FIRST DIVISION

[G.R. No. 126297. February 11, 2008.]

PROFESSIONAL SERVICES, INC. , petitioner, vs . THE COURT OF

APPEALS and NATIVIDAD and ENRIQUE AGANA , respondents.

[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.

[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 : p

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 led by Professional Services,
Inc. (PSI), petitioner in G.R. No. 126297, assailing the Court's First Division Decision
dated January 31, 2007, nding 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 di culty 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 staff 1 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 awed. In the corresponding Record of Operation dated April 11, 1984,
the attending nurses entered these remarks:
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 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 ew 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 intensi ed, prompting Natividad to seek
treatment at the Polymedic General Hospital. While con ned 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 stula 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 led 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
nding PSI, Dr. Ampil and Dr. Fuentes jointly and severally liable. On appeal, the Court of
Appeals, in its Decision dated September 6, 1996, a rmed the assailed judgment with
modification in the sense that the complaint against Dr. Fuentes was dismissed.
PSI, Dr. Ampil and the Aganas led 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 .
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 In its motion for reconsideration, PSI contends that the Court erred in nding 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 lling up specialist
staff with attending and visiting "consultants," who are allegedly not hospital
employees, presents problems in apportioning responsibility for negligence in
medical malpractice cases. However, the di culty is only more apparent
than real .
In the rst place, hospitals exercise signi cant 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 quali cations; generally, evidence of accreditation by the
appropriate board (diplomate), evidence of fellowship in most cases, and
references. These requirements are carefully scrutinized by members of the
hospital administration or by a review committee set up by the hospital who
either accept or reject the application. 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
h o s p i t a l . 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, re 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
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 exercised, the hiring, and the right to terminate consultants all ful ll
the important hallmarks of an employer-employee relationship, with
the exception of the payment of wages. In assessing whether such a
relationship in fact exists, the control test is determining. Accordingly,
on the basis of the foregoing, we rule that for the purpose of
allocating responsibility in medical negligence 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 ring 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 clari ed 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 xxx xxx

The doctrine of apparent authority essentially involves two factors to

determine the liability of an independent contractor-physician.
The rst 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.
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 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 xxx 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 testi ed 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, rst, 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
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 lobby of the hospital amounts to holding out to the public that it offers quality medical
service through the listed physicians. This justi es 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 justi ed 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 testi ed 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.

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 Q You never did hear the hospital investigating the doctors involved
in this case of those missing sponges, or did you hear
something?
xxx xxx xxx
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 re ective 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 nding 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
ndings, among them, the entries of the dates, but not the
operating procedure and operative report. 1 0

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

WHEREFORE, we DENY PSI's motion for reconsideration with finality.
SO ORDERED.
Puno, C.J., Corona, Azcuna and Leonardo-de Castro, JJ., concur.

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 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.
6. Id., 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.

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