This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1996).

STATE OF MINNESOTA

IN COURT OF APPEALS

C2-96-1794

Sheila Kozar,

Appellant,

v.

Church of St. John the Baptist, Excelsior Minnesota,

a/k/a St. John the Baptist Catholic Parish,

Respondent,

John Doe, et al.,

Defendant.

Filed March 4, 1997

Affirmed

Randall Judge

Concurring in part, dissenting in part,

Lansing, Judge

Hennepin County District Court

File No. C1-95-7617

Gary D. Pihlstrom, Hatch, Eiden & Pihlstrom, One Financial Plaza, Suite 950, 120 South Sixth Street Minneapolis, MN, 55402 (for Appellant)

Thomas B. Wieser, John C. Gunderson, 2200 North Central Life Tower, 445 Minnesota Street, St. Paul, MN 55101 (for Respondent)

Considered and decided by Norton, Presiding Judge, Lansing, Judge, and Randall, Judge.

U N P U B L I S H E D O P I N I O N

Randall, Judge.

Appellant challenges a district court grant of summary judgment. Because there are no material facts in dispute and because respondent's statements are subject to a qualified privilege, respondent is entitled to judgment as a matter of law, we affirm.

FACTS

Mary Woida was the business administrator of respondent St. John the Baptist Catholic Parish (church). Woida was responsible for various administrative tasks at the church and was the only person, other than the pastor, Father McIntyre, who had authority to sign checks on behalf of the church. From May 18, 1994 to July 11, 1994, Woida was on sick leave recuperating from surgery.

During part of the time that Woida was out, Father McIntyre went on vacation and a need arose for checks to be issued by the church. Theresa Reuter, the full-time receptionist/secretary of the church, signed some of these checks. Unknown to Woida, Reuter had permission from Father McIntyre to sign checks in his absence.

When Woida returned to work, she discovered that some checks issued in her absence had not been signed by Father McIntyre. Because Father McIntyre was on vacation, Woida expressed her concern to Warren C. "Court" MacFarlane, the chair of St. John's Finance Council. MacFarlane requested that Woida raise the issue at the next Finance Council meeting on July, 26, 1994.

The Finance Council has the responsibility of monitoring church funds and overseeing its financial health. At its meetings, the Council, among other activities, reviews financial reports and advises the pastor, who makes final decisions as to what actions are to be taken.

Father McIntyre was still on vacation and did not attend the July 26 Finance Council meeting. at which Margaret Muehlberg was appointed to serve as secretary and take notes. At the meeting, Woida stated that she believed Terry Reuter had signed some checks. The Finance Council and trustees were concerned that people might be signing checks without authority; they had recently worked to tighten control of the Church's accounts. Somehow, appellant Sheila Kozar's name was also mentioned in connection with the unauthorized signing of checks. Muehlberg recorded the following with respect to the check signing discussion:

It was brought to the Finance Council's attention that during Mary Woida's sick leave, a large number of checks were signed by Terry Reuter and Sheila Kozar under Father McIntyre's signature. Neither Terry nor Sheila have signature authority. The bank honored all of the checks. Court made the following motion: 'Two employees of St. John's have written and signed checks in Father McIntyre's absence. The Finance Council is very disturbed by these actions and recommends that a record of this be placed in each employee's personnel file with a copy to the personnel committee.' Dave seconded the motion, and it was unanimously approved. Mary will report back at the next meeting with further details of the quantity and dollar amounts of the checks signed improperly.

In fact, it is agreed that appellant had never acted improperly or signed any of the checks in question. The record contains no inference, much less proof, of anything indicating that Kozar was not a highly respected and valuable volunteer for the parish.

After typing her notes, Muehlberg faxed them notes to the attention of Woida at the parish office. Reuter picked up the fax transmissions before Woida could retrieve them. Believing it part to be part of her job, Reuter copied the notes and distributed them to the parish staff, members of the Finance Council, and church trustees, and she placed a copy in a binder of Finance Council minutes.

Reuter read the notes and shared a copy with appellant. Appellant and Reuter were concerned about the comments in the minutes and immediately spoke with Woida. Woida said that she believed they had written unauthorized checks. Shortly thereafter, appellant tried to call Dave Baune, the new chair of the Finance Council, but she was unable to speak to him. Appellant then telephoned MacFarlane and expressed her concern about the notes. MacFarlane suggested that appellant and Reuter attend the next Finance Council meeting or write the Finance Council a letter to correct the misunderstanding. Before the next scheduled Finance Council meeting, appellant and Reuter retained counsel.

On August 15, 1994, counsel for appellant wrote a letter to Father McIntyre. The Finance Council scheduled a special meeting for August 18 to discuss the notes from the July 26 Finance Council meeting and the letter from appellant's counsel. At the August 18 meeting, the minutes were changed to reflect the fact that the Finance Council never determined that appellant had signed any unauthorized checks.

Appellant previously had a tense relationship with Woida based on problems that had occurred at work. Appellant's relationship with MacFarlane was cordial; Muehlberg knew appellant only because Muehlberg's children were involved in church religious education programs with appellant.

On December 19, 1994, appellant commenced a defamation lawsuit against respondent; Reuter brought a separate suit against respondent. On January 26, 1996, respondent brought a consolidated motion for summary judgment; on February 29, 1996, the district court heard the motion. On May 15, 1996, the district court granted summary judgment, finding that the defamation claims were not constitutionally barred because of excessive entanglement with religious affairs, that the alleged defamatory statements made by the church were subject to a qualified privilege, and that appellant and Reuter failed to show evidence of any actual malice that would defeat respondent's qualified privilege. Appellant challenges this decision.

Respondent has filed motions to strike portions of appellant's brief, reply, and appendix, and for attorney fees.

D E C I S I O N

On appeal from summary judgment, the court determines whether any genuine issues of material fact exist and whether the district court erred in its application of the law. Offerdahl v. University of Minn. Hosp. and Clinics, 426 N.W.2d 425, 427 (Minn. 1988). The court views the evidence in the light most favorable to the non-moving party. Id. The court need not defer to the district court's decision regarding questions of law. Frost-Benco Elec. Ass'n v. Minnesota Pub. Utils. Comm'n, 358 N.W.2d 639, 642 (Minn. 1984).

To meet the standard for defamation, a statement must be communicated to someone other than the plaintiff, must be false, and must tend to harm the plaintiff's reputation in the estimation of the community. Stuempges v. Parke, Davis & Co., 297 N.W.2d 252, 255 (Minn. 1980). Even though a defamatory statement has been made and published, the originator of the statement may be held not liable if the statement is made in a situation that confers a qualified privilege. Lewis v. Equitable Life Assur. Soc'y., 389 N.W.2d 876, 889 (Minn. 1986). However, a qualified privilege is lost if abused. Id. at 890. Abuse is established if the plaintiff demonstrates that the defendant acted with actual malice. Id. Actual malice exists where the defendant's statements were made from "ill will and improper motives or causelessly and wantonly for the purpose of injuring the plaintiff." Stuempges, 297 N.W.2d at 257.

Qualified privilege and actual malice.

Appellant does not dispute that respondent's alleged defamatory statements are subject to a qualified privilege. However, appellant argues that there are material issues of fact in dispute that must be resolved by a jury. Because respondent's statements are subject to a qualified privilege, material and relevant facts are those that would destroy respondent's qualified privilege. See Lewis, 389 N.W.2d at 890 (qualified privilege may be lost if abused). If respondent acted with actual malice, the qualified privilege is lost. See Stuempges, 297 N.W.2d at 257.

Malice can be shown by direct proof of personal spite or by intrinsic evidence, such as exaggerated language, the character of the language, the extent of publication and "other matters in excess of the privilege." Bauer v. State, 511 N.W.2d 447, 451 (Minn. 1994). Actual malice is usually a question of fact for the jury. Id. at 450. But summary judgment is appropriate on the issue of actual malice where "the plaintiff's allegations are 'based on conjecture and speculation and are insufficient to create a jury question.'" Bolton v. Department of Human Servs., 527 N.W.2d 149, 156, rev'd. in part on other grounds, 540 N.W.2d 523 (Minn. 1995) (quotation omitted).

Appellant argues that the district court erred because it did not put enough emphasis on the history of the relationship between Woida and appellant. The record shows that when Woida first came to work at the church, things were fine. However, after a few days Woida instituted new policies on supervision and paying and disbursing checks; these changes caused conflict and tension among the staff.

Construing these facts in the light most favorable to appellant, there is nothing in the record to indicate that Woida or anyone else acted with actual malice. (i.e., from personal ill will, improper motives, or causelessly and wantonly to injure appellant).

Appellant also asserts that, because the church failed to mail out a retraction, it acted with actual malice. While a retraction may have been a proper course of action, appellant cites no authority for her proposition. Further, there is nothing in the record indicating that the lack of a retraction was the product of a conscious, malicious intention.

None of the fact issues that appellant claims are disputed provides enough evidence in this record to establish even a threat of malice. Thus, respondent's qualified privilege is intact, and the trial court acted properly when granting summary judgment.

Failure to investigate.

Appellant argues that respondent's failure to investigate the facts fully before making the alleged defamatory statements establishes actual malice and destroys respondent's qualified privilege.

An employer's statement is considered privileged if it is made on a proper occasion, from a proper motive, and if the employer has reasonable or proper grounds for believing the validity of the statements. Wirig v. Kinney Shoe Corp., 461 N.W.2d 374, 380 (Minn. 1990). When a communication is made in good faith, the law does not imply malice from the communication itself. Lee v. Metropolitan Airport Comm'n, 428 N.W.2d 815, 820 (Minn. App 1988). Generally, communications between an employer's agents made in the course of investigating employee misconduct are made upon a proper occasion and for a proper purpose. Id. (citing McBride v. Sears Roebuck & Co., 306 Minn. 93, 97, 235 N.W.2d 371, 374 (Minn. 1975).

Appellant cites Cox v. Crown CoCo, Inc., 544 N.W.2d 490, 498 (Minn. App. 1996), to argue that a qualified privilege is lost when an employer does not investigate the underlying facts before making a statement. In that case, a discharged employee, Cox, brought suit alleging retaliatory discharge and defamation. Id. at 494. After Cox was terminated, her former supervisor repeatedly told other employees that Cox had slashed the supervisor's tires. Id. at 495. The record contained no evidence that the supervisor had reasonable grounds for the statements. Id. at 498. The court held that, typically, probable grounds for making defamatory statements exist after the employee admits wrongdoing or after the employer has investigated the allegations and confronted the employee. Id. (citations omitted).

Cox does not hold that an employer must have made a complete investigation for statements to be protected by qualified privilege. Unlike Cox, the record here contains evidence that Woida, without malice, felt she had reasonable grounds to make the statements she did. Upon her return from sick leave, she discovered that checking account procedures, as she understood them, had not been followed, and some of the checks issued by the church in her absence were apparently signed without authority. In Father McIntyre's absence, Woida shared her concerns with MacFarlane, the chair of the church's Finance Council. The Finance Council has the responsibility of monitoring church funds. MacFarlane asked Woida to raise the issue at the next Finance Council meeting so it could be discussed.

Employers have legitimate interests in protecting themselves against dishonest employees. McBride, 306 Minn. at 97, 235 N.W.2d at 374. Employers are entitled to a qualified privilege if they have reasonable grounds for believing in the validity of a statement, even though hindsight might show the statement to be false. Cox, 544 N.W.2d at 498 (citing Wirig, 461 N.W.2d at 380). Woida was understandably bothered by the situation and took steps to address the apparent breach of authority. She spoke to the person who chairs the committee responsible for monitoring church funds and, on his request, to the entire Finance Council. We agree with the trial court that Woida's actions were reasonable to protect her employer.

Failure to dismiss on constitutional grounds.

Respondent asserts that the district court erred when it determined that appellant's defamation claim was not barred by the United States and Minnesota Constitutions, because the claim would cause the court to review respondent's religious practices and thus cause "excessive entanglement."

Because we find for respondent on other grounds, we do not address this issue.

Motion to strike and award of attorney fees.

Respondent has brought two separate motions, both seeking to strike portions of appellant's brief and attorney fees to be awarded.

"The papers filed in the trial court, the exhibits, and the transcript of the proceedings, if any, shall constitute the record on appeal in all cases." Minn. R. Civ. App. P. 110.01. Appellant acknowledges that portions of her brief rely on materials not included in the record. On appeal, appellant is represented by a new attorney, who erroneously believed that deposition testimony had been presented to the district court. Appellant agreed to strike portions of her brief and she has provided corrections to respondent and the court. The first motion to strike is moot, and no award of attorney fees is appropriate.

Respondent's second motion focuses on the materials dealing with Canon Law included in appellant's reply brief. Respondent argues that these materials do not constitute legal authority, were not part of the trial record, and should not be considered on appeal. Appellant's discussion of Canon Law was an appropriate response to arguments on excessive entanglement made in respondent's brief. We note that an appellant can never be sure which issues in a respondent's brief will be addressed by the appellate court. Respondent initially raised the issue, so appellant was entitled to counter.

Our decision reflects that issues of Canon Law are not before us and not needed, but appellant acted in good faith. Neither party is awarded attorney fees on appeal.

Affirmed.

LANSING, Judge (concurring in part and dissenting in part).

The majority has determined that summary judgment is appropriate on Sheila Kozar's defamation claim because there is insufficient proof of malice to overcome the employer's conditional privilege. But this analysis ignores the threshold issue of whether the evidence supports a determination that the employer's communication was privileged.

An employer has a conditional privilege to communicate defamatory information if the communication is based on reasonable or probable cause, has a proper motive, and is made on a proper occasion. Wirig v. Kinney Shoe Corp., 461 N.W.2d 374, 380 (Minn. 1990); McBride v. Sears, Roebuck & Co., 306 Minn. 93, 97, 235 N.W.2d 371, 374 (1975). All three of these conditions are necessary to support the existence of the employer's privilege. Wirig, 461 N.W.2d at 380; McBride, 306 Minn. at 97, 235 N.W.2d at 374.

The evidence is undisputed that Kozar's employer issued a statement that Kozar signed checks without authority, that the finance council was "very disturbed by these actions" and recommended that a record of this be placed in Kozar's personnel file with a copy to the personnel committee, and that the council would obtain further details on the quantity and dollar amounts of the checks improperly signed.

The employer obviously recognized the seriousness of the statement when it indicated that it was very disturbed by Kozar's actions and directed that a copy of the statement be included in Kozar's personnel file and that a copy be forwarded to the personnel committee. Before publishing the statement the employer should have had reasonable and probable grounds for believing it was true. Wirig, 461 N.W.2d at 380.

In Wirig the supreme court noted that "[i]n all cases where we have determined that probable cause existed * * * the results of the investigations provided sufficient evidence of probable cause." Id. (emphasis added). The court concluded that where no investigation was undertaken and the employer relied solely on accusations by other employees who may be biased, the employer lacked probable cause and would not enjoy the conditional privilege. Id. at 380-81.

What is the evidence of reasonable or probable cause for Kozar's employer's statement? According to her employer, the basis for the statement is the "belief" of a coworker with whom Kozar had a problematic working relationship. The employer knew of the coworker's problems working with Kozar and at least one other employee. A dispute resolution specialist from the Archdiocese had been consulting with the employer to mediate the conflict among the staff members. No documentary or eyewitness evidence supported the statement disparaging Kozar, the pastor who had the primary signatory power was not consulted before the statement was made, and Kozar was not personally questioned. The employer made no investigation before issuing the statement. The employer now acknowledges that Kozar signed no checks but has declined to retract the statement and, instead, changed the minutes. The evidence is insufficient to show that the employer had reasonable or probable grounds to believe in the validity of the defamatory statement.

The proof of malice, that the majority concludes is missing, must be supplied to overcome an employer's conditional privilege. But the privilege does not exist when there are no reasonable or probable grounds for an employer's defamatory statement. Because the evidence in the record does not support the existence of the privilege, Kozar cannot be required to show proof of malice to overcome it. For these reasons I dissent on the affirmance of summary judgment on conditional privilege, but concur in the majority's remaining, nondispositive rulings.