ADMIN LAW | B2015CASES

Uy v. Palomar1969

Zaldivaralycat

SUMMARY: Uy is an agent of the PCSO. For the Grand Christmas Sweepstakes Draw, the PCSO directed its agents to undertake every means possible to achieve its sales goal. As such, Uy devised a “Grand Christmas Bonus Award” plan, where the sub-agents who sell winning tickets, and the purchasers of the tickets themselves, in addition to the prize money from PCSO, would win certain items. Pursuant to this, Postmaster Palomar issued a Fraud Order and ordered Uy’s parcels containing sweepstakes tickets and other personal mail to be refused for acceptance for mailing, on the basis of the Postal Law which proscribes the use of the mail system to conduct lotteries, gift enterprises, schemes, etc. Uy filed a complaint challenging the issuance of the fraud order. The SC ruled that it has authority to review the Postmaster’s decision, and that Uy’s plan did not constitute a lottery.

DOCTRINE: Even though the Postal Law contains no provision for judicial review of decisions of the Postmaster General, the Court, however, has ruled that the action of the Postmaster General is subject to revision by the courts in case he exceeded his authority or his act is palpably wrong, and that the courts may interfere with the decision of the Postmaster General if it is clearly of opinion that the Postmaster was wrong. The Court, by ruling thus, recognizes the availability of judicial review over the action of the Postmaster General, notwithstanding the absence of statutory provision for judicial review of his action.

FACTS: The Philippine Charity Sweepstakes Office (PCSO) is a government entity

created and empowered to hold sweepstakes draws and lotteries for charitable and public purposes.

Manuel Uy is an agent of the PCSO, and is engaged in the sale and distribution of sweepstakes and lottery tickets. For this purpose, he employs sub-agents, through which not less than 70% of Uy’s total sales for each draw are made. With the consent of the PCSO, Uy agrees to give 10% of a prize-winning ticket to the sub-agent who sells such.

For the Grand Christmas Sweepstakes Draw of December 1963, the PCSO directed its agents to undertake every means possible to help achieve its P6M sales goal. The prizes were fixed at 700k, 350k, and 175k for 1st, 2nd, and 3rd prize, in that order.

Uy devised a “Grand Christmas Bonus Award” plan, where both his sub-agents and purchasers of winning sweepstakes tickets, in addition to the regular prize money, would each win bonuses and awards. (1st prize: Volkswagen sedan; 2nd: TV; 3rd: refrigerator; 4th: sewing machine; charity prize: radio) Sub-agents and purchasers of sweepstakes tickets did not have to pay any amount on top of the amount paid for the ticket, to benefit from the plan.

Such plan is a modification of the original scheme presented by Uy to the Assistant Postmaster General, which the latter considered as violative of the Postal Law.

Uy advertised the plan in metropolitan newspapers of nationwide circulation weekly, for almost a month.

The Postmaster General Enrico Palomar issued a Fraud Order No. 3. Uy learned of the order two weeks after its issuance, when his parcels containing sweepstakes tickets and other mail matters of purely personal nature, were refused for acceptance for mailing.

Uy filed a complaint alleging that in issuance of the fraud order, the Postmaster acted arbitrarily or gravely exceeded his authority, and/ or committed an error of law.

The Postmaster answered that the Postal Law served as basis for his action, which authorizes him to issue fraud orders upon satisfactory evidence that any person or company is engaged in conducting any lottery, gift enterprise, scheme, etc. through the mails. (Sec. 1982)

The CFI Manila ruled that the fraud order is contrary to law.

RELEVANT ISSUE: WON the Postmaster’s decision (to issue a fraud order) can be reviewed by the Court – YES

RATIO:The Postal Law contains no provision for judicial review of the decision of the Postmaster General. The Court, however, in Reyes v. Topacio has stated that the action of the Postmaster General is subject to revision by the courts in case he exceeded his authority or his act is palpably wrong. And in El Debate Inc. v. Topacio, the Court said that the courts will not interfere with the decision of the Postmaster General as to what is, and what is not, mailable matter, unless it is clearly of opinion that the Postmaster was wrong. The Court, by said rulings, recognizes the availability of judicial review over the action of the Postmaster General, notwithstanding the absence of statutory provision for judicial review of his action.

It may not be amiss to state that said rulings are in consonance with American jurisprudence to the effect that the absence of statutory provisions for judicial review does not necessarily mean that access to the courts is barred. The silence of the Congress is not to be construed as indicating a legislative intent to preclude judicial review. In American School of Magnetic Healing v. McAnnulty, the U.S. Supreme Court held that it is entirely true that the conduct of the post office is part of the administrative department of the Government, but that does not necessarily and always oust the courts of jurisdiction to grant relief to a party aggrieved.

The Postmaster also invokes the doctrine of exhaustion of administrative remedies, and asserts that the action of Uy in the present case was premature because he had not first appealed the fraud order to higher administrative authorities. This assertion has no merit. The rule on exhaustion of administrative remedies is not a hard and fast one. It admits of exceptions, amongst which are: (1) where the question involved is purely a legal one, and (2) where there are circumstances indicating the urgency of judicial intervention. The question involved in the present case is legal: whether or not the plan of Uy is a lottery or gift enterprise. The Court noted that the Grand

ADMIN LAW | B2015CASES

Christmas Sweepstakes draw (December 15) in conjunction with which Uy's plan was offered, was scheduled barely five days from the date when Uy learned of the issuance of the fraud order (December 10). Time was of the essence to Uy.

MAIN ISSUE OF THE CASE: WON Uy’s plan constitutes a lottery, gift enterprise, or similar scheme proscribed by the Postal Law, as would authorize the Postmaster to issue a fraud order – NO

**NOTE: The bulk of the case discusses this issue (Page 5 onwards). It is not connected to our Admin lesson, but is the substantive issue.

RATIO: 1. Postmaster: All the elements of a lottery, presented in the case of El Debate, are

present. - Prize: There are goods to be awarded to the winners.- Chance: The determination of winners depends on the results of the

sweepstakes draw.- Consideration: One must buy (for ticket buyers)/ buy and resell (for

sub-agents) Uy’s ticket. By analogy, there is consideration with respect to persons who will buy Uy’s tickets merely to win prizes in addition to regular sweepstakes prizes. Also, the persons patronizing the Uy Sweepstakes Agency do not all receive the same amount.

Court: There is no presence of the element of consideration. It is true that to be a participant in the plan, one must buy a sweepstakes ticket sold by the Uy Sweepstakes Agency. But the payment for the price of the sweepstakes ticket is the consideration for the chance to win any of the prizes offered by the PCSO; it cannot also be deemed as consideration for the chance to win prizes offered by Uy. Nothing is asked of the buyer of the ticket more than the authorized price.

The test laid down in El Debate seems to favor Uy. The test in the case is: “If the reason for the subscription to El Debate was the desire to subscribe regardless of any prize offered, then there was no consideration insofar as the prize plan is concerned.” In the instant case, there are two groups of participants in Uy’s plan: the ticket buyers and the sub-agents. It cannot be denied that the sub-agents, who have continued to be Uy’s sub-agents, would have sold Uy’s tickets regardless of the plan. Anyway, they stood to receive 10% of a prize-winning ticket sold. On the other hand, the probability is that the general public would have purchased Uy’s tickets regardless of the inducement offered by Uy to win additional prizes. Every person who purchased tickets from the Uy Sweepstakes Agency must have been induced, not by the prizes offered by Uy, but by the substantial prizes.

2. Postmaster: The patronage for Uy tickets constitutes a consideration, because from increased sales, Uy derives benefits in the form of returns on his investment.Court: The question of consideration is not to be determined from the standpoint of Uy, but from the sub-agents of Uy and the ticket buyers. In the cases of Caltex v. Postmaster General and State v. Hundling, the Court held that the true test is whether the participant pays a valuable consideration for the chance, and not whether those conducting the enterprise received something of value in return for the distribution of the prize.

3. Postmaster: Even assuming that the element of consideration is lacking, the scheme is still a gift enterprise, which is also prohibited by the Postal Law, as per Opinion No. 217 of the Secretary of Justice, which ruled that the elements of a gift enterprise are only chance and prize.Court: In the Postal Law, the term “gift enterprise” is used in association with the term “lottery.” Consonant to the well-known principle of legal hermeneutics noscitu a sociis, it is only logical that the term should be accorded no other meaning than that which is consistent with the nature of the word associated therewith. Hence, if lottery is prohibited only if it involves a consideration, so also must the term “gift enterprise” be construed.

HoRULING: Affirmed. The fraud order in question is contrary to law.