BPI Vs LMC, 555 Scra 373

SECOND DIVISION
BANK OF THE PHILIPPINE G.R. No. 176434
ISLANDS,
Petitioner,
Present:
QUISUMBING, J.,
Chairperson,
- versus - CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.
LIFETIME MARKETING
CORPORATION,
Respondent. Promulgated:
June 25, 2008

x ---------------------------------------------------------------------------------x
DECISION
TINGA, J.:
The Bank of the Philippine Islands (BPI) seeks the reversal of the
Decision1[1] of the Court of Appeals dated 31 July 2006 in CA-G.R. CV No. 62769
which ordered it to pay Lifetime Marketing Corporation (LMC) actual damages in
the amount of P2,075,695.50 on account of its gross negligence in handling LMCs
account.
The following facts, quoted from the decision of the Court of Appeals, are
undisputed:
On October 22, 1981, Lifetime Marketing Corporation (LMC, for brevity),

opened a current account with the Bank of the Philippine Islands (BPI, for brevity),
Greenhills-Edsa branch, denominated as Account No. 3101-0680-63. In this
account, the sales agents of LMC would have to deposit their collections or
payments to the latter. As a result, LMC and BPI, made a special arrangement that
the formers agents will accomplish three (3) copies of the deposit slips, the third
copy to be retained and held by the teller until LMCs authorized representatives,
Mrs. Virginia Mongon and Mrs. Violeta Ancajas, shall retrieve them on the
following banking day.
Sometime in 1986, LMC availed of the BPIs inter-branch banking network

services in Metro Manila, whereby the formers agents could make [a] deposit to
any BPI branch in Metro Manila under the same account. Under this system, BPIs
bank tellers were no longer obliged to retain the extra copy of the deposit slips
instead, they will rely on the machine-validated deposit slip, to be submitted by
LMCs agents. For its part, BPI would send to LMC a monthly bank statement
relating to the subject account. This practice was observed and complied with by
the parties.
As a business practice, the registered sales agents or the Lifetime

Educational Consultants of LMC, can get the books from the latter on consignment
basis, then they would go directly to their clients to sell. These agents or Lifetime
Educational Consultants would then pay to LMC, seven (7) days after they pick up
all the books to be sold. Since LMC have several agents around the Philippines, it
required to remit their payments through BPI, where LMC maintained its current
account. It has been LMCs practice to require its agents to present a validated
deposit slip and, on that basis, LMC would issue to the latter an acknowledgement
receipt.
Alice Laurel, is one of LMCs Educational Consultants or agents. On various

dates covering the period from May, [sic] 1991 up to August, 1992, Alice Laurel
deposited checks to LMCs subject account at different branches of BPI,
specifically: at the Harrison/Buendia branch-8 checks; at Arrangue branch-4
checks; at Araneta branch-1 check; at Binondo branch-3 checks; at Ermita branch-
5 checks; at Cubao Shopping branch-1 check; at Escolta branch-4 checks; at the
Malate branch-2 checks; at Taft Avenue branch-2 checks; at Paseo de Roxas
branch-1 check; at J. Ruiz, San Juan branch, at West Avenue and Commonwealth
Quezon City branch- 2 checks; and at Vito Cruz branch-2 checks.
Each check thus deposited were retrieved by Alice Laurel after the deposit
slips were machine-validated, except the following thirteen (13) checks, which bore
no machine validation, to wit: CBC Check No. 484004, RCBC Check No. 419818,
CBC Check No. 484042, FEBTC Check No. 171857, RCBC Check No. 419847,
CBC Check No. 484053, MBTC Check No. 080726, CBC Check No. 484062, PBC
Check No. 158076, CBC Check No. 484027, CBC Check No. 484017, CBC Check
No. 484023 and CBC Check No. 218190.
A verification with BPI by LMC showed that Alice Laurel made check
deposits with the named BPI branches and, after the check deposit slips were
machine-validated, requested the teller to reverse the transactions. Based on general
banking practices, however, the cancellation of deposit or payment transactions
upon request by any depositor or payor, requires that all copies of the deposit slips
must be retrieved or surrendered to the bank. This practice, in effect, cancels the
deposit or payment transaction, thus, it leaves no evidence for any subsequent claim
or misrepresentation made by any innocent third person. Notwithstanding this, the
verbal requests of Alice Laurel and her husband to reverse the deposits even after
the deposit slips were already received and consummated were accommodated by
BPI tellers.
Alice Laurel presented the machine-validated deposit slips to LMC which,

on the strength thereof, considered her account paid. LMC even granted her certain
privileges or prizes based on the deposits she made.
The total aggregate amount covered by Alice Laurels deposit slips was Two
Million Seven Hundred Sixty Seven Thousand, Five Hundred Ninety Four Pesos
(P2,767,594.00) and, for which, LMC paid Laurel the total sum of Five Hundred
Sixty Thousand Seven Hundred Twenty Six Pesos (P560,726.00) by way of sales
discount and promo prizes.
The above fraudulent transactions of Alice Laurel and her husband was
made possible through BPI tellers failure to retrieve the duplicate original copies of
the deposit slips from the former, every time they ask for cancellation or reversal
of the deposit or payment transaction.
Upon discovery of this fraud in early August 1992, LMC made queries from
the BPI branches involved. In reply to said queries, BPI branch managers formally
admitted that they cancelled, without the permission of or due notice to LMC, the
deposit transactions made by Alice and her husband, and based only upon the latters
verbal request or representation.
Thereafter, LMC immediately instituted a criminal action for Estafa against

Alice Laurel and her husband Thomas Limoanco, before the Regional Trial Court
of Makati, Branch 65, docketed as Criminal Case No. 93-7970 to 71, entitled People
of the Philippines v. Thomas Limoanco and Alice Laurel. This case for estafa,
however, was archived because summons could not be served upon the spouses as
they have absconded. Thus, the BPIs apparent reluctance to admit liability and
settle LMCs claim for damages, and a hopeless case of recovery from Alice Laurel
and her husband, has left LMC, with no option but to recover damages from BPI.
On July 24, 1995, LMC, through its representative, Miss Consolacion C.

Rogacion, the President of the company, filed a Complaint for Damages against
BPI, docketed as Civil Case No. 95-1106, and was raffled to Regional Trial Court
of Makati City, Branch 141.
After trial on the merits, the court a quo rendered a Decision in favor of
LMC. The dispositive portion of which reads, as follows:
WHEREFORE, decision is hereby rendered ordering defendant bank to

pay plaintiff actual damages equitably reduced to one (1) million pesos plus
attorneys fees of P100,000.00.
No pronouncement as to costs.
SO ORDERED.2[2]
Only BPI filed an appeal. The Court of Appeals affirmed the decision of the
trial court but increased the award of actual damages to P2,075,695.50 and deleted
the award of P100,000.00 as attorneys fees.3[3] Citing public interest, the appellate
court denied reconsideration in a Resolution4[4] dated 30 January 2007.
In this Petition for Review5[5] dated 19 March 2007, BPI insists that LMC
should have presented evidence to prove not only the amount of the checks that were
deposited and subsequently reversed, but also the actual delivery of the books and
the payment of sales and promo prizes to Alice Laurel. Failing this, there was
allegedly no basis for the award of actual damages. Moreover, the actual damages
should not have been increased because the decision of the trial court became
conclusive as regards LMC when it did not appeal the said decision.
BPI further avers that LMCs negligence in considering the machine-validated

check deposit slips as evidence of Alice Laurels payment was the proximate cause
of its own loss. Allegedly, by allowing its agents to make deposits with other BPI
branches, LMC violated its own special arrangement with BPIs Greenhills-EDSA
branch for the latter to hold on to an extra copy of the deposit slip for pick up by
LMCs authorized representatives. BPI points out that the deposits were in check and
not in cash. As such, LMC should have borne in mind that the machine validation in
the deposit slips is still subject to the sufficiency of the funds in the drawers account.
Furthermore, LMC allegedly ignored the express notice indicated in its monthly
bank statements and consequently failed to check the accuracy of the transactions
reflected therein.
In its Manifestation of Compliance by Respondent on the Order Dated 20 June

2007 Received on 29 July 2007 to Submit Comment,6[6] dated 9 August 2007, LMC
insists that it is indeed entitled to the actual damages awarded to it by the appellate
court.
BPI filed a Reply7[7] dated 15 January 2008, in reiteration of its submissions.
We have repeatedly emphasized that the banking industry is impressed with

public interest. Of paramount importance thereto is the trust and confidence of the
public in general. Accordingly, the highest degree of diligence is expected, and high
standards of integrity and performance are required of it. By the nature of its
functions, a bank is under obligation to treat the accounts of its depositors with
meticulous care, always having in mind the fiduciary nature of its relationship with
them.8[8] The fiduciary nature of banking, previously imposed by case law, is now
enshrined in Republic Act No. 8791 or the General Banking Law of 2000. Section
2 thereof specifically says that the state recognizes the fiduciary nature of banking
that requires high standards of integrity and performance.9[9]
Whether BPI observed the highest degree of care in handling LMCs account
is the subject of the inquiry in this case.
LMC sought recovery from BPI on a cause of action based on tort. Article
2176 of the Civil Code provides, Whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the damage done. Such
fault or negligence if there is no pre-existing contractual relation between the parties,
is called a quasi-delict and is governed by the provisions of this Chapter." There are
three elements of quasi-delict: (a) fault or negligence of the defendant, or some other
person for whose acts he must respond; (b) damages suffered by the plaintiff; and
(c) the connection of cause and effect between the fault or negligence of the
defendant and the damages incurred by the plaintiff.10[10]
In this case, both the trial court and the Court of Appeals found that the
reversal of the transactions in question was unilaterally undertaken by BPIs tellers
without following normal banking procedure which requires them to ensure that all
copies of the deposit slips are surrendered by the depositor. The machine-validated
deposit slips do not show that the transactions have been cancelled, leading LMC to
rely on these slips and to consider Alice Laurels account as already paid.
Negligence is the omission to do something which a reasonable man, guided

by those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man would not
do.11[11] Negligence in this case lies in the tellers disregard of the validation
procedures in place and BPIs utter failure to supervise its employees. Notably, BPIs
managers admitted in several correspondences with LMC that the deposit
transactions were cancelled without LMCs knowledge and consent and based only
upon the request of Alice Laurel and her husband.12[12]
It is well to reiterate that the degree of diligence required of banks is more

than that of a reasonable man or a good father of a family. In view of the fiduciary
nature of their relationship with their depositors, banks are duty-bound to treat the
accounts of their clients with the highest degree of care.13[13]
BPI cannot escape liability because of LMCs failure to scrutinize the monthly
statements sent to it by the bank. This omission does not change the fact that were it
not for the wanton and reckless negligence of BPIs tellers in failing to require the
surrender of the machine-validated deposit slips before reversing the deposit
transactions, the loss would not have occurred. BPIs negligence is undoubtedly the
proximate cause of the loss. Proximate cause is that cause which, in a natural and
continuous sequence, unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred.14[14]
It is also true, however, that LMC should have been more vigilant in managing
and overseeing its own financial affairs. The damages awarded to it were correctly
reduced on account of its own contributory negligence in accordance with Article
1172 of the Civil Code.15[15]
Parenthetically, we find no merit in BPIs allegation that LMC should have

presented evidence of delivery of the books and payment of sales and promo prizes
to Alice Laurel. The evidence presented by LMC in the form of BPIs own admission
that the deposit transactions were
reversed at the instance of Alice Laurel and her husband, coupled with the machine-
validated deposit slips16[16] which were supposed to have been deposited to LMCs
account but were cancelled without its knowledge and consent, sufficiently form the
bases for the actual damages claimed because they are the very same documents
relied upon by LMC in considering Alice Laurels account paid and in granting her
monetary privileges and prizes.
Be that as it may, we find the appellate courts decision increasing the award
of actual damages in favor of LMC improper since the latter did not appeal from the
decision of the trial court. It is well-settled that a party who does not appeal from the
decision may not obtain any affirmative relief from the appellate court other than
what he has obtained from the lower court whose decision is brought up on appeal.
The exceptions to this rule, such as where there are (1) errors affecting the lower
courts jurisdiction over the subject matter, (2) plain errors not specified, and (3)
clerical errors, do not apply in this case.17[17]
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No.

62769 dated 31 July 2006 and its Resolution dated January 30, 2007 are AFFIRMED
with the MODIFICATION that the Bank of the Philippine Islands is ordered to pay
actual damages to Lifetime
Marketing Corporation in the amount of One Million Pesos (P1,000,000.00). No
pronouncement as to costs.
SO ORDERED.

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SECOND DIVISION

BANK OF THE PHILIPPINE G.R. No. 176434

- versus - CARPIO MORALES,

VELASCO, JR., and

June 25, 2008

On October 22, 1981, Lifetime Marketing Corporation (LMC, for brevity),

Sometime in 1986, LMC availed of the BPIs inter-branch banking network

As a business practice, the registered sales agents or the Lifetime

Alice Laurel, is one of LMCs Educational Consultants or agents. On various

Alice Laurel presented the machine-validated deposit slips to LMC which,

Thereafter, LMC immediately instituted a criminal action for Estafa against

On July 24, 1995, LMC, through its representative, Miss Consolacion C.

WHEREFORE, decision is hereby rendered ordering defendant bank to

BPI further avers that LMCs negligence in considering the machine-validated

In its Manifestation of Compliance by Respondent on the Order Dated 20 June

We have repeatedly emphasized that the banking industry is impressed with

Negligence is the omission to do something which a reasonable man, guided

It is well to reiterate that the degree of diligence required of banks is more

Parenthetically, we find no merit in BPIs allegation that LMC should have

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No.

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