W. Rock Co. v. Davis - 432 S.W.2d 555 (Tex. Civ. App. 1968)

Rule:

The liability of corporate officers and directors of corporations is not because they occupy such positions, but springs out of their participation in a wrong. When the fiction is urged to an intent not within its reason and purpose, it should be disregarded and the corporation considered as an aggregation of persons, both in equity and at law. The existence of the corporation as a distinct legal entity is a legal fiction, and where to recognize the corporation as a distinct legal entity will justify wrong, protect fraud, or defend crime, the law will disregard this fiction and view the corporation as an association of persons. 

Facts:

Exception 9a of Article 1995, V.A.T.S., was invoked by a group of property owners, plaintiffs (appellees herein) who sued Western Rock Company, a corporation, G. L. Stroud, L. C. Fuller, and other parties, in Jack County, Texas, seeking damages sustained to their respective homes and business properties because of alleged negligent blasting operations conducted in a rock quarry near Jacksboro, Texas, during the period August, 1965, through April, 1966. G. L. Stroud, L. C. Fuller and Western Rock Company have appealed from the action of the Court in overruling separate pleas of privilege (timely controverted) filed by each to be sued in Dallas County, Texas. It is contended that the court erred in overruling the pleas of G. L. Stroud, President of Western Rock Company, and of L. C. Fuller who was merely a director of such corporation and took no part in the operation of the quarry or the blasting complained of and thus was not responsible for torts or negligence of said corporation or its president; that there was no testimony or insufficient testimony showing blasting operations of Western Rock Company resulted in damages to the property owners’ buildings or to connect such damage with the alleged blasting or to show negligence on the part of any of the appellants which was a proximate cause of such claimed damage and that each plea of privilege should therefore have been sustained rather than overruled.

Issue:

Were the directors liable for damages sustained to the properties because of alleged negligent blasting operations?

Answer:

Yes

Conclusion:

The court found that the property owners’ cause of action against the directors was based upon ample proof that they were the dominating force behind the corporation, a shell corporation, which had no assets and was in financial difficulty. The corporation served as a device through which they could carry on destructive blasting activities at the expense of the property owners of Jacksboro and at the same time be personally insulated from legal and financial responsibility. All of the venue facts were supported by ample evidence. The evidence was adequate to support the judgment of the court that the directors were legally responsible, individually and jointly, for negligent conduct that was a proximate cause of damages sustained in Jack County.