Facts:

Emeterio Cui is a law student at Arellano University, the defendant, from the year 1948-1949. He was granted a
scholarship program. But before it was granted to him, Cui signed a contract stating that “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 the equivalent of my scholarship cash.” he was enrolled in the University up
to the first semester of the fourth year. In the last semester of his fourth year, Cui transferred to the college of
law Abad Santos University. After he graduated, he applied to take the bar examination. However, one of the
requirements was to pass the transcript of records in Arellano University. Unfortunately , the defendant will not
release Cui the records until he refunds the amount of 1, 033. 87 from his tuition before. The defendant refused
to release such records without having refunded to the defendant the equivalent of the scholarship cash followed
by Memorandum No. 38 that the Director of Private Schools issued. Cui paid the amount under protest in order
for him to successfully apply for the bar examination.

Issue:
WON the 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.

Ruling:
NO. The court found the contract of waiver between Cui and Arellano University to be null and void as it
directly contradicted Memorandum No. 38. This memorandum established sound policy regarding scholarships,
emphasizing that they are awarded based on merit and should not entail subsequent charges if a student decides
to leave or transfer schools. The waiver of the student's right to transfer was deemed against public policy.
Arellano University's actions were viewed as a challenge to the authority of the Director of Private Schools and
were considered morally and civically questionable. Scholarships are meant to recognize merit, support gifted
students, and enhance the school's reputation and business potential, rather than merely attracting or retaining
students.

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The contract of waiver between the Cui and Arellano University isa direct violation of Memorandum No. 38,
hence, null and void. The contract was contrary to sound policy and civic honesty. The policy enunciated in
Memorandum No. 38, s. 1949 is sound policy. 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
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The waiver of the student’s right to transfer schools is contrary to public policy. If Arellano University
understood the real essence of scholarships and the motives which prompted the issuance of Memorandum No.
38, s. 1949, it should have not entered into a contract of waiver with Cui which is a direct violation of the
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. More so, scholarships are awarded in recognition of merit and to
help gifted students and keep outstanding ones in school to bolster its prestige and increase its business
potential.