Facts:

The case involves Davao Grains Incorporated and Lapanday Agricultural and Development Corporation as petitioners against the Intermediate Appellate Court and private respondents Protacio Espina and Marcial Espina. The events leading to the case unfolded in Asuncion, Davao, where the Espina brothers entered a parcel of land after the liberation of the Philippines in 1945. They discovered the land was abandoned, settled on it, cleared it, and built houses. On April 28, 1954, they filed a homestead application for the land and paid the necessary fees. While awaiting the issuance of a patent, the government initiated cadastral proceedings for the area, requiring all claimants to file answers. The Espinas participated and, on June 19, 1970, received Decree No. N-130436, leading to the issuance of Original Certificate of Title (OCT) No. 0-2440 in their names.

On May 28, 1975, the Espinas sold the property to Lapanday for P24,520.40, resulting in the cancellation of OCT No. 0-244...

Facts:

Background of the Land

• The parcel of land in question is Lot No. 138, situated in Asuncion, Davao. It was originally occupied by Pablo Gozo, who filed a homestead application (No. 248756) on November 7, 1941, which was approved by the Bureau of Lands.

Private Respondents' Occupation

• After the liberation of the Philippines in 1945, Protacio Espina and Marcial Espina (private respondents) entered the land, which they found abandoned. They cleared, developed, and built houses on the property.
• On April 28, 1954, private respondents filed a homestead application for the land and paid the necessary fees.

Cadastral Proceedings

• Pending the issuance of a homestead patent, cadastral proceedings were initiated by the government covering all lands in Asuncion. Private respondents filed their answer in the cadastral proceedings.
• On June 19, 1970, Decree No. N-130436 was issued in favor of private respondents, and Original Certificate of Title (OCT) No. 0-2440 was issued in their names.

Sale of the Land

• On May 28, 1975, private respondents sold the land to Lapanday Agricultural Development Corporation (Lapanday) for P24,520.40. OCT No. 0-2440 was canceled, and Transfer Certificate of Title (TCT) No. T-19171 was issued in Lapanday's name.
• Lapanday subsequently sold the land to Davao Grains, Inc. on November 10, 1975, and TCT No. T-19171 was canceled, with TCT No. T-20083 issued in favor of Davao Grains, Inc.

Legal Actions

• On March 24, 1980, private respondents filed an action to repurchase the land under Sections 118 and 119 of the Public Land Act (Commonwealth Act No. 141), claiming it was a homestead. The trial court dismissed the case, ruling that the land was a cadastral lot, not a homestead. The decision became final and executory.
• On August 19, 1983, private respondents filed another action for annulment of the sales, arguing that the land was a homestead and subject to repurchase. The trial court ruled in their favor, declaring the sales null and void and reinstating OCT No. 0-2440 in their names.

Appeal

• Petitioners appealed to the Court of Appeals, which affirmed the trial court's decision. Petitioners then filed the present petition before the Supreme Court.

Issue:

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Ruling:

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Ratio:

1. Homestead Character of the Land: The approval of a homestead application segregates the land from the public domain, and the land retains its homestead character even if it is later titled through cadastral proceedings.
2. Innocent Purchaser Doctrine: A purchaser who relies on the correctness of a certificate of title is not bound by restrictions (e.g., homestead conditions) that do not appear on the face of the title. Petitioners, having no knowledge of the homestead character of the land, were protected as innocent purchasers for value.
3. Registration as Operative Act: Under the Land Registration Act, the act of registration is the operative act to convey land. Since the homestead character was not registered, it did not bind the petitioners.
4. Res Judicata and Estoppel: The Court did not address res judicata or estoppel, as the case was resolved on the merits of the homestead and innocent purchaser issues.