G.R. No. L-45667; May 9, 1939
HARRY IVES SHOEMAKER, plaintiff-appellant, vs. LA TONDEÑA, INC., defendant-appellee.

FACTS

Plaintiff Harry Ives Shoemaker and defendant La Tondeña, Inc. entered into a written five-year employment contract (Exhibit A) starting January 1, 1929. The contract provided for a minimum annual salary and a six-month paid vacation in 1933. In March 1933, upon the defendant’s urgent request, the parties orally modified the contract: (a) a temporary monthly salary deduction of P200 from March to December 1933, to be repaid if business improved or upon contract termination; and (b) postponement of the 1933 six-month paid vacation until after the contract, with the defendant to either grant the leave or pay equivalent compensation. Plaintiff fully performed his obligations under the modified contract within 1933, including assuming additional duties. The defendant made the deductions and received the benefits. After the contract, the defendant refused to repay the deductions or grant/compensate the vacation. Plaintiff filed a complaint. The defendant demurred, arguing the oral modification was unenforceable under the Statute of Frauds because the original written contract stipulated modifications required written consent and the modified agreement was not to be performed within a year. The trial court sustained the demurrer and dismissed the complaint when plaintiff chose not to amend.

ISSUE

Whether the trial court erred in sustaining the demurrer on the ground that the facts alleged in the complaint do not constitute a cause of action due to the Statute of Frauds.

RULING

Yes. The order is reversed. The demurrer should be overruled. The facts alleged constitute a cause of action. The Statute of Frauds (Section 335, Code of Civil Procedure) renders unenforceable an agreement that by its terms is not to be performed within a year from its making, unless evidenced by a writing. However, the statute does not apply where one party has fully performed his obligations within the year. The complaint hypothetically admits that plaintiff completely performed his side of the oral modification within 1933 (from March to December). The defendant accepted the benefits. To allow the defendant to invoke the statute to avoid its own obligations after receiving full performance would pervert the statute into an instrument for fraud, contrary to its purpose of preventing fraud. The case is remanded for further proceedings.