[G.R. No. L-8967. May 31, 1956.

]
ANASTACIO VIAA, Petitioner, vs. ALEJO AL-LAGADAN and FILOMENA
PIGA, Respondents.

D E C I S I O N
CONCEPCION, J .:
Petitioner Anastacio Viaa owned the fishing sailboat Magkapatid, which, in the night
of September 3, 1948, sunk in the waters between the province of Bataan and the island of
Corregidor, as a consequence of a collision with the USS TINGLES, a vessel of the U.S. Navy.
Inasmuch as Alejandro Al-Lagadan, a member of the crew of the Magkapatid, disappeared
with the craft, his parents, Respondent Alejo Al-Lagadan and Filomena Piga, filed the
corresponding claim for compensation under Act No. 3428. After appropriate proceedings, a
Referee of the Workmens Compensation Commission rendered a decision, dated February 23,
1953:
1. Ordering Mr. Anastacio Viaa to pay the above-named claimants through the Workmens
Compensation Commission, Manila, the sum of P1,560 in lump sum with interest at 6 per cent
from September 3, 1948 until fully paid;
To pay the sum of P16 to the Workmens Compensation Commission as costs.
Said decision was, on petition for review filed by Viaa, affirmed by the Workmens
Compensation Commissioner, on or about October 22, 1954, with additional fee of P5.00. Said
Commissioner, having subsequently denied a reconsideration of this action, Viaa has brought
the matter to us, for review by certiorari, upon the ground that this case does not fall within the
purview of Act No. 3428, because the gross income of his business for the year 1947 was
allegedly less than P10,000, and because Alejandro Al-Lagadan was, at the time of his death, his
(Petitioners) industrial partner, not his employee.
The first ground is untenable, Petitioner not having invoked it before the rendition of the
Referees decision on February 23, 1953. The objection to the application of Act No. 3428, upon
said ground, was made for the first time when Petitioner sought a review of said decision by the
Workmens Compensation Commissioner. The non- applicability of said Act to employers
whose gross income does not reach P20,000 is, however, a matter of defense, which cannot be
availed of unless pleaded in the employers answer to the claim for compensation filed by the
employee or his heirs. Petitioner herein having failed to do so, said defense may not now be
entertained (Rolan vs. Perez, 63 Phil., 80, 85-86).
As regards the second ground, Petitioner maintains, contrary to the finding of the Referee and
said Commissioner, that the deceased was his industrial partner, not employee. In this
connection, it is alleged in paragraph (6) of the petition:
That the practice observed then and now in engaging the services of crewmen of sailboats
plying between Mindoro and Manila is on a partnership basis, to wit: that the owner of the
vessel, on one hand receives one-half of the earnings of the sailboat after deducting the expenses
for the maintenance of the crew, the other half is divided pro rata among the members of the
crew, the patron or captain receiving four parts, the piloto or next in command three parts, the
wheelsman or timonel 1 1/2 parts and the rest of the members of the crew one part each, as per
Annex B hereof.
It appears that, before rendering his aforementioned decision, the Referee requested Mr.
Manuel O. Morente, an attorney of the Workmens Compensation Commission, to look into and
inquire and determine the method of and the basis of engaging the services of crewmen for
sailboats (batel) of twenty (20) tons or more plying between Manila and Mariveles and moored
along Manila North Harbor, and that, thereafter, said Atty. Morente reported:
The basis of engaging the services of crewmen of a batel is determined in accordance with the
contract executed between the owner and the patron. The contract commonly followed is on a
share basis after deducting all the expenses incurred on the voyage. One half goes to the owner of
the batel and the other half goes to the patron and the members of the crew and divided among
themselves on a share basis also in accordance with their agreement with the patron getting the
lions share. The hiring of the crew is done by the patron himself. Usually, when a patron enters
into a contract with the owner of the batel, he has a crew ready with him. (Italics supplied.)
In sustaining the Referees finding to the effect that the deceased was an employee of
Viaa, the Workmens Compensation Commissioner said:
The trial referee found that there was an employer-employee relation between the
Respondent and the deceased, Alejandro Al-Lagadan, and the share which the deceased received
at the end of each trip was in the nature of wages which is defined under section 39 of the
Compensation Act. This is so because such share could be reckoned in terms of money. In other
words, there existed the relation of employer and employee between the Respondent and
Alejandro Al-Lagadan at the time of the latters death.
We believe that the trial referee did not err in finding the deceased an employee of the
Respondent. We cite the following cases which illustrate the point at issue:
The officers and crews of whaling and other fishing vessels who are to receive certain
proportions of produce of the voyage in lieu of wages; (Rice vs. Austin, 17 Mass. 206; 2Y & C.
61); Captains of merchant ships who, instead of wages, receive shares in the profits of the
adventure; (4 Maule & C. 240); or who take vessels under an agreement to pay certain charges
and receive a share of the earnings; (Tagard vs. Loring, 16 Mass. 336, 8 Am. Dec. 140; Winsor
vs. Cutts, 7 Greenl. Me. 261) have generally been held not to be partners with the Respondent,
and the like. Running a steamboat on shares does not make the owners partners in respect to the
vessel (The Daniel Koine, 35 Fed. 785); so of an agreement between two parties to farm on
shares; (Hooloway vs. Brinkley, 42 Ga. 226); A seaman who is to receive pay in proportion to
the amount of fish caught is not a partner; (Holdren vs. French, 68 Me. 241); sharing profits in
lieu of wages is not a partnership. There is no true contribution; (Crawford vs. Austin, 34 Md.
49; vs. Shickle, 43 Mo. 538Sankey vs. Iron Works, 44 Ga. 228.) (Italics supplied.)
In other words, in the opinion of the Referee, as well as of said Commissioner, the mere
fact that Alejandros share in the understanding could be reckoned in terms of money, sufficed
to characterize him as an employee of Viaa. We do not share this view. Neither can we accept,
however, Petitioners theory to the effect that the deceased was his partner, not an employee,
simply because he (the deceased) shared in the profits, not in the losses. In determining the
existence of employer-employee relationship, the following elements are generally considered,
namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct although the latter is
the most important element (35 Am. Jur. 445). Assuming that the share received by the deceased
could partake of the nature of wages on which we need not, and do not, express our view
and that the second element, therefore, exists in the case at bar, the record does not contain any
specific data regarding the third and fourth elements.
With respect to the first element, the facts before us are insufficient to warrant a
reasonable conclusion, one way or the other. On the one hand, Atty. Morente said, in his
aforementioned report, that the contract commonly followed is on a share basis cralaw The
hiring of a crew is done by the patron himself. Usually, when a patron enters into a contract with
the owner of the batel, he has a crew ready with him. This statement suggests that the members
of the crew are chosen by the patron, seemingly, upon his sole responsibility and authority. It is
noteworthy, however, that said report referred to a practice commonly and usually observed in
a given place. The record is silent on whether such practice had been followed in the case under
consideration. More important still, the language used in said report may be construed as
intimating, not only that the patron selects and engages the crew, but, also, that the members
thereof are subject to his control and may be dismissed by him. To put it differently, the literal
import of said report is open to the conclusion that the crew has a contractual relation, not with
the owner of the vessel, but with the patron, and that the latter, not the former, is either their
employer or their partner.
Upon the other hand, the very allegations of the petition show otherwise, for Petitioner
explicitly averred therein that the deceased Alejandro Al-Lagadan was his industrial partner.
This implies that a contract of partnership existed between them and that, accordingly, if the
crew was selected and engaged by the patron, the latter did so merely as agent or representative
of Petitioner herein. Again, if Petitioner were a partner of the crew members, then neither the
former nor the patron could control or dismiss the latter.
In the interest of justice and equity, and considering that a decision on the merits of the issue
before us may establish an important precedent, it would be better to remand the case to the
Workmens Compensation Commission for further evidence and findings on the following
questions: (1) who selected the crew of the Magkapatid and engaged their services; (2) if
selected and engaged by the patron, did the latter act in his own name and for his own account,
or on behalf and for the account of Viaa; (3) could Viaa have refused to accept any of the
crew members chosen and engaged by the patron; (4) did Petitioner have authority to
determine the time when, the place where and/or the manner or conditions in or under which the
crew would work; and (5) who could dismiss its members.
Wherefore, let the case be remanded to the Workmens Compensation Commission, for further
proceedings in conformity with this decision, without special pronouncement as to costs. SO
ORDERED.

G.R. No. 170087 August 31, 2006
ANGELINA FRANCISCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents.
D E C I S I O N
YNARES-SANTIAGO, J .:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul
and set aside the Decision and Resolution of the Court of Appeals dated October 29, 2004
1
and
October 7, 2005,
2
respectively, in CA-G.R. SP No. 78515 dismissing the complaint for
constructive dismissal filed by herein petitioner Angelina Francisco. The appellate court reversed
and set aside the Decision of the National Labor Relations Commission (NLRC) dated April 15,
2003,
3
in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the
Labor Arbiter dated July 31, 2002,
4
in NLRC-NCR Case No. 30-10-0-489-01, finding that
private respondents were liable for constructive dismissal.
In 1995, petitioner was hired by Kasei Corporation during its incorporation stage. She was
designated as Accountant and Corporate Secretary and was assigned to handle all the accounting
needs of the company. She was also designated as Liaison Officer to the City of Makati to secure
business permits, construction permits and other licenses for the initial operation of the
company.
5

Although she was designated as Corporate Secretary, she was not entrusted with the corporate
documents; neither did she attend any board meeting nor required to do so. She never prepared
any legal document and never represented the company as its Corporate Secretary. However, on
some occasions, she was prevailed upon to sign documentation for the company.
6

In 1996, petitioner was designated Acting Manager. The corporation also hired Gerry Nino as
accountant in lieu of petitioner. As Acting Manager, petitioner was assigned to handle
recruitment of all employees and perform management administration functions; represent the
company in all dealings with government agencies, especially with the Bureau of Internal
Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to
administer all other matters pertaining to the operation of Kasei Restaurant which is owned and
operated by Kasei Corporation.
7

For five years, petitioner performed the duties of Acting Manager. As of December 31, 2000 her
salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei
Corporation.
8

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that
she was required to sign a prepared resolution for her replacement but she was assured that she
would still be connected with Kasei Corporation. Timoteo Acedo, the designated Treasurer,
convened a meeting of all employees of Kasei Corporation and announced that nothing had
changed and that petitioner was still connected with Kasei Corporation as Technical Assistant to
Seiji Kamura and in charge of all BIR matters.
9

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to
September 2001 for a total reduction of P22,500.00 as of September 2001. Petitioner was not
paid her mid-year bonus allegedly because the company was not earning well. On October 2001,
petitioner did not receive her salary from the company. She made repeated follow-ups with the
company cashier but she was advised that the company was not earning well.
10

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but
she was informed that she is no longer connected with the company.
11

Since she was no longer paid her salary, petitioner did not report for work and filed an action for
constructive dismissal before the labor arbiter.
Private respondents averred that petitioner is not an employee of Kasei Corporation. They
alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters
and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her
work at her own discretion without control and supervision of Kasei Corporation. Petitioner had
no daily time record and she came to the office any time she wanted. The company never
interfered with her work except that from time to time, the management would ask her opinion
on matters relating to her profession. Petitioner did not go through the usual procedure of
selection of employees, but her services were engaged through a Board Resolution designating
her as technical consultant. The money received by petitioner from the corporation was her
professional fee subject to the 10% expanded withholding tax on professionals, and that she was
not one of those reported to the BIR or SSS as one of the companys employees.
12

Petitioners designation as technical consultant depended solely upon the will of management.
As such, her consultancy may be terminated any time considering that her services were only
temporary in nature and dependent on the needs of the corporation.
To prove that petitioner was not an employee of the corporation, private respondents submitted a
list of employees for the years 1999 and 2000 duly received by the BIR showing that petitioner
was not among the employees reported to the BIR, as well as a list of payees subject to expanded
withholding tax which included petitioner. SSS records were also submitted showing that
petitioners latest employer was Seiji Corporation.
13

The Labor Arbiter found that petitioner was illegally dismissed, thus:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. finding complainant an employee of respondent corporation;
2. declaring complainants dismissal as illegal;
3. ordering respondents to reinstate complainant to her former position without loss of seniority
rights and jointly and severally pay complainant her money claims in accordance with the
following computation:
a. Backwages 10/2001 07/2002 275,000.00
(27,500 x 10 mos.)
b. Salary Differentials (01/2001 09/2001) 22,500.00
c. Housing Allowance (01/2001 07/2002) 57,000.00
d. Midyear Bonus 2001 27,500.00
e. 13th Month Pay 27,500.00
f. 10% share in the profits of Kasei
Corp. from 1996-2001 361,175.00
g. Moral and exemplary damages 100,000.00
h. 10% Attorneys fees 87,076.50
P957,742.50

If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay
with additional backwages that would accrue up to actual payment of separation pay.
SO ORDERED.
14

On April 15, 2003, the NLRC affirmed with modification the Decision of the Labor Arbiter, the
dispositive portion of which reads:
PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:
1) Respondents are directed to pay complainant separation pay computed at one month per year
of service in addition to full backwages from October 2001 to July 31, 2002;
2) The awards representing moral and exemplary damages and 10% share in profit in the
respective accounts of P100,000.00 and P361,175.00 are deleted;
3) The award of 10% attorneys fees shall be based on salary differential award only;
4) The awards representing salary differentials, housing allowance, mid year bonus and 13th
month pay are AFFIRMED.
SO ORDERED.
15

On appeal, the Court of Appeals reversed the NLRC decision, thus:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor
Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new
one is hereby rendered dismissing the complaint filed by private respondent against Kasei
Corporation, et al. for constructive dismissal.
SO ORDERED.
16

The appellate court denied petitioners motion for reconsideration, hence, the present recourse.
The core issues to be resolved in this case are (1) whether there was an employer-employee
relationship between petitioner and private respondent Kasei Corporation; and if in the
affirmative, (2) whether petitioner was illegally dismissed.
Considering the conflicting findings by the Labor Arbiter and the National Labor Relations
Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the
records to determine which of the propositions espoused by the contending parties is supported
by substantial evidence.
17

We held in Sevilla v. Court of Appeals
18
that in this jurisdiction, there has been no uniform test
to determine the existence of an employer-employee relation. Generally, courts have relied on the
so-called right of control test where the person for whom the services are performed reserves a
right to control not only the end to be achieved but also the means to be used in reaching such
end. In addition to the standard of right-of-control, the existing economic conditions prevailing
between the parties, like the inclusion of the employee in the payrolls, can help in determining
the existence of an employer-employee relationship.
However, in certain cases the control test is not sufficient to give a complete picture of the
relationship between the parties, owing to the complexity of such a relationship where several
positions have been held by the worker. There are instances when, aside from the employers
power to control the employee with respect to the means and methods by which the work is to be
accomplished, economic realities of the employment relations help provide a comprehensive
analysis of the true classification of the individual, whether as employee, independent contractor,
corporate officer or some other capacity.
The better approach would therefore be to adopt a two-tiered test involving: (1) the putative
employers power to control the employee with respect to the means and methods by which the
work is to be accomplished; and (2) the underlying economic realities of the activity or
relationship.
This two-tiered test would provide us with a framework of analysis, which would take into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties. This is especially appropriate in this case where there is no written
agreement or terms of reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the worker over the
period of the latters employment.
The control test initially found application in the case of Viaa v. Al-Lagadan and Piga,
19
and
lately in Leonardo v. Court of Appeals,
20
where we held that there is an employer-employee
relationship when the person for whom the services are performed reserves the right to control
not only the end achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals,
21
we observed the need to consider the existing economic
conditions prevailing between the parties, in addition to the standard of right-of-control like the
inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of
an employer-employee relationship based on an analysis of the totality of economic
circumstances of the worker.
Thus, the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity,
22
such as: (1) the extent to which the services
performed are an integral part of the employers business; (2) the extent of the workers
investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his continued employment in that line
of business.
23

The proper standard of economic dependence is whether the worker is dependent on the alleged
employer for his continued employment in that line of business.
24
In the United States, the
touchstone of economic reality in analyzing possible employment relationships for purposes of
the Federal Labor Standards Act is dependency.
25
By analogy, the benchmark of economic
reality in analyzing possible employment relationships for purposes of the Labor Code ought to
be the economic dependence of the worker on his employer.
By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporations Technical Consultant. She reported for work regularly and served in various
capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions, that is, rendering accounting and tax
services to the company and performing functions necessary and desirable for the proper
operation of the corporation such as securing business permits and other licenses over an
indefinite period of engagement.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of
respondent corporation because she had served the company for six years before her dismissal,
receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from August 1, 1999 to
December 18, 2000.
26
When petitioner was designated General Manager, respondent corporation
made a report to the SSS signed by Irene Ballesteros. Petitioners membership in the SSS as
manifested by a copy of the SSS specimen signature card which was signed by the President of
Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS evinces
the existence of an employer-employee relationship between petitioner and respondent
corporation.
27

It is therefore apparent that petitioner is economically dependent on respondent corporation for
her continued employment in the latters line of business.
In Domasig v. National Labor Relations Commission,
28
we held that in a business establishment,
an identification card is provided not only as a security measure but mainly to identify the holder
thereof as a bona fide employee of the firm that issues it. Together with the cash vouchers
covering petitioners salaries for the months stated therein, these matters constitute substantial
evidence adequate to support a conclusion that petitioner was an employee of private respondent.
We likewise ruled in Flores v. Nuestro
29
that a corporation who registers its workers with the
SSS is proof that the latter were the formers employees. The coverage of Social Security Law is
predicated on the existence of an employer-employee relationship.
Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that
petitioner never acted as Corporate Secretary and that her designation as such was only for
convenience. The actual nature of petitioners job was as Kamuras direct assistant with the duty
of acting as Liaison Officer in representing the company to secure construction permits, license
to operate and other requirements imposed by government agencies. Petitioner was never
entrusted with corporate documents of the company, nor required to attend the meeting of the
corporation. She was never privy to the preparation of any document for the corporation,
although once in a while she was required to sign prepared documentation for the company.
30

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001
affidavit has been allegedly withdrawn by Kamura himself from the records of the
case.
31
Regardless of this fact, we are convinced that the allegations in the first affidavit are
sufficient to establish that petitioner is an employee of Kasei Corporation.
Granting arguendo, that the second affidavit validly repudiated the first one, courts do not
generally look with favor on any retraction or recanted testimony, for it could have been secured
by considerations other than to tell the truth and would make solemn trials a mockery and place
the investigation of the truth at the mercy of unscrupulous witnesses.
32
A recantation does not
necessarily cancel an earlier declaration, but like any other testimony the same is subject to the
test of credibility and should be received with caution.
33

Based on the foregoing, there can be no other conclusion that petitioner is an employee of
respondent Kasei Corporation. She was selected and engaged by the company for compensation,
and is economically dependent upon respondent for her continued employment in that line of
business. Her main job function involved accounting and tax services rendered to respondent
corporation on a regular basis over an indefinite period of engagement. Respondent corporation
hired and engaged petitioner for compensation, with the power to dismiss her for cause. More
importantly, respondent corporation had the power to control petitioner with the means and
methods by which the work is to be accomplished.
The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a
month from January to September 2001. This amounts to an illegal termination of employment,
where the petitioner is entitled to full backwages. Since the position of petitioner as accountant is
one of trust and confidence, and under the principle of strained relations, petitioner is further
entitled to separation pay, in lieu of reinstatement.
34

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal.
Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to
when continued employment becomes impossible, unreasonable or unlikely; when there is a
demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain
by an employer becomes unbearable to an employee.
35
In Globe Telecom, Inc. v. Florendo-
Flores,
36
we ruled that where an employee ceases to work due to a demotion of rank or a
diminution of pay, an unreasonable situation arises which creates an adverse working
environment rendering it impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making and therefore amounted to
an illegal termination of employment.
In affording full protection to labor, this Court must ensure equal work opportunities regardless
of sex, race or creed. Even as we, in every case, attempt to carefully balance the fragile
relationship between employees and employers, we are mindful of the fact that the policy of the
law is to apply the Labor Code to a greater number of employees. This would enable employees
to avail of the benefits accorded to them by law, in line with the constitutional mandate giving
maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary
social economic force in furtherance of social justice and national development.
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of
Appeals dated October 29, 2004 and October 7, 2005, respectively, in CA-G.R. SP No. 78515
are ANNULLED and SET ASIDE. The Decision of the National Labor Relations Commission
dated April 15, 2003 in NLRC NCR CA No. 032766-02, isREINSTATED. The case
is REMANDED to the Labor Arbiter for the recomputation of petitioner Angelina Franciscos
full backwages from the time she was illegally terminated until the date of finality of this
decision, and separation pay representing one-half month pay for every year of service, where a
fraction of at least six months shall be considered as one whole year.
SO ORDERED.

G.R. No. 119268 February 23, 2000
ANGEL JARDIN, DEMETRIO CALAGOS, URBANO MARCOS, ROSENDO MARCOS,
LUIS DE LOS ANGELES, JOEL ORDENIZA and AMADO CENTENO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and GOODMAN TAXI
(PHILJAMA INTERNATIONAL, INC.) respondents.
QUISUMBING, J .:
This special civil action for certiorari seeks to annul the decision
1
of public respondent
promulgated on October 28, 1994, in NLRC NCR CA No. 003883-92, and its resolution
2
dated
December 13, 1994 which denied petitioners motion for reconsideration.
Petitioners were drivers of private respondent, Philjama International Inc., a domestic
corporation engaged in the operation of "Goodman Taxi." Petitioners used to drive private
respondent's taxicabs every other day on a 24-hour work schedule under the boundary system.
Under this arrangement, the petitioners earned an average of P400.00 daily. Nevertheless, private
respondent admittedly regularly deducts from petitioners, daily earnings the amount of P30.00
supposedly for the washing of the taxi units. Believing that the deduction is illegal, petitioners
decided to form a labor union to protect their rights and interests.
Upon learning about the plan of petitioners, private respondent refused to let petitioners drive
their taxicabs when they reported for work on August 6, 1991, and on succeeding days.
Petitioners suspected that they were singled out because they were the leaders and active
members of the proposed union. Aggrieved, petitioners filed with the labor arbiter a complaint
against private respondent for unfair labor practice, illegal dismissal and illegal deduction of
washing fees. In a decision
3
dated August 31, 1992, the labor arbiter dismissed said complaint for
lack of merit.
On appeal, the NLRC (public respondent herein), in a decision dated April 28, 1994, reversed
and set aside the judgment of the labor arbiter. The labor tribunal declared that petitioners are
employees of private respondent, and, as such, their dismissal must be for just cause and after
due process. It disposed of the case as follows:
WHEREFORE, in view of all the foregoing considerations, the decision of the Labor
Arbiter appealed from is hereby SET ASIDE and another one entered:
1. Declaring the respondent company guilty of illegal dismissal and accordingly it is
directed to reinstate the complainants, namely, Alberto A. Gonzales, Joel T. Morato,
Gavino Panahon, Demetrio L. Calagos, Sonny M. Lustado, Romeo Q. Clariza, Luis de
los Angeles, Amado Centino, Angel Jardin, Rosendo Marcos, Urbano Marcos, Jr., and
Joel Ordeniza, to their former positions without loss of seniority and other privileges
appertaining thereto; to pay the complainants full backwages and other benefits, less
earnings elsewhere, and to reimburse the drivers the amount paid as washing charges;
and
2. Dismissing the charge of unfair [labor] practice for insufficiency of evidence.
SO ORDERED.
4

Private respondent's first motion for reconsideration was denied. Remaining hopeful, private
respondent filed another motion for reconsideration. This time, public respondent, in its
decision
5
dated October 28, 1994, granted aforesaid second motion for reconsideration. It ruled
that it lacks jurisdiction over the case as petitioners and private respondent have no employer-
employee relationship. It held that the relationship of the parties is leasehold which is covered by
the Civil Code rather than the Labor Code, and disposed of the case as follows:
VIEWED IN THE LIGHT OF ALL THE FOREGOING, the Motion under
reconsideration is hereby given due course.
Accordingly, the Resolution of August 10, 1994, and the Decision of April 28, 1994 are
hereby SET ASIDE. The Decision of the Labor Arbiter subject of the appeal is likewise
SET ASIDE and a NEW ONE ENTERED dismissing the complaint for lack of
jurisdiction.
No costs.
SO ORDERED.
6

Expectedly, petitioners sought reconsideration of the labor tribunal's latest decision which was
denied. Hence, the instant petition.
In this recourse, petitioners allege that public respondent acted without or in excess of
jurisdiction, or with grave abuse of discretion in rendering the assailed decision, arguing that:
I-THE NLRC HAS NO JURISDICTION TO ENTERTAIN RESPONDENT'S SECOND
MOTION FOR RECONSIDERATION WHICH IS ADMITTEDLY A PLEADING
PROHIBITED UNDER THE NLRC RULES, AND TO GRANT THE SAME ON GROUNDS
NOT EVEN INVOKED THEREIN.
II-THE EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE
PARTIES IS ALREADY A SETTLED ISSUE CONSTITUTING RES JUDICATA, WHICH
THE NLRC HAS NO MORE JURISDICTION TO REVERSE, ALTER OR MODIFY.
III-IN ANY CASE, EXISTING JURISPRUDENCE ON THE MATTER SUPPORTS THE
VIEW THAT PETITIONERS-TAXI DRIVERS ARE EMPLOYEES OF RESPONDENT TAXI
COMPANY.
7

The petition is impressed with merit.
The phrase "grave abuse of discretion amounting to lack or excess of jurisdiction" has settled
meaning in the jurisprudence of procedure. It means such capricious and whimsical exercise of
judgment by the tribunal exercising judicial or quasi-judicial power as to amount to lack of
power.
8
In labor cases, this Court has declared in several instances that disregarding rules it is
bound to observe constitutes grave abuse of discretion on the part of labor tribunal.
In Garcia vs. NLRC,
9
private respondent therein, after receiving a copy of the labor arbiter's
decision, wrote the labor arbiter who rendered the decision and expressed dismay over the
judgment. Neither notice of appeal was filed nor cash or surety bond was posted by private
respondent. Nevertheless, the labor tribunal took cognizance of the letter from private respondent
and treated said letter as private respondent's appeal. In a certiorari action before this Court, we
ruled that the labor tribunal acted with grave abuse of discretion in treating a mere letter from
private respondent as private respondent's appeal in clear violation of the rules on appeal
prescribed under Section 3(a), Rule VI of the New Rules of Procedure of NLRC.
In Philippine Airlines Inc. vs. NLRC,
10
we held that the labor arbiter committed grave abuse of
discretion when he failed to resolve immediately by written order a motion to dismiss on the
ground of lack of jurisdiction and the supplemental motion to dismiss as mandated by Section 15
of Rule V of the New Rules of Procedure of the NLRC.
In Unicane Workers Union-CLUP vs. NLRC,
11
we held that the NLRC gravely abused its
discretion by allowing and deciding an appeal without an appeal bond having been filed as
required under Article 223 of the Labor Code.
In Maebo vs. NLRC,
12
we declared that the labor arbiter gravely abused its discretion in
disregarding the rule governing position papers. In this case, the parties have already filed their
position papers and even agreed to consider the case submitted for decision, yet the labor arbiter
still admitted a supplemental position paper and memorandum, and by taking into consideration,
as basis for his decision, the alleged facts adduced therein and the documents attached thereto.
In Gesulgon vs. NLRC,
13
we held that public respondent gravely abused its discretion in treating
the motion to set aside judgment and writ of execution as a petition for relief of judgment. In
doing so, public respondent had, without sufficient basis, extended the reglementary period for
filing petition for relief from judgment contrary to prevailing rule and case law.
In this case before us, private respondent exhausted administrative remedy available to it by
seeking reconsideration of public respondent's decision dated April 28, 1994, which public
respondent denied. With this motion for reconsideration, the labor tribunal had ample
opportunity to rectify errors or mistakes it may have committed before resort to courts of justice
can be had.
14
Thus, when private respondent filed a second motion for reconsideration, public
respondent should have forthwith denied it in accordance with Rule 7, Section 14 of its New
Rules of Procedure which allows only one motion for reconsideration from the same party, thus:
Sec. 14. Motions for Reconsideration. Motions for reconsideration of any order,
resolution or decision of the Commission shall not be entertained except when based on
palpable or patent errors, provided that the motion is under oath and filed within ten (10)
calendar days from receipt of the order, resolution or decision with proof of service that a
copy of the same has been furnished within the reglementary period the adverse party
and provided further, that only one such motion from the same party shall be
entertained. [Emphasis supplied]
The rationale for allowing only one motion for reconsideration from the same party is to assist
the parties in obtaining an expeditious and inexpensive settlement of labor cases. For obvious
reasons, delays cannot be countenanced in the resolution of labor disputes. The dispute may
involve no less than the livelihood of an employee and that of his loved ones who are dependent
upon him for food, shelter, clothing, medicine, and education. It may as well involve the survival
of a business or an industry.
15

As correctly pointed out by petitioner, the second motion for reconsideration filed by private
respondent is indubitably a prohibited pleading
16
which should have not been entertained at all.
Public respondent cannot just disregard its own rules on the pretext of "satisfying the ends of
justice",
17
especially when its disposition of a legal controversy ran afoul with a clear and long
standing jurisprudence in this jurisdiction as elucidated in the subsequent discussion. Clearly,
disregarding a settled legal doctrine enunciated by this Court is not a way of rectifying an error
or mistake. In our view, public respondent gravely abused its discretion in taking cognizance and
granting private respondent's second motion for reconsideration as it wrecks the orderly
procedure in seeking reliefs in labor cases.
But, there is another compelling reason why we cannot leave untouched the flip-flopping
decisions of the public respondent. As mentioned earlier, its October 28, 1994 judgment is not in
accord with the applicable decisions of this Court. The labor tribunal reasoned out as follows:
On the issue of whether or not employer-employee relationship exists, admitted is the fact that
complainants are taxi drivers purely on the "boundary system". Under this system the driver
takes out his unit and pays the owner/operator a fee commonly called "boundary" for the use of
the unit. Now, in the determination the existence of employer-employee relationship, the
Supreme Court in the case of Sara, et al., vs. Agarrado, et al. (G.R. No. 73199, 26 October 1988)
has applied the following four-fold test: "(1) the selection and engagement of the employee; (2)
the payment of wages; (3) the power of dismissal; and (4) the power of control the employees
conduct."
"Among the four (4) requisites", the Supreme Court stresses that "control is deemed the most
important that the other requisites may even be disregarded". Under the control test, an
employer-employee relationship exists if the "employer" has reserved the right to control the
"employee" not only as to the result of the work done but also as to the means and methods by
which the same is to be accomplished. Otherwise, no such relationship exists. (Ibid.)
Applying the foregoing parameters to the case herein obtaining, it is clear that the respondent
does not pay the drivers, the complainants herein, their wages. Instead, the drivers pay a certain
fee for the use of the vehicle. On the matter of control, the drivers, once they are out plying their
trade, are free to choose whatever manner they conduct their trade and are beyond the physical
control of the owner/operator; they themselves determine the amount of revenue they would
want to earn in a day's driving; and, more significantly aside from the fact that they pay for the
gasoline they consume, they likewise shoulder the cost of repairs on damages sustained by the
vehicles they are driving.
Verily, all the foregoing attributes signify that the relationship of the parties is more of a
leasehold or one that is covered by a charter agreement under the Civil Code rather than the
Labor Code.
18

The foregoing ratiocination goes against prevailing jurisprudence.
In a number of cases decided by this Court,
19
we ruled that the relationship between jeepney
owners/operators on one hand and jeepney drivers on the other under the boundary system is that
of employer-employee and not of lessor-lessee. We explained that in the lease of chattels, the
lessor loses complete control over the chattel leased although the lessee cannot be reckless in the
use thereof, otherwise he would be responsible for the damages to the lessor. In the case of
jeepney owners/operators and jeepney drivers, the former exercise supervision and control over
the latter. The management of the business is in the owner's hands. The owner as holder of the
certificate of public convenience must see to it that the driver follows the route prescribed by the
franchising authority and the rules promulgated as regards its operation. Now, the fact that the
drivers do not receive fixed wages but get only that in excess of the so-called "boundary" they
pay to the owner/operator is not sufficient to withdraw the relationship between them from that
of employer and employee. We have applied by analogy the abovestated doctrine to the
relationships between bus owner/operator and bus conductor,
20
auto-calesa owner/operator and
driver,
21
and recently between taxi owners/operators and taxi drivers.
22
Hence, petitioners are
undoubtedly employees of private respondent because as taxi drivers they perform activities
which are usually necessary or desirable in the usual business or trade of their employer.
As consistently held by this Court, termination of employment must be effected in accordance
with law. The just and authorized causes for termination of employment are enumerated under
Articles 282, 283 and 284 of the Labor Code. The requirement of notice and hearing is set-out in
Article 277 (b) of the said Code. Hence, petitioners, being employees of private respondent, can
be dismissed only for just and authorized cause, and after affording them notice and hearing prior
to termination. In the instant case, private respondent had no valid cause to terminate the
employment of petitioners. Neither were there two (2) written notices sent by private respondent
informing each of the petitioners that they had been dismissed from work. These lack of valid
cause and failure on the part of private respondent to comply with the twin-notice requirement
underscored the illegality surrounding petitioners' dismissal.
Under the law, an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges and to his full backwages,
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
23
It must
be emphasized, though, that recent judicial pronouncements
24
distinguish between employees
illegally dismissed prior to the effectivity of Republic Act No. 6715 on March 21, 1989, and
those whose illegal dismissals were effected after such date. Thus, employees illegally dismissed
prior to March 21, 1989, are entitled to backwages up to three (3) years without deduction or
qualification, while those illegally dismissed after that date are granted full backwages inclusive
of allowances and other benefits or their monetary equivalent from the time their actual
compensation was withheld from them up to the time of their actual reinstatement. The
legislative policy behind Republic Act No. 6715 points to "full backwages" as meaning exactly
that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned
employee during the period of his illegal dismissal. Considering that petitioners were terminated
from work on August 1, 1991, they are entitled to full backwages on the basis of their last daily
earnings.
With regard to the amount deducted daily by private respondent from petitioners for washing of
the taxi units, we view the same as not illegal in the context of the law. We note that after a tour
of duty, it is incumbent upon the driver to restore the unit he has driven to the same clean
condition when he took it out. Car washing after a tour of duty is indeed a practice in the taxi
industry and is in fact dictated by fair play.
25
Hence, the drivers are not entitled to reimbursement
of washing charges.1wphi1.nt
WHEREFORE, the instant petition is GRANTED. The assailed DECISION of public respondent
dated October 28, 1994, is hereby SET ASIDE. The DECISION of public respondent dated April
28, 1994, and its RESOLUTION dated December 13, 1994, are hereby REINSTATED subject to
MODIFICATION. Private respondent is directed to reinstate petitioners to their positions held at
the time of the complained dismissal. Private respondent is likewise ordered to pay petitioners
their full backwages, to be computed from the date of dismissal until their actual reinstatement.
However, the order of public respondent that petitioners be reimbursed the amount paid as
washing charges is deleted. Costs against private respondents.
SO ORDERED.


G.R. No. 79664 August 11, 1992
ANDRES VILLAVILLA and ESTER GADIENTE VILLAVILLA, petitioners,
vs.
COURT OF APPEALS, SOCIAL SECURITY COMMISSION, REYNALDO MERCADO,
and MARCELO COSUCO, respondents, SOCIAL SECURITY SYSTEM, intervenor.
Public Attorney's Office for petitioners.
F.V. Faylona & Associates for Marcelino Casuco.

BELLOSILLO, J .:
This is a petition for review on certiorari of the Decision
1
of the Court of Appeals dated April
10, 1987, affirming the Order
2
of the Social Security Commission dated November 28, 1984,
dismissing the complaint of herein petitioners for lack of cause of action, as well as the
Resolution
3
of respondent court denying the motion of petitioners for reconsideration.
The antecedents: Arturo Villavilla, son of petitioners, was employed as "tripulante" (crew
member) of the fishing boat "F/B Saint Theresa" from 1974 until September 11, 1977, when the
boat sank off Isla Binatikan, Taytay, Palawan. Arturo was not among the known survivors of that
sinking and had been missing since then.
4

On November 20, 1979, petitioners Andres Villavilla and Ester Gadiente Villavilla, parents of
Arturo, filed a petition with the Social Security Commission against Reynaldo Mercado and
Marcelino Cosuco, owners of the ill-fated fishing boat, for death compensation benefits of Arturo
whom respondents failed to register as their employee.
5

On May 29, 1981, the Social Security System (SSS) filed a petition in intervention alleging that
records from the SSS Production Department showed that "F/B Saint Theresa", owned by
Marcelino Cosuco and operated by Reynaldo Mercado, was a registered member-employer, and
that in the event petitioners succeeded in proving the employment of Arturo with private
respondents, the latter should be held liable in damages equivalent to the benefits due the
petitioners for failure to report Arturo for coverage pursuant to Sec. 24 (a) of the Social Security
Act, as amended.
6

Respondent Cosuco filed his answer denying all allegations in the petition and claiming that he
already sold the fishing boat to respondent Mercado on December 10, 1975, and from then on he
did not participate anymore in the operation and management of the boat nor in the hiring of its
crewmembers.
7

Meanwhile respondent Mercado was declared in default for failure to file his answer.
After petitioners had presented their evidence and rested their case, respondent Cosuco filed a
motion to dismiss (demurrer to evidence) on the ground of res judicata and lack of cause of
action. 8
On November 28, 1984, respondent Social Security Commission issued an Order dismissing the
petition for lack of cause of action.
9

On appeal, respondent Court of Appeals in its decision of April 10, 1987, affirmed the
questioned Order of respondent Commission there being no reversible error.
10

Petitioners are before Us predicating their petition for review on the following issues: whether
there was an employer-employee relationship between petitioners' deceased son, Arturo
Villavilla, and herein private respondents; whether private respondents are liable for death
compensation benefits of Arturo Villavilla; and, whether there was a violation of the Social
Security Act, as amended, by private respondents for not registering Arturo Villavilla with the
System as their employee as mandated by law.
Petitioners argue that it was private respondent Reynaldo Mercado who recruited Arturo
Villavilla sometime in 1974 to be a crew member of the fishing boat "F/B Saint Theresa" with a
daily wage of P20.00. The boat was then owned by private respondent Marcelino Cosuco and
operated by Reynaldo Mercado. On December 10, 1975, Cosuco sold the fishing boat to
Mercado.
Invoking Negre vs. Workmen's Compensation Commission,
11
petitioners assert that "fishermen-
crew members are individual employees and not industrial partners as in the case at bar" so that
the "mere presence of Arturo Villavilla in the fishing boat of Mercado makes him an employee of
the employer, Mercado." Further citing RJL Martinez Fishing Corporation vs.
NLRC,
12
petitioners posit that "the main factor that determines whether a person is an employee
of the employer is the kind of work being performed by that person. If the work of the laborer is
part of the regular business or occupation of the employer, the said laborer is a regular employee
of the employer." Petitioners thus contend that since Arturo was recruited by Mercado himself
sometime in 1974 as one of his fishermen-crew members and that the crew members were
uniformly paid by Mercado, there can be no other conclusion but that Arturo was an employee of
Mercado at the time his fishing boat sank.
A careful and assiduous review of the records, however, completely undermines the base of
petitioners' position. The records disclose that the relationship between Mercado and the crew
members of the ship headed by its skipper, Capt. Pedro Matibag, is one positively showing the
existence of a joint venture. This is clearly revealed in the testimonies of Capt. Pedro Matibag
and Gil Chua, a crew member, both witnesses for petitioners, to wit:
Atty. Aganan (to witness Pedro Matibag):
Q Mr. Witness, will you tell us who your employer is?
A Mr. Cosuco, Ma'am.
xxx xxx xxx
Q Who pays your salary?
A The procedure is sharing. It we have a catch, we share the catch.
Q What is the nature of "partihan" or sharing?
A Upon selling the fish to the market, a certain portion will be deducted for the expenses and
taken by the checker and the remaining amount will be shared by the crew-members.
Q By crew-members, you mean, those who are fishing or who catch fish?
A Yes, Ma'am.
xxx xxx xxx
Q Is the checker also paid and also included in the sharing?
A Yes, Ma'am.
13

xxx xxx xxx
Atty. Riva:
Q Mr. Captain, is Arturo Villavilla a member of the crew?
A A fisherman.
Q As a fisherman, what is his duty?
A His duty is, he will ride the fishing boat and he will "mangangawil".
Q By the way, who hired him?
A There was a master whom we talked to.
Q And this master is the one who hired him and gave him the share for fishing?
A Yes, Sir.
Q So, assuming that Marcelino Cosuco is the owner, he has nothing to do with Arturo Villavilla?
A Yes, Sir, it was the master.
Q And the same was through (true) with Reynaldo Mercado that he has nothing to do with the
hiring of Arturo Villavilla because it is the master fisherman who hired him, is that right?
A Yes, Sir.
Q And Mr. Mercado only buys fish from them?
A Yes, Sir.
14

xxx xxx xxx
Hearing Officer:
Q Do you want to convey to this Honorable Commission Mr. Matibag, that you went to fishing
venture to fish?
A Yes, Sir.
Q In this fishing venture, do you have any agreement to (with) the owner of the fishing boat?
A Our agreement with the owner was to go to high seas for fishing.
Q Do you receive monthly salary from the owner of the fishing boat?
A None, Sir, because it was a sharing basis.
Q So, what is the contribution of the owner of the fishing boat to your fishing venture?
A Food and other equipment.
Q Mr. Matibag, who supplied you the gasoline?
A The owner of the fishing boat, Sir.
Q Who gave you provisions or food in your fishing or during the duration of your fishing?
A The owner.
Q While you were in high seas, was there anybody who supervised you?
A None, Sir, there was no radio. I gave the order.
Q Before you go (sic) to the high seas for fishing purposes, did you receive any instruction from
the owner?
A There was no instruction given.
15

xxx xxx xxx
Atty. Agana (to witness Gil Chua):
Q Will you please inform the Honorable Investigator how much is your salary and where did you
get your salary?
A It was given to us by the captain when there is (sic) a sale.
Q So, I understand from you, Mr. witness, that whenever there is a sale of fish, you get a share?
A We received P 200 or P 300, not the same always.
xxx xxx xxx
Atty. Riva:
Q Depending on the volume of sale of fish, is it not?
A That is all I know.
16

xxx xxx xxx
Hearing Officer:
Q Was there a time that you did not receive any share?
A If we have a trip, we usually receive.
Q How about if there is no trip, did you receive any salary from Mr. Mercado as owner of fishing
boat St. Theresa?
A No., Sir.
Q So, you are sure Mister Witness, that when your fishing boat has no catch, you did (sic) not
receive any share?
A Yes, Sir.
17

It is thus clear that the arrangement between the boat owner and the crew members, one of whom
was petitioners' son, partook of the nature of a joint venture: the crew members did not receive
fixed compensation as they only shared in their catch; they ventured to the sea irrespective of the
instructions of the boat owners, i.e., upon their own best judgment as to when, how long, and
where to go fishing; the boat owners did not hire them but simply joined the fishing expedition
upon invitation of the ship master, even without the knowledge of the boat owner. In short, there
was neither right of control nor actual exercise of such right on the part of the boat owner over
his crew members.
Consequently, respondent Court of Appeals is correct in upholding the application by respondent
Social Security Commission of the ruling in Pajarillo v. Social Security System
18
where We
held:
. . . an employee is defined as a "person who performs services for
an employer in which either or both mental and physical efforts are used and
who receives compensation for such services, where there is an employer-
employee relationship" (Sec. 8[d], Rep. Act 1161, as amended by Rep. Act
2658). In the present case, neither the pilots nor the crew-members receive
compensation from boat-owners. They only share in their own catch produced
by their own efforts. There is no showing that outside of their one third share, the
boat-owners have anything to do with the distribution of the rest of the catch
among the pilots and the crew members. The latter perform no service for the
boat-owners, but mainly for their own benefit.
In the undertaking in question, the boat-owners obviously are not responsible for
the wage, salary, or fee of the pilot and crew-members. Their sole participation
in the venture is the furnishing or delivery of the equipment used for fishing,
after which, they merely wait for the boat's return and receive their share in the
catch, if there is any. For his part, a person who joins the outfit is entitled to a
share or participation in the fruit of the fishing trip. If it gives no return, the men
get nothing. It appears to us therefore that the undertaking is in the nature of a
joint venture, with the boat-owner supplying the boat and its equipment (sic),
and the pilot and crew-members contributing the necessary labor, and the parties
getting specific shares for their respective contributions.
Add to this extreme difficulty, if not impossibility of determining
the monthly wage or earning of these fishermen for the purpose of fixing the
amount of their and the supposed employer's contributions (See Secs. 18 and
19, Ibid.), and there is every reason to exempt the parties to this kind of
undertaking from compulsory registration with the Social Security System.
Certainly, petitioners' reliance on Negre v. Workmen's Compensation Commission, supra, and
RJL Fishing Corp. v. NLRC, supra, is misplaced. The observations of respondent Social Security
Commission are more persuasive and correct. Thus
The case of Jose Negre vs. Workmen's Compensation, et al., 135 SCRA 651,
invoked by the petitioners-appellants in support of their claim that there existed
an employer-employee relationship between their son Arturo Villavilla and
private respondent Reynaldo Mercado cannot be applied to the instant case for
the simple reason that the facts in the aforesaid case are different from those in
the case at bar. A look at the Jose Negre case will show that it made referral to
the case of Abong vs. Workmen's Compensation Commission, 54 SCRA 379,
wherein this Honorable Court stated, and we beg to quote:
In Abong vs. Workmen's Compensation Commission (54 SCRA
379) we held that fisherman crew-members Manuel and Miguel
are employees and not industrial partners.
It is to be noted, however, that in the case of Abong vs. Workmen's
Compensation Commission, this Honorable Court stated and we again beg to
quote:
As pointed by the Commission's finding, the fundamental bases
showing that petitioner Dr. Agustino R. Abong is the employer,
are present, namely, the selection and engagement of the
employee; the payment of wages; the power of dismissal and the
employer's power to control the employees conduct. These
powers were lodged in petitioner Abong, thru his agent,
Simplicio Panganiban, whom he alleges to be his partner. On
this score alone, the petition for review must fail. It is well-
settled that employer-employee relationship involves findings of
facts which are conclusive and binding and not subject to review
by this Court. (emphasis supplied).
Interestingly, the aforementioned fundamental bases for the existence of
employer-employee relationship are not present in the case at bar. As mentioned
earlier, private respondent Reynaldo Mercado had no connection with the
selection and engagement of Arturo Villavilla (pp. 38-39, T.S.N. 12-6-83);
exercised no power of dismissal over Arturo Villavilla; neither had he any power
of control or had reserved the right to control Arturo Villavilla as to the result of
the work to be done as well as the means and methods by which the same is to
be accomplished, and there was no such uniform salary involved (pp. 41-43,
T.S.N. 12-6-83).
In the case before Us, it is clear that there was no employer-employee relationship between
petitioner's son Arturo and private respondent Mercado, much less private respondent Cosuco.
As such, Arturo could not be made subject of compulsory coverage under the Social Security
Act; hence, private respondents cannot be said to have violated said law when they did not
register him with the Social Security System. A fortiori, respondent as well as intervenor are not
answerable to petitioners for any death benefits under the law.
Culled from the foregoing, the inexorable conclusion is that respondent Court of Appeals did not
err in sustaining the judgment of respondent Social Security Commission.
It may not be amiss to mention that while petitioners merely raise factual questions which are not
proper under Rule 45 of the Rules of Court, We nevertheless went to great lengths in dissecting
the facts of this case if only to convince Us that petitioners, who are pauper litigants and seeking
claims under a social legislation, have not been denied its benefits. For, We are not unaware that
in this jurisdiction all doubts in the implementation and interpretation of provisions of social
legislations should be resolved in favor of the working class. But, alas, justice is not fully served
by sustaining the contention of the poor simply because he is poor. Justice is done by properly
applying the law regardless of the station in life of the contending parties.
WHEREFORE, finding no reversible error in the questioned judgment of the appellate court, the
same is AFFIRMED. No costs. SO ORDERED.
G.R. No. 124354 April 11, 2002
ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural
guardians of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS, and RON
RAYMOND RAMOS, petitioners,
vs.
COURT OF APPEALS, DE LOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA
and DR. PERFECTA GUTIERREZ, respondents.
R E S O L U T I O N
KAPUNAN, J .:
Private respondents De Los Santos Medical Center, Dr. Orlino Hosaka and Dr. Perfecta
Gutierrez move for a reconsideration of the Decision, dated December 29, 1999, of this Court
holding them civilly liable for petitioner Erlinda Ramos comatose condition after she delivered
herself to them for their professional care and management.
For better understanding of the issues raised in private respondents respective motions, we will
briefly restate the facts of the case as follows:
Sometime in 1985, petitioner Erlinda Ramos, after seeking professional medical help, was
advised to undergo an operation for the removal of a stone in her gall bladder (cholecystectomy).
She was referred to Dr. Hosaka, a surgeon, who agreed to perform the operation on her. The
operation was scheduled for June 17, 1985 at 9:00 in the morning at private respondent De Los
Santos Medical Center (DLSMC). Since neither petitioner Erlinda nor her husband, petitioner
Rogelio, knew of any anesthesiologist, Dr. Hosaka recommended to them the services of Dr.
Gutierrez.
Petitioner Erlinda was admitted to the DLSMC the day before the scheduled operation. By 7:30
in the morning of the following day, petitioner Erlinda was already being prepared for operation.
Upon the request of petitioner Erlinda, her sister-in-law, Herminda Cruz, who was then Dean of
the College of Nursing at the Capitol Medical Center, was allowed to accompany her inside the
operating room.
At around 9:30 in the morning, Dr. Hosaka had not yet arrived so Dr. Gutierrez tried to get in
touch with him by phone. Thereafter, Dr. Gutierrez informed Cruz that the operation might be
delayed due to the late arrival of Dr. Hosaka. In the meantime, the patient, petitioner Erlinda said
to Cruz, "Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor."
By 10:00 in the morning, when Dr. Hosaka was still not around, petitioner Rogelio already
wanted to pull out his wife from the operating room. He met Dr. Garcia, who remarked that he
was also tired of waiting for Dr. Hosaka. Dr. Hosaka finally arrived at the hospital at around
12:10 in the afternoon, or more than three (3) hours after the scheduled operation.
Cruz, who was then still inside the operating room, heard about Dr. Hosakas arrival. While she
held the hand of Erlinda, Cruz saw Dr. Gutierrez trying to intubate the patient. Cruz heard Dr.
Gutierrez utter: "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang
tiyan." Cruz noticed a bluish discoloration of Erlindas nailbeds on her left hand. She (Cruz) then
heard Dr. Hosaka instruct someone to call Dr. Calderon, another anesthesiologist. When he
arrived, Dr. Calderon attempted to intubate the patient. The nailbeds of the patient remained
bluish, thus, she was placed in a trendelenburg position a position where the head of the patient
is placed in a position lower than her feet. At this point, Cruz went out of the operating room to
express her concern to petitioner Rogelio that Erlindas operation was not going well.
Cruz quickly rushed back to the operating room and saw that the patient was still in
trendelenburg position. At almost 3:00 in the afternoon, she saw Erlinda being wheeled to the
Intensive Care Unit (ICU). The doctors explained to petitioner Rogelio that his wife had
bronchospasm. Erlinda stayed in the ICU for a month. She was released from the hospital only
four months later or on November 15, 1985. Since the ill-fated operation, Erlinda remained in
comatose condition until she died on August 3, 1999.
1

Petitioners filed with the Regional Trial Court of Quezon City a civil case for damages against
private respondents. After due trial, the court a quo rendered judgment in favor of petitioners.
Essentially, the trial court found that private respondents were negligent in the performance of
their duties to Erlinda. On appeal by private respondents, the Court of Appeals reversed the trial
courts decision and directed petitioners to pay their "unpaid medical bills" to private
respondents.
Petitioners filed with this Court a petition for review on certiorari. The private respondents were
then required to submit their respective comments thereon. On December 29, 1999, this Court
promulgated the decision which private respondents now seek to be reconsidered. The
dispositive portion of said Decision states:
WHEREFORE, the decision and resolution of the appellate court appealed from are
hereby modified so as to award in favor of petitioners, and solidarily against private
respondents the following: 1) P1,352,000.00 as actual damages computed as of the date
of promulgation of this decision plus a monthly payment of P8,000.00 up to the time that
petitioner Erlinda Ramos expires or miraculously survives; 2) P2,000,000.00 as moral
damages, 3) P1,500,000.00 as temperate damages; 4) P100,000.00 each exemplary
damages and attorneys fees; and 5) the costs of the suit.
2

In his Motion for Reconsideration, private respondent Dr. Hosaka submits the following as
grounds therefor:
I
THE HONORABLE SUPREME COURT COMMITTED REVERSIBLE ERROR WHEN IT
HELD RESPONDENT DR. HOSAKA LIABLE ON THE BASIS OF THE "CAPTAIN-OF-
THE-SHIP" DOCTRINE.
II
THE HONORABLE SUPREME COURT ERRED IN HOLDING RESPONDENT DR.
HOSAKA LIABLE DESPITE THE FACT THAT NO NEGLIGENCE CAN BE
ATTRIBUTABLE TO HIM.
III
ASSUMING WITHOUT ADMITTING THAT RESPONDENT DR. HOSAKA IS LIABLE,
THE HONORABLE SUPREME COURT ERRED IN AWARDING DAMAGES THAT WERE
CLEARLY EXCESSIVE AND WITHOUT LEGAL BASIS.
3

Private respondent Dr. Gutierrez, for her part, avers that:
A. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY
OVERLOOKED THE FACT THAT THE COURT OF APPEALS DECISION DATED
29 MAY 1995 HAD ALREADY BECOME FINAL AND EXECUTORY AS OF 25
JUNE 1995, THEREBY DEPRIVING THIS HONORABLE COURT OF
JURISDICTION OVER THE INSTANT PETITION;
B. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY
OVERLOOKED SEVERAL MATERIAL FACTUAL CIRCUMSTANCES WHICH, IF
PROPERLY CONSIDERED, WOULD INDUBITABLY LEAD TO NO OTHER
CONCLUSION BUT THAT PRIVATE RESPONDENT DOCTORS WERE NOT
GUILTY OF ANY NEGLIGENCE IN RESPECT OF THE INSTANT CASE;
B.1 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS
SUFFICIENTLY DISCHARGED THE BURDEN OF EVIDENCE BY
SUBSTANTIAL PROOF OF HER COMPLIANCE WITH THE STANDARDS
OF DUE CARE EXPECTED IN HER RESPECTIVE FIELD OF MEDICAL
SPECIALIZATION.
B.2 RESPONDENT DOCTOR PERFECTA GUTIERREZ HAS
SUFFICIENTLY DISCHARGED THE BURDEN OF EVIDENCE BY
SUBSTANTIAL PROOF OF HER HAVING SUCCESSFULLY INTUBATED
PATIENT ERLINDA RAMOS
C. THE SUPREME COURT MAY HAVE INADVERTENTLY PLACED TOO MUCH
RELIANCE ON THE TESTIMONY OF PETITIONERS WITNESS HERMINDA
CRUZ, DESPITE THE EXISTENCE OF SEVERAL FACTUAL CIRCUMSTANCES
WHICH RENDERS DOUBT ON HER CREDIBILITY
D. THE SUPREME COURT MAY HAVE INADVERTENTLY DISREGARDED THE
EXPERT TESTIMONY OF DR. JAMORA AND DRA. CALDERON
E. THE HONORABLE SUPREME COURT MAY HAVE INADVERTENTLY
AWARDED DAMAGES TO PETITIONERS DESPITE THE FACT THAT THERE
WAS NO NEGLIGENCE ON THE PART OF RESPONDENT DOCTOR.
4

Private respondent De Los Santos Medical Center likewise moves for reconsideration on the
following grounds:
I
THE HONORABLE COURT ERRED IN GIVING DUE COURSE TO THE INSTANT
PETITION AS THE DECISION OF THE HONORABLE COURT OF APPEALS HAD
ALREADY BECOME FINAL AND EXECUTORY
II
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT AN EMPLOYER-
EMPLOYEE [RELATIONSHIP] EXISTS BETWEEN RESPONDENT DE LOS SANTOS
MEDICAL CENTER AND DRS. ORLINO HOSAKA AND PERFECTA GUTIERREZ
III
THE HONORABLE SUPREME COURT ERRED IN FINDING THAT RESPONDENT DE
LOS SANTOS MEDICAL CENTER IS SOLIDARILY LIABLE WITH RESPONDENT
DOCTORS
IV
THE HONORABLE SUPREME COURT ERRED IN INCREASING THE AWARD OF
DAMAGES IN FAVOR OF PETITIONERS.
5

In the Resolution of February 21, 2000, this Court denied the motions for reconsideration of
private respondents Drs. Hosaka and Gutierrez. They then filed their respective second motions
for reconsideration. The Philippine College of Surgeons filed its Petition-in-Intervention
contending in the main that this Court erred in holding private respondent Dr. Hosaka liable
under the captain of the ship doctrine. According to the intervenor, said doctrine had long been
abandoned in the United States in recognition of the developments in modern medical and
hospital practice.
6
The Court noted these pleadings in the Resolution of July 17, 2000.
7

On March 19, 2001, the Court heard the oral arguments of the parties, including the intervenor.
Also present during the hearing were the amicii curiae: Dr. Felipe A. Estrella, Jr., Consultant of
the Philippine Charity Sweepstakes, former Director of the Philippine General Hospital and
former Secretary of Health; Dr. Iluminada T. Camagay, President of the Philippine Society of
Anesthesiologists, Inc. and Professor and Vice-Chair for Research, Department of
Anesthesiology, College of Medicine-Philippine General Hospital, University of the Philippines;
and Dr. Lydia M. Egay, Professor and Vice-Chair for Academics, Department of
Anesthesiology, College of Medicine-Philippine General Hospital, University of the Philippines.
The Court enumerated the issues to be resolved in this case as follows:
1. WHETHER OR NOT DR. ORLINO HOSAKA (SURGEON) IS LIABLE FOR
NEGLIGENCE;
2. WHETHER OR NOT DR. PERFECTA GUTIERREZ (ANESTHESIOLOGIST) IS
LIABLE FOR NEGLIGENCE; AND
3. WHETHER OR NOT THE HOSPITAL (DELOS SANTOS MEDICAL CENTER) IS
LIABLE FOR ANY ACT OF NEGLIGENCE COMMITTED BY THEIR VISITING
CONSULTANT SURGEON AND ANESTHESIOLOGIST.
8

We shall first resolve the issue pertaining to private respondent Dr. Gutierrez. She maintains that
the Court erred in finding her negligent and in holding that it was the faulty intubation which was
the proximate cause of Erlindas comatose condition. The following objective facts allegedly
negate a finding of negligence on her part: 1) That the outcome of the procedure was a comatose
patient and not a dead one; 2) That the patient had a cardiac arrest; and 3) That the patient was
revived from that cardiac arrest.
9
In effect, Dr. Gutierrez insists that, contrary to the finding of
this Court, the intubation she performed on Erlinda was successful.
Unfortunately, Dr. Gutierrez claim of lack of negligence on her part is belied by the records of
the case. It has been sufficiently established that she failed to exercise the standards of care in the
administration of anesthesia on a patient. Dr. Egay enlightened the Court on what these standards
are:
x x x What are the standards of care that an anesthesiologist should do before we
administer anesthesia? The initial step is the preparation of the patient for surgery and
this is a pre-operative evaluation because the anesthesiologist is responsible for
determining the medical status of the patient, developing the anesthesia plan and
acquainting the patient or the responsible adult particularly if we are referring with the
patient or to adult patient who may not have, who may have some mental handicaps of
the proposed plans. We do pre-operative evaluation because this provides for an
opportunity for us to establish identification and personal acquaintance with the patient.
It also makes us have an opportunity to alleviate anxiety, explain techniques and risks to
the patient, given the patient the choice and establishing consent to proceed with the
plan. And lastly, once this has been agreed upon by all parties concerned the ordering of
pre-operative medications. And following this line at the end of the evaluation we
usually come up on writing, documentation is very important as far as when we train an
anesthesiologist we always emphasize this because we need records for our protection,
well, records. And it entails having brief summary of patient history and physical
findings pertinent to anesthesia, plan, organize as a problem list, the plan anesthesia
technique, the plan post operative, pain management if appropriate, special issues for this
particular patient. There are needs for special care after surgery and if it so it must be
written down there and a request must be made known to proper authorities that such and
such care is necessary. And the request for medical evaluation if there is an indication.
When we ask for a cardio-pulmonary clearance it is not in fact to tell them if this patient
is going to be fit for anesthesia, the decision to give anesthesia rests on the
anesthesiologist. What we ask them is actually to give us the functional capacity of
certain systems which maybe affected by the anesthetic agent or the technique that we
are going to use. But the burden of responsibility in terms of selection of agent and how
to administer it rest on the anesthesiologist.
10

The conduct of a preanesthetic/preoperative evaluation prior to an operation, whether elective or
emergency, cannot be dispensed with.
11
Such evaluation is necessary for the formulation of a
plan of anesthesia care suited to the needs of the patient concerned.
Pre-evaluation for anesthesia involves taking the patients medical history, reviewing his current
drug therapy, conducting physical examination, interpreting laboratory data, and determining the
appropriate prescription of preoperative medications as necessary to the conduct of anesthesia.
12

Physical examination of the patient entails not only evaluating the patients central nervous
system, cardiovascular system and lungs but also the upper airway. Examination of the upper
airway would in turn include an analysis of the patients cervical spine mobility,
temporomandibular mobility, prominent central incisors, deceased or artificial teeth, ability to
visualize uvula and the thyromental distance.
13

Nonetheless, Dr. Gutierrez omitted to perform a thorough preoperative evaluation on Erlinda. As
she herself admitted, she saw Erlinda for the first time on the day of the operation itself, one hour
before the scheduled operation. She auscultated
14
the patients heart and lungs and checked the
latters blood pressure to determine if Erlinda was indeed fit for operation.
15
However, she did
not proceed to examine the patients airway. Had she been able to check petitioner Erlindas
airway prior to the operation, Dr. Gutierrez would most probably not have experienced difficulty
in intubating the former, and thus the resultant injury could have been avoided. As we have
stated in our Decision:
In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the first
time on the day of the operation itself, on 17 June 1985. Before this date, no prior
consultations with, or pre-operative evaluation of Erlinda was done by her. Until the day
of the operation, respondent Dra. Gutierrez was unaware of the physiological make-up
and needs of Erlinda. She was likewise not properly informed of the possible difficulties
she would face during the administration of anesthesia to Erlinda. Respondent Dra.
Gutierrez act of seeing her patient for the first time only an hour before the scheduled
operative procedure was, therefore, an act of exceptional negligence and professional
irresponsibility. The measures cautioning prudence and vigilance in dealing with human
lives lie at the core of the physicians centuries-old Hippocratic Oath. Her failure to
follow this medical procedure is, therefore, a clear indicia of her negligence.
16

Further, there is no cogent reason for the Court to reverse its finding that it was the faulty
intubation on Erlinda that caused her comatose condition. There is no question that Erlinda
became comatose after Dr. Gutierrez performed a medical procedure on her. Even the counsel of
Dr. Gutierrez admitted to this fact during the oral arguments:
CHIEF JUSTICE:
Mr. Counsel, you started your argument saying that this involves a comatose
patient?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
How do you mean by that, a comatose, a comatose after any other acts were
done by Dr. Gutierrez or comatose before any act was done by her?
ATTY. GANA:
No, we meant comatose as a final outcome of the procedure.
CHIEF JUSTICE:
Meaning to say, the patient became comatose after some intervention,
professional acts have been done by Dr. Gutierrez?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
In other words, the comatose status was a consequence of some acts performed
by D. Gutierrez?
ATTY. GANA:
It was a consequence of the well, (interrupted)
CHIEF JUSTICE:
An acts performed by her, is that not correct?
ATTY. GANA:
Yes, Your Honor.
CHIEF JUSTICE:
Thank you.
17


What is left to be determined therefore is whether Erlindas hapless condition was due to any
fault or negligence on the part of Dr. Gutierrez while she (Erlinda) was under the latters care.
Dr. Gutierrez maintains that the bronchospasm and cardiac arrest resulting in the patients
comatose condition was brought about by the anaphylactic reaction of the patient to Thiopental
Sodium (pentothal).
18
In the Decision, we explained why we found Dr. Gutierrez theory
unacceptable. In the first place, Dr. Eduardo Jamora, the witness who was presented to support
her (Dr. Gutierrez) theory, was a pulmonologist. Thus, he could not be considered an authority
on anesthesia practice and procedure and their complications.
19

Secondly, there was no evidence on record to support the theory that Erlinda developed an
allergic reaction to pentothal. Dr. Camagay enlightened the Court as to the manifestations of an
allergic reaction in this wise:
DR. CAMAGAY:
All right, let us qualify an allergic reaction. In medical terminology an allergic
reaction is something which is not usual response and it is further qualified by
the release of a hormone called histamine and histamine has an effect on all the
organs of the body generally release because the substance that entered the body
reacts with the particular cell, the mass cell, and the mass cell secretes this
histamine. In a way it is some form of response to take away that which is not
mine, which is not part of the body. So, histamine has multiple effects on the
body. So, one of the effects as you will see you will have redness, if you have an
allergy you will have tearing of the eyes, you will have swelling, very crucial
swelling sometimes of the larynges which is your voice box main airway, that
swelling may be enough to obstruct the entry of air to the trachea and you could
also have contraction, constriction of the smaller airways beyond the trachea,
you see you have the trachea this way, we brought some visual aids but
unfortunately we do not have a projector. And then you have the smaller
airways, the bronchi and then eventually into the mass of the lungs you have the
bronchus. The difference is that these tubes have also in their walls muscles and
this particular kind of muscles is smooth muscle so, when histamine is released
they close up like this and that phenomenon is known as bronco spasm.
However, the effects of histamine also on blood vessels are different. They dilate
blood vessel open up and the patient or whoever has this histamine release has
hypertension or low blood pressure to a point that the patient may have decrease
blood supply to the brain and may collapse so, you may have people who have
this.
20

These symptoms of an allergic reaction were not shown to have been extant in Erlindas case. As
we held in our Decision, "no evidence of stridor, skin reactions, or wheezing some of the more
common accompanying signs of an allergic reaction appears on record. No laboratory data
were ever presented to the court."
21

Dr. Gutierrez, however, insists that she successfully intubated Erlinda as evidenced by the fact
that she was revived after suffering from cardiac arrest. Dr. Gutierrez faults the Court for giving
credence to the testimony of Cruz on the matter of the administration of anesthesia when she
(Cruz), being a nurse, was allegedly not qualified to testify thereon. Rather, Dr. Gutierrez invites
the Courts attention to her synopsis on what transpired during Erlindas intubation:
12:15 p.m. Patient was inducted with sodium pentothal 2.5% (250 mg) given by slow IV.
02 was started by mask. After pentothal injection this was followed by IV injection of
Norcuron 4mg. After 2 minutes 02 was given by positive pressure for about one minute.
Intubation with endotracheal tube 7.5 m in diameter was done with slight difficulty
(short neck & slightly prominent upper teeth) chest was examined for breath sounds &
checked if equal on both sides. The tube was then anchored to the mouth by plaster &
cuff inflated. Ethrane 2% with 02 4 liters was given. Blood pressure was checked 120/80
& heart rate regular and normal 90/min.
12:25 p.m. After 10 minutes patient was cyanotic. Ethrane was discontinued & 02 given
alone. Cyanosis disappeared. Blood pressure and heart beats stable.
12:30 p.m. Cyanosis again reappeared this time with sibilant and sonorous rales all over
the chest. D_5%_H20 & 1 ampule of aminophyline by fast drip was started. Still the
cyanosis was persistent. Patient was connected to a cardiac monitor. Another ampule of
of [sic] aminophyline was given and solu cortef was given.
12:40 p.m. There was cardiac arrest. Extra cardiac massage and intercardiac injection of
adrenalin was given & heart beat reappeared in less than one minute. Sodium
bicarbonate & another dose of solu cortef was given by IV. Cyanosis slowly disappeared
& 02 continuously given & assisted positive pressure. Laboratory exams done (see
results in chart).
Patient was transferred to ICU for further management.
22

From the foregoing, it can be allegedly seen that there was no withdrawal (extubation) of the
tube. And the fact that the cyanosis allegedly disappeared after pure oxygen was supplied
through the tube proved that it was properly placed.
The Court has reservations on giving evidentiary weight to the entries purportedly contained in
Dr. Gutierrez synopsis. It is significant to note that the said record prepared by Dr. Gutierrez
was made only after Erlinda was taken out of the operating room. The standard practice in
anesthesia is that every single act that the anesthesiologist performs must be recorded. In Dr.
Gutierrez case, she could not account for at least ten (10) minutes of what happened during the
administration of anesthesia on Erlinda. The following exchange between Dr. Estrella, one of the
amicii curiae, and Dr. Gutierrez is instructive:
DR. ESTRELLA
Q You mentioned that there were two (2) attempts in the intubation period?
DR. GUTIERREZ
Yes.
Q There were two attempts. In the first attempt was the tube inserted or was the
laryngoscope only inserted, which was inserted?
A All the laryngoscope.
Q All the laryngoscope. But if I remember right somewhere in the re-direct, a
certain lawyer, you were asked that you did a first attempt and the question was did
you withdraw the tube? And you said you never withdrew the tube, is that right?
A Yes.
Q Yes. And so if you never withdrew the tube then there was no, there was no
insertion of the tube during that first attempt. Now, the other thing that we have to settle
here is when cyanosis occurred, is it recorded in the anesthesia record when the
cyanosis, in your recording when did the cyanosis occur?
A (sic)
Q Is it a standard practice of anesthesia that whatever you do during that period or
from the time of induction to the time that you probably get the patient out of the
operating room that every single action that you do is so recorded in your anesthesia
record?
A I was not able to record everything I did not have time anymore because I did that
after the, when the patient was about to leave the operating room. When there was
second cyanosis already that was the (interrupted)
Q When was the first cyanosis?
A The first cyanosis when I was (interrupted)
Q What time, more or less?
A I think it was 12:15 or 12:16.
Q Well, if the record will show you started induction at 12:15?
A Yes, Your Honor.
Q And the first medication you gave was what?
A The first medication, no, first the patient was oxygenated for around one to two
minutes.
Q Yes, so, that is about 12:13?
A Yes, and then, I asked the resident physician to start giving the pentothal very
slowly and that was around one minute.
Q So, that is about 12:13 no, 12:15, 12:17?
A Yes, and then, after one minute another oxygenation was given and after
(interrupted)
Q 12:18?
A Yes, and then after giving the oxygen we start the menorcure which is a relaxant.
After that relaxant (interrupted)
Q After that relaxant, how long do you wait before you do any manipulation?
A Usually you wait for two minutes or three minutes.
Q So, if our estimate of the time is accurate we are now more or less 12:19, is that
right?
A Maybe.
Q 12:19. And at that time, what would have been done to this patient?
A After that time you examine the, if there is relaxation of the jaw which you push
it downwards and when I saw that the patient was relax because that monorcure is a
relaxant, you cannot intubate the patient or insert the laryngoscope if it is not keeping
him relax. So, my first attempt when I put the laryngoscope on I saw the trachea was
deeply interiorly. So, what I did ask "mahirap ata ito ah." So, I removed the
laryngoscope and oxygenated again the patient.
Q So, more or less you attempted to do an intubation after the first attempt as you
claimed that it was only the laryngoscope that was inserted.
A Yes.
Q And in the second attempt you inserted the laryngoscope and now possible
intubation?
A Yes.
Q And at that point, you made a remark, what remark did you make?
A I said "mahirap ata ito" when the first attempt I did not see the trachea right
away. That was when I (interrupted)
Q That was the first attempt?
A Yes.
Q What about the second attempt?
A On the second attempt I was able to intubate right away within two to three
seconds.
Q At what point, for purposes of discussion without accepting it, at what point did
you make the comment "na mahirap ata to intubate, mali ata ang pinasukan"
A I did not say "mali ata ang pinasukan" I never said that.
Q Well, just for the information of the group here the remarks I am making is based
on the documents that were forwarded to me by the Supreme Court. That is why for
purposes of discussion I am trying to clarify this for the sake of enlightenment. So, at
what point did you ever make that comment?
A Which one, sir?
Q The "mahirap intubate ito" assuming that you (interrupted)
A Iyon lang, that is what I only said "mahirap intubate (interrupted)
Q At what point?
A When the first attempt when I inserted the laryngoscope for the first time.
Q So, when you claim that at the first attempt you inserted the laryngoscope, right?
A Yes.
Q But in one of the recordings somewhere at the, somewhere in the transcript of
records that when the lawyer of the other party try to inquire from you during the first
attempt that was the time when "mayroon ba kayong hinugot sa tube, I do not remember
the page now, but it seems to me it is there. So, that it was on the second attempt that
(interrupted)
A I was able to intubate.
Q And this is more or less about what time 12:21?
A Maybe, I cannot remember the time, Sir.
Q Okay, assuming that this was done at 12:21 and looking at the anesthesia records
from 12:20 to 12:30 there was no recording of the vital signs. And can we presume that
at this stage there was already some problems in handling the patient?
A Not yet.
Q But why are there no recordings in the anesthesia record?
A I did not have time.
Q Ah, you did not have time, why did you not have time?
A Because it was so fast, I really (at this juncture the witness is laughing)
Q No, I am just asking. Remember I am not here not to pin point on anybody I am
here just to more or less clarify certainty more ore less on the record.
A Yes, Sir.
Q And so it seems that there were no recording during that span of ten (10) minutes.
From 12:20 to 12:30, and going over your narration, it seems to me that the cyanosis
appeared ten (10) minutes after induction, is that right?
A Yes.
Q And that is after induction 12:15 that is 12:25 that was the first cyanosis?
A Yes.
Q And that the 12:25 is after the 12:20?
A We cannot (interrupted)
Q Huwag ho kayong makuwan, we are just trying to enlighten, I am just going over
the record ano,kung mali ito kuwan eh di ano. So, ganoon po ano, that it seems to me
that there is no recording from 12:20 to 12:30, so, I am just wondering why there were
no recordings during the period and then of course the second cyanosis, after the first
cyanosis. I think that was the time Dr. Hosaka came in?
A No, the first cyanosis (interrupted).
23

We cannot thus give full credence to Dr. Gutierrez synopsis in light of her admission that it does
not fully reflect the events that transpired during the administration of anesthesia on Erlinda. As
pointed out by Dr. Estrella, there was a ten-minute gap in Dr. Gutierrez synopsis, i.e., the vital
signs of Erlinda were not recorded during that time. The absence of these data is particularly
significant because, as found by the trial court, it was the absence of oxygen supply for four (4)
to five (5) minutes that caused Erlindas comatose condition.
On the other hand, the Court has no reason to disbelieve the testimony of Cruz. As we stated in
the Decision, she is competent to testify on matters which she is capable of observing such as,
the statements and acts of the physician and surgeon, external appearances and manifest
conditions which are observable by any one.
24
Cruz, Erlindas sister-in-law, was with her inside
the operating room. Moreover, being a nurse and Dean of the Capitol Medical Center School of
Nursing at that, she is not entirely ignorant of anesthetic procedure. Cruz narrated that she heard
Dr. Gutierrez remark, "Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang
tiyan." She observed that the nailbeds of Erlinda became bluish and thereafter Erlinda was placed
in trendelenburg position.
25
Cruz further averred that she noticed that the abdomen of Erlinda
became distended.
26

The cyanosis (bluish discoloration of the skin or mucous membranes caused by lack of oxygen or
abnormal hemoglobin in the blood) and enlargement of the stomach of Erlinda indicate that the
endotracheal tube was improperly inserted into the esophagus instead of the trachea.
Consequently, oxygen was delivered not to the lungs but to the gastrointestinal tract. This
conclusion is supported by the fact that Erlinda was placed in trendelenburg position. This
indicates that there was a decrease of blood supply to the patients brain. The brain was thus
temporarily deprived of oxygen supply causing Erlinda to go into coma.
The injury incurred by petitioner Erlinda does not normally happen absent any negligence in the
administration of anesthesia and in the use of an endotracheal tube. As was noted in our
Decision, the instruments used in the administration of anesthesia, including the endotracheal
tube, were all under the exclusive control of private respondents Dr. Gutierrez and Dr.
Hosaka.
27
In Voss vs. Bridwell,
28
which involved a patient who suffered brain damage due to the
wrongful administration of anesthesia, and even before the scheduled mastoid operation could be
performed, the Kansas Supreme Court applied the doctrine of res ipsa loquitur, reasoning that
the injury to the patient therein was one which does not ordinarily take place in the absence of
negligence in the administration of an anesthetic, and in the use and employment of an
endotracheal tube. The court went on to say that "[o]rdinarily a person being put under anesthesia
is not rendered decerebrate as a consequence of administering such anesthesia in the absence of
negligence. Upon these facts and under these circumstances, a layman would be able to say, as a
matter of common knowledge and observation, that the consequences of professional treatment
were not as such as would ordinarily have followed if due care had been
exercised."
29
Considering the application of the doctrine of res ipsa loquitur, the testimony of
Cruz was properly given credence in the case at bar.
For his part, Dr. Hosaka mainly contends that the Court erred in finding him negligent as a
surgeon by applying the Captain-of-the-Ship doctrine.
30
Dr. Hosaka argues that the trend in
United States jurisprudence has been to reject said doctrine in light of the developments in
medical practice. He points out that anesthesiology and surgery are two distinct and specialized
fields in medicine and as a surgeon, he is not deemed to have control over the acts of Dr.
Gutierrez. As anesthesiologist, Dr. Gutierrez is a specialist in her field and has acquired skills
and knowledge in the course of her training which Dr. Hosaka, as a surgeon, does not
possess.
31
He states further that current American jurisprudence on the matter recognizes that the
trend towards specialization in medicine has created situations where surgeons do not always
have the right to control all personnel within the operating room,
32
especially a fellow
specialist.
33

Dr. Hosaka cites the case of Thomas v. Raleigh General Hospital,
34
which involved a suit filed
by a patient who lost his voice due to the wrongful insertion of the endotracheal tube preparatory
to the administration of anesthesia in connection with the laparotomy to be conducted on him.
The patient sued both the anesthesiologist and the surgeon for the injury suffered by him. The
Supreme Court of Appeals of West Virginia held that the surgeon could not be held liable for the
loss of the patients voice, considering that the surgeon did not have a hand in the intubation of
the patient. The court rejected the application of the "Captain-of-the-Ship Doctrine," citing the
fact that the field of medicine has become specialized such that surgeons can no longer be
deemed as having control over the other personnel in the operating room. It held that "[a]n
assignment of liability based on actual control more realistically reflects the actual relationship
which exists in a modern operating room."
35
Hence, only the anesthesiologist who inserted the
endotracheal tube into the patients throat was held liable for the injury suffered by the latter.
This contention fails to persuade.
That there is a trend in American jurisprudence to do away with the Captain-of-the-Ship doctrine
does not mean that this Court will ipso facto follow said trend. Due regard for the peculiar factual
circumstances obtaining in this case justify the application of the Captain-of-the-Ship doctrine.
From the facts on record it can be logically inferred that Dr. Hosaka exercised a certain degree
of, at the very least, supervision over the procedure then being performed on Erlinda.
First, it was Dr. Hosaka who recommended to petitioners the services of Dr. Gutierrez. In effect,
he represented to petitioners that Dr. Gutierrez possessed the necessary competence and skills.
Drs. Hosaka and Gutierrez had worked together since 1977. Whenever Dr. Hosaka performed a
surgery, he would always engage the services of Dr. Gutierrez to administer the anesthesia on his
patient.
36

Second, Dr. Hosaka himself admitted that he was the attending physician of Erlinda. Thus, when
Erlinda showed signs of cyanosis, it was Dr. Hosaka who gave instructions to call for another
anesthesiologist and cardiologist to help resuscitate Erlinda.
37

Third, it is conceded that in performing their responsibilities to the patient, Drs. Hosaka and
Gutierrez worked as a team. Their work cannot be placed in separate watertight compartments
because their duties intersect with each other.
38

While the professional services of Dr. Hosaka and Dr. Gutierrez were secured primarily for their
performance of acts within their respective fields of expertise for the treatment of petitioner
Erlinda, and that one does not exercise control over the other, they were certainly not completely
independent of each other so as to absolve one from the negligent acts of the other physician.
That they were working as a medical team is evident from the fact that Dr. Hosaka was keeping
an eye on the intubation of the patient by Dr. Gutierrez, and while doing so, he observed that the
patients nails had become dusky and had to call Dr. Gutierrezs attention thereto. The Court also
notes that the counsel for Dr. Hosaka admitted that in practice, the anesthesiologist would also
have to observe the surgeons acts during the surgical process and calls the attention of the
surgeon whenever necessary
39
in the course of the treatment. The duties of Dr. Hosaka and those
of Dr. Gutierrez in the treatment of petitioner Erlinda are therefore not as clear-cut as
respondents claim them to be. On the contrary, it is quite apparent that they have a common
responsibility to treat the patient, which responsibility necessitates that they call each others
attention to the condition of the patient while the other physician is performing the necessary
medical procedures.
It is equally important to point out that Dr. Hosaka was remiss in his duty of attending to
petitioner Erlinda promptly, for he arrived more than three (3) hours late for the scheduled
operation. The cholecystectomy was set for June 17, 1985 at 9:00 a.m., but he arrived at DLSMC
only at around 12:10 p.m. In reckless disregard for his patients well being, Dr. Hosaka
scheduled two procedures on the same day, just thirty minutes apart from each other, at different
hospitals. Thus, when the first procedure (protoscopy) at the Sta. Teresita Hospital did not
proceed on time, Erlinda was kept in a state of uncertainty at the DLSMC.
The unreasonable delay in petitioner Erlindas scheduled operation subjected her to continued
starvation and consequently, to the risk of acidosis,
40
or the condition of decreased alkalinity of
the blood and tissues, marked by sickly sweet breath, headache, nausea and vomiting, and visual
disturbances.
41
The long period that Dr. Hosaka made Erlinda wait for him certainly aggravated
the anxiety that she must have been feeling at the time. It could be safely said that her anxiety
adversely affected the administration of anesthesia on her. As explained by Dr. Camagay, the
patients anxiety usually causes the outpouring of adrenaline which in turn results in high blood
pressure or disturbances in the heart rhythm:
DR. CAMAGAY:
x x x Pre-operative medication has three main functions: One is to alleviate
anxiety. Second is to dry up the secretions and Third is to relieve pain. Now, it is
very important to alleviate anxiety because anxiety is associated with the
outpouring of certain substances formed in the body called adrenalin. When a
patient is anxious there is an outpouring of adrenalin which would have adverse
effect on the patient. One of it is high blood pressure, the other is that he opens
himself to disturbances in the heart rhythm, which would have adverse
implications. So, we would like to alleviate patients anxiety mainly because he
will not be in control of his body there could be adverse results to surgery and he
will be opened up; a knife is going to open up his body. x x x
42

Dr. Hosaka cannot now claim that he was entirely blameless of what happened to Erlinda. His
conduct clearly constituted a breach of his professional duties to Erlinda:
CHIEF JUSTICE:
Two other points. The first, Doctor, you were talking about anxiety, would you
consider a patient's stay on the operating table for three hours sufficient enough
to aggravate or magnify his or her anxiety?
DR. CAMAGAY: Yes.
CHIEF JUSTICE:
In other words, I understand that in this particular case that was the case, three
hours waiting and the patient was already on the operating table (interrupted)
DR. CAMAGAY: Yes.
CHIEF JUSTICE:
Would you therefore conclude that the surgeon contributed to the aggravation of
the anxiety of the patient?
DR. CAMAGAY:
That this operation did not take place as scheduled is already a source of anxiety
and most operating tables are very narrow and that patients are usually at risk of
falling on the floor so there are restraints that are placed on them and they are
never, never left alone in the operating room by themselves specially if they are
already pre-medicated because they may not be aware of some of their
movement that they make which would contribute to their injury.
CHIEF JUSTICE: In other words due diligence would require a surgeon to come on
time?
DR. CAMAGAY: I think it is not even due diligence it is courtesy.
CHIEF JUSTICE: Courtesy.
DR. CAMAGAY: And care.
CHIEF JUSTICE: Duty as a matter of fact?
DR. CAMAGAY: Yes, Your Honor.
43


Dr. Hosaka's irresponsible conduct of arriving very late for the scheduled operation of petitioner
Erlinda is violative, not only of his duty as a physician "to serve the interest of his patients with
the greatest solicitude, giving them always his best talent and skill,"
44
but also of Article 19 of the
Civil Code which requires a person, in the performance of his duties, to act with justice and give
everyone his due.
Anent private respondent DLSMCs liability for the resulting injury to petitioner Erlinda, we
held that respondent hospital is solidarily liable with respondent doctors therefor under Article
2180 of the Civil Code
45
since there exists an employer-employee relationship between private
respondent DLSMC and Drs. Gutierrez and Hosaka:
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. x x x
46

DLSMC however contends that applying the four-fold test in determining whether such a
relationship exists between it and the respondent doctors, the inescapable conclusion is that
DLSMC cannot be considered an employer of the respondent doctors.
It has been consistently held that in determining whether an employer-employee relationship
exists between the parties, the following elements must be present: (1) selection and engagement
of services; (2) payment of wages; (3) the power to hire and fire; and (4) the power to control not
only the end to be achieved, but the means to be used in reaching such an end.
47

DLSMC maintains that first, a hospital does not hire or engage the services of a consultant, but
rather, accredits the latter and grants him or her the privilege of maintaining a clinic and/or
admitting patients in the hospital upon a showing by the consultant that he or she possesses the
necessary qualifications, such as accreditation by the appropriate board (diplomate), evidence of
fellowship and references.
48
Second, it is not the hospital but the patient who pays the
consultants fee for services rendered by the latter.
49
Third, a hospital does not dismiss a
consultant; instead, the latter may lose his or her accreditation or privileges granted by the
hospital.
50
Lastly, DLSMC argues that when a doctor refers a patient for admission in a hospital,
it is the doctor who prescribes the treatment to be given to said patient. The hospitals obligation
is limited to providing the patient with the preferred room accommodation, the nutritional diet
and medications prescribed by the doctor, the equipment and facilities necessary for the
treatment of the patient, as well as the services of the hospital staff who perform the ministerial
tasks of ensuring that the doctors orders are carried out strictly.
51

After a careful consideration of the arguments raised by DLSMC, the Court finds that respondent
hospitals position on this issue is meritorious. There is no employer-employee relationship
between DLSMC and Drs. Gutierrez and Hosaka which would hold DLSMC solidarily liable for
the injury suffered by petitioner Erlinda under Article 2180 of the Civil Code.
As explained by respondent hospital, that the admission of a physician to membership in
DLSMCs medical staff as active or visiting consultant is first decided upon by the Credentials
Committee thereof, which is composed of the heads of the various specialty departments such as
the Department of Obstetrics and Gynecology, Pediatrics, Surgery with the department head of
the particular specialty applied for as chairman. The Credentials Committee then recommends to
DLSMC's Medical Director or Hospital Administrator the acceptance or rejection of the
applicant physician, and said director or administrator validates the committee's
recommendation.
52
Similarly, in cases where a disciplinary action is lodged against a consultant,
the same is initiated by the department to whom the consultant concerned belongs and filed with
the Ethics Committee consisting of the department specialty heads. The medical director/hospital
administrator merely acts as ex-officio member of said committee.
Neither is there any showing that it is DLSMC which pays any of its consultants for medical
services rendered by the latter to their respective patients. Moreover, the contract between the
consultant in respondent hospital and his patient is separate and distinct from the contract
between respondent hospital and said patient. The first has for its object the rendition of medical
services by the consultant to the patient, while the second concerns the provision by the hospital
of facilities and services by its staff such as nurses and laboratory personnel necessary for the
proper treatment of the patient.
Further, no evidence was adduced to show that the injury suffered by petitioner Erlinda was due
to a failure on the part of respondent DLSMC to provide for hospital facilities and staff necessary
for her treatment.
For these reasons, we reverse the finding of liability on the part of DLSMC for the injury
suffered by petitioner Erlinda.
Finally, the Court also deems it necessary to modify the award of damages to petitioners in view
of the supervening event of petitioner Erlindas death. In the assailed Decision, the Court
awarded actual damages of One Million Three Hundred Fifty Two Thousand Pesos
(P1,352,000.00) to cover the expenses for petitioner Erlindas treatment and care from the date of
promulgation of the Decision up to the time the patient expires or survives.
53
In addition thereto,
the Court awarded temperate damages of One Million Five Hundred Thousand Pesos
(P1,500,000.00) in view of the chronic and continuing nature of petitioner Erlindas injury and
the certainty of further pecuniary loss by petitioners as a result of said injury, the amount of
which, however, could not be made with certainty at the time of the promulgation of the
decision. The Court justified such award in this manner:
Our rules on actual or compensatory damages generally assume that at the time of
litigation, the injury suffered as a consequence of an act of negligence has been
completed and that the cost can be liquidated. However, these provisions neglect to take
into account those situations, as in this case, where the resulting injury might be
continuing and possible future complications directly arising from the injury, while
certain to occur, are difficult to predict.
In these cases, the amount of damages which should be awarded, if they are to
adequately and correctly respond to the injury caused, should be one which compensates
for pecuniary loss incurred and proved, up to the time of trial; and one which would
meet pecuniary loss certain to be suffered but which could not, from the nature of the
case, be made with certainty. In other words, temperate damages can and should be
awarded on top of actual or compensatory damages in instances where the injury is
chronic and continuing. And because of the unique nature of such cases, no
incompatibility arises when both actual and temperate damages are provided for. The
reason is that these damages cover two distinct phases.
As it would not be equitableand certainly not in the best interests of the administration
of justicefor the victim in such cases to constantly come before the courts and invoke
their aid in seeking adjustments to the compensatory damages previously awarded
temperate damages are appropriate. The amount given as temperate damages, though to a
certain extent speculative, should take into account the cost of proper care.
In the instant case, petitioners were able to provide only home-based nursing care for a
comatose patient who has remained in that condition for over a decade. Having premised
our award for compensatory damages on the amount provided by petitioners at the onset
of litigation, it would be now much more in step with the interests of justice if the value
awarded for temperate damages would allow petitioners to provide optimal care for their
loved one in a facility which generally specializes in such care. They should not be
compelled by dire circumstances to provide substandard care at home without the aid of
professionals, for anything less would be grossly inadequate. Under the circumstances,
an award of P1,500,000.00 in temperate damages would therefore be reasonable.
54

However, subsequent to the promulgation of the Decision, the Court was informed by petitioner
Rogelio that petitioner Erlinda died on August 3, 1999.
55
In view of this supervening event, the
award of temperate damages in addition to the actual or compensatory damages would no longer
be justified since the actual damages awarded in the Decision are sufficient to cover the medical
expenses incurred by petitioners for the patient. Hence, only the amounts representing actual,
moral and exemplary damages, attorneys fees and costs of suit should be awarded to petitioners.
WHEREFORE, the assailed Decision is hereby modified as follows:
(1) Private respondent De Los Santos Medical Center is hereby absolved from liability arising
from the injury suffered by petitioner Erlinda Ramos on June 17, 1985;
(2) Private respondents Dr. Orlino Hosaka and Dr. Perfecta Gutierrez are hereby declared to be
solidarily liable for the injury suffered by petitioner Erlinda on June 17, 1985 and are ordered to
pay petitioners
(a) P1,352,000.00 as actual damages;
(b) P2,000,000.00 as moral damages;
(c) P100,000.00 as exemplary damages;
(d) P100,000.00 as attorneys fees; and
(e) the costs of the suit.
SO ORDERED.










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.
SANDOVAL-GUTIERREZ, J .:
Hospitals, having undertaken one of mankinds 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 hospitals keeping.
1

Assailed in these three consolidated petitions for review on certiorari is the Court of Appeals
Decision
2
dated September 6, 1996 in CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198
affirming with modification the Decision
3
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 staff
4
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 Natividads 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. Ampils 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 Natividads 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 attorneys 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 Resolution
5
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 Decision
6
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
Natividads 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 Resolution
7
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
Natividads 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 Courts attention to other possible causes
of Natividads detriment. He argues that the Court should not discount either of the following
possibilities: first, Dr. Fuentes left the gauzes in Natividads 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 Natividads body.
Dr. Ampils 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 Natividads 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 patients 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 patients 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. Zeagler
10
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 patients 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 patients 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 Natividads 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. Ampils negligence is the proximate cause
12
of Natividads 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 Natividads
vagina established the causal link between Dr. Ampils 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 Natividads 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 plaintiffs 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 defendants 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 Natividads 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 patients 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 ones own acts
or omissions, but also for those of persons for whom one is responsible.
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 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 physicians 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 Hospital
26
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 hospitals 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 Appeals
28
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 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, 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 PSIs 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
hospitals 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 physicians 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, PSIs 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 hospitals act of listing him and his specialty in its lobby directory, as in the case herein.
The high costs of todays 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 hospitals 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 judiciarys 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 hospitals
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 PSIs 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 PSIs 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 PSIs 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 Natividads case.
It is worthy to note that Dr. Ampil and Dr. Fuentes operated on Natividad with the assistance of
the Medical City Hospitals 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 patients 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 hospitals
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.