Kainz v. Lussier

• Decision Date: 22 July 1983
• Docket Number: Nos. 8520,8521,s. 8520
• Citation: 4 Haw.App. 400,667 P.2d 797
• Parties: William KAINZ, Plaintiff-Appellant, Cross-Appellee, v. Marcel Peter LUSSIER, Defendant/Third-Party Plaintiff-Appellee, Cross- Appellant, Mau-Van Development, Inc., Third-Party Defendant-Cross-Appellee.
• Court: Hawaii Court of Appeals

Page 797

667 P.2d 797

4 Haw.App. 400

William KAINZ, Plaintiff-Appellant, Cross-Appellee, v. Marcel Peter LUSSIER, Defendant/Third-Party Plaintiff-Appellee, Cross- Appellant Mau-Van Development, Inc., Third-Party Defendant-Cross-Appellee.

Nos. 8520, 8521.

Intermediate Court of Appeals of Hawai'i.

July 22, 1983.

Syllabus by the Court

1. A qualified privilege arises (1) when the author of a defamatory statement reasonably acts in discharge of some public or private duty, legal, moral, or social and (2) where the publication concerns a subject matter in which the author and the recipients of the publication have a correlative interest or duty.

2. The qualified privilege must be exercised in a reasonable manner and for a proper purpose. The privilege is lost if the author steps outside the scope of or abuses the privilege.

3. The qualified privilege may be abused by (1) excessive publication, (2) use of the occasion for an improper purpose, or (3) lack of belief or grounds for belief in the truth of what is said.

4. Under Rule 56(c), Hawaii Rules of Civil Procedure (HRCP), summary judgment is proper if there is no genuine issue as to any material fact and the movant is entitled to a judgment as a matter of law. In the disposition of the motion, the evidence and the fair inferences therefrom are viewed in the light most favorable to the opposing party.

5. Although Rule 42(a), HRCP, is designed to encourage consolidation where a common question of law or fact is present, the trial court is given broad discretion to decide whether consolidation would be desirable. The trial court's determination will not be reversed unless clear error or exigent circumstances are shown.

6. On a motion for consolidation, the movant has the burden of persuading the trial court that consolidation is desirable. Consolidation may be denied if it will cause delay or will lead to confusion or prejudice.

7. Rule 13(a), HRCP, requires a pleader to state a counterclaim that he has against an "opposing party."

8. A shareholder who brings a derivative action acts in a representative capacity and not in an individual capacity and, thus, is not an "opposing party" under Rule 13(a) and cannot be a subject of a personal counterclaim.

Ronald S. Adelman, Honolulu, for plaintiff-appellant, cross-appellee.

B. Martin Luna and Everett Walton, Wailuku (Ueoka & Luna, Wailuku, of counsel), for third-party defendant-cross-appellee.

Robert A. Smith, Honolulu (Richard L. Rost, Wailuku, on the briefs), for defendant/third-party plaintiff-appellee, cross-appellant.

Before BURNS, C.J., and HEEN and TANAKA, JJ.

TANAKA, Judge.

This defamation action (hereinafter the "defamation case"), which is a companion case to Lussier v. Mau-Van Development, Inc., I, 4 Haw.App. 359, 667 P.2d 804 (1983), a shareholder's derivative action (hereinafter the "derivative case"), involves an appeal (No. 8521) and a cross-appeal (No. 8520). ¹ In No. 8521, plaintiff Wilhelm Kainz (Kainz) appeals from the summary judgment in favor of defendant Marcel Peter Lussier (Lussier) which dismissed the complaint in toto. In No. 8520, Lussier cross-appeals the trial court's denial of his motion to consolidate the defamation and derivative cases and motion to dismiss the complaint on a procedural ground or, in the alternative, for other remedies. We reverse in part and affirm in part.

The issues on appeal are:

1. Whether the record reveals a genuine issue of material fact so that the granting of summary judgment was erroneous;

2. Whether the trial court abused its discretion in denying the consolidation of the defamation and derivative cases; and

3. Whether Kainz's defamation claims constitute compulsory counterclaims in the derivative case under Rule 13(a), Hawaii Rules of Civil Procedure (HRCP) (1981), necessitating dismissal of the defamation complaint or, in the alternative, the granting of other remedies.

We answer yes to issue 1 and no to issues 2 and 3.

On August 29, 1979, Lussier filed his complaint in the derivative case against Mau-Van Development, Inc., a Hawaii corporation (Mau-Van), Kainz, and other directors and shareholders of Mau-Van.

Approximately five months later, on January 24, 1980, Kainz filed his complaint against Lussier in the defamation case. The first count of the complaint charged Lussier with libel, alleging that from and after May 20, 1979, he wrote a series of letters to Mau-Van shareholders accusing Kainz of wrongful acts in his business and fiduciary relationship with Mau-Van. The second count charged Lussier with slander, alleging that he orally stated to third persons the contents of such letters and that Kainz was a "check forger."

On February 8, 1980, Lussier filed his answer denying the material allegations in the complaint and interposing the affirmative defenses of (1) absolute or conditional or qualified privilege, (2) truth, (3) laches, and (4) estoppel. On February 14, 1980, Lussier filed a third-party complaint against Mau- Van stating that his alleged wrongful acts were done as a director and officer of Mau-Van and seeking indemnity.

On June 20, 1980, Lussier moved to consolidate the defamation and derivative cases. The motion was denied on July 17, 1980.

On August 18, 1980, Lussier filed a motion for summary judgment dismissing the complaint or, in the alternative, for an order staying prosecution of the complaint or for an order directing Kainz to set up the defamation complaint as an omitted compulsory counterclaim in the derivative case (hereinafter the "August 18th motion"). The trial court denied this motion on September 16, 1980.

On May 1, 1981, Lussier filed another motion for summary judgment stating that "as a matter of law, defendant's alleged defamatory communications were privileged." The motion was noticed to be heard on May 13, 1981. However, in an order filed on May 18, 1981, the trial court ordered, inter alia:

5. That the "Motion of Defendant Marcel Peter Lussier for Summary Judgment and Attorney's Fees", scheduled to be heard on May 13, 1981 at 10:00 a.m. be and is hereby continued until moved on.

In the interim, the jury trial of the derivative case had commenced on January 5, 1981. On February 13, 1981, judgment was entered in the derivative case in favor of defendants and against Lussier and on March 9, 1981, Lussier's motion for a new trial was denied.

On July 9, 1981, the hearing date for Lussier's July 1, 1981 motion for bifurcation of the trial of the defamation case as to liability and damages and other matters, the trial court sua sponte took up Lussier's May 1, 1981 motion for summary judgment which had been "continued until moved on" and for the "purpose of judicial economy" granted summary judgment "on the ground that [Lussier's] alleged defamatory communications were privileged." Transcript of July 9, 1981 Proceedings at 2-3. The summary judgment was to cover both counts of the complaint--libel and slander. Id. at 8. Judgment was entered on August 10, 1981. ²

After Kainz's motion to vacate and set aside the judgment was denied on October 1, 1981, Kainz appealed and Lussier cross-appealed.

I.

Kainz contends that the trial court erred in granting Lussier's motion for summary judgment on two grounds. First, citing Clarke v. Civil Service Commission, 50 Haw. 169, 434 P.2d 312 (1967), he argues that the trial court, in granting Lussier's motion sua sponte without notice to Kainz and without a hearing on the matter, violated the requirements of Rule 56(c), HRCP (1981). Second, he claims that summary judgment was improper because there was a genuine issue of material fact. We agree with Kainz's second ground and will forego ruling on his first ground.

As indicated above, the trial court granted Lussier's motion on the ground that Lussier's "alleged defamatory communications were privileged." We agree that Lussier's series of letters to Mau-Van shareholders were privileged, but only conditionally or qualifiedly and not absolutely. However, the trial court erred in holding that the allegedly slanderous communications under the second count were also privileged.

A qualified privilege arises (1) when the author of a defamatory statement reasonably acts in the discharge of some public or private duty, legal, moral, or social and (2) where the publication concerns a subject matter in which the author and the recipients of the publication have a correlative interest or duty. Aku v. Lewis, 52 Haw. 366, 477 P.2d 162 (1970). See also Hamm v. Merrick, 61 Haw. 470, 605 P.2d 499 (1980); Russell v. American Guild of Variety Artists, 53 Haw. 456, 497 P.2d 40 (1972); Chow v. Alston, 2 Haw.App. 480, 634 P.2d 430 (1981). In writing and sending the series of letters to the shareholders, Lussier acted in discharge of his private legal duty as corporate secretary and director to investigate and report to the shareholders on the affairs of Mau-Van and the progress of a project Mau-Van was undertaking. However, in allegedly making slanderous statements to third persons, Lussier was not discharging any private or public duty and, thus, did not have a qualified privilege to commit slander.

An interest which is protected by a qualified privilege is one where (1) the publisher and recipient have a common interest and (2) the communication is of a kind reasonably calculated to protect or further such interest. W. Prosser, Handbook of the Law of Torts § 115 (4th ed. 1971). Frequently in such cases there is a legal, as well as a moral obligation to speak. This is most obvious, of course, in the case of those who have entered upon or are considering business dealings with one another, or where the parties are members of a group with a common pecuniary interest, as where officers, agents or employees of a business organization communicate with stockholders ... about the affairs of the organization itself ....

W. Prosser, supra, at 789-90 (footnotes omitted). See also, Comment, Defamation: A Study in Hawaii Law,...