G.R. No.

131723             December 13, 2007

MANILA ELECTRIC COMPANY, petitioner,

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1 of the Court of Appeals (CA) dated June 18, 1997 and its Resolution 2 dated December 3, 1997 in
CA-G.R. CV No. 40282 denying the appeal filed by petitioner Manila Electric Company.

The facts of the case, as culled from the records, are as follows:

Respondent T.E.A.M. Electronics Corporation (TEC) was formerly known as NS Electronics (Philippines), Inc.
before 1982 and National Semi-Conductors (Phils.) before 1988. TEC is wholly owned by respondent
Technology Electronics Assembly and Management Pacific Corporation (TPC). On the other hand, petitioner
Manila Electric Company (Meralco) is a utility company supplying electricity in the Metro Manila area.

Petitioner and NS Electronics (Philippines), Inc., the predecessor-in-interest of respondent TEC, were parties
to two separate contracts denominated as Agreements for the Sale of Electric Energy under the following
account numbers: 09341-1322-163 and 09341-1812-13.4 Under the aforesaid agreements, petitioner undertook
to supply TEC's building known as Dyna Craft International Manila (DCIM) located at Electronics Avenue, Food
Terminal Complex, Taguig, Metro Manila, with electric power. Another contract was entered into for the supply
of electric power to TEC's NS Building under Account No. 19389-0900-10.

In September 1986, TEC, under its former name National Semi-Conductors (Phils.) entered into a Contract of
Lease5 with respondent Ultra Electronics Industries, Inc. (Ultra) for the use of the former's DCIM building for a
period of five years or until September 1991. Ultra was, however, ejected from the premises on February 12,
1988 by virtue of a court order, for repeated violation of the terms and conditions of the lease contract.

On September 28, 1987, a team of petitioner's inspectors conducted a surprise inspection of the electric
meters installed at the DCIM building, witnessed by Ultra's 6 representative, Mr. Willie Abangan. The two meters
covered by account numbers 09341-1322-16 and 09341-1812-13, were found to be allegedly tampered with
and did not register the actual power consumption in the building. The results of the inspection were reflected
in the Service Inspection Reports7 prepared by the team.

In a letter dated November 25, 1987, petitioner informed TEC of the results of the inspection and demanded
from the latter the payment of P7,040,401.01 representing its unregistered consumption from February 10,
1986 until September 28, 1987, as a result of the alleged tampering of the meters. 8 TEC received the letters on
January 7, 1988. Since Ultra was in possession of the subject building during the covered period, TEC's
Managing Director, Mr. Bobby Tan, referred the demand letter to Ultra9 which, in turn, informed TEC that its
Executive Vice-President had met with petitioner's representative. Ultra further intimated that assuming that
there was tampering of the meters, petitioner's assessment was excessive. 10 For failure of TEC to pay the
differential billing, petitioner disconnected the electricity supply to the DCIM building on April 29, 1988.

TEC demanded from petitioner the reconnection of electrical service, claiming that it had nothing to do with the
alleged tampering but the latter refused to heed the demand. Hence, TEC filed a complaint on May 27, 1988
before the Energy Regulatory Board (ERB) praying that electric power be restored to the DCIM building. 11 The
ERB immediately ordered the reconnection of the service but petitioner complied with it only on October 12,
1988 after TEC paid P1,000,000.00, under protest. The complaint before the ERB was later withdrawn as the
parties deemed it best to have the issues threshed out in the regular courts. Prior to the reconnection, or on
June 7, 1988, petitioner conducted a scheduled inspection of the questioned meters and found them to have
been tampered anew.12

Meanwhile, on April 25, 1988, petitioner conducted another inspection, this time, in TEC's NS Building. The
inspection allegedly revealed that the electric meters were not registering the correct power consumption.
Petitioner, thus, sent a letter dated June 18, 1988 demanding payment of P280,813.72 representing the
differential billing.13 TEC denied petitioner's allegations and claim in a letter dated June 29, 1988. 14 Petitioner,
thus, sent TEC another letter demanding payment of the aforesaid amount, with a warning that the electric
service would be disconnected in case of continued refusal to pay the differential billing. 15 To avert the
impending disconnection of electrical service, TEC paid the above amount, under protest.16
On January 13, 1989, TEC and TPC filed a complaint for damages against petitioner and Ultra17 before the
Regional Trial Court (RTC) of Pasig. The case was raffled to Branch 162 and was docketed as Civil Case No.
56851.18 Upon the filing of the parties' answer to the complaint, pre-trial was scheduled.

At the pre-trial, the parties agreed to limit the issues, as follows:

1. Whether or not the defendant Meralco is liable for the plaintiffs' disconnection of electric service at
DCIM Building.

2. Whether or not the plaintiff is liable for (sic) the defendant for the differential billings in the amount
of P7,040,401.01.

3. Whether or not the plaintiff is liable to defendant for exemplary damages.19

For failure of the parties to reach an amicable settlement, trial on the merits ensued. On June 17, 1992, the
trial court rendered a Decision in favor of respondents TEC and TPC, and against respondent Ultra and
petitioner. The pertinent portion of the decision reads:

WHEREFORE, judgment is hereby rendered in this case in favor of the plaintiffs and against the
defendants as follows:

(1) Ordering both defendants Meralco and ULTRA Electronics Instruments, Inc. to jointly and
severally reimburse plaintiff TEC actual damages in the amount of ONE MILLION PESOS with
legal rate of interest from the date of the filing of this case on January 19, 1989 until the said
amount shall have been fully paid;

(2) Ordering defendant Meralco to pay to plaintiff TEC the amount of P280,813.72 as actual
damages with legal rate of interest also from January 19, 1989;

(3) Ordering defendant Meralco to pay to plaintiff TPC the amount of P150,000.00 as actual
damages with interest at legal rate from January 19, 1989;

(4) Condemning defendant Meralco to pay both plaintiffs moral damages in the amount
pf P500,000.00;

(5) Condemning defendant Meralco to pay both plaintiffs corrective and/or exemplary damages
in the amount of P200,000.00;

(6) Ordering defendant Meralco to pay attorney's fees in the amount of P200,000.00

Costs against defendant Meralco.

SO ORDERED.20

The trial court found the evidence of petitioner insufficient to prove that TEC was guilty of tampering the meter
installations. The deformed condition of the meter seal and the existence of an opening in the wire duct leading
to the transformer vault did not, in themselves, prove the alleged tampering, especially since access to the
transformer was given only to petitioner's employees.21 The sudden drop in TEC's (or Ultra's) electric
consumption did not, per se, show meter tampering. The delay in the sending of notice of the results of the
inspection was likewise viewed by the court as evidence of inefficiency and arbitrariness on the part of
petitioner. More importantly, petitioner's act of disconnecting the DCIM building's electric supply constituted
bad faith and thus makes it liable for damages. 22 The court further denied petitioner's claim of differential billing
primarily on the ground of equitable negligence. 23 Considering that TEC and TPC paid P1,000,000.00 to avert
the disconnection of electric power; and because Ultra manifested to settle the claims of petitioner, the court
imposed solidary liability on both Ultra and petitioner for the payment of the P1,000,000.00.

Ultra and petitioner appealed to the CA which affirmed the RTC decision, with a modification of the amount of
actual damages and interest thereon. The dispositive portion of the CA decision dated June 18, 1997, states:

WHEREFORE, this Court renders judgment affirming in toto the Decision rendered by the trial court
with the slight modification that the interest at legal rate shall be computed from January 13, 1989 and
that Meralco shall pay plaintiff T.E.A.M. Electronics Corporation and Technology Electronics Assembly
and Management Pacific Corporation the sum of P150,000.00 per month for five (5) months for actual
damages incurred when it was compelled to lease a generator set with interest at the legal rate from
the above-stated date.
 SO ORDERED.24

The appellate court agreed with the RTC's conclusion. In addition, it considered petitioner negligent for failing
to discover the alleged defects in the electric meters; in belatedly notifying TEC and TPC of the results of the
inspection; and in disconnecting the electric power without prior notice.

Petitioner now comes before this Court in this petition for review on certiorari contending that:

The Court of Appeals committed grievous errors and decided matters of substance contrary to law and
the rulings of this Honorable Court:

1. In finding that the issue in the case is whether there was deliberate tampering of the metering
installations at the building owned by TEC.

2. In not finding that the issue is: whether or not, based on the tampered meters, whether or not
petitioner is entitled to differential billing, and if so, how much.

3. In declaring that petitioner ME RALCO had the burden of proof to show by clear and convincing
evidence that with respect to the tampered meters that TEC and/or TPC authored their tampering.

4. In finding that petitioner Meralco should not have held TEC and/or TPC responsible for the acts of
Ultra.

5. In finding that TEC should not be held liable for the tampering of this electric meter in its DCIM
Building.

6. In finding that there was no notice of disconnection.

7. In finding that petitioner MERALCO was negligent in informing TEC of the alleged tampering.

8. In making the finding that it is difficult to believe that when petitioner MERALCO inspected on June 7,
1988 the meter installations, they were found to be tampered.

9. In declaring that petitioner MERALCO estopped from claiming any tampering of the meters.

10. In finding that "the method employed by MERALCO to as certain (sic) the 'correct' amount of
electricity consumed is questionable";

11. In declaring that MERALCO all throughout its dealings with TEC took on an "attitude" which is
oppressive, wanton and reckless.

12. In declaring that MERALCO acted arbitrarily in inspecting TEC's DCIM building and the NS building.

13. In declaring that respondents TEC and TPC are entitled to the damages which it awarded.

14. In not declaring that petitioner is entitled to the differential bill.

15. In not declaring that respondents are liable to petitioner for exemplary damages, attorney's fee and
expenses for litigation.25

The petition must fail.

The issues for resolution can be summarized as follows: 1) whether or not TEC tampered with the electric
meters installed at its DCIM and NS buildings; 2) If so, whether or not it is liable for the differential billing as
computed by petitioner; and 3) whether or not petitioner was justified in disconnecting the electric power supply
in TEC's DCIM building.

Petitioner insists that the tampering of the electric meters installed at the DCIM and NS buildings owned by
respondent TEC has been established by overwhelming evidence, as specifically shown by the shorting
devices found during the inspection. Thus, says petitioner, tampering of the meter is no longer an issue.

It is obvious that petitioner wants this Court to revisit the factual findings of the lower courts. Well-established is
the doctrine that under Rule 45 of the Rules of Court, only questions of law, not of fact, may be raised before
the Court. We would like to stress that this Court is not a trier of facts and may not re-examine and weigh anew
the respective evidence of the parties. Factual findings of the trial court, especially those affirmed by the Court
of Appeals, are binding on this Court.26

Looking at the record, we note that petitioner claims to have discovered three incidences of meter-tampering;
twice in the DCIM building on September 28, 1987 and June 7, 1988; and once in the NS building on April 24,
1988.

The first instance was supposedly discovered on September 28, 1987. The inspector allegedly found the
presence of a short circuiting device and saw that the meter seal was deformed. In addition, petitioner, through
the Supervising Engineer of its Special Billing Analysis Department,27 claimed that there was a sudden and
unexplainable drop in TEC's electrical consumption starting February 10, 1986. On the basis of the foregoing,
petitioner concluded that the electric meters were tampered with.

However, contrary to petitioner's claim that there was a drastic and unexplainable drop in TEC's electric
consumption during the affected period, the Pattern of TEC's Electrical Consumption28 shows that the sudden
drop is not peculiar to the said period. Noteworthy is the observation of the RTC in this wise:

In fact, in Account No. 09341-1812-13 (heretofore referred as Account/Meter No. 2), as evidenced by
Exhibits "35" and "35-A," there was likewise a sudden drop of electrical consumption from the year
1984 which recorded an average 141,300 kwh/month to 1985 which recorded an average kwh/month at
87,600 or a difference-drop of 53,700 kwh/month; from 1985's 87,600 recorded consumption, the same
dropped to 18,600 kwh/month or a difference-drop of 69,000 kwh/month. Surely, a drop of 53,700 could
be equally categorized as a sudden drop amounting to 69,000 which, incidentally, the Meralco claimed
as "unexplainable. x x x.29

The witnesses for petitioner who testified on the alleged tampering of the electric meters, declared that
tampering is committed by consumers to prevent the meter from registering the correct amount of electric
consumption, and result in a reduced monthly electric bill, while continuing to enjoy the same power supply.
Only the registration of actual electric energy consumption, not the supply of electricity, is affected when a
meter is tampered with.30 The witnesses claimed that after the inspection, the tampered electric meters were
corrected, so that they would register the correct consumption of TEC. Logically, then, after the correction of
the allegedly tampered meters, the customer's registered consumption would go up.

In this case, the period claimed to have been affected by the tampered electric meters is from February 1986
until September 1987. Based on petitioner's Billing Record31 (for the DCIM building), TEC's monthly electric
consumption on Account No. 9341-1322-16 was between 4,500 and 27,000 kwh. 32 Account No. 9341-1812-13
showed a monthly consumption between 9,600 and 34,200 kwh. 33 It is interesting to note that, after correction
of the allegedly tampered meters, TEC's monthly electric consumption from October 1987 to February 1988
(the last month that Ultra occupied the DCIM building) was between 8,700 and 24,300 kwh in its first account,
and 16,200 to 46,800 kwh on the second account.

Even more revealing is the fact that TEC's meters registered 9,300 kwh and 19,200 kwh consumption on the
first and second accounts, respectively, a month prior to the inspection. On the first month after the meters
were corrected, TEC's electric consumption registered at 9,300 kwh and 22,200 kwh on the respective
accounts. These figures clearly show that there was no palpably drastic difference between the consumption
before and after the inspection, casting a cloud of doubt over petitioner's claim of meter-tampering. Indeed,
Ultra's explanation that the corporation was losing; thus, it had lesser consumption of electric power appear to
be the more plausible reason for the drop in electric consumption.

Petitioner likewise claimed that when the subject meters were again inspected on June 7, 1988, they were
found to have been tampered anew. The Court notes that prior to the inspection, TEC was informed about it;
and months before the inspection, there was an unsettled controversy between TEC and petitioner, brought
about by the disconnection of electric power and the non-payment of differential billing. We are more disposed
to accept the trial court's conclusion that it is hard to believe that a customer previously apprehended for
tampered meters and assessed P7 million would further jeopardize itself in the eyes of petitioner.34 If it is true
that there was evidence of tampering found on September 28, 1987 and again on June 7, 1988, the better view
would be that the defective meters were not actually corrected after the first inspection. If so, then Manila
Electric Company v. Macro Textile Mills Corporation35 would apply, where we said that we cannot sanction a
situation wherein the defects in the electric meter are allowed to continue indefinitely until suddenly, the public
utilities demand payment for the unrecorded electricity utilized when they could have remedied the situation
immediately. Petitioner's failure to do so may encourage neglect of public utilities to the detriment of the
consuming public. Corollarily, it must be underscored that petitioner has the imperative duty to make a
reasonable and proper inspection of its apparatus and equipment to ensure that they do not malfunction, and
the due diligence to discover and repair defects therein. Failure to perform such duties constitutes
negligence.36 By reason of said negligence, public utilities run the risk of forfeiting amounts originally due from
their customers.37
As to the alleged tampering of the electric meter in TEC's NS building, suffice it to state that the allegation was
not proven, considering that the meters therein were enclosed in a metal cabinet the metal seal of which was
unbroken, with petitioner having sole access to the said meters.38

In view of the negative finding on the alleged tampering of electric meters on TEC's DCIM and NS buildings,
petitioner's claim of differential billing was correctly denied by the trial and appellate courts. With greater
reason, therefore, could petitioner not exercise the right of immediate disconnection.

The law in force at the time material to this controversy was Presidential Decree (P.D.) No. 401 39 issued on
March 1, 1974.40 The decree penalized unauthorized installation of water, electrical or telephone connections
and such acts as the use of tampered electrical meters. It was issued in answer to the urgent need to put an
end to illegal activities that prejudice the economic well-being of both the companies concerned and the
consuming public.41 P.D. 401 granted the electric companies the right to conduct inspections of electric meters
and the criminal prosecution42 of erring consumers who were found to have tampered with their electric meters.
It did not expressly provide for more expedient remedies such as the charging of differential billing and
immediate disconnection against erring consumers. Thus, electric companies found a creative way of availing
themselves of such remedies by inserting into their service contracts (or agreements for the sale of electric
energy) a provision for differential billing with the option of disconnection upon non-payment by the erring
consumer. The Court has recognized the validity of such stipulations.43 However, recourse to differential billing
with disconnection was subject to the prior requirement of a 48-hour written notice of disconnection.44

Petitioner, in the instant case, resorted to the remedy of disconnection without prior notice. While it is true that
petitioner sent a demand letter to TEC for the payment of differential billing, it did not include any notice that
the electric supply would be disconnected. In fine, petitioner abused the remedies granted to it under P.D. 401
and Revised General Order No. 1 by outrightly depriving TEC of electrical services without first notifying it of
the impending disconnection. Accordingly, the CA did not err in affirming the RTC decision.

As to the damages awarded by the CA, we deem it proper to modify the same. Actual damages are
compensation for an injury that will put the injured party in the position where it was before the injury. They
pertain to such injuries or losses that are actually sustained and susceptible of measurement. Except as
provided by law or by stipulation, a party is entitled to adequate compensation only for such pecuniary loss as
is duly proven. Basic is the rule that to recover actual damages, not only must the amount of loss be capable of
proof; it must also be actually proven with a reasonable degree of certainty, premised upon competent proof or
the best evidence obtainable.45

Respondent TEC sufficiently established, and petitioner in fact admitted, that the former paid P1,000,000.00
and P280,813.72 under protest, the amounts representing a portion of the latter's claim of differential billing.
With the finding that no tampering was committed and, thus, no differential billing due, the aforesaid amounts
should be returned by petitioner, with interest, as ordered by the Court of Appeals and pursuant to the
guidelines set forth by the Court.46

However, despite the appellate court's conclusion that no tampering was committed, it held Ultra solidarily
liable with petitioner for P1,000,000.00, only because the former, as occupant of the building, promised to
settle the claims of the latter. This ruling is erroneous. Ultra's promise was conditioned upon the finding of
defect or tampering of the meters. It did not acknowledge any culpability and liability, and absent any tampered
meter, it is absurd to make the lawful occupant liable. It was petitioner who received the P1 million; thus, it
alone should be held liable for the return of the amount.

TEC also sufficiently established its claim for the reimbursement of the amount paid as rentals for the
generator set it was constrained to rent by reason of the illegal disconnection of electrical service. The official
receipts and purchase orders submitted by TEC as evidence sufficiently show that such rentals were indeed
made. However, the amount of P150,000.00 per month for five months, awarded by the CA, is excessive.
Instead, a total sum of P150,000.00, as found by the RTC, is proper.

As to the payment of exemplary damages and attorney's fees, we find no cogent reason to disturb the same.
Exemplary damages are imposed by way of example or correction for the public good in addition to moral,
temperate, liquidated, or compensatory damages.47 In this case, to serve as an example – that before a
disconnection of electrical supply can be effected by a public utility, the requisites of law must be complied with
– we affirm the award of P200,000.00 as exemplary damages. With the award of exemplary damages, the
award of attorney's fees is likewise proper, pursuant to Article 220848 of the Civil Code. It is obvious that TEC
needed the services of a lawyer to argue its cause through three levels of the judicial hierarchy. Thus, the
award of P200,000.00 is in order.49

We, however, deem it proper to delete the award of moral damages. TEC's claim was premised allegedly on
the damage to its goodwill and reputation.50 As a rule, a corporation is not entitled to moral damages because,
not being a natural person, it cannot experience physical suffering or sentiments like wounded feelings, serious
anxiety, mental anguish and moral shock. The only exception to this rule is when the corporation has a
reputation that is debased, resulting in its humiliation in the business realm. 51 But in such a case, it is
imperative for the claimant to present proof to justify the award. It is essential to prove the existence of the
factual basis of the damage and its causal relation to petitioner's acts. 52 In the present case, the records are
bereft of any evidence that the name or reputation of TEC/TPC has been debased as a result of petitioner's
acts. Besides, the trial court simply awarded moral damages in the dispositive portion of its decision without
stating the basis thereof.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 40282 dated
June 18, 1997 and its Resolution dated December 3, 1997 are AFFIRMED with the
following MODIFICATIONS: (1) the award of P150,000.00 per month for five months as reimbursement for the
rentals of the generator set is REDUCED to P150,000.00; and (2) the award of P500,000.00 as moral
damages is hereby DELETED.

SO ORDERED.