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SECOND DIVISION

MANILA ELECTRIC COMPANY, G.R. No. 195145

Petitioner,
Present:

CARPIO, J., Chairperson,

BRION,
DEL CASTILLO,
- versus - MENDOZA, and
LEONEN,JJ.

Promulgated:

SPOUSES SULPICIO and PATRICIA

RAMOS,
Respondents.
v-
x----------------------------------------------------------------------------------------x

DECISION

BRION,J.:

We resolve the petition for review on certiorari 1 assailing the July 30,
2010 decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 87843
entitled "Spouses Sulpicio and Patricia Ramos v. Manila Electric
Company," that affirmed the Regional Trial Couri' s (RTC) August 22, 2006
decision3 in Civil Case No. 99-95975.

The August 22, 2006 RTC decision ordered the Manila Electric
Company (MERALCO) to restore the electric power connection of Spouses
Sulpicio and Patricia Ramos (respondents) and awarded them
P2,000,000.00, with legal interest, in total damages.

Petition for Review on Certiorari, rol/o, pp. 8-29.

Penned by Associate Justice Mario V. Lopez and concurred in by Associate Justices Magdangal
M. De Leon and Manuel M. Barrios, id. at 36-50.
Penned by Presiding Judge Placido C. Marquez, id at 123-144.

~
Decision 2 G.R. No. 195145

The Factual Antecedents

MERALCO is a private corporation engaged in the business of

selling and distributing electricity to its customers in Metro Manila and other
franchise areas. The respondents are registered customers of MERALCO
under Service Identification Number (SIN) 409076401.

MERALCO entered into a contract of service with the respondents

agreeing to supply the latter with electric power in their residence at 2760-
B Molave St., Manuguit, Tondo, Manila. To measure the respondents
electric consumption, it installed the electric meter with serial number
330ZN43953 outside the front wall of the property occupied by Patricias
brother, Isidoro Sales, and his wife, Nieves Sales (Nieves), located beside the
respondents house.

On November 5, 1999, MERALCOs service inspector inspected the

respondents electrical facilities and found an outside connection attached to
their electric meter. The service inspector traced the connection, an illegal
one, to the residence and appliances of Nieves. Nieves was the only one
present during the inspection and she was the one who signed the Metering
Facilities Inspection Report.

Due to the discovery of the illegal connection, the service inspector

disconnected the respondents electric services on the same day. The
inspection and disconnection were done without the knowledge of the
respondents as they were not at home and their house was closed at the
time.

The respondents denied that they had been using an illegal electrical
connection and they requested MERALCO to immediately reconnect
their electric services. Despite the respondents request, MERALCO
instead demanded from them the payment of P179,231.70 as differential
billing.

On December 20, 1999, the respondents filed a complaint for

breach of contract with preliminary mandatory injunction and damages
against MERALCO before the RTC, Branch 40, City of Manila. They
prayed for the immediate reconnection of their electric service and the award
of actual, moral, and exemplary damages, attorneys fees, and litigation
expenses.

In a decision dated August 22, 2006, the RTC ordered MERALCO to

reconnect the respondents electric service and awarded damages as follows:

WHEREFORE, Judgment is rendered directing defendant

MERALCO to permanently reconnect immediately the plaintiffs electric
services, and for said defendant to pay the following:

1. P100,000.00 as actual or compensatory damages;

2. P1,500,000.00 as moral damages;
Decision 3 G.R. No. 195145

3. P300,000.00 as exemplary damages;

4. P100,000.00 as attorneys fees; and,
5. Costs of suit;

with legal interest on the total damages of P2,000,000.00 from the date of
this Judgment until fully paid.

SO ORDERED.4

MERALCO appealed the RTCs decision to the CA.

In its assailed July 30, 2010 decision,5 the CA denied the appeal for
lack of merit and affirmed the RTCs order of reconnection and award for
payment of damages. The appellate court held that MERALCO failed to
comply not only with its own contract of service, but also with the
requirements under Sections 4 and 6 of Republic Act No. 7832, or the Anti-
Electricity and Electric Transmission Lines/Materials Pilferage Act of 1994
(R.A. 7832), when it resorted to the immediate disconnection of the
respondents electric service without due notice. It also ruled that the
respondents were not liable for the differential billing as it had not been
established that they knew or consented to the illegal connection or even
benefited from it.

MERALCO moved for the reconsideration of the decision, but the CA

denied its motion in a resolution6 dated January 3, 2011. The present
petition for review on certiorari7 was filed with this Court on March 4,
2011, as a consequence.

The Petition

MERALCO argues that under R.A. 7832, it had the right and
authority to immediately disconnect the electric service of the respondents
after they were caught in flagrante delicto using a tampered electrical
installation.

MERALCO also claims that by virtue of their contract of service, the

respondents are liable to pay the differential billing regardless of whether the
latter benefited from the illegal electric service or not. It adds that this is true
even if the respondents did not personally tamper with the electrical
facilities.

Finally, MERALCO contends that there is no basis for the award of

damages as the disconnection of the respondents electric service was done
in good faith and in the lawful exercise of its rights as a public utility
company.

4
Id. at 144.
5
Supra note 2.
6
Rollo, pp. 63-66.
7
Supra note 1.
Decision 4 G.R. No. 195145

The Respondents Comment

In their comment8 of June 29, 2011, the respondents pray for the
denial of the present petition for lack of merit. They argue that the discovery
of an outside connection attached to their electric meter does not give
MERALCO the right to automatically disconnect their electric service as the
law provides certain mandatory requirements that should be observed before
a disconnection could be effected. They claim that MERALCO failed to
comply with these statutory requirements.

Also, the respondents contend that MERALCO breached its

contractual obligations when its service inspector immediately disconnected
their electric service without notice. They claim that this breach of contract,
coupled with MERALCOs failure to observe the requirements under
R.A. 7832, entitled them to damages which were sufficiently established
with evidence and were rightfully awarded by the RTC and affirmed by the
CA.

Lastly, the respondents argue that they are not liable to MERALCO
for the differential billing as they were not the ones who illegally consumed
the unbilled electricity through the illegal connection.

The Courts Ruling

We DENY the petition for review on certiorari as we find no

reversible error committed by the CA in issuing its assailed decision.

The core issue in this case is whether MERALCO had the right
to immediately disconnect the electric service of the respondents upon
discovery of an outside connection attached to their electric meter.

The distribution of electricity is a basic necessity that is imbued with

public interest. Its provider is considered as a public utility subject to the
strict regulation by the State in the exercise of its police power. Failure to
comply with these regulations gives rise to the presumption of bad faith
or abuse of right.9

Nevertheless, the State also recognizes that electricity is the property

of the service provider. R.A. 7832 was enacted by Congress to afford
electric service providers multiple remedies to protect themselves from
electricity pilferage. These remedies include the immediate disconnection
of the electric service of an erring customer, criminal prosecution, and the
imposition of surcharges.10 However, the service provider must avail of any
or all of these remedies within legal bounds, in strict compliance with the
requirements and/or conditions set forth by law.
8
Rollo, pp. 223-240.
9
Samar II Electric Cooperative, Inc. v. Quijano, G.R. No. 144474, April 27, 2007, 522 SCRA 364,
375, 376.
10
Id. at 376-377.
Decision 5 G.R. No. 195145

Section 4(a) of R.A. 7832 provides that the discovery of an outside

connection attached on the electric meter shall constitute as prima facie
evidence of illegal use of electricity by the person who benefits from the
illegal use if the discovery is personally witnessed and attested to by an
officer of the law or a duly authorized representative of the Energy
Regulatory Board (ERB). With the presence of such prima facie evidence,
the electric service provider is within its rights to immediately disconnect the
electric service of the consumer after due notice.

This Court has repeatedly stressed the significance of the presence of

an authorized government representative during an inspection of electric
facilities, viz.:

The presence of government agents who may authorize

immediate disconnections go into the essence of due process. Indeed,
we cannot allow respondent to act virtually as prosecutor and judge in
imposing the penalty of disconnection due to alleged meter tampering.
That would not sit well in a democratic country. After all, Meralco is a
monopoly that derives its power from the government. Clothing it with
unilateral authority to disconnect would be equivalent to giving it a license
to tyrannize its hapless customers.11 (emphasis supplied)

Additionally, Section 6 of R.A. 7832 affords a private electric utility

the right and authority to immediately disconnect the electric service of a
consumer who has been caught in flagrante delicto doing any of the acts
covered by Section 4(a). However, the law clearly states that the
disconnection may only be done after serving a written notice or warning to
the consumer.

To reiterate, R.A. 7832 has two requisites for an electric service

provider to be authorized to disconnect its customers electric service on the
basis of alleged electricity pilferage: first, an officer of the law or an
authorized ERB representative must be present during the inspection of the
electric facilities; and second, even if there is prima facie evidence of illegal
use of electricity and the customer is caught in flagrante delicto committing
the acts under Section 4(a), the customer must still be given due notice prior
to the disconnection.12

In its defense, MERALCO insists that it observed due process when

its service inspector disconnected the respondents electric service, viz.:

Under the present situation, there is no doubt that due process, as required
by R.A. 7832, was observed [when] the petitioner discontinued the electric
supply of respondent: there was an inspection conducted in the premises
of respondent with the consent of their authorized representative; it was
discovered during the said inspection that private respondents were using
outside connection; the nature of the violation was explained to private
respondents representative; the inspection and discovery was personally

11
Quisumbing v. Manila Electric Company, G.R. No. 142943, April 3, 2002, 380 SCRA 195, 208.
12
Manila Electric Company v. Navarro-Domingo, G.R. No. 161893, June 27, 2006, 493 SCRA 363,
371.
Decision 6 G.R. No. 195145

witnessed and attested to by private respondents representative; private

respondents failed and refused to pay the differential billing
amounting to P179,231.70 before their electric service was
disconnected.13 (emphasis supplied)

After a thorough examination of the records of the case, we find no

proof that MERALCO complied with these two requirements under R.A.
7832. MERALCO never even alleged in its submissions that an ERB
representative or an officer of the law was present during the inspection of
the respondents electric meter. Also, it did not claim that the respondents
were ever notified beforehand of the impending disconnection of their
electric service.

In view of MERALCOs failure to comply with the strict

requirements under Sections 4 and 6 of R. A. No. 7832, we
hold that MERALCO had no authority to immediately disconnect
the respondents electric service. As a result, the immediate
disconnection of the respondents electric service is presumed to be in bad
faith.

We point out, too, that MERALCOs allegation that the respondents

refused to pay the differential billing before the disconnection of their
electric service is an obvious falsity. MERALCO never disputed the fact that
the respondents electric service was disconnected on November 5, 1999
the same day as when the electric meter was inspected. Also, MERALCOs
demand letter for payment of the differential billing is dated December 4,
1999. Thus, there is no truth to the statement that the respondents first failed
to pay the differential billing and only then was their electric service
disconnected.

The disconnection of respondents

electric service is not supported by
MERALCOs own Terms and
Conditions of Service.

In addition, we observe that MERALCO also failed to follow its own

procedure for the discontinuance of service under its contract of service with
the respondents. We quote in this regard the relevant terms of service:

DISCONTINUANCE OF SERVICE:

The Company reserves the right to discontinue service in case the

customer is in arrears in the payment of bills in those cases where the
meter stopped or failed to register the correct amount of energy consumed,
or failure to comply with any of these terms and conditions or in case of or
to prevent fraud upon the Company. Before disconnection is made in
case of or to prevent fraud, the Company may adjust the bill of said
customer accordingly and if the adjusted bill is not paid, the
Company may disconnect the same. In case of disconnection, the

13
See Petition for Review on Certiorari, rollo, p. 22.
Decision 7 G.R. No. 195145

provisions of Revised Order No. 1 of the former Public Service

Commission (now ERC) shall be observed. Any such suspension of
service shall not terminate the contract between the Company and the
customer.14 (emphasis supplied)

There is nothing in its contract of service that gives MERALCO the

authority to immediately disconnect a customers electric connection.
MERALCOs contractual right to disconnect electric service arises only after
the customer has been notified of his adjusted bill and has been afforded the
opportunity to pay the differential billing.

In this case, the disconnection of the respondents electric service

happened on November 5, 1999, while the demand for the payment of
differential billing was made through a letter dated December 4, 1999. Thus,
we hold that MERALCO breached its contract of service with the
respondents as it disconnected the latters electric service before they
were ever notified of the differential billing.

Differential billing

Section 6 of R.A. 7832 defines differential billing as the amount to

be charged to the person concerned for the unbilled electricity illegally
consumed by him. Clearly, the law provides that the person who actually
consumed the electricity illegally shall be liable for the differential billing. It
does not ipso facto make liable for payment of the differential billing the
registered customer whose electrical facilities had been tampered with and
utilized for the illegal use of electricity.

In this case, as the prima facie presumption afforded by Section 4 of

R.A. 7832 does not apply, it falls upon MERALCO to first prove that the
respondents had actually installed the outside connection attached on their
electric meter and that they had benefited from the electricity consumed
through the outside connection before it could hold them liable for the
differential billing.

The records show that MERALCO presented no proof that it ever

caught the respondents, or anyone acting in the respondents behalf, in the
act of tampering with their electric meter. As the CA correctly held, the
respondents could not have been caught in flagrante delicto committing the
tampering since they were not present during the inspection of the electric
meter, nor were any of their representatives at hand.15 Moreover, the
presence of an outside connection attached to the electric meter operates
only as a prima facie evidence of electricity pilferage under R.A. 7832; it is
not enough to declare the respondents in flagrante delicto tampering with the
electric meter.16 In fact, MERALCO itself admitted in its submissions that

14
See Petition for Review on Certiorari, rollo, p. 16.
15
Go v. Leyte II Electric Cooperative, Inc., G.R. No. 176909, February 18, 2008, 546 SCRA 187,
195.
16
Manila Electric Company v. Chua, G.R. No. 160422, July 5, 2010, 623 SCRA 81, 98.
Decision 8 G.R. No. 195145

Nieves was the illegal user of the outside connection attached to the
respondents electric meter.17

On this point, MERALCO argues that Nieves was an authorized

representative of the respondents. However, the records are bereft of any
sufficient proof to support this claim. The fact that she is an occupant of the
premises where the electric meter was installed does not make her the
respondents representative considering that the unit occupied by the
respondents is separate and distinct from the one occupied by Nieves and her
family. Similarly, the fact that Nieves was able to show the respondents
latest electric bill does not make her the latters authorized representative.

While this Court recognizes the right of MERALCO as a public utility

to collect system losses, the courts cannot and will not blindly grant a public
utilitys claim for differential billing if there is no sufficient evidence to
prove entitlement.18 As MERALCO failed to sufficiently prove its claim
for payment of the differential billing, we rule that the respondents
cannot be held liable for the billed amount.

On the issue of damages

With MERALCO in bad faith for its failure to follow the strict
requirements under R.A. 7832 in the disconnection of the respondents
electric service, we agree with the CA that the award of damages is in order.
However, we deem it proper to modify the award in accordance with
prevailing jurisprudence.

First, actual damages pertain to such injuries or losses that are

actually sustained and are susceptible of measurement. They are intended
not to enrich the injured party but to put him in the position in which he was
in before he was injured.19

In Viron Transportation Co., Inc. v. Delos Santos,20 we explained that

in order to recover actual damages, there must be pleading and proof of the
damages suffered, viz.:

Actual damages, to be recoverable, must not only be capable of proof, but

must actually be proved with a reasonable degree of certainty. Courts
cannot simply rely on speculation, conjecture or guesswork in determining
the fact and amount of damages. To justify an award of actual damages,
there must be competent proof of the actual amount of loss, credence
can be given only to claims which are duly supported by receipts.
(emphasis supplied)

17
See MERALCOS Answer with Compulsory Counterclaim, rollo, p. 92.
18
Manila Electric Company v. Wilcon Builders Supply, Inc., G.R. No. 171534, June 30, 2008, 556
SCRA 742, 756, 757.
19
Oceaneering Contractors (PHILS), Inc. v. Barretto, G.R. No. 184215, February 9, 2011, 642
SCRA 596, 605, 606.
20
G.R. No. 138296, November 22, 2000, 345 SCRA 509, 519.
Decision 9 G.R. No. 195145

In this case, Patricia stated that her familys food expenses doubled
after MERALCO disconnected their electric services as they could no longer
cook at home. We note, however, that there is no sufficient proof presented
to show the actual food expenses that the respondents incurred.
Nevertheless, Patricia also testified that they were forced to move to a new
residence after living without electricity for eight (8) months at their home in
Tondo, Manila. They proved this allegation through the presentation of a
contract of lease and receipts for payment of monthly rentals for 42 months
amounting to P210,000.00. Thus, we find it proper to increase the award
of actual damages from P100,000.00 to P210,000.00.

Second, moral damages are designed to compensate and alleviate the

physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar
harm unjustly caused to a person.21 They may be properly awarded to
persons who have been unjustly deprived of property without due process of
law.22

In Regala v. Carin,23 we discussed the requisites for the award of

moral damages, viz:

In fine, an award of moral damages calls for the presentation of 1)

evidence of besmirched reputation or physical, mental or psychological
suffering sustained by the claimant; 2) a culpable act or omission factually
established; 3) proof that the wrongful act or omission of the defendant is
the proximate cause of the damages sustained by the claimant; and 4) the
proof that the act is predicated on any of the instances expressed or
envisioned by Article 2219 and Article 2220 of the Civil Code.

Applied to this case, after due consideration of the manner of

disconnection of the respondents electric service and the length of time that
the respondents had to endure without electricity, we find the award of moral
damages proper. Aside from having to spend eight (8) months in the dark at
their own residence, Patricia testified that they suffered extreme social
humiliation, embarrassment, and serious anxiety as they were subjected to
gossip in their neighborhood of stealing electricity through the use of an
illegal connection. The damage to the respondents reputation and social
standing was aggravated by their decision to move to a new residence
following the absolute refusal of MERALCO to restore their electric
services.

However, we find the award of P1,500,000.00 in moral damages to

be excessive. Moral damages are not intended to enrich the complainant as
a penalty for the defendant. It is awarded as a means to ease the moral
suffering the complainant suffered due to the defendants culpable action.24
While prevailing jurisprudence deems it appropriate to award P100,000.00

21
Regala v. Carin, G.R. No. 188715, April 6, 2011, 647 SCRA 419, 426.
22
CIVIL CODE, Article 32.
23
Supra note 21, at 427-428.
24
Manila Electric Company v. Jose, G.R. No. 152769, February 14, 2007, 515 SCRA 669, 680.
Decision 10 G.R. No. 195145

in moral damages in cases where MERALCO wrongfully disconnected

electric service,25 we hold that such amount is not commensurate with the
injury suffered by the respondents. Thus, in view of the specific
circumstances present in this case, we reduce the award of moral damages
from P1,500,000.00 to P300,000.00.

Third, exemplary or corrective damages are imposed by way of

example or correction for the public good, in addition to moral, temperate,
liquidated, or compensatory damages. The award of exemplary damages is
allowed by law as a warning to the public and as a deterrent against the
repetition of socially deleterious actions.26

In numerous cases,27 this Court found that MERALCO failed to

comply with the requirements under R.A. 7832 before a disconnection of a
customers electric service could be effected. In these cases, we aptly
awarded exemplary damages against MERALCO to serve as a warning
against repeating the same actions.

In this case, MERALCO totally failed to comply with the two

requirements under R.A. 7832 before disconnecting the respondents electric
service. While MERALCO insists that R.A. 7832 gives it the right to
disconnect the respondents electric service, nothing in the records indicates
that it attempted to comply with the statutory requirements before effecting
the disconnection.

Under these circumstances, we find that the previous awards against

MERALCO have not served their purpose as a means to prevent the
repetition of the same damaging actions that it has committed in the past.
Therefore, we increase the award of exemplary damages from
P300,000.00 to P500,000.00 in the hope that this will persuade MERALCO
to be more prudent and responsible in its observance of the requirements
under the law in disconnecting a customers electrical supply.

Lastly, in view of the award of exemplary damages, we find the award

of attorney's fees proper, in accordance with Article 2208(1) of the Civil
Code. We find the CAs award of attorneys fees in the amount of
P100,000.00 just and reasonable under the circumstances.

WHEREFORE, the petition is DENIED. The decision dated

July 30, 2010 and resolution dated January 3, 2011 of the Court of
Appeals in CA-G.R. CV No. 87843 are AFFIRMED with the
following modifications: MERALCO is ordered to pay respondents
Spouses Sulpicio and Patricia Ramos P210,000.00 as actual

25
Supra note 17.
26
Tan v. OMC Carriers, Inc., G.R. No. 190521, January 12, 2011, 639 SCRA 471, 485.
27
Quisumbing v. Manila Electric Company, supra note 11; Manila Electric Company v. Santiago,
G.R. No. 170482, September 4, 2009, 598 SCRA 315; Manila Electric Company v. Castillo, G.R.
No. 182976, January 14, 2013, 688 SCRA 455; Manila Electric Company v. Chua, supra note 16;
Manila Electric Company v. Hsing Nan Tannery, G.R. No. 178913, February 12, 2009, 578 SCRA
640; Manila Electric Company v. Navarro-Domingo, supra note 12.
 Decision 11 G.R. No. 195145

damages, P300,000.00 as moral damages, PS00,000.00 as exemplary

damages, and Pl00,000.00 as attorneys fees. Costs against Manila Electric
Company.

SO ORDERED.

UAIUfOMflb_
ARTURO D. BRION
Associate Justice

WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
Chairperson

MARIANO C. DEL CASTILLO NDOZA

Associate Justice

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court's Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson
Decision 12 G.R. No. 195145

CERTIFICATION

Pursuant to Seetion 13, Article VIII of the Constitution and the

Division Chairperson's Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was
assigned to the writer dfthe opinion of the Court's Division.
I

MARIA LOURDES P.A. SERENO

Chief Justice