Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 126297 January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner,

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.

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

G.R. No. 126467 January 31, 2007

NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR.,
EMMA AGANA ANDAYA, JESUS AGANA, and RAYMUND AGANA) and ENRIQUE
AGANA, Petitioners,
vs.
JUAN FUENTES, Respondent.

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

G.R. No. 127590 January 31, 2007

MIGUEL AMPIL, Petitioner,

vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.

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. 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 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
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
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.

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.

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."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 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:

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, 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 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 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.

REYNATO S. PUNO
Chief Justice
Footnotes

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

1Beeck 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.

2Penned 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.

8Rule 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.

9Smith 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.

12In the leading case of Vda. de Bataclan v. Medina, (102 Phil. 181 [1957]), this Court laid down the following
definition of proximate cause in this jurisdiction as follows:

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

13 Ramos v. Court of Appeals, G.R. No. 124354, December 29, 1999, 321 SCRA 584.

14 Africa v. Caltex (Phils.) Inc., 123 Phil. 280 (1966).

15Ranos 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.

18Levin, Hospital Vicarious Liability for Negligence by Independent Contractor Physicians: A New Rule for New
Times, October 17, 2005.

19 Id.

20 Id.

21 Tolentino, The Civil Code of the Philippines, Volume V, 1992 Ed., p. 616.

22 Arkansas M.R. Co. v. Pearson, 98 Ark. 442, 153 SW 595 (1911); Runyan v. Goodrum, 147 Ark. 281, 228 SW 397,
13 ALR 1403 (1921); Rosane v. Senger, 112 Colo. 363, 149 P. 2d 372 (superseded by statute on other grounds); Moon
v. Mercy Hosp., 150 Col. 430, 373 P. 2d 944 (1962); Austin v. Litvak, 682 P. 2d 41, 50 ALR 4th 225 (1984); Western
Ins. Co. v. Brochner, 682 P. 2d 1213 (1983); Rodriguez v. Denver, 702 P. 2d 1349 (1984).

23Arkansas 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).

26211 N.Y. 125, 105 N.E. 92, 52 L.R.A., N.S., 505 (1914). The court in Schloendorff opined that a hospital does not
act through physicians but merely procures them to act on their own initiative and responsibility. For subsequent
application of the doctrine, see for instance, Hendrickson v. Hodkin, 250 App. Div 649, 294 NYS 982, revd on other
grounds, 276 NY 252, 11 NE 2d 899 (1937); Necolayff v. Genesee Hosp., 270 App. Div. 648, 61 NYS 2d 832, affd
296 NY 936, 73 NE2d 117 (1946); Davie v. Lenox Hill Hosp., Inc., 81 NYS 2d 583 (1948); Roth v. Beth El Hosp.,
Inc., 279 App. Div 917, 110 NYS 2d 583 (1952); Rufino v. US, 126 F. Supp. 132 (1954); Mrachek v. Sunshine Biscuit,
Inc., 308 NY 116, 123 N.E. 2d 801 (1954).

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

28 Supra at footnote 13.

29 Black’s Law Dictionary (6th Ed. 1990) 1100. The terms "ostensible agency," "agency by estoppel," "apparent
authority," and "holding out" tend to be used interchangeably by the courts to refer to this theory of liability. See for
instance, Baker v. Werner, 654 P2d 263 (1982) and Adamski v. Tacoma Gen. Hosp., 20 Wash App. 98, 579 P2d 970
(1978). Agency by estoppel is defined as "one created by operation of law and established by proof of such acts of the
principal as reasonably lead third persons to the conclusion of its existence. Arises where principal by negligence in
failing to supervise agent’s affairs, allows agent to exercise powers not granted to him, thus justifying others in
believing the agent possesses requisite authority." Black’s, supra, p. 62. An ostensible agency is "an implied or
presumptive agency which exists where one, either intentionally or from want of ordinary care, induces another to
believe that a third person is his agent, though he never in fact, employed him. It is, strictly speaking, no 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.

30Irving 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).

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 126297 February 11, 2008

PROFESSIONAL SERVICES, INC., petitioner,

vs.
THE COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA, respondents,

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

G.R. No. 126467 February 11, 2008

NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR.,
EMMA AGANA ANDAYA, JESUS AGANA, and RAYMUND AGANA) and ENRIQUE
AGANA, petitioners,
vs.
THE COURT OF APPEALS and JUAN FUENTES, respondents,

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

G.R. No. 127590 February 11, 2008

MIGUEL AMPIL, petitioner,

vs.
THE COURT OF APPEALS and NATIVIDAD AGANA and ENRIQUE AGANA, respondents.

RESOLUTION

SANDOVAL-GUTIERREZ, J.:

As the hospital industry changes, so must the laws and jurisprudence governing hospital liability. The
immunity from medical malpractice traditionally accorded to hospitals has to be eroded if we are to balance the
interest of the patients and hospitals under the present setting.

Before this Court is a motion for reconsideration filed by Professional Services, Inc. (PSI), petitioner in G.R.
No. 126297, assailing the Court’s First Division Decision dated January 31, 2007, finding PSI and Dr. Miguel
Ampil, petitioner in G.R. No. 127590, jointly and severally liable for medical negligence.

A brief revisit of the antecedent facts is imperative.

On April 4, 1984, Natividad Agana was admitted at the Medical City General Hospital (Medical City) because
of difficulty of bowel movement and bloody anal discharge. Dr. Ampil diagnosed her to be suffering from
"cancer of the sigmoid." Thus, on April 11, 1984, Dr. Ampil, assisted by the medical staff1 of Medical City,
performed an anterior resection surgery upon her. During the surgery, he found that the malignancy in her
sigmoid area had spread to her left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil
obtained the consent of Atty. Enrique Agana, Natividad’s husband, to permit Dr. Juan Fuentes, respondent in
G.R. No. 126467, to perform hysterectomy upon Natividad.
Dr. Fuentes performed and completed the hysterectomy. Afterwards, 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 done (sic) but to no avail continue for closure.

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 surgical
operation performed upon her. Dr. Ampil recommended that Natividad consult an oncologist to treat 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 (4) months of consultations and laboratory examinations, Natividad was told that 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 (2) weeks
thereafter, her daughter found a piece of gauze protruding from her vagina. Dr. Ampil was immediately
informed. He proceeded to Natividad’s house where he managed to extract by hand a piece of gauze measuring
1.5 inches in width. Dr. Ampil then assured Natividad that the pains would soon vanish.

Despite Dr. Ampil’s assurance, the pains intensified, prompting Natividad to seek treatment at the Polymedic
General Hospital. While confined thereat, Dr. Ramon Gutierrez detected the presence of a foreign object in her
vagina -- a foul-smelling gauze measuring 1.5 inches in width. The gauze had badly infected her vaginal vault.
A recto-vaginal fistula had formed in her reproductive organ which forced stool to excrete through the vagina.
Another surgical operation was needed to remedy the situation. Thus, in October 1984, Natividad underwent
another surgery.

On November 12, 1984, Natividad and her husband filed with the Regional Trial Court, Branch 96, Quezon
City a complaint for damages against PSI (owner of Medical City), Dr. Ampil and Dr. Fuentes.

On February 16, 1986, pending the outcome of the above case, Natividad died. She was duly substituted by her
above-named children (the Aganas).

On March 17, 1993, the trial court rendered judgment in favor of spouses Agana finding PSI, Dr. Ampil and
Dr. Fuentes jointly and severally liable. On appeal, the Court of Appeals, in its Decision dated September 6,
1996, affirmed the assailed judgment with modification in the sense that the complaint against Dr. Fuentes was
dismissed.

PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review on certiorari. On January 31,
2007, the Court, through its First Division, rendered a Decision holding that PSI is jointly and severally liable
with Dr. Ampil for the following reasons: first, there is an employer-employee relationship between Medical
City and Dr. Ampil. The Court relied on Ramos v. Court of Appeals,2 holding that for the purpose of
apportioning responsibility in medical negligence cases, an employer-employee relationship in effect
exists between hospitals and their attending and visiting physicians; second, PSI’s act of publicly displaying in
the lobby of the Medical City the names and specializations of its accredited physicians, including Dr. Ampil,
estopped it from denying the existence of an employer-employee relationship between them under
the doctrine of ostensible agency or agency by estoppel; and third, PSI’s failure to supervise Dr. Ampil and
its resident physicians and nurses and to take an active step in order to remedy their negligence rendered it
directly liable under the doctrine of corporate negligence.
In its motion for reconsideration, PSI contends that the Court erred in finding it liable under Article 2180 of the
Civil Code, there being no employer-employee relationship between it and its consultant, Dr. Ampil. PSI
stressed that the Court’s Decision in Ramos holding that "an employer-employee relationship in effect exists
between hospitals and their attending and visiting physicians for the purpose of apportioning responsibility"
had been reversed in a subsequent Resolution.3 Further, PSI argues that the doctrine of ostensible agency or
agency by estoppel cannot apply because spouses Agana failed to establish one requisite of the doctrine, i.e.,
that Natividad relied on the representation of the hospital in engaging the services of Dr. Ampil. And lastly,
PSI maintains that the doctrine of corporate negligence is misplaced because the proximate cause of
Natividad’s injury was Dr. Ampil’s negligence.

The motion lacks merit.

As earlier mentioned, the First Division, in its assailed Decision, ruled that an employer-employee
relationship "in effect" exists between the Medical City and Dr. Ampil. Consequently, both are jointly and
severally liable to the Aganas. This ruling proceeds from the following ratiocination in Ramos:

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 only 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. This is particularly true with respondent hospital.

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, a point which respondent
hospital asserts in denying all responsibility for the patient’s condition, 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. This being the case, the question now arises as to whether or not respondent
hospital is solidarily liable with respondent doctors for petitioner’s condition.
 The basis for holding an employer solidarily responsible for the negligence of its employee is found in
Article 2180 of the Civil Code which considers a person accountable not only for his own acts but also
for those of others based on the former’s responsibility under a relationship of partia ptetas.

Clearly, in Ramos, the Court considered the peculiar relationship between a hospital and its consultants on the
bases of certain factors. One such factor is the "control test" wherein the hospital exercises control in the hiring
and firing of consultants, like Dr. Ampil, and in the conduct of their work.

Actually, contrary to PSI’s contention, the Court did not reverse its ruling in Ramos. What it clarified was that
the De Los Santos Medical Clinic did not exercise control over its consultant, hence, there is no employer-
employee relationship between them. Thus, despite the granting of the said hospital’s motion for
reconsideration, the doctrine in Ramos stays, i.e., for the purpose of allocating responsibility in medical
negligence cases, an employer-employee relationship exists between hospitals and their consultants.

In the instant cases, PSI merely offered a general denial of responsibility, maintaining that consultants, like
Dr. Ampil, are "independent contractors," not employees of the hospital. Even assuming that Dr. Ampil is not
an employee of Medical City, but an independent contractor, still the said hospital is liable to the Aganas.

In Nograles, et al. v. Capitol Medical Center, et al.,4 through Mr. Justice Antonio T. Carpio, the Court held:

The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada
is an independent contractor-physician.

In general, a hospital is not liable for the negligence of an independent contractor-physician. There is,
however, an exception to this principle. The hospital may be liable if the physician is the "ostensible"
agent of the hospital. (Jones v. Philpott, 702 F. Supp. 1210 [1988]) This exception is also known as
the "doctrine of apparent authority." (Sometimes referred to as the apparent or ostensible agency
theory. [King v. Mitchell, 31 A.D.3rd 958, 819 N.Y. S.2d 169 (2006)].

xxx

The doctrine of apparent authority essentially involves two factors to determine the liability of an
independent contractor-physician.

The first factor focuses on the hospital’s manifestations and is sometimes described as an inquiry
whether the hospital acted in a manner which would lead a reasonable person to conclude that the
individual who was alleged to be negligent was an employee or agent of the hospital. (Diggs v. Novant
Health, Inc., 628 S.E.2d 851 (2006) citing Hylton v. Koontz, 138 N.C. App. 629 (2000). In this
regard, the hospital need not make express representations to the patient that the treating
physician is an employee of the hospital; rather a representation may be general and
implied. (Id.)

The doctrine of apparent authority is a specie of the doctrine of estoppel. Article 1431 of the Civil
Code provides that "[t]hrough estoppel, an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the person relying thereon."
Estoppel rests on this rule: "Whether a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act upon such belief,
he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it.
(De Castro v. Ginete, 137 Phil. 453 [1969], citing Sec. 3, par. A, Rule 131 of the Rules of Court. See
also King v. Mitchell, 31 A.D.3rd 958, 819 N.Y.S.2d 169 [2006]).
 xxx

The second factor focuses on the patient’s reliance. It is sometimes characterized as an inquiry on
whether the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with
ordinary care and prudence. (Diggs v. Novant Health, Inc.)

PSI argues that the doctrine of apparent authority cannot apply to these cases because spouses Agana failed
to establish proof of their reliance on the representation of Medical City that Dr. Ampil is its employee.

The argument lacks merit.

Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was that he knew him to
be a staff member of Medical City, a prominent and known hospital.

Q Will you tell us what transpired in your visit to Dr. Ampil?

A Well, I saw Dr. Ampil at the Medical City, I know him to be a staff member there, and I told
him about the case of my wife and he asked me to bring my wife over so she could be examined. Prior
to that, I have known Dr. Ampil, first, he was staying in front of our house, he was a neighbor, second,
my daughter was his student in the University of the East School of Medicine at Ramon Magsaysay;
and when my daughter opted to establish a hospital or a clinic, Dr. Ampil was one of our consultants
on how to establish that hospital. And from there, I have known that he was a specialist when it comes
to that illness.

Atty. Agcaoili

On that particular occasion, April 2, 1984, what was your reason for choosing to contact Dr. Ampil in
connection with your wife’s illness?

A First, before that, I have known him to be a specialist on that part of the body as a surgeon; second,
I have known him to be a staff member of the Medical City which is a prominent and known
hospital. And third, because he is a neighbor, I expect more than the usual medical service to be given
to us, than his ordinary patients.5

Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his name and those
of the other physicians in the public directory at the lobby of the hospital amounts to holding out to the public
that it offers quality medical service through the listed physicians. This justifies Atty. Agana’s belief that Dr.
Ampil was a member of the hospital’s staff. It must be stressed that under the doctrine of apparent
authority, 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.6 In these cases, the circumstances yield a positive answer to the question.

The challenged Decision also anchors its ruling on the doctrine of corporate responsibility.7 The duty of
providing quality medical service is no longer the sole prerogative and responsibility of the physician. This is
because the modern hospital now tends to organize a highly-professional medical staff whose competence
and performance need also to be monitored by the hospital commensurate with its inherent responsibility to
provide quality medical care.8 Such responsibility includes the proper supervision of the members of its
medical staff. Accordingly, the hospital has the duty to make a reasonable effort to monitor and oversee
the treatment prescribed and administered by the physicians practicing in its premises.
Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate investigation on the reported
missing gauzes to the great prejudice and agony of its patient. Dr. Jocson, a member of PSI’s medical staff,
who testified on whether the hospital conducted an investigation, was evasive, thus:

Q We go back to the operative technique, this was signed by Dr. Puruganan, was this
submitted to the hospital?

A Yes, sir, this was submitted to the hospital with the record of the patient.

Q Was the hospital immediately informed about the missing sponges?

A That is the duty of the surgeon, sir.

Q As a witness to an untoward incident in the operating room, was it not your obligation, Dr.,
to also report to the hospital because you are under the control and direction of the hospital?

A The hospital already had the record of the two OS missing, sir.

Q If you place yourself in the position of the hospital, how will you recover.

A You do not answer my question with another question.

Q Did the hospital do anything about the missing gauzes?

A The hospital left it up to the surgeon who was doing the operation, sir.

Q Did the hospital investigate the surgeon who did the operation?

A I am not in the position to answer that, sir.

Q You never did hear the hospital investigating the doctors involved in this case of those
missing sponges, or did you hear something?

xxxxxx

A I think we already made a report by just saying that two sponges were missing, it is up to
the hospital to make the move.

Atty. Agana

Precisely, I am asking you if the hospital did a move, if the hospital did a move.

A I cannot answer that.

Court

By that answer, would you mean to tell the Court that you were aware if there was such a move
done by the hospital?
 A I cannot answer that, your honor, because I did not have any more follow-up of the case
that happened until now.9

The above testimony obviously shows Dr. Jocson’s lack of concern for the patients. Such conduct is
reflective of the hospital’s manner of supervision. Not only did PSI breach its duty 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.

Moreover, there is merit in the trial court’s finding that the failure of PSI to conduct an investigation
"established PSI’s part in the dark conspiracy of silence and concealment about the gauzes." The
following testimony of Atty. Agana supports such findings, thus:

Q You said you relied on the promise of Dr. Ampil and despite the promise you were not able to
obtain the said record. Did you go back to the record custodian?

A I did not because I was talking to Dr. Ampil. He promised me.

Q After your talk to Dr. Ampil, you went to the record custodian?

A I went to the record custodian to get the clinical record of my wife, and I was given a
portion of the records consisting of the findings, among them, the entries of the dates, but not
the operating procedure and operative report.10

In sum, we find no merit in the motion for reconsideration.

WHEREFORE, we DENY PSI’s motion for reconsideration with finality.

SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
RENATO C. CORONA ADOLFO S. AZCUNA
Associate Justice Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Resolution 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
Footnotes

1 The medical staff was composed of physicians, both residents and interns, as well as nurses.

2 G.R. No. 124354, December 29, 1999, 321 SCRA 584.

3 Promulgated on April 11, 2002.

4 G.R. No. 142625, December 19, 2006, 511 SCRA 204.

5 TSN, April 12, 1985, pp. 25-26.

6Id., citing Hudson V.C., Loan Assn., Inc. v. Horowytz, 116 N.J.L. 605, 608, 186 A 437 (Sup. Ct.
1936).

7 The corporate negligence doctrine imposes several duties on a hospital: (1) to use reasonable
care in the maintenance of safe and adequate facilities and equipment; (2) to select and retain
only competent physicians; (3) to oversee as to patient care all persons who practice medicine
within its walls; and (4) to formulate, adopt, and enforce adequate rules and policies to ensure
quality care for its patients. These special tort duties arise from the special relationship
existing between a hospital or nursing home and its patients, which are based on the
vulnerability of the physically or mentally ill persons and their inability to provide care for
themselves. 40 A Am Jur 2d 28 citing Funkhouser v. Wilson, 89 Wash. App. 644, 950 P 2d
501 (Div.1 1998), review granted, 135 Wash. 2d 1001,959 P 2d 126 (1998).

8 Purcell v. Zimbelman, 18 Ariz. App. 75, 500 P2d 335 (1972).

9 TSN, February 26, 1987, pp. 26-28.

10 TSN, November 22, 1985, pp. 52-53.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 126297 February 2, 2010

PROFESSIONAL SERVICES, INC., Petitioner,

vs.
THE COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA, Respondents.

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

G.R. No. 126467

NATIVIDAD [substituted by her children Marcelino Agana III, Enrique Agana, Jr., Emma Agana-
Andaya, Jesus Agana and Raymund Agana] and ENRIQUE AGANA, Petitioners,
vs.
THE COURT OF APPEALS and JUAN FUENTES, Respondents.

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

G.R. No. 127590

MIGUEL AMPIL, Petitioner,

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.

RESOLUTION

CORONA, J.:

With prior leave of court,1 petitioner Professional Services, Inc. (PSI) filed a second motion for
reconsideration2 urging referral thereof to the Court en banc and seeking modification of the decision dated
January 31, 2007 and resolution dated February 11, 2008 which affirmed its vicarious and direct liability for
damages to respondents Enrique Agana and the heirs of Natividad Agana (Aganas).

Manila Medical Services, Inc. (MMSI),3 Asian Hospital, Inc. (AHI),4 and Private Hospital Association of the
Philippines (PHAP)5 all sought to intervene in these cases invoking the common ground that, unless modified,
the assailed decision and resolution will jeopardize the financial viability of private hospitals and jack up the
cost of health care.

The Special First Division of the Court granted the motions for intervention of MMSI, AHI and PHAP
(hereafter intervenors),6 and referred en consulta to the Court en banc the motion for prior leave of court and
the second motion for reconsideration of PSI.7

Due to paramount public interest, the Court en banc accepted the referral8 and heard the parties on oral
arguments on one particular issue: whether a hospital may be held liable for the negligence of physicians-
consultants allowed to practice in its premises.9
To recall the salient facts, PSI, together with Dr. Miguel Ampil (Dr. Ampil) and Dr. Juan Fuentes (Dr.
Fuentes), was impleaded by Enrique Agana and Natividad Agana (later substituted by her heirs), in a
complaint10 for damages filed in the Regional Trial Court (RTC) of Quezon City, Branch 96, for the injuries
suffered by Natividad when Dr. Ampil and Dr. Fuentes neglected to remove from her body two gauzes11 which
were used in the surgery they performed on her on April 11, 1984 at the Medical City General Hospital. PSI
was impleaded as owner, operator and manager of the hospital.

In a decision12 dated March 17, 1993, the RTC held PSI solidarily liable with Dr. Ampil and Dr. Fuentes for
damages.13 On appeal, the Court of Appeals (CA), absolved Dr. Fuentes but affirmed the liability of Dr. Ampil
and PSI, subject to the right of PSI to claim reimbursement from Dr. Ampil.14 1avvphi1

On petition for review, this Court, in its January 31, 2007 decision, affirmed the CA decision.15 PSI filed a
motion for reconsideration16 but the Court denied it in a resolution dated February 11, 2008.17

The Court premised the direct liability of PSI to the Aganas on the following facts and law:

First, there existed between PSI and Dr. Ampil an employer-employee relationship as contemplated in the
December 29, 1999 decision in Ramos v. Court of Appeals18 that "for purposes of allocating responsibility in
medical negligence cases, an employer-employee relationship exists between hospitals and their
consultants."19 Although the Court in Ramos later issued a Resolution dated April 11, 200220 reversing its
earlier finding on the existence of an employment relationship between hospital and doctor, a similar reversal
was not warranted in the present case because the defense raised by PSI consisted of a mere general denial of
control or responsibility over the actions of Dr. Ampil.21

Second, by accrediting Dr. Ampil and advertising his qualifications, PSI created the public impression that he
was its agent.22 Enrique testified that it was on account of Dr. Ampil's accreditation with PSI that he conferred
with said doctor about his wife's (Natividad's) condition.23 After his meeting with Dr. Ampil, Enrique asked
Natividad to personally consult Dr. Ampil.24 In effect, when Enrigue and Natividad engaged the services of Dr.
Ampil, at the back of their minds was that the latter was a staff member of a prestigious hospital. Thus, under
the doctrine of apparent authority applied in Nogales, et al. v. Capitol Medical Center, et al.,25 PSI was liable
for the negligence of Dr. Ampil.

Finally, as owner and operator of Medical City General Hospital, PSI was bound by its duty to provide
comprehensive medical services to Natividad Agana, to exercise reasonable care to protect her from harm,26 to
oversee or supervise all persons who practiced medicine within its walls, and to take active steps in fixing any
form of negligence committed within its premises.27 PSI committed a serious breach of its corporate duty when
it failed to conduct an immediate investigation into the reported missing gauzes.28

PSI is now asking this Court to reconsider the foregoing rulings for these reasons:

The declaration in the 31 January 2007 Decision vis-a-vis the 11 February 2009 Resolution that the ruling in
Ramos vs. Court of Appeals (G.R. No. 134354, December 29, 1999) that "an employer-employee relations
exists between hospital and their consultants" stays should be set aside for being inconsistent with or contrary
to the import of the resolution granting the hospital's motion for reconsideration in Ramos vs. Court of Appeals
(G.R. No. 134354, April 11, 2002), which is applicable to PSI since the Aganas failed to prove an employer-
employee relationship between PSI and Dr. Ampil and PSI proved that it has no control over Dr. Ampil. In
fact, the trial court has found that there is no employer-employee relationship in this case and that the doctor's
are independent contractors.

II
Respondents Aganas engaged Dr. Miguel Ampil as their doctor and did not primarily and specifically look to
the Medical City Hospital (PSI) for medical care and support; otherwise stated, respondents Aganas did not
select Medical City Hospital (PSI) to provide medical care because of any apparent authority of Dr. Miguel
Ampil as its agent since the latter was chosen primarily and specifically based on his qualifications and being
friend and neighbor.

III

PSI cannot be liable under doctrine of corporate negligence since the proximate cause of Mrs. Agana's injury
was the negligence of Dr. Ampil, which is an element of the principle of corporate negligence.29

In their respective memoranda, intervenors raise parallel arguments that the Court's ruling on the existence of
an employer-employee relationship between private hospitals and consultants will force a drastic and complex
alteration in the long-established and currently prevailing relationships among patient, physician and hospital,
with burdensome operational and financial consequences and adverse effects on all three parties.30

The Aganas comment that the arguments of PSI need no longer be entertained for they have all been traversed
in the assailed decision and resolution.31

After gathering its thoughts on the issues, this Court holds that PSI is liable to the Aganas, not under the
principle of respondeat superior for lack of evidence of an employment relationship with Dr. Ampil but under
the principle of ostensible agency for the negligence of Dr. Ampil and, pro hac vice, under the principle of
corporate negligence for its failure to perform its duties as a hospital.

While in theory a hospital as a juridical entity cannot practice medicine,32 in reality it utilizes doctors, surgeons
and medical practitioners in the conduct of its business of facilitating medical and surgical treatment.33 Within
that reality, three legal relationships crisscross: (1) between the hospital and the doctor practicing within its
premises; (2) between the hospital and the patient being treated or examined within its premises and (3)
between the patient and the doctor. The exact nature of each relationship determines the basis and extent of the
liability of the hospital for the negligence of the doctor.

Where an employment relationship exists, the hospital may be held vicariously liable under Article 217634 in
relation to Article 218035 of the Civil Code or the principle of respondeat superior. Even when no employment
relationship exists but it is shown that the hospital holds out to the patient that the doctor is its agent, the
hospital may still be vicariously liable under Article 2176 in relation to Article 143136 and Article 186937 of the
Civil Code or the principle of apparent authority.38 Moreover, regardless of its relationship with the doctor, the
hospital may be held directly liable to the patient for its own negligence or failure to follow established
standard of conduct to which it should conform as a corporation.39

This Court still employs the "control test" to determine the existence of an employer-employee relationship
between hospital and doctor. In Calamba Medical Center, Inc. v. National Labor Relations Commission, et
al.40 it held:

Under the "control test", an employment relationship exists between a physician and a hospital if the hospital
controls both the means and the details of the process by which the physician is to accomplish his task.

xxx xxx xxx

As priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through
its medical director, which consisted of 24-hour shifts totaling forty-eight hours each week and which were
strictly to be observed under pain of administrative sanctions.
That petitioner exercised control over respondents gains light from the undisputed fact that in the
emergency room, the operating room, or any department or ward for that matter, respondents' work is
monitored through its nursing supervisors, charge nurses and orderlies. Without the approval or
consent of petitioner or its medical director, no operations can be undertaken in those areas. For control
test to apply, it is not essential for the employer to actually supervise the performance of duties of the
employee, it being enough that it has the right to wield the power. (emphasis supplied)

Even in its December 29, 1999 decision41 and April 11, 2002 resolution42 in Ramos, the Court found the control
test decisive.

In the present case, it appears to have escaped the Court's attention that both the RTC and the CA found no
employment relationship between PSI and Dr. Ampil, and that the Aganas did not question such finding. In
its March 17, 1993 decision, the RTC found "that defendant doctors were not employees of PSI in its hospital,
they being merely consultants without any employer-employee relationship and in the capacity of independent
contractors."43 The Aganas never questioned such finding.

PSI, Dr. Ampil and Dr. Fuentes appealed44 from the RTC decision but only on the issues of negligence, agency
and corporate liability. In its September 6, 1996 decision, the CA mistakenly referred to PSI and Dr. Ampil as
employer-employee, but it was clear in its discussion on the matter that it viewed their relationship as one of
mere apparent agency.45

The Aganas appealed from the CA decision, but only to question the exoneration of Dr. Fuentes.46 PSI also
appealed from the CA decision, and it was then that the issue of employment, though long settled, was
unwittingly resurrected.

In fine, as there was no dispute over the RTC finding that PSI and Dr. Ampil had no employer-employee
relationship, such finding became final and conclusive even to this Court.47 There was no reason for PSI to
have raised it as an issue in its petition. Thus, whatever discussion on the matter that may have ensued was
purely academic.

Nonetheless, to allay the anxiety of the intervenors, the Court holds that, in this particular instance, the
concurrent finding of the RTC and the CA that PSI was not the employer of Dr. Ampil is correct. Control as a
determinative factor in testing the employer-employee relationship between doctor and hospital under which
the hospital could be held vicariously liable to a patient in medical negligence cases is a requisite fact to be
established by preponderance of evidence. Here, there was insufficient evidence that PSI exercised the power
of control or wielded such power over the means and the details of the specific process by which Dr. Ampil
applied his skills in the treatment of Natividad. Consequently, PSI cannot be held vicariously liable for the
negligence of Dr. Ampil under the principle of respondeat superior.

There is, however, ample evidence that the hospital (PSI) held out to the patient (Natividad)48 that the doctor
(Dr. Ampil) was its agent. Present are the two factors that determine apparent authority: first, the hospital's
implied manifestation to the patient which led the latter to conclude that the doctor was the hospital's agent;
and second, the patient’s reliance upon the conduct of the hospital and the doctor, consistent with ordinary care
and prudence.49

Enrique testified that on April 2, 1984, he consulted Dr. Ampil regarding the condition of his wife; that after
the meeting and as advised by Dr. Ampil, he "asked [his] wife to go to Medical City to be examined by [Dr.
Ampil]"; and that the next day, April 3, he told his daughter to take her mother to Dr. Ampil.50 This timeline
indicates that it was Enrique who actually made the decision on whom Natividad should consult and where,
and that the latter merely acceded to it. It explains the testimony of Natividad that she consulted Dr. Ampil at
the instigation of her daughter.51
Moreover, when asked what impelled him to choose Dr. Ampil, Enrique testified:

Atty. Agcaoili

On that particular occasion, April 2, 1984, what was your reason for choosing Dr. Ampil to contact with in
connection with your wife's illness?

A. First, before that, I have known him to be a specialist on that part of the body as a surgeon, second, I have
known him to be a staff member of the Medical City which is a prominent and known hospital. And third,
because he is a neighbor, I expect more than the usual medical service to be given to us, than his ordinary
patients.52 (emphasis supplied)

Clearly, the decision made by Enrique for Natividad to consult Dr. Ampil was significantly influenced by the
impression that Dr. Ampil was a staff member of Medical City General Hospital, and that said hospital was
well known and prominent. Enrique looked upon Dr. Ampil not as independent of but as integrally related to
Medical City.

PSI's acts tended to confirm and reinforce, rather than negate, Enrique's view. It is of record that PSI required a
"consent for hospital care"53 to be signed preparatory to the surgery of Natividad. The form reads:

Permission is hereby given to the medical, nursing and laboratory staff of the Medical City General Hospital to
perform such diagnostic procedures and to administer such medications and treatments as may be deemed
necessary or advisable by the physicians of this hospital for and during the confinement of xxx. (emphasis
supplied)

By such statement, PSI virtually reinforced the public impression that Dr. Ampil was a physician of its
hospital, rather than one independently practicing in it; that the medications and treatments he prescribed were
necessary and desirable; and that the hospital staff was prepared to carry them out. 1avvphi1

PSI pointed out in its memorandum that Dr. Ampil's hospital affiliation was not the exclusive basis of the
Aganas’ decision to have Natividad treated in Medical City General Hospital, meaning that, had Dr. Ampil
been affiliated with another hospital, he would still have been chosen by the Aganas as Natividad's surgeon.54

The Court cannot speculate on what could have been behind the Aganas’ decision but would rather adhere
strictly to the fact that, under the circumstances at that time, Enrique decided to consult Dr. Ampil for he
believed him to be a staff member of a prominent and known hospital. After his meeting with Dr. Ampil,
Enrique advised his wife Natividad to go to the Medical City General Hospital to be examined by said doctor,
and the hospital acted in a way that fortified Enrique's belief.

This Court must therefore maintain the ruling that PSI is vicariously liable for the negligence of Dr. Ampil as
its ostensible agent.

Moving on to the next issue, the Court notes that PSI made the following admission in its Motion for
Reconsideration:

51. Clearly, not being an agent or employee of petitioner PSI, PSI [sic] is not liable for Dr. Ampil's acts during
the operation. Considering further that Dr. Ampil was personally engaged as a doctor by Mrs. Agana, it is
incumbent upon Dr. Ampil, as "Captain of the Ship", and as the Agana's doctor to advise her on what to do
with her situation vis-a-vis the two missing gauzes. In addition to noting the missing gauzes, regular check-
ups were made and no signs of complications were exhibited during her stay at the hospital, which could
have alerted petitioner PSI's hospital to render and provide post-operation services to and tread on Dr.
Ampil's role as the doctor of Mrs. Agana. The absence of negligence of PSI from the patient's admission
up to her discharge is borne by the finding of facts in this case. Likewise evident therefrom is the
absence of any complaint from Mrs. Agana after her discharge from the hospital which had she brought
to the hospital's attention, could have alerted petitioner PSI to act accordingly and bring the matter to
Dr. Ampil's attention. But this was not the case. Ms. Agana complained ONLY to Drs. Ampil and
Fuentes, not the hospital. How then could PSI possibly do something to fix the negligence committed by
Dr. Ampil when it was not informed about it at all.55 (emphasis supplied)

PSI reiterated its admission when it stated that had Natividad Agana "informed the hospital of her discomfort
and pain, the hospital would have been obliged to act on it."56

The significance of the foregoing statements is critical.

First, they constitute judicial admission by PSI that while it had no power to control the means or method by
which Dr. Ampil conducted the surgery on Natividad Agana, it had the power to review or cause the
review of what may have irregularly transpired within its walls strictly for the purpose of determining whether
some form of negligence may have attended any procedure done inside its premises, with the ultimate end of
protecting its patients.

Second, it is a judicial admission that, by virtue of the nature of its business as well as its prominence57 in the
hospital industry, it assumed a duty to "tread on" the "captain of the ship" role of any doctor rendering services
within its premises for the purpose of ensuring the safety of the patients availing themselves of its services and
facilities.

Third, by such admission, PSI defined the standards of its corporate conduct under the circumstances of this
case, specifically: (a) that it had a corporate duty to Natividad even after her operation to ensure her safety as a
patient; (b) that its corporate duty was not limited to having its nursing staff note or record the two missing
gauzes and (c) that its corporate duty extended to determining Dr. Ampil's role in it, bringing the matter to his
attention, and correcting his negligence.

And finally, by such admission, PSI barred itself from arguing in its second motion for reconsideration that the
concept of corporate responsibility was not yet in existence at the time Natividad underwent treatment;58 and
that if it had any corporate responsibility, the same was limited to reporting the missing gauzes and did not
include "taking an active step in fixing the negligence committed."59 An admission made in the pleading cannot
be controverted by the party making such admission and is conclusive as to him, and all proofs submitted by
him contrary thereto or inconsistent therewith should be ignored, whether or not objection is interposed by a
party.60

Given the standard of conduct that PSI defined for itself, the next relevant inquiry is whether the hospital
measured up to it.

PSI excuses itself from fulfilling its corporate duty on the ground that Dr. Ampil assumed the personal
responsibility of informing Natividad about the two missing gauzes.61 Dr. Ricardo Jocson, who was part of the
group of doctors that attended to Natividad, testified that toward the end of the surgery, their group talked
about the missing gauzes but Dr. Ampil assured them that he would personally notify the patient about
it.62 Furthermore, PSI claimed that there was no reason for it to act on the report on the two missing gauzes
because Natividad Agana showed no signs of complications. She did not even inform the hospital about her
discomfort.63

The excuses proffered by PSI are totally unacceptable.

To begin with, PSI could not simply wave off the problem and nonchalantly delegate to Dr. Ampil the duty to
review what transpired during the operation. The purpose of such review would have been to pinpoint when,
how and by whom two surgical gauzes were mislaid so that necessary remedial measures could be taken to
avert any jeopardy to Natividad’s recovery. Certainly, PSI could not have expected that purpose to be achieved
by merely hoping that the person likely to have mislaid the gauzes might be able to retrace his own steps. By
its own standard of corporate conduct, PSI's duty to initiate the review was non-delegable.

While Dr. Ampil may have had the primary responsibility of notifying Natividad about the missing gauzes,
PSI imposed upon itself the separate and independent responsibility of initiating the inquiry into the missing
gauzes. The purpose of the first would have been to apprise Natividad of what transpired during her surgery,
while the purpose of the second would have been to pinpoint any lapse in procedure that led to the gauze count
discrepancy, so as to prevent a recurrence thereof and to determine corrective measures that would ensure the
safety of Natividad. That Dr. Ampil negligently failed to notify Natividad did not release PSI from its self-
imposed separate responsibility.

Corollary to its non-delegable undertaking to review potential incidents of negligence committed within its
premises, PSI had the duty to take notice of medical records prepared by its own staff and submitted to its
custody, especially when these bear earmarks of a surgery gone awry. Thus, the record taken during the
operation of Natividad which reported a gauze count discrepancy should have given PSI sufficient reason to
initiate a review. It should not have waited for Natividad to complain.

As it happened, PSI took no heed of the record of operation and consequently did not initiate a review of what
transpired during Natividad’s operation. Rather, it shirked its responsibility and passed it on to others – to Dr.
Ampil whom it expected to inform Natividad, and to Natividad herself to complain before it took any
meaningful step. By its inaction, therefore, PSI failed its own standard of hospital care. It committed corporate
negligence.

It should be borne in mind that the corporate negligence ascribed to PSI is different from the medical
negligence attributed to Dr. Ampil. The duties of the hospital are distinct from those of the doctor-consultant
practicing within its premises in relation to the patient; hence, the failure of PSI to fulfill its duties as a hospital
corporation gave rise to a direct liability to the Aganas distinct from that of Dr. Ampil.

All this notwithstanding, we make it clear that PSI’s hospital liability based on ostensible agency and corporate
negligence applies only to this case, pro hac vice. It is not intended to set a precedent and should not serve as a
basis to hold hospitals liable for every form of negligence of their doctors-consultants under any and all
circumstances. The ruling is unique to this case, for the liability of PSI arose from an implied agency with Dr.
Ampil and an admitted corporate duty to Natividad.64

Other circumstances peculiar to this case warrant this ruling,65 not the least of which being that the agony
wrought upon the Aganas has gone on for 26 long years, with Natividad coming to the end of her days racked
in pain and agony. Such wretchedness could have been avoided had PSI simply done what was logical: heed
the report of a guaze count discrepancy, initiate a review of what went wrong and take corrective measures to
ensure the safety of Nativad. Rather, for 26 years, PSI hemmed and hawed at every turn, disowning any such
responsibility to its patient. Meanwhile, the options left to the Aganas have all but dwindled, for the status of
Dr. Ampil can no longer be ascertained.66

Therefore, taking all the equities of this case into consideration, this Court believes ₱15 million would be a fair
and reasonable liability of PSI, subject to 12% p.a. interest from the finality of this resolution to full
satisfaction.

WHEREFORE, the second motion for reconsideration is DENIED and the motions for intervention
are NOTED.
Professional Services, Inc. is ORDERED pro hac vice to pay Natividad (substituted by her children Marcelino
Agana III, Enrique Agana, Jr., Emma Agana-Andaya, Jesus Agana and Raymund Agana) and Enrique Agana
the total amount of ₱15 million, subject to 12% p.a. interest from the finality of this resolution to full
satisfaction.

No further pleadings by any party shall be entertained in this case.

Let the long-delayed entry of judgment be made in this case upon receipt by all concerned parties of this
resolution.

SO ORDERED.

RENATO C. CORONA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice

TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION

Associate Justice Associate Justice

(No Part)
DIOSDADO M. PERALTA
LUCAS P. BERSAMIN*
Associate Justice
Associate Justice

(On Official Leave)

MARIANO C. DEL CASTILLO
ROBERTO A. ABAD
Associate Justice
Associate Justice

MARTIN S. VILLARAMA, JR. JOSE P. PEREZ

Associate Justice Associate Justice

(On leave)
JOSE C. MENDOZA
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Resolution
had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNO
Chief Justice
Footnotes

* No part.
** On leave.
1 Rollo (G.R. No. 126297), p. 468.

2 Id., p. 489.

3 Filed a motion for leave of court to intervene (by way of attached memorandum), id., p. 512.

4 Filed a motion to intervene and for leave to file memorandum-in-intervention, id., p. 534. AHI did

not file any memorandum.

5 Filed a motion for intervention (by way of attached brief/memorandum), id., p. 602.

6 Resolution dated June 16, 2008, id., p. 647.

7 Resolution dated June 12, 2008, id., p. 645.

8 Resolution dated August 12, 2008, id., p. 649.

9 As per Advisory dated March 4, 2009. It should be borne in mind that the issues in G.R. No. 126467

on the exculpation of Dr. Juan Fuentes from liability, and in G.R. No. 127590 on the culpability of Dr.
Miguel Ampil for negligence and medical malpractice, are deemed finally decided, no motion for
reconsideration having been filed by the Heirs of Agana in G.R. No. 126467 nor by Dr. Miguel Ampil
in G.R. No. 127467 from the January 31, 2007 Decision of the First Division of the Court.
10 Docketed as Civil Case No. Q-43322, record, p. 6.

11 Also referred to in the records as "sponges."

12 Penned by then Presiding Judge and now Associate Justice of the Supreme Court Lucas Bersamin.

13 RTC Decision, record, p. 133.

14 CA decision dated September 6, 1996, penned by then Court of Appeals Associate Justice and later

Supreme Court Associate Justice Cancio Garcia (Ret.); CA rollo, pp. 136-137.
15 G.R. Nos. 126297/126467/127590, 31 January 2007, 513 SCRA 478.

16 Rollo, p. 403.

17 G.R. Nos. 126297/126467/127590, 11 February 2008, 544 SCRA 170.

18 G.R. No. 124354, 29 December 1999, 321 SCRA 548.

19 Supra at 15, p. 499.

20 G.R. No. 124354, 11 April 2002, 380 SCRA 467.

21 Supra at 17, p. 179.

22 Supra at 15, p. 502.

23 Supra at 17, p. 181, citing TSN, April 12, 1985, pp. 25-26.

24 Id.

25 G.R. No. 142625, 19 December 2006, 511 SCRA 204.

26 Supra at 15, p. 505.

27 Supra at 17, p. 182.

28 Id.

29 Rollo (G.R. No. 126297), pp. 489-490.

30 Id., pp. 518-527, 605-613.

31 Id., p. 659.

32 Section 8, Republic Act No. 2382 (RA 2382) or The Medical Act of 1959.

33 See Acebedo Optical Co. Inc. v. CA, G.R. No. 100152, 31 March 2000, 314 SCRA 315.

34 Article 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.
35 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.
The father and, in case of his death or incapacity, the mother, are responsible for the damages
caused by the minor children who live in their company.
 Guardians are liable for damages caused by the minors or incapacitated persons who are
under their authority and live in their company.
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.
The State is responsible in like manner when it acts through a special agent; but not when the
damage has been caused by the official to whom the task done properly pertains, in which
case what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages
caused by their pupils and students or apprentices, so long as they remain in their custody.
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.
36 Article 1431. Through estoppel an admission or representation is rendered conclusive upon the

person making it, and cannot be denied or disproved as against the person relying thereon.
37 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.
38 Nogales v. Capitol Medical Center, et al., supra at 25.

39 Pedro Solis, Medical Jurisprudence (The Practice of Medicine and the Law), Quezon City: R.P.

Garcia Publishing Co., 1988, p. 321, citing U.S. district and appellate cases. See also Darling v.
Charleston Community Memorial Hospital, 14 A.L.R. 3D 860 (Ill. September 29, 1965).
40 G.R. No. 176484, 25 November 2008, 571 SCRA 585.

41 Supra at 18.

42 Supra at 20.

43 Supra at 13, p. 126.

44 Dr. Fuentes filed with the CA a petition for certiorari docketed as CA-G.R. SP No. 32198 (CA rollo,

p. 1) while Dr. Ampil and PSI jointly filed an appeal docketed as CA-G.R. CV No. 42062 (CA rollo,
pp. 40 and 152).
45 Supra at 14, p. 135.

46 Rollo (G.R. No. 126467), p. 8.

47 Elsie Ang v. Dr. Erniefel Grageda, G.R. No. 166239, 8 June 2006, 490 SCRA 424.

48 Through the patient's husband Enrique.

49 Nogales v. Capitol Medical Center, et al., supra at 25.

50 TSN, April 12, 1985, pp. 26-27.

51 Second Motion for Reconsideration, rollo, pp. 495-496.

52 Supra at 50, pp. 25-26.

53 Exh. "D-1," Exhibit Folder for Plaintiffs, p. 92.

54 Petitioner's Memorandum with Compliance, pp. 57-58.

55 Motion for Reconsideration, rollo, pp. 429-430.

56 Id., p. 434.

57 PSI has not denied its prominent place in the hospital industry but has in fact asserted such role in its

1967 brochure (Annex "K" to its Manifestation filed on May 14, 2009).
58 Rollo, p. 505-506.

59 Id., pp. 506-507.

60
Luciano Tan v. Rodil Enterprises, G. R. No. 168071, 18 December 2006, 511 SCRA 162; Heirs of
Pedro Clemena Y Zurbano v. Heirs of Irene B. Bien, G.R. No. 155508, 11 September 2006, 501
SCRA 405.
61 Second Motion for Reconsideration, rollo, pp. 502-503.

62 Id., p. 503, citing TSN, February 26, 1987, p. 36.

63 Supra at 55.
64 In Partido ng Manggagawa (PM) and Butil Farmers Party (Butil) v. Comelec (G.R. No. 164702,
March 15, 2006, 484 SCRA 671), a ruling expressly qualified as pro hac vice is limited in application
to one particular case only; it cannot be relied upon as a precedent to govern other cases.
65 See Sps. Chua v. Hon. Jacinto Ang, et al., G.R. No. 156164, 4 September 2009.

66 His last pleading was filed on May 13, 2001, rollo (G.R. No. 127590), p. 217.