PROFESSIONAL SERVICES, INC.

, Petitioner, Versus NATIVIDAD and ENRIQUE

AGANA, Respondents.

2007-01-31 | G.R. No. 126297

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

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.1

Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals’ Decision2 dated
September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198 affirming with modification the
Decision3 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 staff4 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.

| Page 1 of 14
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.

| Page 2 of 14
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 Resolution5 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 Decision6 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 Resolution7 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
| Page 3 of 14
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.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. Zeagler10 is explicit, thus:

The removal of all sponges used is part of a surgical operation, and when a physician or surgeon fails to
| Page 4 of 14
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. 11 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 cause12 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.13 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."15

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.
| Page 5 of 14
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.16 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.17 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.18 Those who could afford medical
treatment were usually treated at home by their doctors.19 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. 20

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.

| Page 6 of 14
 xxxxxx

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.

xxxxxx

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."21

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.22 It has been said that medical practice strictly involves highly developed and
specialized knowledge,23 such that physicians are generally free to exercise their own skill and judgment in
rendering medical services sans interference.24 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.25

The case of Schloendorff v. Society of New York Hospital26 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,27 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 Appeals28 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
| Page 7 of 14
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,29 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.30 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.31

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.32 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:
| Page 8 of 14
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."33

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."34
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.35

The doctrine has its genesis in Darling v. Charleston Community Hospital.36 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.37 With the passage of time, more duties were expected from hospitals,
| Page 9 of 14
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.38 Thus, in Tucson Medical Center, Inc. v. Misevich,39 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,40 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,41
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
| Page 10 of 14
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.

xxxxxx

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 Asscociate 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.

| Page 11 of 14
 REYNATO S. PUNO
Chief Justice
_____________

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

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
| Page 12 of 14
 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 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.

Levin, Hospital Vicarious Liability for Negligence by Independent Contractor Physicians: A New Rule for
18

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

| Page 13 of 14
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.

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).

| Page 14 of 14