EN BANC

[G.R. No. L-8967.  May 31, 1956.]

ANASTACIO VIAÑA, Petitioner, vs. ALEJO AL-LAGADAN and
FILOMENA PIGA, Respondents.
 
DECISION
CONCEPCION, J.:
Petitioner Anastacio Viaña 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 Workmen’s Compensation
Commission rendered a decision, dated February 23,
1953:chanroblesvirtuallawlibrary
“1.  Ordering Mr. Anastacio Viaña to pay the above-named claimants
through the Workmen’s Compensation Commission, Manila, the sum of
P1,560 in lump sum with interest at 6 per cent from September 3,
1948 until fully paid; chan roblesvirtualawlibraryand.
“To pay the sum of P16 to the Workmen’s Compensation Commission
as costs.”
Said decision was, on petition for review filed by Viaña, affirmed by the
Workmen’s Compensation Commissioner, on or about October 22,
1954, “with additional fee of P5.00”. Said Commissioner, having
subsequently denied a reconsideration of this action, Viaña 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 (Petitioner’s) industrial partner, not his
employee.
The first ground is untenable, Petitioner not having invoked it before
the rendition of the Referee’s 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 Workmen’s 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 employer’s 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).

1
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:chanroblesvirtuallawlibrary
“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:chanroblesvirtuallawlibrary 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
Workmen’s 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:chanroblesvirtuallawlibrary
“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 lion’s 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 Referee’s finding to the effect that the deceased was
an employee of Viaña, the Workmen’s Compensation Commissioner
said:chanroblesvirtuallawlibrary
“The trial referee found that there was an employer-employee relation
between the Respondentand 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 latter’s 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:chanroblesvirtuallawlibrary
‘The officers and crews of whaling and other fishing vessels who are to
receive certain proportions of produce of the voyage in lieu of

2
wages; chan roblesvirtualawlibrary(Rice vs. Austin, 17 Mass.
206; chan roblesvirtualawlibrary2Y & C. 61); chan
roblesvirtualawlibraryCaptains of merchant ships who, instead of
wages, receive shares in the profits of the adventure; chan
roblesvirtualawlibrary(4 Maule & C. 240); chan roblesvirtualawlibraryor
who take vessels under an agreement to pay certain charges and
receive a share of the earnings; chan roblesvirtualawlibrary(Tagard vs.
Loring, 16 Mass. 336, 8 Am. Dec. 140; chan
roblesvirtualawlibraryWinsor 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); chan
roblesvirtualawlibraryso of an agreement between two parties to farm
on shares; chan roblesvirtualawlibrary(Hooloway vs. Brinkley, 42 Ga.
226); chan roblesvirtualawlibraryA seaman who is to receive pay in
proportion to the amount of fish caught is not a partner; chan
roblesvirtualawlibrary(Holdren vs. French, 68 Me. 241); chan
roblesvirtualawlibrarysharing profits in lieu of wages is not a
partnership. There is no true contribution; chan
roblesvirtualawlibrary(Crawford vs. Austin, 34 Md. 49; chan
roblesvirtualawlibraryWhitehill vs. Shickle, 43 Mo. 538; chan
roblesvirtualawlibrarySankey 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 Alejandro’s share in the
understanding “could be reckoned in terms of money”, sufficed to
characterize him as an employee of Viaña. We do not share this view.
Neither can we accept, however, Petitioner’s 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:chanroblesvirtuallawlibrary (1) the selection and engagement
of the employee; chan roblesvirtualawlibrary(2) the payment of
wages; chan roblesvirtualawlibrary(3) the power of dismissal; chan
roblesvirtualawlibraryand (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

3
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 Workmen’s
Compensation Commission for further evidence and findings on the
following questions:chanroblesvirtuallawlibrary (1) who selected the
crew of the “Magkapatid” and engaged their services; chan
roblesvirtualawlibrary(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 Viaña; chan roblesvirtualawlibrary(3) could
Viaña have refused to accept any of the crew members chosen and
engaged by the “patron”; chan roblesvirtualawlibrary(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; chan roblesvirtualawlibraryand (5) who could dismiss its
members.
Wherefore, let the case be remanded to the Workmen’s Compensation
Commission, for further proceedings in conformity with this decision,
without special pronouncement as to costs. SO ORDERED.
Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista
Angelo, Reyes, J.B.L., and Endencia, JJ., concur.

 
 

4
FIRST DIVISION
 
ANGELINA FRANCISCO, G.R. No. 170087
Petitioner,
Present:
Panganiban, C.J. (Chairperson),
- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, KASEI CORPORATION,
SEIICHIRO TAKAHASHI, TIMOTEO
ACEDO, DELFIN LIZA, IRENE
BALLESTEROS, TRINIDAD LIZA Promulgated:
and RAMON ESCUETA,
Respondents.
August 31, 2006
x --------------------------------------------------------------------------- x
 
DECISION
  
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

5
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]
 

6
 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:
 

7
 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.
 

8
 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
9
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

10
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
11
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
12
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
13
are ANNULLED and SET ASIDE. The Decision of the National Labor
Relations Commission dated April 15, 2003 in NLRC NCR CA No.
032766-02, is REINSTATED. 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.
 
CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
 
 
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
 
 
MA. ALICIA AUSTRIA-MARTINEZ ROMEO J. CALLEJO, SR.
Associate Justice Associate Justice
 
  
MINITA V. CHICO-NAZARIO
Associate Justice
 
 
 
CERTIFICATION
 
 
Pursuant to Section 13, Article VIII of the Constitution, it is hereby
certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion
of the Courts Division.
 
 
 
ARTEMIO V. PANGANIBAN
Chief Justice
 

[1]
 Rollo, pp. 9-22. Penned by Associate Justice Eloy R. Bello, Jr. and
concurred in by Associate Justices Regalado E. Maambong and
Lucenito N. Tagle.

14
[2]
 Id. at 24-25.
[3]
 Id. at 193-198. Penned by Presiding Commissioner Lourdes C. Javier
and concurred in by Commissioner Tito F. Genilo.
[4]
 Id. at 164-173. Penned by Labor Arbiter Eduardo J. Carpio.
[5]
 Id. at 89.
[6]
 Id. at 89-90.
[7]
 Id. at 90.
[8]
 Id.
[9]
 Id. at 91.
[10]
 Id.
[11]
 Id. at 91-92.
[12]
 Id. at 92-93.
[13]
 Id. at 94.
[14]
 Id. at 172-173.
[15]
 Id. at 197-198.
[16]
 Id. at 100.
[17]
 Abante, Jr. v.  Lamadrid Bearing & Parts Corporation, G.R. No.
159890, May 28, 2004, 430 SCRA 368, 379.
[18]
 G.R. Nos. L-41182-3, April 15, 1988, 160 SCRA 171, 179-180,
citing Visayan Stevedore Transportation Company v. Court of
Industrial Relations, 125 Phil. 817, 820 (1967).
[19]
 99 Phil. 408 (1956).
[20]
 G.R. No. 152459, June 15, 2006.
[21]
 Supra note 18.
[22]
 Rutherford Food Corporation v. McComb, 331 U.S. 722, 727
(1947); 91 L.Ed. 1772, 1777 (1946).
[23]
 See Brock v. Lauritzen, 624 F.Supp. 966 (E.D. Wisc. 1985); Real v.
Driscoll Strawberry Associates, Inc., 603 F.2d 748 (9th Cir.
1979); Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28, 81
S.Ct. 933, 6 L.Ed.2d 100 (1961); Bartels v. Birmingham, 332 U.S.
126, 67 S.Ct. 1547, 91 L.Ed. 1947 (1947).
[24]
 Halferty v. Pulse Drug Company, 821 F.2d 261 (5th Cir. 1987).
[25]
 Weisel v. Singapore Joint Venture, Inc., 602 F.2d. 1185 (5th Cir.
1979).
[26]
 Rollo, pp. 305-321.
[27]
 Id. at 264-265.
[28]
 330 Phil. 518, 524 (1996).
[29]
 G.R. No. 66890, April 15, 1988, 160 SCRA 568, 571.
[30]
 Rollo, pp. 120-121.
[31]
 Id. at 57.
[32]
 People v. Joya, G.R. No. 79090, October 1, 1993, 227 SCRA 9, 26-
27.
[33]
 People v. Davatos, G.R. No. 93322, February 4, 1994, 229 SCRA
647, 651.
[34]
 Globe-Mackay Cable and Radio Corporation v. National Labor
Relations Commission, G.R. No. 82511, March 3, 1992, 206 SCRA 701,
711-712.
[35]
 Leonardo v. National Labor Relations Commission, 389 Phil. 118,
126 (2000).
[36]
 438 Phil. 756 (2002).
15
SECOND DIVISION

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 decision1 of

public respondent promulgated on October 28, 1994, in NLRC NCR CA
No. 003883-92, and its resolution2 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

16
practice, illegal dismissal and illegal deduction of washing fees. In a
decision3 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 decision5 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.

17
 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:

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.

18
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 Mañebo 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

19
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
pleading16 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

20
 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

21
(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
pronouncements24 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.1âwphi1.nêt

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.

22
Bellosillo, Mendoza and De Leon, Jr., JJ., concur.
Buena, on official leave.

Footnotes
1
 Rollo, pp. 16-22.
2
 Id. at 23.
3
 Id. at 25-32.
4
 Id. at 41.
5
 Id. at 16-22.
6
 Id. at 21.
7
 Id. at 3.
8
 Arroyo vs. De Venecia, 277 SCRA 268, 294 (1997).
9
 264 SCRA 261, 267 (1996).
10
 263 SCRA 638, 657 (1996).
11
 261 SCRA 573, 583-584 (1996).
12
 229 SCRA 240, 248 (1994).
13
 219 SCRA 561, 566 (1993).
14
 Biogenerics Marketing and Research Corp. vs. NLRC, 122725,
September 8, 1999, p. 6.
15
 Mañebo vs. NLRC, 229 SCRA 240, 248 (1994).
16
 Rollo, p. 8.
17
 Id. at 17.
18
 Rollo, pp. 18-20.
19
 National Labor Union vs. Dinglasan, 98 Phil. 649, 652 (1996);
Magboo vs. Bernardo, 7 SCRA 952, 954 (1963); Lantaco, Sr. vs.
Llamas, 108 SCRA 502, 514 (1981).
20
 Doce vs. Workmen's Compensation Commission, 104 Phil. 946,
948 (1958).

23
 21
 Citizens' League of Freeworkers vs. Abbas, 18 SCRA 71, 73
(1966).
22
 Martinez vs. NLRC, 272 SCRA 793, 800 (1997).
23
 Art. 279, Labor Code.
24
 Bustamante vs. NLRC, 265 SCRA 61, 69-70 (1996); Highway
Copra Traders vs. NLRC, 293 SCRA 350, 356 (1998); Jardine
Davies Inc. vs. NLRC, GR-76272, July 28, 1999, p. 8; Pepsi-Cola
Products Philippines Inc. vs. NLRC, GR-121324, September 30,
1999, p. 9.
25
 Five Taxi vs. NLRC, 235 SCRA 556, 562 (1994).

FIRST DIVISION
[G.R. No. L-7945.  March 23, 1956.]
NATIONAL LABOR UNION, Petitioner, vs. BENEDICTO
DINGLASAN, Respondent.
 
DECISION
PADILLA, J.:
The Petitioner seeks a review and the setting aside of a resolution in
banc of the Court of Industrial Relations adopted on 23 June 1954
which held that there exists no employer-employee relationship
between the Respondent and the driver complainants represented by
the Petitioner and for that reason the Court of Industrial Relations
dismissed the complaint filed by the acting prosecutor of the Court.
The resolution in banc complained of reversed an order of an Associate
Judge of the Court which declared that there was such relationship of
employer-employee between the Respondent and the complainants
represented by the Petitioner. The last mentioned order of 16 February
1954 was just interlocutory but it was set aside by the resolution of 23
June 1954. The National Labor Union in representation of the
complainants appealed from said resolution dismissing its complaint
charging the Respondent with the commission of unfair labor practices.
In the resolution complained of there are no findings of facts. It merely
states that —
 cralaw the Court, in banc, finds that the said motion for
reconsideration is well-taken and, therefore, it hereby reconsider the
order of February 16, 1954, and thereby declares that there is no
employer- employee relation between Respondent, Benedicto

24
Dinglasan, and the driver-complainants in his case. As a consequence,
the motion to dismiss the complaint dated October 31, 1953, filed by
the Acting Prosecutor of the Court, is hereby granted. (Annex D.)
This resolution was adopted upon a motion for reconsideration of the
previous order of 16 February 1954. As there are no findings of fact in
the resolution those set forth in the previous order must have been
relied upon by the Court. They are as
follows:chanroblesvirtuallawlibrary
(a)  Respondent Dinglasan is the owner and operator of TPU jeepneys
plying between España-Quiapo-Pier and vice versa.
(b)  Petitioners are drivers who had verbal contracts with Respondent
for the use of the latter’s jeepneys upon payment of P7.50 for 10
hours use, otherwise known as the “boundary system”.
(c)  Said drivers did not receive salaries or wages from Mr. Dinglasan;
chan roblesvirtualawlibrarytheir day’s earnings being the excess over
the P7.50 that they paid for the use of the jeepneys. In the event that
they did not earn more, Respondent did not have to pay them
anything;
 
(d)  Mr. Dinglasan’s supervision over the drivers consisted in
inspection of the jeepneys that they took out when they passed his
gasoline station for water, checking the route prescribed by the Public
Service Commission, or whether any driver was driving recklessly and
washing and changing the tires of jeepneys. (Annex C.)
The main question to determine is whether there exists a relationship
of employer-employee between the drivers of the jeeps and the owner
thereof. The findings contained in the first order are not disputed by
both parties except the last to which the Respondent took exception.
But in the resolution setting aside the order of 16 February 1954 the
Court of Industrial Relations in banc did not state that such finding is
not supported by evidence. It merely “declares that there is no
employer-employee relation between Respondent, Benedicto
Dinglasan, and the driver-complainants in this case.” If the findings to
which the Respondent took exception is unsupported by the evidence,
a pronouncement to that effect would have been made by the Court in
banc. In the absence of such pronouncement we are not at liberty to
ignore or disregard said finding. The findings of the Court of Industrial
Relations with respect to question of fact, if supported by substantial
evidence on the record shall be conclusive.” 1 Taking into
consideration the findings of fact made by the Court of Industrial
Relations we find it difficult to uphold the conclusion of the Court set
forth in its resolution of 23 June 1954. The drivers did not invest a
single centavo in the business and the Respondent is the exclusive
owner of the jeeps. The management of the business is in the
Respondent’s hands. For even if the drivers of the jeeps take material
possession of the jeeps, still the Respondent as owner thereof and
holder of a certificate of public convenience is entitled to exercise, as

25
he does and under the law he must, supervision over the drivers by
seeing to it that they follow the route prescribed by the Public Service
Commission and the rules and regulations promulgated by it as
regards their operation. And when they pass by the gasoline station of
the Respondent checking by his employees on the water tank, oil and
tire pressure is done. The only features that would make the
relationship of lessor and lessee between the Respondent and the
drivers, members of the union, as contended by the Respondent, are
the fact that he does not pay them any fixed wage but their
compensation is the excess of the total amount of fares earned or
collected by them over and above the amount of P7.50 which they
agreed to pay to the Respondent, the owner of the jeeps, and the fact
that the gasoline burned by the jeeps is for the account of the drivers.
These two features are not, however, sufficient to withdraw the
relationship between them from that of employer-employee, because
the estimated earnings for fares must be over and above the amount
they agreed to pay to the Respondent for a ten-hour shift or ten-hour
a day operation of the jeeps. Not having any interest in the business
because they did not invest anything in the acquisition of the jeeps
and did not participate in the management thereof, their service as
drivers of the jeeps being their only contribution to the business, the
relationship of lessor and lessee cannot be sustained. 1 In the lease of
chattels the lessor loses complete control over the chattel leased
although the lessee cannot make bad use thereof, for he would be
responsible for damages to the lessor should he do so. In this case
there is a supervision and a sort of control that the owner of the jeeps
exercises over the drivers. It is an attempt by ingenious scheme to
withdraw the relationship between the owner of the jeeps and the
drivers thereof from the operation of the labor laws enacted to
promote industrial peace.
As to the point that the National Labor Union is not the real party in
interest to bring the complaint, suffice it to say that “ ‘representative’
includes a legitimate labor organization or any officer or agent of such
organization, whether or not employed by the employer or employees
whom he represents.” 2 And whenever it is charged by an offended
party or his representative that any person has engaged or is engaging
in any unfair labor practice, the Court of Industrial Relations must
investigate such charge. 3 Therefore, the objection to the institution of
the charge for unfair labor practice by the National Labor Union is not
well taken.
The order of 23 June 1904 is reversed and set aside and the case
remanded to the Court of Industrial Relations for such further
proceedings as may be required by law, with costs against the
Respondent.
Paras, C.J., Bengzon, Reyes, A., Bautista Angelo, Labrador,
Concepcion, Reyes, J. B. L. and Endencia, JJ., concur.
 
Endnotes:chanroblesvirtuallawlibrary

26
  1.  Section 6, Republic Act No. 875.
  1.  In the matter of the Park Floral Company, etc., 19 NLRB 403;
chan roblesvirtualawlibraryRadley et al. vs. Commonwealth, 161 SW
(2d) 417; chan roblesvirtualawlibraryJones vs. Goodson et al., 121
Fed. Rep. (2d) 176; chan roblesvirtualawlibraryMitchel vs. Gibbson et
al., 172 Fed. Rep. (2d) 970.
  2.  Section 6, Republic Act No. 875.
  3.  Section 5 (b), Republic Act No. 875.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

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

27
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 crew members. 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.
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.
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

28
operated by Reynaldo Mercado. On December 10, 1975, Cosuco sold
the fishing boat to Mercado.
Invoking Negre vs. Workmen's Compensation Commission, 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

29
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.

30
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.
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.
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.
xxx xxx xxx
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.

31
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.
xxx xxx xxx
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.

32
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:
xxx xxx xxx
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.
xxx xxx xxx
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:
xxx xxx xxx
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).
xxx xxx xxx
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
33
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.
Cruz, Griño-Aquino and Medialdea, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 118915 February 4, 1997

CAPITOL MEDICAL CENTER OF CONCERNED EMPLOYEES-

UNIFIED FILIPINO SERVICE WORKERS, (CMC-ACE-
UFSW), petitioners, 
vs.
HON. BIENVENIDO E. LAGUESMA, Undersecretary of the
Department of Labor and Employment; CAPITOL MEDICAL
CENTER EMPLOYEES ASSOCIATION-ALLIANCE OF FILIPINO
WORKERS AND CAPITOL MEDICAL CENTER INCORPORATED
AND DRA. THELMA CLEMENTE, President, respondents.

34
HERMOSISIMA, JR., J.:

This petition for certiorari and prohibition seeks to reserves and set

aside the Order dated November 18, 1994 of public respondent
Bienvenido E. Laguesma, Undersecretary of the Department of Labor
and Employment in Case No. OS.-A-136-94 1 which dismissed the
petition for certification election filed by petitioner for lack of merit and
further directed private respondent hospital to negotiate a collective
bargaining agreement with respondent union, Capitol Medical Center
Employees Association-Alliance of Filipino Workers.

The antecedent facts are undisputed.

On February 17, 1992, Med-Arbiter Rasidali C. Abdullah issued an

Order which granted respondent union's petition for certification
election among the rank-and-file employees of the Capitol Medical
Center.2 Respondent CMC appealed the Order to the Office of the
Secretary by questioning the legal status of respondent union's
affiliation with the Alliance of Filipino Workers (AFW). To correct any
supposed infirmity in its legal status, respondent union registered itself
independently and withdrew the petition which had earlier been
granted. Thereafter, it filed another petition for certification election.

On May 29, 1992, Med-Arbiter Manases T. Cruz issued an order

granting the petition for certification election.3Respondent CMC again
appealed to the Office of the Secretary which affirmed 4 the Order of
the Med-Arbiter granting the certification election.

On December 9, 1992, elections were finally held with respondent

union garnering 204 votes, 168 in favor of no union and 8 spoiled
ballots out of a total of 380 votes cast. Thereafter, on January 4, 1993,
Med-Arbiter Cruz issued an Order certifying respondent union as the
sole and exclusive bargaining representative of the rank and file
employees at CMC. 5

Unsatisfied with the outcome of the elections, respondent CMC again

appealed to the Office of the Secretary of Labor which appeal was
denied on February 26, 1993.6 A subsequent motion for
reconsideration filed by respondent CMC was likewise denied on March
23, 1993.7

Respondent CMC's basic contention was the supposed pendency of its

petition for cancellation of respondent union's certificate of registration
in Case No. NCR-OD-M-92211-028. In the said case, Med-Arbiter
Paterno Adap issued an Order dated February 4, 1993 which declared
respondent union's certificate of registration as null and
void.8 However, this order was reversed on appeal by the Officer-in-
Charge of the Bureau of Labor Relations in her Order issued on April
13, 1993. The said Order dismissed the motion for cancellation of the

35
certificate of registration of respondent union and declared that it was
not only a bona fide affiliate or local of a federation (AFW), but a duly
registered union as well. Subsequently, this case reached this Court
in Capitol Medical Center, Inc. v. Hon. Perlita Velasco, G.R. No.
110718, where we issued a Resolution dated December 13, 1993,
dismissing the petition of CMC for failure to sufficiently show that
public respondent committed grave abuse of discretion.9 The motion
for reconsideration filed by CMC was likewise denied in our Resolution
dated February 2, 1994. 10 Thereafter, on March 23, 1994, we issued
an entry of judgment certifying that the Resolution dated December
13, 1993 has become final and executory. 11

Respondent union, after being declared as the certified bargaining

agent of the rank-and-file employees of respondent CMC by Med-
Arbiter Cruz, presented economic proposals for the negotiation of a
collective bargaining agreement (CBA). However, respondent CMC
contended that CBA negotiations should be suspended in view of the
Order issued on February 4, 1993 by Med-Arbiter Adap declaring the
registration of respondent union as null and void. In spite of the
refusal of respondent CMC, respondent union still persisted in its
demand for CBA negotiations, claiming that it has already been
declared as the sole and exclusive bargaining agent of the rank-and-
file employees of the hospital.

Due to respondent CMC's refusal to bargain collectively, respondent

union filed a notice of strike on March 1, 1993. After complying with
the other legal requirements, respondent union staged a strike on April
15, 1993. On April 16, 1993, the Secretary of Labor assumed
jurisdiction over the case and issued an order certifying the same to
the National Labor Relations Commission for compulsory arbitration
where the said case is still pending. 12

It is at this juncture that petitioner union, on March 24, 1994, filed a

petition for certification election among the regular rank-and-file
employees of the Capitol Medical Center Inc. It alleged in its petition
that: 1) three hundred thirty one (331) out of the four hundred (400)
total rank-and-file employees of respondent CMC signed a petition to
conduct a certification election; and 2) that the said employees are
withdrawing their authorization for the said union to represent them as
they have joined and formed the union Capitol Medical Center Alliance
of Concerned Employees (CMC-ACE). They also alleged that a
certification election can now be conducted as more that 12 months
have lapsed since the last certification election was held. Moreover, no
certification election was conducted during the twelve (12) months
prior to the petition, and no collective bargaining agreement has as yet
been concluded between respondent union and respondent CMC
despite the lapse of twelve months from the time the said union was
voted as the collective bargaining representative.

36
On April 12, 1994, respondent union opposed the petition and moved
for its dismissal. It contended that it is the certified bargaining agent
of the rank-and-file employees of the Hospital, which was confirmed
by the Secretary of Labor and Employment and by this Court. It also
alleged that it was not remiss in asserting its right as the certified
bargaining agent for it continuously demanded the negotiation of a
CBA with the hospital despite the latter's avoidance to bargain
collectively. Respondent union was even constrained to strike on April
15, 1993, where the Secretary of Labor intervened and certified the
dispute for compulsory arbitration. Furthermore, it alleged that
majority of the signatories who supported the petition were managerial
and confidential employees and not members of the rank-and-file, and
that there was no valid disaffiliation of its members, contrary to
petitioner's allegations.

Petitioner, in its rejoinder, claimed that there is no legal impediment to

the conduct of a certification election as more than twelve (12) months
had lapsed since respondent union was certified as the exclusive
bargaining agent and no CBA was as yet concluded. It also claimed
that the other issues raised could only be resolved by conducting
another certification election.

In its surrejoinder, respondent union alleged that the petition to

conduct a certification election was improper, immoral and in manifest
disregard of the decisions rendered by the Secretary of Labor and by
this Court. It claimed that CMC employed "legal obstructionism's" in
order to let twelve months pass without a CBA having been concluded
between them so as to pave the way for the entry of petitioner union.

On May 12, 1994, Med-Arbiter Brigida Fadrigon, issued an Order

granting the petition for certification election among the rank and file
employees. 13 It ruled that the issue was the majority status of
respondent union. Since no certification election was held within one
year from the date of issuance of a final certification election result
and there was no bargaining deadlock between respondent union and
the employees that had been submitted to conciliation or had become
the subject of a valid notice of strike or lock out, there is no bar to the
holding of a certification election. 14

Respondent union appeared from the said Order, alleging that the
Med-Arbiter erred in granting the petition for certification election and
in holding that this case falls under Section 3, Rule V Book V of the
Rules Implementing the Labor Code. 15 It also prayed that the said
provision must not be applied strictly in view of the facts in this case.

Petitioner union did not file any opposition to the appeal.

On November 18, 1994, public respondent rendered a Resolution

granting the appeal. 16 He ratiocinated that while the petition was
indeed filed after the lapse of one year form the time of declaration of

37
a final certification result, and that no bargaining deadlock had been
submitted for conciliation or arbitration, respondent union was not
remiss on its right to enter into a CBA for it was the CMC which
refused to bargain collectively. 17

CMC and petitioner union separately filed motions for reconsideration

of the said Order.

CMC contended that in certification election proceedings, the employer

cannot be ordered to bargain collectively with a union since the only
issue involved is the determination of the bargaining agent of the
employees.

Petitioner union claimed that to completely disregard the will of the

331 rank-and-file employees for a certification election would result in
the denial of their substantial rights and interests. Moreover,it
contended that public respondent's "indictment" that petitioner
"capitalize (sic) on the ensuing delay which was caused by the
Hospital, . . ." was unsupported by the facts and the records.

On January 11, 1995, public respondent issued a Resolution which

denied the two motions for reconsideration hence this petition. 18

The pivotal issue in this case is whether or not public respondent

committed grave abuse of discretion in dismissing the petition for
certification election, and in directing the hospital to negotiate a
collective bargaining agreement with the said respondent union.

Petitioner alleges that public respondent Undersecretary Laguesma

denied it due process when it ruled against the holding of a
certification election. It further claims that the denial of due process
can be gleaned from the manner by which the assailed resolution was
written, i.e., instead of the correct name of the mother federation
UNIFIED, it was referred to as UNITED; and that the respondent
union's name CMCEA-AFW was referred to as CMCEA-AFLO. Petitioner
maintains that such errors indicate that the assailed resolution was
prepared with "indecent haste."

We do not subscribe to petitioner's contention.

The errors pointed to by petitioner can be classified as mere

typographical errors which cannot materially alter the substance and
merit of the assailed resolution.

Petitioner cannot merely anchor its position on the aforementioned

erroneous' names just to attain a reversal of the questioned resolution.
As correctly observed by the Solicitor General, petitioner is merely
"nit-picking vainly trying to make a monumental issue out of a
negligible error of the public respondent." 19

38
Petitioner also assails public respondents' findings that the former
"capitalize (sic) on the ensuing delay which was caused by the hospital
and which resulted in the non-conclusion of a CBA within the
certification year.'' 20 It further argues that the denial of its motion fro
a fair hearing was clear case of denial of its right to due process.

Such contention of petitioner deserves scant consideration.

A perusal of the record shows that petitioner failed to file its opposition
to oppose the grounds for respondent union's appeal.

It was given an opportunity to be heard but lost it when it refused to

file an appellee's memorandum.

Petitioner insists that the circumstances prescribed in Section 3, Rule

V, Book V Of the Rules Implementing the Labor Code where a
certification election should be conducted, viz: (1) that one year had
lapsed since the issuance of a final certification result; and (2) that
there is no bargaining deadlock to which the incumbent or certified
bargaining agent is a party has been submitted to conciliation or
arbitration, or had become the subject of a valid notice of strike or
lockout, are present in this case. It further claims that since there is no
evidence on record that there exists a CBA deadlock, the law allowing
the conduct of a certification election after twelve months must be
given effect in the interest of the right of the workers to freely choose
their sole and exclusive bargaining agent.

While it is true that, in the case at bench, one year had lapsed since
the time of declaration of a final certification result, and that there is
no collective bargaining deadlock, public respondent did not commit
grave abuse of discretion when it ruled in respondent union's favor
since the delay in the forging of the CBA could not be attributed to the
fault of the latter.

A scrutiny of the records will further reveal that after respondent union
was certified as the bargaining agent of CMC, it invited the employer
hospital to the bargaining table by submitting its economic proposal
for a CBA. However, CMC refused to negotiate with respondent union
and instead challenged the latter's legal personality through a petition
for cancellation of the certificate of registration which eventually
reached this Court. The decision affirming the legal status of
respondent union should have left CMC with no other recourse but to
bargain collectively; but still it did not. Respondent union was left with
no other recourse but to file a notice of strike against CMC for unfair
labor practice with the National Conciliation and Mediation Board. This
eventually led to a strike on April 15, 1993.

Petitioner union on the other hand, after this Court issued an entry of
judgment on March 23, 1994, filed the subject petition for certification

39
election on March 24, 1994, claiming that twelve months had lapsed
since the last certification election.

Was there a bargaining deadlock between CMC and respondent union,

before the filing of petitioner of a petition for certification election,
which had been submitted to conciliation or had become the subject of
a valid notice of strike or lockout?

In the case of Divine Word University of Tacloban v. Secretary of Labor

and Employment, 21 we had the occasion to define what a deadlock
is, viz:\

A "deadlock" is . . . the counteraction of things producing

entire stoppage; . . . . There is a deadlock when there is a
complete blocking or stoppage resulting from the action of
equal and opposed forces . . . . The word is synonymous
with the word impasse, which . . "presupposes reasonable
effort at good faith bargaining which, despite noble
intentions, does not conclude in agreement between the
parties."

Although there is no "deadlock" in its strict sense as there is no

"counteraction" of forces present in this case nor "reasonable effort at
good faith bargaining," such can be attributed to CMC's fault as the
bargaining proposals of respondent union were never answered by
CMC. In fact, what happened in this case is worse than a bargaining
deadlock for CMC employed all legal means to block the certification of
respondent union as the bargaining agent of the rank-and-file; and use
it as its leverage for its failure to bargain with respondent union. Thus,
we can only conclude that CMC was unwilling to negotiate and reach
an agreement with respondent union. CMC has not at any instance
shown willingness to discuss the economic proposals given by
respondent union. 22

As correctly ratiocinated by public respondent, to wit:

For herein petitioner to capitalize on the ensuing delay

which was caused by the hospital and which resulted in the
non-conclusion of a CBA within the certification year, would
be to negate and render a mockery of the proceedings
undertaken before this Department and to put an
unjustified premium on the failure of the respondent
hospital to perform its duty to bargain collectively as
mandated in Article 252 of the Labor Code, as amended,
which states".

"Article 252. Meaning of duty to bargain

collectively — the duty to bargain collectively
means the performance of a mutual obligation to
meet and convene promptly and expeditiously in

40
 good faith for the purpose of negotiating an
agreement with respect to wages, hours of work
and all other terms and conditions of
employment including proposals for adjusting
any grievance or questions arising under such
agreement and executing a contract
incorporating such agreements if requested by
either party but such duty does not compel any
party to agree to a proposal or to make any
concession."

The duly certified bargaining agent, CMCEA-AFW, should

not be made to further bear the brunt flowing from the
respondent hospital's reluctance and thinly disguised refusal
to bargain. 23

If the law proscribes the conduct of a certification election when there

is a bargaining deadlock submitted to conciliation or arbitration, with
more reason should it not be conducted if, despite attempts to bring
an employer to the negotiation table by the "no reasonable effort in
good faith" on the employer certified bargaining agent, there was to
bargain collectively.

In the case of Kaisahan ng Manggagawang Pilipino vs. Trajano 201

SCRA 453 (1991), penned by Chief Justice Andres R. Narvasa, the
factual milieu of which is similar to this case, this Court allowed the
holding of a certification election and ruled that the one year period
known as the "certification year" has long since expired. We also ruled,
that:

. . . prior to the filing of the petition for election in this case,

there was no such "bargaining deadlock . . (which) had
been submitted to conciliation or arbitration or had become
the subject of a valid notice of strike or lockout." To be
sure, there are in the record assertions by NAFLU that its
attempts to bring VIRON to the negotiation table had been
unsuccessful because of the latter's recalcitrance, and
unfulfilled promises to bargain collectively; but there is no
proof that it had taken tiny action to legally coerce VIRON
to comply with its statutory duty to bargain collectively. It
could have charged VIRON with unfair labor practice; but it
did not.  It could have gone on a legitimate strike in protest
against VIRON's refusal to bargain collectively and compel
it to do so; but it did not. There are assertions by NAFLU,
too, that its attempts to bargain collectively had been
delayed by continuing challenges to the resolution
pronouncing it the sole bargaining representative in VIRON;
but there is no adequate substantiation thereof, or of how it
did in fact prevent initiation of the bargaining process
between it and VIRON. 24

41
Although the statements pertinent to this case are merely obiter, still
the fact remains that in the Kaisahan case, NAFLU was counselled by
this Court on the steps that it should have undertaken to protect its
interest, but which it failed to do so.

This is what is strikingly different between the Kaisahan case and the

case at bench for in the latter case, there was proof that the certified
bargaining agent, respondent union, had taken an action to legally
coerce the employer to comply with its statutory duty to bargain
collectively, i.e., charging the employer with unfair labor practice and
conducting a strike in protest against the employer's refusal to
bargain. 25 It is only just and equitable that the circumstances in this
case should be considered as similar in nature to a "bargaining
deadlock" when no certification election could be held. This is also to
make sure that no floodgates will be opened for the circumvention of
the law by unscrupulous employers to prevent any certified bargaining
agent from negotiating a CBA. Thus, Section 3, Rule V, Book V of the
Implement Rules should be interpreted liberally so as to include a
circumstance, e.g. where a CBA could not be concluded due to the
failure of one party to willingly perform its duty to bargain collectively.

The order for the hospital to bargain is based on its failure to bargain
collectively with respondent union.

WHEREFORE, the Resolution dated November 18, 1994 of public

respondent Laguesma is AFFIRMED and the instant petition is hereby
DISMISSED.

SO ORDERED

Padilla, Bellosillo, Vitug and Kapunan, JJ., concur.

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.

42
COURT OF APPEALS, DE LOS SANTOS MEDICAL CENTER, DR.
ORLINO HOSAKA and DR. PERFECTA GUTIERREZ, respondents.

RESOLUTION

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.
Hosaka’s arrival. While she held the hand of Erlinda, Cruz saw Dr.
Gutierrez trying to intubate the patient. Cruz heard Dr. Gutierrez
43
utter: "ang hirap ma-intubate nito, mali yata ang pagkakapasok. O
lumalaki ang tiyan." Cruz noticed a bluish discoloration of Erlinda’s
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
Erlinda’s 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 court’s 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 attorney’s fees; and 5) the costs of the
suit.2

In his Motion for Reconsideration, private respondent Dr. Hosaka

submits the following as grounds therefor:

44
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
APPEAL’S 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 PETITIONER’S
WITNESS HERMINDA CRUZ, DESPITE THE EXISTENCE OF
SEVERAL FACTUAL CIRCUMSTANCES WHICH RENDERS DOUBT
ON HER CREDIBILITY

45
 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:

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

46
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
8
ANESTHESIOLOGIST.

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 Erlinda’s 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

47
 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 patient’s 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

patient’s 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 patient’s 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 auscultated14 the patient’s heart and lungs
and checked the latter’s blood pressure to determine if Erlinda was

48
indeed fit for operation.15 However, she did not proceed to examine the
patient’s airway. Had she been able to check petitioner Erlinda’s
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 physician’s 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:

49
 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 Erlinda’s hapless

condition was due to any fault or negligence on the part of Dr.
Gutierrez while she (Erlinda) was under the latter’s care. Dr. Gutierrez
maintains that the bronchospasm and cardiac arrest resulting in the
patient’s 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

50
 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 Erlinda’s 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 Court’s attention to her
synopsis on what transpired during Erlinda’s 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

51
 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.

52
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.

53
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?

54
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.

55
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

56
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 Erlinda’s 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, Erlinda’s 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.25Cruz 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 patient’s 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.
28 
Bridwell, 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

57
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 patient’s 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 patient’s 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

58
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 patient’s nails had
become dusky and had to call Dr. Gutierrez’s attention thereto. The
Court also notes that the counsel for Dr. Hosaka admitted that in
practice, the anesthesiologist would also have to observe the surgeon’s
acts during the surgical process and calls the attention of the surgeon
whenever necessary39 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 other’s 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 patient’s well being, Dr. Hosaka scheduled two procedures on the
same day, just thirty minutes apart from each other, at different

59
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 Erlinda’s 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 patient’s 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 patient’s 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 x42

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:

60
 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

61
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 DLSMC’s 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
Code45 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 x46

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
consultant’s 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 hospital’s 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 doctor’s orders are carried out strictly.51

62
After a careful consideration of the arguments raised by DLSMC, the
Court finds that respondent hospital’s 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 DLSMC’s 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
Erlinda’s 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 Erlinda’s
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

63
nature of petitioner Erlinda’s 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 equitable—and certainly not in the best

interests of the administration of justice—for 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

64
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, attorney’s 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 attorney’s fees; and

(e) the costs of the suit.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, and Ynares-Santiago, JJ., concur.

65
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 126297             January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner, 

vs.
NATIVIDAD and ENRIQUE AGANA, Respondents.

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

G.R. No. 126467            January 31, 2007

NATIVIDAD (Substituted by her children MARCELINO AGANA

III, ENRIQUE AGANA, JR., EMMA AGANA ANDAYA, JESUS
AGANA, and RAYMUND AGANA) and ENRIQUE
AGANA, Petitioners, 
vs.
JUAN FUENTES, Respondent.

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

G.R. No. 127590            January 31, 2007

MIGUEL AMPIL, Petitioner, 
vs.
NATIVIDAD AGANA and ENRIQUE AGANA, Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

66
Hospitals, having undertaken one of mankind’s most important and
delicate endeavors, must assume the grave responsibility of pursuing
it with appropriate care. The care and service dispensed through this
high trust, however technical, complex and esoteric its character may
be, must meet standards of responsibility commensurate with the
undertaking to preserve and protect the health, and indeed, the very
lives of those placed in the hospital’s keeping.1

Assailed in these three consolidated petitions for review on certiorari is

the Court of Appeals’ Decision2 dated September 6, 1996 in CA-G.R.
CV No. 42062 and CA-G.R. SP No. 32198 affirming with modification
the Decision3dated March 17, 1993 of the Regional Trial Court (RTC),
Branch 96, Quezon City in Civil Case No. Q-43322 and nullifying its
Order dated September 21, 1993.

The facts, as culled from the records, are:

On April 4, 1984, Natividad Agana was rushed to the Medical City

General Hospital (Medical City Hospital) because of difficulty of bowel
movement and bloody anal discharge. After a series of medical
examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590,
diagnosed her to be suffering from "cancer of the sigmoid."

On April 11, 1984, Dr. Ampil, assisted by the medical staff4 of the
Medical City Hospital, performed an anterior resection surgery on
Natividad. He found that the malignancy in her sigmoid area had
spread on her left ovary, necessitating the removal of certain portions
of it. Thus, Dr. Ampil obtained the consent of Natividad’s husband,
Enrique Agana, to permit Dr. Juan Fuentes, respondent in G.R. No.
126467, to perform hysterectomy on her.

After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took
over, completed the operation and closed the incision.

However, the operation appeared to be flawed. In the corresponding

Record of Operation dated April 11, 1984, the attending nurses
entered these remarks:

"sponge count lacking 2

"announced to surgeon searched (sic) done but to no avail continue for

closure."

On April 24, 1984, Natividad was released from the hospital. Her
hospital and medical bills, including the doctors’ fees, amounted to
P60,000.00.

After a couple of days, Natividad complained of excruciating pain in

her anal region. She consulted both Dr. Ampil and Dr. Fuentes about
it. They told her that the pain was the natural consequence of the
surgery. Dr. Ampil then recommended that she consult an oncologist

67
to examine the cancerous nodes which were not removed during the
operation.

On May 9, 1984, Natividad, accompanied by her husband, went to the

United States to seek further treatment. After four months of
consultations and laboratory examinations, Natividad was told she was
free of cancer. Hence, she was advised to return to the Philippines.

On August 31, 1984, Natividad flew back to the Philippines, still

suffering from pains. Two weeks thereafter, her daughter found a
piece of gauze protruding from her vagina. Upon being informed about
it, Dr. Ampil proceeded to her house where he managed to extract by
hand a piece of gauze measuring 1.5 inches in width. He then assured
her that the pains would soon vanish.

Dr. Ampil’s assurance did not come true. Instead, the pains intensified,
prompting Natividad to seek treatment at the Polymedic General
Hospital. While confined there, Dr. Ramon Gutierrez detected the
presence of another foreign object in her vagina -- a foul-smelling
gauze measuring 1.5 inches in width which badly infected her vaginal
vault. A recto-vaginal fistula had formed in her reproductive organs
which forced stool to excrete through the vagina. Another surgical
operation was needed to remedy the damage. Thus, in October 1984,
Natividad underwent another surgery.

On November 12, 1984, Natividad and her husband filed with the RTC,
Branch 96, Quezon City a complaint for damages against the
Professional Services, Inc. (PSI), owner of the Medical City Hospital,
Dr. Ampil, and Dr. Fuentes, docketed as Civil Case No. Q-43322. They
alleged that the latter are liable for negligence for leaving two pieces
of gauze inside Natividad’s body and malpractice for concealing their
acts of negligence.

Meanwhile, Enrique Agana also filed with the Professional Regulation

Commission (PRC) an administrative complaint for gross negligence
and malpractice against Dr. Ampil and Dr. Fuentes, docketed as
Administrative Case No. 1690. The PRC Board of Medicine heard the
case only with respect to Dr. Fuentes because it failed to acquire
jurisdiction over Dr. Ampil who was then in the United States.

On February 16, 1986, pending the outcome of the above cases,

Natividad died and was duly substituted by her above-named children
(the Aganas).

On March 17, 1993, the RTC rendered its Decision in favor of the
Aganas, finding PSI, Dr. Ampil and Dr. Fuentes liable for negligence
and malpractice, the decretal part of which reads:

WHEREFORE, judgment is hereby rendered for the plaintiffs ordering

the defendants PROFESSIONAL SERVICES, INC., DR. MIGUEL AMPIL
and DR. JUAN FUENTES to pay to the plaintiffs, jointly and severally,
68
except in respect of the award for exemplary damages and the interest
thereon which are the liabilities of defendants Dr. Ampil and Dr.
Fuentes only, as follows:

1. As actual damages, the following amounts:

a. The equivalent in Philippine Currency of the total of

US$19,900.00 at the rate of P21.60-US$1.00, as
reimbursement of actual expenses incurred in the United
States of America;

b. The sum of P4,800.00 as travel taxes of plaintiffs and

their physician daughter;

c. The total sum of P45,802.50, representing the cost of

hospitalization at Polymedic Hospital, medical fees, and cost
of the saline solution;

2. As moral damages, the sum of P2,000,000.00;

3. As exemplary damages, the sum of P300,000.00;

4. As attorney’s fees, the sum of P250,000.00;

5. Legal interest on items 1 (a), (b), and (c); 2; and 3

hereinabove, from date of filing of the complaint until full
payment; and

6. Costs of suit.

SO ORDERED.

Aggrieved, PSI, Dr. Fuentes and Dr. Ampil interposed an appeal to the
Court of Appeals, docketed as CA-G.R. CV No. 42062.

Incidentally, on April 3, 1993, the Aganas filed with the RTC a motion
for a partial execution of its Decision, which was granted in an Order
dated May 11, 1993. Thereafter, the sheriff levied upon certain
properties of Dr. Ampil and sold them for P451,275.00 and delivered
the amount to the Aganas.

Following their receipt of the money, the Aganas entered into an

agreement with PSI and Dr. Fuentes to indefinitely suspend any
further execution of the RTC Decision. However, not long thereafter,
the Aganas again filed a motion for an alias writ of execution against
the properties of PSI and Dr. Fuentes. On September 21, 1993, the
RTC granted the motion and issued the corresponding writ, prompting
Dr. Fuentes to file with the Court of Appeals a petition for certiorari
and prohibition, with prayer for preliminary injunction, docketed as
CA-G.R. SP No. 32198. During its pendency, the Court of Appeals

69
issued a Resolution5 dated October 29, 1993 granting Dr. Fuentes’
prayer for injunctive relief.

On January 24, 1994, CA-G.R. SP No. 32198 was consolidated with

CA-G.R. CV No. 42062.

Meanwhile, on January 23, 1995, the PRC Board of Medicine rendered

its Decision6 in Administrative Case No. 1690 dismissing the case
against Dr. Fuentes. The Board held that the prosecution failed to
show that Dr. Fuentes was the one who left the two pieces of gauze
inside Natividad’s body; and that he concealed such fact from
Natividad.

On September 6, 1996, the Court of Appeals rendered its Decision

jointly disposing of CA-G.R. CV No. 42062 and CA-G.R. SP No. 32198,
thus:

WHEREFORE, except for the modification that the case against

defendant-appellant Dr. Juan Fuentes is hereby DISMISSED, and with
the pronouncement that defendant-appellant Dr. Miguel Ampil is liable
to reimburse defendant-appellant Professional Services, Inc., whatever
amount the latter will pay or had paid to the plaintiffs-appellees, the
decision appealed from is hereby AFFIRMED and the instant appeal
DISMISSED.

Concomitant with the above, the petition for certiorari and prohibition
filed by herein defendant-appellant Dr. Juan Fuentes in CA-G.R. SP No.
32198 is hereby GRANTED and the challenged order of the respondent
judge dated September 21, 1993, as well as the alias writ of execution
issued pursuant thereto are hereby NULLIFIED and SET ASIDE. The
bond posted by the petitioner in connection with the writ of
preliminary injunction issued by this Court on November 29, 1993 is
hereby cancelled.

Costs against defendants-appellants Dr. Miguel Ampil and Professional

Services, Inc.

SO ORDERED.

Only Dr. Ampil filed a motion for reconsideration, but it was denied in
a Resolution7 dated December 19, 1996.

Hence, the instant consolidated petitions.

In G.R. No. 126297, PSI alleged in its petition that the Court of
Appeals erred in holding that: (1) it is estopped from raising the
defense that Dr. Ampil is not its employee; (2) it is solidarily liable
with Dr. Ampil; and (3) it is not entitled to its counterclaim against the
Aganas. PSI contends that Dr. Ampil is not its employee, but a mere
consultant or independent contractor. As such, he alone should answer
for his negligence.

70
In G.R. No. 126467, the Aganas maintain that the Court of Appeals
erred in finding that Dr. Fuentes is not guilty of negligence or medical
malpractice, invoking the doctrine of res ipsa loquitur. They contend
that the pieces of gauze are prima facie proofs that the operating
surgeons have been negligent.

Finally, in G.R. No. 127590, Dr. Ampil asserts that the Court of
Appeals erred in finding him liable for negligence and malpractice sans
evidence that he left the two pieces of gauze in Natividad’s vagina. He
pointed to other probable causes, such as: (1) it was Dr. Fuentes who
used gauzes in performing the hysterectomy; (2) the attending nurses’
failure to properly count the gauzes used during surgery; and (3) the
medical intervention of the American doctors who examined Natividad
in the United States of America.

For our resolution are these three vital issues: first, whether the Court
of Appeals erred in holding Dr. Ampil liable for negligence and
malpractice; second, whether the Court of Appeals erred in absolving
Dr. Fuentes of any liability; and third, whether PSI may be held
solidarily liable for the negligence of Dr. Ampil.

I - G.R. No. 127590

Whether the Court of Appeals Erred in Holding Dr. Ampil

Liable for Negligence and Malpractice.

Dr. Ampil, in an attempt to absolve himself, gears the Court’s attention

to other possible causes of Natividad’s detriment. He argues that the
Court should not discount either of the following possibilities: first, Dr.
Fuentes left the gauzes in Natividad’s body after performing
hysterectomy; second, the attending nurses erred in counting the
gauzes; and third, the American doctors were the ones who placed the
gauzes in Natividad’s body.

Dr. Ampil’s arguments are purely conjectural and without basis.

Records show that he did not present any evidence to prove that the
American doctors were the ones who put or left the gauzes in
Natividad’s body. Neither did he submit evidence to rebut the
correctness of the record of operation, particularly the number of
gauzes used. As to the alleged negligence of Dr. Fuentes, we are
mindful that Dr. Ampil examined his (Dr. Fuentes’) work and found it
in order.

The glaring truth is that all the major circumstances, taken together,
as specified by the Court of Appeals, directly point to Dr. Ampil as the
negligent party, thus:

First, it is not disputed that the surgeons used gauzes as sponges

to control the bleeding of the patient during the surgical
operation.
71
 Second, immediately after the operation, the nurses who assisted
in the surgery noted in their report that the ‘sponge count (was)
lacking 2’; that such anomaly was ‘announced to surgeon’ and
that a ‘search was done but to no avail’ prompting Dr. Ampil to
‘continue for closure’ x x x.

Third, after the operation, two (2) gauzes were extracted from
the same spot of the body of Mrs. Agana where the surgery was
performed.

An operation requiring the placing of sponges in the incision is not

complete until the sponges are properly removed, and it is settled that
the leaving of sponges or other foreign substances in the wound after
the incision has been closed is at least prima facie negligence by the
operating surgeon.8 To put it simply, such act is considered so
inconsistent with due care as to raise an inference of negligence. There
are even legions of authorities to the effect that such act is negligence
per se.9

Of course, the Court is not blind to the reality that there are times
when danger to a patient’s life precludes a surgeon from further
searching missing sponges or foreign objects left in the body. But this
does not leave him free from any obligation. Even if it has been shown
that a surgeon was required by the urgent necessities of the case to
leave a sponge in his patient’s abdomen, because of the dangers
attendant upon delay, still, it is his legal duty to so inform his patient
within a reasonable time thereafter by advising her of what he had
been compelled to do. This is in order that she might seek relief from
the effects of the foreign object left in her body as her condition might
permit. The ruling in Smith v. Zeagler10 is explicit, thus:

The removal of all sponges used is part of a surgical operation, and

when a physician or surgeon fails to remove a sponge he has placed in
his patient’s body that should be removed as part of the operation, he
thereby leaves his operation uncompleted and creates a new condition
which imposes upon him the legal duty of calling the new condition to
his patient’s attention, and endeavoring with the means he has at
hand to minimize and avoid untoward results likely to ensue
therefrom.

Here, Dr. Ampil did not inform Natividad about the missing two pieces
of gauze. Worse, he even misled her that the pain she was
experiencing was the ordinary consequence of her operation. Had he
been more candid, Natividad could have taken the immediate and
appropriate medical remedy to remove the gauzes from her body. To
our mind, what was initially an act of negligence by Dr. Ampil has
ripened into a deliberate wrongful act of deceiving his patient.

This is a clear case of medical malpractice or more appropriately,

medical negligence. To successfully pursue this kind of case, a patient

72
must only prove that a health care provider either failed to do
something which a reasonably prudent health care provider would
have done, or that he did something that a reasonably prudent
provider would not have done; and that failure or action caused injury
to the patient.11 Simply put, the elements are duty, breach, injury and
proximate causation. Dr, Ampil, as the lead surgeon, had the duty to
remove all foreign objects, such as gauzes, from Natividad’s body
before closure of the incision. When he failed to do so, it was his duty
to inform Natividad about it. Dr. Ampil breached both duties. Such
breach caused injury to Natividad, necessitating her further
examination by American doctors and another surgery. That Dr.
Ampil’s negligence is the proximate cause12 of Natividad’s injury could
be traced from his act of closing the incision despite the information
given by the attending nurses that two pieces of gauze were still
missing. That they were later on extracted from Natividad’s vagina
established the causal link between Dr. Ampil’s negligence and the
injury. And what further aggravated such injury was his deliberate
concealment of the missing gauzes from the knowledge of Natividad
and her family.

II - G.R. No. 126467

Whether the Court of Appeals Erred in Absolving

Dr. Fuentes of any Liability

The Aganas assailed the dismissal by the trial court of the case against
Dr. Fuentes on the ground that it is contrary to the doctrine of res ipsa
loquitur. According to them, the fact that the two pieces of gauze were
left inside Natividad’s body is a prima facie evidence of Dr. Fuentes’
negligence.

We are not convinced.

Literally, res ipsa loquitur means "the thing speaks for itself." It is the
rule that the fact of the occurrence of an injury, taken with the
surrounding circumstances, may permit an inference or raise a
presumption of negligence, or make out a plaintiff’s prima facie case,
and present a question of fact for defendant to meet with an
explanation.13 Stated differently, where the thing which caused the
injury, without the fault of the injured, is under the exclusive control of
the defendant and the injury is such that it should not have occurred if
he, having such control used proper care, it affords reasonable
evidence, in the absence of explanation that the injury arose from the
defendant’s want of care, and the burden of proof is shifted to him to
establish that he has observed due care and diligence.14

From the foregoing statements of the rule, the requisites for the
applicability of the doctrine of res ipsa loquitur are: (1) the occurrence
of an injury; (2) the thing which caused the injury was under the

73
control and management of the defendant; (3) the occurrence was
such that in the ordinary course of things, would not have happened if
those who had control or management used proper care; and (4) the
absence of explanation by the defendant. Of the foregoing requisites,
the most instrumental is the "control and management of the thing
which caused the injury."15

We find the element of "control and management of the thing which

caused the injury" to be wanting. Hence, the doctrine of res ipsa
loquitur will not lie.

It was duly established that Dr. Ampil was the lead surgeon during the
operation of Natividad. He requested the assistance of Dr. Fuentes
only to perform hysterectomy when he (Dr. Ampil) found that the
malignancy in her sigmoid area had spread to her left ovary. Dr.
Fuentes performed the surgery and thereafter reported and showed
his work to Dr. Ampil. The latter examined it and finding everything to
be in order, allowed Dr. Fuentes to leave the operating room. Dr.
Ampil then resumed operating on Natividad. He was about to finish the
procedure when the attending nurses informed him that two pieces of
gauze were missing. A "diligent search" was conducted, but the
misplaced gauzes were not found. Dr. Ampil then directed that the
incision be closed. During this entire period, Dr. Fuentes was no longer
in the operating room and had, in fact, left the hospital.

Under the "Captain of the Ship" rule, the operating surgeon is the
person in complete charge of the surgery room and all personnel
connected with the operation. Their duty is to obey his orders. 16 As
stated before, Dr. Ampil was the lead surgeon. In other words, he was
the "Captain of the Ship." That he discharged such role is evident from
his following conduct: (1) calling Dr. Fuentes to perform a
hysterectomy; (2) examining the work of Dr. Fuentes and finding it in
order; (3) granting Dr. Fuentes’ permission to leave; and (4) ordering
the closure of the incision. To our mind, it was this act of ordering the
closure of the incision notwithstanding that two pieces of gauze
remained unaccounted for, that caused injury to Natividad’s body.
Clearly, the control and management of the thing which caused the
injury was in the hands of Dr. Ampil, not Dr. Fuentes.

In this jurisdiction, res ipsa loquitur is not a rule of substantive law,

hence, does not per se create or constitute an independent or separate
ground of liability, being a mere evidentiary rule.17 In other words,
mere invocation and application of the doctrine does not dispense with
the requirement of proof of negligence. Here, the negligence was
proven to have been committed by Dr. Ampil and not by Dr. Fuentes.

III - G.R. No. 126297

Whether PSI Is Liable for the Negligence of Dr. Ampil

74
The third issue necessitates a glimpse at the historical development of
hospitals and the resulting theories concerning their liability for the
negligence of physicians.

Until the mid-nineteenth century, hospitals were generally charitable

institutions, providing medical services to the lowest classes of society,
without regard for a patient’s ability to pay.18 Those who could afford
medical treatment were usually treated at home by their
doctors.19 However, the days of house calls and philanthropic health
care are over. The modern health care industry continues to distance
itself from its charitable past and has experienced a significant
conversion from a not-for-profit health care to for-profit hospital
businesses. Consequently, significant changes in health law have
accompanied the business-related changes in the hospital industry.
One important legal change is an increase in hospital liability for
medical malpractice. Many courts now allow claims for hospital
vicarious liability under the theories of respondeat superior, apparent
authority, ostensible authority, or agency by estoppel. 20

In this jurisdiction, the statute governing liability for negligent acts is

Article 2176 of the Civil Code, which reads:

Art. 2176. Whoever by act or omission causes damage to another,

there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.

A derivative of this provision is Article 2180, the rule governing

vicarious liability under the doctrine of respondeat superior, thus:

ART. 2180. The obligation imposed by Article 2176 is demandable not

only for one’s own acts or omissions, but also for those of persons for
whom one is responsible.

x x x x x x

The owners and managers of an establishment or enterprise are

likewise responsible for damages caused by their employees in the
service of the branches in which the latter are employed or on the
occasion of their functions.

Employers shall be liable for the damages caused by their employees

and household helpers acting within the scope of their assigned tasks
even though the former are not engaged in any business or industry.

x x x x x x

The responsibility treated of in this article shall cease when the

persons herein mentioned prove that they observed all the diligence of
a good father of a family to prevent damage.

75
A prominent civilist commented that professionals engaged by an
employer, such as physicians, dentists, and pharmacists, are not
"employees" under this article because the manner in which they
perform their work is not within the control of the latter (employer). In
other words, professionals are considered personally liable for the fault
or negligence they commit in the discharge of their duties, and their
employer cannot be held liable for such fault or negligence. In the
context of the present case, "a hospital cannot be held liable for the
fault or negligence of a physician or surgeon in the treatment or
operation of patients."21

The foregoing view is grounded on the traditional notion that the

professional status and the very nature of the physician’s calling
preclude him from being classed as an agent or employee of a
hospital, whenever he acts in a professional capacity.22 It has been
said that medical practice strictly involves highly developed and
specialized knowledge,23 such that physicians are generally free to
exercise their own skill and judgment in rendering medical services
sans interference.24 Hence, when a doctor practices medicine in a
hospital setting, the hospital and its employees are deemed to
subserve him in his ministrations to the patient and his actions are of
his own responsibility.25

The case of Schloendorff v. Society of New York Hospital26 was then

considered an authority for this view. The "Schloendorff doctrine"
regards a physician, even if employed by a hospital, as an independent
contractor because of the skill he exercises and the lack of control
exerted over his work. Under this doctrine, hospitals are exempt from
the application of the respondeat superior principle for fault or
negligence committed by physicians in the discharge of their
profession.

However, the efficacy of the foregoing doctrine has weakened with the
significant developments in medical care. Courts came to realize that
modern hospitals are increasingly taking active role in supplying and
regulating medical care to patients. No longer were a hospital’s
functions limited to furnishing room, food, facilities for treatment and
operation, and attendants for its patients. Thus, in Bing v.
Thunig,27 the New York Court of Appeals deviated from the
Schloendorff doctrine, noting that modern hospitals actually do far
more than provide facilities for treatment. Rather, they regularly
employ, on a salaried basis, a large staff of physicians, interns, nurses,
administrative and manual workers. They charge patients for medical
care and treatment, even collecting for such services through legal
action, if necessary. The court then concluded that there is no reason
to exempt hospitals from the universal rule of respondeat superior.

In our shores, the nature of the relationship between the hospital and
the physicians is rendered inconsequential in view of our categorical
pronouncement in Ramos v. Court of Appeals28 that for purposes of

76
apportioning responsibility in medical negligence cases, an employer-
employee relationship in effect exists between hospitals and their
attending and visiting physicians. This Court held:

"We now discuss the responsibility of the hospital in this particular

incident. The unique practice (among private hospitals) of filling up
specialist staff with attending and visiting "consultants," who are
allegedly not hospital employees, presents problems in apportioning
responsibility for negligence in medical malpractice cases. However,
the difficulty is more apparent than real.

In the first place, hospitals exercise significant control in the hiring and
firing of consultants and in the conduct of their work within the
hospital premises. Doctors who apply for ‘consultant’ slots, visiting or
attending, are required to submit proof of completion of residency,
their educational qualifications, generally, evidence of accreditation by
the appropriate board (diplomate), evidence of fellowship in most
cases, and references. These requirements are carefully scrutinized by
members of the hospital administration or by a review committee set
up by the hospital who either accept or reject the application. x x x.

After a physician is accepted, either as a visiting or attending

consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and residents,
moderate grand rounds and patient audits and perform other tasks
and responsibilities, for the privilege of being able to maintain a clinic
in the hospital, and/or for the privilege of admitting patients into the
hospital. In addition to these, the physician’s performance as a
specialist is generally evaluated by a peer review committee on the
basis of mortality and morbidity statistics, and feedback from patients,
nurses, interns and residents. A consultant remiss in his duties, or a
consultant who regularly falls short of the minimum standards
acceptable to the hospital or its peer review committee, is normally
politely terminated.

In other words, private hospitals, hire, fire and exercise real control
over their attending and visiting ‘consultant’ staff. While ‘consultants’
are not, technically employees, x x x, the control exercised, the hiring,
and the right to terminate consultants all fulfill the important hallmarks
of an employer-employee relationship, with the exception of the
payment of wages. In assessing whether such a relationship in fact
exists, the control test is determining. Accordingly, on the basis of the
foregoing, we rule that for the purpose of allocating responsibility in
medical negligence cases, an employer-employee relationship in effect
exists between hospitals and their attending and visiting physicians. "

But the Ramos pronouncement is not our only basis in sustaining PSI’s
liability. Its liability is also anchored upon the agency principle of
apparent authority or agency by estoppel and the doctrine of corporate
negligence which have gained acceptance in the determination of a

77
hospital’s liability for negligent acts of health professionals. The
present case serves as a perfect platform to test the applicability of
these doctrines, thus, enriching our jurisprudence.

Apparent authority, or what is sometimes referred to as the "holding

out" theory, or doctrine of ostensible agency or agency by

estoppel,29 has its origin from the law of agency. It imposes liability,
not as the result of the reality of a contractual relationship, but rather
because of the actions of a principal or an employer in somehow
misleading the public into believing that the relationship or the
authority exists.30 The concept is essentially one of estoppel and has
been explained in this manner:

"The principal is bound by the acts of his agent with the apparent
authority which he knowingly permits the agent to assume, or which
he holds the agent out to the public as possessing. The question in
every case is whether the principal has by his voluntary act placed the
agent in such a situation that a person of ordinary prudence,
conversant with business usages and the nature of the particular
business, is justified in presuming that such agent has authority to
perform the particular act in question.31

The applicability of apparent authority in the field of hospital liability

was upheld long time ago in Irving v. Doctor Hospital of Lake Worth,
Inc.32 There, it was explicitly stated that "there does not appear to be
any rational basis for excluding the concept of apparent authority from
the field of hospital liability." Thus, in cases where it can be shown that
a hospital, by its actions, has held out a particular physician as its
agent and/or employee and that a patient has accepted treatment
from that physician in the reasonable belief that it is being rendered in
behalf of the hospital, then the hospital will be liable for the physician’s
negligence.

Our jurisdiction recognizes the concept of an agency by implication or

estoppel. Article 1869 of the Civil Code reads:

ART. 1869. Agency may be express, or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate
the agency, knowing that another person is acting on his behalf
without authority.

In this case, PSI publicly displays in the lobby of the Medical City
Hospital the names and specializations of the physicians associated or
accredited by it, including those of Dr. Ampil and Dr. Fuentes. We
concur with the Court of Appeals’ conclusion that it "is now estopped
from passing all the blame to the physicians whose names it proudly
paraded in the public directory leading the public to believe that it
vouched for their skill and competence." Indeed, PSI’s act is
tantamount to holding out to the public that Medical City Hospital,

78
through its accredited physicians, offers quality health care services.
By accrediting Dr. Ampil and Dr. Fuentes and publicly advertising their
qualifications, the hospital created the impression that they were its
agents, authorized to perform medical or surgical services for its
patients. As expected, these patients, Natividad being one of them,
accepted the services on the reasonable belief that such were being
rendered by the hospital or its employees, agents, or servants. The
trial court correctly pointed out:

x x x regardless of the education and status in life of the patient, he

ought not be burdened with the defense of absence of employer-
employee relationship between the hospital and the independent
physician whose name and competence are certainly certified to the
general public by the hospital’s act of listing him and his specialty in its
lobby directory, as in the case herein. The high costs of today’s
medical and health care should at least exact on the hospital greater,
if not broader, legal responsibility for the conduct of treatment and
surgery within its facility by its accredited physician or surgeon,
regardless of whether he is independent or employed."33

The wisdom of the foregoing ratiocination is easy to discern. Corporate

entities, like PSI, are capable of acting only through other individuals,
such as physicians. If these accredited physicians do their job well, the
hospital succeeds in its mission of offering quality medical services and
thus profits financially. Logically, where negligence mars the quality of
its services, the hospital should not be allowed to escape liability for
the acts of its ostensible agents.

We now proceed to the doctrine of corporate negligence or corporate

responsibility.

One allegation in the complaint in Civil Case No. Q-43332 for

negligence and malpractice is that PSI as owner, operator and
manager of Medical City Hospital, "did not perform the necessary
supervision nor exercise diligent efforts in the supervision of Drs.
Ampil and Fuentes and its nursing staff, resident doctors, and medical
interns who assisted Drs. Ampil and Fuentes in the performance of
their duties as surgeons."34 Premised on the doctrine of corporate
negligence, the trial court held that PSI is directly liable for such
breach of duty.

We agree with the trial court.

Recent years have seen the doctrine of corporate negligence as the

judicial answer to the problem of allocating hospital’s liability for the
negligent acts of health practitioners, absent facts to support the
application of respondeat superior or apparent authority. Its
formulation proceeds from the judiciary’s acknowledgment that in
these modern times, the duty of providing quality medical service is no
longer the sole prerogative and responsibility of the physician. The

79
modern hospitals have changed structure. Hospitals now tend to
organize a highly professional medical staff whose competence and
performance need to be monitored by the hospitals commensurate
with their inherent responsibility to provide quality medical care.35

The doctrine has its genesis in Darling v. Charleston Community

Hospital.36 There, the Supreme Court of Illinois held that "the jury
could have found a hospital negligent, inter alia, in failing to have a
sufficient number of trained nurses attending the patient; failing to
require a consultation with or examination by members of the hospital
staff; and failing to review the treatment rendered to the patient." On
the basis of Darling, other jurisdictions held that a hospital’s corporate
negligence extends to permitting a physician known to be incompetent
to practice at the hospital.37 With the passage of time, more duties
were expected from hospitals, among them: (1) the use of reasonable
care in the maintenance of safe and adequate facilities and equipment;
(2) the selection and retention of competent physicians; (3) the
overseeing or supervision of all persons who practice medicine within
its walls; and (4) the formulation, adoption and enforcement of
adequate rules and policies that ensure quality care for its
patients.38 Thus, in Tucson Medical Center, Inc. v. Misevich,39 it was
held that a hospital, following the doctrine of corporate responsibility,
has the duty to see that it meets the standards of responsibilities for
the care of patients. Such duty includes the proper supervision of the
members of its medical staff. And in Bost v. Riley,40 the court
concluded that a patient who enters a hospital does so with the
reasonable expectation that it will attempt to cure him. The hospital
accordingly has the duty to make a reasonable effort to monitor and
oversee the treatment prescribed and administered by the physicians
practicing in its premises.

In the present case, it was duly established that PSI operates the
Medical City Hospital for the purpose and under the concept of
providing comprehensive medical services to the public. Accordingly, it
has the duty to exercise reasonable care to protect from harm all
patients admitted into its facility for medical treatment. Unfortunately,
PSI failed to perform such duty. The findings of the trial court are
convincing, thus:

x x x PSI’s liability is traceable to its failure to conduct an investigation

of the matter reported in the nota bene of the count nurse. Such
failure established PSI’s part in the dark conspiracy of silence and
concealment about the gauzes. Ethical considerations, if not also legal,
dictated the holding of an immediate inquiry into the events, if not for
the benefit of the patient to whom the duty is primarily owed, then in
the interest of arriving at the truth. The Court cannot accept that the
medical and the healing professions, through their members like
defendant surgeons, and their institutions like PSI’s hospital facility,
can callously turn their backs on and disregard even a mere probability

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of mistake or negligence by refusing or failing to investigate a report of
such seriousness as the one in Natividad’s case.

It is worthy to note that Dr. Ampil and Dr. Fuentes operated on

Natividad with the assistance of the Medical City Hospital’s staff,
composed of resident doctors, nurses, and interns. As such, it is
reasonable to conclude that PSI, as the operator of the hospital, has
actual or constructive knowledge of the procedures carried out,
particularly the report of the attending nurses that the two pieces of
gauze were missing. In Fridena v. Evans,41 it was held that a
corporation is bound by the knowledge acquired by or notice given to
its agents or officers within the scope of their authority and in
reference to a matter to which their authority extends. This means
that the knowledge of any of the staff of Medical City Hospital
constitutes knowledge of PSI. Now, the failure of PSI, despite the
attending nurses’ report, to investigate and inform Natividad regarding
the missing gauzes amounts to callous negligence. Not only did PSI
breach its duties to oversee or supervise all persons who practice
medicine within its walls, it also failed to take an active step in fixing
the negligence committed. This renders PSI, not only vicariously liable
for the negligence of Dr. Ampil under Article 2180 of the Civil Code,
but also directly liable for its own negligence under Article 2176. In
Fridena, the Supreme Court of Arizona held:

x x x In recent years, however, the duty of care owed to the patient by

the hospital has expanded. The emerging trend is to hold the hospital
responsible where the hospital has failed to monitor and review
medical services being provided within its walls. See Kahn Hospital
Malpractice Prevention, 27 De Paul . Rev. 23 (1977).

Among the cases indicative of the ‘emerging trend’ is Purcell v.

Zimbelman, 18 Ariz. App. 75,500 P. 2d 335 (1972). In Purcell, the
hospital argued that it could not be held liable for the malpractice of a
medical practitioner because he was an independent contractor within
the hospital. The Court of Appeals pointed out that the hospital had
created a professional staff whose competence and performance was
to be monitored and reviewed by the governing body of the hospital,
and the court held that a hospital would be negligent where it had
knowledge or reason to believe that a doctor using the facilities was
employing a method of treatment or care which fell below the
recognized standard of care.

Subsequent to the Purcell decision, the Arizona Court of Appeals held

that a hospital has certain inherent responsibilities regarding the
quality of medical care furnished to patients within its walls and it
must meet the standards of responsibility commensurate with this
undertaking. Beeck v. Tucson General Hospital, 18 Ariz. App. 165, 500
P. 2d 1153 (1972). This court has confirmed the rulings of the Court of
Appeals that a hospital has the duty of supervising the competence of
the doctors on its staff. x x x.

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x x x x x x

In the amended complaint, the plaintiffs did plead that the operation
was performed at the hospital with its knowledge, aid, and assistance,
and that the negligence of the defendants was the proximate cause of
the patient’s injuries. We find that such general allegations of
negligence, along with the evidence produced at the trial of this case,
are sufficient to support the hospital’s liability based on the theory of
negligent supervision."

Anent the corollary issue of whether PSI is solidarily liable with Dr.
Ampil for damages, let it be emphasized that PSI, apart from a general
denial of its responsibility, failed to adduce evidence showing that it
exercised the diligence of a good father of a family in the accreditation
and supervision of the latter. In neglecting to offer such proof, PSI
failed to discharge its burden under the last paragraph of Article 2180
cited earlier, and, therefore, must be adjudged solidarily liable with Dr.
Ampil. Moreover, as we have discussed, PSI is also directly liable to
the Aganas.

One final word. Once a physician undertakes the treatment and care of
a patient, the law imposes on him certain obligations. In order to
escape liability, he must possess that reasonable degree of learning,
skill and experience required by his profession. At the same time, he
must apply reasonable care and diligence in the exercise of his skill
and the application of his knowledge, and exert his best judgment.

WHEREFORE, we DENY all the petitions and AFFIRM the challenged

Decision of the Court of Appeals in CA-G.R. CV No. 42062 and CA-G.R.
SP No. 32198.

Costs against petitioners PSI and Dr. Miguel Ampil.

SO ORDERED.

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