Case Summary (G.R. No. 218378)
Key Dates
- January 1, 1998: NPC and BENECO enter into a Contract of Sale of Electricity.
- 1999: NPC’s Metering Services Group installs meter system at Irisan Substation and fixes the Current Transformer Ratio (CTR) at 75/5 (multiplier 5,196.31).
- March 2000: Irisan Substation energized.
- May 2000–February 2004: NPC bills BENECO at half the correct multiplier.
- May 13, 2004: NPC sends demand letter for underbilling of ₱157,743,314.43.
- September 30, 2004: BENECO files complaint for injunction, damages, and reinstatement of prompt payment discount (PPD).
- September 15, 2010: Regional Trial Court (RTC) rules in favor of BENECO.
- November 10, 2010: RTC denies NPC’s motion for reconsideration.
- August 29, 2014: Court of Appeals (CA) affirms RTC decision, deletes award of attorney’s fees.
- May 22, 2015: CA denies NPC’s motion for reconsideration.
- June 14, 2021: Supreme Court renders resolution under the 1987 Constitution.
Applicable Law
- 1987 Philippine Constitution (jurisdictional framework for government corporations).
- Rule 45, Rules of Court (Petition for Review on Certiorari).
- Article 22, Civil Code (principle of unjust enrichment).
- Section 25, Transition Contract for the Supply of Electricity (billing error correction rules).
Factual Background
NPC and BENECO contracted for power supply under a 1998 Contract of Sale and a subsequent Transition Contract providing multiple delivery points, including Irisan Substation. NPC installed the metering system in 1999, set the CTR at 75/5, and billed monthly using multiplier 5,196.31. BENECO paid promptly and enjoyed a 3% PPD. In February 2004, Engr. Umaming noted unusually low system losses, prompting TRANSCO tests that revealed the CTR should have been 150/5. NPC had thus underbilled BENECO from May 2000 to February 2004 by half.
Procedural History
NPC’s May 2004 demand for ₱157.7 million was refused by BENECO, which invoked the 90-day waiver clause in Section 25 of the Transition Contract and NPC’s purported gross negligence. NPC revoked BENECO’s PPD and threatened disconnection. BENECO filed for injunction and damages in 2004. The RTC (2010) and CA (2014) sided with BENECO, declaring the underbilling unenforceable, reinstating the PPD, and finding NPC solely negligent. NPC elevated the case via Rule 45.
Issues Presented
- Whether BENECO’s non-payment of the underbilling constitutes unjust enrichment.
- Whether jurisprudence in Panay Electric, Ridjo Tape, and Meralco applies.
- Whether BENECO remains entitled to the 3% PPD.
Analysis on Unjust Enrichment vs. Contractual Rights
The Court affirms that Article 22 of the Civil Code governs unjust enrichment, which requires:
(a) enrichment of one party without valid ground,
(b) corresponding loss to another,
(c) absence of other remedies in contract or quasi-contract.
Here, NPC and BENECO’s rights and obligations are defined by express contracts. The claim for underbilling arises from Section 25 of the Transition Contract, not quasi-contractual principles. Jurisprudence (Shinryo, National Transmission v. Misamis Oriental) holds that when a contract prescribes remedies, unjust enrichment cannot supplant contractual provisions.
Billing Error Correction under Section 25
Section 25 distinguishes errors due to wrong readings or arithmetical omissions, correctable within 90 days of billing receipt, and errors due to inaccurate meters, correctable at any time. NPC’s failure to set the correct CTR (multiplier) is an omission analogous to wrong readings and must be corrected within 90 days of BENECO’s receipt of the notice (May 17, 2004). Underbillings older than 90 days are deemed waived. BENECO is thus liable only for underbilling on bills received between February 17 and May 17, 2004. Mathematical apportionment must be determined by the RTC on remand.
Non-application of Panay Electric, Ridjo Tape, and Meralco
Those cases addressed suppliers without specific billing-error provisions. Panay Electric and Meralco invoked estoppel and negligence in pais; Ridjo Tape applied a general service agreement duty of diligence. Here, the Transition Contr
...continue readingCase Syllabus (G.R. No. 218378)
Background and Contractual Relationship
- National Power Corporation (NPC), a government-owned and controlled corporation, supplies electric power to Benguet Electric Cooperative, Inc. (BENECO) under a franchise and a January 1, 1998 Contract of Sale of Electricity.
- The parties executed a Transition Contract for the Supply of Electricity, designating NPC’s obligation to deliver power at multiple delivery points, including the Irisan Substation.
- Under the Transition Contract, NPC was responsible for installing, testing, and determining the correct Current Transformer Ratio (CTR) and multiplier for billing.
Metering Installation and Billing Multiplier
- In 1999, NPC’s Metering Services Group installed the metering system at the Irisan Substation, conducted tests, and set the CTR at 75/5, yielding a multiplier of 5,196.31.
- The substation was energized in March 2000, and from May 2000 to February 2004, NPC billed BENECO using the 5,196.31 multiplier.
- NPC granted BENECO a monthly Prompt Payment Discount (PPD) of 3% whenever BENECO’s account was fully paid and up to date.
Discovery of Underbilling
- In February 2004, Engineer Lawrence Umaming of BENECO noted unusually low system losses and alerted the National Transmission Corporation (TRANSCO).
- TRANSCO tests revealed the CTR was erroneously set at 75/5 instead of the correct 150/5, meaning NPC had been underbilling BENECO by half the actual consumption.
- On May 13, 2004, NPC issued a demand letter seeking payment of P157,743,314.43 for underbilling from May 2000 to February 2004; BENECO refused, citing NPC’s negligence and contractual waiver under Section 25 of the Transition Contract.
Trial Court Proceedings (RTC)
- On September 30, 2004, BENECO filed a complaint for injunction, damages, and other relief before the Regional Trial Court (RTC) of La Trinidad, Benguet.
- BENECO argued:
• Under Section 25, NPC waived any claim for billing errors not corrected within 90 days of receipt.
• NPC’s four-year failure to detect its own mistake constituted gross inexcusable negligence. - NPC countered that Section 25 did not cover a wrong CTR setting, which was not an arithmetic mistake or omission, and faulted BENECO for delayed discovery.
RTC Decision and Relief Granted
- On September 15, 2010, the RTC found NPC solely r