Fitchette v. Sumter Hardwood Co. , 145 S.C. 53 ( 1928 )

I respectfully dissent from the conclusions announced in the leading opinion, for the reason which follow:

The gravamen of the charge of libel is that Korn, president of the defendant corporation (both of whom are defendants in the action), wrote a letter to W.A. Clark, chairman of the Board of Directors of the Carolina National Bank, of and concerning the plaintiffs, Fitchette Son, as follows:

"It will not be satisfactory to us to deal with Fitchette Son. They have fallen down on previous contract we had with them. Their account was much overdrawn when they left us, and when it came time for a settlement they totally disregarded their contract. We have lost confidence in them, and do not think they have either the ability or the inclination to carry out any new contract that might be made with them."

Assuming, without expressing an opinion to that effect, that the language used in this letter is libelous per se, I think that the circumstances under which it was written present as clear a case of "qualified privilege," unaccompanied by any circumstance tending to show a malicious intent to injure (an abuse of that privilege), as could possibly be conceived.

The law, as I understand it, is that a communication, madein good faith on any subject in which the writer has an interest, or in reference to which he has a duty to perform, is not the subject of an action in libel for damages, it being protected under the principle of "qualified privilege." An essential element of this principle being that it was "made in good faith," it is necessarily implied that if it has been made with malice, a wicked intent to injure, it was not made in good faith, and is entitled to no protection.

I understand it further to be the law that, if the communication appear prima facie within the safety zone of "qualified privilege," the burden is upon the party claiming to have been aggrieved by the publication to overcome the presumption of good faith, by proof of a malicious purpose to defame his character, under cover of the privilege.

I understand it further to be the law that the question whether or not the communication was, under the admitted facts, within the class of "qualified privilege," is one of law for the Court; and, if taken in connection therewith, it was such as must have been used honestly and in good faith by the defendant (therefore wanting in a malicious purpose), the Judge may withdraw the case from the jury and direct a verdict for the defendant. 25 Cyc., 375, 385, 376. 17 R.C.L., 341, 418. Atwater v. News Co., 67 Conn., 504;34 A., 865; note 3 L.R.A. (N.S.), 696. Smith v. Youmans, 3 Hill, 85. Abraham v. Baldwin, 52 Fla., 151;42 So., 591; 10 L.R.A. (N.S.), 1051; 10 Ann. Cas., 1148.Beeler v. Jackson, 64 Md., 589; 2 A., 916. Hemmens v.Nelson, 138 N.Y., 517; 34 N.E., 342; 20 L.R.A., 440.King v. Patterson, 49 N.J., Law, 417; 9 A., 705; 60 Am.Rep., 622. Fahey v. Shafer, 98 Wn., 517; 167 P., 118.Massee v. Williams (C.C.A.), 207 F., 222; Starkie, Slander, § 670; Townshend, Slander, § 349; Newell, Slander, § 389. Melcher v. Beeler, 48 Colo., 233; 110 P., 181; 139 Am. St. Rep., 273. Denver v. Holloway,34 Colo., 432; 83 P., 131; 3 L.R.A. (N.S.), 696; 114 Am. St. Rep., 171; 7 Ann. Cas., 840. Locke v. Bradstreet (C.C. A.), 22 F., 771; 25 Cyc., 392.

See the quotations from these authorities set forth in the opinion of the writer in Switzer v. Express Co., 119 S.C. 237;112 S.E., 110; 26 A.L.R., 819, which do not lose their force by reason of the fact that they are cited in a dissenting opinion. The citations and quotations contained in the leading opinion herein also sustain these principles without exception.

In Massee v. Williams (C.C.A.), 207 F., 222, the Court said:

"The occasion being privileged, the communication did not amount to actionable defamation until it appeared that it had its origin in actual malice [citing authorities]. It was therefore incumbent on the plaintiff to show such malice in addition to injurious utterances, and that the defendant seized upon the occasion as a pretext or otherwise availed himself of it maliciously * * * to slander him [citing authorities]."

"Exceeding the privilege of a communication about a matter in which both parties have an interest does not destroy the privilege, but the excess of statement is material only as bearing on the question of malice." Nichols v. Eaton,110 Iowa, 509; 81 N.W., 792; 47 L.R.A., 483; 80 Am. St. Rep., 319.

"A communication by a life insurance company to its soliciting agent, with relation to an alleged forgery, by an examining physician, of the signature to an application for insurance, and informing him that another physician would be appointed to make examinations, being upon a subject relating to agency, and in respect to which there is a mutual interest, is a privileged occasion." Nichols v. Eaton,110 Iowa, 509; 81 N.W., 792; 47 L.R.A., 483; 80 Am. St. Rep., 319.

In Stroud v. Harris (C.C.A.), 5 F.2d 25, a bondholder and stockholder was sued in libel for writing to other stockholders a letter seriously reflecting upon the integrity of the manager of the corporation. The Court said, in sustaining the direction of a verdict in his favor:

"The statements he made in the letter were not only for the purpose of protecting his own interests, but their interests also, and show that he was attempting to protect the stockholders as well. Some of the statements may be slightly exaggerated; * * * but the evidence is sufficient to show that he was stating what he honestly believed to be true, and what, from statements made to him by parties in whom he had confidence, he had reasonable ground to believe was true. The letter was a qualifiedly privileged communication, and there is nothing to show that McAdams was actuated by any malice whatever."

It is material, therefore, to inquire, first, whether the communication,prima facie, is entitled to be classed as one of "qualified privilege"; second, whether, if so, has the plaintiff offered any evidence tending to show that it was not made in good faith, but that the occasion was employed as a cloak to cover a splenetic and malicious attack — an abuse of the privilege. The circumstances under which the letter was written were these:

At some time prior to January 1, 1924, one J.C. Bruton, who owned or controlled a large tract of timberland, known as the Segars tract, entered into a contract with the Sumter Hardwood Company for the sale to it of about 1,000,000 feet of the log output of his operations on the Segars tract, at the price of $14 per thousand feet. Bruton was indebted in a large amount to the Carolina National Bank, to which he had given a mortgage upon the timber as security, and also to W.A. Clark, then chairman of the board of directors of that bank, personally, who it appears also had an undefined interest in the Bruton timber. For financial reasons, Bruton became unable to comply with his contract to deliver the logs to the Hardwood Company. The bank and Clark were, of course, greatly interested in Bruton's compliance with that contract, from which alone they expected to be reimbursed for the money owing by Bruton, and doubtless were urging him, if he could not comply, to find some one who could. Negotiations were then opened between Bruton and Clark, on the one side, and the plaintiffs, Fitchette Son, on the other, looking to that end.

Prior to this date, in 1921, Fitchette Son had entered into a contract with the Hardwood Company for the logging of certain timber upon a different tract. This contract had expired in December, 1923; at its expiration, the Fitchettes were indebted to the Hardwood Company, and the Company agreed to take over, in the settlement, certain equipment and supplies. A disagreement arose as to the value to be placed upon these articles, and as to certain items in the accounts between them; this controversy resulted in a lawsuit instituted by the Hardwood Company, a phase of which has been before this Court heretofore. See 133 S.C. 149;130 S.E., 881. This case was pending at the time of the trial of the case at bar, and also at the time of the alleged libelous letter. In it the Hardwood Company claimed a balance due of over $4,500, and the Fitchettes a balance due them of over $5,000; the parties were nearly $10,000 apart.

On February 4, 1924, Clark wrote the Hardwood Company, advising that, in his opinion, Bruton was utterly unable to comply with his contract with them for the logs from the Segars tract, but that Bruton thought that he could interest another party, who would purchase the timber from Bruton and step into his shoes. He inquired of the Hardwood Company whether they would be willing to cancel the contract with Bruton, allow him to contract with the "dark horse," and accept him in the stead of Bruton. All of these parties, Clark, Bruton, and the Fitchettes, studiously concealed the fact that the Fitchettes were the party with whom they were dealing. For nearly three weeks, after request upon request from the Hardwood Company to reveal the name of the party who was expected to take Bruton's place in the contract, the program of camouflage was maintained. It was not until February 21, when it was realized that nothing could be accomplished with the Hardwood Company until the identity of the party should be revealed (a matter of fairness and great moment to the Hardwood Company), that it was revealed in a letter from Bruton to the Hardwood Company that the Fitchettes, the men who were at war with the Hardwood Company, in a bitter fight involving $10,000 and all sorts of charges, were the party who were expected to faithfully comply with the Bruton contract and give their belligerents a square deal.

Reviewing the immediately preceding events, it appears that on February 12th, in answer to his letter of the 4th, the company wrote to Clark that they were willing for a substitution, provided that some arrangement could be made whereby they would be sure of obtaining the lumber which Bruton had contracted to deliver; that it was their desire to co-operate in any way that would benefit Clark and Bruton, but, of course, not to their own detriment. On February 13th, Clark notified the Hardwood Company that a contract had been drawn up between Bruton and an unnamed party, looking to the acquisition by the unnamed party of Bruton's timber rights and the substitution of such party in Bruton's stead, his assumption of Bruton's obligations to the Hardwood Company, and of course, Bruton's release. Copies of the material parts of the contract were forwarded with Clark's letter, and a request that the Hardwood Company signify their approval of the contract by wire. As a matter of fact, the contract between Bruton and the Fitchettes was actually executed by both parties on February 14th, as the exhibit in the transcript shows. On February 16th the Hardwood Company wrote to Clark, asking for information as to the identity of the party with whom he and Bruton were negotiating, stating:

"Where the price, grade, measurements, etc., are to be daily dealt with, we must know who we are trading with. If the parties are acting in good faith, why should they wish to remain concealed in the background while these negotiations with us are going on?"

On the 19th, Clark replied, still concealing the fact that the Fitchettes were the party. On the 20th the Hardwood Company again pressed Clark to make the revelation:

"If we consent to take 1,000,000 feet of logs and release Bruton from further obligations, we want to know who isgoing to furnish these logs to us; also at what price and when. We have asked for this information before, but for some reason the information has been withheld."

Still no response from Clark. On the same day the company wrote Bruton, pressing him for the information they unquestionably were entitled to. On the 21st, the "smoking out" process was completed by a letter from Bruton naming the Fitchettes as the party, and stating that the concealment was at their instigation. Then, on the 23d, Korn wrote the letter upon which the action for libel is based.

Soon thereafter the contract between Bruton and the Fitchettes, which had been executed, as stated, on February 14th, was put into effect, despite the positive declination of the company to deal with the Fitchettes in the proposed substitution of them for Bruton, and the release of Bruton, despite their protest in a matter peculiarly of interest to them. By that contract the Fitchettes acquired Bruton's interest in the timber, though of course without the release of Bruton from his contract with the company. The Fitchettes then entered into a contract with the Congaree Cooperage Company, without the knowledge or consent of the Hardwood Company, to deliver to the Cooperage Company the identical timber that Bruton had contracted to deliver to the Hardwood Company, as brazen a fraud upon the rights of the Hardwood Company as could be conceived. The Fitchettes knew of the contract between Bruton and the Hardwood Company, for they were endeavoring to be substituted for him in the contract; they knew that the Hardwood Company would not accept them as a substitute for Bruton; they concealed their identity in the negotiations, and prevailed upon both Bruton and Clark to do the same, in their effort to complete a contract with Bruton, insuring his release from the Hardwood contract, and forcing the Hardwood Company to accept them as Bruton's substitute; they knew that a recovery of damages against Bruton by the Hardwood Company for a breach of his contract, was "a feather in a jaybird's tail," and when they learned that their scheme had, like "many a plan of mice and men, gang aft agley," they practically robbed the Hardwood Company of their interest in the Bruton contract, by entering into a similar contract with the Congaree Cooperage Company. Before that contract was complied with, the Cooperage Company had to sue them, and recovered a judgment of $4,000 against them for damages on account of its breach, a fact that strongly corroborates the estimate of them in the letter of Korn. As a specimen of deliberate scheming and deceit and resentfulness, it takes high rank in my estimation, and leads me to think that Korn's appreciation of them was a weak solution of what he might have said.

Under these circumstances, can there be a doubt that the letter of Korn comes within the immunity accorded to a communication of "qualified privilege"? All of the parties to the negotiations pending at the time the letter was written, the Hardwood Company, the bank, Clark, and Bruton (not to speak of the submerged Fitchettes), were directly and financially interested in them. The Hardwood Company was engaged in manufacturing lumber; it had to have logs to saw; it had a contract with Bruton for a million feet of logs; it was at least a part of the source of supply, which it was entitled to rely upon; if Bruton was unable to comply with his contract, the Hardwood Company had the right to insist, either upon damages for the breach, or that some one,able to comply, be substituted for Bruton; the negotiations were proceeding upon the theory that Bruton was unable to comply, and, if so that the Hardwood Company's claim for damages against him would be worth about as much as the feathery assets above referred to; the Hardwood Company was therefore confined for relief to securing a fit substitute for Bruton. It was all that they had left, and surely they were entitled to be consulted in that substitution.

The bank was interested, for it appears that Bruton owed it money which he was unable to pay, and all the security furnished by him was a mortgage upon the standing timber, hardly to be considered as a liquid asset. Its only chance was for Bruton to get out the logs and comply with the Hardwood Company contract; he was unable to do so; some one must be found to take his place; the Fitchettes became interested, and the bank, that the Fitchettes be substituted for Bruton. Clark was interested the same as the bank, though possibly to a smaller extent. Bruton was interested, theoretically, perhaps, in being relieved of his obligation under the Hardwood Company contract. It may have concerned him a little as to the ultimate result, but even a man unable to respond to damages is interested in the elimination of all liability on account of the breach of the contract.

All four, therefore, had interests to subserve in the result of the negotiations. If the interest had been confined to the Hardwood Company alone, what was written in explanation of their attitude towards the negotiations and proposed adjustment of the matter was clearly within their rights. If the interest had been confined to the bank, or to Clark, alone, and the Hardwood Company reasonably was under an obligation to them to notify them of the character or ability of the Fitchettes, the communication would have been privileged.

Under these circumstances, as the bank had found a party to take over Bruton's interests and assume his obligation to the Hardwood Company, with a near prospect of realizing from their collateral, it was but natural that in disappointing their expectations the Hardwood Company, in their own interest and in the interest of the bank, should give their estimate of the party whose anticipated activities meant so much to both. They had a duty to perform to both the bank and Clark, and to Bruton. They knew that Bruton was heavily involved to the bank and to Clark. They knew that the bank and Clark, as well as Bruton, were anxious to carry through a plan of substitution, and were greatly interested and active in getting their money out of Bruton, the only chance being from the logging operations. Bruton, had fallen down on his contract with the Hardwood people, and it was the effort of Clark to get some one to take his place. From his letter Clark naturally thought that it was necessary, in order to install some one else in the operations that the contract with the company be canceled. He evidently supposed that the company was standing in the way; the company naturally assumed that it was, and doubtless was obstructing or at least delaying the consummation. They were insisting upon knowing who the other party was, and stated that they had to know before consenting. After they found out, by much corkscrewing, who the other party was, it was clearly their duty to report whether he was acceptable to them or not. They reported that he was not, and gave them reasons therefor which acted as an explanation of their unwillingness to accept the proposed substitute, and as a storm signal to the bank; a signal which doubtless subsequent events proved that they would have been wise to have heeded.

The reasons which Korn gave are reflected in the evidence as true; if not exactly accurate in all particulars, they appear to have been sustained to the extent, at least, of generating a well-founded belief in Korn. He stated in his letter:

(1) "They have fallen down on the previous contract the Hardwood Company had with them."

Any doubt about this? They admit it. If not, it was only what was alleged in the complaint in the action now pending; certainly not libelous in any sense.

(2) "Their account was much overdrawn when they left us."

This was no more than was alleged in the complaint, and, if incorrect, was not libelous, as imputing a crime.James v. Telegraph Co., 130 S.C. 533; 126 S.E., 653.Williamson v. Askin Marine Co., 138 S.C. 47;136 S.E., 21.

(3) "When it came time for a settlement, they totally disregarded their contract."

Exactly what had been alleged in the complaint; in no sense libelous per se.

(4) "We have lost confidence in them."

A personal matter, that cannot be inquired into. Whether groundless or not, it was a sentiment entertained by the Hardwood Company, which was sufficient to cause them to decline a new affiliation.

(5) "We * * * do not think they have either the ability or the inclination to carry out any new contract that might be made with them."

Not an attack upon the Fitchettes, but a plain statement of why they were not acceptable to the Hardwood Company as a substitute for Bruton. The Hardwood Company had the unquestionable right to decide this matter, and a candor, which the others in the negotiation were far from displaying, required them to state their reasons. In consideration of his experiences with the Fitchettes, I think that Korn may well say, as Warren Hastings said upon his trial for peculations in India, "In view of my opportunities, I am amazed at my own moderation."

That in the contract referred to by Korn in the letter in review the Fitchettes "fell down" is conceded; that their account was much overdrawn there can be no question; that they disregarded their contract is equally true; that they had neither the ability or inclination to carry out any new contract had been verified by their experience with the Congaree Cooperage Company. If all of these statements were not strictly accurate, and even if libelous on their face, the occasion was privileged and without malice.

Of course, Bruton had the legal right to transfer his contract with the company to the Fitchettes, or any one else, unless there was a condition prohibiting such transfer; but what Bruton wanted was to substitute the Fitchettes for himself, and to be relieved of his personal responsibility, which he, of course, could not do without the consent of the company. Bruton and the bank and Clark must have known of the business differences between the Fitchettes and the company; the insistence of the Fitchettes that they be not known in the matter was enough to excite the belief that the Fitchettes would not be acceptable to the company as a substitute for Bruton; and yet they endeavored to obtain from the company a cancellation of the contract with Bruton, in such shape as to saddle the company with a party to the new arrangement who they knew was personally obnoxious to them, and in order to do this it must not be known who the party was. When it was known, Korn wrote the above, which he had a perfect right to do, and the experience of the Cooperage Company with the Fitchettes justifies his action.

To say that one who is vitally interested in the substitution of one debtor for another has not the right, in explanation of his refusal, to give such reasons as the above, strikes at the very bowels of the principle of "qualified privilege." That it was within that privilege I have not a doubt; and the only question remaining is: Was the exercise of that privilege accompanied by a single trace of malicious purpose on the part of the company? The evidence is overwhelming to my mind that the company was acting as any man of business, careful of his own interests, would have acted, in the exercise of his right to speak his mind about the Fitchettes, and in the performance of a duty which he owed to Bruton, the bank, and Clark.

Both Clark and Bruton testified that they considered what Korn had written as nothing more than the statement of business differences between the Fitchettes and the company; and the result proves what they said to be true, for, notwithstanding the protest of the company, Bruton and Clark proceeded to consummate the arrangement by which the Fitchettes acquired the Bruton timber rights, made a new contract with the Cooperage Company, and stuck them to the tune of $4,000. What became of the bank and Clark in this new symposium is left to conjecture.