Ross v. Gallant, Farrow & Co., P.C.

• Decision Date: 22 June 1976
• Docket Number: No. 1,CA-CIV,1
• Citation: 551 P.2d 79,27 Ariz.App. 89
• Parties: A. Glynn ROSS, Appellant, v. GALLANT, FARROW & CO., P.C., a professional corporation, William G. Farrow and R. Dale Hensley, Appellees. 2770.
• Court: Arizona Court of Appeals

Page 79

551 P.2d 79

27 Ariz.App. 89

A. Glynn ROSS, Appellant, v. GALLANT, FARROW & CO., P.C., a professional corporation, William G. Farrow and R. Dale Hensley, Appellees.

No. 1 CA-CIV 2770.

Court of Appeals of Arizona, Division 1, Department A.

June 22, 1976.

Cavness & DeRose, by Jack Cavness, John W. Rood, Phoenix, for appellant.

Burch, Cracchiolo, Levie, Guyer & Weyl, by Kenneth C. Weyl, Barry A. MacBan, Phoenix, for appellees.

OPINION

FROEB, Judge.

The issue in this case is whether audit reports of a certified public accountant are actionable either under a theory of libel or negligence. The trial court determined that the facts were insufficient to support a recovery for libel. It also determined that no claim was stated for recovery on a theory of negligence. We agree with both determinations and affirm the judgment.

The defendant company, Gallant, Farrow & Co., was engaged to examine the records of Local 640, a subordinate body of the International Brotherhood of Electrical Workers (IBEW), to determine whether expenditures of local funds had been made in a proper manner under the provisions of the IBEW and local constitution and by-laws. Defendants R. Dale Hensley and William G. Farrow, both licensed certified public accountants with the defendant company, undertook the examination and reported their results to a union official, R. G. Duke (a defendant in the case, but not a party to this appeal).

Suit was brought by plaintiff A. Glynn Ross, the business manager of Local 640, who alleged damage resulting from three letters which were part of an audit report. In general, the letters stated or implied that money was withdrawn from the local bank account by Ross without authorization. The letters report expenditure of these funds for various things, including Christmas party gifts, printing expenses, and two new automobiles. There was considerable testimony at the trial relating to whether the expenditures were properly authorized. On this, there were differences of opinion because of different interpretations of the IBEW constitution and by-laws. There is no question that the defendants could assert a qualified privilege as certified public accountants. The burden then was upon the plaintiff to prove that the audit reports were false and that the defendants were motivated in publishing them by actual malice. 'Actual malice' in Arizona is defined as making a defamatory publication with knowledge of its falsity or in reckless disregard of whether it was false or not. Phoenix Newspapers, Inc. v. Church, 103 Ariz. 582, 447 P.2d 840 (1968). An investigatory failure alone on the part of the publisher is insufficient to raise an issue of actual malice. New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). The defendants must have 'in fact' entertained serious doubts as to the truthfulness of the publications at the time they were published. St. Amant v. Thompson, 390 U.S. 727, 88 S.Ct. 1323, 20 L.Ed.2d 262 (1968).

While the facts and issues were involved and considerable testimony was received, we need not dwell upon the details. Suffice it to say that the trier of fact could have determined that some statements in the three letters were incorrect. The determinative issue in the case was whether the statements were made with malice. As to this, there is no evidence and the action by plaintiff was properly dismissed.

In fact, this determination was made at different stages of the proceedings. The defendants moved for summary judgment on the affidavits of Hensley and Farrow. After a hearing and consideration of the then existing factual record, the trial court granted judgment in favor of defendant Hensley and partial summary judgment in favor of defendant Gallant, Farrow & Co. and Farrow. As to the latter, the trial court dismissed the complaint as to all allegedly libelous statements except the ones relating to the purchase of two automobiles. At the ensuing trial, the court granted a directed verdict in favor of Gallant, Farrow & Co. and Farrow with respect to all issues. The case then proceeded against Duke, the details of which are of no concern on this appeal.

Nowhere in the record, whether it be the record before the trial court in the summary judgment proceedings or the trial record, is there any evidence of malice which would defeat the qualified privilege asserted by the defendants. There is no showing of spite or ill will. We are unable to find any evidence of a 'reckless disregard' for truth or falsity in the audit reports or in the interpretations defendants placed upon the IBEW constitution and by-laws. If we assume that incorrect interpretations or mistakes were...