G.R. No. L-29881 August 31, 1988
HON. ENRICO PALOMAR, petitioner-appellant, vs. COURT OF FIRST INSTANCE OF MANILA, BRANCH XIV and PHILIPPINE REFINING CO., INC., respondents-appellees.

FACTS

In August 1968, Philippine Refining Co., Inc. launched a “Grand Slam” sales promotion for its products. Participants could win prizes by matching half-pictures found on product labels. Advertisements stated that free half-pictures could also be obtained by mail request. The Postmaster General, Enrico Palomar, issued Fraud Order No. 2, declaring the scheme a prohibited lottery under the Postal Law and ordering the interception of related mail. The company sued, arguing the scheme was not a lottery due to the absence of consideration, as participants could join without buying a product by obtaining free half-pictures through mail.
The Court of First Instance of Manila ruled in favor of the company, holding the promotion was not a lottery and permanently enjoining the fraud order. The Postmaster General appealed, contending that consideration was present because participants typically had to purchase products to obtain the half-pictures, and the mail-in option was impractical and more costly than buying the cheap products.

ISSUE

Whether the “Grand Slam” promotional scheme constitutes a lottery prohibited by the Postal Law, specifically, whether the essential element of consideration is present.

RULING

The Supreme Court denied the petition and affirmed the lower court’s decision. The legal logic is anchored on the established definition of a lottery, which requires three elements: prize, chance, and consideration. The Court focused on the element of consideration, which necessitates that participants pay a valuable consideration specifically for the chance to win a prize. The scheme did not meet this requirement. Participants could obtain the necessary half-pictures for free through a mail request, and more importantly, the purchase of the promoted products was not a prerequisite for participation. Even if a participant bought a product, the price paid was solely for the product itself, which the buyer received immediately, and not an additional payment for the mere chance to win. The price of the goods was not increased due to the promotion. The Court cited its precedent in Philippine Refining Company vs. Palomar (G.R. No. L-29062), which ruled that a plan where prizes can be obtained without any additional consideration beyond the product’s usual price is not a lottery. Since the scheme allowed participation without a separate payment for the chance, the element of consideration was absent, and the fraud order was properly invalidated.