G.R. No. 131723 December 13, 2007
MANILA ELECTRIC COMPANY, petitioner, vs. T.E.A.M. ELECTRONICS CORPORATION, TECHNOLOGY ELECTRONICS ASSEMBLY and MANAGEMENT PACIFIC CORPORATION; and ULTRA ELECTRONICS INSTRUMENTS, INC., respondents.

FACTS

Petitioner Manila Electric Company (Meralco) supplied electricity to respondent T.E.A.M. Electronics Corporation (TEC) under several service contracts. In September 1987, Meralco conducted a surprise inspection of the meters at TEC’s DCIM building, then occupied by respondent Ultra Electronics under a lease, and found alleged tampering. Meralco demanded payment of over P7 million from TEC as differential billing for unregistered consumption. TEC, denying involvement, referred the demand to Ultra. For non-payment, Meralco disconnected the power supply in April 1988. TEC secured an Energy Regulatory Board order for reconnection, which Meralco complied with only after TEC paid P1 million under protest. Separately, Meralco inspected TEC’s NS Building, alleged tampering, and demanded payment of another differential bill, which TEC also paid under protest to avoid another disconnection.
TEC and its parent company, TPC, subsequently filed a complaint for damages against Meralco and Ultra. The trial court ruled against Meralco and Ultra, ordering them to jointly reimburse TEC’s protest payments and awarding moral and exemplary damages to TEC/TPC. The Court of Appeals affirmed the trial court’s decision. Meralco elevated the case to the Supreme Court via a petition for review on certiorari.

ISSUE

The core issue is whether Meralco acted lawfully in disconnecting TEC’s electric service and demanding differential billings based on alleged meter tampering.

RULING

The Supreme Court denied Meralco’s petition and affirmed the lower courts’ decisions. The Court held that Meralco failed to prove its claim of meter tampering by TEC with clear and convincing evidence. The legal logic rests on the principle that a utility company bears the burden of proof when it alleges fraud or tampering by a customer to justify a differential billing. Meralco’s evidence, primarily its own inspection reports, was deemed insufficient. The Court found the reports lacked conclusive detail on how the tampering was accomplished and, critically, failed to establish that TEC itself, as the registered customer, was responsible for the alleged acts, especially since the premises were leased to Ultra during the relevant period.
Furthermore, the Court ruled that Meralco’s disconnection of service was wrongful. A utility cannot arbitrarily disconnect service; it must follow due process, which includes a valid and substantiated cause. Since Meralco’s claim of tampering was unproven, the disconnection had no legal basis. The act of disconnection based on an unsubstantiated charge constituted a breach of Meralco’s contractual obligation to provide continuous service, warranting the award of damages. The payments made by TEC under protest to restore and maintain service were properly reimbursable as actual damages. The awards for moral and exemplary damages were also upheld, as Meralco’s high-handed act of disconnection without sufficient proof caused besmirched reputation, mental anguish, and warranted correction.