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FIRST DIVISION

PROFESSIONAL SERVICES, G.R. No. 126297
INC.,

Petitioner,

- versus -

NATIVIDAD and ENRIQUE
AGANA,

Respondents.

x-----------------------x

NATIVIDAD (Substituted by her
children MARCELINO AGANA III,
ENRIQUE AGANA, JR., EMMA G.R. No. 126467
AGANA ANDAYA, JESUS AGANA,
and RAYMUND AGANA) and
ENRIQUE AGANA,

Petitioners,

- versus -

JUAN FUENTES,
Respondent.

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MIGUEL AMPIL,

Petitioner,

- versus -

G.R. No. 127590

Present:

NATIVIDAD AGANA and
ENRIQUE AGANA,
PUNO, C.J., Chairperson
Respondents.
SANDOVAL-GUTIERREZ,

CORONA,

AZCUNA, and

*GARCIA, JJ.

Promulgated:

January 31, 2007
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DECISION

SANDOVAL-GUTIERREZ, J.:

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.

Assailed in these three consolidated petitions for review on certiorari
is the Court of Appeals’ Decision dated September 6, 1996 in CA-G.R. CV
No. 42062 and CA-G.R. SP No. 32198 affirming with modification the
Decision 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 difficulty 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 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
hysterectomy on her.

After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took
over, completed the operation and closed the incision.

However, the operation appeared to be flawed. 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 flew 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
intensified, prompting Natividad to seek treatment at the Polymedic General
Hospital. While confined 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
fistula 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 filed 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.

Meanwhile, Enrique Agana also filed 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).

On March 17, 1993, the RTC rendered its Decision in favor of the
Aganas, finding 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 filed 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 filed 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 file 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 dated October 29, 1993
granting Dr. Fuentes’ prayer for injunctive relief.

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 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 modification 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 filed 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 filed a motion for reconsideration, but it was denied in
a Resolution dated December 19, 1996.
Hence, the instant consolidated petitions.

In 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.

In G.R. No. 126467, the Aganas maintain that the Court of Appeals
erred in finding 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 finding 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: first, 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

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: first, 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
specified 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.

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’ x x x.

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. 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.

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 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.

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. 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 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.

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. 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.

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.”

We find 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 finding everything to be in order, allowed Dr.
Fuentes to leave the operating room. Dr. Ampil then resumed operating on
Natividad. He was about to finish 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.

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. 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 finding 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. 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. Those who could afford medical
treatment were usually treated at home by their doctors. 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 significant conversion from a not-for-profit health care to for-
profit hospital businesses. Consequently, significant 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.

In this jurisdiction, the statute governing liability for negligent acts is
Article 2176 of the Civil Code, which reads:

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.

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.
x x x x x x
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.
x x x x x x
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.”

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. It has been said that medical practice strictly
involves highly developed and specialized knowledge, such that physicians
are generally free to exercise their own skill and judgment in rendering
medical services sans interference. 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.

The case of Schloendorff v. Society of New York Hospital 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 efficacy of the foregoing doctrine has weakened with
the significant 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, 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 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
filling 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.

In the first place, hospitals exercise significant control in the
hiring and firing 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 qualifications, 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. x x x.

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.

In other words, private hospitals, hire, fire and exercise real
control over their attending and visiting ‘consultant’ staff. While
‘consultants’ are not, technically employees, x x x, the control
exercised, the hiring, and the right to terminate consultants all fulfill
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 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.

Apparent authority, or what is sometimes referred to as the “holding
out” theory, or doctrine of ostensible agency or agency by estoppel, 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. 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 justified in presuming
that such agent has authority to perform the particular act in question.

The applicability of apparent authority in the field of hospital liability
was upheld long time ago in Irving v. Doctor Hospital of Lake Worth, Inc.
There, it was explicitly stated that “there does not appear to be any
rational basis for excluding the concept of apparent authority from the
field 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 qualifications, 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:

x x x 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 certified 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.”
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 profits financially. 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.

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.” 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.

The doctrine has its genesis in Darling v. Charleston Community
Hospital. There, the Supreme Court of Illinois held that “the jury could
have found a hospital negligent, inter alia, in failing to have a sufficient
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. 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
and enforcement of adequate rules and policies that ensure quality care for
its patients. Thus, in Tucson Medical Center, Inc. v. Misevich, 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, 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 findings of the trial court are convincing, thus:

x x x 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 benefit 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.

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, it was held that a corporation is bound by the knowledge acquired
by or notice given to its agents or officers 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 fixing 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:

x x x 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, 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 confirmed the rulings of the
Court of Appeals that a hospital has the duty of supervising the
competence of the doctors on its staff. x x x.

x x x x x x

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 find that such general allegations of
negligence, along with the evidence produced at the trial of this case,
are sufficient 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 final 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.

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.

ANGELINA SANDOVAL-GUTIERREZ

Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

Chairperson
RENATO C. CORONA ADOLFO S. AZCUNA

Associate Justice Associate Justice

(No Part)

CANCIO C. GARCIA

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby
certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.

REYNATO S. PUNO

Chief Justice
* No part. Ponente of the assailed Decision in the Court of Appeals.

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.
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.
Penned by Judge Lucas P. Bersamin (now Justice of the Court of Appeals), Rollo,
G.R. No. 126647, pp. 69-83.
The medical staff was composed of physicians, both residents and interns, as well as
nurses.
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.
Rollo of G.R. No. 126467, pp. 84-89.
Rollo of G.R. No. 127590, p. 40.
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.
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.

157 So. 328 Fla. (1934)

Garcia-Rueda v. Pascasio, G.R. No. 118141, September 5, 1997, 278 SCRA 769.
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.
Ramos v. Court of Appeals, G.R. No. 124354, December 29, 1999, 321 SCRA 584.
Africa v. Caltex (Phils.) Inc., 123 Phil. 280 (1966).
Ranos v. Court of Appeals, supra. In Ramos, the phrase used is “control of the
instrumentality which caused the damage,” citing St. John’s Hospital and School of
Nursing v. Chapman, 434 P2d 160 (1967).
Rural Educational Assn v. Bush, 42 Tenn. App. 34, 298 S.W. 2d 761 (1956).
Ramos v. Court of Appeals, supra at footnote 13.
Levin, Hospital Vicarious Liability for Negligence by Independent Contractor
Physicians: A New Rule for New Times, October 17, 2005.
Id.
Id.
Tolentino, The Civil Code of the Philippines, Volume V, 1992 Ed., p. 616.
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).
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.
Fridena v. Evans, 127 Ariz. 516, 522 P. 2d 463 (1980).
Kitto v. Gilbert, 39 Colo App 374, 570 P. 2d 544 (1977).
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).
2 NY 2d 656, 163 NYS 2d 3, 143 N.E. 2d 3 (1957).
Supra at footnote 13.
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 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.
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).
Id., citing Hudson v. C., Loan Assn., Inc. v. Horowytz, 116 N.J.L. 605, 608, 186 A 437
(Sup. Ct. 1936).
Supra.
RTC Decision, p. 9, Rollo of G.R. No. 126467, p. 127.
RTC Decision, p. 2, Rollo of G.R. No. 126467, p. 120.
Purcell v. Zimbelman, 18 Ariz. App. 75, 500 P2d 335 (1972).
Supra at footnote 1.
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).
Welsh v. Bulger, 548 Pa. 504, 698 A.2d 581 (1997).
115 Ariz. 34, 545 P2d 958 (1976).
262 S.E. 2d 391, cert denied 300 NC 194, 269 S.E. 2d 621 (1980).
127 Ariz. 516, 622 P. 2d 463 (1980).