G.R. No. L-39019 - Manila Electric Co. vs. Court of Appeals

Petitioners: Manila Electric Company (MERALCO), a public utility corporation providing electric power in Metro Manila, and Pedro Yambao, a MERALCO bill collector.
Private Respondents: Isaac Chaves, Sr. and Juana O. Chaves (husband and wife), together with their children Isaac O. Chaves, Jr., Rosendo O. Chaves, and Juan O. Chaves. Isaac Sr., Isaac Jr., and Rosendo were members of the Philippine Bar, with Isaac Sr. and Isaac Jr. practicing law, and Rosendo a Legal Officer at the Agricultural Productivity Commission. Juana O. Chaves was a public school teacher.

Isaac Chaves became a MERALCO customer in 1953, depositing P5.00 as a security deposit with MERALCO which applied to subsequent contracts for electrical service across multiple residences, culminating at their residence at No. 2656 Mercedes Street, Singalong, Manila.
At the end of March 1965, Pedro Yambao visited the Chaves residence and presented two overdue electricity bills:

Juana O. Chaves informed Yambao that payment would be made at MERALCO main office.

On April 2, 1965, Isaac Chaves paid only the P7.90 bill (Exhibit C) at MERALCO's main office, leaving the P7.20 bill unpaid.
On April 21, 1965, past 2:30 p.m., MERALCO disconnected the electric service at the Chaves residence and cut the power line.
The following day, April 22, 1965, Rosendo O. Chaves paid the P7.20 overdue bill and an additional P7.00 bill for the period March 10 to April 8, 1965, after being alerted to that obligation.
Rosendo sought help from MERALCO's counsel, Attorney Lourdy Torres. Subsequently, the power line was reconnected, and the electric service restored by 7:00 p.m. the same day.

The Court of First Instance of Manila, Sixth Judicial District, Branch XXIV, ruled on December 13, 1967, ordering MERALCO and Yambao jointly and severally to pay respondents:

The counterclaim of petitioners was dismissed.

Petitioners contended that absence of bad faith precludes liability for moral damages, exemplary damages, and attorney’s fees.
Petitioners argued that failure to give notice may be a breach of contract but not bad faith or fraud unless motivated by ill will or fraudulent intent.
Cite the clean hands doctrine from Mabutas vs. Calapan Electric Company to assert that arrears in payment disqualify respondents from moral damage claims.
Dispute the factual finding that no prior notice was given before disconnection.

MERALCO’s right to disconnect the electric service for nonpayment is absolute but must be preceded by a 48-hour written notice under Section 97 of the Revised Order No. 3 of the Public Service Commission.
The requirement to give prior written notice is critical to prevent arbitrary disconnection and protect consumers from capricious acts by the utility.
There was failure to comply with the mandatory 48-hour prior written notice in the disconnection of Chaves’ electric service.

Whether MERALCO’s disconnection of electrical service without 48-hour prior written notice constitutes a legal basis for damages against the company and its employee.

Whether MERALCO’s failure to give prior notice amounts to bad faith or fraud sufficient to justify the award of moral and exemplary damages and attorney’s fees.

Whether private respondents’ arrears in the payment of their electric bills bars them from recovery of moral damages under the clean hands doctrine.