Cleofe Velez v. Maximo Balzarza

Summary

This case involved a dispute over land transactions between Cleofe Velez and defendants Balzarza and Mabilin. Plaintiff sought return of lands allegedly sold to her deceased husband with repurchase rights, claiming defendants owed unpaid rentals. Defendants contended the transactions were secured loans and they had overpaid. The Supreme Court En Banc affirmed the trial court's finding that the agreements were loans secured by land mortgage, not sales with repurchase rights. The Court determined that payments made by defendants were applied to the principal debt, not as rent or interest, since no interest was expressly stipulated and the creditor had taken possession of the lands and collected their fruits. Finding defendants had overpaid P1,362.88 against loans totaling P3,067, the Court applied Article 1895 of the Civil Code on solutio indebiti (unjust enrichment), ordering plaintiff to return P432.63 she had received in excess. The decision reinforced the principle that no one should be unjustly enriched at another's expense and clarified the legal requirements for interest stipulation in loan agreements.