LUNDQUIST v. REUSSER

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Court of Appeal, Second District, Division 6, California.

Vivienne LUNDQUIST, Plaintiff and Respondent, v. Heinz REUSSER, et al., Defendants and Appellants.

No. B059617.

Decided: December 09, 1992

Archbald & Spray, Barry Clifford Snyder, Katherine H. Bower and Douglas B. Large, Santa Barbara, for defendants appellants. Nordman, Cormany, Hair & Compton, Glen M. Reiser, Oxnard, for plaintiff respondent.

Heinz and Sylvia Reusser, defendants in an action for slander and intentional infliction of emotional distress, appeal from a judgment following a jury verdict in favor of plaintiff Vivienne Lundquist.   Appellants contend, inter alia, that the trial court prejudicially erred by instructing the jury on the burden of proof.   We agree and reverse because the instruction erroneously shifted the burden of proof and required that appellants prove the publication was made without malice.

Lundquist is an established breeder of Peruvian Paso horses.   She claimed that appellants defamed her at an August 14, 1988 meeting of Peruvian Paso horse owners and breeders.

Heinz Reusser, a member of the Board of Directors of the Peruvian Paso Horse Owners Association, was asked to participate in a panel discussion regarding the use of drugs and surgery to enhance the performance of show horses.   Reusser told the audience that one of his multi-champion mares had been surgically altered.   He claimed that the breeder who sold him the mare performed cosmetic surgery on the mare to conceal a neck bulge or ewe-neck.   This conformation defect affected the value of the mare but was not discovered until the mare produced a foal with a similar neck bulge.

Without identifying the horse or breeder, Reusser asked his wife, Sylvia Reusser, to pass around photos of the mare and foal.   John Burgess, another horse breeder who attended the seminar, thought he recognized the mare.   When Burgess asked Mrs. Reusser about the mare's identity, Sylvia Reusser said that Burgess knew the breeder.   Burgess and others who attended the seminar deduced that the mare was Perla De Oro, MSR (Perla) and that Lundquist was the breeder.1

Following the seminar, rumors began to spread that Lundquist surgically altered her show horses to conceal conformation defects.   Lundquist believed that she had been defamed, filed suit, and alleged the privileged occasion in the complaint.   Appellants denied liability in their answer on the theory that the publication was made without malice and was privileged by reason of Civil Code section 47, subdivision (c) which provides that a privileged publication is one made:  “In a communication, without malice, to a person interested therein, (1) by one who is also interested, or (2) by one who stands in such a relation to the person interested as to afford a reasonable ground for supposing the motive for the communication to be innocent, or (3) who is requested by the person interested to give the information.”  (Emphasis added.) 2

Heinz Reusser testified that he purchased Perla from Lundquist for $25,000.   In 1987 Perla was cross-bred with her step-brother resulting in a filly named Tanya.   Tanya was born with an abnormal bulge on the ventral portion of her neck.

After Tanya's birth, appellants discovered that Perla had a 14–inch surgical scar on the same area of the neck.   Their veterinarian, Doctor Charles Boles, examined the scar.   Doctor Boles, who specialized in equine necks and neck surgery, told them that muscle tissue had been removed from Perla's neck.   He knew of no medical reason for the operation.

Appellants compared baby pictures of Perla and Tanya and concluded that Lundquist had performed cosmetic surgery on Perla to conceal the genetic defect.   They never discussed the matter with Lundquist because, based on earlier transactions, they doubted that Lundquist would disclose all the facts.

Lundquist testified that none of the accusations were true.   She explained that Perla developed an abscess in her throat when she was a filly.   Surgery was performed on her neck to remove the abscess and drain the infection.   Lundquist forgot about the surgery and made no mention of it when the mare was sold seven years later.

The jury returned a special verdict awarding Lundquist $20,000 for slander, $20,000 for intentional infliction of emotional distress, $25,000 punitive damages against Heinz Reusser, and $15,000 punitive damages against Sylvia Reusser.

Appellants brought a motion for judgment notwithstanding the verdict and motion for new trial based on jury instruction error and insufficiency of the evidence.   The trial court denied both motions.   This appeal followed.

 Slander is statutorily defined as “a false and unprivileged publication orally, uttered․”  (§ 46, emphasis added.)   Here, Lundquist's own complaint and appellant's answer alleged that the publication concerned Lundquist's business activities and was directed to fellow Peruvian Paso owners and breeders at a seminar where everyone had a common interest.   Putting aside the issue of malice, the instant publication was made on an occasion which gives rise to the common-interest privilege.  (§ 47, subd. (c).)

The scope of common-interest privilege was recently clarified in Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 257 Cal.Rptr. 708, 771 P.2d 406 (Brown).   For more than 60 years the fair-comment defense (a First Amendment defense typically asserted by media defendants) and the common-interest privilege were treated as a single defense.  (Maidman v. Jewish Publications, Inc. (1960) 54 Cal.2d 643, 651–652, 7 Cal.Rptr. 617, 355 P.2d 265;  Institute of Athletic Motivation v. University of Illinois (1980) 114 Cal.App.3d 1, 8–9, fn. 4, 170 Cal.Rptr. 411;  Rollenhagen v. City of Orange (1981) 116 Cal.App.3d 414, 420–421, 172 Cal.Rptr. 49.)

In Brown, our Supreme Court held that section 47(3) could not be asserted by a news media defendant even though the publication involved a matter of public interest.  (Brown, supra, 48 Cal.3d at p. 709, 257 Cal.Rptr. 708, 771 P.2d 406.)  “The fair-comment defense arises independently of section 47(3), which encompasses only the common-interest privilege․  [The Supreme Court disapproved] of Snively [Snively v. Record Publishing Co. (1921) 185 Cal. 565, 198 P. 1] and other cases indicating that the fair-comment defense is within section 47(3).”  (Id. 48 Cal.3d at pp. 732–733, fn. 18, 257 Cal.Rptr. 708, 771 P.2d 406.)  “Section 47(3) defines a privileged communication as one made without malice.   Thus, if malice is shown, the privilege is not merely overcome;  it never arises in the first instance.”  (Ibid. at p. 724, fn. 7, 257 Cal.Rptr. 708, 771 P.2d 406.)

Prior to Brown, there was some confusion about whether the plaintiff had to affirmatively prove malice to defeat the common-interest privilege.  “Older case authority held that the privilege did not apply unless the defendant met the burden of proving an absence of malice.   Later authority suggests that the plaintiff has the burden of proving malice in order to defeat the privilege.   Another line of authority suggests that the defendant must normally carry the burden of proof on the issue of malice;  however, when the plaintiff's complaint alleges facts that show on their face that the statement was made on a privileged occasion, then the plaintiff has the burden of proving malice.”  (4 Levy, Golden & Sacks, Cal.Torts (1992) § 45.12[4], pp. 45–66 to 45–67, fns. omitted.)

The fair import of Brown is that a plaintiff has the burden of proving “actual malice” if the publication occurred on a privileged occasion.   (Brown, supra, 48 Cal.3d at pp. 723, fn. 7, 745, 257 Cal.Rptr. 708, 771 P.2d 406.)   Lundquist concedes that recent revisions to BAJI 7.05 (1991 rev.) and 7.05.1 (1991 new) place the burden of proof on a plaintiff in such a circumstance.3

Here, however, the jury was given a modified BAJI 2.60 instruction stating that the “defendant has the burden of proving by a preponderance of the evidence ․ [that] ․ he made the statements without malice towards the plaintiff.”   This instruction erroneously shifted the burden of proof.   The instruction further stated that “if the evidence is so evenly balanced that you are unable to say that the evidence on either side of an issue preponderates, your finding on that issue must be against the party who had the burden of proving it.”

 We hold that where, as here, the underlying facts for the common-interest privilege are present, the plaintiff has the burden of proof to show “actual malice,” i.e., hatred or ill will evidencing a willingness to vex, annoy, or injure.  (Brown, supra, 48 Cal.3d at pp. 723, fn. 7, 745, 257 Cal.Rptr. 708, 771 P.2d 406;  Manguso v. Oceanside Unified School Dist. (1984) 153 Cal.App.3d 574, 580–581, 200 Cal.Rptr. 535;  Williams v. Taylor (1982) 129 Cal.App.3d 745, 752, 181 Cal.Rptr. 423;  Gantry Const. Co., Inc. v. American Pipe & Const. Co. (1975) 49 Cal.App.3d 186, 197–198, 122 Cal.Rptr. 834.)   Malice may not be inferred from the communication.  (§ 48.)   Our Supreme Court has indicated that the plaintiff may show the equivalent of actual malice by “ ‘․ showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights [citations].’  [Citations.]”   (Frommoethelydo v. Fire Ins. Exchange (1986) 42 Cal.3d 208, 217, 228 Cal.Rptr. 160, 721 P.2d 41;  Sanborn v. Chronicle Pub. Co. (1976) 18 Cal.3d 406, 413, 134 Cal.Rptr. 402, 556 P.2d 764.)  Stevens v. Snow (1923) 191 Cal. 58, 214 P. 968, relied upon by Lundquist, is not in conflict with our holding.   There, unlike the instant case, “․ the defendants did not plead privilege.”  (Id. at p. 64, 214 P. 968.)   The case is factually distinguishable and not controlling.

Lundquist's assertion that appellants waived the instructional error because they failed to object is without merit.  (Code Civ.Proc., § 647;  Agarwal v. Johnson (1979) 25 Cal.3d 932, 949, 160 Cal.Rptr. 141, 603 P.2d 58.)  “[W]here the instruction is erroneous on material elements of the law [or here, the burden of proof], the giving of the instruction is deemed excepted to, even in the absence of objection.  [Citation.]”  (Manguso v. Oceanside Unified School Dist., supra, 153 Cal.App.3d at pp. 581–582, 200 Cal.Rptr. 535.)   Moreover, appellants proffered but the trial court refused Special Instruction D which required that plaintiff prove “actual malice” or its equivalent.

 Based on our review of the record, the question of “actual malice” was a close one and the gist of the entire action.  (Freeman v. Mills (1950) 97 Cal.App.2d 161, 167, 217 P.2d 687.)   Any instructional error regarding the burden of proof or definition of malice was likely to mislead the jury.  (Cal. Const. art. VI, § 13;  Henderson v. Harnischfeger Corp. (1974) 12 Cal.3d 663, 670, 117 Cal.Rptr. 1, 527 P.2d 353 [erroneous strict liability instruction];  Carney v. Santa Cruz Women Against Rape (1990) 221 Cal.App.3d 1009, 1018–1019, 271 Cal.Rptr. 30 [failure to properly instruct on law of defamation];  Roemer v. Retail Credit Co. (1970) 3 Cal.App.3d 368, 371–372, 83 Cal.Rptr. 540 [erroneous malice instruction]).

 We also conclude that the burden of proof instruction prejudicially affected the intentional infliction of emotional distress verdict.  (Deaile v. General Tel. Co. of California (1974) 40 Cal.App.3d 841, 849–850, 115 Cal.Rptr. 582.)   If the statement was uttered on a privileged occasion without malice, appellants did not engage in outrageous conduct.  (Id. at pp. 849–850, 115 Cal.Rptr. 582.)  “ ‘Whether treated as an element of the prima facie case [of intentional infliction of emotional distress] or as a matter of defense, it must also appear that the defendants' conduct was unprivileged.’ ”  (Davidson v. City of Westminister (1982) 32 Cal.3d 197, 209, 185 Cal.Rptr. 252, 649 P.2d 894;  Cervantez v. J.C. Penney Co., Inc. (1979) 24 Cal.3d 579, 593, 156 Cal.Rptr. 198, 595 P.2d 975;  Fletcher v. Western Nat. Life Ins. Co. (1970) 10 Cal.App.3d 376, 394, 89 Cal.Rptr. 78.)

 Lundquist nonetheless claims that the punitive damages special verdict cured the instructional error.   She reasons that the award, which required a higher standard of “malice” and higher quantum of proof, saves the judgment.   We disagree.   The jury may have never reached the punitive damages issue if they had been properly instructed.  “[E]xemplary damages cannot be imposed unless the plaintiff has suffered actual damages.  [Citations.]”   (Brewer v. Second Baptist Church (1948) 32 Cal.2d 791, 801–802, 197 P.2d 713.)

“ ‘[T]he prejudicial effect of a misstatement of an important principle of law cannot be easily overcome by another declaration contradicting it.’  [Citation.]”  (Roemer v. Retail Credit Co., supra, 3 Cal.App.3d at p. 372, 83 Cal.Rptr. 540.)

Here, counsel for Lundquist urged the jury to rely on its prior malice determination in awarding punitive damages:  “So if in your deliberations regarding slander, you decide that he was reckless and therefore malicious, then I suggest to you that when you come down here to deciding whether or not Mrs. Lundquist is entitled to these types of damages, then you can rely, to a great extent, on your prior analysis of the word ‘malice,’ which means the same thing as malicious, which means the same thing as reckless, in deciding whether or not to award these damages.”   This argument allowed the jury to award punitive damages based on recklessness alone and blurs “․ the sharp distinction between the actual malice required by New York Times [the reckless disregard formulation] and that necessary to award punitive damages under section 48a.”  (McCoy v. Hearst Corp. (1986) 42 Cal.3d 835, 873, 231 Cal.Rptr. 518, 727 P.2d 711.)

The judgment is reversed.   The parties shall bear their own costs on appeal.

FOOTNOTES

1.   Appellant's speech was taped and is as follows:“I'm Heinz Reusser.   The reason I like to be on the panel here is my concern about how we influence our horses with drugs and surgery and how that affects, really affects, the future quality and future potential of our breed and to me they are very much the same thing as a breeder.   We know that people breed to winning horses and if these winning horses have only been winning because they had the pharmacist at their side, then we are leading people that are breeding these horses down the wrong path.   Especially if they don't know.   And the same is true if we are breeding or buying for breeding horses that are secretly surgically altered, taking genetic problems out of the horse and later we breed to them.   And, of course, they come back and I think that these two things have the same effect on what we achieve in breeding with many of our breeders being led down the wrong path that may cost them tens or hundreds of thousands of dollars until they find out what happened.“In my specific case, and I just want to mention this to you, I have a mare, multiple champion mare, had a surgically altered neck-ewe and it's very visible and I think that it established that that was done to the mare.   And now I am looking at the first foal and the first foal has exactly the same cosmetic conformational problem as the mother had except you didn't know that.   That is going to come back up three years and fifty thousand dollars later.   So, I think drugs and the methods of surgically altering a horse, if for the purpose of winning in the show ring, are some of the worst tools to serve our breed with.   This is what I would like you to think about and see that we can come back from these ills.   I think they are terrible things.   Sylvia, do you have pictures here?   She took some pictures of that mare so you can look at it.   We are not telling you some wild story, okay?”

2.   All statutory references are to the Civil Code unless otherwise stated.Section 47 subdivision (c), derived from former section 47 subdivision (3), was renumbered without substantive change in 1990.   Where the former section is cited in case quotations, we have quoted it as printed.

3.   We question the language of BAJI 7.05 and 7.05.1 to the extent that they refer to section 47 subdivision (3) as a “defense” or “conditional privilege.”  Section 47 subdivision (3) is not a qualified or conditional privilege.  “Section 47(3) defines a privileged communication as one made without malice.   Thus, if malice is shown, the privilege is not merely overcome;  it never arises in the first instance․  [T]he characterization of the privilege as qualified or conditional is incorrect to the extent that it suggests the privilege is defeasible․”  (Brown, supra, 48 Cal.3d 711, 723, fn. 7, 257 Cal.Rptr. 708, 771 P.2d 406.)In addition, BAJI 7.05.1 says:  “Defendant has the burden of proving by a preponderance of the evidence all of the facts necessary to establish conditional privilege.”   We believe the statement is misleading.   Where the facts with respect to the occasion of the publication are in dispute, a defendant would have the burden to show that the publication was made on a privileged occasion only.   Plaintiff would then have the burden of proving “actual malice” or its equivalent.

YEGAN, Associate Justice.

STONE, P.J., and GILBERT, J., concur.