MANILA ELECTRIC COMPANY, PETITIONER, VS. MA. VICTORIA JOSE, RESPONDENT.

Manila Electric Company versus Jose

The Case

This is a petition for review on certiorari brought by the Manila Electric Company, commonly called Meralco, against its own residential customer, Ma. Victoria Jose. Meralco seeks to reverse the rulings of the Regional Trial Court and the Court of Appeals that permanently enjoined it from collecting a differential billing of 232,385 pesos and from cutting off her electric service, and that held it liable for damages. The case matters because it draws the precise boundary of a power company's contractual right to bill for unregistered or unbilled consumption: the right exists and is valid, but it may be exercised only upon proof of its factual basis, and it collapses where the company's own gross negligence caused the loss.

Procedural History

Victoria Jose filed with the Regional Trial Court of Quezon City a complaint for injunction with damages, with an application for a writ of preliminary injunction and a temporary restraining order. After hearing, the trial court issued a temporary restraining order and later a writ of preliminary injunction. After trial on the merits, the trial court rendered judgment for Victoria, permanently enjoining Meralco from collecting the differential billing and from disconnecting her service, and awarding moral damages of 500,000 pesos, exemplary damages of 500,000 pesos, attorney's fees of 100,000 pesos, and costs.

Meralco appealed to the Court of Appeals, which affirmed the trial court in full. Without first filing a motion for reconsideration, Meralco went up to the Supreme Court by petition for review on certiorari under Rule 45, assigning as errors the rulings on damages and on its entitlement to recover the unregistered consumption.

Facts

Victoria Jose had been a Meralco customer since 1987 at her residence in New Manila, Quezon City. On July 14, 1995, a Meralco polyphase inspector conducted an inspection of her meter and issued a Service Inspection Report stating that further inspection showed burned out insulation of a bushing current transformer and its non-polarity terminal. He recommended that her billing be adjusted and her record updated.

On October 3, 1995, Meralco issued her a differential adjustment billing of 232,385 pesos, explaining that the bills rendered from January 29, 1993 to July 4, 1995 were affected by the metering defect, that the meter registered only 50 percent of her consumption, and that the corrected bill less payments made gave the stated difference. Victoria asked for reconsideration, arguing that the defect was a fortuitous event and that Meralco's own negligence allowed it to go undetected. Meralco refused but offered an installment scheme. She refused to pay, and on November 21, 1995 she received an Overdue Account Notice warning of disconnection if payment was not made by November 24, 1995.

This prompted her complaint for injunction. At trial, Meralco's billing clerk testified that the 50 percent figure and the two-year duration of the defect rested not on any actual variable but on an existing company policy that the maximum duration of any meter defect is two years. Her billing history showed no dramatic increase or decrease in consumption before, during, and after the alleged defective period; consumption in fact rose during it. Meralco also admitted that its standard precaution is to subject meters to a polyphase meter test twice every year, yet her meter was first tested in 1995, seven years after installation.

Issues

• Whether or not Victoria Jose is entitled to the injunctive writ, that is, whether or not Meralco may collect the differential billing of 232,385 pesos for unregistered consumption.
• Whether or not Meralco is liable for moral damages, exemplary damages, and attorney's fees, and whether or not the amounts awarded should be reduced.

Applicable Provisions

The service contract between Meralco and Victoria provides:

xxx [in] the event of the stoppage or the failure by any meter to register the full amount of energy consumed, the Customer shall be billed for such period on an estimated consumption based upon his use of energy in a similar period of like use or the registration of a check meter.

This clause is the source of Meralco's right to issue a differential billing, and the Court declares it valid and binding, but subject to proof of its factual basis.

Ruling

On the first issue, the Court ruled against Meralco. An injunctive writ issues only upon a clear and unmistakable right, a material and substantial invasion of that right, and urgent necessity to prevent serious damage. The service contract does make the customer liable for a differential billing where the meter fails to register full consumption, and the Court has upheld such a stipulation as a measure of self-protection for the utility when its technical equipment wears out. But the right to collect is not without limitation. Before exercising it, Meralco must establish the factual basis: that the meter was defective, that being defective it failed to register actual consumption, and that Meralco was not negligent in the inspection and repair of the meter.

The Court held that the Service Inspection Report is substantial evidence that the meter was defective, since Victoria neither impeached the inspector's expertise nor controverted his technical findings. But the report says nothing about the duration of the defect or the extent of the meter's incapacity; it contains no finding of a 50 percent reduction. The only basis for the 50 percent claim was a company policy on the maximum two-year duration of meter defects, which the Court found highly questionable and negated by Meralco's own billing records showing a pattern of constancy in consumption. Such documented pattern prevails over the company policy. More important, Meralco's failure to test the meter for seven years, contrary to its own twice-yearly standard, constituted gross negligence, so it must bear sole liability for any loss from the defect, including unregistered consumption, and cannot pass that liability to Victoria or threaten her with disconnection.

On the second issue, the Court held Meralco liable for moral and exemplary damages because its gross negligence and its arbitrary issuance of the differential billing caused Victoria anxiety and aggravation. But the awards of 500,000 pesos each were excessive. Moral damages are for reparation of the spiritual status quo ante, not to enrich the complainant or punish the defendant, and must be commensurate to the suffering or proportionate to the wrong; 100,000 pesos approximates her anxiety. Exemplary damages serve deterrence, to curb Meralco's callousness toward customers and inattention to maintaining its equipment; the Court fixed them at 50,000 pesos.

Doctrine

A stipulation in an electric service contract allowing the utility to bill a customer for unregistered or unbilled consumption is valid and binding, as a measure of self-preservation when highly technical metering equipment fails. However, the right to collect a differential billing is limited: the utility must first prove that the meter was defective, that the defect caused it to fail to register actual consumption, and that the utility was not negligent in inspecting and repairing the meter. A service inspection report proving defectiveness does not by itself prove the duration of the defect or the extent of the meter's incapacity. A mere internal company policy on the maximum duration of meter defects cannot substitute for evidence, especially when contradicted by the customer's billing history. Where the utility's gross negligence in maintenance causes the unregistered consumption, it bears sole liability and may not pass the loss to the customer. Moral damages are measured by the suffering endured and exemplary damages by the need for deterrence, not by the desire to punish or enrich.

Disposition

The petition was partly granted: the Decision of the Court of Appeals was affirmed with modification, reducing the moral damages to 100,000 pesos and the exemplary damages to 50,000 pesos, with no costs.

Remember This

The one line to memorize: the power company's right to bill for unregistered consumption is valid but conditional, and it fails where the company's own gross negligence caused the loss. Examiners use this case to test the requisites for a valid differential billing, the limits of company policy as evidence, and the proper measure of moral and exemplary damages.