G.R. No. 73913 - Moles vs. Intermediate Appellate Court

Petitioners are Dakak Beach Resort Corporation (Dakak) and Romeo G. Jalosjos (Jalosjos).
Respondents are Spouses Jose Ma. M. Mendezona and Pilar L. Mendezona.
The dispute concerns Lot No. 8771-A, a 1,602-square-meter property in Taguilon, Dapitan City.
The property was originally owned by Violeta Saguin de Luzuriaga, who leased it to Dakak starting January 1, 1988 under a 10-year lease.

The lease provided a monthly rental starting at PHP 500 for the first two years, increasing by 20% annually thereafter, reaching PHP 2,000 by the tenth year.
The lease term was until December 31, 1997, with a renewal option for an additional five years.
The contract stipulated that all permanent and fixed improvements by the lessee would become the property of the lessor upon termination.

Violeta was not given a copy of the lease despite repeated demands.
In 1993, Violeta reminded Jalosjos to provide a copy and returned rental payments from August to December 1992, believing the lease expired.
In 1994, Violeta demanded Dakak vacate the property but was ignored.
In 1998, Violeta sold the property to her daughter, Pilar, who demanded possession from Dakak in 1999.
Dakak refused to vacate, leading the Spouses Mendezona to file a complaint for recovery of possession, specific performance, rentals, and damages in 2003.

Acknowledged lease expiry in 1997 but claimed preferential right to acquire the property due to their investment.
Asserted right of redemption under Articles 1621 and 1623 of the Civil Code as adjoining landowners.
Claimed entitlement to reimbursement and retention based on improvements made on the leased property.
Offered to buy the property but was refused.

RTC ruled in favor of respondents, ordering Dakak and Jalosjos to vacate within 30 days.
Declared all improvements on the lot belonged to the respondents.
Ordered payment of unpaid rentals from August 1992 to December 1997 and reasonable rent thereafter.
Denied Dakak's right of redemption due to commercial use of land.

Affirmed RTC’s ruling with modifications regarding rental computations.
Sustained classification of the property as agricultural but recognized its commercial use, negating the right of redemption.
Rejected claims under Articles 448 and 1678, citing the lease contract’s specific provisions on improvements.
Adjusted rental rates and struck down RTC-imposed PHP 50,000 monthly rate post-judgment.

Petitioners filed a Petition for Review, contending the rental awards were unconscionable; the lease termination was invalid; and they were entitled to reimbursement for improvements and right of redemption.

Whether the total rent awarded by the Court of Appeals is unconscionable and contrary to law.
Whether the contract of lease was validly terminated.
Whether Dakak is a builder in good faith and entitled to retain the property until reimbursement.
Whether the Spouses Mendezona are obliged to pay Dakak one-half of the value of improvements made upon lease termination.
Whether Dakak and Jalosjos have the right of redemption over Lot No. 8771-A under Articles 1621 and 1623 of the Civil Code.