FIRST DIVISION

[G.R. No. 126297. January 31, 2007.]

PROFESSIONAL SERVICES, INC. , petitioner, vs . NATIVIDAD and

ENRIQUE AGANA , respondents.

[G.R. No. 126467. January 31, 2007.]

NATIVIDAD (Substituted by her children MARCELINO AGANA III,

ENRIQUE AGANA, JR., EMMA AGANA ANDAYA, JESUS AGANA, and
RAYMUND AGANA) and ENRIQUE AGANA , petitioners, vs . JUAN
FUENTES , respondents.

[G.R. No. 127590. January 31, 2007.]

MIGUEL AMPIL , petitioner, vs . NATIVIDAD AGANA and ENRIQUE

AGANA , respondents.

DECISION

SANDOVAL-GUTIERREZ , J : p

Hospitals, having undertaken one of mankind's most important and delicate

endeavors, must assume the grave responsibility of pursuing it with appropriate care. The
care and service dispensed through this high trust, however technical, complex and
esoteric its character may be, must meet standards of responsibility commensurate with
the undertaking to preserve and protect the health, and indeed, the very lives of those
placed in the hospital's keeping. 1
Assailed in these three consolidated petitions for review on certiorari is the Court of
Appeals' Decision 2 dated September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No.
32198 a rming with modi cation the Decision 3 dated March 17, 1993 of the Regional
Trial Court (RTC), Branch 96, Quezon City in Civil Case No. Q-43322 and nullifying its Order
dated September 21, 1993.
The facts, as culled from the records, are:
On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital
(Medical City Hospital) because of di culty of bowel movement and bloody anal
discharge. After a series of medical examinations, Dr. Miguel Ampil, petitioner in G.R. No.
127590, diagnosed her to be suffering from "cancer of the sigmoid."
On April 11, 1984, Dr. Ampil, assisted by the medical staff 4 of the Medical City
Hospital, performed an anterior resection surgery on Natividad. He found that the
malignancy in her sigmoid area had spread on her left ovary, necessitating the removal of
certain portions of it. Thus, Dr. Ampil obtained the consent of Natividad's husband, Enrique
Agana, to permit Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform
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 hysterectomy on her.
After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed
the operation and closed the incision. CAcEaS

However, the operation appeared to be awed. In the corresponding Record of

Operation dated April 11, 1984, the attending nurses entered these remarks:
"sponge count lacking 2

"announced to surgeon searched (sic) done but to no avail

continue
for closure."

On April 24, 1984, Natividad was released from the hospital. Her hospital and
medical bills, including the doctors' fees, amounted to P60,000.00.
After a couple of days, Natividad complained of excruciating pain in her anal region.
She consulted both Dr. Ampil and Dr. Fuentes about it. They told her that the pain was the
natural consequence of the surgery. Dr. Ampil then recommended that she consult an
oncologist to examine the cancerous nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States
to seek further treatment. After four months of consultations and laboratory examinations,
Natividad was told she was free of cancer. Hence, she was advised to return to the
Philippines.
On August 31, 1984, Natividad ew back to the Philippines, still suffering from
pains. Two weeks thereafter, her daughter found a piece of gauze protruding from her
vagina. Upon being informed about it, Dr. Ampil proceeded to her house where he
managed to extract by hand a piece of gauze measuring 1.5 inches in width. He then
assured her that the pains would soon vanish.
Dr. Ampil's assurance did not come true. Instead, the pains intensi ed, prompting
Natividad to seek treatment at the Polymedic General Hospital. While con ned there, Dr.
Ramon Gutierrez detected the presence of another foreign object in her vagina — a foul-
smelling gauze measuring 1.5 inches in width which badly infected her vaginal vault. A
recto-vaginal stula had formed in her reproductive organs which forced stool to excrete
through the vagina. Another surgical operation was needed to remedy the damage. Thus, in
October 1984, Natividad underwent another surgery.
On November 12, 1984, Natividad and her husband led with the RTC, Branch 96,
Quezon City a complaint for damages against the Professional Services, Inc. (PSI), owner
of the Medical City Hospital, Dr. Ampil, and Dr. Fuentes, docketed as Civil Case No. Q-
43322. They alleged that the latter are liable for negligence for leaving two pieces of
gauze inside Natividad's body and malpractice for concealing their acts of negligence. DECcAS

Meanwhile, Enrique Agana also led with the Professional Regulation Commission
(PRC) an administrative complaint for gross negligence and malpractice against Dr. Ampil
and Dr. Fuentes, docketed as Administrative Case No. 1690. The PRC Board of Medicine
heard the case only with respect to Dr. Fuentes because it failed to acquire jurisdiction
over Dr. Ampil who was then in the United States.
On February 16, 1986, pending the outcome of the above cases, Natividad died and
was duly substituted by her above-named children (the Aganas).
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 On March 17, 1993, the RTC rendered its Decision in favor of the Aganas, nding PSI,
Dr. Ampil and Dr. Fuentes liable for negligence and malpractice, the decretal part of which
reads:
WHEREFORE , judgment is hereby rendered for the plaintiffs ordering the
defendants PROFESSIONAL SERVICES, INC., DR. MIGUEL AMPIL and DR.
JUAN FUENTES to pay to the plaintiffs, jointly and severally, except in respect of
the award for exemplary damages and the interest thereon which are the liabilities
of defendants Dr. Ampil and Dr. Fuentes only, as follows:

1. As actual damages, the following amounts:

a. The equivalent in Philippine Currency of the total of US$19,900.00

at the rate of P21.60-US$1.00, as reimbursement of actual expenses
incurred in the United States of America;

b. The sum of P4,800.00 as travel taxes of plaintiffs and their

physician daughter;
c. The total sum of P45,802.50, representing the cost of
hospitalization at Polymedic Hospital, medical fees, and cost of the
saline solution;

2. As moral damages, the sum of P2,000,000.00;

3. As exemplary damages, the sum of P300,000.00;

4. As attorney's fees, the sum of P250,000.00;

5. Legal interest on items 1 (a), (b), and (c); 2; and 3 hereinabove, from date of
filing of the complaint until full payment; and

6. Costs of suit.

SO ORDERED .

Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the Court of
Appeals, docketed as CA-G.R. CV No. 42062.
Incidentally, on April 3, 1993, the Aganas led with the RTC a motion for a partial
execution of its Decision, which was granted in an Order dated May 11, 1993. Thereafter,
the sheriff levied upon certain properties of Dr. Ampil and sold them for P451,275.00 and
delivered the amount to the Aganas.
Following their receipt of the money, the Aganas entered into an agreement with PSI
and Dr. Fuentes to indefinitely suspend any further execution of the RTC Decision. However,
not long thereafter, the Aganas again led a motion for an alias writ of execution against
the properties of PSI and Dr. Fuentes. On September 21, 1993 , the RTC granted the
motion and issued the corresponding writ, prompting Dr. Fuentes to le with the Court of
Appeals a petition for certiorari and prohibition, with prayer for preliminary injunction,
docketed as CA-G.R. SP No. 32198. During its pendency, the Court of Appeals issued a
Resolution 5 dated October 29, 1993 granting Dr. Fuentes' prayer for injunctive relief. HEDSCc

On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with CA-G.R. CV No.
42062.
Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered its Decision 6
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 in Administrative Case No. 1690 dismissing the case against Dr. Fuentes. The Board held
that the prosecution failed to show that Dr. Fuentes was the one who left the two pieces of
gauze inside Natividad's body; and that he concealed such fact from Natividad.
On September 6, 1996, the Court of Appeals rendered its Decision jointly disposing
of CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198, thus:
WHEREFORE , except for the modi cation that the case against
defendant-appellant Dr. Juan Fuentes is hereby DISMISSED , and with the
pronouncement that defendant-appellant Dr. Miguel Ampil is liable to reimburse
defendant-appellant Professional Services, Inc. , whatever amount the latter
will pay or had paid to the plaintiffs-appellees, the decision appealed from is
hereby AFFIRMED and the instant appeal DISMISSED .
Concomitant with the above, the petition for certiorari and prohibition led
by herein defendant-appellant Dr. Juan Fuentes in CA-G.R. SP No. 32198 is hereby
GRANTED and the challenged order of the respondent judge dated September
21, 1993, as well as the alias writ of execution issued pursuant thereto are hereby
NULLIFIED and SET ASIDE . The bond posted by the petitioner in connection
with the writ of preliminary injunction issued by this Court on November 29, 1993
is hereby cancelled.
Costs against defendants-appellants Dr. Miguel Ampil and
Professional Services, Inc.
SO ORDERED .

Only Dr. Ampil led a motion for reconsideration, but it was denied in a Resolution 7
dated December 19, 1996.
Hence, the instant consolidated petitions.
I n G.R. No. 126297 , PSI alleged in its petition that the Court of Appeals erred in
holding that: (1) it is estopped from raising the defense that Dr. Ampil is not its employee;
(2) it is solidarily liable with Dr. Ampil; and (3) it is not entitled to its counterclaim against
the Aganas. PSI contends that Dr. Ampil is not its employee, but a mere consultant or
independent contractor. As such, he alone should answer for his negligence. CSDTac

In G.R. No. 126467 , the Aganas maintain that the Court of Appeals erred in nding
that Dr. Fuentes is not guilty of negligence or medical malpractice, invoking the doctrine of
res ipsa loquitur. They contend that the pieces of gauze are prima facie proofs that the
operating surgeons have been negligent.
Finally, in G.R. No. 127590 , Dr. Ampil asserts that the Court of Appeals erred in
nding him liable for negligence and malpractice sans evidence that he left the two pieces
of gauze in Natividad's vagina. He pointed to other probable causes, such as: (1) it was Dr.
Fuentes who used gauzes in performing the hysterectomy; (2) the attending nurses' failure
to properly count the gauzes used during surgery; and (3) the medical intervention of the
American doctors who examined Natividad in the United States of America.
For our resolution are these three vital issues: rst , whether the Court of Appeals
erred in holding Dr. Ampil liable for negligence and malpractice; second, whether the Court
of Appeals erred in absolving Dr. Fuentes of any liability; and third, whether PSI may be held
solidarily liable for the negligence of Dr. Ampil.
I — G.R. No. 127590
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 Whether the Court of Appeals Erred in Holding Dr. Ampil
Liable for Negligence and Malpractice .
Dr. Ampil, in an attempt to absolve himself, gears the Court's attention to other
possible causes of Natividad's detriment. He argues that the Court should not discount
either of the following possibilities: rst , Dr. Fuentes left the gauzes in Natividad's body
after performing hysterectomy; second, the attending nurses erred in counting the gauzes;
and third, the American doctors were the ones who placed the gauzes in Natividad's body.
Dr. Ampil's arguments are purely conjectural and without basis. Records show that
he did not present any evidence to prove that the American doctors were the ones who put
or left the gauzes in Natividad's body. Neither did he submit evidence to rebut the
correctness of the record of operation, particularly the number of gauzes used. As to the
alleged negligence of Dr. Fuentes, we are mindful that Dr. Ampil examined his (Dr. Fuentes')
work and found it in order.
The glaring truth is that all the major circumstances, taken together, as speci ed by
the Court of Appeals, directly point to Dr. Ampil as the negligent party, thus:
First, it is not disputed that the surgeons used gauzes as sponges to
control the bleeding of the patient during the surgical operation.
EHTCAa

Second, immediately after the operation, the nurses who assisted in the
surgery noted in their report that the ‘sponge count (was) lacking 2'; that such
anomaly was 'announced to surgeon' and that a 'search was done but
to no avail' prompting Dr. Ampil to 'continue for closure' . . . .

Third, after the operation, two (2) gauzes were extracted from the same
spot of the body of Mrs. Agana where the surgery was performed.

An operation requiring the placing of sponges in the incision is not complete until
the sponges are properly removed, and it is settled that the leaving of sponges or other
foreign substances in the wound after the incision has been closed is at least prima facie
negligence by the operating surgeon. 8 To put it simply, such act is considered so
inconsistent with due care as to raise an inference of negligence. There are even legions of
authorities to the effect that such act is negligence per se . 9
Of course, the Court is not blind to the reality that there are times when danger to a
patient's life precludes a surgeon from further searching missing sponges or foreign
objects left in the body. But this does not leave him free from any obligation . Even if
it has been shown that a surgeon was required by the urgent necessities of the case to
leave a sponge in his patient's abdomen, because of the dangers attendant upon delay,
still, it is his legal duty to so inform his patient within a reasonable time
thereafter by advising her of what he had been compelled to do . This is in order
that she might seek relief from the effects of the foreign object left in her body as her
condition might permit. The ruling in Smith v. Zeagler 1 0 is explicit, thus:
The removal of all sponges used is part of a surgical operation, and when
a physician or surgeon fails to remove a sponge he has placed in his patient's
body that should be removed as part of the operation, he thereby leaves his
operation uncompleted and creates a new condition which imposes upon
him the legal duty of calling the new condition to his patient's
attention, and endeavoring with the means he has at hand to minimize
and avoid untoward results likely to ensue therefrom .
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 Here, Dr. Ampil did not inform Natividad about the missing two pieces of gauze.
Worse, he even misled her that the pain she was experiencing was the ordinary
consequence of her operation . Had he been more candid, Natividad could have taken
the immediate and appropriate medical remedy to remove the gauzes from her body. To
our mind, what was initially an act of negligence by Dr. Ampil has ripened into a deliberate
wrongful act of deceiving his patient.
This is a clear case of medical malpractice or more appropriately, medical
negligence. To successfully pursue this kind of case, a patient must only prove that a
health care provider either failed to do something which a reasonably prudent health care
provider would have done, or that he did something that a reasonably prudent provider
would not have done; and that failure or action caused injury to the patient. 1 1 Simply put,
the elements are duty, breach, injury and proximate causation . Dr. Ampil, as the lead
surgeon, had the duty to remove all foreign objects, such as gauzes, from Natividad's body
before closure of the incision. When he failed to do so, it was his duty to inform Natividad
about it. Dr. Ampil breached both duties. Such breach caused injury to Natividad,
necessitating her further examination by American doctors and another surgery. That Dr.
Ampil's negligence is the proximate cause 1 2 of Natividad's injury could be traced from his
act of closing the incision despite the information given by the attending nurses
that two pieces of gauze were still missing . That they were later on extracted from
Natividad's vagina established the causal link between Dr. Ampil's negligence and the
injury. And what further aggravated such injury was his deliberate concealment of the
missing gauzes from the knowledge of Natividad and her family. cEaCAH

II — G.R. No. 126467

Whether the Court of Appeals Erred in Absolving
Dr. Fuentes of any Liability
The Aganas assailed the dismissal by the trial court of the case against Dr. Fuentes
on the ground that it is contrary to the doctrine of res ipsa loquitur. According to them, the
fact that the two pieces of gauze were left inside Natividad's body is a prima facie
evidence of Dr. Fuentes' negligence.
We are not convinced.
Literally, res ipsa loquitur means "the thing speaks for itself." It is the rule that the
fact of the occurrence of an injury, taken with the surrounding circumstances, may permit
an inference or raise a presumption of negligence, or make out a plaintiff's prima facie
case, and present a question of fact for defendant to meet with an explanation. 1 3 Stated
differently, where the thing which caused the injury, without the fault of the injured, is under
the exclusive control of the defendant and the injury is such that it should not have
occurred if he, having such control used proper care, it affords reasonable evidence , in
the absence of explanation that the injury arose from the defendant's want of care, and the
burden of proof is shifted to him to establish that he has observed due care and diligence.
14

From the foregoing statements of the rule, the requisites for the applicability of the
doctrine of res ipsa loquitur are: (1) the occurrence of an injury; (2) the thing which caused
the injury was under the control and management of the defendant; (3) the occurrence
was such that in the ordinary course of things, would not have happened if those who had
control or management used proper care; and (4) the absence of explanation by the
defendant. Of the foregoing requisites, the most instrumental is the "control and
management of the thing which caused the injury ." 1 5
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 We nd the element of "control and management of the thing which caused the
injury" to be wanting. Hence, the doctrine of res ipsa loquitur will not lie.
It was duly established that Dr. Ampil was the lead surgeon during the operation of
Natividad. He requested the assistance of Dr. Fuentes only to perform hysterectomy when
he (Dr. Ampil) found that the malignancy in her sigmoid area had spread to her left ovary.
Dr. Fuentes performed the surgery and thereafter reported and showed his work to Dr.
Ampil. The latter examined it and nding everything to be in order, allowed Dr.
Fuentes to leave the operating room . Dr. Ampil then resumed operating on Natividad.
He was about to nish the procedure when the attending nurses informed him that two
pieces of gauze were missing. A "diligent search" was conducted, but the misplaced
gauzes were not found. Dr. Ampil then directed that the incision be closed . During
this entire period, Dr. Fuentes was no longer in the operating room and had, in fact, left the
hospital. HTSaEC

Under the "Captain of the Ship " rule, the operating surgeon is the person in
complete charge of the surgery room and all personnel connected with the operation.
Their duty is to obey his orders. 1 6 As stated before, Dr. Ampil was the lead surgeon . In
other words, he was the "Captain of the Ship." That he discharged such role is evident from
his following conduct: (1) calling Dr. Fuentes to perform a hysterectomy; (2) examining
the work of Dr. Fuentes and nding it in order; (3) granting Dr. Fuentes' permission to
leave; and (4) ordering the closure of the incision. To our mind, it was this act of
ordering the closure of the incision notwithstanding that two pieces of gauze
remained unaccounted for, that caused injury to Natividad's body . Clearly, the
control and management of the thing which caused the injury was in the hands of Dr.
Ampil, not Dr. Fuentes.
In this jurisdiction, res ipsa loquitur is not a rule of substantive law, hence, does not
per se create or constitute an independent or separate ground of liability, being a mere
evidentiary rule. 1 7 In other words, mere invocation and application of the doctrine does not
dispense with the requirement of proof of negligence. Here, the negligence was proven to
have been committed by Dr. Ampil and not by Dr. Fuentes.
III — G.R. No. 126297
Whether PSI Is Liable for the Negligence of Dr. Ampil
The third issue necessitates a glimpse at the historical development of hospitals
and the resulting theories concerning their liability for the negligence of physicians.
Until the mid-nineteenth century, hospitals were generally charitable institutions,
providing medical services to the lowest classes of society, without regard for a patient's
ability to pay. 1 8 Those who could afford medical treatment were usually treated at home
by their doctors. 1 9 However, the days of house calls and philanthropic health care are over.
The modern health care industry continues to distance itself from its charitable past and
has experienced a signi cant conversion from a not-for-pro t health care to for-pro t
hospital businesses. Consequently, signi cant changes in health law have accompanied
the business-related changes in the hospital industry. One important legal change is an
increase in hospital liability for medical malpractice. Many courts now allow claims for
hospital vicarious liability under the theories of respondeat superior, apparent authority,
ostensible authority, or agency by estoppel. 2 0
In this jurisdiction, the statute governing liability for negligent acts is Article 2176 of
the Civil Code, which reads:
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 Art. 2176 . 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. cHAaEC

A derivative of this provision is Article 2180, the rule governing vicarious liability
under the doctrine of respondeat superior, thus:
ART. 2180. The obligation imposed by Article 2176 is demandable not
only for one's own acts or omissions, but also for those of persons for whom one
is responsible.
xxx xxx xxx
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches
in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks even though
the former are not engaged in any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father of a
family to prevent damage.

A prominent civilist commented that professionals engaged by an employer, such

as physicians, dentists, and pharmacists, are not "employees" under this article because
the manner in which they perform their work is not within the control of the latter
(employer). In other words, professionals are considered personally liable for the
fault or negligence they commit in the discharge of their duties, and their
employer cannot be held liable for such fault or negligence . In the context of the
present case, "a hospital cannot be held liable for the fault or negligence of a physician or
surgeon in the treatment or operation of patients." 2 1
The foregoing view is grounded on the traditional notion that the professional
status and the very nature of the physician's calling preclude him from being classed as an
agent or employee of a hospital, whenever he acts in a professional capacity. 2 2 It has
been said that medical practice strictly involves highly developed and specialized
knowledge, 2 3 such that physicians are generally free to exercise their own skill and
judgment in rendering medical services sans interference . 2 4 Hence, when a doctor
practices medicine in a hospital setting, the hospital and its employees are deemed to
subserve him in his ministrations to the patient and his actions are of his own
responsibility. 2 5
The case of Schloendorff v. Society of New York Hospital 2 6 was then considered an
authority for this view. The " Schloendorff doctrine" regards a physician, even if employed
by a hospital, as an independent contractor because of the skill he exercises and the
lack of control exerted over his work. Under this doctrine, hospitals are exempt from the
application of the respondeat superior principle for fault or negligence committed by
physicians in the discharge of their profession.
However, the e cacy of the foregoing doctrine has weakened with the signi cant
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 developments in medical care. Courts came to realize that modern hospitals are
increasingly taking active role in supplying and regulating medical care to patients. No
longer were a hospital's functions limited to furnishing room, food, facilities for treatment
and operation, and attendants for its patients. Thus, in Bing v. Thunig , 2 7 the New York
Court of Appeals deviated from the Schloendorff doctrine, noting that modern hospitals
actually do far more than provide facilities for treatment. Rather, they regularly employ, on
a salaried basis, a large staff of physicians, interns, nurses, administrative and manual
workers. They charge patients for medical care and treatment, even collecting for such
services through legal action, if necessary. The court then concluded that there is no
reason to exempt hospitals from the universal rule of respondeat superior.
In our shores, the nature of the relationship between the hospital and the physicians
is rendered inconsequential in view of our categorical pronouncement in Ramos v. Court of
Appeals 2 8 that for purposes of apportioning responsibility in medical negligence cases,
an employer-employee relationship in effect exists between hospitals and their
attending and visiting physicians . This Court held:
"We now discuss the responsibility of the hospital in this particular
incident. The unique practice (among private hospitals) of lling up specialist
staff with attending and visiting "consultants," who are allegedly not hospital
employees, presents problems in apportioning responsibility for negligence in
medical malpractice cases. However, the difficulty is more apparent than real. HIACac

In the rst place, hospitals exercise signi cant control in the

hiring and ring of consultants and in the conduct of their work within
the hospital premises. Doctors who apply for 'consultant' slots, visiting
or attending, are required to submit proof of completion of residency,
their educational quali cations, generally, evidence of accreditation by
the appropriate board (diplomate), evidence of fellowship in most
cases, and references. These requirements are carefully scrutinized by
members of the hospital administration or by a review committee set up
by the hospital who either accept or reject the application. . . .
After a physician is accepted, either as a visiting or attending
consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and residents,
moderate grand rounds and patient audits and perform other tasks and
responsibilities, for the privilege of being able to maintain a clinic in
the hospital, and/or for the privilege of admitting patients into the
hospital. In addition to these, the physician's performance as a specialist is
generally evaluated by a peer review committee on the basis of mortality and
morbidity statistics, and feedback from patients, nurses, interns and residents. A
consultant remiss in his duties, or a consultant who regularly falls short of
the minimum standards acceptable to the hospital or its peer review
committee, is normally politely terminated. caTESD

In other words, private hospitals, hire, re and exercise real

control over their attending and visiting 'consultant' staff. While
'consultants' are not, technically employees, . . . , the control exercised,
the hiring, and the right to terminate consultants all ful ll the important
hallmarks of an employer-employee relationship, with the exception of
the payment of wages . In assessing whether such a relationship in fact exists,
the control test is determining. Accordingly, on the basis of the foregoing, we rule
that for the purpose of allocating responsibility in medical negligence
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 cases, an employer-employee relationship in effect exists between
hospitals and their attending and visiting physicians. "

But the Ramos pronouncement is not our only basis in sustaining PSI's liability. Its
liability is also anchored upon the agency principle of apparent authority or agency by
estoppel and the doctrine of corporate negligence which have gained acceptance in
the determination of a hospital's liability for negligent acts of health professionals. The
present case serves as a perfect platform to test the applicability of these doctrines, thus,
enriching our jurisprudence. TaISEH

Apparent authority, or what is sometimes referred to as the "holding out" theory, or

doctrine of ostensible agency or agency by estoppel , 2 9 has its origin from the law of
agency. It imposes liability, not as the result of the reality of a contractual relationship, but
rather because of the actions of a principal or an employer in somehow misleading the
public into believing that the relationship or the authority exists. 3 0 The concept is
essentially one of estoppel and has been explained in this manner:
"The principal is bound by the acts of his agent with the apparent authority
which he knowingly permits the agent to assume, or which he holds the agent out
to the public as possessing. The question in every case is whether the principal
has by his voluntary act placed the agent in such a situation that a person of
ordinary prudence, conversant with business usages and the nature of the
particular business, is justi ed in presuming that such agent has authority to
perform the particular act in question. 3 1

The applicability of apparent authority in the eld of hospital liability was upheld
long time ago in Irving v. Doctor Hospital of Lake Worth, Inc . 3 2 There, it was explicitly
stated that "there does not appear to be any rational basis for excluding the
concept of apparent authority from the eld of hospital liability." Thus, in cases
where it can be shown that a hospital, by its actions, has held out a particular physician as
its agent and/or employee and that a patient has accepted treatment from that physician
in the reasonable belief that it is being rendered in behalf of the hospital, then the hospital
will be liable for the physician's negligence.
Our jurisdiction recognizes the concept of an agency by implication or estoppel.
Article 1869 of the Civil Code reads:
ART. 1869 . Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.

In this case, PSI publicly displays in the lobby of the Medical City Hospital the names
and specializations of the physicians associated or accredited by it, including those of Dr.
Ampil and Dr. Fuentes. We concur with the Court of Appeals' conclusion that it "is now
estopped from passing all the blame to the physicians whose names it proudly
paraded in the public directory leading the public to believe that it vouched for
their skill and competence ." Indeed, PSI's act is tantamount to holding out to the public
that Medical City Hospital, through its accredited physicians , offers quality health care
services. By accrediting Dr. Ampil and Dr. Fuentes and publicly advertising their
quali cations, the hospital created the impression that they were its agents, authorized to
perform medical or surgical services for its patients. As expected, these patients,
Natividad being one of them, accepted the services on the reasonable belief that such
were being rendered by the hospital or its employees, agents, or servants. The trial court
correctly pointed out:
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 . . . regardless of the education and status in life of the patient,
he ought not be burdened with the defense of absence of employer-
employee relationship between the hospital and the independent
physician whose name and competence are certainly certi ed to the
general public by the hospital's act of listing him and his specialty in
its lobby directory, as in the case herein. The high costs of today's
medical and health care should at least exact on the hospital greater, if
not broader, legal responsibility for the conduct of treatment and
surgery within its facility by its accredited physician or surgeon,
regardless of whether he is independent or employed." 3 3

The wisdom of the foregoing ratiocination is easy to discern. Corporate entities, like
PSI, are capable of acting only through other individuals, such as physicians. If these
accredited physicians do their job well, the hospital succeeds in its mission of offering
quality medical services and thus pro ts nancially . Logically, where negligence mars
the quality of its services, the hospital should not be allowed to escape liability for the acts
of its ostensible agents. DCSTAH

We now proceed to the doctrine of corporate negligence or corporate

responsibility .
One allegation in the complaint in Civil Case No. Q-43332 for negligence and
malpractice is that PSI as owner, operator and manager of Medical City Hospital, "did not
perform the necessary supervision nor exercise diligent efforts in the
supervision of Drs. Ampil and Fuentes and its nursing staff, resident doctors,
and medical interns who assisted Drs. Ampil and Fuentes in the performance of
their duties as surgeons ." 3 4 Premised on the doctrine of corporate negligence, the trial
court held that PSI is directly liable for such breach of duty.
We agree with the trial court.
Recent years have seen the doctrine of corporate negligence as the judicial answer
to the problem of allocating hospital's liability for the negligent acts of health practitioners,
absent facts to support the application of respondeat superior or apparent authority. Its
formulation proceeds from the judiciary's acknowledgment that in these modern times,
the duty of providing quality medical service is no longer the sole prerogative and
responsibility of the physician. The modern hospitals have changed structure. Hospitals
now tend to organize a highly professional medical staff whose competence and
performance need to be monitored by the hospitals commensurate with their inherent
responsibility to provide quality medical care. 3 5
The doctrine has its genesis in Darling v. Charleston Community Hospital . 3 6 There,
the Supreme Court of Illinois held that "the jury could have found a hospital
neg lig ent , inter alia , in failing to have a su cient number of trained nurses
attending the patient; failing to require a consultation with or examination by
members of the hospital staff; and failing to review the treatment rendered to
the patient." . . . On the basis of Darling, other jurisdictions held that a hospital's
corporate negligence extends to permitting a physician known to be
incompetent to practice at the hospital . 3 7 With the passage of time, more duties
were expected from hospitals, among them: (1) the use of reasonable care in the
maintenance of safe and adequate facilities and equipment; (2) the selection and
retention of competent physicians; (3) the overseeing or supervision of all
persons who practice medicine within its walls ; and (4) the formulation, adoption
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 and enforcement of adequate rules and policies that ensure quality care for its patients. 3 8
Thus, in Tucson Medical Center, Inc. v. Misevich , 3 9 it was held that a hospital, following the
doctrine of corporate responsibility, has the duty to see that it meets the standards of
responsibilities for the care of patients. Such duty includes the proper supervision of
the members of its medical staff . And in Bost v. Riley , 4 0 the court concluded that a
patient who enters a hospital does so with the reasonable expectation that it will attempt
to cure him. The hospital accordingly has the duty to make a reasonable effort to
monitor and oversee the treatment prescribed and administered by the
physicians practicing in its premises .
In the present case, it was duly established that PSI operates the Medical City
Hospital for the purpose and under the concept of providing comprehensive medical
services to the public. Accordingly, it has the duty to exercise reasonable care to
protect from harm all patients admitted into its facility for medical treatment .
Unfortunately, PSI failed to perform such duty. The ndings of the trial court are
convincing, thus:
. . . PSI's liability is traceable to its failure to conduct an
investigation of the matter reported in the nota bene of the count nurse.
Such failure established PSI's part in the dark conspiracy of silence and
concealment about the gauzes . Ethical considerations, if not also legal,
dictated the holding of an immediate inquiry into the events, if not for the bene t
of the patient to whom the duty is primarily owed, then in the interest of arriving at
the truth. The Court cannot accept that the medical and the healing professions,
through their members like defendant surgeons, and their institutions like PSI's
hospital facility, can callously turn their backs on and disregard even a mere
probability of mistake or negligence by refusing or failing to investigate a report
of such seriousness as the one in Natividad's case. ECaScD

It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the
assistance of the Medical City Hospital's staff, composed of resident doctors, nurses, and
interns. As such, it is reasonable to conclude that PSI, as the operator of the hospital, has
actual or constructive knowledge of the procedures carried out, particularly the report
of the attending nurses that the two pieces of gauze were missing . In Fridena v.
Evans, 4 1 it was held that a corporation is bound by the knowledge acquired by or notice
given to its agents or o cers within the scope of their authority and in reference to a
matter to which their authority extends. This means that the knowledge of any of the staff
of Medical City Hospital constitutes knowledge of PSI. Now, the failure of PSI, despite the
attending nurses' report, to investigate and inform Natividad regarding the missing gauzes
amounts to callous negligence. Not only did PSI breach its duties to oversee or
supervise all persons who practice medicine within its walls, it also failed to
take an active step in xing the negligence committed . This renders PSI, not only
vicariously liable for the negligence of Dr. Ampil under Article 2180 of the Civil Code, but
also directly liable for its own negligence under Article 2176. In Fridena, the Supreme
Court of Arizona held:
. . . In recent years, however, the duty of care owed to the patient by the
hospital has expanded. The emerging trend is to hold the hospital
responsible where the hospital has failed to monitor and review medical
services being provided within its walls . See Kahn Hospital Malpractice
Prevention, 27 De Paul Rev. 23 (1977).
Among the cases indicative of the 'emerging trend' is Purcell v. Zimbelman ,
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 18 Ariz. App. 75,500 P. 2d 335 (1972). In Purcell, the hospital argued that it could
not be held liable for the malpractice of a medical practitioner because he was an
independent contractor within the hospital. The Court of Appeals pointed out
that the hospital had created a professional staff whose competence
and performance was to be monitored and reviewed by the governing
body of the hospital, and the court held that a hospital would be
negligent where it had knowledge or reason to believe that a doctor
using the facilities was employing a method of treatment or care which
fell below the recognized standard of care .

Subsequent to the Purcell decision, the Arizona Court of Appeals

held that a hospital has certain inherent responsibilities regarding the
quality of medical care furnished to patients within its walls and it
must meet the standards of responsibility commensurate with this
undertaking . Beeck v. Tucson General Hospital , 18 Ariz. App. 165, 500 P. 2d
1153 (1972). This court has con rmed the rulings of the Court of Appeals that a
hospital has the duty of supervising the competence of the doctors on its staff. . .
..

xxx xxx xxx

In the amended complaint, the plaintiffs did plead that the operation was
performed at the hospital with its knowledge, aid, and assistance, and that the
negligence of the defendants was the proximate cause of the patient's injuries.
We nd that such general allegations of negligence, along with the
evidence produced at the trial of this case, are su cient to support the
hospital's liability based on the theory of negligent supervision."

Anent the corollary issue of whether PSI is solidarily liable with Dr. Ampil for
damages, let it be emphasized that PSI, apart from a general denial of its responsibility,
failed to adduce evidence showing that it exercised the diligence of a good father of a
family in the accreditation and supervision of the latter. In neglecting to offer such proof,
PSI failed to discharge its burden under the last paragraph of Article 2180 cited earlier,
and, therefore, must be adjudged solidarily liable with Dr. Ampil. Moreover, as we have
discussed, PSI is also directly liable to the Aganas.
One nal word. Once a physician undertakes the treatment and care of a patient, the
law imposes on him certain obligations. In order to escape liability, he must possess that
reasonable degree of learning, skill and experience required by his profession. At the same
time, he must apply reasonable care and diligence in the exercise of his skill and the
application of his knowledge, and exert his best judgment. aEACcS

WHEREFORE, we DENY all the petitions and AFFIRM the challenged Decision of the
Court of Appeals in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198.
Costs against petitioners PSI and Dr. Miguel Ampil.
SO ORDERED.
Puno, C.J., Corona and Azcuna, JJ., concur.
Garcia, J., took no part.

Footnotes
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 1. Beeck v. Tucson General Hospital, 500 P. 2d 1153 (1972), citing Darling v. Charleston
Community Memorial Hospital, 33 Ill. 2d 326, 211 N.E. 2d 253.
2. Penned by Associate Justice Cancio C. Garcia (now a member of the Supreme Court)
and concurred in by Associate Justices Eugenio S. Labitoria and Artemio G. Tuquero
(both retired), Rollo, G.R. Nos. 126297, pp. 36-51; 126467, pp. 27-42; 127590, pp. 23-38.

3. Penned by Judge Lucas P. Bersamin (now Justice of the Court of Appeals), Rollo, G.R.
No. 126647, pp. 69-83.
4. The medical staff was composed of physicians, both residents and interns, as well as
nurses.

5. The dispositive portion reads:

"WHEREFORE , let a writ of preliminary injunction be issued upon petitioner's posting of
bond in the amount of P20,000.00, ENJOINING public respondents from implementing
the questioned order dated September 21, 1993 and from further taking any action in
Civil Case No. Q-43322 entitled 'Natividad G. Agana, et al., plaintiffs, versus Professional
Services, Inc., et al., defendants' pending resolution of the instant petition.
SO ORDERED ."See Rollo, G.R. No. 126297, p. 42.

6. Rollo of G.R. No. 126467, pp. 84-89.

7. Rollo of G.R. No. 127590, p. 40.
8. Rule v. Cheeseman, 317 P. 2d 472 (1957), citing Russel v. Newman, 116 Kan. 268 P. 752;
Bernsden v. Johnson, 174 Kan. 230, 255 P. 2d 1033.
9. Smith v. Zeagler, 157 So. 328 Fla. (1934), citing Ruth v. Johnson, (C.C.A.) 172 F. 191;
Reeves v. Lutz, 179 Mo. App. 61, 162 S.W. 280; Rayburn v. Day, 126 Or. 135,268 P. 1002,
59 A.L.R. 1062; Wynne v. Harvey , 96 Wash. 379, 165 P. 67; Harris v. Fall (C.C.A.) 177 F.
79, 27 L.R.A. (N.S.) 1174; Moore v. Ivey , (Tex. Civ. App.) 264 S.W. 283; 21 R.C. L. 388.

10. 157 So. 328 Fla. (1934)

11. Garcia-Rueda v. Pascasio, G.R. No. 118141, September 5, 1997, 278 SCRA 769.
12. In the leading case of Vda. de Bataclan v. Medina, (102 Phil. 181 [1957]), this Court laid
down the following definition of proximate cause in this jurisdiction as follows:

[T]hat cause, which, in natural and continuous sequence unbroken by any efficient
intervening cause, produces the injury and without which the result would not have
occurred. And more comprehensively, the proximate cause is that acting first and
producing the injury, either immediately or by setting other events in motion, all
constituting a natural and continuous chain of events, each having a close causal
connection with the immediate predecessor, the final event in the chain immediately
effecting the injury as a natural and probable result of the cause which first acted, under
which circumstances that the person responsible for the first event should, as an
ordinarily prudent and intelligent person, have reasonable ground to expect at the
moment of his act or default that an injury to some person might probably result
therefrom.

13. Ramos v. Court of Appeals, G.R. No. 124354, December 29, 1999, 321 SCRA 584.
14. Africa v. Caltex (Phils.) Inc., 123 Phil. 280 (1966).
15. Ranos v. Court of Appeals, supra. In Ramos, the phrase used is "control of the
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 instrumentality which caused the damage," citing St. John's Hospital and School of
Nursing v. Chapman, 434 P2d 160 (1967).
16. Rural Educational Assn v. Bush, 42 Tenn. App. 34, 298 S.W. 2d 761 (1956).
17. Ramos v. Court of Appeals, supra at footnote 13.
18. Levin, Hospital Vicarious Liability for Negligence by Independent Contractor Physicians:
A New Rule for New Times, October 17, 2005.

19. Id.
20. Id.
21. Tolentino, The Civil Code of the Philippines, Volume V, 1992 Ed., p. 616.
22. Arkansas M.R. Co. v. Pearson, 98 Ark. 442, 153 SW 595 (1911); Runyan v. Goodrum,
147 Ark. 281, 228 SW 397, 13 ALR 1403 (1921); Rosane v. Senger, 112 Colo. 363, 149 P.
2d 372 (superseded by statute on other grounds); Moon v. Mercy Hosp., 150 Col. 430,
373 P. 2d 944 (1962); Austin v. Litvak, 682 P. 2d 41, 50 ALR 4th 225 (1984); Western Ins.
Co. v. Brochner, 682 P. 2d 1213 (1983); Rodriguez v. Denver, 702 P. 2d 1349 (1984).
23. Arkansas M.R. Co. v. Pearson, id.; Nieto v. State, 952 P. 2d 834 (1997). But see Beeck v.
Tucson General Hosp., 18 Ariz. App. 165, 500 P. 2d 1153 (1972); Paintsville Hosp. Co.,
683 SW 2d 255 (1985); Kelley v. Rossi, 395 Mass. 659, 481 NE 2d 1340 (1985) which
held that a physician's professional status does not prevent him or her from being a
servant or agent of the hospital.
24. Fridena v. Evans, 127 Ariz. 516, 522 P. 2d 463 (1980).
25. Kitto v. Gilbert, 39 Colo App 374, 570 P. 2d 544 (1977).

26. 211 N.Y. 125, 105 N.E. 92, 52 L.R.A., N.S., 505 (1914). The court in Schloendorff opined
that a hospital does not act through physicians but merely procures them to act on their
own initiative and responsibility. For subsequent application of the doctrine, see for
instance, Hendrickson v. Hodkin, 250 App. Div 649, 294 NYS 982, revd on other grounds,
276 NY 252, 11 NE 2d 899 (1937); Necolayff v. Genesee Hosp., 270 App. Div. 648, 61
NYS 2d 832, affd 296 NY 936, 73 NE2d 117 (1946); Davie v. Lenox Hill Hosp., Inc., 81
NYS 2d 583 (1948); Roth v. Beth El Hosp., Inc., 279 App. Div 917, 110 NYS 2d 583
(1952); Rufino v. US , 126 F. Supp. 132 (1954); Mrachek v. Sunshine Biscuit, Inc., 308 NY
116, 123 N.E. 2d 801 (1954).

27. 2 NY 2d 656, 163 NYS 2d 3, 143 N.E. 2d 3 (1957).

28. Supra at footnote 13.
29. BLACK'S LAW DICTIONARY (6th Ed. 1990) 1100. The terms "ostensible agency,"
"agency by estoppel," "apparent authority," and "holding out" tend to be used
interchangeably by the courts to refer to this theory of liability. See for instance, Baker v.
Werner, 654 P2d 263 (1982) and Adamski v. Tacoma Gen. Hosp., 20 Wash App. 98, 579
P2d 970 (1978). Agency by estoppel is defined as "one created by operation of law
and established by proof of such acts of the principal as reasonably lead third persons
to the conclusion of its existence. Arises where principal by negligence in failing to
supervise agent's affairs, allows agent to exercise powers not granted to him, thus
justifying others in believing the agent possesses requisite authority." Black's, supra, p.
62. An ostensible agency is "an implied or presumptive agency which exists where one,
either intentionally or from want of ordinary care, induces another to believe that a third
person is his agent, though he never in fact, employed him. It is, strictly speaking, no
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 agency at all, but is in reality based entirely upon estoppel." Apparent authority refers to
"the power to affect the legal relations of another person by transactions with third
persons, professedly as agent for the other, arising from and in accordance with the
other's manifestations to such third persons." Supra, p. 96. aEDCSI

30. Irving v. Doctors Hospital of Lake Worth, Inc., 415 So. 2d 55 (1982), quoting Arthur v. St.
Peters Hospital, 169 N.J. 575, 405 A. 2d 443 (1979).
31. Id., citing Hudson v. C., Loan Assn., Inc. v. Horowytz, 116 N.J.L. 605, 608, 186 A 437
(Sup. Ct. 1936).

32. Supra.
33. RTC Decision, p. 9, Rollo of G.R. No. 126467, p. 127.
34. RTC Decision, p. 2, Rollo of G.R. No. 126467, p. 120.

35. Purcell v. Zimbelman, 18 Ariz. App. 75, 500 P2d 335 (1972).
36. Supra at footnote 1.
37. Corleto v. Hospital, 138 N.J. Super. 302, 350 A. 2d 534 (Super. Ct. Law Div.1975);
Purcell v. Zimbelman, 18 Ariz. App. 75,500 P. 2d 335 (1972); Hospital Authority v. Joiner,
229 Ga. 140,189 S.E. 2d 412 (1972).
38. Welsh v. Bulger, 548 Pa. 504, 698 A.2d 581 (1997).
39. 115 Ariz. 34, 545 P2d 958 (1976).
40. 262 S.E. 2d 391, cert denied 300 NC 194, 269 S.E. 2d 621 (1980).

41. 127 Ariz. 516, 622 P. 2d 463 (1980).

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