SUPREME COURT
Manila
EN BANC
G.R. No. L-15127 May 30, 1961
EMETERIO CUI, plaintiff-appellant,
vs.
ARELLANO UNIVERSITY, defendant-appellee.
G.A.S. Sipin, Jr., for plaintiff-appellant.
E. Voltaire Garcia for defendant-appellee.
CONCEPCION, J.:
Appeal by plaintiff Emeterio Cui from a decision of the Court of First
Instance of Manila, absolving defendant Arellano University from
plaintiff's complaint, with costs against the plaintiff, and dismissing
defendant's counter claim, for insufficiency of proof thereon.
In the language of the decision appealed from:
The essential facts of this case are short and undisputed.
As established by the agreement of facts Exhibits X and
by the respective oral and documentary evidence
introduced by the parties, it appears conclusive that
plaintiff, before the school year 1948-1949 took up
preparatory law course in the defendant 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 defendant
university was awarded scholarship grants, for scholastic
merit, so that his semestral tuition fees were returned to
him after the ends of semester 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 P1,033.87. 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 P1,033 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.
(Sgd.) Emeterio Cui".
It is admitted that, on August 16, 1949, the Director of Private
Schools issued Memorandum No. 38, series of 1949, on the
subject of "Scholarship," addressed to "All heads of private schools,
colleges and universities," reading:
1. School catalogs and prospectuses submitted to this,
Bureau show that some schools offer full or partial
scholarships to deserving students — for excellence in
scholarship or for leadership in extra-curricular activities.
Such inducements to poor but gifted students should be
encouraged. But to stipulate the condition that such
scholarships are good only if the students concerned
continue in the same school nullifies the principle of merit
in the award of these scholarships.
2. When students are given full or partial scholarships, it
is understood that such scholarships are merited and
earned. The amount in tuition and other fees
corresponding to these scholarships should not be
subsequently charged to the recipient students when
they decide to quit school or to transfer to another
institution. Scholarships should not be offered merely to
attract and keep students in a school.
3. Several complaints have actually been received from
students who have enjoyed scholarships, full or partial, to
the effect that they could not transfer to other schools
since their credentials would not be released unless they
would pay the fees corresponding to the period of the
scholarships. Where the Bureau believes that the right of
the student to transfer is being denied on this ground, it
reserves the right to authorize such transfer.
that defendant herein received a copy of this memorandum; that
plaintiff asked the Bureau of Private Schools to pass upon the issue
on his right to secure the transcript of his record in defendant
University, without being required to refund the sum of P1,033.87;
that the Bureau of Private Schools upheld the position taken by the
plaintiff and so advised the defendant; and that, this
notwithstanding, the latter refused to issue said transcript of
records, unless said refund were made, and even recommended to
said Bureau that it issue a written order directing the defendant to
release said transcript of record, "so that the case may be
presented to the court for judicial action." As above stated, plaintiff
was, accordingly, constrained to pay, and did pay under protest,
said sum of P1,033.87, in order that he could take the bar
examination in 1953. Subsequently, he brought this action for the
recovery of said amount, aside from P2,000 as moral damages,
P500 as exemplary damages, P2,000 as attorney's fees, and P500
as expenses of litigation.
In its answer, defendant reiterated the stand it took, vis-a-vis the
Bureau of Private Schools, namely, that the provisions of its
contract with plaintiff are valid and binding and that the
memorandum above-referred to is null and void. It, likewise, set up
a counterclaim for P10,000.00 as damages, and P3,000 as
attorney's fees.
The issue in this case is whether the above quoted provision of the
contract between plaintiff and the defendant, whereby the former
waived his right to transfer to another school without refunding to
the latter the equivalent of his scholarships in cash, is valid or not.
The lower court resolved this question in the affirmative, upon the
ground that the aforementioned memorandum of the Director of
Private Schools is not a law; that the provisions thereof are
advisory, not mandatory in nature; and that, although the
contractual provision "may be unethical, yet it was more unethical
for plaintiff to quit studying with the defendant without good reasons
and simply because he wanted to follow the example of his uncle."
Moreover, defendant maintains in its brief that the aforementioned
memorandum of the Director of Private Schools is null and void
because said officer had no authority to issue it, and because it had
been neither approved by the corresponding department head nor
published in the official gazette.
We do not deem it necessary or advisable to consider as the lower
court did, the question whether plaintiff had sufficient reasons or not
to transfer from defendant University to the Abad Santos University.
The nature of the issue before us, and its far reaching effects,
transcend personal equations and demand a determination of the
case from a high impersonal plane. Neither do we deem it essential
to pass upon the validity of said Memorandum No. 38, for,
regardless of the same, we are of the opinion that the stipulation in
question is contrary to public policy and, hence, null and void. The
aforesaid memorandum merely incorporates a sound principle of
public policy. As the Director of Private Schools correctly pointed,
out in his letter, Exhibit B, to the defendant,
There is one more point that merits refutation and that is
whether or not the contract entered into between Cui and
Arellano University on September 10, 1951 was void as
against public policy. In the case of Zeigel vs. Illinois
Trust and Savings Bank, 245 Ill. 180, 19 Ann. Case 127,
the court said: 'In determining a public policy of the state,
courts are limited to a consideration of the Constitution,
the judicial decisions, the statutes, and the practice of
government officers.' It might take more than a
government bureau or office to lay down or establish a
public policy, as alleged in your communication, but
courts consider the practices of government officials as
one of the four factors in determining a public policy of
the state. It has been consistently held in America that
under the principles relating to the doctrine of public
policy, as applied to the law of contracts, courts of justice
will not recognize or uphold a transaction which its object,
operation, or tendency is calculated to be prejudicial to
the public welfare, to sound morality or to civic
honesty (Ritter vs. Mutual Life Ins. Co., 169 U.S. 139;
Heding vs. Gallaghere 64 L.R.A. 811; Veazy vs. Allen,
173 N.Y. 359). If Arellano University understood clearly
the real essence of scholarships and the motives which
prompted this office to issue Memorandum No. 38, s.
1949, it should have not entered into a contract of waiver
with Cui on September 10, 1951, which is a direct
violation of our Memorandum and an open challenge to
the authority of the Director of Private Schools because
the contract was repugnant to sound morality and civic
honesty. And finally, in Gabriel vs. Monte de Piedad, Off.
Gazette Supp. Dec. 6, 1941, p. 67 we read: 'In order to
declare a contract void as against public policy, a court
must find that the contract as to consideration or the thing
to be done, contravenes some established interest of
society, or is inconsistent with sound policy and good
moralsor tends clearly to undermine the security of
individual rights. The policy enunciated in Memorandum
No. 38, s. 1949 is sound policy. Scholarship 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 education institution. Thus conceived it is not only
inconsistent with sound policy but also good morals. But
what is morals? Manresa has this definition. It is good
customs; those generally accepted principles of morality
which have received some kind of social and practical
confirmation. The practice of awarding scholarships to
attract students and keep them in school is not good
customs nor has it received some kind of social and
practical confirmation except in some private institutions
as in Arellano University. The University of the
Philippines which implements Section 5 of Article XIV of
the Constitution with reference to the giving of free
scholarships to gifted children, does not require scholars
to reimburse the corresponding value of the scholarships
if they transfer to other schools. So also with the leading
colleges and universities of the United States after which
our educational practices or policies are patterned. In
these institutions scholarships are granted not to attract
and to keep brilliant students in school for their
propaganda mine but to reward merit or help gifted
students in whom society has an established interest or a
first lien. (Emphasis supplied.)
WHEREFORE, the decision appealed from is hereby reversed and
another one shall be entered sentencing the defendant to pay to
the plaintiff the sum of P1,033.87, 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. It is so
ordered.
Bengzon, C.J., Padilla, Labrador, Reyes, J.B.L., Barrera, Parades,
Dizon, De Leon and Natividad, JJ., concur.
Bautista Angelo, J., reserves his vote.
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