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Manila Electric Company, et al. vs. Nordec Philippines, et al.

THIRD DIVISION

[G.R. No. 196020. April 18, 2018]

MANILA ELECTRIC COMPANY, VICENTE

MONTERO, MR. BONDOC, and MR. BAYONA,
petitioners, vs. NORDEC PHILIPPINES and/or
MARVEX INDUSTRIAL CORP. represented by its
President, DR. POTENCIANO R. MALVAR,
respondent.

[G.R. No. 196116. April 18, 2018]

NORDEC PHILIPPINES represented by its President,

DR. POTENCIANO R. MALVAR, petitioner, vs.
MANILA ELECTRIC COMPANY, VICENTE
MONTERO, MR. BONDOC, and MR. BAYONA,
respondents.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; FOR THE

COURT OF APPEALS’ FACTUAL FINDINGS TO BE
REVIEWED BY THE COURT, IT MUST BE SHOWN THAT
IT GRAVELY ABUSED ITS DISCRETION IN APPRECIATING
THE PARTIES’ RESPECTIVE EVIDENCE.— Meralco is
mistaken in arguing that this Court is duty-bound to review
the factual findings in this case due to the contrary findings
of the Regional Trial Court and of the Court of Appeals. The
Court of Appeals has the jurisdiction to review, and even
reverse, the factual findings of the trial court. For the Court of
Appeals’ factual findings to be reviewed by this Court, it must
be shown that it gravely abused its discretion in appreciating
the parties’ respective evidence. x x x Meralco has failed to
show how the Court of Appeals acted with grave abuse of
discretion in arriving at its factual findings and conclusions,
or how it grossly misapprehended the evidence presented as
to warrant a finding that its review and reversal of the trial court’s
findings of fact had been in error.
2. ID.; ID.; CAUSE OF ACTION; REQUISITES.— A cause of action
“is the act or omission by which a party violates a right of
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62 PHILIPPINE REPORTS
Manila Electric Company, et al. vs. Nordec Philippines, et al.

another.” For a cause of action to exist, there must be, first, a

plaintiff’s legal right; second, defendant’s correlative obligation;
and third, an injury to the plaintiff as a result of the defendant’s
violation of plaintiff’s right.
3. POLITICAL LAW; PUBLIC UTILITIES; ELECTRICITY
DISTRIBUTION UTILITIES ARE DUTY-BOUND TO MAKE
REASONABLE AND PROPER PERIODIC INSPECTIONS OF
THEIR EQUIPMENT.— It is well-settled that electricity
distribution utilities, which rely on mechanical devices and
equipment for the orderly undertaking of their business, are
duty-bound to make reasonable and proper periodic inspections
of their equipment. x x x [T]he duty of inspecting for defects is
not limited to inherent mechanical defects of the distribution
utilities’ devices, but extends to intentional and unintentional
ones, such as those, which are due to tampering and mistakes
in computation. x x x Should a distribution utility not exercise
the standard of care required of it due to its negligence in the
inspection and repair of its apparatus, then it can no longer
recover the amounts of allegedly used but uncharged electricity.
x x x Meralco is also duty-bound to explain the basis for its
billings, especially when these are for unregistered consumption,
to prevent consumers from being solely at its mercy. x x x It
must be emphasized that electricity is “a basic necessity whose
generation and distribution is imbued with public interest, and
its provider is a public utility subject to strict regulation by
the State in the exercise of police power.”
4. CIVIL LAW; DAMAGES; NOMINAL DAMAGES; AN AMOUNT
CONSIDERED REASONABLE BY THE COURT TO
VINDICATE THE VIOLATION OF A RIGHT SUFFERED BY
A PARTY; PROPER IN CASE AT BAR.— Article 2234 of the
Civil Code requires proof of entitlement to moral, temperate or
compensatory damages before exemplary damages may be
awarded: x x x Exemplary damages, which cannot be recovered
as a matter of right, may not be awarded if no moral, temperate,
or compensatory damages have been granted. Since exemplary
damages cannot be awarded, the award of attorney’s fees should
likewise be deleted. Moral damages are also not proper, in line
with Manila Electric Company v. T.E.A.M. Electronics
Corporation: x x x Here, the records are bereft of evidence that
would show that Nordec’s name or reputation suffered due to
the disconnection of its electric supply. Moreover, contrary
to Nordec’s claim, it cannot be awarded temperate or moderate
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damages. x x x When the court finds that a party fails to prove

the fact of pecuniary loss, and not just the amount of this loss,
then Article 2224 does not apply. x x x Nominal damages are
awarded to vindicate the violation of a right suffered by a party,
in an amount considered by the courts reasonable under the
circumstances. Meralco’s negligence in not providing Nordec
sufficient notice of disconnection of its electric supply,
especially when there was an ongoing dispute between them
concerning the recomputation of the electricity bill to be paid,
violated Nordec’s rights. Because of this, Nordec is entitled
to nominal damages in the amount of P30,000.00.

APPEARANCES OF COUNSEL

Raul G. Coralde, Edito E. Cedro and Marlon J. Moises

for Manila Electric Company, et al.
Romeo B. Igot Law Office for Nordec Philippines.

D E C I S I O N

LEONEN, J.:

A distribution utility is mandated to strictly comply with the

legal requisites before disconnecting an electric supply due to
the serious consequences this disconnection may have on the
consumer.
These are two (2) Petitions for Review on Certiorari 1 under
Rule 45 of the Rules of Court, both assailing the January 21,
2011 Decision2 and March 9, 2011 Resolution3 of Court of Appeals

1
Rollo (G.R. No. 196020), pp. 30–82; Rollo (G.R. No. 196116), pp.
30–60.
2
Rollo (G.R. No. 196116), pp. 62–76. The Decision was penned by
Associate Justice Amy C. Lazaro-Javier and concurred in by Associate
Justices Sesinando E. Villon and Stephen C. Cruz of the Special Fifth
Division, Court of Appeals, Manila.
3
Rollo (G.R. No. 196020), p. 108. The Resolution was penned by
Associate Justice Amy C. Lazaro-Javier and concurred in by Associate
Justices Sesinando E. Villon and Stephen C. Cruz of the Special Fifth
Division, Court of Appeals, Manila.
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64 PHILIPPINE REPORTS
Manila Electric Company, et al. vs. Nordec Philippines, et al.

in CA-G.R. CV No. 85564. The Court of Appeals reversed

and set aside the June 15, 2005 Decision4 of Branch 85, Regional
Trial Court, Quezon City in Civil Case No. Q-49651. It ordered
Manila Electric Company (Meralco) to pay Nordec Philippines
(Nordec) the amounts of P5,625.00, representing overbilling
for November 23, 1987; P200,000.00 as exemplary damages;
P100,000.00 as attorney’s fees; and costs of suit.
Meralco was contracted to supply electricity to Marvex
Industrial Corporation (Marvex) under an Agreement for Sale
of Electric Energy, with Service Account No. 9396-3422-15.5
It installed metering devices at Marvex’s premises on January
18, 1985. Marvex was billed according to the monthly electric
consumption recorded in its meter. 6
On May 29, 1985, Meralco service inspectors inspected
Marvex’s electric metering facilities and found that the main
meter terminal and cover seals had been tampered with. During
a second inspection on September 18, 1985, Meralco found
that the metering devices were tampered with again.
Subsequently, Meralco assessed Marvex a differential billing
of P371,919.58 for January 18, 1985 to May 29, 1985, and
P124,466.71 for June 17, 1985 to September 18, 1985, in the
total amount of P496,386.29. Meralco sent demand letters dated
August 7, 1985 and November 29, 1985, and disconnected
Marvex’s electric service when it did not pay.7
On December 23, 1986, Nordec, the new owner of Marvex,8
sued Meralco for damages with prayer for preliminary mandatory
injunction with Branch 85, Regional Trial Court, Quezon City.9

4
Id. at 109–117. The Decision was penned by Judge Marlene B.
Gonzales-Sison.
5
Id. at 93.
6
Id. at 111.
7
Id. at 93.
8
Id. at 98.
9
Id.
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Likewise, impleaded as defendants were Meralco’s legal officer,

Vicente Montero, and two (2) Meralco employees, Mr. Bondoc
and Mr. Bayona.10 It alleged that Meralco’s service inspectors
conducted the 1985 inspections without its consent or approval.
Following the inspections, Meralco’s inspectors gave an unnamed
Nordec employee a Power Field Order that did not mention
the alleged defects in the metering devices. Nordec further
claimed that the parties exchanged letters on the alleged
unregistered electric bill, and that it requested a recomputation,
which Meralco denied in its April 25, 1986 letter. However,
in May 1986, Meralco asked Nordec to show the basis for its
recomputation request, to which Nordec complied in its June
10, 1986 letter. On August 14, 1986, Meralco required Nordec
to pay P371,919.58 for the unregistered electricity bill. Nordec
then informed Meralco of the pending resolution of the
recomputation. Nordec claimed that Meralco then disconnected
its service without prior notice on December 18, 1986, resulting
to loss of income and cancellation of other business opportunities.11
In its defense, Meralco claimed that the 1985 inspections
had been conducted in the presence of Nordec’s representatives.
Further, Meralco had repeatedly warned Nordec of service
disconnection in case of failure to pay the differential bill. Finally,
it averred that there was no contractual relation between Nordec
and Marvex, and that Nordec and its president, Dr. Potenciano
Malvar (Dr. Malvar), failed to show proof that they were
authorized to sue on Marvex’s behalf.12
On January 22, 1987, the Regional Trial Court issued a writ
of preliminary injunction directing Meralco to restore Nordec’s
electric supply. 13

10
Id. at 110.
11
Id. at 93–95.
12
Id. at 95.
13
Id. While the CA Decision mentioned January 22, 1987, Nordec’s
Petition stated January 5, 1987. See rollo (G.R. No. 196116), p. 39.
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On November 23, 1987, Meralco conducted another inspection

of Nordec’s premises in the presence of Nordec’s president,
Dr. Malvar. The inspecting group observed that there were
irregularities in Nordec’s metering devices, as they continued
to register power consumption even though its entire power
supply equipment was turned off. Meralco offered to reimburse
Nordec’s excess bill of P5,625.10, but Nordec rejected this
offer. 14
Nordec filed a second supplemental complaint on January 4,
1991, praying that Meralco be declared guilty of tampering,
and be made to refund its excess bill of not less than P5,625.10.15
In its June 15, 2005 Decision, 16 the Regional Trial Court
dismissed Nordec’s original complaint and second supplemental
complaint. The trial court found that there was sufficient
evidence to prove that the electric meter and metering installation
at Marvex premises had been tampered with.17 It found that
Nordec did not dispute that the inspections of its premises were
conducted with the consent and in the presence of its
representatives. Moreover, Nordec failed to prove that Meralco’s
inspectors had ill motives to falsify their findings regarding the
tampered meter, or that the inspectors were responsible for
the tampering.18
The trial court further found that Ridjo Tape & Chemical
Corporation v. Court of Appeals was inapplicable to this
case, since that case did not involve tampering of meters. It
held Nordec liable for violating its Terms and Conditions of
Service with Meralco, such that Meralco was justified in
disconnecting its electric service.19 Because it was Nordec

14
Id. at 95–96.
15
Id. at 96.
16
Id. at 109–117.
17
Id. at 113.
18
Id. at 114.
19
Id. at 114–116.
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which committed the tampering, it was not entitled to the reliefs

prayed for because it did not come to court with clean hands.20
There was also no contractual relationship between Nordec
and Meralco, since the service contract was between Meralco
and Marvex. Thus, Nordec had no cause of action against
Meralco. 21
The dispositive portion of the Regional Trial Court June 15,
2005 Decision stated:
WHEREFORE, the original complaint as well as the second
supplemental complaint are hereby DISMISSED.
Anent the second supplemental complaint, the same is found to
be without merit, for failure of plaintiff to substantiate with clear and
convincing evidence.
And, finding defendant’s counterclaim to be with merit, the same
is GRANTED. Accordingly, plaintiffs are hereby ordered to pay,
jointly and severally, defendants the total amount of FOUR HUNDRED
NINETY[-]SIX THOUSAND THREE HUNDRED EIGHTY-SIX PESOS
& 29/100 (Php 496,386.29), representing the value of used but
unregistered electric current; the sum of TEN THOUSAND PESOS
(Php 10,000.00) as exemplary damages; and the sum of TWENTY
THOUSAND PESOS (Php20,000.00) as and for attorney’s fees plus
costs.
SO ORDERED.22
Nordec appealed to the Court of Appeals, which docketed
the case as CA-G.R. CV No. 85564. On January 21, 2011,
the Court of Appeals issued its Decision,23 reversing and setting
aside the Regional Trial Court June 15, 2005 Decision.
First, it held that there was a contractual relationship between
Nordec and Meralco. It found that after the service contract

20
Id. at 116.
21
Id.
22
Id.
23
Id. at 92–106.
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between Meralco and Marvex, Nordec bought Marvex from

the Development Bank of the Philippines. Thus, Nordec stepped
into Marvex’s shoes and assumed its rights and obligations as
its assignee or successor-in-interest. As Marvex’s right to
receive electricity is not intransmissible, it was deemed to have
been transmitted to Nordec. Moreover, Meralco’s continued
supply of electricity to Nordec and Nordec’s payment for this
supply indicate that there was an implied contract existing
between these two (2) parties.24
Second, the Court of Appeals found that Meralco was negligent
in discovering the alleged tampering only on May 29, 1985, or
four (4) months after it first found irregularities in the metering
devices, despite the monthly meter readings. There was no
evidence that Nordec was responsible for tampering with its
own metering devices. The Court of Appeals found that it
was unlikely that a company previously charged with tampering
and had been demanded payment for differential billing would
again tamper with a newly installed meter. On the other hand,
there was proof that the new metering devices were defective,
since they continued to run despite a complete power shutdown.
Meralco even offered to refund P5,625.10 due to the defect in
the new meter. 25
Third, Meralco did not deny that there was a pending
communication on Nordec’s request for recomputation. Citing
Spouses Quisumbing v. Manila Electric Company, the Court
of Appeals found that Meralco failed to give the required 48-
hour written notice of disconnection before disconnecting
Nordec’s power supply. 26
Finally, the Court of Appeals awarded Nordec exemplary
damages and attorney’s fees, but not actual damages. As to
actual damages, Nordec failed to prove that it actually sustained
pecuniary losses due to Meralco’s disconnection. But Nordec

24
Id. at 98–99.
25
Id. at 102–103.
26
Id. at 103–104.
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was entitled to exemplary damages as an example or correction

for the public good, and to attorney’s fees since Nordec was
forced to litigate to protect its rights. 27 The Court of Appeals
granted only the P5,625.00 refund since there was no proof
presented beyond this amount. 28
The dispositive portion of the Court of Appeals January 21,
2011 Decision stated:
Accordingly, the appeal is GRANTED. The Decision dated June
15, 2005 of the Regional Trial Court (RTC), Quezon City, Branch 85
is REVERSED and SET ASIDE and a new one rendered ordering
[Meralco] to pay [Nordec]:
1.) P5,625.00, representing overbilling for November 23, 1987[;]
2.) P200,000.00 as exemplary damages;
3.) P100,000.00 as attorney’s fees; and
4.) Costs of suit.
SO ORDERED.29
The Court of Appeals denied Meralco’s Motion for
Reconsideration 30 and Nordec’s Motion for Partial
Reconsideration 31 in its March 9, 2011 Resolution. 32
On March 29, 2011, Meralco filed a motion for extension of
time, praying for additional 30 days within which to file its petition
for review. 33 This was docketed as G.R. No. 196020. On
April 4, 2011, Nordec filed its motion for extension of time,

27
Id. at 104.
28
Id. at 105.
29
Id. at 105–106. The CA Decision awarded P5,625.00 only but it
consistently mentioned P5,625.10 in its discussion. See also p. 36.
30
Id. at 118–139.
31
Id. at 140–150.
32
Id. at 108.
33
Id. at 3–10.
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likewise praying for additional 30 days within which to file its

petition for review, which was docketed as G.R. No. 196116. 34
This Court consolidated G.R. Nos. 196020 and 196116 in its
April 11, 2011 Resolution. 35
On May 3, 2011, Meralco filed its Petition for Review in
G.R. No. 196020, assailing the Court of Appeals January 21,
2011 Decision and March 9, 2011 Resolution.36
Meralco argues that the Court of Appeals erred in making
its findings, which were contrary to the findings of the Regional
Trial Court. It claims that the Court of Appeals relied on
Nordec’s unsubstantiated arguments; first, in finding that Nordec
was Marvex’s assignee or successor-in-interest, and second,
that Meralco was inexcusably negligent in the late discovery
of the tampered metering devices.37
Meralco claims that at the time of the inspections, the applicable
law was Commonwealth Act No. 349, which provided that
distribution utilities were required to discover tampered meters
during the prescribed inspections, which were only once every
two (2) years. In contrast, the four (4)-month period as found
by the Court of Appeals was unreasonable, and even contrary
to the rules laid down by the Energy Regulatory Commission
on the conduct of meter testing.38 Meralco argues that distribution
utilities’ meter readers are not required to discover any defect
or tampering in the meters installed in their customers’ premises,
and are only required to test their customers’ meters only once
every two (2) years, unless the customer requests otherwise.
It avers that cases of meter tampering should not be equated

34
Rollo (G.R. No. 196116), pp. 3–8.
35
Rollo (G.R. No. 196020), p. 27.
36
Id. at 30–82.
37
Id. at 48–49.
38
Id. at 52–53.
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with cases involving defective meters, since the former prejudices

public utilities like Meralco, due to consumers’ unlawful acts.39
Further, Meralco claims that the inspections conducted on
Marvex’s metering facilities were valid and in accordance with
Presidential Decree No. 401, as amended. 40 It argues that this
law did not require the presence of the customer during
inspections. Nonetheless, the two (2) inspections in 1985 were
conducted with the consent and in the presence of Nordec’s
representatives. 41
Meralco also claims that it exercised due diligence in maintaining
its electric meters, which was the standard set by law. By
applying Ridjo Tape v. Court of Appeals,42 the Court of Appeals
imposed a degree of diligence beyond what Commonwealth
Act No. 349 provided. 43 Meralco asserts that the imposition
of a degree of diligence beyond what the law provides is judicial
legislation.44
Moreover, Meralco holds that the demand letter on the assessed
value of the differential billing contained a notice that Marvex’s
electric service would be disconnected if the billing was not
paid, and that this was sufficient notice. Thus, Marvex, as the
registered customer, was aware that the non-payment of the
differential billing would result in the disconnection of the electric
service. 45
Meralco argues that Nordec was not Marvex’s assignee or
successor-in-interest. It maintains that the service contract
was never transferred in Nordec’s name. As such, at the time

39
Id. at 54–55.
40
Id. at 56.
41
Id. at 57–58.
42
350 Phil. 184 (1998) [Per J. Romero, Third Division].
43
Rollo (G.R. No. 196020), pp. 60–61.
44
Id. at 62.
45
Id. at 67–68.
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Manila Electric Company, et al. vs. Nordec Philippines, et al.

Nordec filed its complaint against Meralco, it had no authority

to act on Marvex’s behalf. Meralco pointed out that the Deed
of Absolute Sale between Nordec and the Development Bank
of the Philippines was executed only three (3) years after the
1985 inspections, or on August 16, 1988. There was also no
implied contract between Meralco and Nordec, since there was
no act or conduct on Meralco’s part to be bound to this contract.46
Finally, Meralco contests the awards of refund, exemplary
damages, and attorney’s fees to Nordec. It claims that Nordec
was not entitled to the refund since it already refused without
just cause to accept it, and thus, had waived its right to accept
the payment. 47 It argues that since the Court of Appeals itself
found that Nordec was not entitled to actual damages, it could
not award exemplary damages or attorney’s fees to Nordec.48
In its Comment, 49 Nordec argues that Meralco’s reliance
on Commonwealth Act No. 349 was misplaced, since the two
(2)-year period stated in it referred to testing conducted by the
Standardizing Meter Laboratory, and not by the distribution
utilities themselves.50 Further, Nordec claims that what Meralco
failed to comply with was the 48-hour written notice of
disconnection rule, and its previous demand letters did not
constitute this notice.51
In its Reply,52 Meralco reiterated its claims that Ridjo Tape
v. Court of Appeals was inapplicable53 and that it gave Nordec
due notice of the disconnection.54

46
Id. at 68–71.
47
Id. at 74.
48
Id. at 74–76.
49
Id. at 201–223.
50
Id. at 208–209.
51
Id. at 215–216.
52
Id. at 237–264.
53
Id. at 252–253.
54
Id. at 256–257.
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On May 5, 2011, Nordec filed its Petition for Review in

G.R. No. 196116, assailing the Court of Appeals March 9, 2011
Resolution, denying its Motion for Partial Reconsideration and
praying for the modification of the Court of Appeals January
21, 2011 Decision. 55
Nordec claims that it should be awarded at least P500,000.00
in temperate damages, P150,000.00 in moral damages, and legal
interest by the Court of Appeals. It argues that temperate
damages are warranted since Meralco’s unceremonious and
unreasonable disconnection led to Nordec’s inability to fulfill
its contractual obligations and was even forced to cancel its
clients’ purchase orders. 56
Further, Nordec claims that the Court of Appeals erred in
finding that it was entitled to only P5,625.00 as a refund. It
argues that it proved overbilling in excess of P5,625.00, through
a letter showing that Nordec had been charged P103,412.48
by Meralco, when a past billing was only for P78,860.58, which
Meralco did not refute. While Nordec admits that it failed to
adduce proof of the accurate amount of damages that it sustained,
it holds that it estimates Meralco’s acts to cause at least
P1,000,000.00 worth of damage due to Meralco’s electricity
disconnection, fraud in downgrading the overbilling, and installation
of defective meters. 57
It its Comment,58 Meralco argues that Nordec’s petition should
be denied outright for failing to raise questions of law, but merely
prayed for a modification of the Court of Appeals January 21,
2011 Decision.59 It claims that the Court of Appeals correctly
denied the award of actual and temperate or moderate
damages. 60 Further, it asserts that Nordec, as a corporation,

55
Rollo (G.R. No. 196116), pp. 30–60.
56
Id. at 48–55.
57
Id. at 51–52.
58
Id. at 172–203.
59
Id. at 174–175.
60
Id. at 177–178.
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was not entitled to moral damages.61 Finally, it reiterates that

Nordec was not entitled to any award, since Meralco acted in
accordance with the standard set by law. 62
In its Reply, 63 Nordec claims that this Court may take
cognizance of its petition since there was no longer any need
to examine the probative value of the evidence presented.64 It
argues that corporations may be entitled to damages if their
reputations have been besmirched, such as in this case.65 Nordec
reiterates its entitlement to the damages it prayed for. 66
The issues for this Court’s resolution are:
First, whether or not the Court of Appeals erred in making
findings of fact contrary to those of the Regional Trial Court;
Second, whether or not Nordec Philippines has a cause of
action against Manila Electric Company;
Third, whether or not Manila Electric Company was
inexcusably negligent when it disconnected Nordec Philippines’
electric supply; and
Finally, whether or not Nordec Philippines is entitled to actual,
temperate, moral or exemplary damages, attorney’s fees, and
legal interest.
I
In its petition for review, Meralco faults the Court of Appeals
for making findings of fact contrary to those of the Regional
Trial Court. It claims that the trial court’s findings of fact
should be accorded the highest degree of respect and that the
Court of Appeals failed to find that the trial court’s findings

61
Id. at 184.
62
Id. at 190.
63
Id. at 214–226.
64
Id. at 214.
65
Id. at 221–222.
66
Id. at 223.
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were based on mere conjecture, and not evidence. Thus, Meralco

claims that this Court must review the facts and evidence of
this case.
Meralco is mistaken in arguing that this Court is duty-bound
to review the factual findings in this case due to the contrary
findings of the Regional Trial Court and of the Court of Appeals.
The Court of Appeals has the jurisdiction to review, and even
reverse, the factual findings of the trial court. For the Court
of Appeals’ factual findings to be reviewed by this Court, it
must be shown that it gravely abused its discretion in appreciating
the parties’ respective evidence. In Pascual v. Burgos:67
The Court of Appeals must have gravely abused its discretion in
its appreciation of the evidence presented by the parties and in its
factual findings to warrant a review of factual issues by this court.
Grave abuse of discretion is defined, thus:
By grave abuse of discretion is meant such capricious and
whimsical exercise of judgment as is equivalent to lack of
jurisdiction. The abuse of discretion must be grave as where
the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility and must be so patent
and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to act at all
in contemplation of law.
Grave abuse of discretion refers not merely to palpable errors
of jurisdiction; or to violations of the Constitution, the law and
jurisprudence. It refers also to cases in which, for various
reasons, there has been a gross misapprehension of facts.
(Citations omitted)
This exception was first laid down in Buyco v. People, et al.:
In the case at bar, the Tenth Amnesty Commission, the court
of first instance and the Court of Appeals found, in effect, that
the evidence did not suffice to show that appellant had acted
in the manner contemplated in the amnesty proclamation.
Moreover, unlike the Barrioquinto cases, which were appealed

67
Pascual v. Burgos, G.R. No. 171722, January 11, 2016 <http://
sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2016/
january2016/171722.pdf> [Per J. Leonen, Second Division].
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76 PHILIPPINE REPORTS
Manila Electric Company, et al. vs. Nordec Philippines, et al.

directly to this Court, which, accordingly, had authority to pass

upon the validity of the findings of fact of the court of first
instance and of its conclusions on the veracity of the witnesses,
the case at bar is before us on appeal by certiorari from a
decision of the Court of Appeals, the findings and conclusions
of which, on the aforementioned subjects, are not subject to
our review, except in cases of grave abuse of discretion, which
has not been shown to exist.68 (Citations omitted)

Meralco has failed to show how the Court of Appeals acted

with grave abuse of discretion in arriving at its factual findings
and conclusions, or how it grossly misapprehended the evidence
presented as to warrant a finding that its review and reversal
of the trial court’s findings of fact had been in error.
II
A cause of action “is the act or omission by which a party
violates a right of another.”69 For a cause of action to exist,
there must be, first, a plaintiff’s legal right; second, defendant’s
correlative obligation; and third, an injury to the plaintiff as a
result of the defendant’s violation of plaintiff’s right.70 Here,
the Regional Trial Court found that Nordec had no cause of
action against Meralco since they had no contractual relationship,
as Meralco’s service contract was with Marvex.
The beneficial users of an electric service have a cause of
action against this distribution utility. In Manila Electric
Company v. Spouses Chua, 71 it was the beneficial users who
were awarded damages due to the unjust disconnection of the
electric supply, even though the service contract with Meralco
was registered in the name of another person.
Further, Meralco is deemed to have knowledge of the fact
that Nordec was the beneficial user of Marvex’s service contract
with Meralco. It admits that the inspections of the metering
68
Id. at 12–13.
69
RULES OF COURT, Rule 2, Sec. 2.
70
See Zuñiga-Santos v. Santos-Gran, 745 Phil. 171 (2014) [Per J. Perlas-
Bernabe, First Division].
71
637 Phil. 80 (2010) [Per J. Brion, Third Division].
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devices were conducted in the presence of Nordec’s maintenance

personnel and with the consent of its manager. 72 It further
admits that it corresponded with Nordec regarding the differential
billing, and entertained Nordec’s demand for an explanation
on the finding of tampering and the recomputation of the amount
to be paid by Nordec. 73 Clearly, Meralco knew that it was
dealing with Nordec as the beneficial user of the electricity
supply.
III
It is well-settled that electricity distribution utilities, which
rely on mechanical devices and equipment for the orderly
undertaking of their business, are duty-bound to make reasonable
and proper periodic inspections of their equipment. If they are
remiss in carrying out this duty due to their own negligence,
they risk forfeiting the amounts owed by the customers affected.
In Ridjo Tape & Chemical Corporation v. Court of
Appeals: 74
At this juncture, we hasten to point out that the production and
distribution of electricity is a highly technical business undertaking,
and in conducting its operation, it is only logical for public utilities,
such as MERALCO, to employ mechanical devices and equipment
for the orderly pursuit of its business.
It is to be expected that the parties were consciously aware that
these devices or equipment are susceptible to defects and mechanical
failure. Hence, we are not prepared to believe that petitioners were
ignorant of the fact that stoppages in electric meters can also result
from inherent defects or flaws and not only from tampering or
intentional mishandling. . . .
... ... ...
Corollarily, it must be underscored that MERALCO has the
imperative duty to make a reasonable and proper inspection of its

72
Rollo (G.R. No. 196020), p. 41.
73
Id. at 43–44.
74
350 Phil. 184 (1998) [Per J. Romero, Third Division].
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apparatus and equipment to ensure that they do not malfunction,

and the due diligence to discover and repair defects therein. Failure
to perform such duties constitutes negligence.
A review of the records, however, discloses that the unpaid charges
covered the periods from November 7, 1990 to February 13, 1991 for
Civil Case No. Q-92-13045 and from July 15, 1991 to April 13, 1992
for Civil Case No. 13879, approximately three months and nine months,
respectively. On such basis, we take judicial notice that during those
periods, personnel representing MERALCO inspected and examined
the electric meters of petitioners regularly for the purpose of
determining the monthly dues payable. So, why were these defects
not detected and reported on time?
It has been held that notice of a defect need not be direct and
express; it is enough that the same had existed for such a length of
time that it is reasonable to presume that it had been detected, and
the presence of a conspicuous defect which has existed for a
considerable length of time will create a presumption of constructive
notice thereof. Hence, MERALCO’s failure to discover the defect,
if any, considering the length of time, amounts to inexcusable
negligence. Furthermore, we need not belabor the point that as a
public utility, MERALCO has the obligation to discharge its functions
with utmost care and diligence. 75 (Citations omitted)
Moreover, the duty of inspecting for defects is not limited
to inherent mechanical defects of the distribution utilities’ devices,
but extends to intentional and unintentional ones, such as those,
which are due to tampering and mistakes in computation. 76 In
Manila Electric Co. v. Wilcon Builders Supply, Inc.: 77
The Ridjo doctrine simply states that the public utility has the
imperative duty to make a reasonable and proper inspection of its
apparatus and equipment to ensure that they do not malfunction.

75
Id. at 193–194.
76
See Manila Electric Company v. Macro Textile Mills Corp., 424 Phil.
811 (2002) [Per J. Pardo, First Division]; Manila Electric Company v.
T.E.A.M. Electronics Corp., 564 Phil. 639 (2007) [Per J. Nachura, Third
Division]; Davao Light & Power Co. Inc. v. Opeña, 513 Phil. 160 (2005)
[Per J. Chico-Nazario, Second Division].
77
579 Phil. 214 (2008) [Per J. Nachura, Third Division].
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Its failure to discover the defect, if any, considering the length of

time, amounts to inexcusable negligence; its failure to make the
necessary repairs and replace the defective electric meter installed
within the consumer’s premises limits the latter’s liability. The use
of the words “defect” and “defective” in the above-cited case does
not restrict the application of the doctrine to cases of “mechanical
defects” in the installed electric meters. A more plausible interpretation
is to apply the rule on negligence whether the defect is inherent,
intentional or unintentional, which therefore covers tampering,
mechanical defects and mistakes in the computation of the consumers’
billing.78 (Citation omitted)

Meralco argues that the degree of diligence imposed upon

it was beyond the prevailing law at the time, namely,
Commonwealth Act No. 349. It claims that under this law, it
is only required to test metering devices once every two (2)
years. Thus, for it to be penalized for taking four (4) months
to rectify and repair the defective meter, was tantamount to
judicial legislation.
However, as pointed out by Nordec, the two (2)-year period
prescribed under Commonwealth Act No. 34979 is for the testing
required of meters and appliances for measurements used by
all public services by a standardized meter laboratory under
the control of the then Public Service Commission. It does not
pertain to distribution utilities’ inspections of the metering devices
installed in their consumers’ premises.
Further, contrary to Meralco’s claim, the duty imposed upon
it pursuant to Ridjo is not beyond the standard of care imposed
by law. Distribution utilities are public utilities vested with
public interest, and thus, are held to a higher degree of diligence.
In Ridjo:
The rationale behind this ruling is that public utilities should be
put on notice, as a deterrent, that if they completely disregard their

78
Id. at 222.
79
An Act creating a standardizing meter laboratory to carry out the
provisions of the Public Service Act on meter testing and providing funds
therefor (1938).
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80 PHILIPPINE REPORTS
Manila Electric Company, et al. vs. Nordec Philippines, et al.

duty of keeping their electric meters in serviceable condition, they

run the risk of forfeiting, by reason of their negligence, amounts
originally due from their customers. Certainly, we cannot sanction
a situation wherein the defects in the electric meter are allowed to
continue indefinitely until suddenly the public utilities concerned
demand payment for the unrecorded electricity utilized when, in the
first place, they should have remedied the situation immediately. If
we turn a blind eye on MERALCO’s omission, it may encourage
negligence on the part of public utilities, to the detriment of the
consuming public.
... ... ...
To summarize, it is worth emphasizing that it is not our intention
to impede or diminish the business viability of MERALCO, or any
public utility company for that matter. On the contrary, we would
like to stress that, being a public utility vested with vital public
interest, MERALCO is impressed with certain obligations towards
its customers and any omission on its part to perform such duties
would be prejudicial to its interest. For in the final analysis, the
bottom line is that those who do not exercise such prudence in the
discharge of their duties shall be made to bear the consequences of
such oversight. 80

Should a distribution utility not exercise the standard of care

required of it due to its negligence in the inspection and repair
of its apparatus, then it can no longer recover the amounts of
allegedly used but uncharged electricity.
The distribution utility’s negligence is all the more apparent
when it had made prior findings of tampering, and yet still failed
to correct these defects. In Manila Electric Company v.
T.E.A.M. Electronics Corp.,81 Meralco conducted an inspection
on September 28, 1987 and found that the meters therein were
tampered, and then conducted a second inspection on June 7,
1988, which yielded similar evidence of tampering. Likewise,
the respondent in that case was in the midst of a differential
billing dispute with Meralco, and had previously been assessed

80
350 Phil. 184, 195–196 (1998) [Per J. Romero, Third Division].
81
564 Phil. 639 (2007) [Per J. Nachura, Third Division].
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Manila Electric Company, et al. vs. Nordec Philippines, et al.

P7,000,000.00 due to alleged tampering. There, this Court found

that Meralco was negligent for failing to repair the defects in
respondent’s meters after the first inspection:
Petitioner likewise claimed that when the subject meters were again
inspected on June 7, 1988, they were found to have been tampered
anew. The Court notes that prior to the inspection, [T.E.A.M.
Electronics Corporation] was informed about it; and months before
the inspection, there was an unsettled controversy between [T.E.A.M.
Electronics Corporation] and petitioner, brought about by the
disconnection of electric power and the non-payment of differential
billing. We are more disposed to accept the trial court’s conclusion
that it is hard to believe that a customer previously apprehended
for tampered meters and assessed P7 million would further jeopardize
itself in the eyes of petitioner. If it is true that there was evidence
of tampering found on September 28, 1987 and again on June 7, 1988,
the better view would be that the defective meters were not actually
corrected after the first inspection. If so, then Manila Electric
Company v. Macro Textile Mills Corporation would apply, where
we said that we cannot sanction a situation wherein the defects in
the electric meter are allowed to continue indefinitely until suddenly,
the public utilities demand payment for the unrecorded electricity
utilized when they could have remedied the situation immediately.
Petitioner’s failure to do so may encourage neglect of public utilities
to the detriment of the consuming public. Corollarily, it must be
underscored that petitioner has the imperative duty to make a
reasonable and proper inspection of its apparatus and equipment to
ensure that they do not malfunction, and the due diligence to discover
and repair defects therein. Failure to perform such duties constitutes
negligence. By reason of said negligence, public utilities run the risk
of forfeiting amounts originally due from their customers.82 (Citations
omitted)
Here, as observed by the Court of Appeals, Meralco itself
claimed that the irregularities in the electricity consumption
recorded in Nordec’s metering devices started on January 18,
1985, as evidenced by their August 7, 1985 demand letter, covering
January 18, 1985 to May 29, 1985. However, the alleged
tampering was only discovered during the May 29, 1985

82
Id. at 653–654.
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82 PHILIPPINE REPORTS
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inspection. Considering that Nordec’s meters were read monthly,

Meralco’s belated discovery of the cause of the alleged
irregularities, or four (4) months after they purportedly started,
can only lead to a conclusion of negligence. Notice of a defect
may be constructive when it has conspicuously existed for a
considerable length of time.83 It is also worth noting that during
a third inspection on November 23, 1987, further irregularities
in Nordec’s metering devices were observed, showing electricity
consumption even when Nordec’s entire power supply equipment
was switched off. Clearly, Meralco had been remiss in its
duty as required by law and jurisprudence of a public utility.
Meralco is also duty-bound to explain the basis for its billings,
especially when these are for unregistered consumption, to
prevent consumers from being solely at its mercy. 84 Here, the
Power Field Orders given to Nordec following the inspections
did not mention the alleged defects that were discovered.
Nordec’s request for recomputation of the alleged unregistered
electric bill was still pending when its electric supply was
disconnected on December 18, 1986.
Finally, as found by the Court of Appeals, Meralco failed to
comply with the 48-hour disconnection notice rule. Meralco
claims that the statements in its demand letters, that failure to
pay would result in disconnection, were sufficient notice.
However, pursuant to Section 97 of Revised General Order
No. 1, the governing rule when the disconnection occurred,
disconnection due to non-payment of bills requires that a 48-
hour written notice be given to the customer.85
It must be emphasized that electricity is “a basic necessity
whose generation and distribution is imbued with public interest,
and its provider is a public utility subject to strict regulation by

83
Ridjo Tape & Chemical Corp. v. Court of Appeals, 350 Phil. 184,
194 (1998) [Per J. Romero, Third Division].
84
Manila Electric Company v. Macro Textile Mills Corp., 424 Phil.
811, 828 (2002) [Per J. Pardo, First Division].
85
Manila Electric Company v. T.E.A.M. Electronics Corp., 564 Phil.
639, 656 (2007) [Per J. Nachura, Third Division].
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the State in the exercise of police power.” 86 The serious

consequences on a consumer, whose electric supply has been
cut off, behoove a distribution utility to strictly comply with the
legal requisites before disconnection may be done. 87 This is
all the more true considering Meralco’s dominant position in
the market compared to its customers’ weak bargaining position.88
IV
At the outset, a party’s entitlement to damages is a question
of fact not generally cognizable in a petition for review. 89
However, in this case, the Court of Appeals’ failure to apply
the applicable law and jurisprudence by awarding damages to
Nordec prompts this Court’s review.
The Court of Appeals declined to award actual damages to
Nordec as it failed to prove its pecuniary losses due to Meralco’s
disconnection:
We concede that MERALCO’s service disconnection bore a domino
effect on NORDEC’s business but in the absence of actual proof of
losses, We cannot award actual damages to NORDEC. For one is
only entitled to adequate compensation for pecuniary loss that he
has duly proven. 90

The Court of Appeals then proceeded to award exemplary

damages to Nordec by way of example or correction for the
public good. This is contrary to the requirement in Article
2234 of the Civil Code, which requires proof of entitlement to
moral, temperate or compensatory damages before exemplary
damages may be awarded:

86
Manila Electric Company v. Spouses Chua, 637 Phil. 80, 101 (2010)
[Per J. Brion, Third Division].
87
Id.
88
Id.
89
See Vda. de Formoso v. Philippine National Bank, 665 Phil. 184
(2011) [Per J. Mendoza, Second Division].
90
Rollo (G.R. No. 196020), p. 104.
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Article 2234. While the amount of the exemplary damages need not
be proved, the plaintiff must show that he is entitled to moral,
temperate or compensatory damages before the court may consider
the question of whether or not exemplary damages should be awarded.
In case liquidated damages have been agreed upon, although no proof
of loss is necessary in order that such liquidated damages may be
recovered, nevertheless, before the court may consider the question
of granting exemplary in addition to the liquidated damages, the
plaintiff must show that he would be entitled to moral, temperate or
compensatory damages were it not for the stipulation for liquidated
damages.

Exemplary damages, which cannot be recovered as a matter

of right, may not be awarded if no moral, temperate, or
compensatory damages have been granted.91 Since exemplary
damages cannot be awarded, the award of attorney’s fees should
likewise be deleted.
Moral damages are also not proper, in line with Manila Electric
Company v. T.E.A.M. Electronics Corporation: 92
We, however, deem it proper to delete the award of moral damages.
[T.E.A.M. Electronics Corporation] claim was premised allegedly on
the damage to its goodwill and reputation. As a rule, a corporation
is not entitled to moral damages because, not being a natural person,
it cannot experience physical suffering or sentiments like wounded
feelings, serious anxiety, mental anguish and moral shock. The only
exception to this rule is when the corporation has a reputation that
is debased, resulting in its humiliation in the business realm. But in
such a case, it is imperative for the claimant to present proof to justify
the award. It is essential to prove the existence of the factual basis
of the damage and its causal relation to petitioner’s acts. In the
present case, the records are bereft of any evidence that the name
or reputation of [T.E.A.M. Electronics Corporation/Technology
Electronics Assembly and Management Pacific Corporation] has been
debased as a result of petitioner’s acts. Besides, the trial court simply

91
See Francisco v. Government Service Insurance System, 117 Phil.
586 (1963) [Per J. J.B.L. Reyes, En Banc]; Singson v. Aragon, 92 Phil.
514 (1953) [Per J. Bautista Angelo, En Banc].
92
564 Phil. 639 (2007) [Per J. Nachura, Third Division].
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awarded moral damages in the dispositive portion of its decision

without stating the basis thereof. 93 (Citations omitted)

Here, the records are bereft of evidence that would show

that Nordec’s name or reputation suffered due to the
disconnection of its electric supply.
Moreover, contrary to Nordec’s claim, it cannot be awarded
temperate or moderate damages. Under Article 2224 of the
Civil Code:
Article 2224. Temperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered when
the court finds that some pecuniary loss has been suffered but its
amount can not, from the nature of the case, be proved with certainty.
When the court finds that a party fails to prove the fact of
pecuniary loss, and not just the amount of this loss, then Article
2224 does not apply. In Seven Brothers Shipping Corporation
v. DMC-Construction Resources, Inc. : 94
In contrast, under Article 2224, temperate or moderate damages
may be recovered when the court finds that some pecuniary loss
has been suffered but its amount cannot, from the nature of the case,
be provided with certainty. This principle was thoroughly explained
in Araneta v. Bank of America, which cited the Code Commission,
to wit:
The Code Commission, in explaining the concept of temperate
damages under Article 2224, makes the following comment:
In some States of the American Union, temperate damages
are allowed. There are cases where from the nature of
the case, definite proof of pecuniary loss cannot be offered,
although the court is convinced that there has been such
loss. For instance, injury to one’s commercial credit or
to the goodwill of a business firm is often hard to show
with certainty in terms of money. Should damages be
denied for that reason? The judge should be empowered
to calculate moderate damages in such cases, rather than

93
Id. at 658.
94
748 Phil. 692 (2014) [Per C.J. Sereno, First Division].
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86 PHILIPPINE REPORTS
Manila Electric Company, et al. vs. Nordec Philippines, et al.

that the plaintiff should suffer, without redress from the

defendant’s wrongful act. (Emphasis ours)
Thus, in Tan v. OMC Carriers, Inc., temperate damages were rightly
awarded because plaintiff suffered a loss, although definitive proof
of its amount cannot be presented as the photographs produced as
evidence were deemed insufficient. Established in that case, however,
was the fact that respondent’s truck was responsible for the damage
to petitioner’s property and that petitioner suffered some form of
pecuniary loss. In Canada v. All Commodities Marketing Corporation,
temperate damages were also awarded wherein respondent’s goods
did not reach the Pepsi Cola Plant at Muntinlupa City as a result of
the negligence of petitioner in conducting its trucking and hauling
services, even if the amount of the pecuniary loss had not been
proven. In Philtranco Services Enterprises, Inc. v. Paras, the
respondent was likewise awarded temperate damages in an action
for breach of contract of carriage, even if his medical expenses had
not been established with certainty. In People v. Briones, in which
the accused was found guilty of murder, temperate damages were
given even if the funeral expenses for the victim had not been
sufficiently proven.
Given these findings, we are of the belief that temperate and not
nominal damages should have been awarded, considering that it has
been established that respondent herein suffered a loss, even if the
amount thereof cannot be proven with certainty.95 (Citations omitted)

Here, the Court of Appeals found that Meralco’s disconnection

had a “domino effect” 96 on Nordec’s business, but that Nordec
did not offer actual proof of its losses. Nordec even admitted
in its petition for review that there was an “oversight” on its
part in “adducing proof of the accurate amount of damages it
sustained” due to Meralco’s acts. 97 No pecuniary loss has
been established in this case, apart from the claim in Nordec’s
complaint that the “serious anxiety” of the disconnection had
caused Nordec’s president to cancel business appointments,

95
Id. at 701–702.
96
Rollo (G.R. No. 196020), p. 104.
97
Rollo (G.R. No. 196116), p. 52.
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purchase orders, and fail to fulfill contractual obligations, among

others. 98
In this instance, nominal damages may be awarded. In
Philippine Telegraph & Telephone Corporation v. Court
of Appeals: 99
Temperate or moderate damages may only be given if the “court
finds that some pecuniary loss has been suffered but that its amount
cannot, from the nature of the case, be proved with certainty.” The
factual findings of the appellate court that respondent has failed to
establish such pecuniary loss or, if proved, cannot from their nature
be precisely quantified precludes the application of the rule on
temperate or moderate damages. The result comes down to only a
possible award of nominal damages. Nominal damages are adjudicated
in order that a right of the plaintiff, which has been violated or invaded
by the defendant, may be vindicated or recognized and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.
The court may award nominal damages in every obligation arising
from any source enumerated in article 1157 of the Civil Code or,
generally, in every case where property right is invaded.100 (Citations
omitted)

Nominal damages are awarded to vindicate the violation of

a right suffered by a party, in an amount considered by the
courts reasonable under the circumstances. 101 Meralco’s
negligence in not providing Nordec sufficient notice of
disconnection of its electric supply, especially when there was
an ongoing dispute between them concerning the recomputation
of the electricity bill to be paid, violated Nordec’s rights. Because
of this, Nordec is entitled to nominal damages in the amount
of P30,000.00.

98
Id. at 93.
99
437 Phil. 76 (2002) [Per J. Vitug, First Division].
100
Id. at 86.
101
See Pryce Properties Corp. v. Spouses Octobre, G.R. No. 186976,
December 7, 2016 <http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/
jurisprudence/2016/december2016/186976.pdf> [Per J. Jardeleza, Third
Division]; Fontana Resort and Country Club, Inc. v. Spouses Tan, 680
Phil. 395 (2012) [Per J. Leonardo-De Castro, First Division].
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88 PHILIPPINE REPORTS
Adlawan vs. People

WHEREFORE, the Petitions for Review on Certiorari in

G.R. Nos. 196020 and 196116 are DENIED. The Court of
Appeals January 21, 2011 Decision and March 9, 2011 Resolution
in CA-G.R. CV No. 85564 are AFFIRMED with
MODIFICATION. Manila Electric Company is ordered to
pay Nordec Philippines P5,625.00, representing overbilling for
November 23, 1987; P30,000.00 in nominal damages; and costs
of suit. The awards for exemplary damages and attorney’s
fees are deleted.
SO ORDERED.
Velasco, Jr. (Chairperson), Bersamin, Martires, and
Gesmundo, JJ., concur.

THIRD DIVISION

[G.R. No. 197645. April 18, 2018]

CARLOS JAY ADLAWAN, petitioner, vs. PEOPLE OF

THE PHILIPPINES, respondent.

SYLLABUS

1. REMEDIAL LAW; CIVIL PROCEDURE; APPEALS; PETITION

FOR REVIEW ON CERTIORARI; SHALL RAISE ONLY
QUESTIONS OF LAW; QUESTION OF LAW AND QUESTION
OF FACT, DISTINGUISHED.— At the onset, the Court holds
that the petition fails as the issues it raised involves questions
of fact which are not reviewable in a petition for review on
certiorari under Rule 45 of the Rules of Court. It is a fundamental
rule that a petition for review on certiorari filed with this Court
under Rule 45 of the Rules of Court shall raise only questions
of law. There is a question of law when a doubt or a difference
arises as to what the law is on a certain state of facts, and the