The Supreme Court (SC) has ordered Dakak Beach Resort Corporation and its representative, Romeo Jalosjos, to vacate a 1,602-square-meter property in Taguilon, Dapitan City, Zamboanga del Norte. The ruling also states that all permanent structures built on the land now belong to the property’s owner.

In a decision penned by Associate Justice Alfredo Benjamin S. Caguioa, the SC’s Third Division affirmed the rulings of the Regional Trial Court (RTC) and the Court of Appeals (CA). These courts had previously ordered Dakak and Jalosjos to return the property, settle unpaid rent, and pay PHP 1.5 million in damages.

Background of the Case

The land was originally leased to Dakak by Violeta Saguin de Luzuriaga under a 10-year agreement, which stipulated that any permanent structures built during the lease would belong to Luzuriaga upon its expiration. However, Dakak failed to provide her with a copy of the lease contract. Believing the lease had ended after five years, Luzuriaga refused further rental payments and demanded that Dakak vacate the premises.

Dakak, however, continued using the land while refusing to pay rent. When Luzuriaga later sold the property to her daughter, Pilar L. Mendezona, Dakak ignored similar eviction demands from the new owner. As a result, the Spouses Mendezona filed a legal complaint for possession, unpaid rent, and damages against Dakak and Jalosjos with the RTC.

Claims and Legal Arguments

Dakak asserted that it had a preferential right to acquire the property due to its significant financial investments in the area. The company also claimed the right to redeem the land under laws governing adjacent rural properties and insisted that it should not be required to vacate without reimbursement for its structures.

However, the SC ruled against these claims, stating that Dakak had no right of redemption under Article 1621 of the New Civil Code. The law allows owners of adjoining lands to redeem rural properties sold to third parties, but the court determined that Dakak’s property—used for commercial purposes—did not qualify as rural land.

Additionally, the SC ruled that Dakak was not entitled to reimbursement for the built structures, as its lease agreement explicitly stated that ownership of any permanent structures would revert to the landowner upon lease expiration. The court emphasized that Articles 448 and 546 of the New Civil Code, which provide rights to builders in good faith, did not apply since Dakak was aware it did not own the land.

Bad Faith and Damages

The SC found Dakak and Jalosjos guilty of fraud and bad faith, ordering them to pay moral and exemplary damages to Spouses Mendezona. The court strongly condemned their refusal to vacate and continued occupation without payment:

“Dakak has been using [the land] for its own financial gain for more than 20 years at the expense of its lawful owner. The non-payment of rent, outright refusal to vacate despite multiple demands, and the unnecessary prolonging of a simple lease agreement demonstrate utter bad faith and disregard for contractual obligations. This act of oppression against a small landowner cannot be left unpunished.”

The SC’s decision reaffirms property owners' rights and highlights the legal consequences of bad faith in lease agreements. Dakak and Jalosjos must now comply with the ruling and return the property to its rightful owner.