Decisions / Signed Resolutions

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

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

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.â€ 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 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 responsibilityâ€ 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 effectâ€ 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,â€ 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 “consultantâ€ 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 “consultantâ€ staff. While “consultantsâ€ 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 testâ€ 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,â€ 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 “ostensibleâ€ agent of the
hospital. (Jones v. Philpott, 702 F. Supp. 1210 [1988]) This exception is also
known as the “doctrine of apparent authority.â€ (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.â€ 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.

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

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?

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:

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.

Was the hospital immediately informed about the missing sponges?

That is the duty of the surgeon, sir.

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?

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

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

You do not answer my question with another question.

Did the hospital do anything about the missing gauzes?

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

Did the hospital investigate the surgeon who did the operation?

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

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

xxx xxx

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.

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?

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.â€ The following
testimony of Atty. Agana supports such findings, thus:

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?

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

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

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.
Puno, C.J., Corona, Azcuna, and Leonardo-De Castro, JJ., concur.

[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.