In Mondragon International Philippines, Inc. v. Josephine Blanco, the Supreme Court ruled that a participant in a raffle promotion is entitled to the prize if the sales invoices submitted for the raffle entry were fully paid, even if the participant had other outstanding accounts with the company. The Court emphasized that the raffle rules should be interpreted literally and any ambiguity should be resolved in favor of the participant. This decision clarifies the obligations of companies running promotional raffles and the rights of participants, ensuring fairness and transparency in promotional activities.

Can Fully Paid Raffle Entries Be Disqualified Due to Unrelated Debts?

Mondragon International Philippines, Inc. launched a sales raffle promotion called “Numerong Pangarap, Dalawang Milyong Tanggap” to boost sales and encourage timely payments from its direct sellers, including fashion consultants. The promotion had specific rules and regulations outlining how participants could earn entries and what conditions would lead to disqualification. Josephine Blanco, a fashion consultant for Mondragon, participated in the raffle by submitting four sales coupons in exchange for one entry form. The total amount of the sales invoices was fully paid. During the raffle draw, Josephine’s entry won her a brand-new Toyota Corolla car, which was the grand prize for the platinum pot category. However, Mondragon refused to award Josephine the prize because she had outstanding accounts or unpaid orders that should have been paid before the raffle date. These unpaid accounts were separate from the sales invoices she used to get the winning entry form. Josephine filed a lawsuit against Mondragon, seeking specific performance and damages, to compel the company to award her the prize. The central legal question revolves around interpreting the raffle’s rules and regulations, specifically Rule 21, to determine whether Mondragon had the right to disqualify Josephine based on her overdue accounts, even though her winning entry was based on fully paid sales invoices.

The Regional Trial Court (RTC) initially dismissed Josephine’s complaint, interpreting Rule 21 of the raffle mechanics to mean that any overdue accounts barred her from claiming the prize, regardless of whether those accounts were related to the winning entry. The RTC reasoned that the phrase “orders not paid on due date” referred to any outstanding balances, not just those linked to the winning entry. However, Josephine appealed this decision to the Court of Appeals (CA). The CA reversed the RTC’s ruling, stating that there was nothing in the raffle rules that expressly or impliedly supported Mondragon’s position that a participant could be disqualified for having overdue accounts for other sales or orders, as long as the submitted sales invoices for the winning entry were fully paid. The CA emphasized that Josephine was entitled to the prize because she had complied with the specific requirements for the winning entry. Mondragon then filed a petition for review with the Supreme Court, challenging the CA’s decision and seeking to reinstate the RTC’s ruling.

At the core of this case is the interpretation of Rule 21 of the Raffle Draw, which states:

“21. Only entries corresponding to sales paid on due date and AGP qualifiers will be considered. Prizes are automatically forfeited if orders are not paid on due date or if recruit fails to qualify for the AGP.”

The Supreme Court interpreted the phrase “only entries corresponding to sales paid on due date and AGP qualifiers will be considered” to mean that sales coupons could be exchanged for raffle tickets even if the corresponding sales were not fully paid. However, the entries would only be considered valid if the sales were paid by the time of the draw. The Court clarified that the forfeiture rule, as stated in the second part of Rule 21 – “Prizes are automatically forfeited if orders are not paid on due date or x x x” – applies only to entries with sales that were in default at the time of the raffle draw. According to the Court, the forfeiture clause does not apply to coupons covering sales that were fully paid, as was the case with Josephine.

The Supreme Court underscored the importance of language in determining the parties’ intentions. Citing established jurisprudence, the Court noted that when the language of a contract or agreement is unambiguous, its literal meaning controls in ascertaining the intention of the parties, as illustrated in the case of *Cachola, Sr. vs. Court of Appeals, 208 SCRA 496*. Applying this principle, the Court agreed with the Court of Appeals’ rationalization. The Court of Appeals emphasized that if Mondragon intended to disqualify all direct-sellers with overdue accounts on the day of the raffle draw, regardless of whether those accounts were related to the winning entry, they should have explicitly stated so in the Rules and Regulations. Their failure to do so indicated that they did not have such an intention. Furthermore, the appellate court questioned why Josephine was issued an entry form if she was disqualified. The Court stated that by allowing Josephine’s entry to participate in the raffle, Mondragon was estopped from claiming that she was disqualified. According to the Court, the trial court’s interpretation would render the sentence in Rule 21 regarding prize forfeiture a mere surplusage.

The petitioner, Mondragon, argued that Josephine, as a fashion consultant, was disqualified because she had an unpaid account for more than thirty (30) days, which, according to their rules, meant she ceased to be a fashion consultant. The appellate court correctly ruled that Mondragon should be barred from denying Josephine’s qualification after issuing her an entry form. The Court highlighted that disqualifying her after she had won the top prize would be grossly unfair. The Court also noted that her alleged unpaid accounts were different from the sales invoices she used to secure the winning entry. Mondragon also argued that Josephine’s sister, Virginia Blanco Villadelgado, was a direct distributor and thus disqualified from joining the raffle. However, both the trial court and the appellate court found no evidence to support this claim. The Supreme Court deferred to these factual findings, stating that it would be difficult to overturn the conclusions made by the lower courts.

What was the key issue in this case?	The key issue was whether Mondragon could disqualify Josephine Blanco from receiving her raffle prize due to unrelated overdue accounts, even though her winning entry was based on fully paid sales invoices.
What did Rule 21 of the raffle rules state?	Rule 21 stated that only entries corresponding to sales paid on due date would be considered, and prizes would be forfeited if orders were not paid on due date.
How did the Supreme Court interpret Rule 21?	The Supreme Court interpreted Rule 21 to mean that the forfeiture clause only applies to entries where the corresponding sales were in default at the time of the raffle draw, not to fully paid sales.
Why did the Court of Appeals reverse the trial court’s decision?	The Court of Appeals reversed the trial court’s decision because it found no explicit or implied rule allowing disqualification based on unrelated overdue accounts when the winning entry was fully paid.
What was Mondragon’s argument for disqualifying Josephine?	Mondragon argued that Josephine had overdue accounts and that her sister, a direct distributor, was disqualified, and Josephine used her sales.
How did the court address Mondragon’s claim about Josephine’s sister?	The court found no evidence to support the claim that Josephine’s sister was a direct distributor or that Josephine used her sales invoices, deferring to the factual findings of the lower courts.
What principle did the court emphasize regarding contract interpretation?	The court emphasized that when the language of a contract is unambiguous, its literal meaning controls in ascertaining the intention of the parties.
What was the significance of Mondragon issuing an entry form to Josephine?	The court noted that by issuing an entry form, Mondragon was estopped from claiming that Josephine was disqualified, as it implied she met all qualifications.
What was the final decision of the Supreme Court?	The Supreme Court denied Mondragon’s petition, affirming the Court of Appeals’ decision that Josephine was entitled to the raffle prize.

In conclusion, the Supreme Court’s decision in Mondragon International Philippines, Inc. v. Josephine Blanco reinforces the importance of clear and unambiguous rules in promotional raffles. It protects the rights of participants who comply with the specific requirements of a promotion, ensuring they are not unfairly disqualified based on unrelated issues. The ruling serves as a reminder to companies to draft their promotional rules carefully and to honor their commitments to participants who meet those rules.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Mondragon International Philippines, Inc. v. Josephine Blanco, G.R. No. 139289, April 17, 2001