Dixie Glass Co. v. Pollak

• Citation: 91 A.L.R.2d 662,341 S.W.2d 530
• Decision Date: 01 December 1960
• Docket Number: No. 13268,13268
• Parties: DIXIE GLASS, CO., Inc., of Houston, Texas, Appellant, v. Harry H. POLLAK, Appellee.
• Court: Court of Appeals of Texas. Court of Civil Appeals of Texas

Page 530

341 S.W.2d 530

91 A.L.R.2d 662

DIXIE GLASS, CO., Inc., of Houston, Texas, Appellant, v. Harry H. POLLAK, Appellee.

No. 13268.

Court of Civil Appeals of Texas, Houston.

Dec. 1, 1960.

Rehearing Denied Dec. 22, 1960.

Al Schulman, J. Edwin Smith, Houston, for appellant; Dixie & Schulman, Smith & Lehmann, Houston, of counsel.

L. Keith Simmer, M. W. Parse, Jr., Houston, for appellee; Fulbright, Crooker, Freeman, Bates & Jaworski, Houston, of counsel.

BELL, Chief Justice.

The appellee was employed by written contract of January 1, 1953 as comptroller of appellant for a period of five years and was given an option to renew the contract for three additional five-year terms, the option to be exercised six months prior to the end of each term. The contract provided for a weekly salary of $200 and an annual bonus of 10% of the net profits before deduction for income texes. The contract was authorized by the unanimous vote of all officers, directors and stockholders in a joint meeting held January 2, 1953. On October 19, 1955, the appellant discharged appellee.

Appellee sued appellant for breach of this contract, contending his discharge was without good cause, and sought recovery of his damages, alleging them to be the value if paid now of the amounts, salary and bonus, that he would have earned under the contract for the full term, including the terms for which he was given an option, less any amounts that he should be able to earn during said term from other employment or business which he should be able to obtain by the exercise of reasonable diligence.

Trial was to a jury, which found the discharge was without good cause. The jury found the damages up to the time of trial to be $20,277. It also found appellee would earn $156,000 as salary under the contract up to its termination from the time of trial. It allowed no bonus after the time of trial. It also found appellee's earnings in the future, above all necessary expenses, should be $78,000. The court rendered judgment for appellee for $3,116.24, which was the bonus stipulated to be due appellee as of the date of his discharge on October 19, 1955, together with interest from February 1, 1956, and for $98,277, the amount found by the jury, together with interest from the date of judgment. Execution was stayed as to the $78,000 found to be appellee's damages from the date of trial to the end of the contract.

The record in this case is most voluminous, the statement of facts consisting of 1,200 pages and the transcript being 157 pages long. We feel, however, after reading the entire record, that a relatively brief general summary of the evidence will suffice for purposes of disposing of the questions presented on appeal.

The business carried on by appellant was founded by Mr. Abe Zax, now deceased. Mr. Zax died intestate in 1949. Laura Zax, his widow, took her one-half of the community estate and Mr. Zax's one-half interest passed to his daughter, Phyllis Holland, wife of Leonard Holland, and his son, Robert Zax. Mr. Holland began working for the company prior to Mr. Zax's death. In 1951 the company was incorporated. Mrs. Laura Zax, who in 1952 married appellee, Harry H. Pollak, owned 50% of the corporate stock, Phyllis Holland owned 25% and Robert Zax owned 25%. Mrs. Zax was president of the appellant until October, 1955. We think the evidence fairly well establishes that she worked some in the business but was not too active. Mr. Holland was the most active of any member of the family in the business before appellee became connected with it. While Mr. Holland was of course interested in the whole operation, he primarily handled the sales end. Prior to January 1, 1953, when the contract, which is the subject matter of this suit, was entered into with Harry H. Pollak, a Mr. Kennard was employed to handle the office work. It is undisputed that Mrs. Pollak was receiving $100 per week salary and some allowances in addition, and this was unsatisfactory to Mr. Holland who felt she was making no real contribution to the business. There is evidence of friction between Mr. Holland and the Zax family even before Mr. Pollak came into the picture. In any event, Mr. Holland admits he felt it would be good to bring Mr. Pollak into the business. He denies the contract was his idea, and in fact says it was Mr. Pollak's idea. The contract, dated January 1, 1953, was signed by the officers of the corporation and the owners of all of the stock of the corporation. At a joint meeting of the directors of the corporation and the holders of all of the stock of the corporation on January 2, 1953, the contract with Mr. Pollak was approved unanimously by the directors and stockholders and he was employed as comptroller. Mr. Holland was employed, apparently, as vice president in charge of sales, for a period of one year, with the same compensation as provided for Mr. Pollak.

After the execution of the contract Mr. Pollak entered upon the performance of his duties, they being the handling of all office matters. Mrs. Pollak was president of the company, though relatively inactive.

In October, 1951, Mrs. Pollak sold 25% of the company stock to Leonard Holland, so thereafter she owned only 25% of the stock.

From time to time after appellee became connected with the business there was disagreement between him and Mr. Holland. The record is replete with charges made by Mr. Holland concerning the way in which appellee carried out his duties, while appellee testifies similarly as against Mr. Holland. It is unnecessary for us to at this point notice the charges specifically. Nothing was apparently done until at a meeting of the Board of Directors on July 19, 1954, a resolution was passed appointing Mr. Holland as the Board representative to negotiate with appellee 'with regard to the present unsatisfactory conditions existing between Mr. Pollak and the Corporation.' The results of the negotiations were to be reported to the Board.

At a special meeting of the directors called for August 27, 1954, Mr. Holland made his report. The substance of the report was that appellee did not work full time; that he harassed the actual operations of the business and had damaged the company in the eyes of its employees, customers and friends. The resolution found these things to be true. Mr. Pollak was to be advised by letter that he had no contract but if he contended he did it was terminated. Mr. Holland was appointed general manager with supervision over all employees including appellee. Pollak was to continue as an employee at the same pay as then existed, and various specified duties were assigned to him.

At this same meeting it was decided that all car allowances, travel expense, or entertainment expense must be approved by Holland and a member of the Board of Directors.

A copy of the above resolution was sent to Mr. Pollak.

After this, on about September 3, appellee and Holland were in Mr. Hessel's office (he being the attorney for the company). Appellee testified Holland stated he couldn't get along without appellee. Hessel at this time told appellee, Holland being present, the above letter had nothing to do with the contract of employment.

Friction between Holland and appellee continued until the discharge of appellee. Whose fault it was is the subject of great debate in the evidence. Appellant contended appellee did not perform the duties imposed on him by the contract. The jury found, as hereinafter stated, that appellee did perform the duties within the scope of his employment as a person of ordinary prudence in the industry would have performed them under the same or similar circumstances.

Appellant contended the contract was invalid because for a term longer than authorized by its by-laws. It plead waiver and estoppel by appellee of any rights he might have had by reason of his conduct after purported termination of the contract on August 24, 1955. The jury, on sufficient evidence, found to the contrary.

Too, appellant plead that appellee was discharged for good cause because he tried to pay his own legal fees with corporate funds. This will later be discussed. Appellant says appellee fraudulently concealed from it that he had had tax difficulties and had taken bankruptcy. It suffices to note that the tax difficulties under the evidence showed no improper conduct. If a duty existed for appellee to disclose that he had taken bankruptcy, it is sufficient to say such fact was known to Mrs. Pollak, the then president of appellant, and Mr. Stern, then a director. This was notice to appellant.

At the outset we must decide whether the contract employing appellee as comptroller for a term of five years and giving him the option to extend the contract for three five-year terms is a valid one.

The position of appellant is that its by-laws limited the term for its officers to one year. In this connection it says the appellee neither pled nor proved there was not this limitation in its by-laws. Appellant relies on the case of Pioneer Specialties, Inc. v. Nelson, recently decided by our Supreme Court, 339 S.W.2d 199. Our opinion in that case is reported in Nelson v. Pioneer Specialties, Inc., 325 S.W.2d 924. The Supreme Court held that the Board of Directors could not employ Nelson as president for more than one year because the by-laws fixed the president's term of office at one year. However that Court recognized that the Legislature of Texas, by the passage of Article 1327, Vernon's Ann.Tex.St., in 1951, and Article 2.02 of the Texas Business Corporation Act, V.A.T.S., in 1955, had changed the public policy of Texas which had theretofore prevented the employment of corporate officers for more than one year, so that after the passage of these statutes the corporation had the authority to determine the term of an officer. The corporation might through by-law restrict the authority of the board of directors as to the term for which it might employ an officer. In our opinion, in that...