Entitlement of Moral Damages

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Entitlement of Moral Damages

MAMBULAO LUMBER COMPANY, plaintiff-appellant,

vs.

PHILIPPINE NATIONAL BANK and ANACLETO HERALDO Deputy Provincial Sheriffof Camarines Norte, defendants-appellees.

G.R. No. L-22973; January 30, 1968

Facts:

On May 5, 1956 the plaintiff applied for an industrial loan of P155,000 with the Naga

Branch of defendant PNB and the former offered real estate, machinery, logging and

transportation equipments as collaterals. The application, however, was approved for a

loan of P100,000 only. To secure the payment of the loan, the plaintiff mortgaged to

defendant PNB a parcel of land, together with the buildings and improvements existing

thereon, situated in the poblacion of Jose Panganiban (formerly Mambulao), province of

Camarines Norte, and covered by Transfer Certificate of Title No. 381 of the land

records of said province, as well as various sawmill equipment, rolling unit and other

fixed assets of the plaintiff, all situated in its compound in the aforementioned

municipality.

On August 2, 1956, the PNB released from the approved loan the sum of P27,500, for

which the plaintiff signed a promissory note wherein it promised to pay to the PNB the

said sum in five equal yearly installments at the rate of P6,528.40 beginning July 31,

1957, and every year thereafter, the last of which would be on July 31, 1961.

On October 19, 1956, the PNB made another release of P15,500 as part of the approved

loan granted to the plaintiff and so on the said date, the latter executed another

promissory note wherein it agreed to pay to the former the said sum in five equal yearly

installments at the rate of P3,679.64 beginning July 31, 1957, and ending on July 31,

1961.

Commercial Law Review I

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The plaintiff failed to pay the amortization on the amounts released to and received by

it. Repeated demands were made upon the plaintiff to pay its obligation but it failed or

otherwise refused to do so. Upon inspection and verification made by employees of the

PNB, it was found that the plaintiff had already stopped operation about the end of 1957

or early part of 1958.

On September 27, 1961, the PNB sent a letter to the Provincial Sheriff of Camarines

Norte requesting him to take possession of the parcel of land, together with the

improvements existing thereon, covered by Transfer Certificate of Title No. 381 of the

land records of Camarines Norte, and to sell it at public auction in accordance with the

provisions of Act No. 3135, as amended, for the satisfaction of

the unpaid obligation of the plaintiff, which as of September 22, 1961, amounted to

P57,646.59, excluding attorney's fees. In compliance with the request, on October 16,

1961, the Provincial Sheriff of Camarines Norte issued the corresponding notice of

extra-judicial sale and sent a copy thereof to the plaintiff. According to the notice, the

mortgaged property would be sold at public auction at 10:00 a.m. on November 21,

1961, at the ground floor of the Court House in Daet, Camarines Norte.

On November 6, 1961, the PNB sent a letter to the Provincial Sheriff of Camarines Norte

requesting him to take possession of the chattels mortgaged to it by the plaintiff and sell

them at public auction also on November 21, 1961, for the satisfaction of the sum of

P57,646.59, plus 6% annual interest therefore from September 23, 1961, attorney's fees

equivalent to 10% of the amount due and the costs and expenses of the sale. On the

same day, the PNB sent notice to the plaintiff that the former was foreclosing

extrajudicially the chattels mortgaged by the latter and that the auction sale thereof

would be held on November 21, 1961, between 9:00 and 12:00 a.m., in Mambulao,

Camarines Norte, where the mortgaged chattels were situated.

On November 8, 1961, Deputy Provincial Sheriff Anacleto Heraldo took possession of

the chattels mortgaged by the plaintiff and made an inventory thereof in the presence of

a PC Sergeant and a policeman of the municipality of Jose Panganiban. On November 9,

1961, the said Deputy Sheriff issued the corresponding notice of public auction sale of

the mortgaged chattels to be held on November 21, 1961, at 10:00 a.m., at the plaintiff's


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compound situated in the municipality of Jose Panganiban, Province of Camarines

Norte.

On November 19, 1961, the plaintiff sent separate letters, posted as registered air mail

matter, one to the Naga Branch of the PNB and another to the Provincial Sheriff of

Camarines Norte, protesting against the foreclosure of the real estate and chattel

mortgages on the grounds that they could not be effected unless a Court's order was

issued against it (plaintiff) for said purpose and that the foreclosure proceedings,

according to the terms of the mortgage contracts, should be made in Manila. In said

letter to the Naga Branch of the PNB, it was intimated that if the public auction sale

would be suspended and the plaintiff would be given an extension of ninety (90) days,

its obligation would be settled satisfactorily because an important negotiation was then

going on for the sale of its "whole interest" for an amount more than sufficient to

liquidate said obligation.

The letter of the plaintiff to the Naga Branch of the PNB was construed by the latter as a

request for extension of the foreclosure sale of the mortgaged chattels and so it advised

the Sheriff of Camarines Norte to defer it to December 21, 1961, at the same time and

place. A copy of said advice was sent to the plaintiff for its information and guidance.

The foreclosure sale of the parcel of land, together with the buildings and improvements

thereon, covered by Transfer Certificate of Title No. 381, was, however, held on

November 21, 1961, and the said property was sold to the PNB for the sum of

P56,908.00, subject to the right of the plaintiff to redeem the same within a period of

one year. On the same date, Deputy Provincial Sheriff Heraldo executed a certificate of

sale in favor of the PNB and a copy thereof was sent to the plaintiff.

In a letter dated December 14, 1961 (but apparently posted several days later), the plaintiff sent a bank draft for P738.59 to the Naga Branch of the PNB, allegedly in full

settlement of the balance of the obligation of the plaintiff after the application thereto of

the sum of P56,908.00 representing the proceeds of the foreclosure sale of parcel of

land described in Transfer Certificate of Title No. 381. In the said letter, the plaintiff

reiterated its request that the foreclosure sale of the mortgaged chattels be discontinued


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on the grounds that the mortgaged indebtedness had been fully paid and that it could

not be legally effected at a place other than the City of Manila.

In a letter dated December 16, 1961, the plaintiff advised the Provincial Sheriff of

Camarines Norte that it had fully paid its obligation to the PNB, and enclosed therewith

a copy of its letter to the latter dated December 14, 1961.

On December 18, 1961, the Attorney of the Naga Branch of the PNB, wrote to the

plaintiff acknowledging the remittance of P738.59 with the advice, however, that as of

that date the balance of the account of the plaintiff was P9,161.76, to which should be

added the expenses of guarding the mortgaged chattels at the rate of P4.00 a day

beginning December 19, 1961. It was further explained in said letter that the sum of

P57,646.59, which was stated in the request for the foreclosure of the real estate

mortgage, did not include the 10% attorney's fees and expenses of the sale. Accordingly,

the plaintiff was advised that the foreclosure sale scheduled on the 21st of said month

would be stopped if a remittance of P9,161.76, plus interest thereon and guarding fees,

would be made.

On December 21, 1961, the foreclosure sale of the mortgaged chattels was held at 10:00

a.m. and they were awarded to the PNB for the sum of P4,200 and the corresponding

bill of sale was issued in its favor by Deputy Provincial Sheriff Heraldo.

In a letter dated December 26, 1961, the Manager of the Naga Branch of the PNB

advised the plaintiff giving it priority to repurchase the chattels acquired by the former

at public auction. This offer was reiterated in a letter dated January 3, 1962, of the

Attorney of the Naga Branch of the PNB to the plaintiff, with the suggestion that it

exercise its right of redemption and that it apply for the condonation of the attorney's

fees. The plaintiff did not follow the advice but on the contrary it madeknown of its intention to file appropriate action or actions for the protection of its

interests.

On May 24, 1962, several employees of the PNB arrived in the compound of the plaintiff

in Jose Panganiban, Camarines Norte, and they informed Luis Salgado, Chief Security


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Guard of the premises, that the properties therein had been auctioned and bought by the

PNB, which in turn sold them to Mariano Bundok. Upon being advised that the

purchaser would take delivery of the things he bought, Salgado was at first reluctant to

allow any piece of property to be taken out of the compound of the plaintiff. The

employees of the PNB explained that should Salgado refuse, he would be exposing

himself to a litigation wherein he could be held liable to pay big sum of money by way of

damages. Apprehensive of the risk that he would take, Salgado immediately sent a wire

to the President of the plaintiff in Manila, asking advice as to what he should do. In the

meantime, Mariano Bundok was able to take out from the plaintiff's compound two

truckloads of equipment.

In the afternoon of the same day, Salgado received a telegram from plaintiff's President

directing him not to deliver the "chattels" without court order, with the information that

the company was then filing an action for damages against the PNB. On the following

day, May 25, 1962, two trucks and men of Mariano Bundok arrived but Salgado did not

permit them to take out any equipment from inside the compound of the plaintiff. Thru

the intervention, however, of the local police and PC soldiers, the trucks of Mariano

Bundok were able finally to haul the properties originally mortgaged by the plaintiff to

the PNB, which were bought by it at the foreclosure sale and subsequently sold to

Mariano Bundok.

Issue : WON Petition may claim for moral damages.

Ruling :

An artificial person like herein appellant corporation cannot experience physical

sufferings, mental anguish, fright, serious anxiety, wounded feelings, moral shock or

social humiliation which are basis or moral damages.

A Corporation may have a good reputation if besmirched, may also be a ground for the

award of moral damages. The same cannot be considered under the facts of this case,

however, not only because it is admitted that herein appellant had already ceased in its

business operation at the time of the foreclosure sale of the chattels, but also for the


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reason that whatever adverse effects of the foreclosure sale of the chattels could have

upon its reputation or business standing would

undoubtedly be the same whether the sale was conducted at Jose Panganiban,

Camarines Norte, or in Manila which is the place agreed upon by the parties in the

mortgage contract.

But for the wrongful acts of herein appellee bank and the deputy sheriff of Camarines

Norte in proceeding with the sale in utter disregard of the agreement to have the

chattels sold in Manila as provided for in the mortgage contract, to which their

attentions were timely called by herein appellant, and in disposing of the chattels in

gross for the miserable amount of P4,200.00, herein appellant should be awarded

exemplary damages in the sum of P10,000.00. The circumstances of the case also

warrant the award of P3,000.00 as attorney's fees for herein appellant.

Jardine Davies vs. Court of Appeals [GR 128066, 19 June 2000], also

Purefoods Corporation vs. Court of Appeals [GR 128069]

Facts: In 1992, at the height of the power crisis which the country was then

experiencing, and to remedy and curtail further losses due to the series of power

failures, Pure Foods Corporation decided to install two (2) 1500 KW generators in its

food processing plant in San Roque, Marikina City. Sometime in November 1992 a

bidding for the supply and installation of the generators was held. Several suppliers and

dealers were invited to attend a pre-bidding conference to discuss the conditions,

propose scheme and specifications that would best suit the needs of PUREFOODS. Out

of the 8 prospective bidders who attended the pre-bidding conference, only 3 bidders,

namely, Far East Mills Supply Corporation (FEMSCO), Monark and Advance Power

submitted bid proposals and gave bid bonds equivalent to 5% of their respective bids, as

required. Thereafter, in a letter dated 12 December 1992 addressed to FEMSCO

President Alfonso Po, PUREFOODS confirmed the award of the contract to FEMSCO. Immediately, FEMSCO submitted the required performance bond in the amount of

P1,841,187.90 and contractor's all-risk insurance policy in the amount of P6,137,293.00

which PUREFOODS through its Vice President Benedicto G. Tope acknowledged in a

letter dated 18 December 1992. FEMSCO also made arrangements with its principal and

started the PUREFOODS project by purchasing the necessary materials. PUREFOODS


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on the other hand returned FEMSCO's Bidder's Bond in the amount of P1,000,000.00,

as requested. Later, however, in a letter dated 22 December 1992, PUREFOODS through

its Senior Vice President Teodoro L. Dimayuga unilaterally cancelled the award as

"significant factors were uncovered and brought to (their) attention which dictate (the)

cancellation and warrant a total review and re-bid of (the) project." Consequently,

FEMSCO protested the cancellation of the award and sought a meeting with

PUREFOODS. However, on 26 March 1993, before the matter could be resolved,

PUREFOODS already awarded the project and entered into a contract with JARDINE

NELL, a division of Jardine Davies, Inc. (JARDINE), which incidentally was not one of

the bidders. FEMSCO thus wrote PUREFOODS to honor its contract with the former,

and to JARDINE to cease and desist from delivering and installing the 2 generators at

PUREFOODS. Its demand letters unheeded, FEMSCO sued both Commercial Law -

Corporation Law, 2005 ( 16 ) Narratives (Berne Guerrero) PUREFOODS andJARDINE:

PUREFOODS for reneging on its contract, and JARDINE for its unwarranted

interference and inducement. Trial ensued. After FEMSCO presented its evidence,

JARDINE filed a Demurrer to Evidence. On 27 June 1994 the Regional Trial Court of

Pasig, Branch 68, granted JARDINE's Demurrer to Evidence. On 28 July 1994 the trial

court rendered a decision ordering PUREFOODS: (a) to indemnify FEMSCO the sum of

P2,300,000.00 representing the value of engineering services it rendered; (b) to pay

FEMSCO the sum of US$14,000.00 or its peso equivalent, and P900,000.00

representing contractor's mark-up on installation work, considering that it would be

impossible to compel PUREFOODS to honor, perform and fulfill its contractual

obligations in view of PUREFOOD's contract with JARDINE and noting that

construction had already started thereon; (c) to pay attorney's fees in an amount equivalent to 20% of the total amount due; and, (d) to pay the costs. The trial court

dismissed the counterclaim filed by PUREFOODS for lack of factual and legal basis.

Both FEMSCO and PUREFOODS appealed to the Court of Appeals. FEMSCO appealed

the 27 June 1994 Resolution of the trial court which granted the Demurrer to Evidence

filed by JARDINE resulting in the dismissal of the complaint against it, while

PUREFOODS appealed the 28 July 1994 Decision of the same court which ordered it to

pay FEMSCO. On 14 August 1996 the Court of Appeals affirmed in toto the 28 July 1994

Decision of the trial court. It also reversed the 27 June 1994 Resolution of the lower

court and ordered JARDINE to pay FEMSCO damages for inducing PUREFOODS to violate the latter's contract with FEMSCO. As such, JARDINE was ordered to pay

FEMSCO P2,000,000.00 for moral damages. In addition, PUREFOODS was also

directed to pay FEMSCO P2,000,000.00 as moral damages and P1,000,000.00 as

exemplary damages as well as 20% of the total amount due as attorney's fees. On 31

January 1997 the Court of Appeals denied for lack of merit the separate motions for


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reconsideration filed by PUREFOODS and JARDINE. Hence, 2 petitions for review filed

were by PUREFOODS and JARDINE which were subsequently consolidated.

Issue: Whether FEMSCO is entitled to an award for moral damages.

Ruling: By the unilateral cancellation of the contract, PURE FOODS has acted with

bad faith and this was further aggravated by the subsequent inking of a contract

between Purefoods and Jardine. It is very evident that Purefoods thought that by the

expedient means of merely writing a letter would automatically cancel or nullify the

existing contract entered into by both parties after a process of bidding. This is a

flagrant violation of the express provisions of the law and is contrary to fair and just

dealings to which every man is due. The Court has awarded in the past moral damages

to a corporation whose reputation has been besmirched. Herein, FEMSCO has

sufficiently shown that its reputation was tarnished after it immediately ordered

equipment from its suppliers on account of the urgency of the project, only to be

canceled later. The Court thus sustain the appellate court's award of moral damages.

The Court however reduced the award from P2,000,000.00 to P1,000,000.00, as moral

damages are never intended to enrich the recipient. Likewise, the award of exemplary

damages by way of example for the public good is excessive and should be reduced to

P100,000.00. On the other hand, the appellate court erred in ordering JARDINE to pay

moral damages to FEMSCO as it supposedly induced PUREFOODS to violate the

contract with FEMSCO. While it may seem that PUREFOODS and JARDINE connived

to deceive FEMSCO, there is no specific evidence on record to support such perception.

Likewise, there is no showing whatsoever that JARDINE induced PUREFOODS. The similarity in the design submitted to PUREFOODS by both JARDINE and FEMSCO,

and the tender of a lower quotation by JARDINE are insufficient to show that JARDINE

indeed induced PUREFOODS to violate its contract with FEMSCO.

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.

D E C I S I O N

NACHURA, J. :


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This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the

reversal of the Decision1

of the Court of Appeals (CA) dated June 18, 1997 and its Resolution

2

dated December 3, 1997 in CA-G.R. CV No. 40282 denying the appeal filed by petitioner

Manila Electric Company.

The facts of the case, as culled from the records, are as follows:

Respondent T.E.A.M. Electronics Corporation (TEC) was formerly known as NS Electronics

(Philippines), Inc. before 1982 and National Semi-Conductors (Phils.) before 1988. TEC is

wholly owned by respondent Technology Electronics Assembly and Management Pacific

Corporation (TPC). On the other hand, petitioner Manila Electric Company (Meralco) is a utility

company supplying electricity in the Metro Manila area.

Petitioner and NS Electronics (Philippines), Inc., the predecessor-in-interest of respondent TEC,

were parties to two separate contracts denominated as Agreements for the Sale of Electric

Energy under the following account numbers: 09341-1322-16

3and 09341-1812-13.

4Under the

aforesaid agreements, petitioner undertook to supply TEC's building known as Dyna Craft

International Manila (DCIM) located at Electronics Avenue, Food Terminal Complex, Taguig,

Metro Manila, with electric power. Another contract was entered into for the supply of electric

power to TEC's NS Building under Account No. 19389-0900-10.

In September 1986, TEC, under its former name National Semi-Conductors (Phils.) entered into

a Contract of Lease5

with respondent Ultra Electronics Industries, Inc. (Ultra) for the use of the

former's DCIM building for a period of five years or until September 1991. Ultra was, however,

ejected from the premises on February 12, 1988 by virtue of a court order, for repeated violation of the terms and conditions of the lease contract.

On September 28, 1987, a team of petitioner's inspectors conducted a surprise inspection of the

electric meters installed at the DCIM building, witnessed by Ultra's

6representative, Mr. Willie

Abangan. The two meters covered by account numbers 09341-1322-16 and 09341-1812-13,

were found to be allegedly tampered with and did not register the actual power consumption in

the building. The results of the inspection were reflected in the Service Inspection Reports

7

prepared by the team.

In a letter dated November 25, 1987, petitioner informed TEC of the results of the inspection and

demanded from the latter the payment of P7,040,401.01 representing its unregistered

consumption from February 10, 1986 until September 28, 1987, as a result of the alleged

tampering of the meters.


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8TEC received the letters on January 7, 1988. Since Ultra was in possession of the subject

building during the covered period, TEC's Managing Director, Mr. Bobby Tan, referred the

demand letter to Ultra9

which, in turn, informed TEC that its Executive Vice-President had met

with petitioner's representative. Ultra further intimated that assuming that there was tampering of

the meters, petitioner's assessment was excessive.

10For failure of TEC to pay the differential

billing, petitioner disconnected the electricity supply to the DCIM building on April 29, 1988.

TEC demanded from petitioner the reconnection of electrical service, claiming that it had

nothing to do with the alleged tampering but the latter refused to heed the demand. Hence, TEC

filed a complaint on May 27, 1988 before the Energy Regulatory Board (ERB) praying that

electric power be restored to the DCIM building.

11The ERB immediately ordered the

reconnection of the service but petitioner complied with it only on October 12, 1988 after TEC

paid P1,000,000.00, under protest. The complaint before the ERB was later withdrawn as the

parties deemed it best to have the issues threshed out in the regular courts. Prior to the

reconnection, or on June 7, 1988, petitioner conducted a scheduled inspection of the questioned

meters and found them to have been tampered anew.

12

Meanwhile, on April 25, 1988, petitioner conducted another inspection, this time, in TEC's NS

Building. The inspection allegedly revealed that the electric meters were not registering the

correct power consumption. Petitioner, thus, sent a letter dated June 18, 1988 demanding

payment of

P280,813.72 representing the differential billing.

13

TEC denied petitioner's

allegations and claim in a letter dated June 29, 1988.

14Petitioner, thus, sent TEC another letter

demanding payment of the aforesaid amount, with a warning that the electric service would be

disconnected in case of continued refusal to pay the differential billing.

15To avert the

impending disconnection of electrical service, TEC paid the above amount, under protest.

16

On January 13, 1989, TEC and TPC filed a complaint for damages against petitioner and Ultra

17

before the Regional Trial Court (RTC) of Pasig. The case was raffled to Branch 162 and was

docketed as Civil Case No. 56851.18

Upon the filing of the parties' answer to the complaint,

pre-trial was scheduled.

At the pre-trial, the parties agreed to limit the issues, as follows:

1. Whether or not the defendant Meralco is liable for the plaintiffs' disconnection of

electric service at DCIM Building.


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2. Whether or not the plaintiff is liable for (sic) the defendant for the differential billings

in the amount ofP7,040,401.01.

3. Whether or not the plaintiff is liable to defendant for exemplary damages.

19

For failure of the parties to reach an amicable settlement, trial on the merits ensued. On June 17,

1992, the trial court rendered a Decision in favor of respondents TEC and TPC, and against

respondent Ultra and petitioner. The pertinent portion of the decision reads:

WHEREFORE, judgment is hereby rendered in this case in favor of the plaintiffs and

against the defendants as follows:

(1) Ordering both defendants Meralco and ULTRA Electronics Instruments, Inc.

to jointly and severally reimburse plaintiff TEC actual damages in the amount of

ONE MILLION PESOS with legal rate of interest from the date of the filing of

this case on January 19, 1989 until the said amount shall have been fully paid;

(2) Ordering defendant Meralco to pay to plaintiff TEC the amount of

P280,813.72 as actual damages with legal rate of interest also from January 19,

1989;

(3) Ordering defendant Meralco to pay to plaintiff TPC the amount of

P150,000.00 as actual damages with interest at legal rate from January 19, 1989;

(4) Condemning defendant Meralco to pay both plaintiffs moral damages in the

amount

pfP 500,000.00;

(5) Condemning defendant Meralco to pay both plaintiffs corrective and/or

exemplary damages in the amount of P200,000.00;(6) Ordering defendant Meralco to pay attorney's fees in the amount of

P200,000.00

Costs against defendant Meralco.

SO ORDERED.

20

The trial court found the evidence of petitioner insufficient to prove that TEC was guilty of

tampering the meter installations. The deformed condition of the meter seal and the existence of

an opening in the wire duct leading to the transformer vault did not, in themselves, prove the

alleged tampering, especially since access to the transformer was given only to petitioner's

employees.21

The sudden drop in TEC's (or Ultra's) electric consumption did not, per se, show

meter tampering. The delay in the sending of notice of the results of the inspection was likewise

viewed by the court as evidence of inefficiency and arbitrariness on the part of petitioner. More

importantly, petitioner's act of disconnecting the DCIM building's electric supply constituted bad


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faith and thus makes it liable for damages.

22The court further denied petitioner's claim of

differential billing primarily on the ground of equitable negligence.

23Considering that TEC and

TPC paid P 1,000,000.00 to avert the disconnection of electric power; and because Ultra

manifested to settle the claims of petitioner, the court imposed solidary liability on both Ultra

and petitioner for the payment of the P 1,000,000.00.

Ultra and petitioner appealed to the CA which affirmed the RTC decision, with a modification of

the amount of actual damages and interest thereon. The dispositive portion of the CA decision

dated June 18, 1997, states:

WHEREFORE, this Court renders judgment affirming in toto the Decision rendered by

the trial court with the slight modification that the interest at legal rate shall be computed

from January 13, 1989 and that Meralco shall pay plaintiff T.E.A.M. Electronics

Corporation and Technology Electronics Assembly and Management Pacific Corporation

the sum of

P150,000.00 per month for five (5) months for actual damages incurred when

it was compelled to lease a generator set with interest at the legal rate from the

above-stated date.

SO ORDERED.

24

The appellate court agreed with the RTC's conclusion. In addition, it considered petitioner

negligent for failing to discover the alleged defects in the electric meters; in belatedly notifying

TEC and TPC of the results of the inspection; and in disconnecting the electric power without

prior notice.

Petitioner now comes before this Court in this petition for review on certiorari contending that:The Court of Appeals committed grievous errors and decided matters of substance

contrary to law and the rulings of this Honorable Court:

1. In finding that the issue in the case is whether there was deliberate tampering of the

metering installations at the building owned by TEC.

2. In not finding that the issue is: whether or not, based on the tampered meters, whether

or not petitioner is entitled to differential billing, and if so, how much.

3. In declaring that petitioner ME RALCO had the burden of proof to show by clear and

convincing evidence that with respect to the tampered meters that TEC and/or TPC

authored their tampering.

4. In finding that petitioner Meralco should not have held TEC and/or TPC responsible

for the acts of Ultra.

5. In finding that TEC should not be held liable for the tampering of this electric meter in

its DCIM Building.

6. In finding that there was no notice of disconnection.


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7. In finding that petitioner MERALCO was negligent in informing TEC of the alleged

tampering.

8. In making the finding that it is difficult to believe that when petitioner MERALCO

inspected on June 7, 1988 the meter installations, they were found to be tampered.

9. In declaring that petitioner MERALCO estopped from claiming any tampering of the meters.

10. In finding that "the method employed by MERALCO to as certain (sic) the 'correct'

amount of electricity consumed is questionable";

11. In declaring that MERALCO all throughout its dealings with TEC took on an

"attitude" which is oppressive, wanton and reckless.

12. In declaring that MERALCO acted arbitrarily in inspecting TEC's DCIM building

and the NS building.

13. In declaring that respondents TEC and TPC are entitled to the damages which it

awarded.14. In not declaring that petitioner is entitled to the differential bill.

15. In not declaring that respondents are liable to petitioner for exemplary damages,

attorney's fee and expenses for litigation.

25

The petition must fail.

The issues for resolution can be summarized as follows: 1) whether or not TEC tampered with

the electric meters installed at its DCIM and NS buildings; 2) If so, whether or not it is liable for

the differential billing as computed by petitioner; and 3) whether or not petitioner was justified in

disconnecting the electric power supply in TEC's DCIM building.Petitioner insists that the tampering of the electric meters installed at the DCIM and NS buildings

owned by respondent TEC has been established by overwhelming evidence, as specifically

shown by the shorting devices found during the inspection. Thus, says petitioner, tampering of

the meter is no longer an issue.

It is obvious that petitioner wants this Court to revisit the factual findings of the lower courts.

Well-established is the doctrine that under Rule 45 of the Rules of Court, only questions of law,

not of fact, may be raised before the Court. We would like to stress that this Court is not a trier of

facts and may not re-examine and weigh anew the respective evidence of the parties. Factual

findings of the trial court, especially those affirmed by the Court of Appeals, are binding on this

Court.

26

Looking at the record, we note that petitioner claims to have discovered three incidences of

meter-tampering; twice in the DCIM building on September 28, 1987 and June 7, 1988; and once

in the NS building on April 24, 1988.


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The first instance was supposedly discovered on September 28, 1987. The inspector allegedly

found the presence of a short circuiting device and saw that the meter seal was deformed. In

addition, petitioner, through the Supervising Engineer of its Special Billing Analysis

Department,

27claimed that there was a sudden and unexplainable drop in TEC's electrical

consumption starting February 10, 1986. On the basis of the foregoing, petitioner concluded that

the electric meters were tampered with.

However, contrary to petitioner's claim that there was a drastic and unexplainable drop in TEC's

electric consumption during the affected period, the Pattern of TEC's Electrical Consumption

28shows that the sudden drop is not peculiar to the said period. Noteworthy is the observation of

the RTC in this wise:

In fact, in Account No. 09341-1812-13 (heretofore referred as Account/Meter No. 2), as

evidenced by Exhibits "35" and "35-A," there was likewise a sudden drop of electrical

consumption from the year 1984 which recorded an average 141,300 kwh/month to 1985

which recorded an average kwh/month at 87,600 or a difference-drop of 53,700

kwh/month ; from 1985's 87,600 recorded consumption, the same dropped to 18,600

kwh/month or a difference-drop of 69,000 kwh/month. Surely, a drop of 53,700 could be

equally categorized as a sudden drop amounting to 69,000 which, incidentally, the

Meralco claimed as "unexplainable. x x x.29

The witnesses for petitioner who testified on the alleged tampering of the electric meters,

declared that tampering is committed by consumers to prevent the meter from registering the

correct amount of electric consumption, and result in a reduced monthly electric bill, while continuing to enjoy the same power supply. Only the registration of actual electric energy

consumption, not the supply of electricity, is affected when a meter is tampered with.

30The

witnesses claimed that after the inspection, the tampered electric meters were corrected, so that

they would register the correct consumption of TEC. Logically, then, after the correction of the

allegedly tampered meters, the customer's registered consumption would go up.

In this case, the period claimed to have been affected by the tampered electric meters is from

February 1986 until September 1987. Based on petitioner's Billing Record

31(for the DCIM

building), TEC's monthly electric consumption on Account No. 9341-1322-16 was between

4,500 and 27,000 kwh.

32Account No. 9341-1812-13 showed a monthly consumption between

9,600 and 34,200 kwh.

33It is interesting to note that, after correction of the allegedly tampered

meters, TEC's monthly electric consumption from October 1987 to February 1988 (the last


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month that Ultra occupied the DCIM building) was between 8,700 and 24,300 kwh in its first

account, and 16,200 to 46,800 kwh on the second account.

Even more revealing is the fact that TEC's meters registered 9,300 kwh and 19,200 kwh

consumption on the first and second accounts, respectively, a month prior to the inspection. On

the first month after the meters were corrected, TEC's electric consumption registered at 9,300 kwh and 22,200 kwh on the respective accounts. These figures clearly show that there was no

palpably drastic difference between the consumption before and after the inspection, casting a

cloud of doubt over petitioner's claim of meter-tampering. Indeed, Ultra's explanation that the

corporation was losing; thus, it had lesser consumption of electric power appear to be the more

plausible reason for the drop in electric consumption.

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, TEC

was informed about it; and months before the inspection, there was an unsettled controversy

between TEC 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 P 7 million would further jeopardize itself in the eyes of petitioner.

34If 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

35

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.

36By reason of said negligence, public utilities run the risk of

forfeiting amounts originally due from their customers.37

As to the alleged tampering of the electric meter in TEC's NS building, suffice it to state that the

allegation was not proven, considering that the meters therein were enclosed in a metal cabinet

the metal seal of which was unbroken, with petitioner having sole access to the said meters.

38

In view of the negative finding on the alleged tampering of electric meters on TEC's DCIM and

NS buildings, petitioner's claim of differential billing was correctly denied by the trial and


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appellate courts. With greater reason, therefore, could petitioner not exercise the right of

immediate disconnection.

The law in force at the time material to this controversy was Presidential Decree (P.D.) No.

401

39issued on March 1, 1974.

40The decree penalized unauthorized installation of water,

electrical or telephone connections and such acts as the use of tampered electrical meters. It was

issued in answer to the urgent need to put an end to illegal activities that prejudice the economic

well-being of both the companies concerned and the consuming public.

41

P.D. 401 granted the

electric companies the right to conduct inspections of electric meters and the criminal

prosecution

42of erring consumers who were found to have tampered with their electric meters.

It did not expressly provide for more expedient remedies such as the charging of differential

billing and immediate disconnection against erring consumers. Thus, electric companies found a

creative way of availing themselves of such remedies by inserting into their service contracts (or agreements for the sale of electric energy) a provision for differential billing with the option of

disconnection upon non-payment by the erring consumer. The Court has recognized the validity

of such stipulations.

43However, recourse to differential billing with disconnection was subject

to the prior requirement of a 48-hour written notice of disconnection.

44

Petitioner, in the instant case, resorted to the remedy of disconnection without prior notice.

While it is true that petitioner sent a demand letter to TEC for the payment of differential billing,

it did not include any notice that the electric supply would be disconnected. In fine, petitioner

abused the remedies granted to it under P.D. 401 and Revised General Order No. 1 by outrightly

depriving TEC of electrical services without first notifying it of the impending disconnection.

Accordingly, the CA did not err in affirming the RTC decision.

As to the damages awarded by the CA, we deem it proper to modify the same. Actual damages

are compensation for an injury that will put the injured party in the position where it was before

the injury. They pertain to such injuries or losses that are actually sustained and susceptible of

measurement. Except as provided by law or by stipulation, a party is entitled to adequate

compensation only for such pecuniary loss as is duly proven. Basic is the rule that to recover

actual damages, not only must the amount of loss be capable of proof; it must also be actually

proven with a reasonable degree of certainty, premised upon competent proof or the best

evidence obtainable.

45

Respondent TEC sufficiently established, and petitioner in fact admitted, that the former paid

P1,000,000.00 and P280,813.72 under protest, the amounts representing a portion of the latter's

claim of differential billing. With the finding that no tampering was committed and, thus, no


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differential billing due, the aforesaid amounts should be returned by petitioner, with interest, as

ordered by the Court of Appeals and pursuant to the guidelines set forth by the Court.

46

However, despite the appellate court's conclusion that no tampering was committed, it held Ultra

solidarily liable with petitioner for P 1,000,000.00, only because the former, as occupant of the

building,

promised to settle the claims of the latter. This ruling is erroneous. Ultra's promise was

conditioned upon the finding of defect or tampering of the meters. It did not acknowledge any

culpability and liability, and absent any tampered meter, it is absurd to make the lawful occupant

liable. It was petitioner who received the P1 million; thus, it alone should be held liable for the

return of the amount.

TEC also sufficiently established its claim for the reimbursement of the amount paid as rentals

for the generator set it was constrained to rent by reason of the illegal disconnection of electrical

service. The official receipts and purchase orders submitted by TEC as evidence sufficiently

show that such rentals were indeed made. However, the amount of P 150,000.00 per month for

five months, awarded by the CA, is excessive. Instead, a total sum ofP150,000.00, as found by

the RTC, is proper.

As to the payment of exemplary damages and attorney's fees, we find no cogent reason to disturb

the same. Exemplary damages are imposed by way of example or correction for the public good

in addition to moral, temperate, liquidated, or compensatory damages.

47In this case, to serve as

an example – that before a disconnection of electrical supply can be effected by a public utility,

the requisites of law must be complied with – we affirm the award of P200,000.00 as exemplary

damages. With the award of exemplary damages, the award of attorney's fees is likewise proper,

pursuant to Article 220848

of the Civil Code. It is obvious that TEC needed the services of a

lawyer to argue its cause through three levels of the judicial hierarchy. Thus, the award

ofP 200,000.00 is in order.

49

We, however, deem it proper to delete the award of moral damages. TEC's claim was premised

allegedly on the damage to its goodwill and reputation.50

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.

51But 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.

52In the present case, the records are bereft of


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any evidence that the name or reputation of TEC/TPC has been debased as a result of petitioner's

acts. Besides, the trial court simply awarded moral damages in the dispositive portion of its

decision without stating the basis thereof.

WHEREFORE , the petition is DENIED . The Decision of the Court of Appeals in CA-G.R. CV

No. 40282 dated June 18, 1997 and its Resolution dated December 3, 1997 are

AFFIRMED with the following

MODIFICATIONS: (1) the award of P 150,000.00 per month for five

months as reimbursement for the rentals of the generator set is

REDUCED to P150,000.00; and

(2) the award of P500,000.00 as moral damages is hereby DELETED .


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Entitlement of Moral Damages

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