Sierra Madre Development, Inc. v. Via Entrada Townhouses Ass'n

Decision Date02 October 1973
Docket NumberCA-CIV,No. 2,2
Citation514 P.2d 503,20 Ariz.App. 550
PartiesSIERRA MADRE DEVELOPMENT, INC., Robert C. Murphey and Kasey Murphey, husband and wife, James H. Zeisler and Geraldine Zeisler, husband and wife, Appellants, v. VIA ENTRADA TOWNHOUSES ASSOCIATION, a corporation, Appellee. 1358.
CourtArizona Court of Appeals

HATHAWAY, Chief Judge.

Defendants Sierra Madre Development, Inc. (Sierra Madre) Robert C. and Kasey Murphey (Murphey), and James H. and Geraldine Zeisler (Zeisler) have appealed from a judgment dismissing with prejudice count one in each of their respective counterclaims. Count One in each counterclaim alleged libel and all defendants stated virtually the same claim for relief.

It appears from the pleadings and briefs that plaintiff, Via Entrada Townhouses Association (Via Entrada) is an Arizona nonprofit corporation, owned and operated by the owners of townhouses in the Via Entrada Townhouse subdivision in Tucson. Also, it appears that defendant Sierra Madre is an Arizona corporation wholly owned by defendants Murphey, Zeisler and George Ogonowski (Ogonowski) 1 and that it has developed or participated in the development of the Via Entrada Townhouse subdivision.

After a portion of the townhouses were sold and occupied, a dispute arose between the homeowners association (Via Entrada) and the developer (Sierra Madre) over the adequacy of the drainage system of the subdivision. After Sierra Madre had constructed 36 of the 40 townhouses it had intended to build, Via Entrada filed a three count complaint against it and the individual defendants.

The second count alleged negligent and improper construction and design of certain common areas which resulted in improper drainage. Plaintiff asked for a judgment ordering defendants to repair or for the cost of repairs. The first count contained allegations that Sierra Madre, Murphey and Zeisler were not licensed contractors and were therefore acting illegally and criminally in participating in the construction of the Via Entrada subdivision. The prayer asked for $5,000 punitive damages and that Sierra Madre, Murphey and Zeisler be enjoined from constructing any buildings on the remaining four lots until they acquired a contracting license. The third count contained allegations that Ogonowski (President of Sierra Madre) was a licensed contractor, that he was illegally using his contractor's license to aid and abet Sierra Madre in evading state laws, and that he was knowingly conspiring with Sierra Madre, Zeisler and Murphey with the intent to evade state law. Plaintiff then asked that Ogonowski's license be revoked, that plaintiff be awarded attorney's fees from the bond Ogonowski had been required to post with the State of Arizona; that Ogonowski be restrained from aiding and abetting Sierra Madre in evading state law, and that plaintiff be awarded punitive damages.

The defendants' motion to dismiss all three counts of the original complaint was granted with leave to amend. Subsequently, Via Entrada filed an amended ten count complaint seeking relief on a variety of theories, including tort, breach of contract and breach of warranty. The first and fifth count of the amended complaint substantially restated the first and third counts of the original complaint set out above. Again, criminal activity and conspiracy on the part of the defendants were alleged in the same manner. The only change was that a portion of the equitable relief requested in the original two counts was not requested in the two counts as amended. The trial court dismissed with prejudice the two counts alleging criminal activity along with six of the remaining eight counts set out in the amended complaint.

The appellants then answered and counterclaimed. Each counterclaimant sought damages from Via Entrada upon two theories--libel and abuse of process. Basically, the claims for relief sounding in libel asserted that the allegations of criminal activity and conspiracy in the first and third counts of Via Entrada's complaint and the first and fifth counts of its amended complaint were libelous, false, malicious, wilful and unprivileged. The trial court later dismissed with prejudice each claim for relief based upon libel while allowing the claims sounding in abuse of process to stand. The claims for libel were dismissed apparently on the basis that the alleged libelous statements were contained in pleadings and being relevant to the judicial proceeding, were privileged. It is from this judgment that Sierra Madre, Murphey and Zeisler appeal.

In considering a motion to dismiss for failure to state a claim, all of the material allegations of the pleadings of the non-moving party are taken to be true. Lakin Cattle Co. v. Engelthaler, 101 Ariz. 282, 284, 419 P.2d 66 (1966). We therefore assume for purposes of appeal that the factual allegations of criminal activity in Via Entrada's complaint and amended complaint were libelous.

Affirmative defenses, such as privilege, may be raised and determined on a motion to dismiss where the facts constituting the defense appear, as they do here, on the face of the complaint or counterclaim. Ross v. Ross, 96 Ariz. 249, 393 P.2d 933 (1964); Industrial Commission v. Superior Court, 5 Ariz.App. 100, 423 P.2d 375 (1967).

The sole question presented for review is the extent to which libelous matter alleged in pleadings is 'absolutely' privileged. Absolute privilege, if applicable, protects a party who files pleadings in a judicial proceeding from all liability for defamatory statements contained therein 'irrespective of his purpose in publishing the defamatory matter, of his belief in its truth or even his knowledge of its falsity.' Comment (a), Restatement of Torts, § 587 (1938). See also, Massengale v. Lester, 403 S.W.2d 701 (Ky.1966); Stryker v. Barbers Super Markets, Inc., 81 N.M. 44, 462 P.2d 629 (1969); and Greenberg v. Aetna Ins. Co., 427 Pa. 511, 235 A.2d 576, 38 A.L.R.3d 262 (1967).

Divisions One of this court has held that parties to judicial proceedings in this state are generally granted an absolute privilege to use defamatory language in pleadings because of an 'overriding public interest that persons should speak freely and fearlessly in litigation, 'uninfluenced by the possibility of being brought to account in an action for defamation.' (Citation omitted)' Stewart v. Fahey, 14 Ariz.App. 149, 150--151, 481 P.2d 519, 521 (1971). Recently in Todd v. Cox, 20 Ariz.App. 347, 512 P.2d 1234 (filed August 7, 1973), the same privilege was applied to the testimony of a witness in a judicial proceeding. In Stewart, the Restatement of Torts, § 587 (1938) was followed.

'A party to a private litigation . . . is absolutely privileged to publish false and defamatory matter of another in communications preliminary to a proposed judicial proceeding, or in the institution of or during the course and as a part of a judicial proceeding in which he participates, If the matter has some relation thereto.' 14 Ariz.App. at 151, 481 P.2d at 521 (Emphasis added)

Since in Stewart, the alleged defamatory language obviously had 'some relation' to the claim stated, there was no need to discuss in detail the 'relevancy' requirement italicized in the preceding quotation. The scope of this relevancy requirement requires our consideration on this appeal. Appellants argue that an alleged defamatory statement made in pleadings is only privileged if it is relevant or pertinent to some issue in the case. Appellee argues that the statement need only be relevant in the sense that it is connected with or has some relation to the subject matter of the controversy.

The question of the 'relevancy' or 'pertinency' of an alleged defamatory statement or whether it is related to the 'subject of inquiry' has been considered in hundreds of American cases. The annotation at 38 A.L.R.3d 272 (1971) sets out a good portion of them. The language used to express the 'relevancy' requirement has varied from case to case. The author of the annotation perceptively concludes:

'The courts . . . may be said not to be expressing different tests as to relevancy but rather to be using different language to ask the same thing: Is this particular defamatory matter so related to the case that as a matter of public policy it should be deemed absolutely privileged?' (38 A.L.R.3d at 288)

In delineating the point at which defamatory matter should be considered irrelevant or unrelated to the litigation and therefore unprivileged, we must weigh the private interest one has in his reputation with the public interest in effective administration of justice. The latter requires that a party to a judicial proceeding be allowed to plead any matter which might possibly strengthen or have a bearing on his claim for relief or defense without fear of a defamation suit. It likewise requires that a party be allowed to plead any set of facts which could even conceivably add up to a claim for relief or defense. The need for according a party to a judicial proceeding the widest possible latitude in his pleading has been expressed in Veeder, Absolute Immunity in Defamation, 9 Colum.L.Rev. 463, 477--78 (1909), as follows:

'The absolute immunity of parties litigant rests upon the public policy which deems it desirable that all suitors, whether malicious and bold, or conscientious and timid, should have free access to the conscience of the State with whatever complaint they choose to make. This is necessary to a thorough and searching investigation of the truth. Should the parties to a cause be placed in fear of suits for libel or slander for reflections cast upon parties or others, * * * the trial of civil causes would be far less...

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