## Facts

- Ronald Nelson was elected president of Pioneer Specialties, Inc. in April 1957 under bylaws stating that the president and other officers “shall be elected for one year.”
- On August 1, 1957, Nelson and the corporation executed a written agreement employing him “to be president” for two years, through July 31, 1959.
- On December 15, 1957, the board removed Nelson as president and installed Tom S. Gillis.
- For summary-judgment purposes, the discharge was treated as not being for good cause.
- Nelson sued the corporation and Gillis for breach of the two-year agreement and sought damages through the end of the asserted contractual term.

## Issues

1. Whether a bylaw providing that the president “shall be elected for one year” necessarily prohibits the board from contracting to employ a person as president for longer than one year.
2. If a multi-year “as president” contract conflicts with the bylaws, whether the removed officer may still recover damages for wrongful removal during the unexpired portion of the valid one-year elective term.

## Decision

- The Texas Supreme Court held that the bylaw limiting the president’s term to one year, by necessary implication, prohibited employing a person as president for a period exceeding one year.
- The Court held the two-year “as president” agreement was unenforceable to the extent it purported to bind the corporation beyond the bylaw-defined one-year term.
- The Court nonetheless affirmed the remand for trial to allow Nelson to attempt to prove damages, if any, arising from removal during the remainder of the one-year elective term.
- Any potential recovery was limited to losses attributable to removal between December 15, 1957 and the end of the one-year term for which Nelson had been elected.

## Legal Principles

- Corporate bylaws that validly fix the duration of an officer’s term limit the board’s authority to contractually guarantee that office for a longer period.
- A contract employing a person “as” a corporate officer is invalid to the extent it conflicts with the bylaws governing the office’s term.
- An officer removed without cause during a valid bylaw-defined term may have a damages claim for the unexpired portion of that term, even if an overlong “as officer” contract cannot be enforced beyond the permissible term.
- Summary judgment is improper where the record permits a claim for damages within the lawful term, even though the broader contract theory fails.

## Conclusion

The court treated the one-year bylaw term as an implied prohibition on a longer contract guaranteeing the presidency, but allowed the removed president to pursue damages at trial for wrongful removal during the remaining part of the one-year term to which he was duly elected.


Pioneer Specialties, Inc. v. Nelson, 161 Tex. 244, 339 S.W.2d 199 (Tex. 1960)