Western Rock Co. v. Davis

Western Rock Company (defendant), a corporation, engaged in blasting operations in Jacksboro, Texas from August 1965 through May 1966. G.L. Stroud (defendant) was Western Rock’s president and supervised its operations. Stroud and his wife owned 50 percent of its stock. The other half was owned by Machine Investment Corporation (MIC), an entity owned and controlled by L.C. Fuller (defendant). Fuller was also a member of Western Rock’s board of directors. All of Western Rock’s equipment and other assets were leased from MIC. The lease was structured so that Fuller would profit if Western Rock succeeded, but if Western Rock encountered difficulty, Fuller and MIC could recover all of the company’s assets. In the early fall of 1965, Stroud began receiving complaints from Jacksboro residents who claimed the blasting had damaged their property. In November 1965, Stroud learned that Western Rock had been sued by a group of property owners (plaintiffs), and that the company’s insurance would likely not cover any damages. Despite being in daily contact with Fuller during the relevant time period, Stroud did not mention either the complaints or the lawsuit to Fuller until January 1966. At that time they decided to continue the blasting activities in spite of the financial risk. After a verdict was entered against Western Rock, Fuller assumed full control over the company. All the company’s assets were transferred back to MIC. The court also entered judgment against Stroud and Fuller personally on the grounds that Western Rock was a shell corporation that they used to conduct destructive activities. Stroud and Fuller appealed.