Facts:

The case revolves around the Bank of the Philippine Islands (BPI) as the petitioner and Lifetime Marketing Corporation (LMC) as the respondent. On October 22, 1981, LMC opened a current account with BPI at its Greenhills-Edsa branch, designated as Account No. 3101-0680-63. This account was intended for sales agents of LMC to deposit their collections or payments. An arrangement was specifically made where the agents would produce three copies of deposit slips—one for LMC and the second to be retained by BPI until it was retrieved by LMC's authorized representatives.

In 1986, LMC took advantage of BPI’s inter-branch banking services so that the agents could deposit funds at various branches without the requirement of presenting a retained copy of the deposit slips. In practice, BPI started to rely solely on machine-validated deposit slips provided by the agents. LMC routinely checked these deposits against their own records and issued receipts to the agents based on validate

...

Facts:

Establishment of the Special Banking Arrangement

• In October 22, 1981, Lifetime Marketing Corporation (LMC) opened a current account with the Bank of the Philippine Islands (BPI) at its Greenhills-Edsa branch (Account No. 3101-0680-63).
• LMC and BPI agreed on a special arrangement wherein LMC’s “sales agents” were to deposit payments by providing three copies of the deposit slips; the teller would retain the third copy until LMC’s authorized representatives (Mrs. Virginia Mongon and Mrs. Violeta Ancajas) retrieved them on the following banking day.

Modification of the Deposit Process

• Around 1986, LMC availed itself of BPI’s inter-branch banking network services in Metro Manila, permitting agents to deposit payments across various BPI branches.
• Under this system, BPI tellers relied on the machine-validated deposit slip for recordkeeping and no longer retained the extra copy, while LMC received monthly bank statements reflecting the transactions.

The Business Practices and Transaction Procedures of LMC

• LMC engaged its registered sales agents or “Lifetime Educational Consultants” on a consignment basis to distribute books, with the agents paying LMC seven days after the books were picked up.
• It was standard practice for LMC to require agents to present a validated deposit slip to substantiate payments, on the basis of which LMC issued receipts and granted certain privileges or prizes.

Fraudulent Transactions and BPI’s Negligence

• Alice Laurel, one of LMC’s educational consultants, deposited checks between May 1991 and August 1992 at various BPI branches.
• While most checks were processed with proper machine validation, thirteen (13) checks lacked machine validation.
• LMC’s verification confirmed that after machine validation, Alice Laurel requested the reversal of some transactions, which was processed by BPI tellers solely on verbal request.
• BPI’s standard procedure for cancellation—retrieval of all copies of the deposit slips—was not followed, thereby leaving machine-validated slips as evidence that the deposits had been made.

Consequences of the Cancellation and Its Discovery

• Relying on the machine-validated deposit slips, LMC assumed that the deposited amounts were credited, and accordingly, granted privileges and sales discounts and prizes to Alice Laurel.
• The total amount reflected by the validated slips amounted to P2,767,594.00, from which LMC disbursed P560,726.00 to Alice Laurel as “sales discount and promo prizes.”
• Upon discovering the fraudulent reversal in early August 1992, LMC confirmed, through inquiries to various BPI branches, that deposit transactions were cancelled without its knowledge or consent.

Initiation of Legal Actions by LMC

• LMC first instituted a criminal action for Estafa against Alice Laurel and her husband, Thomas Limoanco, which was later archived due to the inability to serve summons.
• On July 24, 1995, LMC filed a Complaint for Damages against BPI in Civil Case No. 95-1106 before the Regional Trial Court of Makati City, Branch 141.
• The trial court rendered a decision ordering BPI to pay LMC actual damages of P1,000,000 plus attorney’s fees of P100,000.00, which was subsequently modified on appeal.

Procedural History and Appellate Decisions

• BPI was the only party to appeal the trial court decision.
• The Court of Appeals affirmed the decision in favor of LMC, increasing the award of actual damages to P2,075,695.50 and deleting the attorney’s fees award.
• LMC further manifested its compliance claiming entitlement to the damages as awarded, while BPI maintained several arguments regarding evidence and contributory negligence.

Core Evidence and Submissions

• LMC’s evidence largely relied on BPI’s own admissions that the tellers cancelled the deposit transactions solely on verbal requests.
• The machine-validated deposit slips, which were not appropriately cancelled, served as the basis for LMC’s claim, since they were used to justify the granting of privileges to Alice Laurel.
• BPI contended that LMC failed to present evidence of the actual delivery of books and payment of prizes and further argued that LMC itself contributed to the loss by relying on the slips without verifying the monthly statements.

Issue:

Whether BPI’s tellers, by failing to follow standard deposit cancellation procedures (i.e., not retrieving all copies of the deposit slips), committed gross negligence in processing LMC’s transactions.

• Determining the extent to which the cancellation, based solely on verbal instructions even after machine validation, constituted a breach of standard banking practice.

Whether the machine-validated deposit slips could be considered sufficient evidence of payment to LMC, given that BPI processed reversals inadequately.

• Analysis of the effect of these slips on LMC’s subsequent business transactions (e.g., granting sales discounts and promotional prizes).

To what extent LMC’s own contributory negligence—through failure to verify monthly bank statements and oversight of its accounts—affected the awarding and amount of damages.

• The issue also examined whether LMC’s inattention should reduce its recoverable damages.

Whether the increase in the award of actual damages by the Court of Appeals, despite LMC not appealing the trial court decision, was proper and within the bounds of appellate jurisdiction.

• This includes a consideration of the established rule barring parties from obtaining additional relief on appeal except under limited exceptions.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)