PAMINTUAN v.

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

FACTS:
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.

ISSUE:
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.

HELD:
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