PILIPINAS SHELL PETROLEUM CORPORATION, PETITIONER, VS. THE HONORABLE COURT OF APPEALS AND CLARITA T. CAMACHO, RESPONDENTS.

Was the hydro-pressure test of the underground storage tank in
private respondent Clarita T. Camacho’s gasoline station conducted by an
independent contractor or not? A
negative answer will make petitioner Pilipinas Shell Petroleum Corporation
(Shell, for brevity) liable for the said independent contractor’s acts or
omissions; otherwise, no. This is the
issue that this Court is called upon to resolve in this case.

The facts are as follows:

Private respondent Clarita T. Camacho (private respondent for
short) was the operator of a gasoline station in Naguilian Road, Baguio City,
wherein she sells petitioner Shell’s petroleum products. Sometime in April
1983, private respondent requested petitioner to conduct a hydro-pressure test
on the underground storage tanks of the said station in order to determine
whether or not the sales losses she was incurring for the past several months
were due to leakages therein. Petitioner acceded to the said request and on April 27, 1983, one Jesus
“Jessie” Feliciano together with other workers, came to private
respondent’s station with a Job Order from petitioner to perform the
hydro-pressure test.

On the same day, Feliciano and his men drained the underground
storage tank which was to be tested of its remaining gasoline. After which, they filled the tank with water
through a water hose from the deposit tank of private respondent. Then, after requesting one of private
respondent’s gasoline boys to shut off the water when the tank was filled,
Feliciano and his men left. At around
2:00 a.m. the following day, private respondent saw that the water had reached
the lip of the pipe of the underground storage tank and so, she shut off the
water faucet.

At around 5:30 a.m., private respondent’s husband opened the
station and started selling gasoline. But at about 6:00 a.m., the customers who had bought gasoline returned
to the station complaining that their vehicles stalled because there was water
in the gasoline that they bought. On
account of this, private respondent was constrained to replace the gasoline
sold to the said customers. However, a
certain Eduardo Villanueva, one of the customers, filed a complaint with the
police against private respondent for selling the adulterated gasoline. In addition, he caused the incident to be
published in two local newspapers.

Feliciano, who arrived later that morning, did not know what
caused the water pollution of the gasoline in the adjacent storage tank. So he called up Nick Manalo, Superintendent
of Shell’s Poro Point Installation at San Fernando, La Union, and referred the
matter to the latter. Manalo went up to
Baguio in the afternoon to investigate. Thereafter, he and Feliciano again filled with water the underground
storage tank undergoing hydro-pressure test whereat they noticed that the water
was transferring to the other tanks from whence came the gasoline being
sold. Manalo asked permission from
Shell’s Manila Office to excavate the underground pipes of the station. Upon being granted permission to do so,
Feliciano and his men began excavating the driveway of private respondent’s
station in order to expose the underground pipeline. The task was continued by one Daniel “Danny” Pascua who
replaced Feliciano. Pascua removed the
corroded pipeline and installed new independent vent pipe for each storage
tank.

Meanwhile, petitioner undertook to settle the criminal complaint
filed by Villanueva. Subsequently,
Villanueva filed an Affidavit of Desistance,^[1]
declaring, inter alia –

“THAT, after careful evaluation of the surrounding circumstances,
especially the explanation of the representatives of SHELL Phils., that the
gasoline tanks of Mrs. Camacho were subject to Hydro test, in such a way that
water was used for the said test, I believe that she may not have had anything
to do with the filling of water in the tank of my car;

x x x                                                                          x
x x                                                                             x
x x

THAT, said representatives of SHELL Phils. have interceded for and
in behalf of Mrs. Camacho and have fully satisfied my claim against her.

THAT, in view of all the foregoing I do not intend to prosecute the
case and I am therefore asking for the dismissal of the case against Mrs.
Camacho.”

Thereafter, private respondent demanded from petitioner the
payment of damages in the amount of P10,000.00. Petitioner, instead, offered private respondent additional credit
line and other beneficial terms, which offer was, however, rejected.

Subsequently, or on October 12, 1983, private respondent filed
before the trial court a complaint for damages against petitioner due to the
latter’s alleged negligence in the conduct of the hydro-pressure test in her
gasoline station. For its part,
petitioner denied liability because, according to it, the hydro-pressure test
on the underground storage tanks was conducted by an independent contractor.

The trial court dismissed private respondent’s complaint for
damages for the reason that:

“The hydro-pressure test which brought about the incident was
conducted by Jesus Feliciano, who was neither an employee nor agent nor
representative of the defendant. Jesus
Feliciano is responsible for his own acts and omissions. He alone was in control of the Manner of how
he is to undertake the hydro-pressure test.

Considering that the conduct of said hydro-pressure test was under
the sole and exclusive control and supervision of Jesus Feliciano, the overflow
with water causing the same to sip into the adjoining tank cannot be attributed
to the fault or negligence of defendant.”^[2]

From the adverse decision of the trial court, private respondent
appealed to the Court of Appeals which court reversed the decision of the trial
court. Thus,

“PREMISES CONSIDERED, the decision being appealed from is
hereby SET ASIDE and, in lieu thereof, another rendered ordering defendant to
pay plaintiff:

1. P100,000.00 as moral damages;

2. P2,639.25 and P15,000.00 representing the
actual losses suffered by plaintiff as a result of the water pollution of the
gasoline.

No costs.

SO ORDERED.”^[3]

Petitioner moved to have the above decision reconsidered but the same
was denied in a Resolution dated March 9, 1992. Hence, this recourse.

As stated at the very outset, the pivotal issue in this case is
whether or not petitioner should be held accountable for the damage to private
respondent due to the hydro-pressure test conducted by Jesus Feliciano.

It is a well-entrenched rule that an employer-employee
relationship must exist before an employer may be held liable for the
negligence of his employee. It is
likewise firmly settled that the existence or non-existence of the
employer-employee relationship is commonly to be determined by examination of
certain factors or aspects of that relationship. These include: (a) the
manner of selection and engagement of the putative employee; (b) the mode of
payment of wages; (c) the presence or absence of a power to control the
putative employee’s conduct,^[4]
although the latter is the most important element.^[5]

In this case, respondent Court of Appeals held petitioner liable
for the damage caused to private respondent as a result of the hydro-pressure
test conducted by Jesus Feliciano due to the following circumstances:^[6]

1. Feliciano was hired by
petitioner;

2. He received his
instructions from the Field Engineer of petitioner, Mr. Roberto Mitra;

3. While he was at
private respondent’s service station, he also received instructions from Nick
Manalo, petitioner’s Poro Point Depot Superintendent;

4. Instructions from
petitioner’s Manila Office were also relayed to him while he was at the job
site at Baguio City;

5. His work was under the
constant supervision of petitioner’s engineer;

6. Before he could
complete the work, he was instructed by Mr. Manalo, petitioner’s
Superintendent, to discontinue the same and it was turned over to Daniel
Pascua, who was likewise hired by petitioner.

Based on the foregoing, respondent Court of Appeals concluded
that Feliciano was not an independent contractor but was under the control and
supervision of petitioner in the performance of the hydro-pressure test, hence,
it held petitioner liable for the former’s acts and omissions.

We are not in accord with the above finding of respondent Court
of Appeals. As aptly held by the trial
court, petitioner did not exercise control and supervision over Feliciano with
regard to the manner in which he conducted the hydro-pressure test. All that petitioner did, through its Field
Engineer, Roberto Mitra, was relay to Feliciano the request of private
respondent for a hydro-pressure test, to determine any possible leakages in the
storage tanks in her gasoline station. The mere hiring of Feliciano by petitioner for that particular task is
not the form of control and supervision contemplated by law which may be the
basis for establishing an employer-employee relationship between petitioner and
Feliciano. The fact that there was no
such control is further amplified by the absence of any Shell representative in
the job site at the time when the test was conducted. Roberto Mitra was never there. Only Feliciano and his men were.

True, it was petitioner who sent Feliciano to private
respondent’s gasoline station to conduct the hydro-pressure test as per the
request of private respondent herself. But this single act did not automatically make Feliciano an employee of
petitioner. As discussed earlier, more
than mere hiring is required. It must
further be established that petitioner is the one who is paying Feliciano’s
salary on a regular basis; that it has the power to dismiss said employee, and
more importantly, that petitioner has control and supervision over the work of Feliciano. The last requisite was sorely missing in the
instant case.

A careful perusal of the records will lead to the conclusion that
Feliciano is an independent contractor. Section 8 of Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code provides:

“Sec. 8. Job
contracting. – There is job contracting permissible under the Code if the
following conditions are met:

(1) The contractor carries on an independent
business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of
his employer or principal in all matters connected with the performance of the
work except as to the results thereof; and

(2) The contractor has substantial capital or
investment in the form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of his business.”

Feliciano is independently maintaining a business under a duly
registered business name, “JFS Repair and Maintenance Service,” and
is duly registered with the Bureau of Domestic Trade.^[7] He
does not enjoy a fixed salary but instead charges a lump sum consideration for
every piece of work he accomplishes.^[8] If he
is not able to finish his work, he does not get paid, as what happened in this
case.^[9]
Further, Feliciano utilizes his own tools and equipment and has a complement of
workers. Neither is he required to work
on a regular basis. Instead, he merely
awaits calls from clients such as petitioner whenever repairs and maintenance
services are requested. Moreover,
Feliciano does not exclusively service petitioner because he can accept other
business but not from other oil companies.^[10] All
these are the hallmarks of an independent contractor.

Being an independent contractor, Feliciano is responsible for his
own acts and omissions. As he alone was
in control over the manner of how he was to undertake the hydro-pressure test,
he alone must bear the consequences of his negligence, if any, in the conduct
of the same.

Anent the issue of damages, the same has been rendered moot by
the failure of private respondent to establish an employer-employee
relationship between petitioner and Feliciano. Absent said relationship, petitioner cannot be held liable for the acts
and omissions of the independent contractor, Feliciano.

WHEREFORE, premises considered, the appealed decision of
respondent Court of Appeals is hereby SET ASIDE and the decision of the trial
court REINSTATED. Without pronouncement
as to costs.

SO ORDERED.

Narvasa, C.J., (Chairman), Padilla, Regalado, and Nocon, JJ., concur.

^[1]
Rollo, p. 63.

^[2]
Decision, “Clarita T. Camacho vs. Pilipinas Shell Petroleum
Corporation,” Civil Case No. 83-20735, December 17, 1985, Judge Bernardo
P. Pardo; Rollo, p. 94.

^[3]
Penned by Justice Jorge S. Imperial; concurred in by Justices Manuel C. Herrera
and Arturo B. Buena; Rollo, p. 53.

^[4]
Hijos de F. Escaño, Inc. vs. NLRC, 201 SCRA 63 (1991).

^[5]
Besa vs. Trajano, 146 SCRA 501 (1986).

^[6]
Supra, note 4 at p. 50.

^[7]
Exhibit “3”, Original Records, p. 258; TSN, February 7, 1985, pp.
24-26.

^[8]
Ibid., p. 31.

^[9]
TSN, March 28, 1985, pp. 30-31.

^[10]
TSN, February 7, 1985, pp. 24-29.