Philippine Charity Sweepstakes Office vs. Mendoza

The essential condition precedent to winning the Lotto 6/42 jackpot prize is the bettor's selection of the winning number combination, not the presentation of a pristine, readable ticket; where the ticket is damaged but the bettor proves by preponderance of evidence—through corroborating PCSO records and other circumstances—that he selected the winning combination, the obligation of PCSO to pay the prize arises.

The Philippine Charity Sweepstakes Office (PCSO) is the principal government agency authorized under Republic Act No. 1169, as amended, to hold and conduct charity sweepstakes races and lotteries, subject to rules and regulations promulgated by its Board of Directors. The Lotto 6/42 is an on-line lottery game governed by the PCSO Amended Game Rules and Regulations for the Lotto 6/42, which characterize the game as a "number match game." Antonio F. Mendoza was a regular customer at a lotto outlet operated by Fermina Panganiban in Brgy. Dacanlao, Calaca, Batangas. The lotto ticket bears printed notices at the back, including warnings to keep the ticket away from heat and a provision that prizes will not be paid if the ticket is altered, defaced, torn, damaged, or has failed validation tests.

On October 2, 2014, Antonio F. Mendoza placed three bets via "lucky pick" for the Lotto 6/42 draw at a lotto outlet in Brgy. Dacanlao, Calaca, Batangas, operated by Fermina Panganiban. His lucky pick number combinations were: (1) 09, 21, 31, 36, 40, 41; (2) 02, 08, 09, 17, 29, 42; and (3) 05, 26, 27, 28, 35, 38. The following morning, he learned that one of his combinations had won the jackpot. Before he could claim the prize, however, his granddaughter grabbed and crumpled the winning ticket. In an attempt to flatten it, Mendoza's daughter ironed the ticket with a piece of cloth covering it, causing the ticket to blacken. Only the first two digits of each of the three bet combinations remained visible, along with the outlet number, draw date, purchase date, and a partial timestamp.

On October 5, 2014, Mendoza presented his partially blackened ticket to the PCSO in Mandaluyong City and was instructed to submit a handwritten account of what happened. He returned on October 7, 2014 to submit an affidavit to the Legal Department. When the media reported Mendoza's story on October 11, 2014, PCSO representatives stated in an interview that it would not close its doors to his case and that there was still a one-year period to claim the prize if no other claimant came forward. Nevertheless, by letter dated October 20, 2014, PCSO informed Mendoza that the prize could not be awarded because the ticket was damaged and could not be validated.

Mendoza thereafter aired his story at several hearings of the House of Representatives Committee on Games and Amusements. During the November 19, 2014 hearing, a PCSO representative stated under oath that he would personally allow payment if the Commission on Audit approved it, and the COA in turn stated it would not disallow payment if the PCSO Board allowed it. Mendoza and his family underwent polygraph tests at the National Bureau of Investigation, which cleared them of deception and found no derogatory records. On December 10, 2014, the PCSO Board declared it would not pay, invoking its "no ticket, no payment" policy. On May 12, 2015, the Committee on Games issued Committee Report No. 717 recommending that the prize be awarded to Mendoza based on other circumstances and evidence establishing his ownership of the winning ticket. Mendoza, through counsel, formally demanded payment of the PHP 12,391,600.00 jackpot, but was ignored.

On September 30, 2015, Mendoza filed a Complaint for specific performance against PCSO in the Regional Trial Court of Balayan, Batangas. PCSO moved to dismiss on the ground that the complaint failed to state a cause of action because the valid winning ticket was not appended. After preliminary hearings on this affirmative defense, the parties moved for judgment on the pleadings, considering that the issues were purely legal questions. The RTC rendered its March 29, 2019 Decision in favor of Mendoza, finding that he presented substantial evidence that he was the exclusive winner and that the damage to the ticket justified resort to secondary evidence. The RTC also awarded moral damages, exemplary damages, and attorney's fees. PCSO's motion for reconsideration was denied on July 26, 2019. On appeal, the Court of Appeals affirmed the RTC's factual findings that Mendoza proved by preponderance of evidence that he was the only person who selected the winning combination, but deleted the awards of damages and attorney's fees for insufficient factual and legal basis. PCSO's motion for reconsideration before the CA was likewise denied.

• PCSO Rules as Binding Contract: PCSO argued that the PCSO Rules, particularly Articles V and VI and Article VII(4)(c), clearly and absolutely require presentation and surrender of the winning ticket as a condition precedent to payment, and these rules bind all lotto participants.
• Failure to State a Cause of Action: PCSO maintained that Mendoza's complaint failed to state a cause of action because the actionable document—the valid winning ticket—was not appended to the complaint, such that there could be no basis for the relief sought.
• Ticket Text Warnings: PCSO argued that when Mendoza purchased the lotto ticket, he agreed to the rules and policies printed on the back of the ticket, including the provision that prizes will not be paid if the ticket is altered, defaced, torn, damaged, or has failed validation tests.
• Precedent of Number Fever Cases: PCSO asserted that, as in the "Number Fever" promotion cases where claimants failed to comply with conditions precedent for winning the prize, the conditions for payment of the jackpot prize were likewise not met by Mendoza.
• Risk of Fraud: PCSO contended that acceptance of secondary evidence in lieu of a valid ticket would pave the way for fraudulent claims and undermine the integrity of the lottery, the conduct of which is imbued with public interest.
• Committee Report as Merely Recommendatory: PCSO emphasized that the findings in Committee Report No. 717 were merely recommendatory and could neither override nor supplant duly promulgated PCSO rules and regulations.

• Ambiguity of PCSO Rules: Mendoza argued that the fact that the Committee on Games and PCSO differed in their interpretation of the PCSO Rules rendered the Rules ambiguous.
• Overwhelming Proof of Winning: Mendoza maintained that he had overwhelming proof that he was the winner, including his partly burnt ticket whose contents were reproduced in Committee Report No. 717, PCSO's own November 27, 2014 certification confirming that the sole winning combination was one of three bets placed at Panganiban's outlet, and PCSO's December 4, 2014 certification from its Gaming Technology Department confirming that only one three-bet transaction occurred at that outlet on October 2, 2014 with matching first two digits.
• Bad Faith of PCSO: Mendoza argued that PCSO's continued refusal to pay the jackpot prize was tantamount to bias or partiality and showed evident bad faith, especially since no one else had claimed the winnings.
• No Legal Basis for "No Ticket, No Payment" Policy: Mendoza contended that the "no ticket, no payment" policy lacked legal basis.

• Interpretability of PCSO Rules: Whether the provisions in the PCSO Rules and Regulations for the Lotto 6/42 are susceptible to judicial interpretation.
• Sufficiency of Proof Despite Damaged Ticket: Whether Antonio F. Mendoza has sufficiently proved that he is entitled to the jackpot prize of PHP 12,391,600.00 despite the fact that his winning ticket was partially burned.

• Interpretability of PCSO Rules: Yes. The PCSO Rules are ambiguous and susceptible to judicial interpretation because they admit of two reasonable alternative interpretations as to the condition precedent for payment of the prize.
• Sufficiency of Proof Despite Damaged Ticket: Yes. Mendoza proved by preponderance of evidence that he selected the winning number combination, entitling him to the jackpot prize despite the damaged ticket, as corroborated by PCSO's own database records and certifications.

• Interpretability of PCSO Rules: The Court applied the principle from Benguet Corporation vs. Cabildo that a contract provision is ambiguous if it is susceptible of two reasonable alternative interpretations, and where ambiguity exists, interpretation is left to the court. PCSO insisted that presentation of the complete physical ticket was a condition precedent, while Mendoza and the Committee on Games considered the selection of the winning number combination as the essential condition. These two interpretations rendered the PCSO Rules ambiguous. The Court then examined the Rules as a whole: Article I characterizes Lotto 6/42 as a "number match game"; Article II defines "draw" as the process of selecting six official winning numbers, "prize" as the amount payable for a winning selection, and "winning numbers" as the six-number combination drawn as the official winning combination—all referencing a winning combination of numbers, not a "winning ticket." A ticket was defined only as produced by a terminal "confirming the selection" made by the customer. The ticket is thus merely proof of the bettor's selection, not the essence of winning. Because the Rules do not contemplate a pre-determined "winning ticket," the presentation of a ticket in pristine state cannot be the sole determinant for payment. The interpretation of the PCSO Rules, which forms part of the contract between PCSO and bettors, was therefore properly undertaken by the court.

• Sufficiency of Proof Despite Damaged Ticket: The Court first clarified that the determination of whether Mendoza overcame the burden of proof through preponderance of evidence is a question of fact, and since the Court is not a trier of facts, it adopted the findings of the RTC and the CA. Those findings established that no one besides Mendoza sought to claim the jackpot; Panganiban testified that Mendoza was her regular customer; the NBI cleared Mendoza and his family of deception; PCSO admitted before the Committee on Games that Mendoza's ticket was a genuine and authentic PCSO-generated ticket; and PCSO's own certifications confirmed that the sole winning combination was one of three bets placed in a documented transaction at Panganiban's outlet, and that this was the only three-bet transaction at that outlet on that date. The first two numbers of each combination, as well as the other transaction details, perfectly matched what remained visible on Mendoza's damaged ticket. The Court then clarified that the Best Evidence Rule did not apply because the issue was not the content of the ticket but the existence of the ticket and the circumstances surrounding its execution—specifically, whether Mendoza actually entered a lotto bet with the winning numbers. Where the issue is the existence or execution of a document rather than its content, testimonial evidence is admissible without need to account for the original. Mendoza's testimonial evidence, substantiated by PCSO's own records, was therefore rightly admitted and given weight. The Court distinguished the "Number Fever" cases, where claimants' crowns lacked the correct security codes uniquely assigned to winning crowns, meaning the conditions of the offer were never satisfied. Here, by contrast, an obligation arose on PCSO's part when Mendoza accepted the offer and the numbers he betted on were subsequently drawn as the winning combination—the condition was fulfilled. The only dispute was proof of that acceptance, which Mendoza established through corroborating evidence. Pursuant to Nacar vs. Gallery Frames, the Court imposed 6% per annum legal interest from finality until full payment.

• Ambiguity in Contract Interpretation — A contract provision is ambiguous if it is susceptible of two reasonable alternative interpretations; where the written terms are not ambiguous and can only be read one way, the court interprets the contract as a matter of law, but if ambiguous, interpretation is left to the court to resolve in light of intrinsic evidence. The Court applied this doctrine to the PCSO Rules, finding that PCSO's reading (presentation of a complete ticket as condition precedent) and Mendoza's reading (selection of the winning combination as condition precedent) were both reasonable, rendering the Rules ambiguous and susceptible to judicial interpretation.

• Best Evidence Rule — Scope and Limitations — The Best Evidence Rule applies only when the content of a document is the subject of the inquiry; where the issue is the execution or existence of the document or the circumstances surrounding its execution, the rule does not apply and testimonial evidence is admissible. The Court held that the issue was not the content of Mendoza's ticket (i.e., the numbers printed on it) but the existence of the ticket and the fact that Mendoza placed a bet with the winning combination; thus, the Best Evidence Rule did not apply, and testimonial evidence corroborated by PCSO records was properly admitted.

• Question of Law vs. Question of Fact — A question of law arises when there is doubt as to what the law is on a certain state of facts; a question of fact arises when the doubt is as to the truth or falsity of the alleged facts. The test is whether the appellate court can determine the issue without reviewing or evaluating the evidence. The Court held that determining whether Mendoza established his claim by preponderance of evidence is a question of fact, and because the Court is not a trier of facts, it adopted the factual findings of the RTC and CA.

• Obligations Arising from Games of Chance — In games of chance, the contract or terms of the game serve as the source of obligation. A binding obligation may originate from advertisements or offers addressed to the general public; when a party publishes an offer and another acts on it before it is withdrawn, the offering party is bound to perform. The Court held that PCSO's obligation to pay arose when Mendoza accepted the offer and the numbers he selected were drawn as the winning combination, fulfilling the condition of the offer.

• "It is notable from the above cited PCSO Rules that there is no reference to a 'winning ticket.' At most, a ticket was only defined as 'produced by a terminal confirming the selection made by the customer.' Stated otherwise, the ticket is only proof of the fact that the bettor selected the winning combination of numbers." — This passage articulates the ratio decidendi: the ticket is merely confirmatory proof of the bettor's selection, not the essence of winning, which is the selection of the winning number combination.

• "Whether the ticket bearing the numbers of the lotto indeed existed is an issue that does not require the application of the Best Evidence Rule. Hence, compliance with the rules on the presentation of secondary evidence does not apply." — This clarifies the evidentiary framework: because the dispute concerns the existence of the ticket and the circumstances of its execution rather than its content, the Best Evidence Rule is inapplicable and testimonial evidence is admissible.

• "Unlike the Number Fever cases, an obligation arose on the part of the sweepstakes office when Mendoza accepted the offer, and was able to comply with the conditions of the offer—that is, when the numbers he betted on were subsequently drawn to be the winning number combination for the 6/42 lotto." — This distinguishes the present case from the Pepsi-Cola "Number Fever" line of cases and establishes that the condition precedent was fulfilled, giving rise to PCSO's obligation to pay.

• "A contract provision is ambiguous if it is susceptible of two reasonable alternative interpretations. Where the written terms of the contract are not ambiguous and can only be read one way, the court will interpret the contract as a matter of law. If the contract is determined to be ambiguous, then the interpretation of the contract is left to the court, to resolve the ambiguity in the light of the intrinsic evidence." — This is the canonical formulation of the ambiguity test borrowed from Benguet Corporation vs. Cabildo, applied here to determine that the PCSO Rules were subject to judicial interpretation.

• Benguet Corporation vs. Cabildo, 585 Phil. 23 (2008) — Followed for the principle that a contract provision is ambiguous if susceptible of two reasonable alternative interpretations, and that ambiguous contracts are subject to judicial interpretation. The Court applied this test to find the PCSO Rules ambiguous.
• Arceo, Jr. vs. People, 527 Phil. 531 (2006) — Followed for the principle that the Best Evidence Rule applies only where the content of the document is the subject of inquiry; where the issue is the execution or existence of the document, testimonial evidence is admissible.
• Gaw vs. Chua, 574 Phil. 640 (2008) — Followed as further elaboration of the Best Evidence Rule's scope, confirming that where the issue concerns whether a document was executed or exists, any substitutionary evidence is admissible without need to account for the original.
• Pepsi-Cola Products Philippines, Inc. vs. Pagdanganan, 535 Phil. 540 (2006) — Distinguished. The "Number Fever" cases involved claimants whose crowns lacked the correct security codes, meaning the conditions of the offer were never satisfied. In the present case, the condition—selection of the winning combination—was fulfilled.
• Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Followed for the imposition of 6% per annum legal interest from the finality of the decision until full payment.
• De la Rosa vs. Bank of the Philippine Islands, 51 Phil. 926 (1924) — Followed for the principle that a binding obligation may originate from advertisements or offers addressed to the general public, and that where a party publishes an offer and another acts on it, the offering party is bound to perform.

• Republic Act No. 1169, as amended — "An Act Providing for Charity Sweepstakes Horse Races and Lotteries." This statute authorizes PCSO to hold and conduct charity sweepstakes races and lotteries, subject to rules and regulations promulgated by the Board of Directors. The PCSO Amended Game Rules and Regulations for the Lotto 6/42 were promulgated pursuant to this authority.
• PCSO Amended Game Rules and Regulations for the Lotto 6/42, Articles I, II, IV, V, VI, and VII — These rules govern the conduct of the Lotto 6/42 game. Article I characterizes the game as a "number match game." Article II defines key terms—"draw," "prize," and "winning numbers"—all referencing a winning combination of numbers rather than a "winning ticket." Article IV classifies tickets having all six selected numbers corresponding to the six official winning numbers as Category I prize. Article VII(4)(c) provides that PCSO shall not consider payment of any prize without presentation and surrender of the winning ticket. The Court found these provisions ambiguous when read together, as they admit two reasonable interpretations regarding the condition precedent for payment.
• Civil Code, Article 1156 — Defines an obligation as a juridical necessity to give, to do, or not to do. Applied to establish that PCSO's duty to pay the jackpot prize constitutes an obligation arising from the contract formed when Mendoza accepted PCSO's offer by selecting the winning combination.
• Civil Code, Article 1157 — Enumerates the sources of obligations: law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts. Applied to identify the contract (i.e., the terms of the lotto game) as the source of PCSO's obligation.
• Civil Code, Article 1319 — Provides that consent is manifested by the meeting of the offer and acceptance upon the thing and the cause constituting the contract, and that the offer must be certain and acceptance absolute. Applied to determine that Mendoza's acceptance of PCSO's offer—by selecting the winning number combination—created a binding contract.
• Rules of Court, Rule 130, Sections 3, 5, 6, 7, and 8 — Govern the Best Evidence Rule and the admissibility of secondary evidence. The Court held that the Best Evidence Rule did not apply because the issue was the existence of the ticket, not its content, making testimonial evidence admissible without compliance with secondary evidence requirements.

Leonen, SAJ. (Chairperson), Lazaro-Javier, M. Lopez, and Kho, Jr., JJ., concurred.