Court Opinion

ID: 9771472
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:44:39.000351+00
Date Added: 2024-06-11T07:31:31.839405
License: Public Domain

Mr. Justice Walker,
joined by Justices Culver and NorVELL, dissenting.
It seems quite anamalous to say that while an officer of a corporation may be removed by the board of directors at any time, such action can be made the basis of an award of damages against the company for breach of its agreement to employ the particular individual to serve as such officer for a definite period. Respondent was employed only to act as president, and Section 2.43 of the Texas Business Corporation Act provides in no uncertain terms that he may be removed from that office by the board of directors whenever in its judgment the best interests of the corporation will be served thereby. When this provision is read into the agreement as it should be, respondent has no contract rights which can be enforced against the corporation. The two parts of the statute are thus rather incon*249sistent if they are given the meaning attributed to them by the majority.
The majority holding is that the directors could not exercise their statutory authority and remove respondent without at the same time breaching the employment contract. This construction of the statutes will enable a board of directors to place its successors in a position where they must either subject the corporation to heavy financial loss or retain in office one who should be replaced by an available person who is better qualified to hold the position. It can result in the election or retention of an official even though the directors are convinced that the best interests of the corporation require his removal from office. I cannot believe that the Legislature intended any such result when it enacted Section 2.43 and Article 1327, Vernon’s Annotated Texas Civil Statutes.
Under the provisions of Section 2.42 of the Texas Business Corporation Act, an officer of the corporation is not employed but must be elected by the directors. It seems clear to me that when Section 2.43 and Article 1327 speak of contracts of employment and contract rights, they are referring to an agreement by which a person who has been elected to corporate office is employed to perform services which do not inhere in the office held. The president might thus be engaged to act as general manager of the company for a period of years, or a contract could be made for the assistant treasurer to do stenographic work for the other officers. In either instance the contract would not inhibit a free exercise by the board of directors of its statutory judgment and discretion in determining whether the best interests of the company will be served by retaining the particular individual as one of its officials. Removal from office would not interfere in any way with performance of the employment contract by both parties, and enforcement of the agreement would thus be entirely consistent with the power of removal conferred upon the directors by Section 2.43.
In my opinion the statutes simply permit, and recognize the binding effect of, an agreement to employ one who is an official of the company to perform services and functions other than those which are inseparable from the office held. This construction harmonizes and gives meaning and effect to all of their provisions. It also avoids the undesirable consequences of the majority holding "without depriving the directors of power to offer an employment contract for a definite period as a means of inducing capable individuals to accept responsible positions *250with the company. Since respondent was not employed to do anything except act as president and has been legally removed from that office, I would hold that he has no cause of action for breach of contract.
Opinion delivered October 5,1960.
Rehearing overruled November 9,1960.