statutory construction full text cases (1)

8/3/2019 Statutory Construction Full Text Cases (1)

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STATUTORY CONSTRUCTION FULL TEXT CASES

CALTEX vs. PALOMAR (G.R. No. L-19650, September 29, 1966 )1

CASTRO, J.: In the year 1960 the Caltex (Philippines) Inc. (hereinafter referred to as Caltex) conceived and laid the groundworkfor a promotional scheme calculated to drum up patronage for its oil products. Denominated "Caltex Hooded PumpContest", it calls for participants therein to estimate the actual number of liters a hooded gas pump at each Caltexstation will dispense during a specified period. Employees of the Caltex (Philippines) Inc., its dealers and itsadvertising agency, and their immediate families excepted, participation is to be open indiscriminately to all "motor vehicle owners and/or licensed drivers". For the privilege to participate, no fee or consideration is required to be paid,no purchase of Caltex products required to be made. Entry forms are to be made available upon request at eachCaltex station 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 "Dealer Contest", the contestantwhose estimate is closest to the actual number of liters dispensed by the hooded pump thereat is to be awarded thefirst prize; the next closest, the second; and the next, the third. Prizes at this level consist of a 3-burner kerosenestove for first; a thermos bottle and a Ray-O-Vac hunter lantern for second; and an Everready Magnet-lite flashlightwith batteries and a screwdriver set for third. The first-prize winner in each station will then be qualified to join in the"Regional Contest" in seven different regions. The winning stubs of the qualified contestants in each region will bedeposited in a sealed can from which the first-prize, second-prize and third-prize winners of that region will be drawn.The regional first-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 "National Contest". The regional second-prize and third-prize winners will receive cash prizes of P500 and P300, respectively. At the national level, the stubsof the seven regional first-prize winners 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 this final stage are:P3,000 for first; P2,000 for second; Pl,500 for third; and P650 as consolation prize for each of the remaining four participants. Foreseeing the extensive use of the mails not only as amongst the media for publicizing the contest but also for thetransmission of communications relative thereto, representations were made by Caltex with the postal authorities for the contest to be cleared in advance for mailing, having in view sections 1954(a), 1982 and 1983 of the RevisedAdministrative Code, the pertinent provisions of which read as follows:

SECTION 1954. Absolutely non-mailable matter . No matter belonging to any of the following classes,whether sealed as first-class matter or not, shall be imported into the Philippines through the mails, or to bedeposited in or carried by the mails of the Philippines, or be delivered to its addressee by any officer or employee of the Bureau of Posts:

Written or printed matter in any form advertising, describing, or in any manner pertaining to, or conveyingor purporting to convey any information concerning any lottery, gift enterprise, or similar scheme depending inwhole or in part upon lot or chance, or any scheme, device, or enterprise for obtaining any money or property of any kind by means of false or fraudulent pretenses, representations, or promises. "SECTION 1982. Fraud orders .Upon satisfactory evidence that any person or company is engaged inconducting any lottery, gift enterprise, or scheme for the distribution of money, or of any real or personalproperty 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 by means of false or

fraudulent pretenses, representations, or promises, the Director of Posts may instruct any postmaster or other officer or employee of the Bureau to return to the person, depositing the same in the mails, with the word"fraudulent" plainly written or stamped upon the outside cover thereof, any mail matter of whatever class mailedby or addressed to such person or company or the representative or agent of such person or company. SECTION 1983. Deprivation of use of money order system and telegraphic transfer service .The Director of Posts may, upon evidence satisfactory to him that any person or company is engaged in conducting any lottery,

1CONSTRUCTION DEFINED

gift enterprise or scheme for 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 by means of false or fraudulent pretenses,representations, or promise, forbid the issue or payment by any postmaster of any postal money order or telegraphic transfer to said person or company or to the agent of any such person or company, whether suchagent is acting as an individual or as a firm, bank, corporation, or association of any kind, and may provide byregulation for the return to the remitters of the sums named in money orders or telegraphic transfers drawn infavor of such person or company or its agent.

The overtures were later formalized in a letter to the Postmaster General, dated October 31, 1960, in which theCaltex, thru counsel, enclosed a copy of the contest rules and endeavored to justify its position that the contest doesnot violate the anti-lottery provisions of the Postal Law. Unimpressed, the then Acting Postmaster General opinedthat the scheme falls within the purview of the provisions aforesaid and declined to grant the requested clearance. Inits counsel's letter of December 7, 1960, Caltex sought a reconsideration of the foregoing stand, stressing that therebeing involved no consideration in the part of any contestant, the contest was not, under controlling authorities,condemnable as a lottery. Relying, however, on an opinion rendered by the Secretary of Justice on an unrelatedcase seven years before (Opinion 217, Series of 1953), the Postmaster General maintained his view that the contestinvolves consideration, or that, if it does not, it is nevertheless a "gift enterprise" which is equally banned by thePostal Law, and in his letter of December 10, 1960 not only denied the use of the mails for purposes of the proposedcontest but as well threatened 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 rendered declaring its 'Caltex Hooded Pump Contest' not to beviolative of the Postal Law, and ordering 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 the parties, the trial courtrendered judgment as follows:

In view of the foregoing considerations, the Court holds that the proposed 'Caltex Hooded Pump Contest'announced to be conducted by the petitioner under the rules marked as Annex B of the petitioner does notviolate the Postal Law and the respondent 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 stsufficient cause of action for declaratory relief; and second , whether the proposed "Caltex Hooded Pump Conteviolates the Postal Law. We shall take these up in seriatim . 1. By express mandate of section 1 of Rule 66 of the old Rules of Court, which was the applicable legal basis for theremedy at the time it was invoked, declaratory relief is available to any 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 hisrights thereunder" (now section 1, Rule 64, Revised Rules of Court). In amplification, this Court, conformably toestablished jurisprudence on the matter, laid down certain conditions sine qua non therefor, to wit: (1) there ma justiciable controversy; (2) the controversy must be between persons whose interests are adverse; (3) the partyseeking declaratory relief must 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, 1Delumen, et al . vs. Republic of the Philippines, 50 O.G., No. 2, pp. 576, 578-579; Edades vs. Edades, et No. L-8964, July 31, 1956). The gravamen of the appellant's stand being that the petition herein states no sufficientcause of action for declaratory 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 of significant points standout in bold relief. The appellee (Caltex), as a business enterprise of some consequence, concededly has theunquestioned right to exploit every legitimate means, and to avail of all appropriate media to advertise and stimulateincreased patronage for its products. In contrast, the appellant, as the authority charged with the enforcement of thePostal Law, admittedly has the power and the duty to suppress transgressions thereof particularly thru the


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issuance of fraud orders, under Sections 1982 and 1983 of the Revised Administrative Code, against legally non-mailable schemes. Obviously pursuing its right aforesaid, the appellee laid out plans for the sales promotion schemehereinbefore 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 advance clearance therefor. However,likewise by virtue of his jurisdiction in the premises and construing the pertinent provisions of the Postal Law, theappellant saw a violation thereof in the proposed scheme and accordingly declined the request. A point of differenceas to the correct construction to be given to the applicable statute was thus reached. Communications in which theparties expounded on their respective theories were exchanged. The confidence with which the appellee insistedupon its position was matched only by the obstinacy with which the appellant stood his ground. And this impassewas climaxed by the appellant's open warning to the appellee that if the proposed contest was "conducted, a fraudorder 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's insistent assertion of itsclaim to the use of the mails for its proposed contest, and the challenge thereto and consequent denial by theappellant of the privilege demanded, undoubtedly spawned a live controversy. The justiciability of the dispute cannotbe gainsaid. There is an active antagonistic assertion of a legal right on one side and a denial thereof on the other,concerning a real not a mere theoretical question or issue. The contenders are as real as their interests aresubstantial. To the appellee, the uncertainty occasioned by the divergence of views on the issue of constructionhampers or disturbs its freedom to enhance its business. To the appellant, the suppression of the appellee'sproposed contest believed to transgress a law he has sworn to uphold and enforce is an unavoidable duty. With theappellee's bent to hold the contest and the appellant's threat to issue a fraud order therefor if carried out, thecontenders are confronted by the ominous shadow of an imminent and inevitable litigation unless their differencesare settled and stabilized by a tranquilizing declaration (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 can rightly besaid that merely the appellee's "desires are thwarted by its own doubts, or by the fears of others" which admittedlydoes not confer a cause of action. Doubt, if any there was, has ripened into a justiciable controversy when, as in thecase at bar, it was translated into a positive claim of right which is actually contested (III Moran, Comments on theRules of Court, 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 thesaid appellant "simply applied the clear provisions of the law to a given set of facts as embodied in the rules of thecontest", hence, there is no room for declaratory relief. The infirmity of this pose lies in the fact that it proceeds fromthe assumption that, if the circumstances here presented, the construction of the legal provisions can be divorcedfrom the matter of their application to the appellee's contest. This is not feasible. Construction, verily, is the art or process of discovering and expounding the meaning and intention of the authors of the law with respect to itsapplication 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 is precisely the case here.Whether or not the scheme proposed by the appellee is within the coverage of the prohibitive provisions of the PostalLaw inescapably requires an inquiry into the intended meaning of the words used therein. To our mind, this is asmuch a question of construction or interpretation as any other. Nor is it accurate to say, as the appellant intimates, that a pronouncement on the matter at hand can amount tonothing more than an advisory opinion the handing down of which is anathema to a declaratory relief action. Of course, no breach of the Postal Law has as yet been committed. Yet, the disagreement over the construction thereof is no longer nebulous or 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, the propriety nay, thenecessity of setting the dispute at rest before it accumulates the asperity distemper, animosity, passion andviolence of a full-blown battle which looms ahead (III Moran, Comments on the Rules of Court, 1963 ed., p. 132 andcases cited), cannot but be 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 the appellee in the situationinto which it has been cast, would be to force it to choose between undesirable alternatives. If it cannot obtain a finaland definitive pronouncement as to whether the anti-lottery provisions of the Postal Law apply to its proposedcontest, it would be faced with these choices: If it launches the contest and uses the mails for purposes thereof, it notonly incurs the risk, but is also actually threatened with the certain imposition, of a fraud order with its concomitantstigma which may attach even if the appellee will eventually be vindicated; if it abandons the contest, it becomes aself-appointed censor, or permits the appellant to put into effect a virtual fiat of previous censorship which is

constitutionally unwarranted. As we weigh these considerations in one equation and in the spirit of liberality withwhich the Rules of Court are to be interpreted in order to promote their object (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, rightsand duties under a law we can see in the present case any imposition upon our jurisdiction or any futility or prematurity in our intervention. The appellant, we apprehend, underrates the force and binding effect of the ruling we hand down in this case if hebelieves that it will not have the final and pacifying function that a declaratory judgment is calculated to subserve. Atthe very least, the appellant will be bound. But more than this, he obviously overlooks that in this jurisdiction,"Judicial decisions applying or interpreting the law shall form a part of the legal system" (Article 8, Civil Code of thePhilippines). In effect, judicial decisions assume the same authority as the statute itself and, until authoritativelyabandoned, necessarily become, to the extent that they are applicable, the criteria which must control the actuationsnot only of those called upon to abide thereby but also of those in duty bound to enforce obedience thereto.Accordingly, we entertain 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 is not without precedent.In Liberty Calendar Co. vs. Cohen , 19 N.J., 399, 117 A. 2d., 487, where a corporation engaged in promotionaladvertising was advised by the county prosecutor that its proposed sales promotion plan had the characteristics of alottery, and that if such sales promotion were conducted, the corporation would be subject to criminal prosecution, itwas held that the corporation was entitled to maintain a declaratory relief action against the county prosecutor todetermine the legality of its sales promotion plan. In pari materia , see also: Bunis vs. Conway , 17 App. Div. 2234 N.Y.S. 2d., 435; Zeitlin vs. 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 identical terminology in sections1954(a), 1982 and 1983 thereof, supra , condemns as absolutely non-mailable, and empowers the PostmasterGeneral to issue fraud orders against, or otherwise deny the use of the facilities of the postal service to, anyinformation concerning "any lottery, gift enterprise, or scheme for the distribution of money, or of any real or personalproperty by lot, chance, or drawing of any kind". Upon these words hinges the resolution of the second issue posedin this appeal. Happily, this is not an altogether untrodden judicial path. As early as in 1922, in "El Debate", Inc. vs. TopacioPhil., 278, 283-284, which significantly dwelt on the power of the postal authorities under the abovementionedprovisions of the Postal Law, this Court declared that

While countless definitions of lottery have been attempted, the authoritative one for this jurisdiction is that of theUnited States Supreme Court, in analogous cases having 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 as policyplaying, gift exhibitions, prize concerts, raffles at fairs, etc., and various forms of gambling. The three essentialelements of a lottery are: First, consideration; second, prize; and third, chance. (Horner vs. States [1892], 147U.S. 449; Public Clearing 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 HotelConstruction Company vs. Carmona, p. 233, ante .)

Unanimity there is in all quarters, and we agree, that the elements of prize and chance are too obvious in thedisputed scheme to be the subject of contention. Consequently as the appellant himself concedes, the field of inquiryis narrowed down to the existence of the element of consideration therein. Respecting this matter, our task isconsiderably lightened inasmuch as in the same case just cited, this Court has laid down a definitive yard-stick in thefollowing terms

In respect to the last element of consideration, the law does not condemn the gratuitous distribution of propertyby chance, if no consideration is derived directly or indirectly from the party receiving the chance, but doescondemn as criminal schemes in which a valuable consideration of some kind is paid directly or indirectly for thechance to draw a prize.


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

No puzzles, no rhymes? You don't need wrappers, labels or boxtops? You don't have to buy anything? Simplyestimate the actual number of liter the Caltex gas pump with the hood at your favorite Caltex dealer willdispense from to , and win valuable prizes . . . ." .

Nowhere in the said rules is any requirement that any fee be paid, any merchandise be bought, any service be

rendered, or any value whatsoever be given for the privilege to participate. A prospective contestant has but to go toa Caltex station, request for the entry form which is available on demand, and accomplish and submit the same for the drawing of the winner. Viewed from all angles or turned inside out, the contest fails to exhibit any discernibleconsideration which would brand it as a lottery. Indeed, even as we head the stern injunction, "look beyond the fair exterior, to the substance, in order to unmask the real element and pernicious tendencies which the law is seeking toprevent" ("El Debate", Inc. vs. Topacio, supra , p. 291), we find none. In our appraisal, the scheme does not onlyappear to be, 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 buy Caltex products simply to wina prize would actually be indirectly paying a consideration for the privilege to join the contest. Perhaps this would betenable if the purchase of any Caltex product or the use of any Caltex service were a pre-requisite to participation.But it is not. A contestant, it hardly needs reiterating, does not have to buy anything or to give anything of value. 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 be encouraged to prefer Caltex products "if only to getthe chance to draw a prize by securing entry blanks". The required element of consideration does not consist of thebenefit derived by the proponent of the contest. The true test, as laid down in People vs. Cardas , 28 P. 2d., 99, 137Cal. 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 in return for the distribution of the prize. Perspectiveproperly oriented, the standpoint of the contestant is all that matters, not that of the sponsor. The following, culledfrom Corpus Juris Secundum, should set the matter at rest:

The fact that the holder of the drawing expects thereby to receive, or in fact does receive, some benefit in theway of patronage or otherwise, as a result of the drawing; 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 theappellee is not a lottery that may be administratively and adversely dealt with under the Postal Law. But it may be asked: Is it not at least a "gift enterprise, or scheme for the distribution of money, or of any real or personal property by lot, chance, or drawing of any kind", which is equally prescribed? Incidentally, while theappellant's brief appears to have concentrated on the issue of consideration, this aspect of the case cannot beavoided if the remedy here invoked is to achieve its tranquilizing effect as an instrument of both curative andpreventive justice. Recalling that the appellant's action was predicated, amongst other bases, upon Opinion 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 which that 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 giftenterprise, cannot be passed over sub silencio . While an all-embracing concept of the term "gift enterprise" is yet to be spelled out in explicit words, there appears tobe a consensus among lexicographers and standard authorities that the term is commonly applied to a sportingartifice of under which goods are sold for their market value but by way of inducement each purchaser is given achance to win a prize (54 C.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 of Plattsmouth 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, 5Sneed, 507, 509). As thus conceived, the term clearly cannot embrace the scheme at bar. As already noted, there is

no sale of anything to which the chance offered is attached as an inducement to the purchaser. The contest is opento all qualified contestants irrespective of whether or not they buy the appellee's products.

Going a step farther, however, and assuming that the appellee's contest can be encompassed within the broadestsweep that the term "gift enterprise" is capable of being extended, we think that the appellant's pose will gain noadded comfort. As stated in the opinion relied upon, rulings there are indeed holding that a gift enterprise involvingan award by 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 Corporation, 132 P. 2d., 689, 694, 698, 114 Mont. 52). But this isonly 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, 12N.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 the specific statutoryprovisions relied upon are not identical. In some cases, as pointed out in 54 C.J.S., 851, the terms "lottery" and "giftenterprise" are used interchangeably (Bills vs. People, supra ); in others, the necessity for the elemenconsideration or chance has been specifically eliminated by statute. (54 C.J.S., 351-352, citing Barker vs.State, supra ; State ex rel . Stafford vs. Fox-Great Falls Theater Corporation, supra ). The lesson that we derivethis state of the pertinent jurisprudence is, therefore, that every case must be resolved upon the particular phraseology of the applicable statutory provision. Taking this cue, we note that in the Postal Law, the term in question is used in association with the word "lottery".

With the meaning of lottery settled, and consonant to the well-known principle of legal hermeneutics noscitur which Opinion 217 aforesaid also relied upon although only insofar as the element of chance is concerned it isonly logical that the term under a construction should be accorded no other meaning than that which is consistentwith the nature of the word associated therewith. Hence, if lottery is prohibited only if it involves a consideration, soalso must the term "gift enterprise" be so construed. Significantly, there is not in the law the slightest indicium of anyintent to eliminate that element 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, resort to the determinationthereof being an accepted extrinsic aid in statutory construction. Mail fraud orders, it is axiomatic, are designed toprevent the use of the mails as a medium for disseminating printed matters which on grounds of public policy aredeclared non-mailable. As applied to lotteries, gift enterprises and similar schemes, justification lies in the recognizednecessity to suppress their tendency to inflame the gambling spirit and to corrupt public morals (Com. vs. Lund, 15A. 2d., 839, 143 Pa. Super. 208). Since in gambling it is inherent that something of value be hazarded for a chanceto gain a larger amount, it follows ineluctably that where no consideration is paid by the contestant to participate, thereason behind 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 is not resorted to as a deviceto evade the law and no consideration is derived , directly or indirectly, from the party receivingchance, gambling spirit not being cultivated or stimulated thereby . City of Roswell vs. Jones, 67 P. 2d., 286N.M., 258." (25 Words and Phrases, perm. ed., p. 695, emphasis supplied).

We find no obstacle in saying the same respecting a gift enterprise. In the end, we are persuaded to hold that, under the prohibitive provisions of the Postal Law which we have heretofore examined, gift enterprises and similar schemes therein contemplated are condemnable only if, like lotteries, they involve the element of consideration.Finding none in the contest here in question, we rule that the appellee may not be denied the use of the mails for purposes thereof. Recapitulating, we hold that the petition herein states a sufficient cause of action for declaratory relief, and that the

"Caltex Hooded Pump Contest" as described in the rules submitted by the appellee does not transgress theprovisions of the Postal Law. ACCORDINGLY, the judgment appealed from is affirmed. No costs.


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COLLECTOR OF INTERNAL REVENUE vs. MANILA LODGE (G.R. No. L-11176, June 29, 1959 )2

CONCEPCION, J .:This is an appeal taken by the Collector of Internal Revenue from a decision of the Court of Tax Appeals holding thatthe Manila Lodge No. 761 of the Benevolent & Protective Order of Elks "is not liable for privilege taxes on its sale byretail of liquor and tobacco exclusively to its members and their guests," and reversing and setting aside a decisionof said appellant to the contrary, dated November 19, 1953 without special pronouncement as to costs.

The uncontested facts are set forth in the decision of said Court, from which we quote:

This is an appeal from two decisions of the respondent Collector of Internal Revenue assessing and demandingfrom the petitioner herein the sums of P1,203.50 and P332.00, respectively representing fixed taxes as retaildealer in liquor, fermented liquor, and tobacco, allegedly due from the petitioner for the period from the 4thquarter of 1946 to 1953 and the period from 1954-1955, pursuant to subsections (i), (k) and (n) of section 193 of the Tax Code, in relation to 178 of the same Code.

The petitioner, Manila Lodge No. 761 is admittedly a fraternal, civic, non-stock, non-profit organization dulyincorporated under Philippine laws. It owns and operates a clubhouse located at Dewey Boulevard, Manila,wherein it sells at retail, liquor, fermented liquor, cigar and cigarettes only to its members and their guests.B.I.R. agents discovered that the Manila Elks Club had not paid for the period in question the privilege tax for retail liquor dealer (B-4), retail dealer in fermented liquor (B-7), and retail tobacco dealer (B-9-a) prescribed insection 193 of the Tax Code.

On November 19, 1953, the Collector of Internal Revenue assessed against and demanded from the petitioner the payment of the sum of P1,203.50 representing fixed taxes, as retail dealer, for the period from its 4thquarter of 1946 to 1953, exclusive of the suggested compromise penalty of P80.00. The petitioner, claiming thatit was exempted from the payment of the privilege taxes in question, requested that the said assessment bereviewed by the Conference Staff of the Bureau of Internal Revenue. The Conference Staff, after due hearing,upheld and reiterated the assessment made by the respondent Collector of Internal Revenue. Forthwith, thepetitioner appealed to this Court on June 1, 1955.

During the pendency of the original petition for review in the above-entitled case, respondent issued another assessment covering fixed taxes for the years 1954 to 1955 in the amount of P332.00, exclusive of thesuggested compromise penalty of P50.00. Consequently, petitioner with leave of Court filed a supplementalpetition for review which included the latter assessment.

Petitioner bases its claim for exemption from the payment of the privilege taxes in question on the grounds thatit is not engaged in the business of selling at retail liquor, fermented liquor, and tobacco because the sale of these aforementioned specific goods is made only to members of the club and their guests' on a very limitedscale in pursuance only of its general purpose as a fraternal social club, to provide comfort, recreation, andconvenience to such members, and merely to provide enough margin to cover operational expenses.(Petitioner's Memo p. 3).

Respondent, on the other hand, maintains that persons selling articles subject to specific tax, such as cigars,tobacco, liquor and the like, are subject to the fixed taxes imposed by section 193 of the Tax Code, irrespectiveof whether or not they made profit, and whether or not they are civic or fraternal clubs selling only to their members and their guests. This contention is based on a ruling promulgated by the Bureau of Internal Revenuemade in 1921.

Petitioner herein maintains that:

1. The respondent Court of Tax Appeals erred in reversing the decision of the petitioner-appellant which heldthe respondent club liable for fixed taxes.

2NATURE AND OBJECT OF CONSTRUCTION

2. The respondent Court of Tax Appeals erred in holding that before respondent club's liability for the privilegetaxes imposed by section 193 of the Tax Code attaches it is necessary that it be engaged in the "business" of selling liquor and tobacco.

3. The respondent Court of Tax of Appeals erred in holding that a fraternal, civic, non-stock, non-profitorganization like the respondent club selling at retail liquor and tobacco only to its members and their guestswith just enough margin to cover operational expenses should not be held liable for the fixed taxes incident tothe business of selling at retail, liquor and tobacco.

4. The respondent Court of Tax Appeals erred in holding that the Administrative construction of the Bureau of Internal Revenue on the matter in question is outside the ambit of, and is inconsistent with, the RevisedAdministrative Code and Tax Code.

This appeal is untenable. In the language of the Court of Tax Appeals:

The bone of contention between the two parties herein . . ., lies in the proper interpretation and application of the pertinent provisions of the Tax Code, namely, subsections (i), (k) and (n) of section 193 in relation to section178 of the Tax Code, which we quote hereunder:

Sec. 178. Payment of privilege taxes . A privilege tax must be paid before any business or occhereinafter specified can be lawfully begun or pursued. The tax on business is payable for every separadistinct establishment or place where the business subject to the tax is conducted ; and one occupation or lbusiness does not become exempt by being conducted with some other occupation or business for which suchtax has been paid.

The occupation tax must be paid by each individual engaged in a calling subject thereto; the tax on a businessby the person, firm, or company conducting the same. (Emphasis supplied.)

SEC. 193. Amount of tax on business . Fixed taxes on business shall be collected as follows, the amounstated being for the whole year when not otherwise specified:

(i) Retail liquor dealers, one hundred pesos.

(k) Retail dealers in fermented liquors, fifty pesos.

x x x x x x x x x(n) Wholesale tobacco dealers, sixty pesos; retail tobacco dealers, sixteen pesos.

The aforequoted provisions of the Tax Code are clear and precise. The privilege taxes prescribed in section 193of the Tax Code in relation to section 178 of the same, are to be imposed or classified therein for "business"purposes. This evident intention of the law becomes more palpable when we take into consideration the factsthat the drafters of our Tax Code had grouped the aforequoted provisions of law under one general division of the Tax Code headed as "Title V, Privilege Taxes on Business and occupation.

It is not therefore entirely correct to maintain as respondent does, that all person selling articles subject tospecific taxes, like liquor and tobacco, should likewise be subject to the fixed taxes imposed by section 193 of

the Tax Code. We believe, that in order that these persons should be subjected to the privilege taxes imposedby the aforementioned section of the Tax Code, it is necessary that they be engaged in the "business" of sellingliquor and tobacco, otherwise the privilege taxes as a dealer of liquor and tobacco can not attach.At this juncture a definition of the word "business" is in order and we have the following:

The word "business" in its ordinary and common use is employed to designate human efforts which have for their and living or reward; it is not commonly used as descriptive of charitable, religious, educational or sociagencies. (Ballantine's Law Dictionary, 1948 Ed. P. 179)


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Business "that which busies or engages time, attention or labor as a principal serious concern or interest;any particular occupation or employment habitually engaged in specially for livelihood or gain." (Vol. 1, 1949Merriam-Webster's New International Dictionary, 2nd Ed. p. 362.)

Other definitions of the term "business" as given by judicial pronouncement are found in Volume V, Words andPhrases, page 999 as follows:

Business is a word of large signification, and denotes the employment or occupation in which a person isengaged to produce a living. (Citing: Goddard v. Chaffee, 84 Mass (Allen) 395; 79 Am Dec. 769).

Business in common speech means habitual or regular occupation that a party is engaged in with a view towinning a livelihood or some gain. (Citing: In re Lemont, 41 p. 2D, 497, 502)

An enterprise not conducted as a means of livelihood or for profit does not come within the ordinary meaning of the terms, "business, trade or industry." (Citing City of Rochester vs. Rochester Girl's Home, 194 N.Y.S. 236,237).

The term "business" as used in law imposing a license tax on business, trades, etc. ordinarily means businessin the trade or commercial sense only, carried on with a view to profit or livelihood. (Citing: Cuzner vs. CaliforniaClub 100 p. 868, 867, 155, Cal. 303, 20 L.R.A. N.S. 1095).

From the foregoing definitions, it is evident that the plain ordinary meaning of "business" is restricted to activitiesor affairs where profit is the purpose, or livelihood is the motive. The term "business" being used without anyqualification in section 193 of the Tax Code in relation to section 178 of the same, should therefore beconstrued in its plain and ordinary meaning, restricted to activities for profit or livelihood.

With these considerations in mind, we now come to the question of whether or not the Manila Elks Club isengaged in the "business" of selling liquor and tobacco.

Respondent, in paragraph 1 of his answer, admits that the petitioner herein, Manila Elks Club is a fraternal,civic, non-stock, non-profit organization. It has been established without contradiction that the Manila Elks Club,in pursuance of its purpose as a fraternal social club, sells on retail at its clubhouse on Dewey Boulevard, liquor,cigars and cigarettes, on a very limited scale, only to its members and their guests, providing just enoughmargin to cover operational expenses without intention to obtain profit. Such being the case then, the ManilaElks Club cannot be considered as engaged in the "business" of selling liquor and tobacco.

Where the corporation handled no money except such as was necessary to cover operational expenses ,conducted no business for itself, and engaged in no transactions that contemplated a profit for itself suchcorporation is considered not organized for profit under the General Corporation Law. (Read V. Tidewater CoalExch., 116 A 898, 904, cited in Vol. 34 Words & Phrases, p. 220, defining "profits"; underscoring provided.).

The petitioner herein, Manila elks Club, not being engaged in the business of selling at retail liquor and tobacco,cannot therefore be held liable for the privilege taxes required by section 193, subsections (1), (k) and (n). Theweight of American authorities enhances the strength of our findings that a fraternal, civic, non-stock, non-profitorganization, like the Elks Club, selling at retail liquor and tobacco only to its members and their guests inpursuance with its general purpose as a fraternal social club with just enough margin to cover operationalexpenses, should not be held liable for the fixed taxes incident to the business of selling at retail, liquor andtobacco.

A bonafide social club, which disposes of liquors at its clubhouse to members and their guests at a fixed chargeas incident to the general purposes of the organizational is not required to take out a license by Rev. Laws No.3777-3785, approved March 15, 1905, which provides for a license upon the business of disposing intoxicatingliquors; the term business in such statute meaning business in the trade or commercial sense. (State v.university Club, 130 p. 468, 470; 35 Nev. 475; 44 L.R.A., N. S. 1026).

A social club, not organized for the purpose of evading the liquor laws, but which furnishes its members withliquors and refreshments without profit to itself, is not a retail liquor dealer, within the statute imposing a licensetax on all persons dealing in, selling or disposing of intoxicating liquors by retail. (Barden v. Montan Club, 25 P.1042, 10 Mont. 330, II L.R.A. 593).

Acts 1881, C. 149, authorizing taxation of liquors dealers, does not include a social club maintaining a library,giving musical entertainments, and furnishing meals for its members, which keeps a small stock of liquor; themembers paying for its drink as it is taken, but no profit being made on such sales. (Tennessee Club of Memphis v. Dwyer, 79 Tenn. (11 Lea) 452, 461, 47 Am. Rep. 298.).

A social club composed of members who have no proprietary interest in the assets which provides a readingroom, restaurant, bar room, library, billiard rooms and sitting rooms for its members, the expenses of which aredefrayed by annual dues from each member, and by payments made by the members for food and drinks, isnot engaged in the business of a retail liquor dealer, within section 11 of the Louisiana License Tax Laws. (LaAnn. 585, 20 L.R.A. 185). Respondent however, insists that the petitioner should pay the privilege tax on thesale at retail of liquor and tobacco because this has been allegedly the practice consistently followed by theBureau of Internal Revenue since 1921, and because section 1464 of the Revised Administrative Code under which said ruling was then based had been reenacted by the legislature as section 193 of the National InternalRevenue Code. Thus, respondent contends, that the policy of the Bureau of Internal Revenue has thereforegained "approval by legislative reenactments."The alleged administrative practice is founded upon the following ruling rendered in 1921.

Clubs selling exclusively to members thereof liquors and other products on which the specific tax isimposed should pay the privilege tax corresponding to the business engaged in . The fact that such producsold at cost to the members of the club does not affect the club's liability to tax. (Ruling, Oct. 13, 1921, B.I.R.105.02; Exh. 3, pp. 66-69. BIR records.)

We do not agree with the contention of the respondent. While there is admittedly a ruling on this point in 1921,there is no showing that such has been a long-continued practice. Be that as it may, any such administrativeconstruction must be within the ambit of, and must be consistent with, the Revised Administrative Code and theTax Code. It is likewise the rule that where the statute is unambiguous, an administrative construction isunwarranted (U.S. vs. Missouri P.R. Co. 278 U. S. 269, 73 L. Ed. 322) and no construction may be made torestrict or enlarge the meaning of an Act. (Blatt vs. U.S.., 305 U.S. 267, 83 L. Ed. 167).

An examination of section 1464 of the Revised Administrative Code taken in connection with section 1453 of the same, discloses the fact that aside from the change in rates of taxes to be paid and the arrangement of theclassification of business enumerated therein, section 193 of the present Tax Code is a verbatim copy of theaforementioned provisions of the Revised Administrative Code. The policy or principle followed by the said coderegarding privileges taxes, i.e. that the privilege taxes are payable only by those persons or entities engaged inthe business enumerated in section 1464 of the said Code, has not suffered any change, and the same stillobtains under our present Tax Code. In the absence of a showing that the legislative body had been apprised of the aforesaid ruling, what has gained legislative approval thru reenactment is, we believe, the policy behind theabove-mentioned provision of the Revised Administrative Code of taxing persons engaged in business and notthe alleged practice following the administrative ruling of 1921. We believe that no amount of trenchantadherence to an established practice may justify its continued application where it is clear and manifest that thesame is not in consonance with the policy of the legislature as defined by law.

It is urged by appellant that emphasis should be placed not on the term "business", but on the phrases "retail liquor dealers", in fermented liquors" and "retail tobacco dealers", appearing in section 193 of the National InternalRevenue Code, which are defined in section 194 thereof as follows:

SEC. 194. Words and phrases defined . In applying the provisions of the preceding section, words anphrases shall be taken in the sense and extension indicated below:

x x x x x x x x x


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(i) "Retail liquor dealer" includes every person, except a retail vino dealer, who for himself or on commissionsells or offers for sale wine or distilled spirits (other than denatured alcohol) in quantities of five liters or less atany one time and not for sale.

x x x x x x x x x(k) "Retail dealer in fermented liquors" includes every person, except dealers in tuba, basi, and tapuy, who for himself or on commission sells or offers for sale fermented liquors and quantities of five liters or less at any onetime and not for resale.

x x x x x x x x x(o) "Tobacco dealer" comprehends every person who himself or on commission sells or offers for sale cigars,

cigarettes, or manufactured tobacco.

Undoubtedly, these definitions must be given all the weight due thereto, in the interpretation of section 193 of the TaxCode. As used therein, the phrases above referred to are, however, part and parcel of the provisions contained, notonly in said section 193, but, also, in section 178 and other parts of the Tax Code, all of which must be given effect intheir entirety as a harmonious, coordinated and integrated unit, not as a mass of heterogeneous and unrelated if notincongruous terms, clauses and sentences. In other words, the phrases in question should be construed in the lightof the context of the whole Tax Code, of which they are integral parts. And when this is done when we consider that section 193 requires "retail liquor dealers", "retail dealers in fermented liquors" and "retail tobacco dealers" topay the taxes on business " therein specified; that said section 193 is entitled "Amount of tax on business ", that saidsection 193 merely implements the general provision in section 178, to the effect that "a privilege tax must be paid inbefore any business or occupation hereinafter specified can be lawfully begun and pursued"; that the term "business"is used in said section 178, six (6) times; and that the aforementioned sections 178, 193 and 194 are part of Title Vof the Tax Code, entitled "Privilege taxes on business and occupation" it becomes crystal clear that the "retailliquor dealers", "retail dealers in fermented liquors" and "retail tobacco dealers" alluded to in said section 193 arethose engaged in "business", not fraternal, civic, non-stock, non-profit organizations, like herein respondent, whichsells wines, distilled spirits, fermented liquors and tobacco, exclusively to its members and their guests, at suchprices as are merely sufficient to cover operational expenses.

Petitioner assails the applicability of the decisions relied upon by the Court of Tax Appeals, upon the ground that saiddecisions refer to the authority to license, and, hence, to the exercise to the police power, not that of taxation whichis involved in the case at bar. However, the distinction made enhances instead of detracting from the weight of said decisions as precedents, insofar as the issue herein is concerned. Indeed, the police power is, in generalbroader and subject to less restrictions than the power to tax. It is not difficult to conceive the advisability, if not,necessity, of requiring a license for some activities undertaken by so-called "clubs", owing to the possibility, if notprobability, of use of said name, appellation or denomination, in order to avoid or evade some laws or to camouflagecertain ventures, pursuits or enterprises which otherwise would clearly be illegal, immoral or contrary to public policy.Upon the other hand, a tax is a burden and, as such, it will not be deemed imposed upon fraternal, civic, non-profit,non-stock organizations, unless the intent to the contrary is manifest and patent.

Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed, without special pronouncement asto costs. It is so ordered.

GENERAL vs. BARRAMEDA (G.R. No. L-29906, January 30, 1976) 3

ESGUERRA, J.:Petition for certiorari to review the decision of the Court of Appeals (Second Division) in CA-G.R. No. 38363-R,entitled " Leoncio Barrameda, plaintiff-appellant, vs. Development Bank of the Philippines (Naga Branch, Naga City) ,Rodolfo General and Carmen Gontang, defendants-appellees," which reversed the decision of the Court of FirstInstance of Camarines Sur in its Civil Case No. 5697, "dismissing the complaint with costs against plaintiff".

3 NATURE AND OBJECT OF CONSTRUCTION

Appellate Court's decision has the following dispositive portion:

We therefore find that the appealed judgment should be reversed and set aside and another one entereddeclaring (1) null and void the sale executed on September 3, 1963, by defendant Development Bank of thePhilippines in favor of its defendants Rodolfo General and Carmen Gontang, (2) T.C.T. No. 5003 cancelled and(3) the mortgaged property redeemed; and ordering the Clerk of the lower court to deliver the amount of P7,271.22 deposited to defendants Rodolfo General and Carmen Gontang and the Register of Deeds to issue anew Transfer Certificate of Title in the name of plaintiff in lieu of T.C.T. No. 5003 upon payment by him of corresponding fees; with costs against the defendants in both instances.

Undisputed facts are:

Plaintiff seeks to redeem the land formerly embraced in Transfer Certificate of Title No. 1418, containing anarea of 59.4687 hectares, situated in barrio Taban, Minalabac Camarines Sur; to annul any and all contractsaffecting said property between the Development Bank of the Philippines (DBP) and Rodolfo General andCarmen Gontang and to recover damages, attorney's fees and costs.

The land in dispute was mortgaged by plaintiff to the DBP to secure a loan of P22,000.00. For failure of themortgagor to pay in full the installments as they fall due, the mortgagee foreclosed extrajudicially pursuant tothe provisions of Act 3135. On April 23, 1962, the provincial sheriff conducted an auction sale in which themortgagee, as the highest bidder, bought the mortgaged property for P7,271.22. On May 13, 1963, the sheriff executed a final deed of sale in favor of the DBP (Exhibit 2) and the DBP executed an affidavit of consolidationof ownership (Exhibit 3). Upon registration of the sale and affidavit on September 2, 1963 (Exhibit 1), T1418 in the name of plaintiff was cancelled and TCT No. 5003 issued to the DBP (Exhibit-5) in its stead. OnSeptember 3, 1963, defendants Rodolfo General and Carmen Gontang purchased the land from their codefendant. The sale in their favor was annotated on TCT No. 5003 on November 26, 1963 only.

Prior to the date last mentioned, or on November 20, 1963, plaintiff offered to redeem the land. In view of therefusal of the DBP to allow the redemption, plaintiff commenced this suit. The original complaint was filed incourt on November 23, 1963. On August 12, 1964, plaintiff deposited with the clerk of court the sum of P7,271.22, representing the repurchase price of the land.

The trial court held that the one-year period of redemption began to run on April 23, 1962, when the sale atpublic auction was held, and ended on April 24, 1963; that the plaintiff's offer to redeem on November 20, 1963and the deposit of the redemption price on August 12, 1964 were made beyond the redemption period; and thatdefendants Rodolfo General and Carmen Gontang 'are legitimate purchasers for value.

Two principal issues raised are:

(1) In the interpretation and application of Section 31, Commonwealth Act 459 (Law that created the Agriculturaland Industrial Bank, now Development Bank of the Philippines) which provides:

The Mortgagor or debtor to the Agricultural and Industrial Bank whose real property was sold at publicauction, judicially or extrajudicially, for the full or partial payment of an obligation to said bank shall,one year from the date of' the auction sale, have the right to redeem the real property ... (Emphasupplied),

shall the period of redemption start from the date of auction sale or the date of the registration of the sale in theregister of deeds as the respondent Appellate Court held?

(2) Were petitioners under obligation to look beyond what appeared in the certificate of title of their vendor theDevelopment Bank of the Philippines and investigate the validity of its title before they could be classified aspurchasers in good faith?

Petitioners' principal contentions are: that Section 31 of Commonwealth Act No. 459 which created the Agricultural


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and Industrial Bank, predecessor of the Rehabilitation Finance Corporation and the Development Bank of thePhilippines, clearly provides that the right to redeem the real property sold at public auction judicially or extra-

judicially may only be exercised "within one year from the date of the auction sale"; that there is no provision inCommonwealth Act No. 459 expressly stating that the redemption period of one year shall start from the registrationof the certificate of sale in the register of deeds; that Sec. 31 of C. A. 459 is a specific provision of law which governsredemption of real property foreclosed by the Agricultural and Industrial Bank (now the Development Bank of thePhilippines), and prescribes the redemption period for both judicial and extra-judicial foreclosures of mortgage; thatinsofar as foreclosures of mortgage by banking and financial institutions are concerned, the period of redemptionapplicable must be the one prescribed in their respective charters as, in the case at bar, Section 31, C.A. No. 459;that the ruling in the case of Agbulos vs. Alberto , G.R. No. L-17483, July 31, 1962, cited by respondent AppellateCourt as a basis for its decision, is not applicable to the case at bar because this Court based its Agbulos ruling on

Section 26 (now Sec. 90) of Rule 39 of the Rules of Court, wherein it is not clear when the period of redemptionshould start (date when execution sale was conducted, or when the certificate of sale was executed by sheriff, or when the certificate of sale was registered in the registry of deeds), and this Court ruled that as the land involved inthat case is registered under the Torrens system, the date of redemption should begin to run from the date of registration, unlike in the case at bar where Section 31 of Commonwealth Act 459 specifically and clearly providesthat the running of the redemption period shall start from the date of the auction sale ; and that the ruling of this Courtin Gonzales vs. P.N.B., 48 Phil. 824, also invoked by respondent Appellate Court as a basis for its decision, islikewise not applicable to the case at bar because the provisions on the matter of the P.N.B. Charter, Act No. 2938,are different from that of Commonwealth Act 459. Section 32 of Act 2938, which is now Section 20 of R.A. No. 1300(PNB Charter) provides that the mortgagor shall have the right to redeem within one year the sale of the real estate .This is Identical to the provision appearing in Sec. 26, now Sec. 30, Rule 39, Rules of Court, while under Sec. 31 of Commonwealth Act 459, the period of redemption should star, on the date of the auction sale, and the latter provision is applicable specifically and expressly to the case at bar.It is also petitioners' principal argument that the ruling in Metropolitan Insurance Company, substituted byspouses Loreto Z. Marcaida and Miguel de Marcaida vs. Pigtain 101 Phil. 1111, 1115-1116, wherein this Court, inconstruing Sec. 6 of Act No. 3135, categorically stated that the one year redemption period shall start from the dateof sale and not from the report of the sale or the registration of the sale certificate in the office of the Register of Deeds, is more applicable to the present case. The pertinent portion of the decision in the Marcaida case follows:

But again the appellants claim that in this particular case, the statutory redemption period of one year should begin from December 17, 1954, when the auction sale was actually recorded in the office of the Register of Deeds of Manila and not from December 15, 1953, when the sale at public auction of the properties in questiontook place. We find its contention to be also untenable in view of the clear provision of the aforesaid Section 6 of Act No. 3135 to the effect that the right of redemption should be exercised within one year from the date of the sale. It should not be overlooked that the extrajudicial sale in question was for foreclosure of a mortgageand was not by virtue of an ordinary writ of execution in a civil case. ... And since the appeallants had failed toredeem the land in question within the time allowed by Section 6 of Act 3135, the appellee has perfect right torequire the cancellation of the attachment lien in question. (Emphasis supplied)

Notwithstanding the impressive arguments presented by petitioners, the crucial issue to determine is the choice of what rule to apply in determining the start of the one year redemption period, whether from the date of the auctionsale or from that of the registration of the sale with the registry of deeds. In other words it is whether a literalinterpretation of the provision of Section 31 of Commonwealth Act 459 that the period of redemption shall start from the date of the auction sale shall govern, or whether the words, " auction sale " shall be considered in their ordinary meaning or in the same sense that site is used in the texts of Section 26, now 30, of Rule 39 of the Rules of Court, and Section 26 of Act 2938, now Section 20, R.A. 1300 (Charter of PNB). Stated differently, should the word"sale " used in the above indicated provisions of the Rules of Court and the PNB Charter, under whichWe ruled thatthe redemption period shall start from the registration of the sale in the registry of deeds be applied to foreclosuresales for the DBP and give to the words auction sale" in its charter the same meaning of "sale" as used in connectionwith registered land?

We are of the view that a correct solution to the foregoing issue must entail not merely trying to determine themeaning of the words auction sale" and "sale" in different legislative enactments, but, more importantly, adetermination of the legislative intent which is quite a task to achieve as it depends more on a determination of thepurpose and objective of the law in giving mortgagors a period of redemptiom of their foreclosed properties.

Mortgagors whose properties are foreclosed and are purchased by the mortgagee as highest bidder at the auctionsale are decidedly at a great disadvatage because almost invariably mortgagors forfeit their properties at a great lossas they are purchased at nominal costs by the mortgagee himself who ordinarily bids in no more than his credit or the balance threof at the auction sale. That is the reason why the law gives them a chance to redeem their propertieswithin a fixed period. It cannot be denied that in all foreclosures of mortgages and sale of property pursuan toexecution, whether judicial or extrajudicial in nature, under different legislative enactments, a public auction sale is aindispensable pre-requisite to the valid disposal of properties used as collateral for the obligation. So that whether the legislators in different laws used as collateral for the obligation. So that whether the legislators in different lawsused the term "sale" or "auction sale" is of no moment, since the presumption is that when they used those words"sale" and "auction sale" interchangeable in different laws they really referred to only one act the sale aauction indispensably necessary in the disposition of mortgaged properties and those levied upon to pay civil

obligations of their owners.

In the case of Ernesto Salazar, et al. vs. Flor De Lis Meneses, et al., G.R. No. L-15378, promulgated July 31, 1this Court stated:

The issue decisive of this appeal is the one raised by appellants in their third assignment of error, which is tothis effect: that the lower court erred in not holding that the period of redemption in this case, as far asappellants are concerned, started only on May 26, 1956, registered. Should We rule to this effect, it is clearhen appellants attempted to exercise their right to redeem, as judgment creditors of the deceased mortgagor by

judgment subsequent to the extrajudicial foreclosure sale, and when they initiated the present action on October 1, 1956, the period of redemption had not yer expired.We find appellants' contention to be meritorious. In the case of Agbulos vs. Alberto, G.R. No. Lpromulgated on July 31, 1962, We held:

The property involved in the present case is registered land. It is the law in this jurisdiction that when property brought under the operation of the Land Registration Act sold, the operative act registration of the deed of conveyance. The deed of sale does not take effect this a conveyance or bind the land it is registered. (Section 50, Act 496; Tuason vs. Raymundo, 28 Phil. 635; Sikatuna vs. Guevara,43 Phil. 371; Worcester vs. Ocampo, 34 Phil. 646) (Emphasis supplied)

We find no compelling reason to deviate from the aforequoted ruling and not apply the same to the present case. ToUs petitioners' main contention that there is a great deal of difference in legislative intent in the use of the words 94auction sale" in Sec. 31 of Commonwealth Act 459 and the word "sale" in See. 32 of Act 2938, and See. 30 of Rule39 of the Rules of Court, pales into insignificance in the light of Our stand that those words used interchangeablyrefer to one thing, and that is the public auction sale required by law in the disposition of properties foreclosed or levied upon. Our stand in the Salazar case and in those mentioned therein (Garcia vs. Ocampo, G.R. No. L-13029,June 30, 1959; Gonzales et al. vs. Philippine National Bank et al. 48 Phil. 824) is firmly planted on the premise thatregistration of the deed of conveyance for properties brought under the Torrens System is the operative act totransfer title to the property and registration is also the notice to the whole world that a transaction involving the samehad taken place.

To affirm the previous stand this Court has taken on the question of when the one year period of redemption shouldstart (from the time of registration of the sale) would better serve the ends of justice and equity especially in thiscase, since to rule otherwise would result in preventing the respondent-mortgagor from redeeming his 59.4687hectares of land which was acquired by the Development Bank of the Philippines as the highest bidder at the auctionsale for the low price of only P7,271.22 which was simply the unpaid balance of the mortgage debt of P22,000.00after the respondent-mortgagor had paid the sum of P14,728.78. As it is, affirmance of the Appellate Court's decisionwould not result in any loss to petitioners since the amount of P7,271.22 they paid to the Bank will be returned to'them. What further strengthen's Our stand is the fact found by the respondent Appellate Court that respondentBarrameda has always been in possession of the disputed land.

IN THE LIGHT OF THE FOREGOING, We find it no longer necessary to determine whether the petitioners arepurchasers in good faith of the land involved, since the respondent Barrameda redeemed the mortgaged propertywithin the legal period of redemption and, consequently the sale of the property executed on September 3, 1963, bythe Development Bank of the Philippine in favor of the petitioners is null and void.


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WHEREFORE, the decision of the respondent Appellate Court is affirmed, with costs against petitioners.

MANILA JOCKEY CLUB, INC. vs. GAMES AND AMUSEMENTS BOARD (G.R. No. L-12727, February 29, 1960 )4

BARRERA, J .:This is a petition for declaratory relief filed by petitioner Manila Jockey Club, Inc., in the Court of First Instance Manila(Civil Case No. 31274), in which the Philippine Racing Club, Inc., intervened as party in interest with leave of court,praying that judgment be rendered against respondents Games and Amusements Board (GAB), Philippine CharitySweepstakes Office (PCSO), and Executive Secretary Fortunato de Leon:

(a) Interpreting Republic Acts Nos. 309 and 1502 in such a manner that the 30 Sundays unreserved for charitable institutions and therefore belonging to the private racing clubs under Section 4 of Republic Act No.309 continue to pertain to said private entities, and that the 6 additional sweepstakes races authorized under Republic Act No. 1502 should be held on 6 of the 12 Saturdays not reserved for any private entity or particular charitable institution under Section 4 of Republic Act No. 309, or on any other day of the week besides Sunday,Saturday and legal holiday;

(b) Holding that respondent PCSO does not have the right or power to appropriate or use the race tracks andequipment of petitioner without its consent, nor can respondents compel petitioner to so allow such use of itsrace tracks and equipment under pain of having its license revoked.

Respondents duly filed their respective answers to said petition and the case was heard. After hearing, the court, onJuly 5, 1957, rendered a decision which, in part, reads:

The court does not deem it necessary to rule on the deprivation of property of the petitioner and the intervenor without due process of law, as feared by them, because as they have stated, the Philippine CharitySweepstakes Office is using their premises and equipment under separate contracts of lease voluntarily andwillingly entered into by the parties upon payment of a corresponding rental. There is therefore no deprivation of property without due process of law.

Wherefore, the court is of the opinion and so holds that once a month on a Sunday not reserved for the Anti-Tuberculosis Society, the White Cross and other charitable institutions by Section 4 of Republic Act No. 309,the Philippine Charity Sweepstakes Office is authorized to hold one regular sweepstakes draw and races,pursuant to Section 9 of Republic Act No. 1502, thus reducing the number of Sundays which may be alloted toprivate entities by the Games and Amusements Board. . . .

From this judgment, petitioner and intervenor interposed the present appeal.

The issue is the proper placement of the six (6) additional racing days given to the Philippine Charity SweepstakesOffice, in virtue of Republic Act No. 1502, approved on June 16, 1956.The authorized racing days specifically designated and distributed in Section 4 of Republic Act No. 309, the basiclaw on horse racing in the Philippines, as later amended by Republic Act No. 983, are as follows:

A. Sundays

(1) For the Philippine Anti-Tuberculosis 12 Sundays(2) For the Phil ippine Char ity Sweepstakes Off ice (PCSO) . 6 Sundays(3) For the White Cross, Inc. 4 Sundays(4) For the Grand Derby Race of the Philippine Anti-TuberculosisSociety

1 Sunday

TOTAL 23 Sundays

4 NATURE AND OBJECT OF CONSTRUCTION

(5) For private individuals and entities duly licensed by the GAB, other Sundays not reserved under this Act, as may be determined by theGAB

29 Sundays

or 30 for Leap yearsTotal for the year

52 Sundays

Or 53 for leap yearsB. Saturdays

(1) For the Philippine Anti-Tuberculosis Society 12 Saturdays(2) For the White Cross, Inc. 4 Saturdays(3) For private Individuals and entities duly licensed by GAB and asmay be determined by it

24 Saturdays

(4) For races authorized by the President for charitable, relief, or civicpurposes other than the particular charitable institutions named above,all other Saturdays not reserved for the latter

12 Saturdays

TOTAL 53 Saturdays

C. Legal Holidays : All, except Thursday and Friday of the Holy Week, July 4th and December 30th, havebeen reserved for private individuals and entities duly licensed by the GAB.

As stated, Republic Act No. 1502 increased the sweepstakes draw and races of the PCSO to twelve, but withoutspecifying the days on which they are to be run. To accommodate these additional races, the GAB resolved toreduce the number of Sundays assigned to private individuals and entities by six. Appellants protested, contendingthat the said increased should be taken from the 12 Saturdays reserved to the President, for charitable, relief, or civicpurposes, or should be assigned to any other day of the week besides Sunday, Saturday, and legal holiday.

Appellants' contention cannot be sustained. Section 4 Republic Act No. 309, as amended by Republic Act No. 983,

by express terms, specifically reserved 23 Sundays and 16 Saturdays for the Philippine Anti-Tuberculosis Society,the White Cross, Inc. and the PCSO, and 12 Saturdays to the President for other charitable, relief, or civic purposes.These days can not be disposed of by the GAB without authority of law. As to the remaining racing days, the lawprovides:

SEC. 4. Racing days .Private individuals and entities duly licensed by the Commission on Races (now GAB)may hold horse races on Sundays not reserved under this Act, on twenty-four Saturdays as may be determinedby the said Commission (GAB), and on legal holidays, except Thursday and Friday of Holy Week, July fourth,commonly known as Independence Day, and December thirtieth, commonly known as Rizal Day.

It is clear from the above-quoted provision that appellants have no vested right to the unreserved Sundays, or evento the 24 Saturdays (except, perhaps, on the holidays), because their holding of races on these days is merelypermissive, subject to the licensing and determination by the GAB. When, therefore, Republic Act No. 1502 wasenacted increasing by six (6) the sweepstakes draw and races, but without specifying the days for holding them, theGAB had no alternative except to make room for the additional races, as it did, form among the only available racingdays unreserved by any law the Sundays on which the private individuals and entities have been permitted to holdtheir races, subject to licensing and determination by the GAB.

It is suggested that the GAB should have chosen any week days or Saturday afternoons. In the first place, weekdays are out of the question. The law does not authorize the holding of horse races with betting on week days (SeeArticle 198 of the Revised Penal Code). Secondly, sweepstakes races have always been held on Sundays. Besides,it is not possible to hold them on Saturday afternoons as, it is claimed, a whole day is necessary for the mixing of thesweepstakes balls, the drawing of winning sweepstakes numbers, and the running of the sweepstakes races. Be thatas it may, since the law has given certain amount of discretion to the GAB in determining and allocating racing daysnot specifically reserved, and since the court does not find that a grave abuse of this discretion has been committed,there seems to be no reason, legal or otherwise, to set aside the resolution of the GAB.


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Furthermore, appellants contend that even granting that the six (6) additional sweepstakes races should be run onSundays, yet if they are held on a club race day, the GAB should only insert them in the club races and not given thewhole day to the PCSO, to the exclusion of appellants. In support of this contention, the following quotation from thedebate in the House of Representatives before voting on House Bill No. 5732, which became Republic Act No. 1502,is cited:

Mr. ABELEDA. If there are no more amendments, I move that we vote on the measure.

Mr. MARCOS. Mr. Speaker, before we proceed to vote on this bill, I want to make it of record that it is the clear intention of the House to increase by two the ten regular and special Sweepstakes races making it all in all,twelve, and that in cases where a sweepstakes race falls in a club race days the Sweepstakes races should be

inserted in the club race .

Mr. ABELEDA. The gentleman from Ilocos Norte is correct. . . . (t.s.n., Proceedings in House of Representatives, Congress, May 17, 1956; emphasis supplied.)

Appellants cite in their briefs a number of authorities sustaining the view that in the interpretation of statutessusceptible of widely differing constructions, legislative debates and explanatory statements by members of thelegislature may be resorted to, to throw light on the meaning of the words used in the statutes. Upon the other hand,the appellees, likewise, quote in their briefs other authorities to the effect that statements made by the individualmembers of the legislature as to the meaning of provisions in the bill subsequently enacted into law, made during thegeneral debate on the bill on the floor of each legislative house, following its presentation by a standing committee,are generally held to be in admissable as an aid in construing the statute. Legislative debates are expressive of theviews and motives of individual members and are not safe guides and, hence, may not be resorted to in ascertainingthe meaning and purpose of the lawmaking body. It is impossible to determine with certainty what construction wasput upon an act by the members of the legislative body that passed the bill, by resorting to the speeches of themembers thereof. Those who did not speak, may not have agreed with those who did; and those who spoke, mightdiffer from each other. 1

In view of these conflicting authorities, no appreciable reliance can safely be placed on any of them. It is to be notedin the specific case before us, that while Congressmen Marcos and Abeleda were, admittedly, of the view that theadditional sweepstakes races may be inserted in the club races, still there is nothing in Republic Act No. 1502, as itwas finally enacted, which would indicate that such an understanding on the part of these two members of the Lower House of Congress were received the sanction or conformity of their colleagues, for the law is absolutely devoid of any such indication. This is, therefore, not a case where a doubtful wording is sought to be interpreted; rather, if weadopt appellants' theory, we would be supplying something that does not appear in the statute. It is pertinent toobserve here that, as pointed out by one of appellants' own cited authorities, 2 in the interpretation of a legaldocument, especially a statute, unlike in the interpretation of an ordinary written document, it is not enough to obtaininformation to the intention or meaning of the author or authors, but also to see whether the intention or meaning hasbeen expressed in such a way as to give it legal effect and validity. In short, the purpose of the inquiry, is not only toknow what the author meant by the language he used, but also to see that the language used sufficiently expressesthat meaning. The legal act, so to speak, is made up of two elements an internal and an external one; it originatesin intention and is perfected by expression. Failure of the latter may defeat the former. The following, taken from 59Corpus Juris 1017, is in the line with this theory:

The intention of the legislature to which effect must be given is that expressed in the statute and the courts willnot inquire into the motives which influence the legislature, or individual members, in voting for its passage; nor indeed as to the intention of the draftsman, or the legislature, so far as it has been expressed in the act. So, inascertaining the meaning of a statute the court will not be governed or influenced by the views or opinions of any or all members of the legislature or its legislative committees or any other persons.

Upon the other hand, at the time of the enactment of Republic Act No. 1502 in June, 1956, the long, continuous, anduniform practice was that all sweepstakes draws and races were held on Sundays and during the whole day. Withthis background, when Congress chose not to specify in express terms how the additional sweepstakes draws andraces would be held, it is safe to conclude that it did not intend to disturb the then prevailing situation and practice."On the principle of contemporaneous exposition, common usage and practice under the statute, or a course of

conduct indicating a particular undertaking of it, will frequently be of great value in determining its real meaning,especially where the usage has been acquired in by all parties concerned and has extended over a long period of time; . . . (59 C. J. 1023).

Likewise, the language of Republic Act No. 1502 in authorizing the increase, clearly speaks of regular sweepstakesdraws and races. If the intention of Congress were to authorize additional sweepstakes draws only which could,admittedly, be inserted in the club races, the law would not have included regular races ; and since sweepstakes races were specifically authorized, and it would be confusing, inconvenient, if not impossible to mixthese sweepstakes races with the regular club races all on the same day (and it has never been done before), theconclusion seems inevitable that the additional sweepstakes draws and races were intended to be held on a wholeday, separate and apart from the club races.

Appellants' contention that to compel them to permit the PCSO to use their premises and equipment against their willwould constitute deprivation of property without due process of law, deserves no serious consideration. As the lower court has found, every time the PCSO uses appellants' premises and equipment, they are paid rentals in accordancewith the terms of separate contracts of lease existing between them and the PCSO.

The decision appealed from, being in consonance with the above findings and considerations of this Court, the sameis hereby affirmed, with costs against the appellants. So ordered.

ENDENCIA vs. DAVID (G.R. No. L-6355-56, August 31, 1953) 5

MONTEMAYOR, J. :This is a joint appeal from the decision of the Court of First Instance of Manila declaring section 13 of Republic ActNo. 590 unconstitutional, and ordering the appellant Saturnino David as Collector of Internal Revenue to re-fund toJustice Pastor M. Endencia the sum of P1,744.45, representing the income tax collected on his salary as AssociateJustice of the Court of Appeals in 1951, and to Justice Fernando Jugo the amount of P2,345.46, representing theincome tax collected on his salary from January 1,1950 to October 19, 1950, as Presiding Justice of the Court of Appeals, and from October 20, 1950 to December 31,1950, as Associate Justice of the Supreme Court, withoutspecial pronouncement as to costs.

Because of the similarity of the two cases, involving as they do the same question of law, they were jointly submittedfor determination in the lower court. Judge Higinio B. Macadaeg presiding, in a rather exhaustive and wellconsidered decision found and held that under the doctrine laid down by this Court in the case of Perfecto vs. Meer,85 Phil., 552, the collection of income taxes from the salaries of Justice Jugo and Justice Endencia was a diminutionof their compensation and therefore was in violation of the Constitution of the Philippines, and so ordered the refundof said taxes.

We see no profit and necessity in again discussing and considering the proposition and the arguments pro and consinvolved in the case of Perfecto vs. Meer, supra, which are raised, brought up and presented here. In that case, wehave held despite the ruling enunciated by the United States Federal Supreme Court in the case of O 'Malley vs.Woodrought 307 U. S., 277, that taxing the salary of a judicial officer in the Philippines is a diminution of such salaryand so violates the Constitution. We shall now confine our-selves to a discussion and determination of the remainingquestion of whether or not Republic Act No. 590, particularly section 13, can justify and legalize the collection of income tax on the salary of judicial officers

According to the brief of the Solicitor General on behalf of appellant Collector of Internal Revenue, our decision in thecase of Perfecto vs. Meer, supra, was not received favorably by Congress, because immediately after itspromulgation, Congress enacted Republic Act No. 590. To bring home his point, the Solicitor General reproducedwhat he considers the pertinent discussion in the Lower House of House Bill No. 1127 which became Republic ActNo. 590.

5LIMITATIONS TO POWER TO CONSTRUE


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For purposes of reference, we are reproducing section 9, Article VIII of our Constitution:.

SEC. 9. The members of the Supreme Court and all judges of inferior courts shall hold office during goodbehavior, until they reach the age of seventy years, or become incapacitated to discharge the duties of their office. They shall receive such compensation as may be fixed by law, which shall not be diminished during their continuance in office . Until the Congress shall provide otherwise, the Chief Justice of the Supreme Court shallreceive an annual compensation of sixteen thousand pesos, and each Associate Justice, fifteen thousandpesos.

As already stated construing and applying the above constitutional provision, we held in the Perfecto case that judicial officers are exempt from the payment of income tax on their salaries, because the collection thereof by the

Government was a decrease or diminution of their salaries during their continuance in office, a thing which isexpressly prohibited by the Constitution. Thereafter, according to the Solicitor General, because Congress did notfavorably receive the decision in the Perfecto case, Congress promulgated Republic Act No. 590, if not to counteractthe ruling in that decision, at least now to authorize and legalize the collection of income tax on the salaries of judicialofficers. We quote section 13 of Republic Act No. 590:

SEC 13. No salary wherever received by any public officer of the Republic of the Philippines shall beconsidered as exempt from the income tax, payment of which is hereby declared not to be dimunition of hiscompensation fixed by the Constitution or by law.

So we have this situation. The Supreme Court in a decision interpreting the Constitution, particularly section 9,Article VIII, has held that judicial officers are exempt from payment of income tax on their salaries, because thecollection thereof was a diminution of such salaries, specifically prohibited by the Constitution. Now comes theLegislature and in section 13, Republic Act No. 590, says that "no salary wherever received by any public officer of the Republic (naturally including a judicial officer) shall be considered as exempt from the income tax," and proceedsto declare that payment of said income tax is not a diminution of his compensation. Can the Legislature validly dothis? May the Legislature lawfully declare the collection of income tax on the salary of a public official, specially a

judicial officer, not a decrease of his salary, after the Supreme Court has found and decided otherwise? To

determine this question, we shall have to go back to the fundamental principles regarding separation of powers.

Under our system of constitutional government, the Legislative department is assigned the power to make and enactlaws. The Executive department is charged with the execution of carrying out of the provisions of said laws. But theinterpretation and application of said laws belong exclusively to the Judicial department. And this authority tointerpret and apply the laws extends to the Constitution. Before the courts can determine whether a law isconstitutional or not, it will have to interpret and ascertain the meaning not only of said law, but also of the pertinentportion of the Constitution in order to decide whether there is a conflict between the two, because if there is, then thelaw will have to give way and has to be declared invalid and unconstitutional.

Defining and interpreting the law is a judicial function and the legislative branch may not limit or restrict thepower granted to the courts by the Constitution. (Bandy vs. Mickelson et al., 44N. W., 2nd 341, 342.)

When it is clear that a statute transgresses the authority vested in the legislature by the Constitution, it is theduty of the courts to declare the act unconstitutional because they cannot shrink from it without violating their oaths of office. This duty of the courts to maintain the Constitution as the fundamental law of the state isimperative and unceasing; and, as Chief Justice Marshall said, whenever a statute is in violation of thefundamental law, the courts must so adjudge and thereby give effect to the Constitution. Any other coursewould lead to the destruction of the Constitution. Since the question as to the constitutionality of a statute is a

judicial matter, the courts will not decline the exercise of jurisdiction upon the suggestion that action might betaken by political agencies in disregard of the judgment of the judicial tribunals. (11 Am. Jur., 714-715.)

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