HE Crawford Company v. Dun & Bradstreet, Inc.

• Decision Date: 08 January 1957
• Docket Number: No. 7274.,7274.
• Citation: 241 F.2d 387
• Parties: H. E. CRAWFORD COMPANY, Inc., Appellant, v. DUN & BRADSTREET, Inc., Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

241 F.2d 387 (1957)

H. E. CRAWFORD COMPANY, Inc., Appellant, v. DUN & BRADSTREET, Inc., Appellee.

No. 7274.

United States Court of Appeals Fourth Circuit.

Argued November 15, 1956.

Decided January 8, 1957.

Stephen Perry Millikin, Greensboro, N. C. (Beverly C. Moore and Smith, Moore, Smith, Schell & Hunter, Greensboro, N. C., on brief), for appellant.

L. P. McLendon, Jr., Greensboro, N. C. (L. P. McLendon, Sr., and Brooks, McLendon, Brim & Holderness, Greensboro, N. C., on brief), for appellee.

Before PARKER, Chief Judge, SOBELOFF, Circuit Judge, and R. DORSEY WATKINS, District Judge.

R. DORSEY WATKINS, District Judge.

This is an appeal by H. E. Crawford Company, Inc. (Crawford), plaintiff-appellant, from a judgment in favor of Dun & Bradstreet, Inc. (Dun & Bradstreet), defendant-appellee, entered by the court after trial, under Fed.Rules Civ.Proc. rule 50(b), 28 U.S.C.A., on Dun & Bradstreet's motion for directed verdict, in an action based upon an alleged libelous credit report.

Crawford is a North Carolina corporation. Since at least 1949 it has been engaged, among other things, in the production of textile knitting machines, knitting machine attachments, and replacement parts. Its most important textile machine permitted machine knitting of argyle socks.¹

In June 1949 Crawford had entered into a contract with Standard Hosiery Mills² (Standard), under which Crawford produced argyle knitting machines exclusively for Standard, and Standard reimbursed Crawford for equipment for manufacturing the machines, together with the cost of the machines plus 10%, and paid Crawford a royalty³ of 10 cents per dozen on all socks made by Standard on these machines. Under this arrangement Crawford produced for and sold to Standard 151 argyle machines and received approximately $500,000 in payment for the equipment and machines.

An accounting was reached on August 31, 1951 pursuant to which Crawford executed a note and chattel mortgage to Standard in the amount of $56,017.90, the note being payable in two installments of $28,008.95 with interest, the first being due July 1, 1952, and the second July 1, 1953. The mortgage, in which Standard's attorney, Kenneth W. Young, was named as trustee, was secured by "all the capital, machinery and equipment owned by" Crawford⁴ and by additional collateral.⁵ On September 2, 1952, the note was in default, with an unpaid balance of $37,598.45. A renewal note for this amount, with the same security, was executed. Crawford was obligated to pay monthly installments of $1,500 and accrued interest beginning November 15, 1952, and a lump payment of $9,234.02 on May 1, 1953. Payments of $9,234.02 and of one installment of $1,500 were made.⁶ In June or July, 1953, Standard's attorney discussed the overdue indebtedness with Crawford, and also discussed various possible settlements, including the assignment of amounts to be received on the delivery of various machines being built by Crawford under contracts hereinafter described. On August 6, 1953, Crawford was given written notice that if the unpaid principal and interest of $28,132.47 was not paid by August 10, 1953, legal action would be taken to enforce payment of the balance. No payment was made, and on August 10, 1953, an action was instituted in the Superior Court of Alamance County, North Carolina, to secure a judgment for the balance due. "Claim and delivery" proceedings⁷ ancillary thereto were issued with summons directed to the Sheriff of Forsyth County to repossess the machinery and equipment, all of which were located in Forsyth County, listed in the chattel mortgage.

Before the ancillary proceedings were sent to Forsyth County for service, Crawford arranged with Standard to hold up service of the claim and delivery on Crawford's undertaking to make an immediate payment of $7,000 on the indebtedness; to authorize the application against the note of a parts account of $6,663.50 owed by Standard; and to pay the balance of $14,832.50 not later than August 20, 1953. The indebtedness was reduced by the first two amounts, but the balance due August 20th was not paid.

In connection with the renewal note of September 2, 1952, Standard released Crawford from its obligation to manufacture argyle machines exclusively for it; and Crawford released Standard from the payment of "royalties" on socks thereafter manufactured by Standard.

Beginning in December 1952 through August 1953, Crawford secured orders for 121 of its argyle knitting machines. Crawford was unable to finance the construction of these machines and accordingly required substantial advances from its customers at the inception of the contracts, far in excess of the 10% deposit required by its competitor. The customers therefore required Crawford to furnish performance bonds.

The following contracts were obtained:

Griffin Hosiery Mills (Griffin), contract dated December 31, 1952, for 30 machines costing $66,000; deposit by Griffin of $50,000; machines to be delivered August 15, 1953;

Bear Brand Hosiery Company (Bear), contract dated January 7, 1953, for 31 machines costing $70,000; deposit by Bear of $50,000; machines to be delivered August 31, 1953;

Harriss & Covington Hosiery Mills (Harriss & Covington), contract dated March 2, 1953, for 30 machines costing $80,000; deposit by Harriss & Covington of $50,000; machines to be delivered August 31, 1953; and

Unique Knitting Company (Unique), contract dated August 11, 1953 for 30 machines costing $78,300; deposit by Unique of $30,000; machines to be delivered December 31, 1953.

The Griffin and Bear Brand contracts were each secured by a $50,000 advance payment performance bond executed by Century Indemnity Company (Century) as surety. The Harriss & Covington contract was secured by a $50,000 advance payment performance bond executed by United States Fidelity & Guaranty Company (U. S. F. & G.) as surety.

Each bond contained indemnity provisions, and each provided that changes in Crawford's financial condition were to be communicated to the surety.

Crawford was unable to secure a corporate surety for the Unique advance payment, and the parties controlling Crawford gave their personal undertakings, secured by collateral.

As of August 19, 1953 Crawford was in default on the Griffin contract; had delivered only 3 of the 31 machines due Bear by August 31, 1953; and had delivered only one of the 30 machines due Harriss & Covington by August 31, 1953.⁸

Dun & Bradstreet is a Delaware corporation, engaged, among other things, in the furnishing to subscribers to its service of commercial credit ratings and reports. In addition to a compilation of ratings, it furnishes reports upon individual companies pursuant to contracts each of which contains the provision that all information furnished "shall be held in strict confidence, and shall never be revealed or made accessible in any manner whatever to the persons reported upon or to any others."

Dun & Bradstreet employs a number of investigators or reporters. It is their duty to investigate any person, firm or corporation assigned to them, and also to check court records and report any suits or judgments against anyone appearing in the Dun & Bradstreet lists. The reporter in Alamance County in checking the court records for that county learned of the claim and delivery proceedings brought on August 10, 1953 by Standard against Crawford. He did not then have any of the reporting forms generally used by Dun & Bradstreet, which permit specific indication as to whether the proceeding is a suit or a judgment. He copied on plain paper and sent to the Dun & Bradstreet office in Winston-Salem, North Carolina (Forsyth County, where Crawford is located), the following:

"Standard Hosiery Mills, Inc. "Kenneth W. Young, Trustee, "Plaintiff "vs. "H. E. Crawford Co., Inc. "Defendant

"H. E. Crawford Co., Inc. defaulted on Promissory Note dated August 13, 1951 and renewal obligation (promissory note) dated September 2, 1952. $37,598.45.

"Wherefore, plaintiff, Standard Hosiery Mills, Inc., prays that it have and recover of the defendant:

"1. The sum of $28,132.47, together with interest at legal rate from and after the date of the institution of this action.

"2. As an ancillary remedy the plaintiff, Kenneth W. Young, Trustee, recover the possession of said personal properties.

"3. That the Court order the sale of the said personal properties by the plaintiff, Kenneth W. Young, Trustee, for the satisfaction of any judgment obtained in this cause and that the plaintiff further recover the cost of this action to be taxed by the clerk."

No contention has been made that this was an inaccurate summary. In Winston-Salem, this was received in ordinary course by one of Dun & Bradstreet's "reporters" who dictated the following report on a transcribing machine:

"Investigation of Guilford County for court records reveal Standard Hosiery Mills, Kenneth W. Young, Trustee, obtained judgment against subject (H. E. Crawford Co., Inc.) in amount of $28,132.47 together with interest from September 1952. Investigation indicates subject has defaulted in payment of a promissory note dated August 13, 1951 and renewal obligation dated September 2, 1952 in amount of $37,598.45. The court has ordered sale of said personal properties of (sic) the plaintiff, Kenneth W. Young, Trustee, for the satisfaction of any judgment obtained in this cause, and that plaintiff further recover the cost of the action to be taxed by the Clerk."

No completely satisfactory explanation for the admittedly erroneous report was given. The reporter had dictated a number of judgment reports that day, and apparently treated this case as one of the series.

On or about August 19, 1953, this report was mailed by Dun & Bradstreet to 43 of its subscribers, each of whom had specially requested credit reports of and concerning Crawford.

At that time, in addition to the situation of Crawford with respect to its contracts for the production of argyle...