Court Opinion

ID: 9768996
Source: CourtListenerOpinion
Date Created: 2023-08-29 14:01:52.898395+00
Date Added: 2024-06-11T15:04:27.590373
License: Public Domain

WHITHAM, Justice.
The appellee-employee, Glenn D. Sealock, and the appellant-employer, Texas Federal Savings & Loan Association, had a written employment agreement. The agreement contained a “golden parachute” provision. The term “golden parachute” refers generally to agreements between a corporation and its top officers which guarantee those officers continued employment, payment of a lump sum, or other benefits in the event of a change of corporate ownership. Schreiber v. Burlington Northern, Inc., 472 U.S. 1, 105 S.Ct. 2458, 2460 n. 2, 86 L.Ed.2d 1 (1985). A corporate reorganization pertaining to Texas Federal occurred. Texas Federal refers to that transaction as a “reverse triangular merger.” We will use the same description. The principal issue is whether the reverse triangular merger triggered the golden parachute provision. The trial court rendered judgment in favor of Sealock awarding recovery of contractual liquidated damages under the golden parachute provision. We conclude that the reverse triangular merger did not trigger the golden parachute provision for liquidated damages in Sealock’s employment agreement. Thus, Sealock’s parachute never opened. Accordingly, we reverse and render a take-nothing judgment against Sealock.

Sealock’s Paragraph 6(b) Claim

On July 27, 1981, Sealock, as employee, and Texas Federal, as employer, made a written contract. The pertinent parts of Sealock’s employment agreement are as follows:
1. Term
This Agreement shall be for a term of two (2) years, to commence immediately upon Texas Federal’s receipt of its charter S as as [sic] capital stock savings and loan association; provided, however, that should such charter not be granted prior *872to September 1, 1981, then this Agreement shall become null and void upon such date, and be of no force or effect. The term shall automatically renew from year to year, and shall be terminable by either party at the expiration of the original or any renewal term upon the giving of six (6) months prior written notice of such intention to the other party, or as otherwise provided herein.
* * * * * *
5. Compensation for services
In consideration for the services to be performed by the Employee, Texas Federal agrees to pay to the Employee an annual salary of $61,000 which shall be subject to increment from time to time as the Board of Directors of Texas Federal, in its sole discretion may determine. In addition, the Employee shall be reimbursed for any actual travel and other business expenses necessarily incurred by the Employee in the performance of his duties hereunder. The Employee shall receive such additional compensation in the form of fringe benefits, such as, insurance, pension, bonus, stock options, etc. as the Board of Directors of Texas Federal in its sole discretion may from time to time determine. As used herein, the term “total annual compensation” means the aggregate of the Employee’s annual salary and fringe benefits provided to the Employee by Texas Federal as additional compensation. ******
6. Termination
a. In the event that the Employee shall breach or violate any term or condition of this Agreement, Texas Federal may thereupon terminate his employment consistent with the then current employment and termination of employment practices of Texas Federal; but in no event shall the effective date of termination by [sic] earlier then [sic] ten (10) days after written notification of the date of discharge by the Association to the employee.
b. If, during the term of this contract, ownership of 10 percent (10%) or more of the outstanding voting securities of Texas Federal become vested in any person or group of persons acting in concert and subsequent to the vesting of such ownership Texas Federal terminates the employment of Employee, for any reason other than theft, or commission of a felony in the course of employment. The parties contemplate that the damages resulting to the Employee from such determination will be difficult to ascertain. Accordingly, in such circumstances, Texas Federal agrees to pay to the Employee, as liquidated damages and not as penalty, an amount equal to twice the Employee’s then total annual compensation; that amount of compensation is mutually determined to be reasonable by the parties.
(For clarity, we conclude that the first two sentences of paragraph 6(b) must be read as the following one sentence: “If during the term of this contract, ownership of 10 percent (10%) or more of the outstanding voting securities of Texas Federal become vested in any person or group of persons acting in concert and subsequent to the vesting of such ownership Texas Federal terminates the employment of Employee, for any reason other than theft, or commission of a felony in the course of employment[,] [t]he parties contemplate that the damages resulting to the Employee from such []termination will be difficult to ascertain.”) Paragraph 6(b) is the golden parachute provision at issue.
We will describe the reverse triangular merger in more detail later. For now, know that during the spring of 1983, a holding company, Texas Federal Financial Corporation (TFFC), was organized by the directors and officers of Texas Federal as a Delaware corporation. In the transaction, a newly created second savings and loan association, which was a subsidiary of TFFC, was to merge into Texas Federal and thereby the “resulting association” was to become a wholly owned subsidiary of the holding company. Other than estab*873lish the holding company, however, the merger was not to result in any change of management or control at Texas Federal. During the summer months of 1983, the necessary steps to set up TFFC as a holding company for Texas Federal were complete. On September 8, 1983, all governmental approvals had been obtained and the merger (the “September 8 merger”) became effective so that the “Resulting Association” (named Texas Federal Savings & Loan Association) formed by the merger of the TFFC subsidiary into Texas Federal became a subsidiary of TFFC. Hence, our use of the name “Texas Federal” for periods after September 8, 1983, is not intended to suggest that the “Resulting Association” called “Texas Federal” is one and the same as the entity called “Texas Federal” prior to September 8,1983. Upon the merger becoming effective, all outstanding shares of stock (i.e., the voting securities) of Texas Federal became and were converted, by the express language of the merger agreement and by operation of law and without any action on the part of the stockholder, into the right to receive shares of TFFC on a share for share basis. Following the merger, Texas Federal’s common stock ceased to be authorized to be quoted on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”) and the registration of the stock under the Securities Exchange Act of 1934 was terminated. TFFC stock was thereafter so quoted and registered. In short, as of September 8, 1983, all outstanding voting securities of Texas Federal ceased to exist as such and were instead considered by operation of law to be the equivalent of shares of TFFC stock. Seal-ock was discharged by Texas Federal on September 19, 1983, eleven days after the September 8 merger.
Although a jury case, the trial court did not submit to the jury any issue or issues bearing on whether the September 8 merger triggered the liquidated damages provision in paragraph 6(b). Instead, the trial court treated the question of whether the September 8 merger triggered the liquidated damages provision in paragraph 6(b) as a question of law. Hence, in its judgment, the trial court found:
Further, the Court is of the opinion that the September 8, 1983 merger between [Texas Federal] and [TFFC’s] wholly-owned subsidiary constituted, under 6(b), a “vesting” of the entire ownership of [Texas Federal] in [TFFC], as a matter of law.
Thus, the trial court determined that, as a matter of law, the reverse triangular merger triggered the golden parachute provisions for liquidated damages in paragraph 6(b) in Sealock’s employment contract and assessed damages based on the jury’s damage awards.1 In this connection, we note that at oral argument both parties conceded that Sealock’s employment agreement was unambiguous. Furthermore, we note that the facts regarding the reverse triangular merger transaction are undisputed. Therefore, we reach the question of whether the trial court correctly determined that the September 8 merger between Texas Federal and TFFC’s wholly-owned subsidiary constituted, under paragraph 6(b), a vesting of the entire ownership of Texas Federal in TFFC, as a matter of law.
In its first two points of error, Texas Federal contends that the trial court erred in overruling its motion for judgment and motion for new trial (1) because, as a matter of law, the undisputed evidence establishes that Sealock was not entitled to recover under Paragraph 6(b) of the employment agreement in that there was no vesting of the ownership of ten percent or more of Texas Federal’s outstanding voting securities in any person or group prior to Seal-ock’s termination, as required by Paragraph 6(b); and (2) because there is no evidence to establish that the ownership of *874ten percent or more of Texas Federal’s outstanding voting securities vested in any person or group prior to Sealock’s termination. We agree. At trial, in order to prevail on his claim, Sealock had the burden of proving that paragraph 6(b) was triggered and became operative; that is, that “ownership of 10 percent (10%) or more of the outstanding voting securities of Texas Federal [became] vested in any person or group of persons,” (emphasis added) prior to his discharge. We conclude that Sealock failed in his burden. We reach this conclusion for the reason that the shares of the old Texas Federal existing prior to the September 8 merger disappeared in the reverse triangular merger. Therefore, being non-existent, we reason that the “outstanding voting securities of Texas Federal” could never be vested in “any person or group of persons acting in concert.”
The facts regarding the reverse triangular merger are undisputed. We now provide a more detailed description of the transaction. On April 25,1983, Texas Federal entered into the merger agreement with TFFC and its subsidiary. On April 26, 1983, Texas Federal issued its Notice of Annual Meeting of Stockholders and Proxy Statement seeking approval of the proposed merger and new holding company. Sealock was a stockholder at this time. On May 2, 1983, Sealock executed his copy of the proxy statement. On May 4, 1983, Texas Federal received Sealock’s executed proxy allowing his shares to be voted in favor of the merger. The proxy statement made clear that there would be no change in the control of Texas Federal as a result of the merger. The merger of Texas Federal and the newly formed subsidiary of TFFC would create a surviving savings and loan association (the “Resulting Association”), which Resulting Association would have the name “Texas Federal Savings & Loan Association,” and “will continue the operations of the Association at the same locations, with the same management, and with all of the rights, obligations, and liabilities of the Association immediately prior to the Merger.” (Emphasis added.) “The present directors of the Association will become the directors of the Resulting Association, and the present officers of the Association will become the officers of the Resulting Association, each serving in the position or positions he or she now holds with the Association.” (Emphasis added.) On May 17,1983, at the stockholders’ meeting, the merger was approved by the stockholders and no stockholder exercised any dissenter's rights.
The purpose of the merger was to establish TFFC as a savings and loan holding company. The merger agreement identifies four separate entities, either “associations” or “corporations”. The entity referred to as “Employer” in Sealock’s employment agreement was known as “Texas Federal Savings & Loan Association”. This first entity was identified in the merger agreement as the “Existing Association.” At the time the merger agreement was signed, Texas Federal — the Existing Association — had previously caused to be issued 1,500,000 shares of common stock and 100,000 shares of preferred stock. The public owned such “outstanding” shares. These shares of stock were referred to in Sealock’s employment agreement as the “outstanding voting securities of Texas Federal.”
The second entity mentioned in the merger agreement was TFFC, referred to as “the Corporation”. TFFC was organized as a Delaware corporation on April 6, 1983. Prior to the merger, TFFC had no outstanding shares of stock and no capital. However, it did have sufficient authorized common and preferred stock to issue to the shareholders of Texas Federal — the Existing Association — exactly the same number of shares of TFFC stock as those shareholders owned of the Existing Association upon the merger becoming effective.
The third entity identified in the merger agreement, New Texas Federal Savings & Loan Association (the “Other Association”), was also a new corporation chartered shortly prior to the merger. Immediately *875prior to the merger, the Other Association had issued all of its 1,000 shares of common stock to TFFC for $1,000.00. Thus, immediately prior to the merger, the Other Association was already the wholly owned subsidiary of TFFC. As in the case of the Existing Association, the Other Association lost its separate identity as a result of the merger.
The fourth and last entity referred to in the merger agreement was actually created by the merger. That entity was known as the “Resulting Association.” Pursuant to certain provisions of Federal Law (12 C.F.R. § 552.13 (1987)), on the effective date of the merger, New Texas Federal was merged with and into Texas Federal— the Existing Association — to form the “Resulting Association.” The Resulting Association, bore the same name, “Texas Federal Savings & Loan Association,” as the Existing Association had borne prior to the merger. All of the assets, properties and liabilities of both the Existing Association and the New Texas Federal became the assets and properties of the Resulting Association.
Pursuant to the express terms of the merger agreement “all outstanding shares of [Texas Federal] Common and [Texas Federal] Preferred Stock shall by operation of law ... become and be converted into the right to receive ... one share of [TFFC] Common Stock for each share of [Texas Federal] Common Stock ... [and] one share of [TFFC] Preferred Stock_” (Emphasis added.) Pursuant to the merger, the holders of the outstanding securities of Texas Federal — the Existing Association — were to maintain the same percentage ownership in TFFC as they held in Texas Federal, since their stock was converted on a share-for-share basis. Subsequent to the merger, the directors, officers and members of committees of Texas Federal — the Existing Association — became the directors, officers and committee members of the Resulting Association.
Therefore, we conclude that the ownership of ten percent or more of the “outstanding voting securities” of Texas Federal did not become, and could not have become, vested in anyone else, including TFFC, through the merger because the ownership of 100 percent of such securities was required by operation of law to become and be converted into stock of TFFC. Thus, TFFC did not become “vested” with the ownership of any of the “outstanding voting securities” of Texas Federal. Furthermore, there was no change in the control of Texas Federal. The merger resulted in the formation of TFFC as a holding company which by operation of law was owned by the very same shareholders as owned Texas Federal. Hence, TFFC never owned any of the outstanding voting securities of the employer identified in Sealock’s employment agreement. As pointed out above, Sealock was the owner of Texas Federal stock prior to the merger. By the express terms of the merger agreement and by operation of law, the ownership of his own stock — and the ownership of the stock held by the other stockholders — became “converted into” the right to receive stock of TFFC. The only stock TFFC ever owned before or after the September 8 merger was the 1000 shares of stock of its subsidiary, the newly chartered association called New Texas Federal in the merger agreement. Its ownership never increased. Instead, the stockholders of Texas Federal became the stockholders of TFFC, each holding the same number of shares before and after the merger.
In light of the facts surrounding the September 8 merger, we conclude that the trial court erred in finding that paragraph 6(b) was triggered by this transaction. Therefore, we decline to hold that the ownership of old Texas Federal became vested in TFFC as a result of the September 8 merger. Consequently, we conclude that Sealock did not have a claim under paragraph 6(b), either in form or in substance. Construing paragraph 6(b) strictly, as we must, it follows, and we so hold, that Texas Federal was entitled to judgment as a matter of law. We sustain Texas Federal’s first two points of error.

*876
Sealock’s Paragraph 6(a) Claim

In the trial court, Sealock sought recovery on alternative theories: one seeking contractual liquidated damages under the golden parachute provision in paragraph 6(b); the second seeking damages for wrongful termination of employment covered by paragraph 6(a). The trial court’s judgment awarded Sealock recovery solely on the basis of his golden parachute claim under paragraph 6(b) and denies all other relief. In the trial court’s language in its judgment: “All relief not expressly granted herein is expressly DENIED.” In order that there be no misunderstanding concerning the basis of the trial court’s judgment, we quote the trial court’s judgment omitting only the formal introduction and recitation of the jury’s findings:
After reviewing the jury’s findings in the presence of the jury and before all parties and their attorneys of record, the Court polled the jury en masse. Each party was also given the opportunity to further “poll” the jury, but declined. Thereafter, the jury’s verdict was “accepted” by the Court.
Based upon the jury’s answers to the foregoing Special Issues, the Court is of the opinion that the Plaintiff has established every element necessary to recover under Paragraph 6(b) of the Plaintiff’s Employment Agreement.
Further, the Court is of the opinion that the September 8, 1983 merger between Texas Federal Savings and Loan Association and Texas Federal Financial Corporation’s wholly-owned subsidiary constituted, under 6(b), a “vesting” of the entire ownership of Texas Federal Savings and Loan Association in Texas Federal Financial Corporation, as a matter of law.
IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that Plaintiff shall have and recover from Defendant the sum of Seven Hundred Ninety Thousand Dollars ($790,000.00), together with prejudgment interest at the rate of ten percent (10%) from July 27, 1984, until the date of this JUDGMENT, together with post judgment interest at the rate of ten percent (10%) per annum from the date of this Judgment until all amounts granted hereunder are fully paid, plus the sum of One Hundred Seventeen Thousand Dollars ($117,000.00) which the Court deems (and the jury has found) to be a reasonable and necessary attorney’s fee in this cause. However, in the event that no appeal is taken from this Judgment by Defendant, Plaintiff shall remit the sum of $32,000 to Defendant as a credit upon such attorneys’ fees and, provided further, that in the event Defendant shall (unsuccessfully) appeal this case to the Court of Appeals but thereafter elect not to apply for a writ of error to the Supreme Court of Texas, Plaintiff shall remit the sum of $10,-000.00 as a credit upon such attorney’s fees. All costs of court are taxed against the Defendant. Plaintiff shall also be entitled to all writs and processes necessary for the enforcement and collection of this Judgment.
All relief not expressly granted herein is expressly DENIED.
Thus, there can be no doubt that the trial court awarded Sealock recovery solely on the basis of his golden parachute claim under paragraph 6(b) and denied all other relief. Hence, the trial court denied Seal-ock recovery for wrongful termination of employment under paragraph 6(a).
Nevertheless, on appeal Texas Federal tells us its reasons why Sealock should not recover under paragraph 6(a). As appellant, Texas Federal advances eleven alternative points of error challenging Sealock’s right to recover under paragraph 6(a). As appellee, Sealock responds to Texas Federal’s eleven alternative points of error in five alternative reply points. Nowhere, however, does Sealock complain on appeal of the trial court’s denial of recovery for wrongful termination of employment under paragraph 6(a). Instead, in his brief, Seal-ock presents the unnumbered statement: “Wrongful Termination Claim and Jury’s *877Verdict (Sealock’s alternate theory of recovery).” In his argument under this statement, Sealock asserts that “if Seal-ock’s 6(b) judgment is set aside for any reason, then this court can render judgment based upon Sealock’s wrongful discharge theory upon the facts proven and the jury’s answers to the remaining special issues.” For the purposes of this opinion, we assume, but do not decide, that Seal-ock’s statement is a cross-point of error. For the purposes of this opinion, we further assume, but do not decide, that Seal-ock was not required to file an appeal or cost bond in order to present this cross-point of error. Nevertheless, we conclude that we cannot render judgment for Seal-ock based upon his wrongful discharge claim under paragraph 6(a). We reach this conclusion because Sealock failed to pray that we render judgment based upon his wrongful discharge claim. We quote Seal-ock’s prayer:
The evidence supports the jury’s findings that Sealock was terminated after the September 8, 1983 merger of Texas Federal with another entity. The trial court correctly ruled, as a matter of law, that the September 8, 1983 merger constituted a triggering event under paragraph 6(b) of Sealock’s Employment Contract, entitling Sealock to recover twice the amount of his total annual compensation. Alternatively, the record demonstrates ample support for the jury’s determination that Sealock was fired without cause and that Texas Federal was not honestly dissatisfied with Sealock’s job performance at the time of his termination, and that he suffered actual damages of at least $165,871.00 by virtue of the wrongful termination.
For the reasons stated herein, Appellee Glenn Sealock respectfully submits that the findings by the jury and the trial court are in all ways correct; that the judgment entered by said court was proper; that Texas Federal has failed to show harmful error; and that the judgment below should be affirmed. In addition, Sealock respectfully requests this Court to grant such other and further relief to which he has shown himself entitled.
(Emphasis added). Nothing is better established than the proposition that relief that has not been prayed for on appeal cannot be granted. See West End API. LTD. v. Rothpletz, 732 S.W.2d 371, 374 (Tex.App.—Dallas, 1987, writ ref’d n.r.e.). The nature of relief sought on appeal should be clearly stated. TEX.R.APP.P. 74(g). In the present case, Sealock only prays that the trial court’s judgment be affirmed. He does not pray that judgment be rendered for him on his wrongful discharge claim under paragraph 6(a). Accordingly we conclude that we cannot render judgment for Sealock on his wrongful discharge claim. We overrule Sealock’s assumed cross-point of error.

Disposition

We have sustained Texas Federal’s first two points of error. We have overruled Sealock’s assumed cross-point of error. Therefore, we must reverse the trial court’s judgment and render a take-nothing judgment against Sealock. Accordingly, we reverse the trial court’s judgment and render judgment that Sealock take nothing against Texas Federal.
McCRAW, J., dissents.

. In light of our disposition of the case, we need not reach Texas Federal’s challenge to the damages assessed by the trial court.