#### T. G. HARTSFIELD v. HARVEY C. HINES COMPANY, a Corporation, and HARVEY C. HINES, Individually.

(Filed 18 February, 1931.)

1. Libel and Slander B b — Privilege is a question of,law to be determined by the court.

The question of whether slanderous words are privileged is a question of law for the court.

2. Same — Where words are qualifledly privileged the plaintiff must prove falsity and malice.

Where the slanderous words spoken of the plaintiff by the defendant are absolutely privileged, falsity and malice are irrebuttably negatived, but where the words are qualifledly privileged the plaintiff must prove that they were falsely and maliciously uttered.

3. Same — Words held to be qualifledly privileged under the facts of this case.

Where the president of a corporation, after making investigation of reports of certain alleged misappropriations of its treasurer, summons him to his presence and inferentially charges him therewith in the presence of other officers or employees of the corporation having the duty of keeping the company’s records, the accusations of the president are quali-*357fiedly privileged, the president, officers and employees having an interest therein, and the treasurer in his action to recover damages for the utterance of the alleged slander must show that the words were spoken falsely and maliciously.

4. Same — Evidence failed to show malice in utterance of words quali-fiedly privileged and directed verdict would have been proper.

In an action for slander uttered by the defendant as president of a corporation, inferentially charging its treasurer, the plaintiff, with misappropriating the company’s property, evidence that the president and the plaintiff had always theretofore been on friendly terms, that the words were spoken in good faith and that the president appeared to be distressed at the time, is sufficient to support the finding of the court that the words spoken were spoken without malice.

5. Same — Words spoken to police officer concerning misappropriations were qualifiedly privileged, the officer having an interest therein.

Where a police, officer has arrested an employee of a corporation having in his possession goods of the corporation that had been misappropriated, words spoken to the officer by the president of the corporation charging that another employee of the corporation had also misappropriated goods of the corporation are qualifiedly privileged, the president of the corporation and the officer having an interest in the matter, it being the duty of the officer to detect criminals.

6. Same — In this case held: answer of defendant sufficiently pleaded qualified privilege.

In an action to recover damages for slander justification and mitigation are comprehended in the defendant’s answer alleging truth and privilege, especially when the facts from which the privilege springs are set up by the defendant and appear to be sufficient. O. S., 542.

Civil actioN, before *Devin, J.,*at June Term, 1930, of Lenoih.

Tbe plaintiff was employed by the individual defendant fourteen or fifteen years ago. Subsequently the business was incorporated and was thereafter known as' the Harvey C. Hines Company. The plaintiff began work at $60 or $65 a month, and at the time of the utterance of the slanderous words, hereinafter complained of, he was making $4,200 per year. The plaintiff had general supervision of the entire business of defendant and was at the time the cause of action arose, treasurer of the defendant corporation and held a share of stock therein. The defendant corporation transacted a large volume of business and had many employees.

The evidence tended to show that the defendant Hines and the plaintiff were close friends and visited the homes of each other frequently, and each apparently had implicit confidence in the other. The defendant Harvey C. Hines was president of the corporation and in such capacity had general supervision and control of all the affairs of the company. Some time prior to 6 August, 1926, certain trusted employees *358made certain complaints and reports to Harvey C. Hines, president, with, respect to certain transactions of plaintiff, which tended to leave the impression that the plaintiff was misappropriating the money of his employer. As a consequence of such reports, the defendant, Harvey C. Hines, undertook to make an investigation of the transactions of plaintiff, in the course of which investigation he examined the plaintiff’s bank account and other business transactions, and as a result of inquiries so made, the defendant Hines, on the morning of 6 August, 1926, called the plaintiff into his private office. At the time there were also in the office Mr. Walters, Mr. Weise, and Mr. Small, who were all trusted employees of the corporation. Walters was vice-president of the company; Weise was head bookkeeper, and had charge of invoices and records, and Small was night clerk or the man in charge of the business during the night. These were the only persons in the private office of defendant Hines.

The conversation in the private office was narrated by the plaintiff as follows: I took a seat opposite Mr. Hines. He said: “Tom, I guess you know what I want to talle with you about ?” I told him I did not. He said, “Well, we feel like you have not been dealing fair with us,” and I said, “I don’t understand any such accusation and I would like for you to explain,” and he said, “I mean that you have simply been dishonest with us and I have made my investigation and am pretty well satisfied.” I said, “You may be satisfied, but I would like to be satisfied. I would like for you to tell me what you are getting at.” He said it did not need any explanation, and he said, “You don’t deny these papers, do you?” He laid before me certain papers, and I told him those papers did not mean anything, and I asked him if he had anything besides that, and he said Mr. Small was his eye witness. I continuously asked him if he would not give me some definite reason for it. He said no, it did not need any explanation, and all he was going to ask of me was to resign, and he would not ju’osecute me, and that that was all that was necessary. I told Mr. Hines I would hand in my resignation, but first I would like for him *to*let me know just what his charges were, and if he would I would like to talk to him privately, and that instant we left the office and went out in the warehouse, etc.

The defendant offered testimony tending to show that the plaintiff did not deny misappropriating money, but confessed to the same. Employees of defendant testified that when the defendant returned from the warehouse where he and plaintiff had had a private conversation that the defendant Hines was shedding tears and was greatly distressed over what he considered the unfaithfulness of a trusted friend. The plaintiff, however, denied that he ever made any confession in private.

The defendant pleaded truth and justification. The defendant filed *359an itemized list of money and property wbicb be claimed tbe plaintiff bad appropriated to bis own use. This list appears in tbe record as “Exhibit A” and consists of a certain sum of money in tbe compartment of tbe safe of tbe corporation used exclusively by tbe plaintiff. In addition to sums of money tbe said “Exhibit A” charged that tbe plaintiff bad taken goods, wares and merchandise from tbe defendant’s store for his own consumption, consisting of coca cola, coal, canned goo'ds, and other items.

The plaintiff, as a witness in bis own behalf, offered evidence tending to explain the items of money. Some of these items of money the plaintiff contended belonged to tbe Ku KLux and represented collections turned over to him from time to time by members of said order.

On 2 October, 1926, Asa C. Hawkins, a deputy sheriff of Lenoir County, arrested Mr. Small, an employee of defendant corporation, and one of those present on 6 August at the conference between the plaintiff and the defendant when tbe first alleged slanderous utterances were made by defendant Hines. Small was charged with illegal possession of whiskey. The evidence tended to show that on 2 August, 1926, at about 2 o’clock in the morning the defendant Hawkins called the defendant Hines over the telephone and informed him that he had arrested one of his employees. Thereupon Hawkins, in company with Mr. Wilcox, chief of police, went to the home of Mr. Hines. Hines came out on the porch in his bath robe and it was then between 1, 2 or 3 o’clock in the morning. Hawkins reported to Hines that be had one of his employees under arrest for violation of the law, and that he had found some of the property of the corporation down in the woods where tbe arrested employee was. The deputy sheriff testified that he “made a remark to him (Hines) that it was probably where some of his shortage came from. Hines replied, 'Tom (plaintiff Hartsfield) has been at that for two or three years.’ ” There was no evidence that Wilcox, the police officer, heard any of the conversation.

This conversation before daybreak at Hines’ house on the second day of October, 1926, constitutes the second cause of action.

At the conclusion of the evidence the trial judge held as a matter of law that the conversation of 6 August, 1926, in the private office of defendant Hines was privileged and withdrew from the jury all consideration of the first cause of action based upon said conversation. In deference to such intimation of the court tbe plaintiff took a nonsuit as to the first cause of action and assigned the ruling of the judge as error.

Thereupon, the trial judge submitted the following issues to the jury:

1. Did tbe defendant, Harvey 0. Hines, on or about 2 October, 1926, and in the presence of Asa Hawkins, speak of and concerning the plaintiff in substance tbe words alleged in tbe complaint?

*3602. If so, were they true?

3. What compensatory damages, if any, is the plaintiff entitled to recover therefor?

4. What punitive damages, if any, is the plaintiff entitled to recover therefor ?

The jury answered the first issue “Yes”; the second issue “No”; the third is'sue “$10,325”; the fourth issue “$2,166.66.”

The trial judge in his discretion set aside the verdict as to the fourth issue relating to punitive damages, and thereupon entered judgment that the plaintiff recover from the defendant, Harvey C. Hines, the sum of $10,325, with interest from 9 June, 1930, until paid. It was further ordered that the plaintiff recover nothing of the corporate defendant.

The plaintiff testified in reference to the relation between Hines and himself that up until 6 August, 1926, “I had always considered that my relations with Mr. Hines had not only been most pleasant, but had been cordial. I considered it so up until this very hour. He had shown me every consideration that I could expect from him. He had always treated me in a nice way. I felt like I had *served him*properly and he always respected me.”

Erom judgment rendered both parties appealed.

*George G. Green, McLean & Rodman, Whitalcer & Allen and Rouse & Rouse for plaintiff.*

*Dawson & Jones, Sutton & Green, F. E. Wallace and Varser, Lawrence & McIntyre for defendant, Harvey O. Hines.*

BkogdtsN, J.

The determinative questions of law presented by the record are:

1. Was the trial judge correct in holding that the conversation on 6 August, 1926, in the private office .of defendant was privileged?

2. Was the conversation between the defendant and the deputy sheriff, Hawkins, on 2 October, 1926, privileged?

3. Must privilege be expressly pleaded where the defendant pleads truth and justification?

With reference to the first cause of action, based upon the conversation of 2 August, the judge charged the jury as follows:

> “As to the first occasion, 6 August, 1926, the uncontradicted evidence is that the words were' spoken by the defendant Harvey C. Hines as president of the Harvey C. Hines Company and were spoken to the plaintiff, who at that time was an officer and employee of that company, and were spoken in the presence of other employees of the company in respect to a matter as to which each of them had an interest, and, therefore, the communication was a qualifiedly privileged one and *361no action for damages would lie, therefore, unless tbe words were spoken with actual or express malice, in tbe sense of ill will, grudge, revenge or desire to injure, and as to tbe utterance of 6 August, 1926, there is not sufficient evidence to be submitted to you that Harvey C. Hines was at that time and on that occasion and under those circumstances actuated by express malice, and tbe court having at tbe close of tbe testimony so announced these views as to tbe law, and that it would so charge tbe jury, tbe plaintiff in deference to such intimation of tbe court, took a nonsuit as to tbe cause of action based on tbe alleged slander on 6 August, 1926, and, therefore, that part of tbe case is removed from your consideration and issues are submitted to you now only as to tbe utterance alleged to have been made by tbe defendant, Harvey C. Hines, to Asa Hawkins on 2 October, 1926.”

Tbe foregoing instruction is in accord with authority established by tbe decisions of this Court. *Ramsey v. Cheek,*109 N. C., 270; *Gattis v. Kilgo,*128 N. C., 402; *Gattis v. Kilgo,*140 N. C., 106; *Fields v. Bynum,*156 N. C., 413; *Beck v. Bank,*161 N. C., 201; *Brown v. Lumber Co.,*167 N. C., 9; *Elmore*v. *R. R.,*189 N. C., 658; *Tripp v. Tobacco Co.,*193 N. C., 614; *Ferrell v. Siegle,*195 N. C., 102; *Newberry v. Willis,*195 N. C., 302.

Privilege is a question of law and is to be determined by tbe court. Tbe idea was expressed in *Gattis*v. *Kilgo,*140 N. C., 106, as follows: “Tbe standard of privilege is tbe standard of tbe law,, not of the individual, and tbe privilege depends, not on what tbe individual may have supposed to be bis interest or duty, but upon what a judge decides, as matter of law, bis interest or duty to have been. Tbe court determines what is and what is not privileged.”

The legal distinctions between absolute and qualified privilege are pointed out in tbe decisions. Qualified privilege rests upon tbe fact of interest or duty. That is to say, if tbe speaker of tbe alleged slanderous words has an interest or duty in tbe subject-matter of tbe conversation, and tbe bearer has an interest or duty with respect to tbe subject-matter of tbe conversation, then tbe doctrine of qualified privilege applies-. “If tbe words are actionable *per se*in 'unprivileged’ slander and libel, falsity and malice are prima facie presumed. If ‘absolutely privileged,’ falsity and malice are irrebuttably negatived, and if it is a case of 'qualified privilege,’ falsity and malice must be proven.” *Newberry v. Willis,*195 N. C., 302.

Applying tbe law to tbe conversation of 6 August, 1926, in tbe private office of tbe defendant, it is clear that all parties present bad an interest in tbe subject-matter of tbe conversation. Tbe subject-matter of tbe conversation disclosed by tbe evidence was certain irregularities in handling tbe cash, invoices and other records of tbe business. Tbe *362plaintiff' bad an interest in these transactions because be was tbe treasurer of tbe company and charged with tbe duty of preserving tbe property and records of bis employer. Walters, who was present, bad an interest in tbe subject-matter of tbe conversation because be was vice-president of tbe company. Weise bad an interest because be was bead bookkeeper and charged with the duty of preserving tbe records and property of bis employer. Small bad an interest because be was in charge of tbe business at night, and it was likewise bis duty to preserve and properly account for invoices and property of bis employer coming into bis bands. Certainly tbe defendant Hines, as president of tbe corporation and as tbe active bead of its transactions, bad an interest in tbe subject-matter of tbe conversation and was in like manner charged with tbe duty of preserving tbe property and records of tbe corporation. Moreover, there was no evidence of such malice as tbe law recognizes as sufficient to overthrow tbe qualified privilege of tbe occasion because tbe plaintiff testified that tbe relations between him and the defendant bad been close, friendly and cordial up to tbe very moment of tbe conference.

Therefore, we bold that tbe trial judge ruled properly in excluding tbe first cause of action from consideration by tbe jury.

Tbe second cause of action involves tbe conversation between tbe defendant and a deputy sheriff. Tbe evidence discloses that tbe conversation took place before daybreak at tbe defendant’s borne, and that be was presumably called from bis bed by tbe officer and apprised of tbe fact that a trusted employee, to wit, one Small, was under arrest, and that certain property of tbe defendant corporation bad been found in tbe woods where Small bad been. Tbe conversation between tbe deputy sheriff and tbe defendant is not clearly expressed in tbe evidence, but tbe unmistakable inference from tbe words used compel tbe conclusion that tbe officer intended to suggest to tbe defendant that Small was tbe party responsible for tbe shortage in tbe business. Small was one of tbe persons present at the conference between tbe plaintiff and tbe defendant on 6 August, and was at tbe time of tbe officer’s visit a trusted employee of tbe defendant corporation and in charge of its property and records during tbe night time. Tbe bald intimation made to tbe defendant by tbe officer was that Small and not tbe plaintiff was guilty of misappropriation, if such bad occurred.

In this situation, what was *the*defendant *to*do? Should be stand mute or should be reply to tbe accusation thus made? He chose to speak tbe words set out in tbe record. It is to be assumed that tbe officer approached tbe defendant in tbe dead hours of tbe night in good faith, and for tbe sole purpose of bringing tbe wrongdoer, whoever be was, to account. He was employed by tbe State for that exclusive pur*363pose. Thus the officer had an interest in the occasion. The defendant likewise had an interest in the subject-matter of the conversation and was charged with a duty with reference to the accusation made by the officer.

The courts and textwriters have discussed the question as to whether a communication to such officers, made in good faith and without malice, is justified under the doctrine of qualified or absolute privilege. See *Stevens v. Allen,*15 A. L. R., 245; *Shinglemeyer v. Wright,*124 Mich., 230, 50 L. R. A., 129; *Parker v. Kilpatrick,*126 Atlantic, 825. In the *Parker case, supra,*the Supreme Court of Maine holds that words spoken to a police officer, peace officer, or deputy sheriff, either for the detection of crime or for the protection of his own property, if made in good faith and without malice, are privileged. To like effect áre the words quoted in the case of *Logan v. Hodges,*146 N. C., 38, as follows: “"Words charging a party with theft, spoken in good faith, under a belief of their truth and with probable cause, to a police officer employed to detect the robber, are in the nature of a privileged communication.” As all police officers and sheriffs are employed by the State to detect crime, it is not apprehended that they should be specifically employed by a particular individual in order to permit him to claim the protection of qualified privilege.

Applying the accepted principles of law to the facts disclosed, we are of the opinion and so hold, that the conversation of 2 October, 1926, was subject to the defense of qualified privilege, and, therefore, we deem the ruling of the trial judge to the contrary, as erroneous.

The third question of law involves the question as to whether privilege must be specifically pleaded. O. S., 542, expressly provides that a plea of justification and mitigating circumstances may be set up in the answer as a defense to an action for slander. Apparently the statute contemplated that privilege was a form of justification. Certainly in the forum of reason justification is a general term broad enough to cover both truth and privilege. At any rate the facts from which the privilege springs are set forth in the answer. The plaintiff relies upon *Gudger v. Penland,*108 N. C., 593, but an examination of that decision discloses that the court had in mind the allegations of the complaint rather than defenses required to be set up in the answer, and we do not deem this case decisive of the question.

Questions of the admissibility of evidence and exceptions to the charge of the court have been debated in the briefs, but as a new trial must be awarded for the reason hereinbefore set out, we do not discuss or decide the points of law raised by said exceptions.

Plaintiff’s appeal: No error.

Defendant’s appeal: New trial.