PMI Colleges vs National Labor

Relations Commission
277 SCRA 462 – Business Organization – 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 the
remunerations due
to Galvan. 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 the 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.