James William Harris had just pulled into his driveway after a day of fishing when his wife came running out, upset over an article in the local newspaper, The Gazette.

The brief item--in a feature called "The Public Record"--appeared to his wife to say that she and Harris had been charged with a sex crime. In fact, the Harrises had reported the alleged offense and had never been charged with anything.

"I just couldn't believe it," Harris, a 36-year-old decorated Vietnam veteran later told a court. "The only way I can say it is the article was written that I sexually aggravated somebody . . . It looked like you had to have done something wrong."

After a two-day trial in January, a Goochland County jury found that the Gazette had libeled the Harrises and awarded the couple and a neighbor also mentioned in the item a total of $50,000 in compensatory damages. The verdict came after a Gazette reporter testified that he did not fully understand the juvenile court docket book from which he gained his information.

That award, and two others against Virginia newspapers, are being challenged in the Virginia Supreme Court in appeals that are being watched closely by newspaper publishers and editors across the state. Lawyers for the newspapers, invoking the First Amendment and even the Virginia Declaration of Rights, have asked that the verdicts be overturned, saying they will have a "chilling effect" on reporting the news.

Yet, The Gazette case also shows the damage the media can inflict when it commits what the paper itself describes as "at worst, an honest mistake." Harris testified the emotional anguish was so severe that he had to seek hospital treatment.

His case is one of many across the country that, some press lawyers argue, are testing the limits of constitutional claim of a free press. "The First Amendment doesn't give you a license to lie, it doesn't give you a license to be careless . . . " says Arthur B. Hanson, a libel expert and the former general counsel for the American Newspaper Publishers Assocation. "I'm sick and tired of hearing people talk about chilling effect . . . (When reporters make mistakes) they should damn well pay for them."

The three Virginia cases raise one of the most sensitive issues in press law -- the standards under which a newspaper can libel a private person. None of the plaintiffs was a public figure and was thus not required to prove that the newspapers exhibited "actual malice" in their reporting, defined in a 1964 U.S. Supreme Court case as knowingly printing a falsehood or showing reckless disregard for the truth. Instead, local judges instructed juries that they only had to find that the papers acted with "simple negligence" as defined by a "reasonable man."

The fear that the Virginia Supreme Court will uphold that far more lenient standard has alarmed many publishers. "A reasonable man doesn't have any idea about what goes on in a newsroom," says Alexander Wellford, a lawyer for the Virginia Press Association, which represents 124 of the state's newspapers. "Reasonable men don't care for the press anyway. Given the chance, they'll stick it to the newspapers every time."

The lawyer who won the Gazette case, S. Keith Barker, challenges press claims to a higher level of protection under the U.S. Constitution. "If they put into the newspaper that your name is mud, there's nothing you can do about it," asks Barker "How do you fight that sort of thing? . . . Why should the media be held to any different standard than doctors are held to or lawyers are held to?"

The libel issue comes before the Virginia court at a time when libel cases are proliferating and public opinion polls show widespread distrust of the media in general. In one of the three Virginia cases, The Alexandria Port Packet, a weekly tabloid with one full-time reporter and a paid circulation of 5,350, was ordered to pay $150,000 in damages to a couple whose son's accidential death was mentioned in a July 1980 article about child abuse. The couple's lawyer called the article a blatant example of "sloppy reporting and yellow journalism."

In the third case, a pregnant woman who had been raped was mistakenly identified by the The Daily Progress in Charlottesville as "Miss" instead of "Mrs."

The Gazette case underscores the issues at stake in the libel debate. A small rural weekly with one editor and two reporters, The Gazette is the only regular source of local news in Powhatan and Goochland counties, a sprawling stretch of dairy farms and one-lane roads located just beyond the western fringes of the Richmond suburbs. As is often the case in country journalism, the paper makes no pretense of chronicling the ebb and flow of world events.

"We never even talk about Washington," says William T. Reed, the paper's tall, patrician publisher who bought the paper 12 years ago. "We won't mention the strategic arms talks or El Salvador and we rarely even mention Richmond . . . We talk about high school graduations and honor rolls and what the local supervisors are doing. We've provided a voice for the community."

What that means, in practical terms, is that nearly everybody here reads The Gazette. According to the paper's own figures, its editions reach 65 percent of all of Powatan's residents and about 80 percent of Goochland's.

"If we spell Suzie's name wrong on the honor roll, we hear about it," says David Bovenizer, the paper's 35-year-old editor.

The apparent mistake the paper made July 30, 1981, was more serious. Reporter John Bruce, attempting to confirm reports of a sex crime, had checked out the docket book of the Goochland County Juvenile and Domestic Relations Court. In doing so, Barker argues, Bruce based his article on confidential records that were unguarded at the courthouse, though the judge ruled that use of those papers was not an issue in the trial.

Next, in writing a one-paragraph summary of the charges of "aggravated sexual battery" for the paper's "Criminal Cases" section, Bruce listed first the name of the defendant, and then his three accusers, including the Harrises, without distinguishing among them.

"It was published as we took it down and as we understood it from the public, official record," publisher Reed testified during the libel trial. He was unable to cite another instance in which anybody other than the criminal defendant's name had been published in the "The Public Record."

There also was no effort to print a correction or clarification, although there are conflicting statements as to why. Reed and Bovenizer say none was ever asked for, even when Harris' wife called the newspaper office a few days after the item ran. Barker, however, says he called the paper months later and was told, " 'Drop dead, we don't want to talk to you.' " It is a conversation Reed insists never took place.

For Harris, the entire experience has been a draining one, he says. Unemployed as a result of an industrial accident that had left him disabled, Harris testified during the trial that the item was embarrassing and emotionally disturbing. Friends and neighbors testified they were shocked and "flabbergasted" to read that the couple was linked to such a crime.

"I have never been in jail, I've never been in any trouble, nothing," Harris said during a recent interview. "This was no little mistake."

Reed, who says the suit has taken an "emotional" toll, says there is a larger issue at stake: the ability of small newspaper publishers to survive the large expense and time of defending libel suits. Alexandria's Port Packet has said it may not be able to survive an adverse ruling in its case.

"Some guys publishers are going to throw in the towel and say to hell with it," says Reed. "Small newspapers don't have the staff to stay in litigation. Some people will get fed up because they'll know that if they make a simple mistake, they can be held liable for it."