G.R. No. 196020 & 196116. April 18, 2018.
MANILA ELECTRIC COMPANY, ET AL., PETITIONERS, VS. NORDEC PHILIPPINES AND/OR MARVEX INDUSTRIAL CORP., RESPONDENT. [CONSOLIDATED CASES]

FACTS

Meralco supplied electricity to Marvex Industrial Corporation. In 1985, Meralco inspectors found the metering devices tampered with on two occasions and subsequently issued a differential billing. After demand letters, Meralco disconnected the electric service. Nordec Philippines, as the new owner of Marvex, sued Meralco for damages, alleging the inspections were unauthorized and the subsequent disconnection on December 18, 1986, was done without prior notice, causing business losses. Meralco defended that inspections were witnessed, warnings were given, and disconnection was justified due to tampering and non-payment.
The Regional Trial Court dismissed Nordec’s complaint, finding sufficient evidence of meter tampering and holding Nordec liable for violating its service terms. It ordered Nordec to pay the differential bill. The Court of Appeals reversed this decision, finding Meralco’s disconnection procedurally defective and ordering it to pay Nordec a refund for overbilling, exemplary damages, and attorney’s fees.

ISSUE

Whether Meralco lawfully disconnected Nordec’s electric service.

RULING

No, the disconnection was unlawful. The Supreme Court emphasized that a distribution utility must strictly comply with legal requisites before disconnection due to its severe consequences. While Meralco established a prima facie case of meter tampering under its Terms and Conditions, justifying a differential bill, the act of disconnection itself was procedurally infirm.
The law requires a valid notice of disconnection that clearly states the cause and gives the consumer a reasonable period to settle the bill or contest it. Meralco’s demand letters were for the payment of the differential bill arising from tampering. However, the eventual disconnection was executed without a separate, specific notice explicitly stating the intent to disconnect for non-payment of that differential bill. This failure to provide the proper, final disconnection notice violated Nordec’s right to due process. The Court distinguished the right to bill from the right to disconnect; the former may be justified by tampering, but the latter requires strict adherence to procedural notice requirements. Consequently, Meralco acted in bad faith in effecting the disconnection.
The Supreme Court modified the Court of Appeals’ decision. It affirmed the order for Meralco to refund Nordec’s overbilling but deleted the award for exemplary damages and attorney’s fees, as Nordec was itself liable for the underlying differential bill due to the prima facie evidence of tampering. The core ruling is that even with a valid cause for billing, disconnection without the mandatory procedural notice is unlawful.