SECOND DIVISION

[G.R. No. 176434. June 25, 2008.]

BANK OF THE PHILIPPINE ISLANDS , petitioner, vs . LIFETIME

MARKETING CORPORATION , respondent.

DECISION

TINGA , J : p

The Bank of the Philippine Islands (BPI) seeks the reversal of the Decision 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 LMC's 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 former's agents will accomplish three (3) copies of the deposit slips, the
third copy to be retained and held by the teller until LMC's authorized
representatives, Mrs. Virginia Mongon and Mrs. Violeta Ancajas, shall retrieve
them on the following banking day.
Sometime in 1986, LMC availed of the BPI's inter-branch banking
network services in Metro Manila, whereby the former's agents could make [a]
deposit to any BPI branch in Metro Manila under the same account. Under this
system, BPI's 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 LMC's 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. AHCcET

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 LMC's 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 LMC's "Educational Consultants" or agents. On
various dates covering the period from May, [sic] 1991 up to August, 1992, Alice
Laurel deposited checks to LMC's subject account at different branches of BPI,
speci cally: at the Harrison/Buendia branch-8 checks; at Arrangue branch-4
checks; at Araneta branch-1 check; at Binondo branch-3 checks; at Ermita
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 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 veri cation 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. IAETDc

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 Laurel's 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 teller's 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 latter's 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 BPI's apparent reluctance
to admit liability and settle LMC's 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.
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 Rogacion, the President of the company, led a Complaint for Damages against
BPI, docketed as Civil Case No. 95-1106, and was ra ed 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: IEHaSc

WHEREFORE , decision is hereby rendered ordering defendant bank

to pay plaintiff actual damages equitably reduced to one (1) million pesos
plus attorney's fees of P100,000.00.
No pronouncement as to costs.
SO ORDERED . 2
Only BPI led an appeal. The Court of Appeals a rmed 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 attorney's fees. 3 Citing public interest, the appellate court
denied reconsideration in a Resolution 4 dated 30 January 2007.
In this Petition for Review 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 LMC's negligence in considering the machine-validated
check deposit slips as evidence of Alice Laurel's 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 BPI's Greenhills-EDSA branch
for the latter to hold on to an extra copy of the deposit slip for pick up by LMC's
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 su ciency 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 re ected
therein.
In its Manifestation of Compliance by Respondent on the Order Dated 20 June
2007 Received on 29 July 2007 to Submit Comment, 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 Reply 7 dated 15 January 2008, in reiteration of its submissions. DACIHc

We have repeatedly emphasized that the banking industry is impressed with

public interest. Of paramount importance thereto is the trust and con dence 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 duciary nature of its relationship with them. 8 The duciary
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 speci cally says that the
state recognizes the duciary nature of banking that requires high standards of
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 integrity and performance. 9
Whether BPI observed the highest degree of care in handling LMC's 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. 1 0
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 BPI's 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 Laurel's 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. 1 1
Negligence in this case lies in the tellers' disregard of the validation procedures in place
and BPI's utter failure to supervise its employees. Notably, BPI's managers admitted in
several correspondences with LMC that the deposit transactions were cancelled
without LMC's knowledge and consent and based only upon the request of Alice Laurel
and her husband. 1 2 DIEAHc

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 duciary nature of
their relationship with their depositors, banks are duty-bound to treat the accounts of
their clients with the highest degree of care. 1 3
BPI cannot escape liability because of LMC's 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 BPI's tellers in failing to require the
surrender of the machine-validated deposit slips before reversing the deposit
transactions, the loss would not have occurred. BPI's negligence is undoubtedly the
proximate cause of the loss. Proximate cause is that cause which, in a natural and
continuous sequence, unbroken by any e cient intervening cause, produces the injury,
and without which the result would not have occurred. 1 4
It is also true, however, that LMC should have been more vigilant in managing and
overseeing its own nancial 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. 1 5
Parenthetically, we nd no merit in BPI's 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 BPI's own admission that
the deposit transactions were reversed at the instance of Alice Laurel and her husband,
coupled with the machine-validated deposit slips 1 6 which were supposed to have been
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 deposited to LMC's account but were cancelled without its knowledge and consent,
su ciently form the bases for the actual damages claimed because they are the very
same documents relied upon by LMC in considering Alice Laurel's account paid and in
granting her monetary privileges and prizes.
Be that as it may, we nd the appellate court's 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 a rmative 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 court's
jurisdiction over the subject matter, (2) plain errors not speci ed, and (3) clerical errors,
do not apply in this case. 1 7 CADHcI

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.
Quisumbing, Carpio-Morales, Velasco, Jr. and Brion, JJ., concur.

Footnotes

1. Rollo, pp. 7-21; penned by Associate Justice Normandie B. Pizarro and concurred in by
Associate Justices Josefina Guevara-Salonga and Aurora Santiago-Lagman.

2. Id. at 8-13.
3. Id. at 20-21.

4. Id. at 22-23.
5. Id. at 28-49.
6. Id. at 84-88.

7. Temporary Rollo. HcSETI

8. Citibank, N.A. v. Cabamongan, G.R. No. 146918, 2 May 2006, 488 SCRA 517, 531; Prudential
Bank v. Lim, G.R. No. 136371, 11 November 2005, 474 SCRA 485, 495.
9. Associated Bank v. Tan, G.R. No. 156940, 14 December 2004, 446 SCRA 282, 292.

10. Philippine Bank of Commerce v. CA, 336 Phil. 667, 675 (1997).
11. Philippine Bank of Commerce v. CA, 336 Phil. 667, 676 (1997).

12. Records, pp. 28-36.

13. Supra, note 10.
14. Bank of the Philippine Islands v. Casa Montessori Internationale, G.R. No. 149507, 28 May
2004, 430 SCRA 261, 287.
15. The Consolidated Bank & Trust Corporation v. Court of Appeals, 457 Phil. 688, 713 (2003).
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 16. Records, pp. 15-27.

17. Real v. Belo, G.R. No. 146224, 26 January 2007, 513 SCRA 111, 126-127; Santos v. Court of
Appeals, G.R. No. 100963, 6 April 1993, 221 SCRA 42, 46.

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