G.R. No. L-28482 - People vs. Brioso

Petitioners: Bataan Seedling Association, Inc. (BSAI) and Carlos Valencia, representing the association.
Respondent: Republic of the Philippines, represented by the Department of Environment and Natural Resources (DENR).
Entered into a Community Based Reforestation Contract on October 26, 1990, with a total contract price of P975,126.61.
Ancillary documents include a Project Development Plan, an Approved Schedule of Progress Payments, and a Contract of Undertaking for a mobilization fund.

BSAI committed to reforest and plant a fifty-hectare denuded forest land located in Barangay Liyang, Pilar, Bataan within a three-year period.
Specific tasks under the contract included:

Survey and mapping of the fifty-hectare area.
Nursery operations for various tree species.
Plantation establishment activities such as site preparation, spot hoeing, staking, holing, and planting of 83,333 pieces (seedlings, medium-sized seedlings, and sucklers).
Infrastructure developments including a footpath, graded trail, plantation road, bunkhouse, and look-out tower.

Obligations also required periodic submission of progress billings and accomplishment reports as well as timely notification of any delays or adverse events affecting project performance.

A mobilization fund of P75,054.66 was released to BSAI to assist in project commencement.
The fund was to be returned to the DENR upon completion of the project or deducted from periodic releases.
The fund was later scrutinized when its balance became an issue upon the alleged non-compliance.

Failure to fully plant/establish the entire fifty-hectare area during the first year.
Improper handling or disposal of seedlings and lack of proper care in the nursery, resulting in overgrown, neglected seedlings.
Failure to report a forest fire in December 1991, which substantially damaged the reforestation area.
Non-submission of required progress reports and accomplishment documents.

Field inspections by the PENRO/CENRO Monitoring and Evaluation Team on March 18, 25, and 31, 1992 which found the project area abandoned (except for an inhabitant of a bunkhouse).
Repeated notices, both written and verbal, with no adequate response from petitioners.

The Regional Trial Court of Quezon City initially ruled that while the DENR had grounds to cancel the contract, petitioners were only liable for exemplary damages of P50,000.00 without refund of the mobilization fund.
The Court of Appeals (CA) modified the trial court’s decision:

Ordered petitioners to refund a balance of P56,290.69 (representing the remaining mobilization fund), with interest at 12% per annum from January 27, 1994, until full payment.
Upheld the award of exemplary damages against petitioners.

Petitioners raised issues on the validity of the unilateral cancellation and the award imposed, contesting both the contractual interpretation and the imposed interest rate.

Whether the DENR’s unilateral cancellation of the Community-Based Reforestation Contract was legally and factually justified given the alleged failures of BSAI.
Whether BSAI’s failure to fully plant the entire fifty-hectare area in the first year constituted a material breach warranting cancellation.

Whether the award directing petitioners to refund the balance of the mobilization fund amounting to P56,290.69, plus interest at 12% per annum, is correct and supported by the contractual provisions.
Whether the mobilization fund should be considered a mere advance on work or should be reimbursed given the breaches committed.

Whether the award of exemplary damages, originally set at P50,000.00, is legally sustainable given the circumstances of the breach and the nature of the contractual violation.