Facts:

The case involves petitioners Olimpio Reyes, Antonio G. Reyes, Irene R. Reyes, Petronila R. Carreon, Natividad R. Gahol, Florencio Carreon, and Dioscoro Gahol against respondents Oscar R. Zubiri, Eufracia Gabay, and the Court of Appeals. The events leading to the case began on August 31, 1959, when spouses Olimpio Reyes and Eulogia Gutierrez, the registered owners of a 4,022 square meter parcel of land in Barrio Panghulo, Malabon, Rizal, leased their property to a partnership named "Capiz and Rafael" for ten years. The lease agreement stipulated that any improvements made by the lessee would belong to the lessor if not removed within sixty days after the lease's expiration. This contract was duly registered with the Registry of Deeds for Rizal.

During the lease, the lessees constructed various improvements on the property, including an adobe stone fence, a garage, a factory, a two-storey residential building, and a canteen. These improvements were also registe...

Facts:

Ownership and Lease of the Land
Petitioners, spouses Olimpio Reyes and Eulogia Gutierrez, were the registered owners of a 4,022-square-meter parcel of land in Barrio Panghulo, Malabon, Rizal, covered by TCT No. 123579. On August 31, 1959, they leased the land to a partnership named "Capiz and Rafael" for ten years. The lease agreement stipulated that all improvements made by the lessee would automatically belong to the lessor if not removed within sixty days after the lease expired. This contract was registered and annotated on the title.

Improvements and Assignments
The lessee built various improvements, including an adobe stone fence, a garage, a factory, a two-storey residential building, and a canteen. These improvements were annotated on the title on March 21, 1960. On October 10, 1961, Cecilio Rafael assigned his leasehold rights and the improvements to Republic Bank, which was also annotated on the title. He mortgaged the improvements to secure a loan from the bank.

Second Assignment to Zubiri
On July 31, 1967, Rafael assigned his leasehold rights and the improvements to private respondent Atty. Oscar Zubiri as payment for legal services. This assignment was not registered. After defaulting on his loan, Rafael filed for insolvency, and Republic Bank did not proceed with the sale of the improvements.

Disputed Transaction Between Reyes and Zubiri
Petitioner Olimpio Reyes claimed he was tricked by Zubiri into signing documents (including a "Kasunduan" and "Sanglaan ng Lupa") on January 30, 1968, which allegedly involved the sale of the improvements for P35,000. Zubiri, however, denied this, stating that Reyes willingly negotiated the sale. Reyes later disputed the documents, claiming they were falsified.

Demand Letters and Legal Action
Respondents Zubiri and Gabay sent demand letters for payment of the balance of the purchase price and mortgage obligations. Petitioners filed a case to annul the contracts, recover ownership of the improvements, and claim damages. The trial court ruled in favor of the petitioners, declaring the documents null and void and awarding damages. The Court of Appeals reversed this decision, prompting the petitioners to file this petition.

Issue:

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Ruling:

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Ratio:

1. Validity of the Second Assignment
   Under the law, once a lessee assigns his leasehold rights and improvements to another party, as Rafael did to Republic Bank, he ceases to have any rights to assign further. The first assignment to Republic Bank was registered and served as constructive notice to all, including Zubiri. Thus, Zubiri acquired nothing from the second assignment.

2. Public Policy and Attorney’s Prohibited Transactions
   Zubiri, as Rafael’s lawyer, was barred by public policy from acquiring rights to the improvements, which could have been subject to execution in Rafael’s pending case. The transfer of rights to Zubiri was null and void.

3. Falsification and Fraud
   The Court found that Zubiri falsified the "Kasunduan" and "Sanglaan ng Lupa" and acted in gross bad faith. Equitable considerations cannot favor a party guilty of fraud and deceit.

4. Ownership of Improvements
   Under the lease contract, the improvements automatically became the property of the lessor (Reyes) if not removed within sixty days after the lease expired. Since the lease ended on August 31, 1969, and the improvements remained, Reyes became their lawful owner.

5. Award of Damages
   The Court deleted the award of moral damages to Reyes due to his contributory negligence but upheld the award of attorney’s fees due to Zubiri’s bad faith.