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B2022 REPORTS ANNOTATED VOL 32 [August 6, 1991]

Velez v Balzarza Velez v Balzarza

I. Recit-ready summary Looking at the stipulations of the contract, there was no specific instance of mentioning
interest. Due to article 1755 of the civil code, no interest is due unless it is expressly
stipulated
There can be no presumption as even if multiple pieces of evidence show the fact that it is
Facts: X extended 5 loans to Y, which were secured by mortgages to 7 interest paid, there can be no contention as it does not follow that the interest is expressly
parcels of land belonging to Y. During the period of the loan, X lived on stipulated.
the land. Y paid X periodically, but X insisted that these should be applied
as rent & interest, & not as the principal on the loan.  In Guzman v. Balarag (11 Phil., 503, 508-509 [year 1908]), the plaintiff therein loaned
P1,500 to defendant who mortgaged his house and lot. Plaintiff took possession of the
Held: There was no express stipulation in the contract as to interest; thus, premises and collected rents from third persons. It was claimed by the plaintiff that these
no interest could be charged. Furthermore, X was allowed enjoyment of rents received by him should be applied to the payment of interest. But this Court held
the land, The amount must therefore be applied to the principal. As such, otherwise,
Y had already overpaid & is entitled to reimbursement from X. The two
requisites for solutio indebiti are present: (1) there is no right to collect "If the debtor Pascual Balarag is only under the obligation to pay the creditor, Guzman, the
these excess sums; and (2) the amounts have been paid through mistake 1,500 pesos received as a loan, without interest, upon permitting the latter to collect the rent
by defendants. of property owned by the debtor and keep the amounts so collected, it must be assumed that
it was in order to provide for the refund of the debt arising from the loan. It is not possible to
apply the money except in settlement of the debt, unless the allegations of the debtor be
Taken from Katgaw cause it’s a really simple case.  disproven; the record does not contain any proof of the contrary allegation to the effect that
it was stipulated that the rent collected should be applied to the payment of interest, and the
II. Facts of the case allegation of the defendant debtor is all the more convincing and irrefutable, inasmuch as it
has not in any way been demonstrated that interest on the loan was stipulated."
Velez, the widow of Ramon Neri San Jose, prays for the return of the lands her late
Therefore, the trial court was right in finding that these payments were applied to the
husband purchased from Balzarza. Under a contract of lease, Velez had allowed the use principal.
of the lands to Balzarza but recently has not been receiving the rentals.
In looking at the rules of Solutio Indebiti
Balzarza claims that the agreement was only a loan agreement (Lands being The two requisites are present: (1) there is no right to collect these excess sums; and (2) the
collateral). 2400 was the original amount but a total of 4420.88 pesos has already been paid and amounts have been paid through mistake by defendants.
is now asking for the return of the excess.
Both are met in this case and therefore there is a requirement for the return of the excess
The court found that the total amount borrowed was around 3067 and Balzarza has payment. There being no proof as to interest payments, there was no right to collect the excess
already paid 4429.88. Only 432.63 collected by Velez. payment.

Evidence presented in court (Exhibit A to E) all show the contractual relationship of V. Disposition
Balzarza with Neri. A and D both show a sale with right to repurchase, while B, C and E all
show the loan contract. They do not show if the payments where then paid to the principal or the Wherefore, the judgment appealed from is affirmed, with costs against the appellant.
interest. So ordered.

III. Issue/s VI. Notes

W/N the payments made will be applied to the Principal or the Interest?
- Principal

IV. Ratio/Legal Basis

First, the receipts show no help as there was no mention of them being paid towards the
principal or the interest.

G.R. NO: 177056 PONENTE: Chico Nazario, J


ARTICLE; TOPIC OF CASE: Eminent domain, taking DIGEST MAKER: Ash

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