Cui vs.

Arellano University 2 SCRA 205

Facts: Before the school year 1948-1949, the petitioner took up preparatory law course in the Arellano
University. After finishing his preparatory law course plaintiff enrolled in the College of Law of the
defendant from the school year 1948-1949. Plaintiff finished his law studies in the defendant university
up to and including the first semester of the fourth year. During all the school years in which plaintiff
was studying law in defendant law college, Francisco R. Capistrano, brother of the mother of plaintiff,
was the dean of the College of Law and legal counsel of the defendant university. Plaintiff enrolled for
the last semester of his law studies in the defendant university but failed to pay his tuition fees, because
his uncle Dean Francisco R. Capistrano having severed his connection with defendant and having
accepted the deanship and chancellorship of the College of Law of Abad Santos University, plaintiff left
the defendant's law college and enrolled for the last semester of his fourth year law in the college of law
of the Abad Santos University graduating from the college of law of the latter university. Plaintiff, during
all the time he was studying law in Arellano University was awarded scholarship grants, for scholastic
merit, so that his semestral tuition fees were returned to him after the ends of semesters and when his
scholarship grants were awarded to him. The whole amount of tuition fees paid by plaintiff to defendant
and refunded to him by the latter from the first semester up to and including the first semester of his
last year in the college of law or the fourth year, is in total P 1,033.87.

After graduating in law from Abad Santos University he applied to take the bar examination. To secure
permission to take the bar he needed the transcripts of his records in defendant Arellano University.
Plaintiff petitioned the latter to issue to him the needed transcripts. The defendant refused until after he
had paid back the P 1,033.87 which defendant refunded to him as above stated. As he could not take
the bar examination without those transcripts, plaintiff paid to defendant the said sum under protest.
This is the sum which plaintiff seeks to recover from defendant in this case.

"Before defendant awarded to plaintiff the scholarship grants as above stated, he was made to sign the
following contract, covenant and agreement. In consideration of the scholarship granted to me by the
University, I hereby waive my right to transfer to another school without having refunded to the
University (defendant) the equivalent of my scholarship cash.
Issue: Whether or not the contract between Cui and Arellano University, whereby the former waived his
right to transfer to another school without refunding the equivalent cash of his scholarship valid or not.

Ruling: Not valid, because the contract is contrary to public policy. Scholarships are awarded in
recognition of merit not to keep outstanding students in school to bolster its prestige. In the
understanding of that university scholarships award is a business scheme designed to increase the
business potential of an educational institution. Thus conceived it is not only inconsistent with sound
policy but also good morals.
The decision appealed from is hereby reversed, and another one shall be entered sentencing the
defendant to pay to the plaintiff the sum of P 1,033.87, with interest thereon at the legal rate from
September 1, 1954, date of the institution of this case, as well as the costs, and dismissing defendant's
counterclaim.