FIRST DIVISION

[G.R. No. 124354. December 29, 1999]

ROGELIO E. RAMOS and ERLINDA RAMOS, in their own behalf and as natural guardians of the minors, ROMMEL RAMOS, ROY RODERICK RAMOS and RON RAYMOND RAMOS,petitioners, vs. COURT OF APPEALS, DELOS SANTOS MEDICAL CENTER, DR. ORLINO HOSAKA and DRA. PERFECTA GUTIERREZ, respondents.

D E C I S I O N

KAPUNAN, J.:

The Hippocratic Oath mandates physicians to give primordial consideration to the health and welfare of their patients. If a doctor fails to live up to this precept, he is made accountable for his acts. A mistake, through gross negligence or incompetence or plain human error, may spell the difference between life and death. In this sense, the doctor plays God on his patients fate.[1]

In the case at bar, the Court is called upon to rule whether a surgeon, an anesthesiologist and a hospital should be made liable for the unfortunate comatose condition of a patient scheduled for cholecystectomy.[2]

Petitioners seek the reversal of the decision[3] of the Court of Appeals, dated 29 May 1995, which overturned the decision [4]of the Regional Trial Court, dated 30 January 1992, finding private respondents liable for damages arising from negligence in the performance of their professional duties towards petitioner Erlinda Ramos resulting in her comatose condition.

The antecedent facts as summarized by the trial court are reproduced hereunder:

Plaintiff Erlinda Ramos was, until the afternoon of June 17, 1985, a 47-year old (Exh. A) robust woman (TSN, October 19, 1989, p. 10). Except for occasional complaints of discomfort due to pains allegedly caused by the presence of a stone in her gall bladder (TSN, January 13, 1988, pp. 4-5), she was as normal as any other woman. Married to Rogelio E. Ramos, an executive of Philippine Long Distance Telephone Company, she has three children whose names are Rommel Ramos, Roy Roderick Ramos and Ron Raymond Ramos (TSN, October 19, 1989, pp. 5-6).

Because the discomforts somehow interfered with her normal ways, she sought professional advice. She was advised to undergo an operation for the removal of a stone in her gall bladder (TSN, January 13, 1988, p. 5). She underwent a series of examinations which included blood and urine tests (Exhs. A and C) which indicated she was fit for surgery.

Through the intercession of a mutual friend, Dr. Buenviaje (TSN, January 13, 1988, p. 7), she and her husband Rogelio met for the first time Dr. Orlino Hozaka (should be Hosaka; see TSN, February 20, 1990, p. 3), one of the defendants in this case, on June 10, 1985. They agreed that their date at the operating table at the DLSMC (another defendant), would be on June 17, 1985 at 9:00 A.M.. Dr. Hosaka decided that she should undergo a cholecystectomy operation after examining the documents (findings from the Capitol Medical Center, FEU Hospital and DLSMC) presented to him. Rogelio E. Ramos, however, asked Dr. Hosaka to look for a good anesthesiologist. Dr. Hosaka, in turn, assured Rogelio that he will get a good anesthesiologist. Dr. Hosaka charged a fee of P16,000.00, which was to include the anesthesiologists fee and which was to be paid after the operation (TSN, October 19, 1989, pp. 14-15, 22-23, 31-33; TSN, February 27, 1990, p. 13; and TSN, November 9, 1989, pp. 3-4, 10, 17).

A day before the scheduled date of operation, she was admitted at one of the rooms of the DLSMC, located along E. Rodriguez Avenue, Quezon City (TSN, October 19, 1989, p. 11).

At around 7:30 A.M. of June 17, 1985 and while still in her room, she was prepared for the operation by the hospital staff. Her sister-in-law, Herminda Cruz, who was the Dean of the College of Nursing at the Capitol Medical Center, was also there for moral support. She reiterated her previous request for Herminda to be with her even during the operation. After praying, she was given injections. Her hands were held by Herminda as they went down from her room to the operating room (TSN, January 13, 1988, pp. 9-11). Her husband, Rogelio, was also with her (TSN, October 19, 1989, p. 18). At the operating room, Herminda saw about two or three nurses and Dr. Perfecta Gutierrez, the other defendant, who was to administer anesthesia. Although not a member of the hospital staff, Herminda introduced herself as Dean of the College of Nursing at the Capitol Medical Center who was to provide moral support to the patient, to them. Herminda was allowed to stay inside the operating room.

At around 9:30 A.M., Dr. Gutierrez reached a nearby phone to look for Dr. Hosaka who was not yet in (TSN, January 13, 1988, pp. 11-12). Dr. Gutierrez thereafter informed Herminda Cruz about the prospect of a delay in the arrival of Dr. Hosaka. Herminda then went back to the patient who asked, Mindy, wala pa ba ang Doctor? The former replied, Huwag kang mag-alaala, darating na iyon (ibid.).

Thereafter, Herminda went out of the operating room and informed the patients husband, Rogelio, that the doctor was not yet around (id., p. 13). When she returned to the operating room, the patient told her, Mindy, inip na inip na ako, ikuha mo ako ng ibang Doctor. So, she went out again and told Rogelio about what the patient said (id., p. 15). Thereafter, she returned to the operating room.

At around 10:00 A.M., Rogelio E. Ramos was already dying [and] waiting for the arrival of the doctor even as he did his best to find somebody who will allow him to pull out his wife from the operating room (TSN, October 19, 1989, pp. 19-20). He also thought of the feeling of his wife, who was inside the operating room waiting for the doctor to arrive (ibid.). At almost 12:00 noon, he met Dr. Garcia who remarked that he (Dr. Garcia) was also tired of waiting for Dr. Hosaka to arrive (id., p. 21). While talking to Dr. Garcia at around 12:10 P.M., he came to know that Dr. Hosaka arrived as a nurse remarked, Nandiyan na si Dr. Hosaka, dumating na raw. Upon hearing those words, he went down to the lobby and waited for the operation to be completed (id., pp. 16, 29-30).

At about 12:15 P.M., Herminda Cruz, who was inside the operating room with the patient, heard somebody say that Dr. Hosaka is already here. She then saw people inside the operating room moving, doing this and that, [and] preparing the patient for the operation (TSN, January 13, 1988, p. 16). As she held the hand of Erlinda Ramos, she then saw Dr. Gutierrez intubating the hapless patient. She thereafter heard Dr. Gutierrez say, ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan (id., p. 17). Because of the remarks of Dra. Gutierrez, she focused her attention on what Dr. Gutierrez was doing. She thereafter noticed bluish discoloration of the nailbeds of the left hand of the hapless Erlinda even as Dr. Hosaka approached her. She then heard Dr. Hosaka issue an order for someone to call Dr. Calderon, another anesthesiologist (id., p.

19). After Dr. Calderon arrived at the operating room, she saw this anesthesiologist trying to intubate the patient. The patients nailbed became bluish and the patient was placed in a trendelenburg position - a position where the head of the patient is placed in a position lower than her feet which is an indication that there is a decrease of blood supply to the patients brain (Id., pp. 19-20). Immediately thereafter, she went out of the operating room, and she told Rogelio E. Ramos that something wrong was x x x happening (Ibid.). Dr. Calderon was then able to intubate the patient (TSN, July 25, 1991, p. 9).

Meanwhile, Rogelio, who was outside the operating room, saw a respiratory machine being rushed towards the door of the operating room. He also saw several doctors rushing towards the operating room. When informed by Herminda Cruz that something wrong was happening, he told her (Herminda) to be back with the patient inside the operating room (TSN, October 19, 1989, pp. 25-28).

Herminda Cruz immediately rushed back, and saw that the patient was still in trendelenburg position (TSN, January 13, 1988, p. 20). At almost 3:00 P.M. of that fateful day, she saw the patient taken to the Intensive Care Unit (ICU).

About two days thereafter, Rogelio E. Ramos was able to talk to Dr. Hosaka. The latter informed the former that something went wrong during the intubation. Reacting to what was told to him, Rogelio reminded the doctor that the condition of his wife would not have happened, had he (Dr. Hosaka) looked for a good anesthesiologist (TSN, October 19, 1989, p. 31).

Doctors Gutierrez and Hosaka were also asked by the hospital to explain what happened to the patient. The doctors explained that the patient had bronchospasm (TSN, November 15, 1990, pp. 26-27).

Erlinda Ramos stayed at the ICU for a month. About four months thereafter or on November 15, 1985, the patient was released from the hospital.

During the whole period of her confinement, she incurred hospital bills amounting to P93,542.25 which is the subject of a promissory note and affidavit of undertaking executed by Rogelio E. Ramos in favor of DLSMC. Since that fateful afternoon of June 17, 1985, she has been in a comatose condition. She cannot do anything. She cannot move any part of her body. She cannot see or hear. She is living on mechanical means. She suffered brain damage as a result of the absence of oxygen in her brain for four to five minutes (TSN, November 9, 1989, pp. 21-22). After being discharged from the hospital, she has been staying in their residence, still needing constant medical attention, with her husband Rogelio incurring a monthly expense ranging from P8,000.00 to P10,000.00 (TSN, October 19, 1989, pp. 32-34). She was also diagnosed to be suffering from diffuse cerebral parenchymal damage (Exh. G; see also TSN, December 21, 1989, p. 6).[5]

Thus, on 8 January 1986, petitioners filed a civil case [6] for damages with the Regional Trial Court of Quezon City against herein private respondents alleging negligence in the management and care of Erlinda Ramos.

During the trial, both parties presented evidence as to the possible cause of Erlindas injury. Plaintiff presented the testimonies of Dean Herminda Cruz and Dr. Mariano Gavino to prove that the damage sustained by Erlinda was due to lack of oxygen in her brain caused by the faulty management of her airway by private respondents during the anesthesia phase. On the other hand, private respondents primarily relied on the expert testimony of Dr. Eduardo Jamora, a pulmonologist, to the effect that the cause of brain damage was Erlindas allergic reaction to the anesthetic agent, Thiopental Sodium (Pentothal).

After considering the evidence from both sides, the Regional Trial Court rendered judgment in favor of petitioners, to wit:

After evaluating the evidence as shown in the finding of facts set forth earlier, and applying the aforecited provisions of law and jurisprudence to the case at bar, this Court finds and so holds that defendants are liable to plaintiffs for damages.The defendants were guilty of, at the very least, negligence in the performance of their duty to plaintiff-patient Erlinda Ramos.

On the part of Dr. Perfecta Gutierrez, this Court finds that she omitted to exercise reasonable care in not only intubating the patient, but also in not repeating the administration of atropine (TSN, August 20, 1991, pp. 5-10), without due regard to the fact that the patient was inside the operating room for almost three (3) hours. For after she committed a mistake in intubating [the] patient, the patient's nailbed became bluish and the patient, thereafter, was placed in trendelenburg position, because of the decrease of blood supply to the patient's brain. The evidence further shows that the hapless patient suffered brain damage because of the absence of oxygen in her (patient's) brain for approximately four to five minutes which, in turn, caused the patient to become comatose.

On the part of Dr. Orlino Hosaka, this Court finds that he is liable for the acts of Dr. Perfecta Gutierrez whom he had chosen to administer anesthesia on the patient as part of his obligation to provide the patient a `good anesthesiologist', and for arriving for the scheduled operation almost three (3) hours late.

On the part of DLSMC (the hospital), this Court finds that it is liable for the acts of negligence of the doctors in their `practice of medicine' in the operating room. Moreover, the hospital is liable for failing through its responsible officials, to cancel the scheduled operation after Dr. Hosaka inexcusably failed to arrive on time.

In having held thus, this Court rejects the defense raised by defendants that they have acted with due care and prudence in rendering medical services to plaintiff-patient. For if the patient was properly intubated as claimed by them, the patient would not have become comatose. And, the fact that another anesthesiologist was called to try to intubate the patient after her (the patient's) nailbed turned bluish, belie their claim. Furthermore, the defendants should have rescheduled the operation to a later date. This, they should have done, if defendants acted with due care and prudence as the patient's case was an elective, not an emergency case.

x x x

WHEREFORE, and in view of the foregoing, judgment is rendered in favor of the plaintiffs and against the defendants. Accordingly, the latter are ordered to pay, jointly and severally, the former the following sums of money, to wit:

1) the sum of P8,000.00 as actual monthly expenses for the plaintiff Erlinda Ramos reckoned from November 15, 1985 or in the total sum of P632,000.00 as of April 15, 1992, subject to its being updated;

2) the sum of P100,000.00 as reasonable attorney's fees;

3) the sum of P800,000.00 by way of moral damages and the further sum of P200,000.00 by way of exemplary damages; and,

4) the costs of the suit.

SO ORDERED.[7]

Private respondents seasonably interposed an appeal to the Court of Appeals. The appellate court rendered a Decision, dated 29 May 1995, reversing the findings of the trial court. The decretal portion of the decision of the appellate court reads:

WHEREFORE, for the foregoing premises the appealed decision is hereby REVERSED, and the complaint below against the appellants is hereby ordered DISMISSED. The counterclaim of appellant De Los Santos Medical Center is GRANTED but only insofar as appellees are hereby ordered to pay the unpaid hospital bills amounting to P93,542.25, plus legal interest for justice must be tempered with mercy.

SO ORDERED.[8]

The decision of the Court of Appeals was received on 9 June 1995 by petitioner Rogelio Ramos who was mistakenly addressed as Atty. Rogelio Ramos. No copy of the decision, however, was sent nor received by the Coronel Law Office, then counsel on record of petitioners. Rogelio referred the decision of the appellate court to a new lawyer, Atty. Ligsay, only on 20 June 1995, or four (4) days before the expiration of the reglementary period for filing a motion for reconsideration. On the same day, Atty. Ligsay, filed with the appellate court a motion for extension of time to file a motion for reconsideration. The motion for reconsideration was submitted on 4 July 1995. However, the appellate court denied the motion for extension of time in its Resolution dated 25 July 1995. [9] Meanwhile petitioners engaged the services of another counsel, Atty. Sillano, to replace Atty. Ligsay. Atty. Sillano filed on 7 August 1995 a motion to admit the motion for reconsideration contending that the period to file the appropriate pleading on the assailed decision had not yet commenced to run as the Division Clerk of Court of the Court of Appeals had not yet served a copy thereof to the counsel on record.Despite this explanation, the appellate court still denied the motion to admit the motion for reconsideration of petitioners in its Resolution, dated 29 March 1996, primarily on the ground that the fifteen-day (15) period for filing a motion for reconsideration had already expired, to wit:

We said in our Resolution on July 25, 1995, that the filing of a Motion for Reconsideration cannot be extended; precisely, the Motion for Extension (Rollo, p. 12) was denied. It is, on the other hand, admitted in the latter Motion that plaintiffs/appellees received a copy of the decision as early as June 9, 1995. Computation wise, the period to file a Motion for Reconsideration expired on June 24. The Motion for Reconsideration, in turn, was received by the Court of Appeals already on July 4, necessarily, the 15-day period already passed. For that alone, the latter should be denied.

Even assuming admissibility of the Motion for Reconsideration, but after considering the Comment/Opposition, the former, for lack of merit, is hereby DENIED.

SO ORDERED.[10]

A copy of the above resolution was received by Atty. Sillano on 11 April 1996. The next day, or on 12 April 1996, Atty. Sillano filed before this Court a motion for extension of time to file the present petition for certiorari under Rule 45.The Court granted the motion for extension of time and gave petitioners additional thirty (30) days after the expiration of the fifteen-day (15) period counted from the receipt of the resolution of the Court of Appeals within which to submit the petition. The due date fell on 27 May 1996. The petition was filed on 9 May 1996, well within the extended period given by the Court.

Petitioners assail the decision of the Court of Appeals on the following grounds:

I

IN PUTTING MUCH RELIANCE ON THE TESTIMONIES OF RESPONDENTS DRA. GUTIERREZ, DRA. CALDERON AND DR. JAMORA;

II

IN FINDING THAT THE NEGLIGENCE OF THE RESPONDENTS DID NOT CAUSE THE UNFORTUNATE COMATOSE CONDITION OF PETITIONER ERLINDA RAMOS;

III

IN NOT APPLYING THE DOCTRINE OF RES IPSA LOQUITUR.[11]

Before we discuss the merits of the case, we shall first dispose of the procedural issue on the timeliness of the petition in relation to the motion for reconsideration filed by petitioners with the Court of Appeals. In their Comment,[12] private respondents contend that the petition should not be given due course since the motion for reconsideration of the petitioners on the decision of the Court of Appeals was validly dismissed by the appellate court for having been filed beyond the reglementary period. We do not agree.

A careful review of the records reveals that the reason behind the delay in filing the motion for reconsideration is attributable to the fact that the decision of the Court of Appeals was not sent to then counsel on record of petitioners, the Coronel Law Office. In fact, a copy of the decision of the appellate court was instead sent to and received by petitioner Rogelio Ramos on 9 June 1995 wherein he was mistakenly addressed as Atty. Rogelio Ramos. Based on the other communications received by petitioner Rogelio Ramos, the appellate court apparently mistook him for the counsel on record. Thus, no copy of the decision of the appellate court was furnished to the counsel on record. Petitioner, not being a lawyer and unaware of the prescriptive period for filing a motion for reconsideration, referred the same to a legal counsel only on 20 June 1995.

It is elementary that when a party is represented by counsel, all notices should be sent to the partys lawyer at his given address. With a few exceptions, notice to a litigant without notice to his counsel on record is no notice at all. In the present case, since a copy of the decision of the appellate court was not sent to the counsel on record of petitioner, there can be no sufficient notice to speak of. Hence, the delay in the filing of the motion for reconsideration cannot be taken against petitioner. Moreover, since the Court of Appeals already issued a second Resolution, dated 29 March 1996, which superseded the earlier resolution issued on 25 July 1995, and denied the motion for reconsideration of petitioner, we believe that the receipt of the former should be considered in determining the timeliness of the filing of the present petition. Based on this, the petition before us was submitted on time.

After resolving the foregoing procedural issue, we shall now look into the merits of the case. For a more logical presentation of the discussion we shall first consider the issue on the applicability of the doctrine of res ipsa loquitur to the instant case. Thereafter, the first two assigned errors shall be tackled in relation to the res ipsa loquitur doctrine.

Res ipsa loquitur is a Latin phrase which literally means the thing or the transaction speaks for itself. The phrase res ipsa loquitur is a maxim for the rule that the fact of the occurrence of an injury, taken with the surrounding circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiffs prima facie case, and present a question of fact for defendant to meet with an explanation.[13] Where the thing which caused the injury complained of is shown to be under the management of the defendant or his servants and the accident is such as in ordinary course of things does not happen if those who have its management or control use proper care, it affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from or was caused by the defendants want of care. [14]

The doctrine of res ipsa loquitur is simply a recognition of the postulate that, as a matter of common knowledge and experience, the very nature of certain types of occurrences may justify an inference of negligence on the part of the person who controls the instrumentality causing the injury in the absence of some explanation by the defendant who is charged with negligence.[15] It is grounded in the superior logic of ordinary human experience and on the basis of such experience or common knowledge, negligence may be deduced from the mere occurrence of the accident itself.[16] Hence, res ipsa loquitur is applied in conjunction with the doctrine of common knowledge.

However, much has been said that res ipsa loquitur is not a rule of substantive law and, as such, does not create or constitute an independent or separate ground of liability.[17] Instead, it is considered as merely evidentiary or in the nature of a procedural rule. [18] It is regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and relieves a plaintiff of, the burden of producing specific proof of negligence. [19] In other words, mere invocation and application of the doctrine does not dispense with the requirement of proof of negligence. It is simply a step in the process of such proof, permitting the plaintiff to present along with the proof of the accident, enough of the attending circumstances to invoke the doctrine, creating an inference or presumption of negligence, and to thereby place on the defendant the burden of going forward with the proof.[20] Still, before resort to the doctrine may be allowed, the following requisites must be satisfactorily shown:

1. The accident is of a kind which ordinarily does not occur in the absence of someones negligence;

2. It is caused by an instrumentality within the exclusive control of the defendant or defendants; and

3. The possibility of contributing conduct which would make the plaintiff responsible is eliminated.[21]

In the above requisites, the fundamental element is the control of the instrumentality which caused the damage. [22] Such element of control must be shown to be within the dominion of the defendant. In order to have the benefit of the rule, a plaintiff, in addition to proving injury or damage, must show a situation where it is applicable, and must establish that the essential elements of the doctrine were present in a particular incident.[23]

Medical malpractice[24]cases do not escape the application of this doctrine. Thus, res ipsa loquitur has been applied when the circumstances attendant upon the harm are themselves of such a character as to justify an inference of negligence as the cause of that harm. [25] The application of res ipsa loquitur in medical negligence cases presents a question of law since it is a judicial function to determine whether a certain set of circumstances does, as a matter of law, permit a given inference. [26]

Although generally, expert medical testimony is relied upon in malpractice suits to prove that a physician has done a negligent act or that he has deviated from the standard medical procedure, when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical testimony is dispensed with because the injury itself provides the proof of negligence.[27] The reason is that the general rule on the necessity of expert testimony applies only to such matters clearly within the domain of medical science, and not to matters that are within the common knowledge of mankind which may be testified to by anyone familiar with the facts. [28] Ordinarily, only physicians and surgeons of skill and experience are competent to testify as to whether a patient has been treated or operated upon with a reasonable degree of skill and care. However, testimony as to the statements and acts of physicians and surgeons, external appearances, and manifest conditions which are observable by any one may be given by non-expert witnesses.[29] Hence, in cases where the res ipsa loquitur is applicable, the court is permitted to find a physician negligent upon proper proof of injury to the patient, without the aid of expert testimony, where the court from its fund of common knowledge can determine the proper standard of care. [30] Where common knowledge and experience teach that a resulting injury would not have occurred to the patient if due care had been exercised, an inference of negligence may be drawn giving rise to an application of the doctrine of res ipsa loquitur without medical evidence, which is ordinarily required to show not only what occurred but how and why it occurred. [31] When the doctrine is appropriate, all that the patient must do is prove a nexus between the particular act or omission complained of and the injury sustained while under the custody and management of the defendant without need to produce expert medical testimony to establish the standard of care. Resort to res ipsa loquitur is allowed because there is no other way, under usual and ordinary conditions, by which the patient can obtain redress for injury suffered by him.

Thus, courts of other jurisdictions have applied the doctrine in the following situations: leaving of a foreign object in the body of the patient after an operation,[32] injuries sustained on a healthy part of the body which was not under, or in the area, of treatment,[33] removal of the wrong part of the body when another part was intended,[34] knocking out a tooth while a patients jaw was under anesthetic for the removal of his tonsils, [35] and loss of an eye while the patient plaintiff was under the influence of anesthetic, during or following an operation for appendicitis,[36] among others.

Nevertheless, despite the fact that the scope of res ipsa loquitur has been measurably enlarged, it does not automatically apply to all cases of medical negligence as to mechanically shift the burden of proof to the defendant to show that he is not guilty of the ascribed negligence. Res ipsa loquitur is not a rigid or ordinary doctrine to be perfunctorily used but a rule to be cautiously applied, depending upon the circumstances of each case. It is generally restricted to situations in malpractice cases where a layman is able to say, as a matter of common knowledge and observation, that the consequences of professional care were not as such as would ordinarily have followed if due care had been exercised.[37] A distinction must be made between the failure to secure results, and the occurrence of something more unusual and not ordinarily found if the service or treatment rendered followed the usual procedure of those skilled in that particular practice. It must be conceded that the doctrine of res ipsa loquitur can have no application in a suit against a physician or surgeon which involves the merits of a diagnosis or of a scientific treatment. [38] The physician or surgeon is not required at his peril to explain why any particular diagnosis was not correct, or why any particular scientific treatment did not produce the desired result. [39] Thus, res ipsa loquitur is not available in a malpractice suit if the only showing is that the desired result of an operation or treatment was not accomplished. [40] The real question, therefore, is whether or not in the process of the operation any extraordinary incident or unusual event outside of the routine performance occurred which is beyond the regular scope of customary professional activity in such operations, which, if unexplained would themselves reasonably speak to the average man as the negligent cause or causes of the untoward consequence. [41] If there was such extraneous interventions, the doctrine of res ipsa loquitur may be utilized and the defendant is called upon to explain the matter, by evidence of exculpation, if he could.[42]

We find the doctrine of res ipsa loquitur appropriate in the case at bar. As will hereinafter be explained, the damage sustained by Erlinda in her brain prior to a scheduled gall bladder operation presents a case for the application of res ipsa loquitur.

A case strikingly similar to the one before us is Voss vs. Bridwell,[43] where the Kansas Supreme Court in applying the res ipsa loquitur stated:

The plaintiff herein submitted himself for a mastoid operation and delivered his person over to the care, custody and control of his physician who had complete and exclusive control over him, but the operation was never performed. At the time of submission he was neurologically sound and physically fit in mind and body, but he suffered irreparable damage and injury rendering him decerebrate and totally incapacitated. The injury was one which does not ordinarily occur in the process of a mastoid operation or in the absence of negligence in the administration of an anesthetic, and in the use and employment of an endoctracheal tube. Ordinarily a person being put under anesthesia is not rendered decerebrate as a consequence of administering such anesthesia in the absence of negligence. Upon these facts and under these circumstances a layman would be able to say, as a matter of common knowledge and observation, that the consequences of professional treatment were not as such as would ordinarily have followed if due care had been exercised.

Here the plaintiff could not have been guilty of contributory negligence because he was under the influence of anesthetics and unconscious, and the circumstances are such that the true explanation of event is more accessible to the defendants than to the plaintiff for they had the exclusive control of the instrumentalities of anesthesia.

Upon all the facts, conditions and circumstances alleged in Count II it is held that a cause of action is stated under the doctrine of res ipsa loquitur.[44]

Indeed, the principles enunciated in the aforequoted case apply with equal force here. In the present case, Erlinda submitted herself for cholecystectomy and expected a routine general surgery to be performed on her gall bladder. On that fateful day she delivered her person over to the care, custody and control of private respondents who exercised complete and exclusive control over her. At the time of submission, Erlinda was neurologically sound and, except for a few minor discomforts, was likewise physically fit in mind and body. However, during the administration of anesthesia and prior to the performance of cholecystectomy she suffered irreparable damage to her brain. Thus, without undergoing surgery, she went out of the operating room already decerebrate and totally incapacitated. Obviously, brain damage, which Erlinda sustained, is an injury which does not normally occur in the process of a gall bladder operation. In fact, this kind of situation does not happen in the absence of negligence of someone in the administration of anesthesia and in the use of endotracheal tube. Normally, a person being put under anesthesia is not rendered decerebrate as a consequence of administering such anesthesia if the proper procedure was followed. Furthermore, the instruments used in the administration of anesthesia, including the endotracheal tube, were all under the exclusive control of private respondents, who are the physicians-in-charge. Likewise, petitioner Erlinda could not have been guilty of contributory negligence because she was under the influence of anesthetics which rendered her unconscious.

Considering that a sound and unaffected member of the body (the brain) is injured or destroyed while the patient is unconscious and under the immediate and exclusive control of the physicians, we hold that a practical administration of justice dictates the application of res ipsa loquitur. Upon these facts and under these circumstances the Court would be able to say, as a matter of common knowledge and observation, if negligence attended the management and care of the patient. Moreover, the liability of the physicians and the hospital in this case is not predicated upon an alleged failure to secure the desired results of an operation nor on an alleged lack of skill in the diagnosis or treatment as in fact no operation or treatment was ever performed on Erlinda. Thus, upon all these initial determination a case is made out for the application of the doctrine of res ipsa loquitur.

Nonetheless, in holding that res ipsa loquitur is available to the present case we are not saying that the doctrine is applicable in any and all cases where injury occurs to a patient while under anesthesia, or to any and all anesthesia cases.Each case must be viewed in its own light and scrutinized in order to be within the res ipsa loquitur coverage.

Having in mind the applicability of the res ipsa loquitur doctrine and the presumption of negligence allowed therein, the Court now comes to the issue of whether the Court of Appeals erred in finding that private respondents were not negligent in the care of Erlinda during the anesthesia phase of the operation and, if in the affirmative, whether the alleged negligence was the proximate cause of Erlindas comatose condition. Corollary thereto, we shall also determine if the Court of Appeals erred in relying on the testimonies of the witnesses for the private respondents.

In sustaining the position of private respondents, the Court of Appeals relied on the testimonies of Dra. Gutierrez, Dra. Calderon and Dr. Jamora. In giving weight to the testimony of Dra. Gutierrez, the Court of Appeals rationalized that she was candid enough to admit that she experienced some difficulty in the endotracheal intubation [45]of the patient and thus, cannot be said to be covering her negligence with falsehood. The appellate court likewise opined that private respondents were able to show that the brain damage sustained by Erlinda was not caused by the alleged faulty intubation but was due to the allergic reaction of the patient to the drug Thiopental Sodium (Pentothal), a short-acting barbiturate, as testified on by their expert witness, Dr. Jamora. On the other hand, the appellate court rejected the testimony of Dean Herminda Cruz offered in favor of petitioners that the cause of the brain injury was traceable to the wrongful insertion of the tube since the latter, being a nurse, was allegedly not knowledgeable in the process of intubation. In so holding, the appellate court returned a verdict in favor of respondents physicians and hospital and absolved them of any liability towards Erlinda and her family.

We disagree with the findings of the Court of Appeals. We hold that private respondents were unable to disprove the presumption of negligence on their part in the care of Erlinda and their negligence was the proximate cause of her piteous condition.

In the instant case, the records are helpful in furnishing not only the logical scientific evidence of the pathogenesis of the injury but also in providing the Court the legal nexus upon which liability is based. As will be shown hereinafter, private respondents own testimonies which are reflected in the transcript of stenographic notes are replete of signposts indicative of their negligence in the care and management of Erlinda.

With regard to Dra. Gutierrez, we find her negligent in the care of Erlinda during the anesthesia phase. As borne by the records, respondent Dra. Gutierrez failed to properly intubate the patient. This fact was attested to by Prof. Herminda Cruz, Dean of the Capitol Medical Center School of Nursing and petitioner's sister-in-law, who was in the operating room right beside the patient when the tragic event occurred. Witness Cruz testified to this effect:

ATTY. PAJARES:

Q: In particular, what did Dra. Perfecta Gutierrez do, if any on the patient?

A: In particular, I could see that she was intubating the patient.

Q: Do you know what happened to that intubation process administered by Dra. Gutierrez?

ATTY. ALCERA:

She will be incompetent Your Honor.

COURT:

Witness may answer if she knows.

A: As I have said, I was with the patient, I was beside the stretcher holding the left hand of the patient and all of a sudden I heard some remarks coming from Dra. Perfecta Gutierrez herself. She was saying Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan.

x x x

ATTY. PAJARES:

Q: From whom did you hear those words lumalaki ang tiyan?

A: From Dra. Perfecta Gutierrez.

x x x

After hearing the phrase lumalaki ang tiyan, what did you notice on the person of the patient?

A: I notice (sic) some bluish discoloration on the nailbeds of the left hand where I was at.

Q: Where was Dr. Orlino Ho[s]aka then at that particular time?

A: I saw him approaching the patient during that time.

Q: When he approached the patient, what did he do, if any?

A: He made an order to call on the anesthesiologist in the person of Dr. Calderon.

Q: Did Dr. Calderon, upon being called, arrive inside the operating room?

A: Yes sir.

Q: What did [s]he do, if any?

A: [S]he tried to intubate the patient.

Q: What happened to the patient?

A: When Dr. Calderon try (sic) to intubate the patient, after a while the patients nailbed became bluish and I saw the patient was placed in trendelenburg position.

x x x

Q: Do you know the reason why the patient was placed in that trendelenburg position?

A: As far as I know, when a patient is in that position, there is a decrease of blood supply to the brain.[46]

x x x

The appellate court, however, disbelieved Dean Cruz's testimony in the trial court by declaring that:

A perusal of the standard nursing curriculum in our country will show that intubation is not taught as part of nursing procedures and techniques. Indeed, we take judicial notice of the fact that nurses do not, and cannot, intubate. Even on the assumption that she is fully capable of determining whether or not a patient is properly intubated, witness Herminda Cruz, admittedly, did not peep into the throat of the patient. (TSN, July 25, 1991, p. 13). More importantly, there is no evidence that she ever auscultated the patient or that she conducted any type of examination to check if the endotracheal tube was in its proper place, and to determine the condition of the heart, lungs, and other organs. Thus, witness Cruz's categorical statements that appellant Dra. Gutierrez failed to intubate the appellee Erlinda Ramos and that it was Dra. Calderon who succeeded in doing so clearly suffer from lack of sufficient factual bases.[47]

In other words, what the Court of Appeals is trying to impress is that being a nurse, and considered a layman in the process of intubation, witness Cruz is not competent to testify on whether or not the intubation was a success.

We do not agree with the above reasoning of the appellate court. Although witness Cruz is not an anesthesiologist, she can very well testify upon matters on 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. [48] This is precisely allowed under the doctrine of res ipsa loquitur where the testimony of expert witnesses is not required. It is the accepted rule that expert testimony is not necessary for the proof of negligence in non-technical matters or those of which an ordinary person may be expected to have knowledge, or where the lack of skill or want of care is so obvious as to render expert testimony unnecessary.[49] We take judicial notice of the fact that anesthesia procedures have become so common, that even an ordinary person can tell if it was administered properly. As such, it would not be too difficult to tell if the tube was properly inserted. This kind of observation, we believe, does not require a medical degree to be acceptable.

At any rate, without doubt, petitioner's witness, an experienced clinical nurse whose long experience and scholarship led to her appointment as Dean of the Capitol Medical Center School of Nursing, was fully capable of determining whether or not the intubation was a success. She had extensive clinical experience starting as a staff nurse in Chicago, Illinois; staff nurse and clinical instructor in a teaching hospital, the FEU-NRMF; Dean of the Laguna College of Nursing in San Pablo City; and then Dean of the Capitol Medical Center School of Nursing.[50]Reviewing witness Cruz' statements, we find that the same were delivered in a straightforward manner, with the kind of detail, clarity, consistency and spontaneity which would have been difficult to fabricate. With her clinical background as a nurse, the Court is satisfied that she was able to demonstrate through her testimony what truly transpired on that fateful day.

Most of all, her testimony was affirmed by no less than respondent Dra. Gutierrez who admitted that she experienced difficulty in inserting the tube into Erlindas trachea, to wit:

ATTY. LIGSAY:

Q: In this particular case, Doctora, while you were intubating at your first attempt (sic), you did not immediately see the trachea?

DRA. GUTIERREZ:

A: Yes sir.

Q: Did you pull away the tube immediately?

A: You do not pull the ...

Q: Did you or did you not?

A: I did not pull the tube.

Q: When you said mahirap yata ito, what were you referring to?

A: Mahirap yata itong i-intubate, that was the patient.

Q: So, you found some difficulty in inserting the tube?

A: Yes, because of (sic) my first attempt, I did not see right away.[51]

Curiously in the case at bar, respondent Dra. Gutierrez made the haphazard defense that she encountered hardship in the insertion of the tube in the trachea of Erlinda because it was positioned more anteriorly (slightly deviated from the normal anatomy of a person) [52] making it harder to locate and, since Erlinda is obese and has a short neck and protruding teeth, it made intubation even more difficult.

The argument does not convince us. If this was indeed observed, private respondents adduced no evidence demonstrating that they proceeded to make a thorough assessment of Erlindas airway, prior to the induction of anesthesia, even if this would mean postponing the procedure. From their testimonies, it appears that the observation was made only as an afterthought, as a means of defense.

The pre-operative evaluation of a patient prior to the administration of anesthesia is universally observed to lessen the possibility of anesthetic accidents. Pre-operative evaluation and preparation for anesthesia begins when the anesthesiologist reviews the patients medical records and visits with the patient, traditionally, the day before elective surgery.[53] It includes taking the patients medical history, review of current drug therapy, physical examination and interpretation of laboratory data. [54] The physical examination performed by the anesthesiologist is directed primarily toward the central nervous system, cardiovascular system, lungs and upper airway.[55] A thorough analysis of the patient's airway normally involves investigating the following: cervical spine mobility, temporomandibular mobility, prominent central incisors, diseased or artificial teeth, ability to visualize uvula and the thyromental distance.[56] Thus, physical characteristics of the patients upper airway that could make tracheal intubation difficult should be studied.[57] Where the need arises, as when initial assessment indicates possible problems (such as the alleged short neck and protruding teeth of Erlinda) a thorough examination of the patients airway would go a long way towards decreasing patient morbidity and mortality.

In the case at bar, respondent Dra. Gutierrez admitted that she saw Erlinda for the first time on the day of the operation itself, on 17 June 1985. Before this date, no prior consultations with, or pre-operative evaluation of Erlinda was done by her. Until the day of the operation, respondent Dra. Gutierrez was unaware of the physiological make-up and needs of Erlinda. She was likewise not properly informed of the possible difficulties she would face during the administration of anesthesia to Erlinda. Respondent Dra. Gutierrez act of seeing her patient for the first time only an hour before the scheduled operative procedure was, therefore, an act of exceptional negligence and professional irresponsibility. The measures cautioning prudence and vigilance in dealing with human lives lie at the core of the physicians centuries-old Hippocratic Oath. Her failure to follow this medical procedure is, therefore, a clear indicia of her negligence.

Respondent Dra. Gutierrez, however, attempts to gloss over this omission by playing around with the trial court's ignorance of clinical procedure, hoping that she could get away with it. Respondent Dra. Gutierrez tried to muddle the difference between an elective surgery and an emergency surgery just so her failure to perform the required pre-operative evaluation would escape unnoticed. In her testimony she asserted:

ATTY. LIGSAY:

Q: Would you agree, Doctor, that it is good medical practice to see the patient a day before so you can introduce yourself to establish good doctor-patient relationship and gain the trust and confidence of the patient?

DRA. GUTIERREZ:

A: As I said in my previous statement, it depends on the operative procedure of the anesthesiologist and in my case, with elective cases and normal cardio-pulmonary clearance like that, I usually don't do it except on emergency and on cases that have an abnormalities (sic).[58]

However, the exact opposite is true. In an emergency procedure, there is hardly enough time available for the fastidious demands of pre-operative procedure so that an anesthesiologist is able to see the patient only a few minutes before surgery, if at all. Elective procedures, on the other hand, are operative procedures that can wait for days, weeks or even months. Hence, in these cases, the anesthesiologist possesses the luxury of time to make a proper assessment, including the time to be at the patient's bedside to do a proper interview and clinical evaluation. There is ample time to explain the method of anesthesia, the drugs to be used, and their possible hazards for purposes of informed consent. Usually, the pre-operative assessment is conducted at least one day before the intended surgery, when the patient is relaxed and cooperative.

Erlindas case was elective and this was known to respondent Dra. Gutierrez. Thus, she had all the time to make a thorough evaluation of Erlindas case prior to the operation and prepare her for anesthesia. However, she never saw the patient at the bedside. She herself admitted that she had seen petitioner only in the operating room, and only on the actual date of the cholecystectomy. She negligently failed to take advantage of this important opportunity. As such, her attempt to exculpate herself must fail.

Having established that respondent Dra. Gutierrez failed to perform pre-operative evaluation of the patient which, in turn, resulted to a wrongful intubation, we now determine if the faulty intubation is truly the proximate cause of Erlindas comatose condition.

Private respondents repeatedly hammered the view that the cerebral anoxia which led to Erlindas coma was due to bronchospasm [59] mediated by her allergic response to the drug, Thiopental Sodium, introduced into her system. Towards this end, they presented Dr. Jamora, a Fellow of the Philippine College of Physicians and Diplomate of the

Philippine Specialty Board of Internal Medicine, who advanced private respondents' theory that the oxygen deprivation which led to anoxic encephalopathy, [60] was due to an unpredictable drug reaction to the short-acting barbiturate. We find the theory of private respondents unacceptable.

First of all, Dr. Jamora cannot be considered an authority in the field of anesthesiology simply because he is not an anesthesiologist. Since Dr. Jamora is a pulmonologist, he could not have been capable of properly enlightening the court about anesthesia practice and procedure and their complications. Dr. Jamora is likewise not an allergologist and could not therefore properly advance expert opinion on allergic-mediated processes. Moreover, he is not a pharmacologist and, as such, could not have been capable, as an expert would, of explaining to the court the pharmacologic and toxic effects of the supposed culprit, Thiopental Sodium (Pentothal).

The inappropriateness and absurdity of accepting Dr. Jamoras testimony as an expert witness in the anesthetic practice of Pentothal administration is further supported by his own admission that he formulated his opinions on the drug not from the practical experience gained by a specialist or expert in the administration and use of Sodium Pentothal on patients, but only from reading certain references, to wit:

ATTY. LIGSAY:

Q: In your line of expertise on pulmonology, did you have any occasion to use pentothal as a method of management?

DR. JAMORA:

A: We do it in conjunction with the anesthesiologist when they have to intubate our patient.

Q: But not in particular when you practice pulmonology?

A: No.

Q: In other words, your knowledge about pentothal is based only on what you have read from books and not by your own personal application of the medicine pentothal?

A: Based on my personal experience also on pentothal.

Q: How many times have you used pentothal?

A: They used it on me. I went into bronchospasm during my appendectomy.

Q: And because they have used it on you and on account of your own personal experience you feel that you can testify on pentothal here with medical authority?

A: No. That is why I used references to support my claims.[61]

An anesthetic accident caused by a rare drug-induced bronchospasm properly falls within the fields of anesthesia, internal medicine-allergy, and clinical pharmacology. The resulting anoxic encephalopathy belongs to the field of neurology.While admittedly, many bronchospastic-mediated pulmonary diseases are within the expertise of pulmonary medicine, Dr. Jamora's field, the anesthetic drug-induced, allergic mediated bronchospasm alleged in this case is within the disciplines of anesthesiology, allergology and pharmacology. On the basis of the foregoing transcript, in which the pulmonologist himself admitted that he could not testify about the drug with medical authority, it is clear that the appellate court erred in giving weight to Dr. Jamoras testimony as an expert in the administration of Thiopental Sodium.

The provision in the rules of evidence[62]regarding expert witnesses states:

Sec. 49. Opinion of expert witness. - The opinion of a witness on a matter requiring special knowledge, skill, experience or training which he is shown to possess, may be received in evidence.

Generally, to qualify as an expert witness, one must have acquired special knowledge of the subject matter about which he or she is to testify, either by the study of recognized authorities on the subject or by practical experience. [63] Clearly, Dr. Jamora does not qualify as an expert witness based on the above standard since he lacks the necessary knowledge, skill, and training in the field of anesthesiology. Oddly, apart from submitting testimony from a specialist in the wrong field, private respondents intentionally avoided providing testimony by competent and independent experts in the proper areas.

Moreover, private respondents theory, that Thiopental Sodium may have produced Erlinda's coma by triggering an allergic mediated response, has no support in evidence. 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.

In any case, private respondents themselves admit that Thiopental induced, allergic-mediated bronchospasm happens only very rarely. If courts were to accept private respondents' hypothesis without supporting medical proof, and against the weight of available evidence, then every anesthetic accident would be an act of God. Evidently, the Thiopental-allergy theory vigorously asserted by private respondents was a mere afterthought. Such an explanation was advanced in order to absolve them of any and all responsibility for the patients condition.

In view of the evidence at hand, we are inclined to believe petitioners stand that it was the faulty intubation which was the proximate cause of Erlindas comatose condition.

Proximate cause has been defined as that which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces injury, and without which the result would not have occurred.[64] An injury or damage is proximately caused by an act or a failure to act, whenever it appears from the evidence in the case, that the act or omission played a substantial part in bringing about or actually causing the injury or damage; and that the injury or damage was either a direct result or a reasonably probable consequence of the act or omission.[65] It is the dominant, moving or producing cause.

Applying the above definition in relation to the evidence at hand, faulty intubation is undeniably the proximate cause which triggered the chain of events leading to Erlindas brain damage and, ultimately, her comatosed condition.

Private respondents themselves admitted in their testimony that the first intubation was a failure. This fact was likewise observed by witness Cruz when she heard respondent Dra. Gutierrez remarked, Ang hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan. Thereafter, witness Cruz noticed abdominal distention on the body of Erlinda. The development of abdominal distention, together with respiratory embarrassment indicates that the endotracheal tube entered the esophagus instead of the respiratory tree. In other words, instead of the intended endotracheal intubation what actually took place was an esophageal intubation. During intubation, such distention indicates that air has entered the gastrointestinal tract through the esophagus instead of the lungs through the trachea. Entry into the esophagus would certainly cause some delay in oxygen delivery into the lungs as the tube which carries oxygen is in the wrong place. That abdominal distention had been observed during the first intubation suggests that the length of time utilized in inserting the endotracheal tube (up to the time the tube was withdrawn for the second attempt) was fairly significant. Due to the delay in the

delivery of oxygen in her lungs Erlinda showed signs of cyanosis.[66] As stated in the testimony of Dr. Hosaka, the lack of oxygen became apparent only after he noticed that the nailbeds of Erlinda were already blue.[67] However, private respondents contend that a second intubation was executed on Erlinda and this one was successfully done. We do not think so. No evidence exists on record, beyond private respondents' bare claims, which supports the contention that the second intubation was successful. Assuming that the endotracheal tube finally found its way into the proper orifice of the trachea, the same gave no guarantee of oxygen delivery, the hallmark of a successful intubation. In fact, cyanosis was again observed immediately after the second intubation. Proceeding from this event (cyanosis), it could not be claimed, as private respondents insist, that the second intubation was accomplished. Even granting that the tube was successfully inserted during the second attempt, it was obviously too late. As aptly explained by the trial court, Erlinda already suffered brain damage as a result of the inadequate oxygenation of her brain for about four to five minutes.[68]

The above conclusion is not without basis. Scientific studies point out that intubation problems are responsible for one-third (1/3) of deaths and serious injuries associated with anesthesia.[69] Nevertheless, ninety-eight percent (98%) or the vast majority of difficult intubations may be anticipated by performing a thorough evaluation of the patients airway prior to the operation.[70] As stated beforehand, respondent Dra. Gutierrez failed to observe the proper pre-operative protocol which could have prevented this unfortunate incident. Had appropriate diligence and reasonable care been used in the pre-operative evaluation, respondent physician could have been much more prepared to meet the contingency brought about by the perceived anatomic variations in the patients neck and oral area, defects which would have been easily overcome by a prior knowledge of those variations together with a change in technique.[71] In other words, an experienced anesthesiologist, adequately alerted by a thorough pre-operative evaluation, would have had little difficulty going around the short neck and protruding teeth. [72] Having failed to observe common medical standards in pre-operative management and intubation, respondent Dra. Gutierrez negligence resulted in cerebral anoxia and eventual coma of Erlinda.

We now determine the responsibility of respondent Dr. Orlino Hosaka as the head of the surgical team. As the so-called captain of the ship,[73] it is the surgeons responsibility to see to it that those under him perform their task in the proper manner. Respondent Dr. Hosakas negligence can be found in his failure to exercise the proper authority (as the captain of the operative team) in not determining if his anesthesiologist observed proper anesthesia protocols. In fact, no evidence on record exists to show that respondent Dr. Hosaka verified if respondent Dra. Gutierrez properly intubated the patient. Furthermore, it does not escape us that respondent Dr. Hosaka had scheduled another procedure in a different hospital at the same time as Erlindas cholecystectomy, and was in fact over three hours late for the latters operation. Because of this, he had little or no time to confer with his anesthesiologist regarding the anesthesia delivery. This indicates that he was remiss in his professional duties towards his patient. Thus, he shares equal responsibility for the events which resulted in Erlindas condition.

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,[74] who are allegedly not hospital employees, presents problems in apportioning responsibility for negligence in medical malpractice cases. However, the difficulty is only more apparent than real.

In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their work within the hospital premises. Doctors who apply for consultant slots, visiting or attending, are required to submit proof of completion of residency, their educational qualifications; generally, evidence of accreditation by the appropriate board (diplomate), evidence of fellowship in most cases, and references. These requirements are carefully scrutinized by members of the hospital administration or by a review committee set up by the hospital who either accept or reject the application.[75] This is particularly true with respondent hospital.

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

In other words, private hospitals, hire, fire and exercise real control over their attending and visiting consultant staff. While consultants are not, technically employees, a point which respondent hospital asserts in denying all responsibility for the patients condition, the control exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians. This being the case, the question now arises as to whether or not respondent hospital is solidarily liable with respondent doctors for petitioners condition.[76]

The basis for holding an employer solidarily responsible for the negligence of its employee is found in Article 2180 of the Civil Code which considers a person accountable not only for his own acts but also for those of others based on the formers responsibility under a relationship of patria potestas.[77] Such responsibility ceases when the persons or entity concerned prove that they have observed the diligence of a good father of the family to prevent damage. [78] In other words, while the burden of proving negligence rests on the plaintiffs, once negligence is shown, the burden shifts to the respondents (parent, guardian, teacher or employer) who should prove that they observed the diligence of a good father of a family to prevent damage.

In the instant case, respondent hospital, apart from a general denial of its responsibility over respondent physicians, failed to adduce evidence showing that it exercised the diligence of a good father of a family in the hiring and supervision of the latter. It failed to adduce evidence with regard to the degree of supervision which it exercised over its physicians. In neglecting to offer such proof, or proof of a similar nature, respondent hospital thereby failed to discharge its burden under the last paragraph of Article 2180. Having failed to do this, respondent hospital is consequently solidarily responsible with its physicians for Erlindas condition.

Based on the foregoing, we hold that the Court of Appeals erred in accepting and relying on the testimonies of the witnesses for the private respondents. Indeed, as shown by the above discussions, private respondents were unable to rebut the presumption of negligence. Upon these disquisitions we hold that private respondents are solidarily liable for damages under Article 2176[79] of the Civil Code.

We now come to the amount of damages due petitioners. The trial court awarded a total of P632,000.00 pesos (should be P616,000.00) in compensatory damages to the plaintiff, subject to its being updated covering the period from 15 November 1985 up to 15 April 1992, based on monthly expenses for the care of the patient estimated at P8,000.00.

At current levels, the P8000/monthly amount established by the trial court at the time of its decision would be grossly inadequate to cover the actual costs of home-based care for a comatose individual. The calculated amount was not even arrived at by looking at the actual cost of proper hospice care for the patient. What it reflected were the actual expenses incurred and proved by the petitioners after they were forced to bring home the patient to avoid mounting hospital bills.

And yet ideally, a comatose patient should remain in a hospital or be transferred to a hospice specializing in the care of the chronically ill for the purpose of providing a proper milieu adequate to meet minimum standards of care. In the instant case for instance, Erlinda has to be constantly turned from side to side to prevent bedsores and hypostatic pneumonia. Feeding is done by nasogastric tube. Food preparation should be normally made by a dietitian to provide her with the correct daily caloric requirements and vitamin supplements. Furthermore, she has to be seen on a regular basis by a physical therapist to avoid muscle atrophy, and by a pulmonary therapist to prevent the accumulation of secretions which can lead to respiratory complications.

Given these considerations, the amount of actual damages recoverable in suits arising from negligence should at least reflect the correct minimum cost of proper care, not the cost of the care the family is usually compelled to undertake at home to avoid bankruptcy. However, the provisions of the Civil Code on actual or compensatory damages present us with some difficulties.

Well-settled is the rule that actual damages which may be claimed by the plaintiff are those suffered by him as he has duly proved. The Civil Code provides:

Art. 2199. - Except as provided by law or by stipulation, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or compensatory damages.

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.[80] 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 ofP1,500,000.00 in temperate damages would therefore be reasonable.[81]

In Valenzuela vs. Court of Appeals,[82] this Court was confronted with a situation where the injury suffered by the plaintiff would have led to expenses which were difficult to estimate because while they would have been a direct result of the injury (amputation), and were certain to be incurred by the plaintiff, they were likely to arise only in the future. We awarded P1,000,000.00 in moral damages in that case.

Describing the nature of the injury, the Court therein stated:

As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic amputation of her left lower extremity at the distal left thigh just above the knee. Because of this, Valenzuela will forever be deprived of the full ambulatory functions of her left extremity, even with the use of state of the art prosthetic technology. Well beyond the period of hospitalization (which was paid for by Li), she will be required to undergo adjustments in her prosthetic devise due to the shrinkage of the stump from the process of healing.

These adjustments entail costs, prosthetic replacements and months of physical and occupational rehabilitation and therapy. During her lifetime, the prosthetic devise will have to be replaced and readjusted to changes in the size of her lower limb effected by the biological changes of middle-age, menopause and aging. Assuming she reaches menopause, for example, the prosthetic will have to be adjusted to respond to the changes in bone resulting from a precipitate decrease in calcium levels observed in the bones of all post-menopausal women. In other words, the damage done to her would not only be permanent and lasting, it would also be permanently changing and adjusting to the physiologic changes which her body would normally undergo through the years. The replacements, changes, and adjustments will require corresponding adjustive physical and occupational therapy. All of these adjustments, it has been documented, are painful.

x x x.

A prosthetic devise, however technologically advanced, will only allow a reasonable amount of functional restoration of the motor functions of the lower limb. The sensory functions are forever lost. The resultant anxiety, sleeplessness, psychological injury, mental and physical pain are inestimable.[83]

The injury suffered by Erlinda as a consequence of private respondents negligence is certainly much more serious than the amputation in the Valenzuela case.

Petitioner Erlinda Ramos was in her mid-forties when the incident occurred. She has been in a comatose state for over fourteen years now. The burden of care has so far been heroically shouldered by her husband and children, who, in the intervening years have been deprived of the love of a wife and a mother.

Meanwhile, the actual physical, emotional and financial cost of the care of petitioner would be virtually impossible to quantify. Even the temperate damages herein awarded would be inadequate if petitioners condition remains unchanged for the next ten years.

We recognized, in Valenzuela that a discussion of the victims actual injury would not even scratch the surface of the resulting moral damage because it would be highly speculative to estimate the amount of emotional and moral pain, psychological damage and injury suffered by the victim or those actually affected by the victims condition.[84] The husband and the children, all petitioners in this case, will have to live with the day to day uncertainty of the patients illness, knowing any hope of recovery is close to nil. They have fashioned their daily lives around the nursing care of petitioner, altering their long term goals to take into account their life with a comatose patient. They, not the respondents, are charged with the moral responsibility of the care of the victim. The familys moral injury and suffering in this case is clearly a real one. For the foregoing reasons, an award of P2,000,000.00 in moral damages would be appropriate.

Finally, by way of example, exemplary damages in the amount of P100,000.00 are hereby awarded. Considering the length and nature of the instant suit we are of the opinion that attorneys fees valued at P100,000.00 are likewise proper.

Our courts face unique difficulty in adjudicating medical negligence cases because physicians are not insurers of life and, they rarely set out to intentionally cause injury or death to their patients. However, intent is immaterial in negligence cases because where negligence exists and is proven, the same automatically gives the injured a right to reparation for the damage caused.

Established medical procedures and practices, though in constant flux are devised for the purpose of preventing complications. A physicians experience with his patients would sometimes tempt him to deviate from established community practices, and he may end a distinguished career using unorthodox methods without incident. However, when failure to follow established procedure results in the evil precisely sought to be averted by observance of the procedure and a nexus is made between the deviation and the

injury or damage, the physician would necessarily be called to account for it. In the case at bar, the failure to observe pre-operative assessment protocol which would have influenced the intubation in a salutary way was fatal to private respondents case.

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 as exemplary damages and attorneys fees; and, 5) the costs of the suit.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 126297 January 31, 2007

PROFESSIONAL SERVICES, INC., Petitioner, vs.NATIVIDAD and ENRIQUE AGANA, Respondents.

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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.

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G.R. No. 127590 January 31, 2007

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

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

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 Decision3 dated March 17, 1993 of the Regional Trial Court (RTC), Branch 96, Quezon City in Civil Case No. Q-43322 and nullifying its Order dated September 21, 1993.

The facts, as culled from the records, are:

On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital (Medical City Hospital) because of difficulty of bowel movement and bloody anal discharge. After a series of medical examinations, Dr. Miguel Ampil, petitioner in G.R. No. 127590, diagnosed her to be suffering from "cancer of the sigmoid."

On April 11, 1984, Dr. Ampil, assisted by the medical 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 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, 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 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.

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.

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 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 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

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.

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 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 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, 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 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 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.

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.

EN BANC

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

Petitioner, Present:PUNO, C.J.,

CARPIO,CORONA,

CARPIO MORALES,VELASCO, JR.,

NACHURA,- v e r s u s - LEONARDO-DE CASTRO,

BRION,PERALTA,

BERSAMIN,*

DEL CASTILLO,ABAD,

VILLARAMA, JR.,PEREZ and

MENDOZA, JJ.**

THE COURT OF APPEALS and NATIVIDAD and ENRIQUEAGANA,

Respondents.

x - - - - - - - - - - - - - - - - - - - xNATIVIDAD [substituted by her G.R. No. 126467

children Marcelino Agana III,Enrique Agana, Jr.,

Emma Agana-Andaya,Jesus Agana and Raymund

Agana] and ENRIQUE AGANA,Petitioners,

- v e r s u s -

THE COURT OF APPEALS and JUAN FUENTES,Respondents.

x - - - - - - - - - - - - - - - - - - - xMIGUEL AMPIL, G.R. No. 127590

Petitioner,

- v e r s u s -

NATIVIDAD and ENRIQUEAGANA,

Respondents.Promulgated:

February 2, 2010

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

R E S O L U T I O N

CORONA, J.:

With prior leave of court,[1] petitioner Professional Services, Inc. (PSI) filed a second motion for reconsideration[2] urging referral thereof to the Court en banc and seeking

modification of the decision dated January 31, 2007 and resolution dated February 11, 2008 which affirmed its vicarious and direct liability for damages to respondents Enrique

Agana and the heirs of Natividad Agana (Aganas).

Manila Medical Services, Inc. (MMSI),[3] Asian Hospital, Inc. (AHI),[4] and Private Hospital Association of the Philippines (PHAP) [5] all sought to intervene in these cases invoking the

common ground that, unless modified, the assailed decision and resolution will jeopardize the financial viability of private hospitals and jack up the cost of health care.

The Special First Division of the Court granted the motions for intervention of MMSI, AHI and PHAP (hereafter intervenors), [6] and referred en consulta to the Court en banc the

motion for prior leave of court and the second motion for reconsideration of PSI.[7]

Due to paramount public interest, the Court en banc accepted the referral[8] and heard the parties on oral arguments on one particular issue: whether a hospital may be held

liable for the negligence of physicians-consultants allowed to practice in its premises.[9]

To recall the salient facts, PSI, together with Dr. Miguel Ampil (Dr. Ampil) and Dr. Juan Fuentes (Dr. Fuentes), was impleaded by Enrique Agana and Natividad Agana (later

substituted by her heirs), in a complaint[10] for damages filed in the Regional Trial Court (RTC) of Quezon City, Branch 96, for the injuries suffered by Natividad when Dr. Ampil

and Dr. Fuentes neglected to remove from her body two gauzes [11] which were used in the surgery they performed on her on April 11, 1984 at the Medical City General Hospital.

PSI was impleaded as owner, operator and manager of the hospital.

In a decision[12] dated March 17, 1993, the RTC held PSI solidarily liable with Dr. Ampil and Dr. Fuentes for damages. [13] On appeal, the Court of Appeals (CA), absolved Dr.

Fuentes but affirmed the liability of Dr. Ampil and PSI, subject to the right of PSI to claim reimbursement from Dr. Ampil.[14]

On petition for review, this Court, in its January 31, 2007 decision, affirmed the CA decision.[15] PSI filed a motion for reconsideration[16] but the Court denied it in a resolution

dated February 11, 2008.[17]

The Court premised the direct liability of PSI to the Aganas on the following facts and law:

First, there existed between PSI and Dr. Ampil an employer-employee relationship as contemplated in the December 29, 1999 decision in Ramos v. Court of Appeals[18] that for

purposes of allocating responsibility in medical negligence cases, an employer-employee relationship exists between hospitals and their consultants. [19] Although the Court

in Ramos later issued a Resolution dated April 11, 2002[20] reversing its earlier finding on the existence of an employment relationship between hospital and doctor, a similar

reversal was not warranted in the present case because the defense raised by PSI consisted of a mere general denial of control or responsibility over the actions of Dr. Ampil.[21]

Second, by accrediting Dr. Ampil and advertising his qualifications, PSI created the public impression that he was its agent. [22] Enrique testified that it was on account of Dr.

Ampil's accreditation with PSI that he conferred with said doctor about his wife's (Natividad's) condition. [23] After his meeting with Dr. Ampil, Enrique asked Natividad to

personally consult Dr. Ampil.[24] In effect, when Enrigue and Natividad engaged the services of Dr. Ampil, at the back of their minds was that the latter was a staff member of a

prestigious hospital. Thus, under the doctrine of apparent authority applied in Nogales, et al. v.Capitol Medical Center, et al.,[25] PSI was liable for the negligence of Dr. Ampil.

Finally, as owner and operator of Medical City General Hospital, PSI was bound by its duty to provide comprehensive medical services to Natividad Agana, to exercise reasonable

care to protect her from harm,[26] to oversee or supervise all persons who practiced medicine within its walls, and to take active steps in fixing any form of negligence committed

within its premises.[27] PSI committed a serious breach of its corporate duty when it failed to conduct an immediate investigation into the reported missing gauzes.[28]

PSI is now asking this Court to reconsider the foregoing rulings for these reasons:

I

The declaration in the 31 January 2007 Decision vis-a-vis the 11 February 2009 Resolution that the ruling in Ramos vs. Court of Appeals (G.R. No. 134354, December 29, 1999) that an employer-employee relations exists between hospital and their consultants stays should be set aside for being inconsistent with or contrary to the import of the resolution granting the hospital's motion for reconsideration in Ramos vs. Court of Appeals (G.R. No. 134354, April 11, 2002), which is applicable to PSI since the Aganas failed to prove an employer-employee relationship between PSI and Dr. Ampil and PSI proved that it has no control over Dr. Ampil. In fact, the trial court has found that there is no employer-employee relationship in this case and that the doctor's are independent contractors.

II

Respondents Aganas engaged Dr. Miguel Ampil as their doctor and did not primarily and specifically look to the Medical City Hospital (PSI) for medical care and support; otherwise stated, respondents Aganas did not select Medical City Hospital (PSI) to provide medical care because of any apparent authority of Dr. Miguel Ampil as its agent since the latter was chosen primarily and specifically based on his qualifications and being friend and neighbor.

III

PSI cannot be liable under doctrine of corporate negligence since the proximate cause of Mrs. Agana's injury was the negligence of Dr. Ampil, which is an element of the principle of corporate negligence.[29]

In their respective memoranda, intervenors raise parallel arguments that the Court's ruling on the existence of an employer-employee relationship between private hospitals

and consultants will force a drastic and complex alteration in the long-established and currently prevailing relationships among patient, physician and hospital, with burdensome

operational and financial consequences and adverse effects on all three parties.[30]

The Aganas comment that the arguments of PSI need no longer be entertained for they have all been traversed in the assailed decision and resolution. [31]

After gathering its thoughts on the issues, this Court holds that PSI is liable to the Aganas, not under the principle of respondeat superior for lack of evidence of an employment

relationship with Dr. Ampil but under the principle of ostensible agency for the negligence of Dr. Ampil and, pro hac vice, under the principle of corporate negligence for its

failure to perform its duties as a hospital.

While in theory a hospital as a juridical entity cannot practice medicine, [32] in reality it utilizes doctors, surgeons and medical practitioners in the conduct of its business of

facilitating medical and surgical treatment.[33] Within that reality, three legal relationships crisscross: (1) between the hospital and the doctor practicing within its premises; (2)

between the hospital and the patient being treated or examined within its premises and (3) between the patient and the doctor. The exact nature of each relationship

determines the basis and extent of the liability of the hospital for the negligence of the doctor.

Where an employment relationship exists, the hospital may be held vicariously liable under Article 2176 [34] in relation to Article 2180[35] of the Civil Code or the principle

of respondeat superior. Even when no employment relationship exists but it is shown that the hospital holds out to the patient that the doctor is its agent, the hospital may still

be vicariously liable under Article 2176 in relation to Article 1431[36] and Article 1869[37] of the Civil Code or the principle of apparent authority.[38] Moreover, regardless of its

relationship with the doctor, the hospital may be held directly liable to the patient for its own negligence or failure to follow established standard of conduct to which it should

conform as a corporation.[39]

This Court still employs the control test to determine the existence of an employer-employee relationship between hospital and doctor. In Calamba Medical Center, Inc. v.

National Labor Relations Commission, et al.[40] it held:

Under the "control test", an employment relationship exists between a physician and a hospital if the hospital controls both the means and the details of the process by which the physician is to accomplish his task. xx xx xxAs priorly stated, private respondents maintained specific work-schedules, as determined by petitioner through its medical director, which consisted of 24-hour shifts totaling forty-eight hours each week and which were strictly to be observed under pain of administrative sanctions. That petitioner exercised control over respondents gains light from the undisputed fact that in the emergency room, the operating room, or any department or ward for that matter, respondents' work is monitored through its nursing supervisors, charge nurses and orderlies. Without the approval or consent of petitioner or its medical director, no operations can be undertaken in those areas. For control test to apply, it is not essential for the employer to actually supervise the performance of duties of the employee, it being enough that it has the right to wield the power. (emphasis supplied)

Even in its December 29, 1999 decision[41] and April 11, 2002 resolution[42] in Ramos, the Court found the control test decisive.

In the present case, it appears to have escaped the Court's attention that both the RTC and the CA found no employment relationship between PSI and Dr. Ampil, and that the

Aganas did not question such finding. In its March 17, 1993 decision, the RTC found that defendant doctors were not employees of PSI in its hospital, they being merely

consultants without any employer-employee relationship and in the capacity of independent contractors.[43] The Aganas never questioned such finding.

PSI, Dr. Ampil and Dr. Fuentes appealed [44] from the RTC decision but only on the issues of negligence, agency and corporate liability. In its September 6, 1996 decision, the CA

mistakenly referred to PSI and Dr. Ampil as employer-employee, but it was clear in its discussion on the matter that it viewed their relationship as one of mere apparent agency.

[45]

The Aganas appealed from the CA decision, but only to question the exoneration of Dr. Fuentes. [46] PSI also appealed from the CA decision, and it was then that the issue of

employment, though long settled, was unwittingly resurrected.

In fine, as there was no dispute over the RTC finding that PSI and Dr. Ampil had no employer-employee relationship, such finding became final and conclusive even to this Court.

[47] There was no reason for PSI to have raised it as an issue in its petition. Thus, whatever discussion on the matter that may have ensued was purely academic.

Nonetheless, to allay the anxiety of the intervenors, the Court holds that, in this particular instance, the concurrent finding of the RTC and the CA that PSI was not the employer

of Dr. Ampil is correct. Control as a determinative factor in testing the employer-employee relationship between doctor and hospital under which the hospital could be held

vicariously liable to a patient in medical negligence cases is a requisite fact to be established by preponderance of evidence. Here, there was insufficient evidence that PSI

exercised the power of control or wielded such power over the means and the details of the specific process by which Dr. Ampil applied his skills in the treatment of

Natividad. Consequently, PSI cannot be held vicariously liable for the negligence of Dr. Ampil under the principle of respondeat superior.

There is, however, ample evidence that the hospital (PSI) held out to the patient (Natividad) [48] that the doctor (Dr. Ampil) was its agent. Present are the two factors that

determine apparent authority: first, the hospital's implied manifestation to the patient which led the latter to conclude that the doctor was the hospital's agent; and second, the

patients reliance upon the conduct of the hospital and the doctor, consistent with ordinary care and prudence.[49]

Enrique testified that on April 2, 1984, he consulted Dr. Ampil regarding the condition of his wife; that after the meeting and as advised by Dr. Ampil, he asked [his] wife to go to

Medical City to be examined by [Dr. Ampil]; and that the next day, April 3, he told his daughter to take her mother to Dr. Ampil.[50] This timeline indicates that it was Enrique who

actually made the decision on whom Natividad should consult and where, and that the latter merely acceded to it. It explains the testimony of Natividad that she consulted Dr.

Ampil at the instigation of her daughter.[51]

Moreover, when asked what impelled him to choose Dr. Ampil, Enrique testified:Atty. Agcaoili On that particular occasion, April 2, 1984, what was your reason for choosing Dr. Ampil to contact with in connection with your wife's illness? A. First, before that, I have known him to be a specialist on that part of the body as a surgeon, second, I have known him to be a staff member of the Medical City which is a prominent and known hospital. And third, because he is a neighbor, I expect more than the usual medical service to be given to us, than his ordinary patients. [52] (emphasis supplied)

Clearly, the decision made by Enrique for Natividad to consult Dr. Ampil was significantly influenced by the impression that Dr. Ampil was a staff member

of Medical City General Hospital, and that said hospital was well known and prominent. Enrique looked upon Dr. Ampil not as independent of but as integrally related

to Medical City.

PSI's acts tended to confirm and reinforce, rather than negate, Enrique's view. It is of record that PSI required a consent for hospital care [53] to be signed preparatory to the

surgery of Natividad. The form reads: Permission is hereby given to the medical, nursing and laboratory staff of the Medical City General Hospital to perform such diagnostic procedures and to administer such medications and treatments as may be deemed necessary or advisable by the physicians of this hospital for and during the confinement of xxx. (emphasis supplied)

By such statement, PSI virtually reinforced the public impression that Dr. Ampil was a physician of its hospital, rather than one independently practicing in it; that the

medications and treatments he prescribed were necessary and desirable; and that the hospital staff was prepared to carry them out.

PSI pointed out in its memorandum that Dr. Ampil's hospital affiliation was not the exclusive basis of the Aganas decision to have Natividad treated

in Medical City General Hospital, meaning that, had Dr. Ampil been affiliated with another hospital, he would still have been chosen by the Aganas as Natividad's surgeon.[54]

The Court cannot speculate on what could have been behind the Aganas decision but would rather adhere strictly to the fact that, under the circumstances at that time,

Enrique decided to consult Dr. Ampil for he believed him to be a staff member of a prominent and known hospital. After his meeting with Dr. Ampil, Enrique advised his wife

Natividad to go to the Medical City General Hospital to be examined by said doctor, and the hospital acted in a way that fortified Enrique's belief.

This Court must therefore maintain the ruling that PSI is vicariously liable for the negligence of Dr. Ampil as its ostensible agent.

Moving on to the next issue, the Court notes that PSI made the following admission in its Motion for Reconsideration: 51. Clearly, not being an agent or employee of petitioner PSI, PSI [sic] is not liable for Dr. Ampil's acts during the operation. Considering further that Dr. Ampil was personally engaged as a doctor by Mrs. Agana, it is incumbent upon Dr. Ampil, as Captain of the Ship, and as the Agana's doctor to advise her on what to do with her situation vis-a-vis the two missing gauzes. In addition to noting the missing gauzes, regular check-ups were made and no signs of complications were exhibited during her stay at the hospital, which could have alerted petitioner PSI's hospital to render and provide post-operation services to and tread on Dr. Ampil's role as the doctor of Mrs. Agana. The absence of negligence of PSI from the patient's admission up to her discharge is borne by the finding of facts in this case. Likewise evident therefrom is the absence of any complaint from Mrs. Agana after her discharge from the hospital which had she brought to the hospital's attention, could have alerted petitioner PSI to act accordingly and bring the matter to Dr. Ampil's attention. But this was not the case. Ms. Agana complained ONLY to Drs. Ampil and Fuentes, not the hospital. How then could PSI possibly do something to fix the negligence committed by Dr. Ampil when it was not informed about it at all.[55] (emphasis supplied)

PSI reiterated its admission when it stated that had Natividad Agana informed the hospital of her discomfort and pain, the hospital would have been obliged to act on it.[56]

The significance of the foregoing statements is critical.

First, they constitute judicial admission by PSI that while it had no power to control the means or method by which Dr. Ampil conducted the surgery on Natividad Agana, it had

the power to review or cause the review of what may have irregularly transpired within its walls strictly for the purpose of determining whether some form of negligence may

have attended any procedure done inside its premises, with the ultimate end of protecting its patients.

Second, it is a judicial admission that, by virtue of the nature of its business as well as its prominence [57] in the hospital industry, it assumed a duty to tread on the captain of the

ship role of any doctor rendering services within its premises for the purpose of ensuring the safety of the patients availing themselves of its services and facilities.

Third, by such admission, PSI defined the standards of its corporate conduct under the circumstances of this case, specifically: (a) that it had a corporate duty to Natividad even

after her operation to ensure her safety as a patient; (b) that its corporate duty was not limited to having its nursing staff note or record the two missing gauzes and (c) that its

corporate duty extended to determining Dr. Ampil's role in it, bringing the matter to his attention, and correcting his negligence.

And finally, by such admission, PSI barred itself from arguing in its second motion for reconsideration that the concept of corporate responsibility was not yet in existence at the

time Natividad underwent treatment;[58] and that if it had any corporate responsibility, the same was limited to reporting the missing gauzes and did not include taking an active

step in fixing the negligence committed.[59]An admission made in the pleading cannot be controverted by the party making such admission and is conclusive as to him, and all

proofs submitted by him contrary thereto or inconsistent therewith should be ignored, whether or not objection is interposed by a party.[60]

Given the standard of conduct that PSI defined for itself, the next relevant inquiry is whether the hospital measured up to it.

PSI excuses itself from fulfilling its corporate duty on the ground that Dr. Ampil assumed the personal responsibility of informing Natividad about the two missing gauzes. [61] Dr.

Ricardo Jocson, who was part of the group of doctors that attended to Natividad, testified that toward the end of the surgery, their group talked about the missing gauzes but

Dr. Ampil assured them that he would personally notify the patient about it. [62] Furthermore, PSI claimed that there was no reason for it to act on the report on the two missing

gauzes because Natividad Agana showed no signs of complications. She did not even inform the hospital about her discomfort.[63]

The excuses proffered by PSI are totally unacceptable.

To begin with, PSI could not simply wave off the problem and nonchalantly delegate to Dr. Ampil the duty to review what transpired during the operation. The purpose of such

review would have been to pinpoint when, how and by whom two surgical gauzes were mislaid so that necessary remedial measures could be taken to avert any jeopardy to

Natividads recovery. Certainly, PSI could not have expected that purpose to be achieved by merely hoping that the person likely to have mislaid the gauzes might be able to

retrace his own steps. By its own standard of corporate conduct, PSI's duty to initiate the review was non-delegable.

While Dr. Ampil may have had the primary responsibility of notifying Natividad about the missing gauzes, PSI imposed upon itself the separate and independent responsibility of

initiating the inquiry into the missing gauzes. The purpose of the first would have been to apprise Natividad of what transpired during her surgery, while the purpose of the

second would have been to pinpoint any lapse in procedure that led to the gauze count discrepancy, so as to prevent a recurrence thereof and to determine corrective measures

that would ensure the safety of Natividad. That Dr. Ampil negligently failed to notify Natividad did not release PSI from its self-imposed separate responsibility.

Corollary to its non-delegable undertaking to review potential incidents of negligence committed within its premises, PSI had the duty to take notice of medical records prepared

by its own staff and submitted to its custody, especially when these bear earmarks of a surgery gone awry. Thus, the record taken during the operation of Natividad which

reported a gauze count discrepancy should have given PSI sufficient reason to initiate a review. It should not have waited for Natividad to complain.

As it happened, PSI took no heed of the record of operation and consequently did not initiate a review of what transpired during Natividads operation. Rather, it shirked its

responsibility and passed it on to others to Dr. Ampil whom it expected to inform Natividad, and to Natividad herself to complain before it took any meaningful step. By its

inaction, therefore, PSI failed its own standard of hospital care. It committed corporate negligence.

It should be borne in mind that the corporate negligence ascribed to PSI is different from the medical negligence attributed to Dr. Ampil. The duties of the hospital are distinct

from those of the doctor-consultant practicing within its premises in relation to the patient; hence, the failure of PSI to fulfill its duties as a hospital corporation gave rise to a

direct liability to the Aganas distinct from that of Dr. Ampil.

All this notwithstanding, we make it clear that PSIs hospital liability based on ostensible agency and corporate negligence applies only to this case, pro hac vice. It is not intended

to set a precedent and should not serve as a basis to hold hospitals liable for every form of negligence of their doctors-consultants under any and all circumstances. The ruling is

unique to this case, for the liability of PSI arose from an implied agency with Dr. Ampil and an admitted corporate duty to Natividad.[64]

Other circumstances peculiar to this case warrant this ruling, [65] not the least of which being that the agony wrought upon the Aganas has gone on for 26 long years, with

Natividad coming to the end of her days racked in pain and agony. Such wretchedness could have been avoided had PSI simply done what was logical: heed the report of a guaze

count discrepancy, initiate a review of what went wrong and take corrective measures to ensure the safety of Nativad. Rather, for 26 years, PSI hemmed and hawed at every

turn, disowning any such responsibility to its patient. Meanwhile, the options left to the Aganas have all but dwindled, for the status of Dr. Ampil can no longer be ascertained.[66]

Therefore, taking all the equities of this case into consideration, this Court believes P15 million would be a fair and reasonable liability of PSI, subject to 12% p.a. interest from

the finality of this resolution to full satisfaction.

WHEREFORE, the second motion for reconsideration is DENIED and the motions for intervention are NOTED.

Professional Services, Inc. is ORDERED pro hac vice to pay Natividad (substituted by her children Marcelino Agana III, Enrique Agana, Jr., Emma Agana-Andaya, Jesus Agana and

Raymund Agana) and Enrique Agana the total amount of P15 million, subject to 12% p.a. interest from the finality of this resolution to full satisfaction.

No further pleadings by any party shall be entertained in this case.

Let the long-delayed entry of judgment be made in this case upon receipt by all concerned parties of this resolution.

SO ORDERED.

THIRD DIVISION RAUL G. LOCSIN and G.R. No. 185251EDDIE B. TOMAQUIN,Petitioners,Present: YNARES-SANTIAGO, J.,Chairperson,- versus - CHICO-NAZARIO,VELASCO, JR.,NACHURA, andPERALTA, JJ.PHILIPPINE LONG DISTANCE Promulgated:TELEPHONE COMPANY,Respondent. October 2, 2009x-----------------------------------------------------------------------------------------x

D E C I S I O N

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks the reversal of the May 6, 2008 Decision [1] and November 4, 2008 Resolution[2] of the Court of Appeals (CA) in CA-G.R.

SP No. 97398, entitled Philippine Long Distance Telephone Company v. National Labor Relations Commission, Raul G. Locsin and Eddie B. Tomaquin . The assailed decision set

aside the Resolutions of the National Labor Relations Commission (NLRC) dated October 28, 2005 and August 28, 2006 which in turn affirmed the Decision dated February 13,

2004 of the Labor Arbiter. The assailed resolution, on the other hand, denied petitioners motion for reconsideration of the assailed decision.

The Facts

On November 1, 1990, respondent Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation of the Philippines (SSCP) entered into a Security

Services Agreement[3](Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned to its various offices.

Pursuant to such agreement, petitioners Raul Locsin and Eddie Tomaquin, among other security guards, were posted at a PLDT office.

On August 30, 2001, respondent issued a Letter dated August 30, 2001 terminating the Agreement effective October 1, 2001.[4]

Despite the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office. They were allegedly directed to remain at their post

by representatives of respondent. In support of their contention, petitioners provided the Labor Arbiter with copies of petitioner Locsins pay slips for the period of January to

September 2002.[5]

Then, on September 30, 2002, petitioners services were terminated.

Thus, petitioners filed a complaint before the Labor Arbiter for illegal dismissal and recovery of money claims such as overtime pay, holiday pay, premium pay for holiday and

rest day, service incentive leave pay, Emergency Cost of Living Allowance, and moral and exemplary damages against PLDT.

The Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the Decision that petitioners were found to be employees of PLDT and not of

SSCP. Such conclusion was arrived at with the factual finding that petitioners continued to serve as guards of PLDTs offices. As such employees, petitioners were entitled to

substantive and procedural due process before termination of employment. The Labor Arbiter held that respondent failed to observe such due process requirements. The

dispositive portion of the Labor Arbiters Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering respondent Philippine Long Distance and Telephone Company (PLDT) to pay complainants Raul E. Locsin and Eddie Tomaquin their separation pay and back wages computed as follows: NAME SEPARATION PAY BACKWAGES1. Raul E. Locsin P127,500.00 P240,954.672. Eddie B. Tomaquin P127,500.00 P240,954.67P736,909.34 All other claims are DISMISSED for want of factual basis. Let the computation made by the Computation and Examination Unit form part of this decision. SO ORDERED.

PLDT appealed the above Decision to the NLRC which rendered a Resolution affirming in toto the Arbiters Decision.

Thus, PDLT filed a Motion for Reconsideration of the NLRCs Resolution which was also denied.

Consequently, PLDT filed a Petition for Certiorari with the CA asking for the nullification of the Resolution issued by the NLRC as well as the Labor Arbiters Decision. The CA

rendered the assailed decision granting PLDTs petition and dismissing petitioners complaint. The dispositive portion of the CA Decision provides:

WHEREFORE, the instant Petition for Certiorari is GRANTED. The Resolutions dated October 28, 2005 and August 28, 2006 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents complaint against Philippine Long Distance Telephone Company is DISMISSED. SO ORDERED.

The CA applied the four-fold test in order to determine the existence of an employer-employee relationship between the parties but did not find such relationship. It determined

that SSCP was not a labor-only contractor and was an independent contractor having substantial capital to operate and conduct its own business. The CA further bolstered its

decision by citing the Agreement whereby it was stipulated that there shall be no employer-employee relationship between the security guards and PLDT.

Anent the pay slips that were presented by petitioners, the CA noted that those were issued by SSCP and not PLDT; hence, SSCP continued to pay the salaries of petitioners after

the Agreement. This fact allegedly proved that petitioners continued to be employees of SSCP albeit performing their work at PLDTs premises.

From such assailed decision, petitioners filed a motion for reconsideration which was denied in the assailed resolution.

Hence, we have this petition.

The Issues

1. Whether or not; complainants extended services to the respondent for one (1) year from October 1, 2001, the effectivity of the termination of the contract of complainants agency SSCP, up to September 30, 2002, without a renewed contract, constitutes an employer-employee relationship between respondent and the complainants. 2. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, complainants extended services to the respondent for another one (1) year without a contract be considered as contractual employment. 3. Whether or not; in accordance to the provision of the Article 280 of the Labor Code, does complainants thirteen (13) years of service to the respondent with manifestation to the respondent thirteen (13) years renewal of its security contract with the complainant agency SSCP, can be considered only as seasonal in nature or fixed as [specific projects] or undertakings and its completion or termination can be dictated as [controlled] by the respondent anytime they wanted to. 4. Whether or not; complainants from being an alleged contractual employees of the respondent for thirteen (13) years as they were then covered by a contract, becomes regular employees of the respondent as the one (1) year extended services of the complainants were not covered by a contract, and can be considered as direct employment pursuant to the provision of the Article 280 of the Labor Code. 5. Whether or not; the Court of Appeals committed grave abuse of discretion when it set aside and [annulled] the labor [arbiters] decision and of the NLRCs resolution declaring the dismissal of the complainant as illegal.[6]

The Courts Ruling

This petition is hereby granted.

An Employer-Employee

Relationship Existed Between the Parties

It is beyond cavil that there was no employer-employee relationship between the parties from the time of petitioners first assignment to respondent by SSCP in 1988 until the

alleged termination of the Agreement between respondent and SSCP. In fact, this was the conclusion that was reached by this Court in Abella v. Philippine Long Distance

Telephone Company,[7] where we ruled that petitioners therein, including herein petitioners, cannot be considered as employees of PLDT. It bears pointing out that petitioners

were among those declared to be employees of their respective security agencies and not of PLDT.

The only issue in this case is whether petitioners became employees of respondent after the Agreement between SSCP and respondent was terminated.

This must be answered in the affirmative.

Notably, respondent does not deny the fact that petitioners remained in the premises of their offices even after the Agreement was terminated. And it is this fact that must be

explained.

To recapitulate, the CA, in rendering a decision in favor of respondent, found that: (1) petitioners failed to prove that SSCP was a labor-only contractor; and (2) petitioners are

employees of SSCP and not of PLDT.

In arriving at such conclusions, the CA relied on the provisions of the Agreement, wherein SSCP undertook to supply PLDT with the required security guards, while furnishing

PLDT with a performance bond in the amount of PhP 707,000. Moreover, the CA gave weight to the provision in the Agreement that SSCP warranted that it carry on an

independent business and has substantial capital or investment in the form of equipment, work premises, and other materials which are necessary in the conduct of its business.

Further, in determining that no employer-employee relationship existed between the parties, the CA quoted the express provision of the Agreement, stating that no employer-

employee relationship existed between the parties herein. The CA disregarded the pay slips of Locsin considering that they were in fact issued by SSCP and not by PLDT.

From the foregoing explanation of the CA, the fact remains that petitioners remained at their post after the termination of the Agreement. Notably, in its Comment dated March

10, 2009,[8] respondent never denied that petitioners remained at their post until September 30, 2002. While respondent denies the alleged circumstances stated by petitioners,

that they were told to remain at their post by respondents Security Department and that they were informed by SSCP Operations Officer Eduardo Juliano that their salaries

would be coursed through SSCP as per arrangement with PLDT, it does not state why they were not made to vacate their posts. Respondent said that it did not know why

petitioners remained at their posts.

Rule 131, Section 3(y) of the Rules of Court provides:

SEC. 3. Disputable presumptions.The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence: x x x x (y) That things have happened according to the ordinary course of nature and the ordinary habits of life.

In the ordinary course of things, responsible business owners or managers would not allow security guards of an agency with whom the owners or managers have severed ties

with to continue to stay within the business premises. This is because upon the termination of the owners or managers agreement with the security agency, the agencys

undertaking of liability for any damage that the security guard would cause has already been terminated. Thus, in the event of an accident or otherwise damage caused by such

security guards, it would be the business owners and/or managers who would be liable and not the agency. The business owners or managers would, therefore, be opening

themselves up to liability for acts of security guards over whom the owners or managers allegedly have no control.

At the very least, responsible business owners or managers would inquire or learn why such security guards were remaining at their posts, and would have a clear understanding

of the circumstances of the guards stay. It is but logical that responsible business owners or managers would be aware of the situation in their premises.

We point out that with respondents hypothesis, it would seem that SSCP was paying petitioners salaries while securing respondents premises despite the termination of their

Agreement. Obviously, it would only be respondent that would benefit from such a situation. And it is seriously doubtful that a security agency that was established for profit

would allow its security guards to secure respondents premises when the Agreement was already terminated.

From the foregoing circumstances, reason dictates that we conclude that petitioners remained at their post under the instructions of respondent. We can further conclude that

respondent dictated upon petitioners that the latter perform their regular duties to secure the premises during operating hours. This, to our mind and under the circumstances,

is sufficient to establish the existence of an employer-employee relationship. Certainly, the facts as narrated by petitioners are more believable than the irrational denials made

by respondent. Thus, we ruled in Lee Eng Hong v. Court of Appeals:[9]

Evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in itself such as the common experience and observation of mankind can approve as probable under the circumstances. We have no test of the truth of human testimony, except its conformity to our knowledge, observation and experience. Whatever is repugnant to these belongs to the miraculous and is outside judicial cognizance (Castaares v. Court of Appeals, 92 SCRA 568 [1979]).

To reiterate, while respondent and SSCP no longer had any legal relationship with the termination of the Agreement, petitioners remained at their post securing the premises of

respondent while receiving their salaries, allegedly from SSCP. Clearly, such a situation makes no sense, and the denials proffered by respondent do not shed any light to the

situation. It is but reasonable to conclude that, with the behest and, presumably, directive of respondent, petitioners continued with their services. Evidently, such are indicia of

control that respondent exercised over petitioners.

Such power of control has been explained as the right to control not only the end to be achieved but also the means to be used in reaching such end. [10] With the conclusion that

respondent directed petitioners to remain at their posts and continue with their duties, it is clear that respondent exercised the power of control over them; thus, the existence

of an employer-employee relationship.

In Tongko v. The Manufacturers Life Insurance Co. (Phils.) Inc. ,[11] we reiterated the oft repeated rule that control is the most important element in the determination of the

existence of an employer-employee relationship:

In the determination of whether an employer-employee relationship exists between two parties, this Court applies the four-fold test to determine the existence of the elements of such relationship. In Pacific Consultants International Asia, Inc. v. Schonfeld, the Court set out the elements of an employer-employee relationship, thus: Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct. It is the so-called control test which constitutes the most important index of the existence of the employer-employee relationship that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished. Stated otherwise, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved but also the means to be used in reaching such end.

Furthermore, Article 106 of the Labor Code contains a provision on contractors, to wit: Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these

types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code. There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (Emphasis supplied.)

Thus, the Secretary of Labor issued Department Order No. 18-2002, Series of 2002, implementing Art. 106 as follows: Section 5. Prohibition against labor-only contracting.Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present: (i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or (ii) the contractor does not exercise the right to control over the performance of the work of the contractual employee. The foregoing provisions shall be without prejudice to the application of Article 248 (C) of the Labor Code, as amended. Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out. The right to control shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.

On the other hand, Sec. 7 of the department order contains the consequence of such labor-only contracting: Section 7. Existence of an employer-employee relationship.The contractor or subcontractor shall be considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor Code, including the failure to pay wages. The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by a competent authority: (a) where there is labor-only contracting; or (b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof. (Emphasis supplied.)

Evidently, respondent having the power of control over petitioners must be considered as petitioners employerfrom the termination of the Agreement onwardsas this was the

only time that any evidence of control was exhibited by respondent over petitioners and in light of our ruling in Abella.[12] Thus, as aptly declared by the NLRC, petitioners were

entitled to the rights and benefits of employees of respondent, including due process requirements in the termination of their services.

Both the Labor Arbiter and NLRC found that respondent did not observe such due process requirements. Having failed to do so, respondent is guilty of illegal dismissal.

WHEREFORE, we SET ASIDE the CAs May 6, 2008 Decision and November 4, 2008 Resolution in CA-G.R. SP No. 97398. We hereby REINSTATE the Labor Arbiters Decision

dated February 13, 2004 and the NLRCs Resolutions dated October 28, 2005 and August 28, 2006.

No costs.

SO ORDERED.

SECOND DIVISION AQUINAS SCHOOL, G.R. No. 184202Petitioner,Present:CARPIO, J., Chairperson,- versus - NACHURA,PERALTA,ABAD, andMENDOZA, JJ.SPS. JOSE INTON and MA. VICTORIAS. INTON, on their behalf and onbehalf of their minor child, JOSE LUISS. INTON, and SR. MARGARITA Promulgated:YAMYAMIN, OP,

Respondents. January 26, 2011x --------------------------------------------------------------------------------------- x

DECISION ABAD, J.:

This case is about the private schools liability for the outside catechists act of shoving a student and kicking him on the legs when he disobeyed her instruction to remain in his

seat and not move around the classroom.

The Facts and the Case

In 1998 respondent Jose Luis Inton (Jose Luis) was a grade three student at Aquinas School (Aquinas). Respondent Sister Margarita Yamyamin (Yamyamin), a religion teacher

who began teaching at that school only in June of that year, taught Jose Luis grade three religion class.

On July 14, 1998, while Yamyamin was writing on the blackboard, Jose Luis left his assigned seat and went over to a classmate to play a joke of surprising him. Yamyamin noticed

this and sent Jose Luis back to his seat. After a while, Jose Luis got up again and went over to the same classmate. This time, unable to tolerate the childs behavior, Yamyamin

approached Jose Luis and kicked him on the legs several times. She also pulled and shoved his head on the classmates seat. Finally, she told the child to stay where he was on

that spot of the room and finish copying the notes on the blackboard while seated on the floor.

As a result of the incident, respondents Jose and Victoria Inton (the Intons) filed an action for damages on behalf of their son Jose Luis against Yamyamin and Aquinas before the

Regional Trial Court (RTC) of Pasig City in Civil Case 67427. The Intons also filed a criminal action against Yamyamin for violation of Republic Act 7610 to which she pleaded guilty

and was sentenced accordingly.

With regard to the action for damages, the Intons sought to recover actual, moral, and exemplary damages, as well as attorneys fees, for the hurt that Jose Luis and his mother

Victoria suffered. The RTC dismissed Victorias personal claims but ruled in Jose Luis favor, holding Yamyamin liable to him for moral damages of P25,000.00, exemplary damages

of P25,000.00, and attorneys fees of P10,000.00 plus the costs of suit.[1]

Not satisfied, the Intons elevated the case to the Court of Appeals (CA). [2] They asked the CA to increase the award of damages and hold Aquinas solidarily liable with

Yamyamin. Finding that an employer-employee relation existed between Aquinas and Yamyamin, the CA found them solidarily liable to Jose Luis. The CA, however, declined to

increase the award of damages.[3] Jose Luis moved for partial reconsideration but this was denied. Aquinas, for its part, appealed directly to this Court from the CA decision

through a petition for review on certiorari.

The Issue Presented

The sole issue presented in this case is whether or not the CA was correct in holding Aquinas solidarily liable with Yamyamin for the damages awarded to Jose Luis.

The Courts Ruling

The CA found Aquinas liable to Jose Luis based on Article 2180 of the Civil Code upon the CAs belief that the school was Yamyamins employer. Aquinas contests this.

The Court has consistently applied the four-fold test to determine the existence of an employer-employee relationship: the employer (a) selects and engages the employee; (b)

pays his wages; (c) has power to dismiss him; and (d) has control over his work. Of these, the most crucial is the element of control. Control refers to the right of the employer,

whether actually exercised or reserved, to control the work of the employee as well as the means and methods by which he accomplishes the same. [4]

In this case, the school directress testified that Aquinas had an agreement with a congregation of sisters under which, in order to fulfill its ministry, the congregation would send

religion teachers to Aquinas to provide catechesis to its students. Aquinas insists that it was not the school but Yamyamins religious congregation that chose her for the task of

catechizing the schools grade three students, much like the way bishops designate the catechists who would teach religion in public schools. Under the circumstances, it was

quite evident that Aquinas did not have control over Yamyamins teaching methods.The Intons had not refuted the school directress testimony in this regard. Consequently, it

was error for the CA to hold Aquinas solidarily liable with Yamyamin.

Of course, Aquinas still had the responsibility of taking steps to ensure that only qualified outside catechists are allowed to teach its young students. In this regard, it cannot be

said that Aquinas took no steps to avoid the occurrence of improper conduct towards the students by their religion teacher.

First, Yamyamins transcript of records, certificates, and diplomas showed that she was qualified to teach religion.

Second, there is no question that Aquinas ascertained that Yamyamin came from a legitimate religious congregation of sisters and that, given her Christian training, the school

had reason to assume that she would behave properly towards the students.

Third, the school gave Yamyamin a copy of the schools Administrative Faculty Staff Manual that set the standards for handling students. It also required her to attend a teaching

orientation before she was allowed to teach beginning that June of 1998.[5]

Fourth, the school pre-approved the content of the course she was to teach[6] to ensure that she was really catechizing the students.

And fifth, the school had a program for subjecting Yamyamin to classroom evaluation.[7] Unfortunately, since she was new and it was just the start of the school year, Aquinas did

not have sufficient opportunity to observe her methods. At any rate, it acted promptly to relieve her of her assignment as soon as the school learned of the incident. [8] It cannot

be said that Aquinas was guilty of outright neglect.

Regarding the Intons plea for an award of greater amounts of damages, the Court finds no justification for this since they did not appeal from the decision of the CA. The Intons

prayed for the increase only in their comment to the petition. They thus cannot obtain from this Court any affirmative relief other than those that the CA already granted them

in its decision.[9]

WHEREFORE, the Court GRANTS the petition, SETS ASIDE the decision of the Court of Appeals in CA-G.R. CV 88106 dated August 4, 2008, and HOLDS petitioner Aquinas School

not liable in damages to respondent Jose Luis Inton.

SO ORDERED.

Republic of the Phils vs AsiaPro Cooperative

D E C I S I O N

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Decision [1] and

Resolution[2] of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which annulled and set aside the Orders of the Social

Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17 February 2004 [3] and 16 September 2004,[4] respectively, thereby dismissing the petition-complaint dated 12

June 2003 filed by herein petitioner Social Security System (SSS) against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body authorized by law to resolve disputes arising under Republic Act No. 1161, as

amended by Republic Act No. 8282.[5] Petitioner SSS is a government corporation created by virtue of Republic Act No. 1161, as amended. On the other hand, herein respondent

Asiapro Cooperative (Asiapro) is a multi-purpose cooperative created pursuant to Republic Act No. 6938 [6] and duly registered with the Cooperative Development Authority

(CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460.[7]

The antecedents of this case are as follows:

Respondent Asiapro, as a cooperative, is composed of owners-members. Under its by-laws, owners-members are of two categories, to wit: (1) regular member, who is entitled

to all the rights and privileges of membership; and (2) associate member, who has no right to vote and be voted upon and shall be entitled only to such rights and privileges

provided in its by-laws.[8] Its primary objectives are to provide savings and credit facilities and to develop other livelihood services for its owners-members. In the discharge of

the aforesaid primary objectives, respondent cooperative entered into several Service Contracts [9] with Stanfilco - a division of DOLE Philippines, Inc. and a company based in

Bukidnon. The owners-members do not receive compensation or wages from the respondent cooperative. Instead, they receive a share in the service surplus[10] which the

respondent cooperative earns from different areas of trade it engages in, such as the income derived from the said Service Contracts with Stanfilco. The owners-members get

their income from the service surplus generated by the quality and amount of services they rendered, which is determined by the Board of Directors of the respondent

cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the respondent cooperative, who were assigned to Stanfilco requested the services

of the latter to register them with petitioner SSS as self-employed and to remit their contributions as such. Also, to comply with Section 19-A of Republic Act No. 1161, as

amended by Republic Act No. 8282, the SSS contributions of the said owners-members were equal to the share of both the employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division, Atty. Eddie A. Jara, sent a letter [11] to the respondent cooperative, addressed

to its Chief Executive Officer (CEO) and General Manager Leo G. Parma, informing the latter that based on the Service Contracts it executed with Stanfilco, respondent

cooperative is actually a manpower contractor supplying employees to Stanfilco and for that reason, it is an employer of its owners-members working with Stanfilco. Thus,

respondent cooperative should register itself with petitioner SSS as an employer and make the corresponding report and remittance of premium contributions in accordance

with the Social Security Law of 1997. On 9 October 2002,[12] respondent cooperative, through its counsel, sent a reply to petitioner SSSs letter asserting that it is not an employer

because its owners-members are the cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002,[13] petitioner SSS sent a letter to respondent

cooperative ordering the latter to register as an employer and report its owners-members as employees for compulsory coverage with the petitioner SSS. Respondent

cooperative continuously ignored the demand of petitioner SSS.

Accordingly, petitioner SSS, on 12 June 2003, filed a Petition [14] before petitioner SSC against the respondent cooperative and Stanfilco praying that the respondent cooperative

or, in the alternative, Stanfilco be directed to register as an employer and to report respondent cooperatives owners-members as covered employees under the compulsory

coverage of SSS and to remit the necessary contributions in accordance with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-15507-03. Respondent

cooperative filed its Answer with Motion to Dismiss alleging that no employer-employee relationship exists between it and its owners-members, thus, petitioner SSC has no

jurisdiction over the respondent cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against the respondent cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the respondent cooperative. The respondent cooperative moved for the

reconsideration of the said Order, but it was likewise denied in another Order issued by the SSC dated 16 September 2004.

Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time to File a Petition for Review before the Court of Appeals. Subsequently,

respondent cooperative filed a Manifestation stating that it was no longer filing a Petition for Review. In its place, respondent cooperative filed a Petition for Certiorari before

the Court of Appeals, docketed as CA-G.R. SP No. 87236, with the following assignment of errors:

I. The Orders dated 17 February 2004 and 16 September 2004 of [herein petitioner] SSC were issued with grave abuse of discretion amounting to a (sic) lack or excess of jurisdiction in that: A. [Petitioner] SSC arbitrarily proceeded with the case as if it has jurisdiction over the petition a quo, considering that it failed to first resolve the issue of the existence of an employer-employee relationship between [respondent] cooperative and its owners-members.B. While indeed, the [petitioner] SSC has jurisdiction over all disputes arising under the SSS Law with respect to coverage, benefits, contributions, and related matters, it is respectfully submitted that [petitioner] SSC may only assume jurisdiction in cases where there is no dispute as to the existence of an employer-employee relationship.C. Contrary to the holding of the [petitioner] SSC, the legal issue of employer-employee relationship raised in [respondents] Motion to Dismiss can be preliminarily resolved through summary hearings prior to the hearing on the merits. However, any inquiry beyond a preliminary determination, as what [petitioner SSC] wants to accomplish, would be to encroach on the jurisdiction of the National Labor Relations Commission [NLRC], which is the more competent body clothed with power to resolve issues relating to the existence of an employment relationship. II. At any rate, the [petitioner] SSC has no jurisdiction to take cognizance of the petition a quo. A. [Respondent] is not an employer within the contemplation of the Labor Law but is a multi-purpose cooperative created pursuant to Republic Act No. 6938 and composed of owners-members, not employees.B. The rights and obligations of the owners-members of [respondent] cooperative are derived from their Membership Agreements, the Cooperatives By-Laws, and Republic Act No. 6938, and not from any contract of employment or from the Labor Laws. Moreover, said owners-members enjoy rights that are not consistent with being mere employees of a company, such as the right to participate and vote in decision-making for the cooperative.C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent] cooperative are not paid any compensation income. [15] (Emphasis supplied.)

On 5 January 2006, the Court of Appeals rendered a Decision granting the petition filed by the respondent cooperative. The decretal portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16 September 2004], are ANNULLED and SET ASIDE and a new one is entered DISMISSING the petition-complaint dated [12 June 2003] of [herein petitioner] Social Security System.[16]

Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied by the appellate court in its Resolution dated 20 March 2006.

Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in not finding that the SSC has jurisdiction over the subject matter and it has a

valid basis in denying respondents Motion to Dismiss. The said issue is supported by the following arguments:

I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under R.A. No. 8282. II. Respondent [cooperative] is estopped from questioning the jurisdiction of petitioner SSC after invoking its jurisdiction by filing an [A]nswer with [M]otion to [D]ismiss before it. III. The [petitioner SSC] did not act with grave abuse of discretion in denying respondent [cooperatives] [M]otion to [D]ismiss. IV. The existence of an employer-employee relationship is a question of fact where presentation of evidence is necessary. V. There is an employer-employee relationship between [respondent cooperative] and its [owners-members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS as it involved an issue of whether or not a worker is entitled to compulsory

coverage under the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers upon petitioner SSC the power to

settle disputes on compulsory coverage, benefits, contributions and penalties thereon or any other matter related thereto. Likewise, Section 9 of the same law clearly provides

that SSS coverage is compulsory upon all employees. Thus, when petitioner SSS filed a petition-complaint against the respondent cooperative and Stanfilco before the petitioner

SSC for the compulsory coverage of respondent cooperatives owners-members as well as for collection of unpaid SSS contributions, it was very obvious that the subject matter

of the aforesaid petition-complaint was within the expertise and jurisdiction of the SSC.

Petitioners similarly assert that granting arguendo that there is a prior need to determine the existence of an employer-employee relationship between the respondent

cooperative and its owners-members, said issue does not preclude petitioner SSC from taking cognizance of the aforesaid petition-complaint. Considering that the principal

relief sought in the said petition-complaint has to be resolved by reference to the Social Security Law and not to the Labor Code or other labor relations statutes, therefore,

jurisdiction over the same solely belongs to petitioner SSC.

Petitioners further claim that the denial of the respondent cooperatives Motion to Dismiss grounded on the alleged lack of employer-employee relationship does not constitute

grave abuse of discretion on the part of petitioner SSC because the latter has the authority and power to deny the same. Moreover, the existence of an employer-employee

relationship is a question of fact where presentation of evidence is necessary. Petitioners also maintain that the respondent cooperative is already estopped from assailing the

jurisdiction of the petitioner SSC because it has already filed its Answer before it, thus, respondent cooperative has already submitted itself to the jurisdiction of the petitioner

SSC.

Finally, petitioners contend that there is an employer-employee relationship between the respondent cooperative and its owners-members. The respondent cooperative is the

employer of its owners-members considering that it undertook to provide services to Stanfilco, the performance of which is under the full and sole control of the respondent

cooperative.

On the other hand, respondent cooperative alleges that its owners-members own the cooperative, thus, no employer-employee relationship can arise between them. The

persons of the employer and the employee are merged in the owners-members themselves. Likewise, respondent cooperatives owners-members even requested the

respondent cooperative to register them with the petitioner SSS as self-employed individuals. Hence, petitioner SSC has no jurisdiction over the petition-complaint filed before it

by petitioner SSS.

Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC acted with grave abuse of discretion when it assumed jurisdiction over the

petition-complaint without determining first if there was an employer-employee relationship between the respondent cooperative and its owners-members. Respondent

cooperative claims that the question of whether an employer-employee relationship exists between it and its owners-members is a legal and not a factual issue as the facts are

undisputed and need only to be interpreted by the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the jurisdiction of petitioner SSC simply because it filed an Answer with Motion to

Dismiss, especially where the issue of jurisdiction is raised at the very first instance and where the only relief being sought is the dismissal of the petition-complaint for lack of

jurisdiction.

From the foregoing arguments of the parties, the issues may be summarized into:

I. Whether the petitioner SSC has jurisdiction over the petition-complaint filed before it by petitioner SSS against the respondent cooperative. II. Whether the respondent cooperative is estopped from assailing the jurisdiction of petitioner SSC since it had already filed an Answer with Motion to Dismiss before the said body.

Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.

Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to coverage, benefits, contributions and penalties thereon or any other matter related thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:

Section 1. Jurisdiction. Any dispute arising under the Social Security Act with respect to coverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or any other matter related thereto, shall be cognizable by the Commission after the SSS through its President, Manager or Officer-in-charge of the Department/Branch/Representative Office concerned had first taken action thereon in writing. (Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the compulsory coverage of the SSS is well within the exclusive domain of the petitioner SSC. It is important

to note, though, that the mandatory coverage under the SSS Law is premised on the existence of an employer-employee relationship [17] except in cases of compulsory coverage

of the self-employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the Answer or in the Motion to Dismiss, determine which court has jurisdiction over an action;

otherwise, the question of jurisdiction would depend almost entirely upon the defendant .[18] Moreover, it is well-settled that once jurisdiction is acquired by the court, it

remains with it until the full termination of the case.[19] The said principle may be applied even to quasi-judicial bodies.

In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the respondent cooperative and Stanfilco alleges that the owners-members of

the respondent cooperative are subject to the compulsory coverage of the SSS because they are employees of the respondent cooperative. Consequently, the respondent

cooperative being the employer of its owners-members must register as employer and report its owners-members as covered members of the SSS and remit the necessary

premium contributions in accordance with the Social Security Law of 1997. Accordingly, based on the aforesaid allegations in the petition-complaint filed before the petitioner

SSC, the case clearly falls within its jurisdiction. Although the Answer with Motion to Dismiss filed by the respondent cooperative challenged the jurisdiction of the petitioner SSC

on the alleged lack of employer-employee relationship between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its jurisdiction over the

petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming jurisdiction over the petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship between the respondent cooperative and its owners-members was put in issue and considering that the

compulsory coverage of the SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC to determine if there is really an employer-employee

relationship that exists between the respondent cooperative and its owners-members.

The question on the existence of an employer-employee relationship is not within the exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the

Labor Code enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.x x x x6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employer-employee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.[20]

Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily include issues on the coverage thereof, because claims are undeniably rooted in

the coverage by the system.Hence, the question on the existence of an employer-employee relationship for the purpose of determining the coverage of the Social Security

System is explicitly excluded from the jurisdiction of the NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty of settling disputes arising

under the Social Security Law of 1997.

On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the issue of compulsory coverage of the owners-members of the respondent

cooperative, this Court agrees with the petitioner SSC when it declared in its Order dated 17 February 2004 that as an incident to the issue of compulsory coverage, it may

inquire into the presence or absence of an employer-employee relationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC for prior

determination. Since both the petitioner SSC and the NLRC are independent bodies and their jurisdiction are well-defined by the separate statutes creating them, petitioner SSC

has the authority to inquire into the relationship existing between the worker and the person or entity to whom he renders service to determine if the employment, indeed, is

one that is excepted by the Social Security Law of 1997 from compulsory coverage.[21]

Even before the petitioner SSC could make a determination of the existence of an employer-employee relationship, however, the respondent cooperative already elevated the

Order of the petitioner SSC, denying its Motion to Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner SSC became a party

to the said Petition for Certiorari pursuant to Section 5(b)[22] of Republic Act No. 8282. The appellate court ruled in favor of the respondent cooperative by declaring that the

petitioner SSC has no jurisdiction over the petition-complaint filed before it because there was no employer-employee relationship between the respondent cooperative and its

owners-members. Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a Petition for Review before this Court.

Although as a rule, in the exercise of the Supreme Courts power of review, the Court is not a trier of facts and the findings of fact of the Court of Appeals are conclusive and

binding on the Court,[23]said rule is not without exceptions. There are several recognized exceptions[24] in which factual issues may be resolved by this Court. One of these

exceptions finds application in this present case which is, when the findings of fact are conflicting. There are, indeed, conflicting findings espoused by the petitioner SSC and the

appellate court relative to the existence of employer-employee relationship between the respondent cooperative and its owners-members, which necessitates a departure from

the oft-repeated rule that factual issues may not be the subject of appeals to this Court.

In determining the existence of an employer-employee relationship, the following elements are considered: (1) the selection and engagement of the workers; (2) the payment of

wages by whatever means; (3) the power of dismissal; and (4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration. [25] The

most important element is the employers control of the employees conduct, not only as to the result of the work to be done, but also as to the means and methods to

accomplish.[26] The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually

supervise the performance of duties of the employee; it is enough that the employer has the right to wield that power.[27] All the aforesaid elements are present in this case.

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion in the selection and engagement of the owners-

members as well as its team leaders who will be assigned at Stanfilco.[28] Second. Wages are defined as remuneration or earnings, however designated, capable of being

expressed in terms of money, whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculating the same, which is payable by an

employer to an employee under a written or unwritten contract of employment for work done or to be done, or for service rendered or to be rendered .[29] In this case,

the weekly stipends or the so-called shares in the service surplus given by the respondent cooperative to its owners-members were in reality wages, as the same were

equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including the wage order applicable to the area and industry; or the same

shall not be lower than the prevailing rates of wages.[30] It cannot be doubted then that those stipends or shares in the service surplus are indeed wages, because these are given

to the owners-members as compensation in rendering services to respondent cooperatives client, Stanfilco. Third. It is also stated in the above-mentioned Service Contracts that

it is the respondent cooperative which has the power to investigate, discipline and remove the owners-members and its team leaders who were rendering services at

Stanfilco.[31] Fourth. As earlier opined, of the four elements of the employer-employee relationship, the control test is the most important. In the case at bar, it is the respondent

cooperative which has the sole control over the manner and means of performing the services under the Service Contracts with Stanfilco as well as the means and methods

of work.[32] Also, the respondent cooperative is solely and entirely responsible for its owners-members, team leaders and other representatives at Stanfilco. [33] All these clearly

prove that, indeed, there is an employer-employee relationship between the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco expressly provide that there shall be no employer-employee relationship

between the respondent cooperative and its owners-members.[34] This Court, however, cannot give the said provision force and effect.

As previously pointed out by this Court, an employee-employer relationship actually exists between the respondent cooperative and its owners-members. The four elements in

the four-fold test for the existence of an employment relationship have been complied with. The respondent cooperative must not be allowed to deny its employment

relationship with its owners-members by invoking the questionable Service Contracts provision, when in actuality, it does exist. The existence of an employer-employee

relationship cannot be negated by expressly repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment status of a person

is defined and prescribed by law and not by what the parties say it should be.[35]

It is settled that the contracting parties may establish such stipulations, clauses, terms and conditions as they want, and their agreement would have the force of law between

them. However, the agreed terms and conditions must not be contrary to law, morals, customs, public policy or public order .[36] The Service Contract provision in question

must be struck down for being contrary to law and public policy since it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage

of its employees, who are also its owners-members, by the Social Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City, Inc. v. Ferrer-Calleja[37] wherein it held that:

A cooperative, therefore, is by its nature different from an ordinary business concern, being run either by persons, partnerships, or corporations. Its owners and/or members are the ones who run and operate the business while the others are its employees x x x. An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In the opinion of August 14, 1981 of the Solicitor General he correctly opined that employees of cooperatives who are themselves members of the cooperative have no right to form or join labor organizations for purposes of collective bargaining for being themselves co-owners of the cooperative. However, in so far as it involves cooperatives with employees who are not members or co-owners thereof, certainly such employees are entitled to exercise the rights of all workers to organization, collective bargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country.

The situation in the aforesaid case is very much different from the present case. The declaration made by the Court in the aforesaid case was made in the context of whether an

employee who is also an owner-member of a cooperative can exercise the right to bargain collectively with the employer who is the cooperative wherein he is an owner-

member. Obviously, an owner-member cannot bargain collectively with the cooperative of which he is also the owner because an owner cannot bargain with himself. In the

instant case, there is no issue regarding an owner-members right to bargain collectively with the cooperative. The question involved here is whether an employer-employee

relationship can exist between the cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will show that it actually recognized

that an owner-member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with the Cooperative Development Authority. [38] It has its Board of Directors, which

directs and supervises its business; meaning, its Board of Directors is the one in charge in the conduct and management of its affairs. [39] With that, a cooperative can be likened

to a corporation with a personality separate and distinct from its owners-members. Consequently, an owner-member of a cooperative can be an employee of the latter and an

employer-employee relationship can exist between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the Cooperative Development Authority, as evidenced by its Certificate of

Registration No. 0-623-2460.[40]In its by-laws,[41] its Board of Directors directs, controls, and supervises the business and manages the property of the respondent

cooperative. Clearly then, the management of the affairs of the respondent cooperative is vested in its Board of Directors and not in its owners-members as a whole. Therefore,

it is completely logical that the respondent cooperative, as a juridical person represented by its Board of Directors, can enter into an employment with its owners-members.

In sum, having declared that there is an employer-employee relationship between the respondent cooperative and its owners-member, we conclude that the petitioner SSC has

jurisdiction over the petition-complaint filed before it by the petitioner SSS. This being our conclusion, it is no longer necessary to discuss the issue of whether the respondent

cooperative was estopped from assailing the jurisdiction of the petitioner SSC when it filed its Answer with Motion to Dismiss.

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January

2006 and 20 March 2006, respectively, are hereby REVERSED and SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16 September 2004 are

hereby REINSTATED. The petitioner SSC is herebyDIRECTED to continue hearing the petition-complaint filed before it by the petitioner SSS as regards the compulsory coverage

of the respondent cooperative and its owners-members. No costs.

SO ORDERED.

SECOND DIVISION

JOSE MEL BERNARTE, G.R. No. 192084

Petitioner,

Present:

- versus - CARPIO, J., Chairperson,

BRION,

DEL CASTILLO,*

PEREZ, and

SERENO, JJ.

PHILIPPINE BASKETBALL

ASSOCIATION (PBA), JOSE

EMMANUEL M. EALA, and Promulgated:

PERRY MARTINEZ,

Respondents. September 14, 2011

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

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review1 of the 17 December 2009 Decision2 and 5 April 2010 Resolution3 of the Court of Appeals in CA-G.R. SP No. 105406. The Court of Appeals set aside the decision of the National Labor Relations Commission (NLRC), which affirmed the decision of the Labor Arbiter, and held that petitioner Jose Mel Bernarte is an independent contractor, and not an employee of respondents Philippine Basketball Association (PBA), Jose Emmanuel M. Eala, and Perry Martinez. The Court of Appeals denied the motion for reconsideration.

The Facts

The facts, as summarized by the NLRC and quoted by the Court of Appeals, are as follows:

Complainants (Jose Mel Bernarte and Renato Guevarra) aver that they were invited to join the PBA as referees. During the leadership of Commissioner Emilio Bernardino, they were made to sign contracts on a year-to-year basis. During the term of Commissioner Eala, however, changes were made on the terms of their employment.

Complainant Bernarte, for instance, was not made to sign a contract during the first conference of the All-Filipino Cup which was from February 23, 2003 to June 2003. It was only during the second conference when he was made to sign a one and a half month contract for the period July 1 to August 5, 2003.

On January 15, 2004, Bernarte received a letter from the Office of the Commissioner advising him that his contract would not be renewed citing his unsatisfactory performance on and off the court. It was a total shock for Bernarte who was awarded Referee of the year in 2003. He felt that the dismissal was caused by his refusal to fix a game upon order of Ernie De Leon.

On the other hand, complainant Guevarra alleges that he was invited to join the PBA pool of referees in February 2001. On March 1, 2001, he signed a contract as trainee. Beginning 2002, he signed a yearly contract as Regular Class C referee. On May 6, 2003, respondent Martinez issued a memorandum to Guevarra expressing dissatisfaction over his questioning on the assignment of referees officiating out-of-town games. Beginning February 2004, he was no longer made to sign a contract.

Respondents aver, on the other hand, that complainants entered into two contracts of retainer with the PBA in the year 2003. The first contract was for the period January 1, 2003 to July 15, 2003; and the second was for September 1 to December 2003. After the lapse of the latter period, PBA decided not to renew their contracts.

Complainants were not illegally dismissed because they were not employees of the PBA. Their respective contracts of retainer were simply not renewed. PBA had the prerogative of whether or not to renew their contracts, which they knew were fixed.4

In her 31 March 2005 Decision,5 the Labor Arbiter6 declared petitioner an employee whose dismissal by respondents was illegal. Accordingly, the Labor Arbiter ordered the reinstatement of petitioner and the payment of backwages, moral and exemplary damages and attorneys fees, to wit:

WHEREFORE, premises considered all respondents who are here found to have illegally dismissed complainants are hereby ordered to (a) reinstate complainants within thirty (30) days from the date of receipt of this decision and tosolidarily pay complainants:

The rest of the claims are hereby dismissed for lack of merit or basis.

SO ORDERED.7

In its 28 January 2008 Decision,8 the NLRC affirmed the Labor Arbiters judgment. The dispositive portion of the NLRCs decision reads:

WHEREFORE, the appeal is hereby DISMISSED. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated March 31, 2005 is AFFIRMED.

SO ORDERED.9

Respondents filed a petition for certiorari with the Court of Appeals, which overturned the decisions of the NLRC and Labor Arbiter. The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated January 28, 2008 and Resolution dated August 26, 2008 of the National Labor Relations Commission are ANNULLED and SET ASIDE. Private respondents complaint before the Labor Arbiter is DISMISSED.

SO ORDERED.10

The Court of Appeals Ruling

The Court of Appeals found petitioner an independent contractor since respondents did not exercise any form of control over the means and methods by which petitioner performed his work as a basketball referee. The Court of Appeals held:

While the NLRC agreed that the PBA has no control over the referees acts of blowing the whistle and making calls during basketball games, it, nevertheless, theorized that the said acts refer to the means and methods employed by the referees in officiating basketball games for the illogical reason that said acts refer only to the referees skills. How could a skilled referee perform his job without blowing a whistle and making calls? Worse, how can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?

Moreover, this Court disagrees with the Labor Arbiters finding (as affirmed by the NLRC) that the Contracts of Retainer show that petitioners have control over private respondents.

x x x x

Neither do We agree with the NLRCs affirmance of the Labor Arbiters conclusion that private respondents repeated hiring made them regular employees by operation of law.11

The Issues

The main issue in this case is whether petitioner is an employee of respondents, which in turn determines whether petitioner was illegally dismissed.

Petitioner raises the procedural issue of whether the Labor Arbiters decision has become final and executory for failure of respondents to appeal with the NLRC within the reglementary period.

The Ruling of the Court

The petition is bereft of merit.

The Court shall first resolve the procedural issue posed by petitioner.

Petitioner contends that the Labor Arbiters Decision of 31 March 2005 became final and executory for failure of respondents to appeal with the NLRC within the prescribed period. Petitioner claims that the Labor Arbiters decision was constructively served on respondents as early as August 2005 while respondents appealed the Arbiters decision only on 31 March 2006, way beyond the reglementary period to appeal. Petitioner points out that service of an unclaimed registered mail is deemed complete five days from the date of first notice of the post master. In this case three notices were issued by the post office, the last being on 1 August 2005. The unclaimed registered mail was consequently returned to sender. Petitioner presents the Postmasters Certification to prove constructive service of the Labor Arbiters decision on respondents. The Postmaster certified:

x x x

That upon receipt of said registered mail matter, our registry in charge, Vicente Asis, Jr., immediately issued the first registry notice to claim on July 12, 2005 by the addressee. The second and third notices were issued on July 21 and August 1, 2005, respectively.

That the subject registered letter was returned to the sender (RTS) because the addressee failed to claim it after our one month retention period elapsed. Said registered letter was dispatched from this office to Manila CPO (RTS) under bill #6, line 7, page1, column 1, on September 8, 2005.12

Section 10, Rule 13 of the Rules of Court provides:

SEC. 10. Completeness of service. Personal service is complete upon actual delivery. Service by ordinary mail is complete upon the expiration of ten (10) days after mailing, unless the court otherwise provides. Service by registered mail is complete upon actual receipt by the addressee, or after five (5) days from the date he received the first notice of the postmaster, whichever date is earlier.

The rule on service by registered mail contemplates two situations: (1) actual service the completeness of which is determined upon receipt by the addressee of the registered mail; and (2) constructive service the completeness of which is determined upon expiration of five days from the date the addressee received the first notice of the postmaster.13

Insofar as constructive service is concerned, there must be conclusive proof that a first notice was duly sent by the postmaster to the addressee.14   Not only is it required that notice of the registered mail be issued but that it should also be delivered to and received by the addressee.15   Notably, the presumption that official duty has been regularly performed is not applicable in this situation. It is incumbent upon a party who relies on constructive service to prove that the notice was sent to, and received by, the addressee.16

The best evidence to prove that notice was sent would be a certification from the postmaster, who should certify not only that the notice was issued or sent but also as to how, when and to whom the delivery and receipt was made. The mailman may also testify that the notice was actually delivered.17

In this case, petitioner failed to present any concrete proof as to how, when and to whom the delivery and receipt of the three notices issued by the post office was made. There is no conclusive evidence showing that the post office notices were actually received by respondents, negating petitioners claim of constructive service of the Labor Arbiters decision on respondents. The Postmasters Certification does not sufficiently prove that the three notices were delivered to and received by respondents; it only indicates that the post office issued the three notices. Simply put, the issuance of the notices by the post office is not equivalent to delivery to and receipt by the addressee of the registered mail. Thus, there is no proof of completed constructive service of the Labor Arbiters decision on respondents.

At any rate, the NLRC declared the issue on the finality of the Labor Arbiters decision moot as respondents appeal was considered in the interest of substantial justice. We agree with the NLRC. The ends of justice will be better served if we resolve the instant case on the merits rather than allowing the substantial issue of whether petitioner is an independent contractor or an employee linger and remain unsettled due to procedural technicalities.

The existence of an employer-employee relationship is ultimately a question of fact. As a general rule, factual issues are beyond the province of this Court. However, this rule admits of exceptions, one of which is where there are conflicting findings of fact between the Court of Appeals, on one hand, and the NLRC and Labor Arbiter, on the other, such as in the present case.18

To determine the existence of an employer-employee relationship, case law has consistently applied the four-fold test, to wit: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employee on the means and methods by which the work is accomplished. The so-called control test is the most important indicator of the presence or absence of an employer-employee relationship.19

In this case, PBA admits repeatedly engaging petitioners services, as shown in the retainer contracts. PBA pays petitioner a retainer fee, exclusive of per diem or allowances, as stipulated in the retainer contract. PBA can terminate the retainer contract for petitioners violation of its terms and conditions.

However, respondents argue that the all-important element of control is lacking in this case, making petitioner an independent contractor and not an employee of respondents.

Petitioner contends otherwise. Petitioner asserts that he is an employee of respondents since the latter exercise control over the performance of his work. Petitioner cites the following stipulations in the retainer contract which evidence control: (1) respondents classify or rate a referee; (2) respondents require referees to attend all basketball games organized or authorized by the PBA, at least one hour before the start of the first game of each day; (3) respondents assign petitioner to officiate ballgames, or to act as alternate referee or substitute; (4) referee agrees to observe and comply with all the requirements of the PBA governing the conduct of the referees whether on or off the court; (5) referee agrees (a) to keep himself in good physical, mental, and emotional condition during the life of the contract; (b) to give always his best effort and service, and loyalty to the PBA, and not to officiate as referee in any basketball game outside of the PBA, without written prior consent of the Commissioner; (c) always to conduct himself on and off the court according to the highest standards of honesty or morality; and (6) imposition of various sanctions for violation of the terms and conditions of the contract.

The foregoing stipulations hardly demonstrate control over the means and methods by which petitioner performs his work as a referee officiating a PBA basketball game. The contractual stipulations do not pertain to, much less dictate, how and when petitioner will blow the whistle and make calls. On the contrary, they merely serve as rules of conduct or guidelines in order to maintain the integrity of the professional basketball league. As correctly observed by the Court of Appeals, how could a skilled referee perform his job without blowing a whistle and making calls? x x x [H]ow can the PBA control the performance of work of a referee without controlling his acts of blowing the whistle and making calls?20

In Sonza v. ABS-CBN Broadcasting Corporation,21 which determined the relationship between a television and radio station and one of its talents, the Court held that not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. The Court held:

We find that these general rules are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio programs that comply with standards of the industry. We have ruled that:

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation to the services being rendered may be accorded the effect of establishing an employer-employee relationship. The facts of this case fall squarely with the case of Insular Life Assurance Co., Ltd. v. NLRC. In said case, we held that:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.22

We agree with respondents that once in the playing court, the referees exercise their own independent judgment, based on the rules of the game, as to when and how a call or decision is to be made. The referees decide whether an infraction was committed, and the PBA cannot overrule them once the decision is made on the playing court. The referees are the only, absolute, and final authority on the playing court. Respondents or any of the PBA officers cannot and do not determine which calls to make or not to make and cannot control the referee when he blows the whistle because such authority exclusively belongs to the referees. The very nature of petitioners job of officiating a professional basketball game undoubtedly calls for freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an independent contractor: (1) the referees are required to report for work only when PBA games are scheduled, which is three times a week spread over an average of only 105 playing days a year, and they officiate games at an average of two hours per game; and (2) the only deductions from the fees received by the referees are withholding taxes.

In other words, unlike regular employees who ordinarily report for work eight hours per day for five days a week, petitioner is required to report for work only when PBA games are scheduled or three times a week at two hours per game. In addition, there are no deductions for contributions to the Social Security System, Philhealth or Pag-Ibig, which are the usual deductions from employees salaries. These undisputed circumstances buttress the fact that petitioner is an independent contractor, and not an employee of respondents.

Furthermore, the applicable foreign case law declares that a referee is an independent contractor, whose special skills and independent judgment are required specifically for such position and cannot possibly be controlled by the hiring party.

In Yonan v. United States Soccer Federation, Inc.,23 the United States District Court of Illinois held that plaintiff, a soccer referee, is an independent contractor, and not an employee of defendant which is the statutory body that governs soccer in the United States. As such, plaintiff was not entitled to protection by the Age Discrimination in Employment Act. The U.S. District Court ruled:

Generally, if an employer has the right to control and direct the work of an individual, not only as to the result to be achieved, but also as to details by which the result is achieved, an employer/employee relationship is likely to exist. The Court must be careful to distinguish between control[ling] the conduct of another party contracting party by setting out in detail his obligations consistent with the freedom of contract, on the one hand, and the discretionary control an employer daily exercises over its employees conduct on the other.

Yonan asserts that the Federation closely supervised his performance at each soccer game he officiated by giving him an assessor, discussing his performance, and controlling what clothes he wore while on the field and traveling. Putting aside that the Federation did not, for the most part, control what clothes he wore, the Federation did not supervise Yonan, but rather evaluated his performance after matches. That the Federation evaluated Yonan as a referee does not mean that he was an employee. There is no question that parties retaining independent contractors may judge the performance of those contractors to determine if the contractual relationship should continue. x x x

It is undisputed that the Federation did not control the way Yonan refereed his games. He had full discretion and authority, under the Laws of the Game, to call the game as he saw fit. x x x In a similar vein, subjecting Yonan to qualification standards and procedures like the Federations registration and training requirements does not create an employer/employee relationship. x x x

A position that requires special skills and independent judgment weights in favor of independent contractor status. x x x Unskilled work, on the other hand, suggests an employment relationship. x x x Here, it is undisputed that soccer refereeing, especially at the professional and international level, requires a great deal of skill and natural ability. Yonan asserts that it was the Federations training that made him a top referee, and that suggests he was an employee. Though substantial training supports an employment inference, that inference is dulled significantly or negated when the putative employers activity is the result of a statutory requirement, not the employers choice. x x x

In McInturff v. Battle Ground Academy of Franklin,24 it was held that the umpire was not an agent of the Tennessee Secondary School Athletic Association (TSSAA), so the players vicarious liability claim against the association should be dismissed. In finding that the umpire is an independent contractor, the Court of Appeals of Tennesse ruled:

The TSSAA deals with umpires to achieve a result-uniform rules for all baseball games played between TSSAA member schools. The TSSAA does not supervise regular season games. It does not tell an official how to conduct the game beyond the framework established by the rules. The TSSAA does not, in the vernacular of the case law, control the means and method by which the umpires work.

In addition, the fact that PBA repeatedly hired petitioner does not by itself prove that petitioner is an employee of the former. For a hired party to be considered an employee, the hiring party must have control over the means and methods by which the hired party is to perform his work, which is absent in this case. The continuous rehiring by PBA of petitioner simply signifies the renewal of the contract between PBA and petitioner, and highlights the satisfactory services rendered by petitioner warranting such contract renewal. Conversely, if PBA decides to discontinue petitioners services at the end of the term fixed in the contract, whether for unsatisfactory services, or violation of the terms and conditions of the contract, or for whatever other reason, the same merely results in the non-renewal of the contract, as in the present case. The non-renewal of the contract between the parties does not constitute illegal dismissal of petitioner by respondents.

WHEREFORE, we DENY the petition and AFFIRM the assailed decision of the Court of Appeals.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 155207 August 13, 2008

WILHELMINA S. OROZCO, petitioner, vs.THE FIFTH DIVISION OF THE HONORABLE COURT OF APPEALS, PHILIPPINE DAILY INQUIRER, and LETICIA JIMENEZ MAGSANOC, respondents.

D E C I S I O N

NACHURA, J.:

The case before this Court raises a novel question never before decided in our jurisdiction – whether a newspaper columnist is an employee of the newspaper which publishes the column.

In this Petition for Review under Rule 45 of the Revised Rules on Civil Procedure, petitioner Wilhelmina S. Orozco assails the Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 50970 dated June 11, 2002 and its Resolution2 dated September 11, 2002 denying her Motion for Reconsideration. The CA reversed and set aside the Decision3 of the National Labor Relations Commission (NLRC), which in turn had affirmed the Decision4 of the Labor Arbiter finding that Orozco was an employee of private respondent Philippine Daily Inquirer (PDI) and was illegally dismissed as columnist of said newspaper.

In March 1990, PDI engaged the services of petitioner to write a weekly column for its Lifestyle section. She religiously submitted her articles every week, except for a six-month stint in New York City when she, nonetheless, sent several articles through mail. She received compensation ofP250.00 – later increased to P300.00 – for every column published.5

On November 7, 1992, petitioner’s column appeared in the PDI for the last time. Petitioner claims that her then editor, Ms. Lita T. Logarta, 6 told her that respondent Leticia Jimenez Magsanoc, PDI Editor in Chief, wanted to stop publishing her column for no reason at all and advised petitioner to talk to Magsanoc herself. Petitioner narrates that when she talked to Magsanoc, the latter informed her that it was PDI Chairperson Eugenia Apostol who had asked to stop publication of her column, but that in a telephone conversation with Apostol, the latter said that Magsanoc informed her (Apostol) that the Lifestyle section already had many columnists.7

On the other hand, PDI claims that in June 1991, Magsanoc met with the Lifestyle section editor to discuss how to improve said section. They agreed to cut down the number of columnists by keeping only those whose columns were well-written, with regular feedback and following. In their judgment, petitioner’s column failed to improve, continued to be superficially and poorly written, and failed to meet the high standards of the newspaper. Hence, they decided to terminate petitioner’s column.8

Aggrieved by the newspaper’s action, petitioner filed a complaint for illegal dismissal, backwages, moral and exemplary damages, and other money claims before the NLRC.

On October 29, 1993, Labor Arbiter Arthur Amansec rendered a Decision in favor of petitioner, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered, finding complainant to be an employee of respondent company; ordering respondent company to reinstate her to her former or equivalent position, with backwages.

Respondent company is also ordered to pay her 13th month pay and service incentive leave pay.

Other claims are hereby dismissed for lack of merit.

SO ORDERED.9

The Labor Arbiter found that:

[R]espondent company exercised full and complete control over the means and method by which complainant’s work – that of a regular columnist – had to be accomplished. This control might not be found in an instruction, verbal or oral, given to complainant defining the means and method she should write her column. Rather, this control is manifested and certained (sic) in respondents’ admitted prerogative to reject any article submitted by complainant for publication.

By virtue of this power, complainant was helplessly constrained to adopt her subjects and style of writing to suit the editorial taste of her editor. Otherwise, off to the trash can went her articles.

Moreover, this control is already manifested in column title, "Feminist Reflection" allotted complainant. Under this title, complainant’s writing was controlled and limited to a woman’s perspective on matters of feminine interests. That respondent had no control over the subject matter written by complainant is strongly belied by this observation. Even the length of complainant’s articles were set by respondents.

Inevitably, respondents would have no control over when or where complainant wrote her articles as she was a columnist who could produce an article in thirty (3) (sic) months or three (3) days, depending on her mood or the amount of research required for an article but her actions were controlled by her obligation to produce an article a week. If complainant did not have to report for work eight (8) hours a day, six (6) days a week, it is because her task was mainly mental. Lastly, the fact that her articles were (sic) published weekly for three (3) years show that she was respondents’ regular employee, not a once-in-a-blue-moon contributor who was not under any pressure or obligation to produce regular articles and who wrote at his own whim and leisure.10

PDI appealed the Decision to the NLRC. In a Decision dated August 23, 1994, the NLRC Second Division dismissed the appeal thereby affirming the Labor Arbiter’s Decision. The NLRC initially noted that PDI failed to perfect its appeal, under Article 223 of the Labor Code, due to non-filing of a cash or surety bond. The NLRC said that the reason proffered by PDI for not filing the bond – that it was difficult or impossible to determine the amount of the bond since the Labor Arbiter did not specify the amount of the judgment award – was not persuasive. It said that all PDI had to do was compute based on the amount it was paying petitioner, counting the number of weeks from November 7, 1992 up to promulgation of the Labor Arbiter’s decision.11

The NLRC also resolved the appeal on its merits. It found no error in the Labor Arbiter’s findings of fact and law. It sustained the Labor Arbiter’s reasoning that respondent PDI exercised control over petitioner’s work.

PDI then filed a Petition for Review12 before this Court seeking the reversal of the NLRC Decision. However, in a Resolution 13 dated December 2, 1998, this Court referred the case to the Court of Appeals, pursuant to our ruling in St. Martin Funeral Homes v. National Labor Relations Commission.14

The CA rendered its assailed Decision on June 11, 2002. It set aside the NLRC Decision and dismissed petitioner’s Complaint. It held that the NLRC misappreciated the facts and rendered a ruling wanting in substantial evidence. The CA said:

The Court does not agree with public respondent NLRC’s conclusion. First, private respondent admitted that she was and [had] never been considered by petitioner PDI as its employee. Second, it is not disputed that private respondent had no employment contract with petitioner PDI. In fact, her engagement to contribute articles for publication was based on a verbal agreement between her and the petitioner’s Lifestyle Section Editor. Moreover, it was evident that private respondent was not required to report to the office eight (8) hours a day. Further, it is not disputed that she stayed in New York for six (6) months without petitioner’s permission as to her leave of absence nor was she given any disciplinary action for the same. These undisputed facts negate private respondent’s claim that she is an employee of petitioner.

Moreover, with regards (sic) to the control test, the public respondent NLRC’s ruling that the guidelines given by petitioner PDI for private respondent to follow, e.g. in terms of space allocation and length of article, is not the form of control envisioned by the guidelines set by the Supreme Court. The length of the article is obviously limited so that all the articles to be featured in the paper can be accommodated. As to the topic of the article to be published, it is but logical that private respondent should not write morbid topics such as death because she is contributing to the lifestyle section. Other than said given limitations, if the same could be considered limitations, the topics of the articles submitted by private respondent were all her choices. Thus, the petitioner PDI in deciding to publish private respondent’s articles only controls the result of the work and not the means by which said articles were written.

As such, the above facts failed to measure up to the control test necessary for an employer-employee relationship to exist.15

Petitioner’s Motion for Reconsideration was denied in a Resolution dated September 11, 2002. She then filed the present Petition for Review.

In a Resolution dated April 29, 2005, the Court, without giving due course to the petition, ordered the Labor Arbiter to clarify the amount of the award due petitioner and, thereafter, ordered PDI to post the requisite bond. Upon compliance therewith, the petition would be given due course. Labor Arbiter Amansec clarified that the award under the Decision amounted to P15,350.00. Thus, PDI posted the requisite bond on January 25, 2007.16

We shall initially dispose of the procedural issue raised in the Petition.

Petitioner argues that the CA erred in not dismissing outright PDI’s Petition for Certiorari for PDI’s failure to post a cash or surety bond in violation of Article 223 of the Labor Code.

This issue was settled by this Court in its Resolution dated April 29, 2005.17 There, the Court held:

But while the posting of a cash or surety bond is jurisdictional and is a condition sine qua non to the perfection of an appeal, there is a plethora of jurisprudence recognizing exceptional instances wherein the Court relaxed the bond requirement as a condition for posting the appeal.

x x x x

In the case of Taberrah v. NLRC, the Court made note of the fact that the assailed decision of the Labor Arbiter concerned did not contain a computation of the monetary award due the employees, a circumstance which is likewise present in this case. In said case, the Court stated,

As a rule, compliance with the requirements for the perfection of an appeal within the reglamentary (sic) period is mandatory and jurisdictional. However, in National Federation of Labor Unions v. Ladrido as well as in several other cases, this Court relaxed the requirement of the posting of an appeal bond within the reglementary period as a condition for perfecting the appeal. This is in line with the principle that substantial justice is better served by allowing the appeal to be resolved on the merits rather than dismissing it based on a technicality.

The judgment of the Labor Arbiter in this case merely stated that petitioner was entitled to backwages, 13 th month pay and service incentive leave pay without however including a computation of the alleged amounts.

x x x x

In the case of NFLU v. Ladrido III, this Court postulated that "private respondents cannot be expected to post such appeal bond equivalent to the amount of the monetary award when the amount thereof was not included in the decision of the labor arbiter." The computation of the amount awarded to petitioner not having been clearly stated in the decision of the labor arbiter, private respondents had no basis for determining the amount of the bond to be posted.

Thus, while the requirements for perfecting an appeal must be strictly followed as they are considered indispensable interdictions against needless delays and for orderly discharge of judicial business, the law does admit of exceptions when warranted by the circumstances. Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties. But while this Court may relax the observance of reglementary periods and technical rules to achieve substantial justice, it is not prepared to give due course to this petition and make a pronouncement on the weighty issue obtaining in this case until the law has been duly complied with and the requisite appeal bond duly paid by private respondents.18

Records show that PDI has complied with the Court’s directive for the posting of the bond;19 thus, that issue has been laid to rest.

We now proceed to rule on the merits of this case.

The main issue we must resolve is whether petitioner is an employee of PDI, and if the answer be in the affirmative, whether she was illegally dismissed.

We rule for the respondents.

The existence of an employer-employee relationship is essentially a question of fact. 20 Factual findings of quasi-judicial agencies like the NLRC are generally accorded respect and finality if supported by substantial evidence.21

Considering, however, that the CA’s findings are in direct conflict with those of the Labor Arbiter and NLRC, this Court must now make its own examination and evaluation of the facts of this case.

It is true that petitioner herself admitted that she "was not, and [had] never been considered respondent’s employee because the terms of works were arbitrarily decided upon by the respondent."22 However, the employment status of a person is defined and prescribed by law and not by what the parties say it should be.23

This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee relationship between parties. 24 The four elements of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct.25

Of these four elements, it is the power of control which is the most crucial 26 and most determinative factor,27 so important, in fact, that the other elements may even be disregarded.28 As this Court has previously held:

the significant factor in determining the relationship of the parties is the presence or absence of supervisory authority to control the method and the details of performance of the service being rendered, and the degree to which the principal may intervene to exercise such control.29

In other words, the test is whether the employer controls or has reserved the right to control the employee, not only as to the work done, but also as to the means and methods by which the same is accomplished.30

Petitioner argues that several factors exist to prove that respondents exercised control over her and her work, namely:

a. As to the Contents of her Column – The PETITIONER had to insure that the contents of her column hewed closely to the objectives of its Lifestyle Section and the over-all principles that the newspaper projects itself to stand for. As admitted, she wanted to write about death in relation to All Souls Day but was advised not to.

b. As to Time Control – The PETITIONER, as a columnist, had to observe the deadlines of the newspaper for her articles to be published. These deadlines were usually that time period when the Section Editor has to "close the pages" of the Lifestyle Section where the column in located. "To close the pages" means to prepare them for printing and publication.

As a columnist, the PETITIONER’s writings had a definite day on which it was going to appear. So she submitted her articles two days before the designated day on which the column would come out.

This is the usual routine of newspaper work. Deadlines are set to fulfill the newspapers’ obligations to the readers with regard to timeliness and freshness of ideas.

c. As to Control of Space – The PETITIONER was told to submit only two or three pages of article for the column, (sic) "Feminist Reflections" per week. To go beyond that, the Lifestyle editor would already chop off the article and publish the rest for the next week. This shows that PRIVATE RESPONDENTS had control over the space that the PETITIONER was assigned to fill.

d. As to Discipline – Over time, the newspaper readers’ eyes are trained or habituated to look for and read the works of their favorite regular writers and columnists. They are conditioned, based on their daily purchase of the newspaper, to look for specific spaces in the newspapers for their favorite write-ups/or opinions on matters relevant and significant issues aside from not being late or amiss in the responsibility of timely submission of their articles.

The PETITIONER was disciplined to submit her articles on highly relevant and significant issues on time by the PRIVATE RESPONDENTS who have a say on whether the topics belong to those considered as highly relevant and significant, through the Lifestyle Section Editor. The PETITIONER had to discuss the topics first and submit the articles two days before publication date to keep her column in the newspaper space regularly as expected or without miss by its readers.31

Given this discussion by petitioner, we then ask the question: Is this the form of control that our labor laws contemplate such as to establish an employer-employee relationship between petitioner and respondent PDI?

It is not.

Petitioner has misconstrued the "control test," as did the Labor Arbiter and the NLRC.

Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. Rules which serve as general guidelines towards the achievement of the mutually desired result are not indicative of the power of control.32 Thus, this Court has explained:

It should, however, be obvious that not every form of control that the hiring party reserves to himself over the conduct of the party hired in relation to the services rendered may be accorded the effect of establishing an employer-employee relationship between them in the legal or technical sense of the term. A line must be drawn somewhere, if the recognized distinction between an employee and an individual contractor is not to vanish altogether. Realistically, it would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. x x x.33

The main determinant therefore is whether the rules set by the employer are meant to control not just the results of the work but also the means and method to be used by the hired party in order to achieve such results. Thus, in this case, we are to examine the factors enumerated by petitioner to see if these are merely guidelines or if they indeed fulfill the requirements of the control test.

Petitioner believes that respondents’ acts are meant to control how she executes her work. We do not agree. A careful examination reveals that the factors enumerated by the petitioner are inherent conditions in running a newspaper. In other words, the so-called control as to time, space, and discipline are dictated by the very nature of the newspaper business itself.

We agree with the observations of the Office of the Solicitor General that:

The Inquirer is the publisher of a newspaper of general circulation which is widely read throughout the country. As such, public interest dictates that every article appearing in the newspaper should subscribe to the standards set by the Inquirer, with its thousands of readers in mind. It is not, therefore, unusual for the Inquirer to control what would be published in the newspaper. What is important is the fact that such control pertains only to the end result, i.e., the submitted articles. The Inquirer has no control over [petitioner] as to the means or method used by her in the preparation of her articles. The articles are done by [petitioner] herself without any intervention from the Inquirer.34

Petitioner has not shown that PDI, acting through its editors, dictated how she was to write or produce her articles each week. Aside from the constraints presented by the space allocation of her column, there were no restraints on her creativity; petitioner was free to write her column in the manner and style she was accustomed to and to use whatever research method she deemed suitable for her purpose. The apparent limitation that she had to write only on subjects that befitted the Lifestyle section did not translate to control, but was simply a logical consequence of the fact that her column appeared in that section and therefore had to cater to the preference of the readers of that section.

The perceived constraint on petitioner’s column was dictated by her own choice of her column’s perspective. The column title "Feminist Reflections" was of her own choosing, as she herself admitted, since she had been known as a feminist writer.35 Thus, respondent PDI, as well as her readers, could reasonably expect her columns to speak from such perspective.

Contrary to petitioner’s protestations, it does not appear that there was any actual restraint or limitation on the subject matter – within the Lifestyle section – that she could write about. Respondent PDI did not dictate how she wrote or what she wrote in her column. Neither did PDI’s guidelines dictate the kind of research, time, and effort she put into each column. In fact, petitioner herself said that she received "no comments on her articles…except for her to shorten them to fit into the box allotted to her column." Therefore, the control that PDI exercised over petitioner was only as to the finished product of her efforts, i.e., the column itself, by way of either shortening or outright rejection of the column.

The newspaper’s power to approve or reject publication of any specific article she wrote for her column cannot be the control contemplated in the "control test," as it is but logical that one who commissions another to do a piece of work should have the right to accept or reject the product. The important factor to consider in the "control test" is still the element of control over how the work itself is done, not just the end result thereof.

In contrast, a regular reporter is not as independent in doing his or her work for the newspaper. We note the common practice in the newspaper business of assigning its regular reporters to cover specific subjects, geographical locations, government agencies, or areas of concern, more commonly referred to as "beats." A reporter must produce stories within his or her particular beat and cannot switch to another beat without permission from the editor. In most newspapers also, a reporter must inform the editor about the story that he or she is working on for the day. The story or article must also be submitted to the editor at a specified time. Moreover, the editor can easily pull out a reporter from one beat and ask him or her to cover another beat, if the need arises.

This is not the case for petitioner. Although petitioner had a weekly deadline to meet, she was not precluded from submitting her column ahead of time or from submitting columns to be published at a later time. More importantly, respondents did not dictate upon petitioner the subject matter of her columns, but only imposed the general guideline that the article should conform to the standards of the newspaper and the general tone of the particular section.

Where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no employer-employee relationship exists.36

Aside from the control test, this Court has also used the economic reality test. The economic realities prevailing within the activity or between the parties are examined, taking into consideration the totality of circumstances surrounding the true nature of the relationship between the parties.37 This is especially appropriate when, as in this case, there is no written agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment relationships for purposes of applying the Labor Code ought to be the economic dependence of the worker on his employer.38

Petitioner’s main occupation is not as a columnist for respondent but as a women’s rights advocate working in various women’s organizations. 39 Likewise, she herself admits that she also contributes articles to other publications.40 Thus, it cannot be said that petitioner was dependent on respondent PDI for her continued employment in respondent’s line of business.41

The inevitable conclusion is that petitioner was not respondent PDI’s employee but an independent contractor, engaged to do independent work.

There is no inflexible rule to determine if a person is an employee or an independent contractor; thus, the characterization of the relationship must be made based on the particular circumstances of each case.42 There are several factors43 that may be considered by the courts, but as we already said, the right to control is the dominant factor in determining whether one is an employee or an independent contractor.44

In our jurisdiction, the Court has held that an independent contractor is one who carries on a distinct and independent business and undertakes to perform the job, work, or service on one’s own account and under one’s own responsibility according to one’s own manner and method, free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof.45

On this point, Sonza v. ABS-CBN Broadcasting Corporation46 is enlightening. In that case, the Court found, using the four-fold test, that petitioner, Jose Y. Sonza, was not an employee of ABS-CBN, but an independent contractor. Sonza was hired by ABS-CBN due to his "unique skills, talent and celebrity status not possessed by ordinary employees," a circumstance that, the Court said, was indicative, though not conclusive, of an independent contractual relationship. Independent contractors often present themselves to possess unique skills, expertise or talent to distinguish them from ordinary employees.47 The Court also found that, as to payment of wages, Sonza’s talent fees were the result of negotiations between him and ABS-CBN.48 As to the power of dismissal, the Court found that the terms of Sonza’s engagement were dictated by the contract he entered into with ABS-CBN, and the same contract provided that either party may terminate the contract in case of breach by the other of the terms thereof. 49 However, the Court held that the foregoing are not determinative of an employer-employee relationship. Instead, it is still the power of control that is most important.

On the power of control, the Court found that in performing his work, Sonza only needed his skills and talent – how he delivered his lines, appeared on television, and sounded on radio were outside ABS-CBN’s control.50 Thus:

We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZA’s work. ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program format and airtime schedule "for more effective programming." ABS-CBN’s sole concern was the quality of the shows and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance of SONZA’s work.

SONZA claims that ABS-CBN’s power not to broadcast his shows proves ABS-CBN’s power over the means and methods of the performance of his work. Although ABS-CBN did have the option not to broadcast SONZA’s show, ABS-CBN was still obligated to pay SONZA’s talent fees... Thus, even if ABS-CBN was completely dissatisfied with the means and methods of SONZA’s performance of his work, or even with the quality or product of his work, ABS-CBN could not dismiss or even discipline SONZA. All that ABS-CBN could do is not to broadcast SONZA’s show but ABS-CBN must still pay his talent fees in full.

Clearly, ABS-CBN’s right not to broadcast SONZA’s show, burdened as it was by the obligation to continue paying in full SONZA’s talent fees, did not amount to control over the means and methods of the performance of SONZA’s work. ABS-CBN could not terminate or discipline SONZA even if the means and methods of performance of his work - how he delivered his lines and appeared on television - did not meet ABS-CBN’s approval. This proves that ABS-CBN’s control was limited only to the result of SONZA’s work, whether to broadcast the final product or not. In either case, ABS-CBN must still pay SONZA’s talent fees in full until the expiry of the Agreement.

In Vaughan, et al. v. Warner, et al., the United States Circuit Court of Appeals ruled that vaudeville performers were independent contractors although the management reserved the right to delete objectionable features in their shows. Since the management did not have control over the manner of performance of the skills of the artists, it could only control the result of the work by deleting objectionable features.

SONZA further contends that ABS-CBN exercised control over his work by supplying all equipment and crew. No doubt, ABS-CBN supplied the equipment, crew and airtime needed to broadcast the "Mel & Jay" programs. However, the equipment, crew and airtime are not the "tools and instrumentalities" SONZA needed to perform his job. What SONZA principally needed were his talent or skills and the costumes necessary for his appearance. Even though ABS-CBN provided SONZA with the place of work and the necessary equipment, SONZA was still an independent contractor since ABS-CBN did not supervise and control his work. ABS-CBN’s sole concern was for SONZA to display his talent during the airing of the programs.

A radio broadcast specialist who works under minimal supervision is an independent contractor. SONZA’s work as television and radio program host required special skills and talent, which SONZA admittedly possesses. The records do not show that ABS-CBN exercised any supervision and control over how SONZA utilized his skills and talent in his shows.51

The instant case presents a parallel to Sonza. Petitioner was engaged as a columnist for her talent, skill, experience, and her unique viewpoint as a feminist advocate. How she utilized all these in writing her column was not subject to dictation by respondent. As in Sonza, respondent PDI was not involved in the actual performance that produced the finished product. It only reserved the right to shorten petitioner’s articles based on the newspaper’s capacity to accommodate the same. This fact, we note, was not unique to petitioner’s column. It is a reality in the newspaper business that space constraints often dictate the length of articles and columns, even those that regularly appear therein.

Furthermore, respondent PDI did not supply petitioner with the tools and instrumentalities she needed to perform her work. Petitioner only needed her talent and skill to come up with a column every week. As such, she had all the tools she needed to perform her work.

Considering that respondent PDI was not petitioner’s employer, it cannot be held guilty of illegal dismissal.

WHEREFORE, the foregoing premises considered, the Petition is DISMISSED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 50970 are hereby AFFIRMED.

SO ORDERED.

THIRD DIVISION

G.R. No. 189255, June 17, 2015

JESUS G. REYES, Petitioner, v. GLAUCOMA RESEARCH FOUNDATION, INC., EYE REFERRAL CENTER AND MANUEL B. AGULTO, Respondent.

D E C I S I O N

PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to reverse and set aside the Decision1and Resolution2 of the Court of Appeals (CA), dated April 20, 2009 and August 25, 2009, respectively, in CA-G.R. SP No. 104261. The assailed CA Decision annulled the Decision of the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 05-0441-05 and reinstated the Decision of the Labor Arbiter (LA) in the same case, while the CA Resolution denied petitioner's motion for reconsideration.

The instant petition arose from a complaint for illegal dismissal filed by petitioner against respondents with the NLRC, National Capital Region, Quezon City. Petitioner alleged that: on August 1, 2003, he was hired by respondent corporation as administrator of the latter's Eye Referral Center (ERC); he performed his duties as administrator and continuously received his monthly salary of P20,000.00 until the end of January 2005; beginning February 2005, respondent withheld petitioner's salary without notice but he still continued to report for work; on April 11, 2005, petitioner wrote a letter to respondent Manuel Agulto ( Agulto), who is the Executive Director of respondent corporation, informing the latter that he has not been receiving his salaries since February 2005 as well as his 14 th month pay for 2004; petitioner did not receive any response from Agulto; on April 21, 2005, petitioner was informed by the Assistant to the Executive Director as well as the Assistant Administrative Officer, that he is no longer the Administrator of the

ERC; subsequently, petitioner's office was padlocked and closed without notice; he still continued to report for work but on April 29, 2005 he was no longer allowed by the security guard on duty to enter the premises of the ERC.

On their part, respondents contended that: upon petitioner's representation that he is an expert in corporate organizational structure and management affairs, they engaged his services as a consultant or adviser in the formulation of an updated organizational set-up and employees' manual which is compatible with their present condition; based on his claim that there is a need for an administrator for the ERC, he later designated himself as such on a trial basis; there is no employer-employee relationship between them because respondents had no control over petitioner in terms of working hours as he reports for work at anytime of the day and leaves as he pleases; respondents also had no control as to the manner in which he performs his alleged duties as consultant; he became overbearing and his relationship with the employees and officers of the company soured leading to the filing of three complaints against him; petitioner was not dismissed as he was the one who voluntarily severed his relations with respondents.

On January 20, 2006, the LA assigned to the case rendered a Decision 3 dismissing petitioner's complaint. The LA held, among others, that petitioner failed to establish that the elements of an employer-employee relationship existed between him and respondents because he was unable to show that he was, in fact, appointed as administrator of the ERC and received salaries as such; he also failed to deny that during his stint with respondents, he was, at the same time, a consultant of various government agencies such as the Manila International Airport Authority, Manila Intercontinental Port Authority, Anti-Terrorist Task Force for Aviation and Air Transportation Sector; his actions were neither supervised nor controlled by the management of the ERC; petitioner, likewise, did not observe working hours by reporting for work and leaving therefrom as he pleased; and, he was receiving allowances, not salaries, as a consultant.

On appeal, the NLRC reversed and set aside the Decision of the LA. The NLRC declared petitioner as respondents' employee, that he was illegally dismissed and ordered respondents to reinstate him to his former position without loss of seniority rights and privileges with full backwages. The NLRC held that the basis upon which the conclusion of the LA was drawn lacked support; that it was incumbent for respondents to discharge the burden of proving that petitioner's dismissal was for cause and effected after due process was observed; and, that respondents failed to discharge this burden.4

Respondents filed a motion for reconsideration, but it was denied by the NLRC in its Resolution 5 dated May 30, 2008.

Respondents then filed a Petition for Certiorari6 with the CA.

In its assailed Decision, the CA annulled and set aside the judgment of the NLRC and reinstated the Decision of the LA. The CA held that the LA was correct in ruling that, under the control test and the economic reality test, no employer-employee relationship existed between respondents and petitioner.

Petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated August 25, 2009.

Hence, the present petition for review on certiorari based on the following grounds:chanroblesvirtuallawlibraryI

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN NOT DISMISSING RESPONDENTS' PETITION FOR CERTIORARI ON THE GROUND THAT RESPONDENTS SUBMITTED A VERIFICATION THAT FAILS TO COMPLY WITH THE 2004 RULES ON NOTARIAL PRACTICE.cralawlawlibrary

II

THE HONORABLE COURT OF APPEALS ERRED AND ABUSED ITS DISCRETION IN RULING THAT NO EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS BETWEEN RESPONDENTS AND PETITIONER.7cralawlawlibraryAs to the first ground, petitioner contends that respondents' petition for certiorari filed with the CA should have been dismissed on the ground that it was improperly verified because the jurat portion of the verification states only the community tax certificate number of the affiant as evidence of her identity. Petitioner argues that under the 2004 Rules on Notarial Practice, as amended by a Resolution8 of this Court, dated February 19, 2008, a community tax certificate is not among those considered as competent evidence of identity.

The Court does not agree.

This Court has already ruled that competent evidence of identity is not required in cases where the affiant is personally known to the notary public.9

Thus, in Jandoquile v. Revilla, Jr.,10 this Court held that:chanroblesvirtuallawlibraryIf the notary public knows the affiants personally, he need not require them to show their valid identification cards. This rule is supported by the definition of a "jurat" under Section 6, Rule II of the 2004 Rules on Notarial Practice. A "jurat" refers to an act in which an individual on a single occasion: (a) appears in person before the notary public and presents an instrument or document; (b) is personally known to the notary public or identified by the notary public through competent evidence of identity ; (c) signs the instrument or document in the presence of the notary; and (d) takes an oath or affirmation before the notary public as to such instrument or document.11cralawlawlibraryAlso, Section 2(b), Rule IV of the 2004 Rules on Notarial Practice provides as follows:chanroblesvirtuallawlibrarySEC. 2. Prohibitions -

(a) x x x

(b) A person shall not perform a notarial act if the person involved as signatory to the instrument or document -(1) is not in the notary's presence personally at the time of the notarization; and

(2) is not personally known to the notary public or otherwise identified by the notary public through competent evidence of identity as defined by these Rules.Moreover, Rule II, Section 6 of the same Rules states that:

SEC 6. Jurat. - "Jurat" refers to an act in which an individual on a single occasion:chanroblesvirtuallawlibrary(a) appears in person before the notary public and presents an instrument or document;

(b) is personally known to the notary public or identified by the notary public through competent evidence of identity as defined by these Rules;

(c) signs the instrument or document in the presence of the notary; and

(d) takes an oath or affirmation before the notary public as to such instrument or document.In legal hermeneutics, "or" is a disjunctive that expresses an alternative or gives a choice of one among two or more things.12 The word signifies disassociation and independence of one thing from another thing in an enumeration.13

Thus, as earlier stated, if the affiant is personally known to the notary public, the latter need not require the former to show evidence of identity as required under the 2004 Rules on Notarial Practice, as amended.

Applying the above rule to the instant case, it is undisputed that the attorney-in-fact of respondents who executed the verification and certificate against forum shopping, which was attached to respondents' petition filed with the CA, is personally known to the notary public before whom the documents were acknowledged. Both attorney-in-fact and the notary public hold office at respondents' place of business and the latter is also the legal counsel of respondents.

In any event, this Court's disquisition in the fairly recent case of Heirs of Amada Zaulda v. Isaac Zaulda14 regarding the import of procedural rules vis-a-vis the substantive rights of the parties, is instructive, to wit:chanroblesvirtuallawlibrary[G]ranting, arguendo, that there was non-compliance with the verification requirement, the rule is that courts should not be so strict about procedural lapses which do not really impair the proper administration of justice. After all, the higher objective of procedural rule is to ensure that the substantive rights of the parties are protected. Litigations should, as much as possible, be decided on the merits and not on technicalities. Every party-litigant must be afforded ample opportunity for the proper and just determination of his case, free from the unacceptable plea of technicalities.

In Coca-Cola Bottlers v. De la Cruz, where the verification was marred only by a glitch in the evidence of the identity of the affiant, the Court was of the considered view that, in the interest of justice, the minor defect can be overlooked and should not defeat the petition.

The reduction in the number of pending cases is laudable, but if it would be attained by precipitate, if not preposterous, application of technicalities, justice would not be served. The law abhors technicalities that impede the cause of justice. The court's primary duty is to render or dispense justice. "It is a more prudent course of action for the court to excuse a technical lapse and afford the parties a review of the case on appeal rather than dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if not miscarriage of justice."

What should guide judicial action is the principle that a party-litigant should be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor, or property on technicalities. The rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed. At this juncture, the Court reminds all members of the bench and bar of the admonition in the often-cited case of Alonso v. Villamor:chanroblesvirtuallawlibraryLawsuits, unlike duels, are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. There should be no vested rights in technicalities.15cralawlawlibraryAnent the second ground, petitioner insists that, based on evidence on record, an employer-employee relationship exists between him and respondents.

The Court is not persuaded.

It is a basic rule of evidence that each party must prove his affirmative allegation.16 If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent.17 The test for determining on whom the burden of proof lies is found in the result of an inquiry as to which party would be successful if no evidence of such matters were given.18 In an illegal dismissal case, the onus probandi rests on the employer to prove that its dismissal of an employee was for a valid cause.19However, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established.20 Thus, in filing a complaint before the LA for illegal dismissal, based on the premise that he was an employee of respondents, it is incumbent upon petitioner to prove the employer-employee relationship by substantial evidence.21

In regard to the above discussion, the issue of whether or not an employer-employee relationship existed between petitioner and respondents is essentially a question of fact.22 The factors that determine the issue include who has the power to select the employee, who pays the employee's wages, who has the power to dismiss the employee, and who exercises control of the methods and results by which the work of the employee is accomplished.23 Although no particular form of evidence is required to prove the existence of the relationship, and any competent and relevant evidence to prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest on substantial evidence, which is that amount of relevant evidence that a reasonable mind might accept as adequate to justify a conclusion.24

Generally, the Court does not review factual questions, primarily because the Court is not a trier of facts.25 However, where, like here, there is a conflict between the factual findings of the LA and the CA, on one hand, and those of the NLRC, on the other, it becomes proper for the Court, in the exercise of its equity jurisdiction, to review and re-evaluate the factual issues and to look into the records of the case and re-examine the questioned findings.26

Etched in an unending stream of cases are four standards in determining the existence of an employer-employee relationship, namely: (a) the manner of selection and engagement of the putative employee; (b) the mode of payment of wages; (c) the presence or absence of power of dismissal; and, (d) the presence or absence of control of the putative employee's conduct. Most determinative among these factors is the so-called "control test."27

Indeed, the power of the employer to control the work of the employee is considered the most significant determinant of the existence of an employer-employee relationship.28 This test is premised on whether the person for whom the services are performed reserves the right to control both the end achieved and the manner and means used to achieve that end.29

In the present case, petitioner contends that, as evidence of respondents' supposed control over him, the organizational plans he has drawn were subject to the approval of respondent corporation's Board of Trustees. However, the Court agrees with the disquisition of the CA on this matter, to wit:chanroblesvirtuallawlibrary[Respondents'] power to approve or reject the organizational plans drawn by [petitioner] cannot be the control contemplated in the "control test." It is but logical that one who commissions another to do a piece of work should have the right to accept or reject the product. The important factor to consider in the "control test" is still the element of control over how the work itself is done, not just the end result thereof.

Well settled is the rule that where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no employer-employee relationship exists.30cralawlawlibraryWhat was glaring in the present case is the undisputed fact that petitioner was never subject to definite working hours. He never denied that he goes to work and leaves therefrom as he pleases.31In fact, on December 1-31, 2004, he went on leave without seeking approval from the officers of respondent company. On the contrary, his

letter32 simply informed respondents that he will be away for a month and even advised them that they have the option of appointing his replacement during his absence. This Court has held that there is no employer-employee relationship where the supposed employee is not subject to a set of rules and regulations governing the performance of his duties under the agreement with the company and is not required to report for work at any time, nor to devote his time exclusively to working for the company.33

In this regard, this Court also agrees with the ruling of the CA that:chanroblesvirtuallawlibraryAside from the control test, the Supreme Court has also used the economic reality test in determining whether an employer-employee relationship exists between the parties. Under this test, the economic realities prevailing within the activity or between the parties are examined, taking into consideration the totality of circumstances surrounding the true nature of the relationship between the parties. This is especially appropriate when, as in this case, there is no written agreement or contract on which to base the relationship. In our jurisdiction, the benchmark of economic reality in analyzing possible employment relationships for purposes of applying the Labor Code ought to be the economic dependence of the worker on his employer.

In the instant case, as shown by the resume of [petitioner], he concurrently held consultancy positions with the Manila International Airport Authority (from 04 March 2001 to September 2003 and from 01 November 2004 up to the present) and the Anti-Terrorist Task Force for Aviation and Air Transportation Sector (from 16 April 2004 to 30 June 2004) during his stint with the Eye Referral Center (from 01 August 2003 to 29 April 2005). Accordingly, it cannot be said that the [petitioner] was wholly dependent on [respondent] company.34cralawlawlibrary

In bolstering his contention that there was an employer-employee relationship, petitioner draws attention to the pay slips he supposedly received from respondent corporation. However, he does not dispute the findings of the CA that there are no deductions for SSS and withholding tax from his compensation, which are the usual deductions from employees' salaries. Thus, the alleged pay slips may not be treated as competent evidence of petitioner's claim that he is respondents' employee.

In addition, the designation of the payments to petitioner as salaries, is not determinative of the existence of an employer-employee relationship. 35 Salary is a general term defined as a remuneration for services given.36 Evidence of this fact, in the instant case, was the cash voucher issued in favor of petitioner where it was stated therein that the amount of P20,000.00 was given as petitioner's allowance for the month of December 2004, although it appears from the pay slip that the said amount was his salary for the same period.

Additional evidence of the fact that petitioner was hired as a consultant and not as an employee of respondent corporation are affidavits to this effect which were executed by Roy Oliveres37 and Aurea Luz Esteva,38 who are Medical Records Custodian and Administrative Officer, respectively, of respondent corporation. Petitioner insists in its objection of the use of these affidavits on the ground that they are, essentially, hearsay. However, this Court has ruled that although the affiants had not been presented to affirm the contents of their affidavits and be cross-examined, their affidavits may be given evidentiary value; the argument that such affidavits were hearsay was not persuasive. 39Likewise, this Court ruled that it was not necessary for the affiants to appear and testify and be cross-examined by counsel for the adverse party. 40 To require otherwise would be to negate the rationale and purpose of the summary nature of the proceedings mandated by the Rules and to make mandatory the application of the technical rules of evidence. 41

These affidavits are corroborated by evidence, as discussed above, showing that petitioner has no definite working hours and is not subject to the control of respondents.

Lastly, the Court does not agree with petitioner's insistence that his being hired as respondent corporation's administrator and his designation as such in intra-company correspondence proves that he is an employee of the corporation. The fact alone that petitioner was designated as an administrator does not necessarily mean that he is an employee of respondents. Mere title or designation in a corporation will not, by itself, determine the existence of an employer-employee relationship. 42 In this regard, even the identification card which was issued to petitioner is not an adequate proof of petitioner's claim that he is respondents' employee. In addition, petitioner's designation as an administrator neither disproves respondents' contention that he was engaged only as a consultant.

As a final point, it bears to reiterate that while the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor.43 Management also has its rights which are entitled to respect and enforcement in the interest of simple fair play.44 Out of its concern for the less privileged in life, the Court has inclined, more often than not, toward the worker and upheld his cause in his conflicts with the employer.45 Such favoritism, however, has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.46

WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of Appeals, dated April 20, 2009 and August 25, 2009, respectively, in CA-G.R. SPNo. 104261, are AFFIRMED.

SO ORDERED.chanroblesvirtuallawlibrary