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Docket Number

No. 7718SC843

Attorney(S)

Smith, Patterson, Follin, Curtis, James and Harkavy, by Norman B. Smith, Michael K. Curtis and Jonathan R. Harkavy, for plaintiff appellant. Jordan, Wright, Nichols, Caffrey and Hill, by William L. Stocks and Robert D. Albergotti, for defendant appellees.

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Smart Summary

Summary of Opinion: Betty B. Arnold v. Max W. Sharpe and Community Bank of Carolina (No. 7718SC843, N.C. Ct. App., filed Aug. 15, 1978)

Factual and Procedural Background

Plaintiff Betty B. Arnold brought an action for libel and for blacklisting in violation of G.S. 14-355 against Max W. Sharpe (a vice president of Community Bank of Carolina) and the bank. The opinion states that no evidence was presented on the blacklisting claim. The factual evidence produced by plaintiff was that in February 1975 she worked for Community Bank of Carolina and reported to Mr. Sharpe. She reported that some employees were taking excessive lunch breaks and having others punch them in on the time clock. After Mr. Sharpe declined to act, she reported the matter to the bank president on 24 February 1975. Following conferences between Mr. Sharpe and the bank president and between Mr. Sharpe and Mrs. Arnold, she was discharged that day.

Plaintiff testified that prior to the discharge Mr. Sharpe had praised her performance, but after returning from a conference with the president on the day of discharge he appeared upset, called her a "divorcee," and became angry. Mary Jane Moore, another employee, testified she glanced at a paper on Mr. Sharpe's desk which she recalled said something to the effect that Mrs. Arnold "gossiped" and "could not get along well with employees" and that she was a "troublemaker." The handwritten memorandum from which a typed memorandum was produced was prepared by Mr. Sharpe at his desk; the handwritten memorandum was later destroyed. Mr. Sharpe testified that a typewritten memorandum was delivered to the bank president.

At the close of plaintiff's evidence the trial court (Superior Court, Guilford County, Judge Hal H. Walker) granted the defendants' motion for a directed verdict in their favor. Plaintiff appealed. The Court of Appeals (Judge Webb delivering the majority opinion; Judge Morris concurs; Judge Hedrick dissents) reversed and remanded.

Legal Issues Presented

Whether the memorandum(s) concerning the plaintiff constituted libel per se.
Whether the plaintiff established communication (publication) of the alleged libel to a third person such that an action could be maintained.
Whether the defendants were protected by a qualified (conditional) privilege and, if so, whether the privilege was defeated by proof of actual malice sufficient to submit the matter to a jury.
Whether evidence of the bank's financial condition was admissible on the issue of punitive damages.

Arguments of the Parties

Plaintiff-Appellant's Arguments

There were communications (publications) of the memorandum: first, when Mary Jane Moore read the handwritten memorandum on Mr. Sharpe's desk; and second, when the typewritten memorandum was delivered to and read by the bank president.
The content of the memorandum was defamatory and actionable per se (so special damages need not be proved).
Evidence of the bank's financial condition should be admissible if punitive damages are considered.

Defendant-Appellees' Arguments

Defendants moved for a directed verdict at the close of plaintiff's evidence, arguing that plaintiff had not established actionable publication or other required elements for recovery.
Defendants pleaded and relied upon a qualified (conditional) privilege for communications among bank officers and employees, arguing such communications were made in good faith in connection with bank interests and duties.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Flake v. Greensboro News Co., 212 N.C. 780, 195 S.E. 55 (1938)	Classification of libels into categories (libel per se, ambiguous publications, libel per quod); statement of definition for libel per se.	Used to frame the standard for libel per se and to cite the test that defamatory matter actionable per se tends to expose a plaintiff to public hatred, contempt, ridicule, or aversion and is susceptible of but one meaning.
Robinson v. Nationwide Insurance Co., 273 N.C. 391, 159 S.E.2d 896 (1968)	Referenced as a case classifying libels and related principles (cited with Flake).	Cited along with Flake to support the classification of libels and the legal standards applied.
Badame v. Lampke, 242 N.C. 755, 89 S.E.2d 466 (1955)	Example of words held actionable per se.	Cited as authority for the proposition that certain statements are libelous per se; used to illustrate precedent where courts found actionable statements.
Kindley v. Privette, 241 N.C. 140, 84 S.E.2d 660 (1954)	Allegations that a person was a continuous troublemaker and disruptive held actionable per se.	Used as supporting authority that statements about causing continuous upheaval are actionable per se.
Broadway v. Cope, 208 N.C. 85, 179 S.E. 452 (1935)	Statement by one businessman accusing another of slaughtering a mad, dog-bitten cow—held actionable per se.	Offered as an example of statements held libelous per se, illustrating the court's view of per se categories.
Bell v. Simmons, 247 N.C. 488, 101 S.E.2d 383 (1958)	Publication permitting inferences of misconduct in office (missing records, sheriff investigation) held actionable per se.	Used to demonstrate prior holdings that accusations damaging to one's professional duties are actionable per se.
Pentuff v. Park, 194 N.C. 146, 138 S.E. 616 (1927)	Example of statements held libelous per se concerning a minister's character.	Cited as another instance of per se libel holdings supporting the court's conclusion about statements deprecating a person's professional or social standing.
Lay v. Gazette Publishing Co., 209 N.C. 134, 183 S.E. 416 (1936)	Publication that plaintiff was strike leader and arrested—held libelous per se because it was calculated to injure employment prospects.	Supports the proposition that statements impairing job prospects can be actionable per se.
Deese v. Collins, 191 N.C. 749, 133 S.E. 92 (1926)	Example of words held not actionable per se ("plaintiff had Negro blood in his veins").	Cited as contrast showing that not all derogatory statements are actionable per se; helps delineate the court's per se test.
Jones v. Hester, 260 N.C. 264, 132 S.E.2d 586 (1963)	Rule that to overcome qualified privilege the plaintiff must prove actual malice.	Cited to establish the plaintiff's burden to prove actual malice to defeat a qualified privilege defense.
Stewart v. Nation-Wide Check Corp., 279 N.C. 278, 182 S.E.2d 410 (1971)	Statement that defamatory charges actionable per se raise a presumption of malice; used regarding punitive damages.	Cited for the presumption of malice arising from per se statements and for the proposition that punitive damages may be considered when malice is proven; the court noted the presumption but did not rest exclusively on it.
Roth v. Greensboro News Co., 217 N.C. 13, 6 S.E.2d 882 (1940)	Financial condition of defendant admissible on punitive damages issue.	Cited to support the court's holding that the bank's financial statements were admissible if punitive damages were to be considered.
Prosser, W., Handbook of The Law of Torts (4th Ed. 1971), Chap. 19	Secondary source noting that libel is usually in writing.	Used to note that libel usually requires writing; cited as background authority (secondary source).
50 Am. Jur.2d, Libel and Slander	Encyclopedic statement defining qualified (conditional) privilege and its elements.	Quoted by the court to explain the nature and elements of qualified privilege applicable to communications made in good faith on matters of mutual interest or duty.

Court's Reasoning and Analysis

The Court of Appeals proceeded in a structured analysis:

Characterization of the alleged statements: The court reviewed the legal categories of defamation (libel per se, ambiguous publications, libel per quod) and applied the Flake test for libel per se — that such writings tend, without need for extrinsic proof, to expose the plaintiff to contempt, ridicule, or an evil opinion among persons of normal mores.
Application to the memorandum: The court held that statements describing an employee as a "trouble maker," a "gossip," and unable "to get along well with other employees" are libelous per se because these words are susceptible of a single meaning and tend to deprecate a person in her job or profession.
Publication (communication) analysis:
- As to Mary Jane Moore's viewing of the handwritten memorandum: Although there was evidence the memorandum existed and was read by Moore, there was no direct evidence that Moore saw the plaintiff's name or knew the memorandum referred to Mrs. Arnold. The court concluded that, while the jury could find the memorandum concerned Mrs. Arnold, there was no evidence Moore knew it referred to Arnold; therefore, no communication to Moore was proved.
- As to the bank president: Mr. Sharpe testified he delivered the typewritten memorandum to the president. The court held that a jury could reasonably infer that the president would read a memorandum submitted by his vice president. Thus there was sufficient evidence of communication to a third person (the president).
Privilege and malice: The defendants invoked the qualified privilege that protects communications made in good faith on matters of mutual interest or duty (as described in 50 Am. Jur.2d). The court explained that to overcome that privilege the plaintiff must prove actual malice (citing Jones v. Hester). Although defamatory statements actionable per se raise a presumption of malice (Stewart), the court did not rely solely on the presumption. Instead, the court identified specific evidence from which a jury could infer actual malice: (a) prior approving conduct by Mr. Sharpe toward the plaintiff's job performance, (b) Mr. Sharpe's angry reaction on the day she complained and was discharged, and (c) the fact that Mr. Sharpe then prepared the memorandum which led to her discharge. The court held this evidence was sufficient for a jury to find actual malice and thereby defeat the qualified privilege.
Admissibility of financial information: The court addressed the plaintiff's offered bank financial statements, which the trial court had excluded. The appellate court held exclusion was error because, if the jury found actual malice, punitive damages could be awarded and evidence of the defendants' financial condition is admissible for that purpose (citing Roth).

Holding and Implications

Core Ruling: The Court of Appeals reversed the trial court's directed verdict for the defendants and remanded the case for further proceedings.

Consequences and immediate implications:

The court held as a matter of law that the words at issue — labeling an employee a troublemaker, a gossip, and unable to get along with other employees — are libelous per se.
The court found sufficient evidence of communication (publication) to the bank president but insufficient evidence that the other employee (Mary Jane Moore) knew the memorandum referred to the plaintiff.
The qualified privilege asserted by the defendants could be overcome because the record contained evidence from which a jury could find actual malice by Mr. Sharpe; thus the privilege did not mandate a directed verdict for defendants.
The trial court erred in excluding the bank's financial statements; such evidence should be admissible on the issue of punitive damages if the jury finds actual malice.
Direct effect: The case was reversed and remanded for further proceedings consistent with these holdings (i.e., the case may proceed to submission to a jury on issues including actual malice and damages, including punitive damages if warranted).

The opinion does not announce that it establishes any broader rule beyond the holdings applied to the facts of this case; it reverses and remands to allow the plaintiff's claims to proceed in light of the court's conclusions regarding per se libel, publication to the president, the jury-issue of actual malice, and the admissibility of financial evidence on punitive damages.

Disposition: Reversed and remanded.

Judge Morris concurred; Judge Hedrick dissented.

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BETTY B. ARNOLD v. MAX W. SHARPE AND COMMUNITY BANK OF CAROLINA

1. Libel and Slander 2 — libel per se A publication is libelous per se if it tends, without aid of extrinsic proof, to expose the plaintiff to contempt or ridicule or to induce an evil opinion of him in the minds of people who hold to normal mores.

2. Libel and Slander 5.1 — writing that employee is trouble maker and gossip — libel per se It is libelous per se to write of an employee that she is a trouble maker and gossip who cannot get along well with other employees.

3. Libel and Slander 6 — libelous memorandum — publication There was sufficient evidence for the jury to conclude that a libelous typewritten memorandum prepared by a bank vice president was communicated to the bank president where the vice president testified that the memorandum was delivered to the president, since the jury could reasonably conclude that the president of a bank would read a memorandum submitted to him by a vice president of the bank.

4. Libel and Slander 10.1 — memorandum about employee — qualified privilege — malice Qualified privilege was a defense to a former bank employee's action for libel based on a bank vice president's memorandum about the employee sent to the bank president if the vice president acted in good faith and without malice; however, the jury could conclude that the vice president's memorandum was induced by actual malice where there was evidence tending to show that the vice president had approved of the way plaintiff did her job prior to the day she was discharged as a bank employee, that on that day the vice president became angry with plaintiff because she reported to the president that the vice president took no action with regard to malingering employees, and that the vice president then wrote the memorandum which led to plaintiff's discharge.

5. Libel and Slander 15 — libel action — financial condition of defendant — punitive damages Financial statements of a bank were admissible on the question of punitive damages in an action against the bank for libel.

Judge HEDRICK dissenting.

This is an action by the plaintiff for libel and for blacklisting the plaintiff in violation of G.S. 14-355. No evidence was presented as to blacklisting. The plaintiff's evidence was to the effect that in February 1975, she was employed by Community Bank of Carolina and that Max W. Sharpe was a vice president of the bank. She reported to him that some of the employees of the bank were taking more than an hour for lunch and having other employees punch them in on the time clock. Mr. Sharpe told her "it was none of her business." When she reported this again to Mr. Sharpe and he again did nothing about it, she reported the matter to the president of the bank on 24 February 1975. Following conferences between Mr. Sharpe and the bank president and between Mr. Sharpe and Mrs. Arnold, Mrs. Arnold was that day discharged. Betty B. Arnold testified that prior to the day she was discharged Max W. Sharpe had never criticized her, but had only praised her. She testified further that when Mr. Sharpe returned from his conference with the bank president he seemed "very upset." He told her she had gone over his head and after some conversation "he got mad" and called her a "divorcee." Mary Jane Moore testified that she was employed by the bank in February 1975. Mr. Sharpe's desk was in an open area facing the people whom he supervised. It had drawers and it was not surrounded by any type of enclosure. Mary Jane Moore testified further that on 24 February 1975, Sarah Williams said something to her about a paper that was lying on Mr. Sharpe's desk and Mary Jane Moore walked over and glanced at it. It said "something to the effect that she gossiped and she could not get along well with employees and that she was a troublemaker. . . As to whether anyone was named in the handwritten document I don't recall." Three other employees of the bank — Mrs. Perry, Mrs. Williams, and Mrs. Taylor — were present when Ms. Moore looked at the paper and she heard the paper discussed in the bank "lots of times." The defendant Max W. Sharpe was called as a witness by the plaintiff and testified that he prepared a handwritten memorandum in regard to the plaintiff from which a typed memorandum was made which was delivered to the president of the bank. The handwritten memorandum was then destroyed. At the close of the plaintiff's evidence the defendant's motion for a directed verdict was allowed and the plaintiff has appealed.

WEBB, Judge.

For reasons stated in this opinion, we reverse the judgment of the superior court.

Libel is one of the two torts of defamation, the other being slander. It is an invasion of the interest in reputation and good name and requires that something be communicated to a third person that affects that interest of the plaintiff. To be libelous, the communication must usually be in writing although other types of communication not germane to this case have been held libelous. See Prosser, W., Handbook of The Law of Torts (4th Ed. 1971), Chap. 19, 112. Libels may be divided into three classes: (1) libel per se; (2) publications which are susceptible to two reasonable interpretations, one of which is defamatory and the other is not, and (3) libel per quod which are publications not obviously defamatory, but which become so when considered in connection with innuendo, colloquim [colloquium] and explanatory circumstances. Flake v. Greensboro News Co., 212 N.C. 780, 195 S.E. 55 (1938) and Robinson v. Nationwide Insurance Co., 273 N.C. 391, 159 S.E.2d 896 (1968). Unless a publication is actionable per se, the plaintiff must prove special damages. Special damages were not proved in this case, and the directed verdict was proper unless the publication by defendant Sharpe was libelous per se.

A publication is libelous per se if it tends, without aid of extrinsic proof, to expose the plaintiff to contempt or ridicule or to induce an evil opinion of him in the minds of people who hold to normal mores.

In Flake v. Greensboro News Co., supra, at 786, the Supreme Court said:

"It may be stated as a general proposition that defamatory matter written or printed, or in the form of caricatures or other signs, may be libelous and actionable per se, that is, actionable without any allegations of special damage, if they tend to expose plaintiff to public hatred, contempt, ridicule, aversion or disgrace and to induce an evil opinion of him in the minds of right thinking persons and to deprive him of their friendly intercourse and society.

* * *

. . . But defamatory words to be libelous per se must be susceptible of but one meaning and of such nature that the court can presume as a matter of law that they tend to disgrace and degrade the party or hold him up to public hatred, contempt or ridicule, or cause him to be shunned and avoided. The imputation must be one tending to affect a party in a society whose standard of opinion the court can recognize."

We hold that it is libelous per se to write of an employee that she is a trouble maker, a gossip and could not get along well with other employees. We believe these words are susceptible of but one meaning and tend to expose the plaintiff to contempt, ridicule or aversion by a recognized standard of opinion in society.

Words which have been held actionable per se are: "Do you know Captain McCall of the Charlotte Police Department? Call him and he can tell you about all the shady deals Mr. Badame has pulled." Badame v. Lampke, 242 N.C. 755, 89 S.E.2d 466 (1955); allegations that a minister who as a member of a church "had been a disorderly member thereof in the sense that he was unwilling to cooperate in maintaining peace and the right spirit in the church but caused trouble amounting to a continuous upheaval and disrupted the peace and harmony of the church and therefore was excluded therefrom." Kindley v. Privette, 241 N.C. 140, 84 S.E.2d 660 (1954); the statement by a butcher that his competitor had slaughtered a mad dog-bitten cow, Broadway v. Cope, 208 N.C. 85, 179 S.E. 452 (1935). A publication was said to be actionable per se which permitted inferences that (1) plaintiff, secretary and treasurer of the Duplin County Farm Bureau, did not pay certain women fees which they were due, (2) she did so because she had no records, (3) that the records had been missing for some time, (4) that important records of the Farm Bureau, which should have been in plaintiff's custody, were missing without explanation, and (5) the sheriff was called in to investigate the matter of the missing records. Bell v. Simmons, 247 N.C. 488, 101 S.E.2d 383 (1958). A publication was held libelous per se which said of an ordained minister that there was not in this generation "a more ignorant man . . . or one less charitable toward men who might honestly disagree with him." Pentuff v. Park, 194 N.C. 146, 138 S.E. 616 (1927). It has been held to be libel per se for a newspaper to publish that the plaintiff was the leader of a strike and had been arrested for trespassing on mill property. The Court said this statement was calculated to injure the plaintiff and to prevent him from securing employment as a textile worker. Lay v. Gazette Publishing Co., 209 N.C. 134, 183 S.E. 416 (1936). Words which have been held not to be actionable per se are: the plaintiff had "infavorable [sic] personal habits"; Robinson v. Nationwide Insurance Co., supra. "The plaintiff had Negro blood in his veins"; Deese v. Collins, 191 N.C. 749, 133 S.E. 92 (1926). From a reading of these cases, we believe it is libelous per se to publish of a person words which tend to deprecate a person in his or her job or profession. We believe that is what the memorandum of Mr. Sharpe tended to do for the plaintiff.

Having determined that the publication by defendant Sharpe was libelous per se, we turn to the question of communication. Unless the defamatory words were communicated to a third person they are not actionable. The plaintiff contends there were communications when Mary Jane Moore read the handwritten memorandum and when the bank president read the typewritten memorandum.

Considering first the reading of the handwritten memorandum by Mary Jane Moore, there is no direct evidence that Mary Jane Moore saw the plaintiff's name on the memorandum. Max W. Sharpe testified that he prepared, at his desk, a handwritten memorandum in regard to Mrs. Arnold, but he did not remember whether he left it on his desk. He said it was substantially the same in content as the typewritten memorandum which he delivered to the bank president. Mary Jane Moore testified that after being told of a memorandum by other employees of the bank, she read a part of it while it was lying on Mr. Sharpe's desk. Mary Jane Moore testified she did not recall seeing the plaintiff's name. The question then is whether Mary Jane Moore could know from other evidence that the memorandum referred to the plaintiff. She testified she heard the memorandum discussed in the bank "lots of times", but she did not testify that anyone told her Mrs. Arnold's name was on it. We hold that there is evidence from which the jury could find that Mrs. Arnold's name was on the memorandum, but there is no evidence from which it could be concluded that Mary Jane Moore knew the memorandum was referring to the plaintiff. For this reason, we hold there was not a communication to Mary Jane Moore.

We hold that there is sufficient evidence for the jury to conclude that the typewritten memorandum was communicated to the bank president. Mr. Sharpe testified it was delivered to the president. We believe the jury could reasonably conclude that the president of the bank would read a memorandum submitted to him by a vice president of the bank. As to this communication to the bank president, the defendants have pleaded and rely on a qualified privilege as a defense.

50 Am. Jur.2d, Libel and Slander, 195, at pages 698-700 says:

"Conditional or qualified privilege is based on public policy. It does not change the actionable quality of the words published, but merely rebuts the inference of malice that is imputed in the absence of privilege, and makes a showing of falsity and actual malice essential to the right of recovery.

A qualified or conditionally privileged communication is one made in good faith on any subject matter in which the person communicating has an interest, or in reference to which he has a right or duty, if made to a person having a corresponding interest or duty on a privileged occasion and in a manner and under circumstances fairly warranted by the occasion and duty, right, or interest. The essential elements thereof are good faith, an interest to be upheld, a statement limited in its scope to this purpose, a proper occasion, and publication in a proper manner and to proper parties only. The privilege arises from the necessity of full and unrestricted communication concerning a matter in which the parties have an interest or duty. The transmitter must have an interest or duty in the subject matter, and the addressee must have a corresponding interest or duty, but such duty may be moral or social, rather than a legal one. The defense of qualified privilege does not extend to a publication to the general public."

Max W. Sharpe's position as vice president of the bank and the occasion on which he delivered the memorandum to the president of the bank were sufficient to protect the parties from liability if Max Sharpe was acting in good faith. In order to overcome the defense of qualified privilege, the plaintiff must prove that Max Sharpe's action was induced by actual malice. Jones v. Hester, 260 N.C. 264, 132 S.E.2d 586 (1963). We have held that the communication is libelous per se. The Supreme Court of North Carolina has said that defamatory charges which are actionable per se raise a presumption of malice. Stewart v. Nation-Wide Check Corp., 279 N.C. 278, 182 S.E.2d 410 (1971). We do not rest on this presumption. We hold there is evidence in this case from which the jury could conclude that Max W. Sharpe's communication was induced by actual malice. There is evidence that prior to the day she was discharged, he had approved of the way plaintiff performed her job, that on that day he became angry with her because she reported to the president that he took no action in regard to malingering employees, and that he then wrote the memorandum which led to her discharge. We believe this was sufficient for the jury to infer actual malice.

The last question presented by this appeal is in regard to a matter of evidence. The plaintiff offered in evidence and the court excluded the financial statements of the bank. We hold this was error. If the jury should find there was actual malice, they should be allowed to award punitive damages. Stewart v. Nation-Wide Check Corp., supra. On the question of punitive damages, evidence relating to the defendants' financial condition is admissible. Roth v. Greensboro News Co., 217 N.C. 13, 6 S.E.2d 882 (1940).

Reversed and remanded.

Judge MORRIS concurs.

Judge HEDRICK dissents.

ARNOLD v. SHARPE