Dang, I can give a good short answer to this. The simple answer is: the sword exists if you make it your first job to talk to Damaris, get the quest, then make her sword the first thing you pick up the moment you wake up in the zone past the tutorial zone. Okay, I am kind of exaggerating but for people who know how buggy this game is they'll feel I'm telling the figurative truth. Otherwise you'll find the exact same sword, but it somehow doesn't count as Damaris' sword. Glorious spaghetti code!
It has been a long time since I played and I only have an old version I'm not willing to boot up now so please tolerate my lack of ability to specify exact names and locations.
First, go to the taberna where Damaris is, talk to her, get the quest. I may as well add that you should ask about taking off your mask because if you don't you don't get the quest to do that. It's weird that roleplaying dialogue a certain way can lock you out of the main quest to get your fun-looking body.
Secondly, on the roads towards the taberna across a thin walkway over a stream, past this walkway will be a cave tunnel where 3 statues form the scene of a woman sexed (raped?) by 2 men. This statue arrangement in this tunnel is unique in the whole game. Just outside that tunnel between the tunnel and the bridge, a statue stands with a sword plunged into it. This is Damaris' sword.
Bonus: It bugs out hella often, often spawning multiple copies of said sword in the same place. You can probably score at least 1 more copy to keep one for yourself after you give on to Damaris. You can even sell Damaris' sword to Damaris and she won't recognize it... making this approach impossible as a solution to resolve a bugged sword quest but nice as extra income. It's a decently fast and strong sword with a nice blocking bonus and a nice crit chance. However the poisonous viper sword is overall better for DPS, there's a 2-handed big blade that gives you a nice moveset though not much more damage, and there's a one-handed axe around though I've not seen the quest to get it yet.
I'm super busy these days and the previous update didn't seem to add much. I might get the next version after and play that for a while though.