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District Court of Appeal, Second District, Division 1, California.

STATIONERS CORPORATION, a California Corporation, Lillian W. Boyd and Omar E. Boyd, Jr., Plaintiffs and Appellants, v. DUN & BRADSTREET, INC., a Delaware Corporation, and W. R. Wagoner, Defendants and Respondents.

Civ. 28091.

Decided: August 18, 1964

Wolver & Wolver, Los Angeles, for appellants. Flint & MacKay, John J. Waller and Edwin Freston, Los Angeles, for respondents.

Plaintiffs appeal from a summary judgment rendered against them in an action denominated as one for ‘Defamation of Business, Libel and Negligence.’ By minute order, prior to the rendition of judgment and after consideration of declarations in support of and in opposition to the motion (for summary judgment), the lower court found that ‘the uncontroverted facts establish a complete defense under the mercantile agency privilege and the provisions of Section 47(3)1 of the California Civil Code’ and therefore the cause presented no triable issue of fact.

The complaint was in six counts, all of which sought damages for language contained in two documents prepared by Dun & Bradstreet and distributed to its subscribers as mercantile agency reports. The first three causes of action are conventional libel counts; the last three are for asserted ‘negligent libels.’ Annexed to the amended complaint as exhibits, and referred to in the briefs as Special Notice Report and Key Account Service Letter, the documents make reference to litigation against appellants instituted by a corporate minority stockholder to compel the removal from office of the individual appellants and other relief. Not only must we decide whether respondent corporation is protected by the qualified privilege set forth in section 47(3), supra, but we must also determine whether the supporting declarations (weighed against those in opposition) establish that the communications were made without malice and accordingly within the privilege defined in subdivision 3 of the governing statute. (Pavlovsky v. Board of Trade, 171 Cal.App.2d 110, 113, 340 P.2d 63.) The further question is presented as to appellants' right to recovery under the theory of negligent conduct on the part of the respondents in publishing the subject material.

We quote the relevant portions of the two documents. According to the Special Notice Report, the complaint by the minority stockholder ‘asks that annual stockholder meetings be held, that the minute book of the corporation be produced, and that Lillian and Omar Boyd be removed from office * * * that the defendant individuals became stockholders upon the death of one of the founders, Omar E. Boyd * * * and set unnecessarily large salaries for themselves, after taking over the business * * * that such salaries are fraudulent misappropriations of corporate assets, because neither of them had the experience, education or qualifications for the positions held * * * that no annual stockholders meetings have been held, and that Mrs. Boyd has declined to allow perusal of the minute book of the corporation.’ Finally, that defendant corporation ‘be enjoined from paying any further sums of money to the defendant individuals, whether as salary, expenses or otherwise; that they be ordered to account for such funds already received; and that they be ordered to repay a good portion of such funds already received.’

The above Report was attached to a Key Account Service Letter mailed the same day that the Report was prepared. Among other things, the communication states that ‘The management [of Stationers Corporation] has not been available for comment on the suit filed by Healy Enterprises, Inc. In outside quarters, a number of authorities are of the opinion that this suit has considerable merit, and may bring about the removal of at least Lillian Boyd from the top management. It has long been considered that she was not the one to head this business.’

Printed at the bottom of each of the above one-page communications is the following caveat: ‘The foregoing report is furnished, at your request, under your Subscription Contract, in STRICT CONFIDENCE, by Dun & Bradstreet, as your agents and employees, for your exclusive use as an aid in making business decisions, in determining the advisability of granting credit or insurance, and for no other purpose.’

California follows the majority rule that the privilege defined in section 47(3) of the Civil Code covers credit reports by mercantile agencies if made ‘without malice.’ (Pavlovsky v. Board of Trade, supra, 171 Cal.App.2d 110, 113, 340 P.2d 63.) That Dun & Bradstreet is such an agency is established by the declaration of Louis M. Marzluft whose duties include supervision of his company's reporting operations in California and other western states. He authenticated and included printed booklets, prepared in the ordinary course of business, explaining in detail respondent company's operating service. He stated that the two reports in question were distributed under his authority and supervision—at their specific request, 147 copies of the Special Notice Report and 7 copies of the Key Account Service Letter were sent to the subscribers concerned; he further stated that the caveat (quoted above) applied to both communications at bar.

The declaration of W. R. Wagoner also supports the claim that the reports in question were prepared in the ordinary course of respondent company's mercantile agency business. A credit analyst for Dun & Bradstreet, Wagoner, stated that he had received an inquiry from a subscriber as to a pending lawsuit against Stationer Corporation; after finding no reference to the lawsuit in the Dun & Bradstreet records, he called a fellow employee, Charles Hooton, who was charged with the responsibility of checking public records, including court files. When Hooton did so, and reported back, Wagoner unsuccessfully attempted to reach the management at Stationers, including Mrs. Boyd. Before releasing the two reports, Wagoner contacted two local credit managers of firms doing business with Stationers, a former executive of appellant company and a credit manager of two suppliers. According to Wagoner, he believed these persons to be reliable, objective and truthful; he also stated his then belief that the information he had acquired was important to Dun & Bradstreet's subscribers.

The Hooton declaration sets out what he did in supplying information to his company from which credit reports could be prepared, detailing what he did with respect to the Healy-Stationers litigation.

All three declarations concluded with the statement that neither the declarant nor his employer bore appellants any hatred or ill will, or possessed any desire or intent to injure appellants.

‘The summary judgment procedure seeks to discover, through the media of affidavits, whether the parties possess evidence which demands the analysis of trial.’ (Burke v. Hibernia Bank, 186 Cal.App.2d 739, 744, 9 Cal.Rptr. 890, 893.) The statute (Code Civ.Proc. § 437c) requires that the affidavits in support of the motion shall state facts within the affiant's personal knowledge and that they be set forth with particularity. To satisfy the requirement of ‘particularity,’ the movant's affidavits must state evidentiary facts and not merely the ultimate facts. (House v. Lala, 180 Cal.App.2d 412, 416, 4 Cal.Rptr. 366.) The Marzluft and Wagoner declarations both declare that the ‘facts' set forth therein are within each declarant's ‘personal knowledge’; each declarant also states evidentiary facts from which ultimate facts can be established. Since a defendant may testify as to his lack of malice in publishing the alleged libelous material (Fleet v. Tichenor, 156 Cal. 343, 348, 104 P. 458, 34 L.R.A.,N.S., 323), wholly aside from the fact that malice is not presumed, and since the several statements in the supporting declarations affirmatively establish, as above indicated, that the reports were protected by the mercantile agency privilege, absent sufficiently valid opposition in appellants' counter-declarations a judgment in respondents' favor would have been proper.

Examination of the counter-declarations discloses some reliance on subdivision 4 of section 47 which provides in pertinent part that a ‘fair and true report in a public journal, of (1) a judicial * * * proceeding’ is qualifiedly privileged. Dunn & Bradstreet, of course, is not a public journal, and subdivision 4 has no place in these proceedings. The counter-declarations also challenged respondents' claim to the mercantile agency privilege under the facts here present by asserting that the dissemination of the information was not limited to Dun & Bradstreet's subscribers, and that respondents had no probable cause for belief in the statements as published. As to the first of these two contentions, appellants rely upon the rule that the original publisher is liable for a republication if it ‘was a result which [it] might have reasonably foreseen as likely to occur.’ (Siemon v. Finkle, 190 Cal. 611, 617, 213 P. 954, 957.) The second contention would have us apply the recognized limitation upon qualified privilege, namely, that the privilege is lost if defendant has no reasonable grounds for believing his statements to be true. Brewer v. Second Baptist Church, 32 Cal.2d 791, 799–800, 197 P.2d 713.)

There is no merit to the contention that the asserted dissemination of the material to non-subscribers destroyed respondents' claim of privilege. Though non-subscribers, it does not follow that such individuals were not ‘person[s] interested’ within the purview of the governing statute (Civ.Code, § 47[3]). In this connection, significantly enough, the amended complaint alleges that the two documents in suit were distributed to ‘customers, prospective customers, vendees, contractors, creditors and persons allowing credit to or from whom credit has been requested by plaintiff corporation * * *.’ Of further significance is the statement in the counter-declaration of Mr. Gruber, appellant company's credit manager, that ‘upon the filing of a lawsuit in this instance on August 16, 1962, by Healy Enterprises, Inc. wherein the corporation plaintiff herein and individual plaintiffs herein were named as defendants such matter would come to the attention of several credit men through ‘McCord's Daily, the Los Angeles Daily Journal or the Metropolitan News and when the same is the subject of public newspaper notices often by reason thereof. (2) The various credit men whose attention was thus called to the filing of such litigation would make inquiry of reporting services or would make inquiry of other credit men concerning the mutual account that was the subject of such litigation or whose credit might be affected thereby. Such inquiries would continue from time to time as other credit men first became acquainted therewith or as credit men having knowledge thereof seek to make their information more current. (3) That upon receipt of reports such Exhibits ‘I’ and ‘J’ herein referred to, credit men having possession thereof would probably and where the account was substantial enough or the relationship reciprocal enough to justify it would discuss such reports and the respective contents thereof with other credit men making inquiries as to the credit or credit standing of the subject account. (4) That reciprocation of information between responsible credit men or persons of responsible positions seeking credit information is one of the recognized bases for credit functions and is necessary for the adequate function in regard to credit of pertinent and mutual accounts, since one credit man or person interested in credit by himself, cannot generally assemble adequate information for an intelligent evaluation of the credit of the subject account in adequate and sufficient time without the use of or joint reference with other credit men.'' (Emphasis added.)

Thus, there is the concession from appellants themselves that the usual, and foreseeable, result of any republication (albeit unauthorized) would be the dissemination of the subject material among persons having a community of interest in the contents of the reports. We can perceive no essential difference between the common interest of members of the credit fraternity in credit matters and ‘the common interest of the members of a church in church matters [which] is sufficient to give rise to a qualified privilege to communications between members on subjects relating to the church's interest.’ (Brewer v. Second Baptist Church, supra, 32 Cal.2d 791, 796, 197 P.2d 713, 717.) The foreseeable consequence of the unauthorized republication being privileged, the defense furnished by the governing statute remains available to respondents. It is further a fact, possibly making the above observations not wholly unacademic, that neither of the counter-declarations sets forth a single instance in which either document was actually made available to a non-subscriber. Mindful of the rule that in summary judgment proceedings the affidavits must establish a party's possession of evidence ‘which demands the analysis of trial,’ (Burke v. Hibernia Bank, supra, 186 Cal.App.2d 739, 744, 9 Cal.Rptr. 890, 893) we conclude that the present contention may not be sustained.

Since the claimed defamations appearing in the subject documents were privileged, it was necessary for appellants, in order to prevail, to show ‘actual malice’ as distinguished from the fictional malice ‘implied by law’ from the intentional doing of a wrongful act without justification. (Harris v. Curtis Pub. Co., 49 Cal.App.2d 340, 349, 121 P.2d 761.) Too, section 48 of the Civil Code declares that malice is not inferred from the communication or publication in the cases provided for in subdivision 3 of section 47, here controlling. “Actual malice' is that state of mind arising from hatred or ill will toward the plaintiff; * * *' (Civ.Code, § 48a, subd. 4.) It does not appear to be contended that respondents bore appellants any personal animus—in the strict literal sense; it is urged, however, that ‘if the facts believed to be true are exaggerated, overdrawn, or colored to the detriment of plaintiff, or are not stated fully and fairly with respect to the plaintiff, the court or jury may properly consider these circumstances as evidence tending to prove actual malice, and they may be sufficient for that purpose without other evidence on the subject.’ (Snively v. Record Publishing Co., 185 Cal. 565, 578, 198 P. 1, 6.) See also Brewer v. Second Baptist Church, supra, 32 Cal.2d 791, 799, 197 P.2d 713. We do not believe that the communications in suit belong in the above hypothetical category. The filing of any lawsuit usually imports considerable differences of opinion between the litigants. If, as in the case of labor disputes, ‘a necessarily broad area of discussion without civil responsibility in damages [is] an indispensible concomitant of the controversy’ (Smith v. Los Angeles Bookbinders Union, 133 Cal.App.2d 486, 493, 284 P.2d 194, 197), the same privilege should be accorded respondents as dispensers of credit information.

The counter-declarations do not deny that respondent Wagoner tried unsuccessfully to reach Stationers' management, including Mrs. Boyd, for comment; had they been reached the publications in their present form would in all probability have been prevented. Nor is it denied that certain ‘authorities' (albeit unnamed) were contacted by respondents for an evaluation of the Healy litigation and believed such evaluation to be reliable and objective.2 The situation is quite different, therefore, from the Brewer case where no attempt was made to assemble all the facts, and where there was an element of carelessness in the publication of the defamatory material. ‘To destroy the privilege plaintiff must allege and prove that defendants entertained toward him a feeling of hatred or ill will “* * * going beyond that which the occasion apparently justifies * * *” and “‘* * * different from that which prima facie rendered the communication privileged, and being a motive contrary to good morals.”’ [Citations.]' (Everett v. California Teachers Assn., 208 Cal.App.2d 291–295, 25 Cal.Rptr. 120, 123.) Appellants have not met that burden; accordingly, as stated in Nizuk v. Gorges, 180 Cal.App.2d 699, 710, 4 Cal.Rptr. 565, 573, in quoting from a federal case, they ‘were not entitled to a denial of the motion [for summary judgment] merely on the basis of a hope that some evidence might develop at the trial.’

The final point for decision concerns the contention that an independent cause of action for negligence (counts four through six) was stated and can be established. The matters alleged are the same as those upon which appellants base their claims in the first three causes of action; an adverse determination has been made by us with respect to such claims. Although the distinction appears to be a fine one, in the Pavlovsky case (supra, 171 Cal.App.2d 110, 340 P.2d 63) recovery was likewise sought on the theory of negligent conduct. Said the Court: ‘Plaintiff's third count alleges that the board ‘without any preliminary investigation, without a hearing, without obtaining the consent of the plaintiff * * *, and without requesting his version as to any report made against him, negligently, without due care and without reasonable cause, published the name of plaintiff to its membership.’' Continuing: ‘If this count be deemed to allege libel, it meets the same obstacles of qualified privilege and lack of allegation of malice already discussed. If it be regarded as seeking to assert a cause of action for negligence, it is also defective.’ (171 Cal.App.2d p. 114, 340 P.2d p. 65.)

We have canvassed the numerous authorities, several from other jurisdictions, assembled by appellants. They are either inapplicable on their facts or otherwise not persuasive. An example is Cepeda v. Cowles Magazines and Broadcasting, Inc., (9th Cir.), 328 F.2d 869, the plaintiff being a wellknown baseball player. The court cites and discusses the various California cases involving qualified privilege, including Morris v. National Federation of the Blind, 192 Cal.App.2d 162, 13 Cal.Rptr. 336, where it was held that the publication was not to a limited group whose interest warranted the disclosure to them; also referred to is Freeman v. Mills, 97 Cal.App.2d 161, 217 P.2d 687, that case holding that a publication in letters between members of the race course investigating bureau relating to the conduct of the plaintiff as a race course starter was a communication between interested persons and was qualifiedly privileged, even though false, in the absence of malice. After expressing some uncertainty as to whether the qualified privilege accorded communications between persons in the relation of mutually interested parties, as in Freeman, should also be applied by California courts to ‘distinguished athletes, or would extend to so widely distributed a publication as that of the defendant's magazine,’ the federal appellate court expressed its inability to see ‘how a public policy in favor of fair comment is relevant or could generate a privilege in this unusual type of situation.’ Unlike the situation in Cepeda, the subject of the two communications in suit did not relate to matters of considerable public or national interest. More pertinent to the present problem is the reasoning in the Freeman case—and we so hold.

The judgment is affirmed.


FN1. Section 47(3) of the Civil Code: ‘A privileged publication or broadcast is one made—* * * 3. 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 relation to the person interested as to afford a reasonable ground for supposing the motive for the communication innocent, or (3) who is requested by the person interested to give the information.’.  FN1. Section 47(3) of the Civil Code: ‘A privileged publication or broadcast is one made—* * * 3. 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 relation to the person interested as to afford a reasonable ground for supposing the motive for the communication innocent, or (3) who is requested by the person interested to give the information.’

2.  Citing Donnachie v. East Bay Regional Park Dist., 217 Cal.App.2d 172, 31 Cal.Rptr. 611, which characterizes an anonymous pamphlet as ‘the grossest form of hearsay evidence,’ appellants argue that the anonymity of respondents' ‘authorities' made reliance thereon completely valueless for the purposes of the present motion. In the Donnachie case, the court says, the declarations ‘contain no clue as to the author of the pamphlet.’ (217 Cal.App.2d p. 175, 31 Cal.Rptr. p. 613.) In the case at bar, however, clues were given by respondent Wagoner, it being stated in his declaration that he talked with ‘the local credit managers of two suppliers who sell supplies to Stationers Corporation,’ ‘with the credit managers of two other suppliers in the Southern California area who sell office supplies to Stationers Corporation,’ and ‘with an executive-level employee of Stationers Corporation who had recently obtained a position outside Stationers Corporation.’ Such declarations, it seems to us, satisfy the requirement of ‘particularity,’ namely, the setting forth of evidentiary facts in the moving papers. (Code Civ.Proc. § 437c.)

LILLIE, Justice.

WOOD, P. J., and FOURT, J., concur.

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