FIRST DIVISION

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

Petitioner,

- versus -

THE COURT OF APPEALS and

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

- versus -

THE COURT OF APPEALS and JUAN

FUENTES,
Respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x
MIGUEL AMPIL, G.R. No. 127590
Petitioner,
Present:

- versus - PUNO, C.J.,

SANDOVAL-GUTIERREZ,
CORONA,
THE COURT OF APPEALS and AZCUNA, and
NATIVIDAD AGANA and ENRIQUE LEONARDO-DE CASTRO, JJ.
AGANA,
Respondents. Promulgated:
 February 11, 2008
x---------------------------------------------------------x

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 Courts 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,
[1]
1984, Dr. Ampil, assisted by the medical staff 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,
Natividads 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 Natividads 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. Ampils 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
[2]
City and Dr. Ampil. The Court relied on Ramos v. Court of Appeals, 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, PSIs 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, PSIs
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 Courts
Decision in Ramos holding that an employer-employee relationship in effect exists
between hospitals and their attending and visiting physicians for the purpose of
[3]
apportioning responsibility had been reversed in a subsequent Resolution. 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 Natividads injury was Dr. Ampils
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 physicians
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 patients 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 petitioners
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 formers
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 PSIs 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 hospitals 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.

[4]
In Nograles, et al. v. Capitol Medical Center, et al., 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 hospitals 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 patients 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 wifes 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
[5]
his ordinary patients.

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. Aganas belief that Dr. Ampil
was a member of the hospitals 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
[6]
particular act in question. In these cases, the circumstances yield a positive
answer to the question.

The challenged Decision also anchors its ruling on the doctrine of corporate
[7]
responsibility. 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
[8]
responsibility to provide quality medical care. 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 PSIs 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
[9]
of the case that happened until now.
 The above testimony obviously shows Dr. Jocsons lack of concern for the
patients. Such conduct is reflective of the hospitals 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 courts finding that the failure of PSI to
conduct an investigation established PSIs 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
[10]
report.

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

WHEREFORE, we DENY PSIs 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 Courts Division.

REYNATO S. PUNO
Chief Justice

[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.