Cui v. Arellano University
REITERATIONFacts
The Antecedents: Plaintiff Emeterio Cui enrolled in the preparatory law course and subsequently the College of Law of defendant Arellano University. During his studies, he was awarded scholarship grants for scholastic merit, resulting in the refund of his tuition fees totaling P1,033.87. Before receiving these scholarships, Cui signed a contract waiving his right to transfer to another school without refunding the equivalent of his scholarship cash. When Cui transferred to Abad Santos University for his final semester and graduated therefrom, he needed his transcripts from Arellano University to take the bar examination. Arellano University refused to issue the transcripts unless Cui refunded the P1,033.87. Cui paid the amount under protest and subsequently filed a case to recover it. Procedural History: The Court of First Instance of Manila absolved Arellano University, ruling that the contractual provision was valid and that the Memorandum No. 38 of the Director of Private Schools was advisory, not mandatory. The lower court also found the plaintiff's reasons for transferring to be insufficient. The Petition: Plaintiff appealed the decision of the Court of First Instance, seeking to recover the P1,033.87 paid under protest, along with damages and attorney's fees.
Issue(s)
Whether the stipulation in the contract between the plaintiff and the defendant, whereby the former waived his right to transfer to another school without refunding the equivalent of his scholarships in cash, is valid. Whether Memorandum No. 38, series of 1949, issued by the Director of Private Schools, is binding on private educational institutions.
Ruling
The Supreme Court reversed the decision of the lower court. It ruled that the stipulation in the contract is void as it contravenes public policy. The Court ordered the defendant to pay the plaintiff the sum of P1,033.87 with legal interest and costs, and dismissed the defendant's counterclaim.
Ratio Decidendi
On the validity of the stipulation waiving the right to transfer without refunding scholarship grants: The Court held that the stipulation is void as it contravenes public policy, sound morality, and civic honesty. The Court emphasized that scholarships are awarded in recognition of merit, not to keep outstanding students in school to bolster its prestige or as a business scheme. Such a practice is inconsistent with sound policy and good morals. The University of the Philippines and leading colleges in the United States, which serve as models for Philippine educational practices, do not require reimbursement of scholarship values upon transfer, as scholarships are meant to reward merit or help gifted students in whom society has an interest. The Court cited various American cases and the definition of morals by Manresa to support its stance that contracts prejudicial to public welfare, sound morality, or civic honesty are not upheld by courts. On the binding nature of Memorandum No. 38, series of 1949: While the lower court considered the memorandum advisory, the Supreme Court found it unnecessary to definitively pass upon its validity. The Court stated that regardless of the memorandum's binding force, the stipulation in question is contrary to public policy. The memorandum merely incorporated a sound principle of public policy, and the Director of Private Schools correctly pointed out that the contract was repugnant to sound morality and civic honesty. The Court noted that the practice of awarding scholarships to attract and keep students is not a good custom and lacks social and practical confirmation, unlike the practice of the University of the Philippines.
Main Doctrine
A contractual stipulation requiring a student to refund scholarship grants as a condition for transferring to another school or for the release of academic records is void as it contravenes public policy, sound morality, and civic honesty.