G.R. No. 121466 – 343 Phil. 237 – 277 SCRA 462 – Mercantile Law – Corporation Law – By-laws and Innocent Third Persons
In 1991, PMI Colleges hired the services of Alejandro Galvan for the latter to teach in said institution. However, for unknown reasons, PMI defaulted from paying his remunerations. Galvan made demands but were ignored by PMI. Eventually, Galvan filed a labor case against PMI. Galvan got a favorable judgment from the Labor Arbiter; this was affirmed by the National Labor Relations Commission. On appeal, PMI reiterated, among others, that the employment of Galvan is void because it did not comply with its by-laws. Apparently, the by-laws require that an employment contract must be signed by the Chairman of the Board of PMI. PMI asserts that Galvan’s employment contract was not signed by the Chairman of the Board.
ISSUE: Whether or not Galvan’s employment contract is void.
HELD: No. PMI Colleges never even presented a copy of their by-laws to prove the existence of such provision. But even if it did, the employment contract cannot be rendered invalid just because it does not bear the signature of the Chairman of the Board of PMI. By-Laws operate merely as internal rules among the stockholders, they cannot affect or prejudice third persons who deal with the corporation, unless they have knowledge of the same. In this case, PMI was not able to prove that Galvan knew of said provision in the by-laws when he was employed by PMI.
