Douglas Elec. Corp. v. Grace

• Decision Date: 23 October 1990
• Docket Number: No. 90,90
• Citation: 590 N.E.2d 363,70 Ohio App.3d 7
• Parties: DOUGLAS ELECTRIC CORPORATION et al., Appellees, v. GRACE, d.b.a. MG Electric, Appellant. CA 01.
• Court: Ohio Court of Appeals

Page 7

70 Ohio App.3d 7

590 N.E.2d 363

DOUGLAS ELECTRIC CORPORATION et al., Appellees, v. GRACE, d.b.a. MG Electric, Appellant.

No. 90 CA 01.

Court of Appeals of Ohio, Second District, Greene County.

Decided Oct. 23, 1990.

J. Timothy Campbell, Xenia, for appellees.

F. Thomas Green, Dayton, for appellant.

FAIN, Judge.

Defendant-appellant, Mike Grace, d.b.a. MG Electric, appeals both from the judgment of the trial court rendered in favor of plaintiff-appellee Douglas Electric Corp. on its complaint, and from the judgment rendered against Grace upon his counterclaim against Douglas Electric and plaintiff-appellee Neal Hastings for defamation.

Grace claims that the trial court erred in finding that Douglas Electric and Hastings did not libel him. Grace further contends that the trial court erred in refusing to reopen the case and accept new evidence and that the trial court erred by overruling his motion for a new trial. Although we reject all of his other assignments of error, we agree with Grace that even when the evidence before the trial court is viewed in a light most favorable to Hastings, reasonable minds can come to but one conclusion, and that is that Douglas Electric and Hastings libeled Grace. Neither the defense of truth nor of qualified privilege, which Douglas Electric and Hastings now seek to interpose to the libel, was raised in the trial court.

The judgment in favor of Douglas Electric upon its complaint will be affirmed; the judgment in favor of Douglas Electric and Hastings upon Grace's counterclaim will be reversed, and this cause will be remanded for a determination of damages.

I

Douglas Electric brought this action against Grace asserting claims for materials and labor expended in certain electrical contracting work. Neal Hastings, president and sole owner of Douglas Electric, was joined as a party plaintiff. Grace disputed the original claims by answer, and counterclaimed against both Douglas Electric and Hastings for costs of labor and material and for alleged libel.

After a bench trial, the court rendered a judgment in favor of Douglas Electric for part of its claims, judgment in favor of Grace for part of his counterclaims for material and labor, and judgment in favor of both plaintiffs on Grace's counterclaim for libel.

Grace moved the trial court to reopen the judgment to permit the introduction of additional evidence and for a new trial upon the ground that the adverse judgment upon his counterclaim for libel was contrary to law and against the manifest weight of the evidence. The trial court overruled both motions. Grace appeals from the judgment of the trial court.

The facts giving rise to this appeal are as follows: Hastings and Grace are electricians in the business of bidding and contracting for electrical construction and repairs. In 1984, Douglas Electric and Hastings, operating as an electrical contractor, entered into an agreement with Grace, d.b.a. MG Electric. This agreement contemplated assisting each other on jobs requiring additional assistance, including materials and manpower. Much of the exchange of work and materials was only partially documented, and practically all the documentation was in the hands of Hastings. In fact, much of the conflicting evidence presented at trial pertained to the parties' dispute over labor and materials.

During the trial, James Snyder, owner of Wheel Construction, Inc., testified that he received the following anonymous letter which Hastings later admitted having written and sent on Douglas Electric's behalf:

"April 15, 1988

"Wheel Construction Inc.

"J.W. Snyder, Owner

"111 Ogden Road

"Springfield, Ohio 45503

"Dear Sirs:

"I write to you so that you may be informed of fraud and 'kick-backs' that are presently undermining your operations.

"In August of 1987, Jeff Hurley approached Mike Grace, MG Electric, concerning a grave personal problem. Jeff's brother was in big trouble with the law and needed cash to pay attorney fees in an attempt to keep him from going to prison.

"A deal was cut and MG was given four jobs (Wilmington Speedway, Beavercreek Pro Care, Blue Ash Marathon, and Stuckeys gas canopy) in return for several thousand dollars directly to Jeff.

"I recommend you take these allegations and look at these job files for confirmation of facts. I would assume that extras have been added to all of these jobs and would question the validity of each considering the pact between these two people. I would note the lack of bids from MG as an indicator of the above allegation.

"You have a lot at stake to have someone within your company working for themselves instead of you at your risk."

Snyder testified that this letter caused him to cease doing business with Grace. Grace based his libel claim against Hastings and Douglas Electric upon this communication.

II

Grace's First Assignment of Error is as follows:

"The trial court committed prejudicial error in entering judgment on the libel issue in favor of plaintiffs and against defendant."

In its judgment entry, the trial court disposed of Grace's counterclaim for libel as follows:

"Defendant's action for libel has not been proven, and judgment is granted for the Plaintiff thereon."

In its findings of fact and conclusions of law, the trial court addressed the libel issue as follows:

"The Court finds the facts as follows:

" * * * "3. Evidence submitted by Defendant regarding libel action is insufficient to demonstrate intent to damage Defendant and his business reputation, as well as insufficient to establish malice and monetary damage to Defendant."

"The Court's conclusions of law are as follows:

" * * *

"3. Douglas Electric Corporation is entitled to judgment in its favor on the libel action as the libel claim of the Defendant was not proven."

Grace contends that the trial court's judgment against him on his claim for libel is contrary to law because Hastings admitted to having written and sent, on behalf of Douglas Electric, a letter that was libelous per se, no defenses of truth or qualified privilege were asserted, and there was clear proof that the libelous letter caused Grace to lose the recipient's work.

In their reply to Grace's counterclaim, Douglas Electric and Hastings did not interpose the affirmative defenses of truth or qualified privilege, but contented themselves with a general denial. Grace contends that the trial court was thereby precluded from considering the affirmative defenses of truth or qualified privilege.

A general denial to a claim of defamation is not sufficient to support proof of justification for an otherwise defamatory statement. Duval v. Davey (1877), 32 Ohio St. 604, 609-610. In that case, the truth of the defamatory statement was held to have been an affirmative defense that had not been pled, so that proof of the statement's truth was properly excluded. In accord, see Spencer v. News Publishing Co. (1947), 79 Ohio App. 519, 35 O.O. 336, 74 N.E.2d 282, second paragraph of syllabus, in which it was held that the truth of a libelous statement was not material to a general denial, but was relevant and could be considered in mitigation of damages. See, also, R.C. 2739.02, which seems to set up truth as an affirmative defense to an action for libel or slander.

Because the existence of a qualified privilege is also a justification for a statement that is otherwise defamatory, we conclude that the existence of a qualified privilege is also an affirmative defense that must be pled separately from a general denial, although the existence of a moral duty to speak--the basis for the qualified privilege--like truth, would be a mitigating circumstance in any event. Both truth and the qualified privilege would be relevant to the issue of malice, since both go to disprove it. Thus, both truth and circumstances amounting to a qualified privilege were relevant to an issue in the case before us, since Grace sought punitive damages on his libel claim, for which malice was required.

It might be argued that the defenses of truth or qualified privilege were tried with the implied consent of both parties, requiring an amendment to the pleadings pursuant to Civ.R. 15(B), since evidence pertaining to both issues was admitted without objection. However, no objection would have been proper, since both types of evidence were relevant to the issue of malice, which was an issue in the case. Thus, Grace's failure to object to that evidence cannot be interpreted as having constituted his implied consent to the trial of affirmative defenses not made up by the pleadings.

"Ordinarily, defamatory statements that injure a person in his trade or profession are actionable per se." Smith v. Klein (1985), 23 Ohio App.3d 146, 148, 23 OBR 387, 390, 492 N.E.2d 852, 855. We conclude that in his testimony Hastings admitted to having uttered a statement that was libelous per se. Hastings testified as follows:

"Q. Now, just a couple of questions on the Wheel Construction letter that was referred to. You did write that letter?

"A. Yes, sir, I did.

"Q. And the contents of that letter, where did you get the information?

"A. From Mike [Grace].

"Q. So, everything that was in the letter was what Mike told you?

"A. Yes, sir.

"Q. And the sum and substance in your judgment was it was [sic ] illegal activity?

"A. Well amoral, unethical. I wasn't concerned about the illegal more than the rest of it.

"Q. And, that letter was sent by you to Wheel?

"A. Yes, sir, it was.

"Q. And other than a copy I think you said went to Mike Grace it didn't go to anyone else?

"A. No, sir.

"Q. And it was all based exactly upon what Mike had told you?

"A. Yes, sir.

"Q. That is where you got the information?

"A. That's correct."

Hastings also testified as follows:

"Q. And you were working on behalf of Douglas Electric Corporation when you wrote that anonymous letter which you mailed to Mr. Snyder at Wheel in Springfield, is that right?

"A. That's correct.

"Q. Why did you...