## Facts

- Dixie Glass Co., a closely held Texas corporation, hired Harry H. Pollak as comptroller under a written contract effective January 1, 1953, for a five-year term.
- The contract set compensation at $200 per week plus an annual bonus of 10% of net profits before income taxes.
- Pollak received options to renew for three additional five-year terms, exercisable six months before each term ended.
- All officers, directors, and shareholders unanimously authorized the contract at a joint meeting.
- The corporation’s bylaws limited officer tenure to one year, and the company later asserted this made the long-term contract invalid.
- Dixie Glass discharged Pollak on October 19, 1955; a jury found the discharge was without good cause.
- The jury found damages up to trial of $20,277; projected remaining salary of $156,000; no post-trial bonus; and projected future earnings from other employment (net of necessary expenses) of $78,000.
- The trial court awarded Pollak the bonus due at discharge ($3,116.24 plus interest) and $98,277 based on the jury findings, with a stay of execution as to the portion attributed to post-trial damages.

## Issues

1. Whether a closely held corporation may be bound by a multi-year employment contract with an officer despite bylaws limiting officer tenure to one year when the contract was unanimously approved by all shareholders/directors.
2. Whether a wrongfully discharged employee under a fixed-term employment contract may recover, in a single action, damages for the entire unexpired term (and related option periods), reduced by amounts the employee could earn with reasonable diligence.

## Decision

- The court held the long-term employment contract was not void solely because it conflicted with the one-year officer-tenure bylaw, where all shareholders/directors unanimously authorized the contract, effectively modifying the bylaw as applied.
- The court held a wrongful discharge before completion of a fixed-term employment contract constitutes a total breach permitting recovery in one action of damages for the full contract term, subject to mitigation offsets.
- The court reversed the trial court’s judgment and remanded for a new trial due to problems in the submission and proof of damages (including treatment of option periods, mitigation, and future-loss calculations).

## Legal Principles

- A wrongful termination of a fixed-term employment contract before performance is complete permits the employee to treat the contract as totally breached and seek damages for the entire remaining term in one suit.
- Future-loss recovery must be reduced by amounts the employee actually earns, or should earn with reasonable diligence, during the unexpired term (mitigation).
- In a closely held corporation, unanimous shareholder/director authorization of an employment agreement inconsistent with an officer-tenure bylaw may be given effect as an informal modification of the bylaw in that setting.
- Even when the legal measure of damages is correct, a judgment may be reversed and remanded if the damage issues are improperly submitted or inadequately supported by the evidence.

## Conclusion

The court recognized that a wrongfully discharged fixed-term employee may recover full-term damages in a single action, less mitigation, and treated a unanimously authorized long-term officer employment contract as enforceable despite a one-year bylaw; however, it required a new trial to correct defects in the damages proof and submission.


Dixie Glass Co. v. Pollak, 341 S.W.2d 530 (Tex. Civ. App.—Houston 1960)