be made clear that the disciplinary action taken against him is not for the thoughtsentertained or opinions uttered by him. Judges are not expected to be wholly in agreementwith every decision of this Tribunal. Nor are they required to keep locked up within theirbreasts their own views on such matters. Doubts and skepticism about the continuing validityof doctrines announced by us may under appropriate, ventilated. As a matter of fact, theyshould not be discourage for the progress of the law may very well depend on a moresearching inquiry as to the continuing validity of certain assumptions and "Presuppositionsuncritically accepted. Nonetheless, as long as our rulings constitute authoritative precedents,the duty of obedience is cast on inferior court judges.

Nor is respondent Judge to be held responsible for the manner in which he gave expressionto his thoughts. There is no offense against this Court arising from a rather truculent tonethat fails to exhibit, the redeeming grace of urbanity. Nor could the mere fact that theimpression left is one, of dogmatic finality, that apparently could not harbor the leastsuspicion that one could possibly be in the slightest bit mistaken, call for a reproof. After all,the style reflect the man and perhaps he cannot help himself.

What calls for disciplinary action is the recklessness warn which respondent Judge did hurlthe baseless allegation that the Clerk of this Court was permitted to exercise an authoritywhich appertained to the Chief Justice. He did speak with all the valor of ignorance. Nor didhe retreat from such an indefensible stand in the face of his being informed that what theClerk did was solely in accordance with what was previously decided by this Court, whichcertainly will not tolerate, anybody else, much less a subordinate, to speak and act for itself.

This gross disrespect shown to this Court has no justification: The misdeed of respondentJudge is compounded by such an accusation apparently arising from his adamantineconviction that a doctrine of this Court that fails to meet his approval need not be applied. Noinferior court judge, to repeat, can be permitted to arrogate unto himself such a prerogativeat war with everything that the rule of law stands for.

The delicate task of ascertaining the significance that attaches to a constitutional statutoryprovision, an executive order a procedural norm or a municipal ordinance is discharges arole no less committed to the judiciary. It thus discharges a role no less crucial than thatappertaining the other two departments in the maintenance of the rule of law. To assurestability in legal relations and avoid confusion, it has to speak with one voice. It does so withfinality, logically and rightly, through the highest judicial organ, this Court. What it says thenshould be definitive and authoritative, binding on those occupying the lower ranks in the

judicial hierarchy. They have to defer and to submit. What was so appropriately said byJustice Laurel comes to mind: "A becoming modesty of inferior courts demands consciousrealization of the position that they occupy in the interrelation and operation of the integrated

judicial system of the nation." 13

Such a thought was reiterated in an opinion of Justice J.B.L. Reyes and further emphasizedin these words: "Judge Gaudencio Cloribel need not be reminded that the Supreme Court,by tradition and in our system of judicial administration, has the last word on what the law is;


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The overturned Decision of the Regional Trial Court (RTC) of Angeles City,Branch 56,[4]affirmed in toto the Municipal Trial Court (MTC) of Angeles City,Branch II.[5]

The Facts

The facts of the case are summarized by the CA in this wise:

In a Complaint for IllegalDetainer with Damages filed on October 15, 1998,

the [respondents] alleged that they are the owners of four (4) parcels of land

designated as Lot Nos. 164, 165, 166, and 167 of the Cadastral Survey of

Angeles City, and covered, respectively, by Transfer Certificates of Title Nos.

83247, 83246, 83248 and 83249, all issued by the Register of Deeds of Angeles

City. These four (4) parcels of land have been consolidated and subdivided into

several blocks and lots, and are now collectively designatedas Bagong Silang Phase III-C. By mere permission and tolerance of the

[respondents], the [petitioners] have occupied and erected their homes on four

(4) of the said lots, as follows:

George T. Villena and wife = Block 5, Lot 14

Carlos N. Villena and wife = Block 5, Lot 13

Aurora M. Bondoc and husband = Block 2, Lot 4

Ronnie C. Hernandez and wife = Block 3, Lot 5

All the [petitioners] are members of theBagong Silang Phase III-C

Homeowners Association, Inc., with office address at Cutud, Angeles City.

The [respondents] allowed the [petitioners] and other members of the said

homeowners association to continue occupying the subject lots and ultimately

to acquire ownership of the lots occupied, in consideration of a certain amount

to be paid to the [respondents] as equity.

The [respondents] further alleged that the other members of the saidhomeowners association paid to the [respondents] their respective equity for

their right to continue occupying and ultimately acquiring ownership of the

occupied lots. However, notwithstanding repeated demands made upon the

[petitioners], they have refused and failed without any justifiable ground to pay

their respective equity. In view of such failure to pay, the [petitioners] have

forfeited their right to continue occupying the lots in question. Formal demand
http://sc.judiciary.gov.ph/jurisprudence/2003/nov2003/148126.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2003/nov2003/148126.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2003/nov2003/148126.htm#_ftn4http://sc.judiciary.gov.ph/jurisprudence/2003/nov2003/148126.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2003/nov2003/148126.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2003/nov2003/148126.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2003/nov2003/148126.htm#_ftn5http://sc.judiciary.gov.ph/jurisprudence/2003/nov2003/148126.htm#_ftn4


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letters were then sent by registered mail to the [petitioners], wherein they were

given a period of thirty (30) days from receipt within which to vacate and

remove their houses from the subject lots. The period given to the [petitioners]

lapsed on April 11, 1998, but up to the present time, the [petitioners] refused

and failed without any justifiable reason or ground to vacate and remove their

houses from the said lots.

The [respondents] then prayed in their Complaint that the [petitioners] be

ordered to vacate and remove their houses from the lots currently occupied; that

each of the [petitioners] be ordered to pay the [respondents] P1,000.00 a month

as reasonable rental for the use and occupation of the lots starting from April

11, 1998 until they have finally vacated and removed their houses from said

lots; and that the [petitioners] jointly and severally pay the [respondents]

P25,000.00 as actual and compensatory damages, P2,000.00 as appearance fee

per hearing, exemplary damages, and the costs of the suit.

In their answer with compulsory counter-claim filed on November 3, 1998,

the [petitioners] countered that the [respondents] have no cause of action to

institute the present action, considering that the properties in question are under

the community mortgage program implemented by the National Home

Mortgage Finance Corporation. Moreover, the [petitioners] claimed that they

are lawful tenants of the premises, and that they have been paying their equity

to their originator, the Urban Land and Development Foundation[,] Inc.

However, they were not issued the corresponding receipts evidencing payment

and a copy of their contract. The [petitioners] further averred that they were

willing to continue paying their equity until the same shall have been fully paid,

but their originator, without justifiable reason, refused to accept the tender of

payment made by them. The [petitioners] subsequently agreed with their

originator that the payment of equity should be continued only upon the release

of a Purchase Commitment Line (PCL).

In addition, the [petitioners] alleged that they are qualified beneficiaries under

Republic Act No. 7279, otherwise known as the Urban Development and

Housing Act of 1992; hence, they cannot be summarily evicted and their

dwelling houses demolished unless and until they have been relocated.

According to the [petitioners], they are also builders in good faith and should

be indemnified for the improvements they constructed on the properties in

question.

The [petitioners] prayed in their answer that the complaint be dismissed; that

they be declared lawful tenants and qualified beneficiaries under R.A. 7279;


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that the [respondents] be ordered to sell the lots in question to them, and to pay

attorneys fees and the costs of suit.

After the pre-trial conference, both parties submitted their position papers. On

September 15, 1999, MTC Branch II of Angeles City rendered a decision

dismissing both the [respondents] complaint and the [petitioners] counter-claim, on the ground that the filing of an ejectment case based on the alleged

violation of the parties agreement which has not yet been rescinded is

premature, and that it is beyond the competence of the said court to act on the

case, as rescission or specific performance is beyond the jurisdiction of the said

court.

The [respondents] appealed such adverse judgment to the RTC of Angeles

City, which appeal was raffled to Branch 56 of the said court. On March 29,

2000, RTC Branch 56 of Angeles City rendered a decision affirming in toto the

MTC judgment.[6]

Ruling of the Court of Appeals

The CA held that the right of petitioners to continue occupying the subjectproperties hinged on their continued payment of the agreed amount asequity.[7]Even after formal letters of demand to vacate the premises had beensent to them, however, they still did not make any effort to pay their equity toprotect their right to continue occupying those lots. Thus, the appellate court

ruled that their failure to pay made their occupancy unlawful, in consequence ofwhich they became subject to an ejectment suit.

The CA rejected the contention of petitioners that they were protected by RA7279. According to the appellate court, there was no express declaration by thelocal government unit that the parcels of land owned by respondents were to beused for socialized housing. Neither was there proof of the allegation that theyhad applied therefor under the Community Mortgage Program of the NationalHome Mortgage Finance Corporation under Section 31 of RA 7279. Besides,even granting that petitioners were protected under RA 7279, they were stillliable to pay amortization or face eviction.

Likewise debunked was the allegation of petitioners that respondents werenot t

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