Case Summary (G.R. No. 159108)
Factual Background and Contractual Relationship
Meralco initially supplied electricity to Marvex under a service contract executed in 1985. Tampering with electric metering devices was discovered during inspections in May and September 1985, for which Meralco assessed differential billing totaling approximately ₱496,386.29. Despite demand letters issued to Marvex, service was disconnected due to non-payment. Nordec later acquired Marvex and filed suit against Meralco, alleging damages from improper disconnection and disputed meter tampering claims. The ownership and contractual standing of Nordec were contested, where Meralco argued no contract existed between it and Nordec, while the Court of Appeals found that Nordec succeeded Marvex’s contractual rights and obligations as the beneficial user of the account.
Inspection Findings and Meter Tampering Allegations
Meralco’s inspections in 1985 revealed tampering in metering devices, supported by measured electric consumption irregularities and differential billing. Nordec contested these findings, claiming inspections were unauthorized and denial of duly requested recomputation. A later inspection in November 1987 showed metering irregularities, including power usage registration despite the system being shut down, leading to Meralco’s offer of reimbursement for overbilling, which Nordec rejected. Meralco maintained that inspections were lawful, conducted with consent and in the presence of Nordec representatives.
Regional Trial Court’s Decision
The Regional Trial Court dismissed Nordec’s complaints, finding sufficient evidence of meter tampering at Marvex’s premises and no ill intent by Meralco inspectors. It held Nordec accountable for violating Meralco’s Terms and Conditions of Service and denied contractual relationship recognition between Meralco and Nordec, resulting in dismissal of Nordec’s claims and a counterclaim in favor of Meralco for unpaid electricity charges, exemplary damages, and attorney’s fees.
Court of Appeals’ Decision and Rationale
The Court of Appeals reversed the Regional Trial Court, affirming a contractual relationship between Meralco and Nordec, recognizing Nordec as Marvex’s successor-in-interest and beneficial user of the electric service. It found Meralco negligent for its delayed discovery of meter irregularities and defects, including a defective meter running despite power shutdown, constituting reasonable grounds to reject the meter tampering claim against Nordec. Meralco’s failure to provide the mandatory 48-hour written notice prior to disconnection was also established. The Court awarded Nordec refunds for overbilling, exemplary damages, attorney’s fees, and costs of suit, though it denied actual damages for lack of proof.
Issues Presented to the Supreme Court
The issues reviewed by the Supreme Court include: whether the Court of Appeals erred in overturning the Regional Trial Court’s factual findings; the existence of a cause of action by Nordec against Meralco; whether Meralco was inexcusably negligent in disconnecting Nordec's electric supply without proper notice; and the propriety of damages and attorney’s fees awarded to Nordec.
Supreme Court’s Analysis on Factual Findings Review
The Supreme Court held that the Court of Appeals is empowered to review and revise the factual findings of trial courts unless there is grave abuse of discretion—defined as such a capricious or whimsical exercise of judgment tantamount to lack of jurisdiction. Meralco failed to prove grave abuse of discretion by the Court of Appeals. Thus, the appellate court’s factual findings stand.
Supreme Court’s Ruling on Cause of Action and Contractual Relationship
The Supreme Court recognized a cause of action based on the established relationship between Meralco and Nordec, as Meralco acted knowingly with Nordec as the de facto beneficial user of the electric supply after the transfer of ownership from Marvex. Correspondence and presence of Nordec representatives during inspections support this. The lack of a formal contract in Meralco’s name did not preclude Nordec from asserting its rights or obligations regarding electric service consumption.
Duty of Distribution Utilities and Standard of Diligence
The Court emphasized the established jurisprudence that public utilities like Meralco have an imperative duty to exercise due diligence by conducting reasonable and proper inspections of metering devices to prevent malfunction or tampering. Negligence by Meralco in discovering meter defects or tampering, or failure to repair such defects timely, results in the forfeiture of its claims for unpaid consumption. The Court clarified that the duty extends to mechanical defects and intentional tampering, thereby encompassing varied causes of meter irregularities.
Application of Commonwealth Act No. 349 and Prevailing Law
Although Meralco argued that meter testing under Commonwealth Act No. 349 was limited to once every two years and that such a standard governed its obligations at the time, the Court held that this statute pertains to standardized laboratory testing, not Meralco’s inspection duties under its service agreement. The Ridjo Tape jurisprudence requires distribution utilities to maintain continuous diligence beyond such minimal periodic testing standards.
Meralco’s Negligence in Meter Inspection and Disconnection Procedure
The Court found Meralco’s late discovery of meter irregularities—four months after irregular consumption was detected—constituted negligence. Furthermore, Meralco failed to give the mandatory 48-hour written notice prior t
...continue readingCase Syllabus (G.R. No. 159108)
Case Background and Parties Involved
- The case involves two consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court, challenging the Court of Appeals’ Decision and Resolution concerning a dispute between Manila Electric Company (Meralco) and Nordec Philippines (Nordec), represented by its president, Dr. Potenciano R. Malvar.
- Meralco was the electricity supplier contracted to provide service to Marvex Industrial Corporation (Marvex) under a service agreement beginning January 18, 1985.
- Nordec acquired Marvex subsequently and was the beneficial user of the electric service, although Meralco contended that the contract was with Marvex alone.
- Disputes arose due to alleged tampering with Meralco’s metering devices installed at Marvex’s premises, leading to differential billing and eventual disconnection of service.
- Nordec sued Meralco and some of its employees, alleging unauthorized inspections, failure to properly recompute the disputed billing, and illegal disconnection without the required notice.
Facts of the Case
- Meralco installed electric meters at Marvex’s premises and billed based on monthly meter readings.
- Two inspections in 1985 revealed tampering with the main meter terminal and cover seals; differential billings amounting to P496,386.29 were assessed.
- Demand letters preceded disconnection after non-payment of the assessed amounts.
- Nordec, as Marvex’s new owner, filed suit for damages and injunction against Meralco’s actions.
- Meralco claimed valid inspections, warnings of disconnection, and absence of a contractual relationship with Nordec.
- The Regional Trial Court initially dismissed Nordec’s complaints but granted Meralco’s counterclaim for unpaid electric charges and damages.
- The Court of Appeals reversed the trial court’s decision, recognizing a contractual relationship between Meralco and Nordec by succession, and found Meralco negligent in late detection of meter tampering and in failing to observe disconnection protocol.
Legal Issues Presented
- Whether the Court of Appeals erred in making factual findings contrary to the Regional Trial Court.
- Whether Nordec has a valid cause of action against Meralco despite the contract being originally with Marvex.
- Whether Meralco was negligent in disconnecting Nordec’s electric supply.
- Whether Nordec is entitled to actual, temperate, moral, or exemplary damages, attorney’s fees, and legal interest.
Jurisdiction and Standards for Reviewing Factual Findings
- The Supreme Court recognized that the Court of Appeals has jurisdiction to review and even reverse the Regional Trial Court’s factual findings.
- For this Court to interfere with appellate factual findings, grave abuse of discretion must be established—defined as arbitrary or despotic exercise of judgment.
- No grave abuse of discretion or gross misapprehension of facts by the Court of Appeals was demonstrated here.
- Accordingly, the Court will defer to the factual findings of the Court of Appeals.
Contractual Relationship and Cause of Action
- A valid cause of action requires a plaintiff’s legal right, defendant’s correlative obligation, and injury due to violation.
- Although the service contract was initially between Meralco and Marvex, Nordec’s acquisition of Marvex and its actions (such as correspondence with Meralco, presence during inspections, payment for electricity) established an implied contractual relationship.
- As the beneficial user of the electricity supply, Nordec has the right to sue Meralco.
- Meralco had constructive knowledge that Nordec acted as the benefi