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G.R. No. L-26339, December 14, 1979.
94 Phil. 556

1. This is about the recovery compensatory, damages of breach of a contract of sale in addition to
the liquidated damages.
Pamintuan and Yu Ping Kun were business partners. Pamintuan was a license barter who export
corn flakes to Japan in exchange of plastic sheetings. Yu Ping Kun complains in violation of their
contract because although plastic sheetings were delivered on the proper time and place. The quality of
materials and overpricing the same violates their agreement.

2. Mariano Pamintuan was in an agreement with Yu Ping Kun Co., Inc. to sell plastic sheetings
imported by the former from Japan through a barter license he had for the export of white flint
corn to Toyo Menka Kaisha, Ltd. While the plastic sheetings were arriving in Manila, Pamintuan
informed the President of Yu Ping Kun that he was in dire need of cash and requested that he be
paid immediately for the plastic sheetings. Consequently, the two parties fixed a price to the
plastic sheetings regardless of the kind, quality or actual invoice value thereof and based it on
dividing the total price of the shipment with its aggregate quantity. After the shipments arrived in
Manila (4 shipments in total), Pamintuan only delivered a portion or 224, 150 yards of the
expected 339, 440 yards of plastic sheetings he received to Yu Ping Kun's warehouse.
Furthermore, he delivered plastic sheetings of inferior quality that were valued at a lesser price
than what Yu Ping Kun had paid. Subsequently, Yu Ping Kun filed an action to enforce a
provision in their contract of sale which states that any violation of the stipulations of that
contract would entitle the aggrieved party to liquidated damages in the amount of 10, 000 Php
from the offending party.

Whether or not compensatory damages may be awarded for breach of a contract of sale in addition to
liquidated damages/stipulated penalty in the said contract.

Yes, compensatory damages may be awarded for breach of a contract of sale in addition to liquidated
damages/stipulated penalty in the said contract. Paragraph 1 of Article 1226 of the New Civil Code states that:
In obligations with a penal clause, the penalty shall substitute the indemnity
for damages and the payment of interests in case of noncompliance, if there is
no stipulation to the contrary. Nevertheless, damages shall be paid if the
obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of
the obligation.
Thus, as a general rule, the penalty takes the place of the indemnity for damages and the payment of
interest. However there are exceptions to this rule under the Civil Code, and one of them is; when the obligor is
guilty of fraud in the fulfillment of the obligation, indemnity for damages may be awarded in addition to and
apart from the penalty stipulated.
The factual findings of the lower courts that Pamintuan was guilty of fraud because he did not make a
complete delivery of the plastic sheetings and he overpriced the same is conclusive upon the Supreme Court.
Hence, based on this fact, Pamintuan should pay damages. However, in case of fraud the creditor (in this case
Yu Ping Kun), in addition to and apart from the stipulated penalty, may only recover the difference between the
actual proven damages and the stipulated penalty.
Bienvenido Babao vs. Florencio Perez Article 1324; statute of fraud

Facts: Santiago Babao married the niece of Celestina Perez. 1924, Santi and Celestina allegedly had a verbal
agreement where Santi was bound to improve the land of Celestina by leveling, clearing, planting fruits and
other crops; that he will act as the administrator of the land; that all expenses for labor and materials will be at
his cost, in consideration of which Celestina in turn bound herself to convey to Santi or his wife 12 of the land,,
with all the improvements after the death of Celestina. But, shortly before Celestinas death, she sold the land to
another part. Thus, Santi filed this complaint alleging the sale of the land as fraudulent and fictitious and prays
to recover the 12 land or the expenses he incurred in improving the land.

Issue: whether or not the verbal agreement falls within the Stature of Frauds

Held: Contracts which by their terms are not to be performed within one year, may be taken out of the statute
through performance by one party thereto. All that is required in such case is complete performance within the
year by one party, however many tears may have to elapse before the agreement is performed by the other party.
But nothing less than full performance by one party will suffice, and it has been held that, if anything remains to
be done after the expiration of the year besides the mere payment of money, the statute will apply. It is not
therefore correct to state that Santiago Babao has fully complied with his part within the year from the alleged
contract in question.
Having reached the conclusion that all the parol evidence of appellee was submitted in violation of the
Statute of Frauds, or of the rule which prohibits testimony against deceased persons, we find unnecessary to
discuss the other issues raised in appellants' brief.
The case is dismissed, with costs against appellee.