COOK v. FARMERS GROUP INC (1991)

Plaintiff Stephen Cook appeals from summary judgment entered in favor of defendant Farmers Group, Inc.¹ on his complaint for malicious prosecution.   The appellate issue is whether the trial court correctly concluded in its summary judgment that the dismissal of a prior criminal proceeding against Cook “for delay in filing charges and a delay in arresting [Cook] does not indicate the innocence of [Cook].   It is procedural, based on the notion that the defendant was prejudiced by the delay, not that the defendant was innocent.   It therefore follows that the dismissal of [the criminal] case was not a favorable termination within the meaning of that term in the context of a malicious prosecution action.”

FACTUAL AND PROCEDURAL BACKGROUND

According to the allegations of the amended complaint for malicious prosecution, on May 25, 1984, defendant (hereinafter Farmers) maliciously and without probable cause caused a criminal complaint to be filed in the municipal court charging Cook with the felony of submitting a false claim to Farmers in violation of former Insurance Code section 556, subdivision (a), (see now Ins.Code, § 1871.1);  following a preliminary hearing, Cook was bound over to the superior court for trial;  on August 14, 1985, the superior court conducted an evidentiary hearing in the criminal case “after which it determined that there was an unreasonable delay from the time the charges against [Cook] were filed and his arrest in violation of his constitutional rights, [and the court] dismissed the case, thus terminating said criminal charges ․ in favor of plaintiff herein.”

Farmers answered the amended complaint, asserting the affirmative defense, inter alia, that the complaint fails to state facts sufficient to constitute a cause of action.   Farmers then moved for summary judgment or in the alternative for summary adjudication of an issue related to damages.   The only ground Farmers asserted for summary judgment was that the dismissal for delay in prosecution did not indicate Cook's innocence and cannot be construed as a favorable termination sufficient to sustain an action for malicious prosecution.   The motion was supported by declarations as well as the transcript of the hearing on Cook's motion to dismiss for delay in prosecution.

According to declarations filed in support of the motion for summary judgment, as well as Cook's opposition, in July 1983, Cook, the owner of a 1982 BMW vehicle insured by Farmers, reported to Long Beach police that the vehicle had been stolen;  in August 1983, Cook made a claim to Farmers asserting the vehicle had been stolen;  in November 1983, Farmers paid about $15,000 to Cook to compensate him for the alleged loss of the vehicle, and title to the vehicle was transferred to Farmers.

The hearing on Cook's motion to dismiss the criminal action was held over the course of three days in June, July, and August 1985.   According to the transcript of that hearing, on December 21, 1983, officers arrested Cynthia Caves, who was driving a 1982 BMW;  the vehicle identification number (VIN) on the dash was covered with a piece of embossing tape;  a VIN on the embossing tape was checked and came back with no record on file;  the actual VIN inside the engine compartment of the vehicle was run and came back stolen;  the registered owner was Stephen Cook;  Cynthia Caves told the officers that she had borrowed the car from Mr. Bouchet (or Bousquet, as he is sometimes referred to in our record) because her Volkswagen had broken down;  she did not know the car was stolen;  later that day, the officers interviewed Bouchet, who was in the Lakewood Sheriff's jail on unrelated charges of violation of probation and drunk driving;  the officers also asked Bouchet if he was in jail for perjury, but Bouchet denied that and told them that the perjury charge had been dismissed.   At first Bouchet stated that he bought the car from Cook and then, after the officers called him a liar and a thief, and that “we are going to go ahead and get a complaint filed against you probably,” Bouchet stated that he conspired with Cook to hide the car for two years at the home of Mr. Littlejohn;  Cook would report it stolen and in two years they would strip the car and sell the parts;  Cook would pay Bouchet an amount of money and some tools.

Two days after talking with Bouchet, the officers talked with Littlejohn, who told them that Bouchet, who was living at his (Littlejohn's) residence, had bought the car from Cook because Cook could no longer afford the payments.   Littlejohn did not indicate to the officers that he himself had talked to Cook.

In December 1983, officers went to Cook's house;  Cook was not at home, but the officers spoke with Cook's mother;  also in December, an officer telephoned Cook and set up an appointment for him to come to the police station about the car that he had reported stolen, but Cook did not keep the appointment.

In January 1984, Farmers' investigator contacted the police and offered to help in investigation and preparation of the case;  Farmers' investigator conducted interviews with Bouchet and Littlejohn.   In May 1984, a criminal complaint was filed against Cook for insurance fraud;  an arrest warrant was obtained on May 25, 1984, but the warrant was never put into the police computer.   On one occasion in September 1984, and one occasion in October, the police attempted to serve the warrant on Cook at his residence, but Cook was not contacted;  a neighbor told the officer he did not know Cook and thought the people that had lived there had moved.

Cook was arrested at his residence on January 23, 1985.   The 1982 BMW had been turned over to Farmers and Farmers had disposed of the vehicle in June 1984.

In granting Cook's motion to dismiss, the court stated in pertinent part: ²  “I am going to grant the motion on the basis that prejudice has inured to the defendant in this matter [and] outweighs any justification by law enforcement.  [¶] In particular since Cynthia Caves the driver of the automobile and Littlejohn whose whereabouts is unknown and would be material and essential witness in this case, since she apparently resided ․ with those two named individuals [who] apparently are the prosecution's main witnesses.  [¶] Secondly, the car is no longer available for inspection.   The inspection could have revealed material facts to the defendant's case.  [¶] The defendant was never interviewed in this matter initially․  [¶] The only justification that the law enforcement official demonstrated in this was that they were busy with the Olympics․  [¶] Mr. Cook never moved from the location.   No one else was assigned to issue the warrant in this case.  [¶] He was never interviewed [when] the suspicion first arose in regard to this matter.  [¶] No warrant was ever placed in the warrant system and no one else was assigned to even look at this matter.  [¶] I think in the eight month period there was only one attempt to contact the defendant.  [¶] Based on those reasons I will grant the motion.”

In support of its motion for summary judgment, Farmers set out only four “facts” in its separate statement of undisputed material facts, all purportedly supported by the transcript of the hearing in the criminal case on Cook's motion to dismiss for delay in prosecution:  (1) The prior criminal action against Cook was dismissed as a result of the delay in filing criminal charges against Cook and the delay in arresting him;  (2) in dismissing the criminal complaint, the court did not indicate that it believed Cook was innocent;  (3) the court did not indicate that it believed the action lacked merit;  and (4) the court “stated that it was concerned regarding the possible prejudicial effect upon plaintiff's defense due to the fact that certain material witnesses and evidence were unavailable for questioning and/or inspection.”

In opposition to the motion, Cook argued that the “facts” set out by Farmers were merely legal conclusions and/or misinterpretations of the court order, the proper effect of which is a matter for judicial interpretation.   Cook argued that Farmers had not made a sufficient showing entitling it to summary judgment in its favor.

After the court granted Farmers' motion for summary judgment, Cook moved for reconsideration on the ground that a case relied upon by Farmers had been depublished.   The court granted reconsideration and upon reconsideration, again granted the motion for summary judgment, impliedly concluding that the depublication of the case had no bearing on the merits of the motion.   Cook filed timely notice of appeal from the judgment.   On appeal, Cook challenges the propriety of the summary judgment and also challenges the trial court's refusal to award Cook sanctions against Farmers under Code of Civil Procedure section 128.5, for purportedly attaching irrelevant material to its motion for summary judgment.

I

SUMMARY JUDGMENT PRINCIPLES

 “A motion for summary judgment must be granted if all the affidavits, declarations, and other supporting papers show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.  (Code Civ.Proc., § 437c, subd. (c).)”  (Lucchesi v. Giannini & Uniack (1984) 158 Cal.App.3d 777, 781–782, 205 Cal.Rptr. 62, fn. omitted.)   In examining the sufficiency of the declarations and other supporting papers filed in connection with the motion, we consider the respondent's papers strictly to determine if they establish a right to judgment by conclusively negating a necessary element of appellant's cause of action, and we construe appellant's declarations liberally to determine if appellant has established the existence of a triable issue of fact.  (Id., at p. 782, 205 Cal.Rptr. 62.)   Doubts as to the propriety of granting the motion are resolved against the moving party.  (Ibid.)  “Finally, the moving party has the burden of proving the absence of any triable issue of fact even though the burden of proof as to the particular issue may rest with the resisting party at the trial.”  (Ibid.)

 In reviewing a grant of summary judgment, an appellate court must make its own independent determination of the construction and effect of the papers submitted, and the validity of the ruling is reviewable irrespective of the reasons stated.  (Preis v. American Indemnity Co. (1990) 220 Cal.App.3d 752, 757, 269 Cal.Rptr. 617.)

 The elements of a cause of action for malicious prosecution are that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination in plaintiff's favor, (2) was brought without probable cause, and (3) was initiated with malice.  (See Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 871–872, 254 Cal.Rptr. 336, 765 P.2d 498.)

As the summary judgment motion in the instant case was based on the lack of a prior favorable termination, the issue presented on this appeal is whether Farmers has established that there is no dispute of fact that the prior criminal action was not terminated favorably to Cook.   We first discuss the pertinent law with respect to the element of favorable termination.

II

FAVORABLE TERMINATION OF PRIOR ACTION

As explained in Jaffe v. Stone (1941) 18 Cal.2d 146, 114 P.2d 335:  “The theory underlying the requirement of favorable termination is that it tends to indicate the innocence of the accused, and coupled with the other elements of lack of probable cause and malice, establishes the tort, that is the malicious and unfounded charge of crime against an innocent person.”   (Id., at p. 150, 114 P.2d 335.)   This theory is consistent with the observation that “in an action for malicious prosecution it is a complete defense to show that the plaintiff was in fact guilty of the offense charged against him by defendant, and this though the proof of guilt is furnished by evidence not known to defendant when the prosecution against the plaintiff was instituted.   This testimony is not in such case offered in support of probable cause, but to show that the plaintiff has suffered no wrong by his arrest.   The law considers that, if a criminal is fortunate enough to escape conviction, he should rest content with his good luck, and not belabor one who suspected his guilt and acted accordingly.   As was said in Newton v. Weaver, 13 R.I. 617:  ‘The action for malicious prosecution was designed for the benefit of the innocent, and not the guilty.’ ”  (Mack v. Sharp (1904) 138 Mich. 448, 101 N.W. 631;  see also McFarland v. Shirkey (Ohio App.1958) 106 Ohio App. 517, 151 N.E.2d 797, 803–804;  Verdier v. Verdier (1957) 152 Cal.App.2d 348, 352–353, 313 P.2d 123.) ³

“It is not essential to maintenance of an action for malicious prosecution that the prior proceeding was favorably terminated following trial on the merits.   However, termination must reflect on the merits of the underlying action.  (Minasian v. Sapse [ (1978) ] 80 Cal.App.3d 823, 827 [145 Cal.Rptr. 829].)  In holding a dismissal for failure to prosecute constitutes a favorable termination, the court in Minasian noted several examples illustrative of what may or may not be deemed favorable termination.   ‘In some instances the manner of termination reflects the opinion of the court that the action lacks merit, as where the criminal proceedings are dismissed for lack of sufficient evidence of guilt following a preliminary hearing.  [Citation omitted.]   In others, the termination reflects the opinion of the prosecuting party that, if pursued, the action would result in a decision in favor of the defendant, as where the district attorney seeks dismissal of the prosecution of a criminal action for lack of evidence [citations omitted] or where the plaintiff in a civil proceeding voluntarily dismisses the action [citations omitted].   By way of contrast, a dismissal ․ for lack of jurisdiction [citation omitted] not only is not on the merits, it is unreflective of the merits;  neither the judgment of the court nor that of the prosecuting party on the merits is implicated in the dismissal.  [¶] A dismissal for failure to prosecute ․ does reflect on the merits of the action․   The reflection arises from the natural assumption that one does not simply abandon a meritorious action once instituted.’ ”  (Lackner v. LaCroix (1979) 25 Cal.3d 747, 750–751, 159 Cal.Rptr. 693, 602 P.2d 393;  original emphasis;  [holding that dismissal of a prior action because of the bar of the statute of limitations does not reflect on the merits of the action and thus is not a favorable termination for purposes of a subsequent malicious prosecution action].)

In attempting to distinguish dismissals which indicate the innocence of the accused from those which do not, the court in Jaffe stated:  “The distinction is summed up in Halberstadt v. New York Life Ins. Co. [ (1909) 194 N.Y. 1, 86 N.E. 801] as follows:  ‘․ Where a criminal proceeding has been terminated in favor of the accused by judicial action of the proper court or official, in any way involving the merits or propriety of the proceeding;  or by a dismissal or discontinuance based on some act chargeable to the complainant, as his consent or his withdrawal or abandonment of his prosecution,—a foundation in this respect has been laid for an action of malicious prosecution.   The other and reverse rule is that, where the proceeding has been terminated without regard to its merits or propriety by agreement or settlement of the parties, or solely by the procurement of the accused as a matter of favor, or as the result of some act, trick, or device preventing action and consideration of the court, there is no such termination as may be availed of for the purpose of such an action.’ ”  (18 Cal.2d at pp. 151–152, 114 P.2d 335.)

“Of course where the termination of the former proceeding is not on the merits it is somewhat more difficult to ascertain whether it indicates the innocence of the defendant in the action.   Nevertheless, the theory is the same in testing a dismissal or other termination without a trial on the merits.  ‘If it is of such a nature as to indicate the innocence of the accused, it is a favorable termination sufficient to satisfy the requirement.   If, however, the dismissal is on technical grounds, for procedural reasons, or for any other reason not inconsistent with his guilt, it does not constitute a favorable termination.’  [Citation.]”  (Minasian v. Sapse, supra, 80 Cal.App.3d 823, 826, 145 Cal.Rptr. 829.)

 Accordingly, we conclude from the above authorities that to be favorable, the termination of the prior criminal action does not need to include an actual determination of the innocence of the accused;  rather, to constitute a favorable termination, all that is required is that the manner of termination reflect on the accused's innocence.   The element of favorable termination is thus to be distinguished from the affirmative defense that the accused is actually guilty, which defense does raise the issue of the actual guilt or innocence of the accused.  (See Verdier v. Verdier, supra, 152 Cal.App.2d at pp. 352–353, 313 P.2d 123.)

Respondent's primary argument on appeal fails to take into account the above crucial distinction.   Farmers contends that in dismissing the criminal case, the court in the prior action did not reach the merits of the criminal charge or indicate that the criminal action lacked merit.   That may be so;  however, this fact does not dispose of the issue of whether the manner of termination tended to indicate or reflected on Cook's innocence.

Respondent also maintains that such a dismissal is analogous to a dismissal due to the bar of the statute of limitations and thus constitutes a dismissal which is technical or procedural and not one which indicates the innocence of the accused.   Because there are significant differences in the factors that are considered by the court in dismissing a criminal case due to the bar of the statute of limitations as opposed to dismissing a case for delay in prosecution, we do not find the analogy particularly apt.   The most significant differences are the factors of prejudice to the accused, and the reasons for the delay in prosecution and arrest, which are at issue in the latter type of dismissal but not the former.

The parties have not brought to our attention any California case in which a court has addressed the issue of whether dismissal of a criminal action for delay in prosecution on due process grounds (see, e.g., Scherling v. Superior Court (1978) 22 Cal.3d 493, 504–505, 149 Cal.Rptr. 597, 585 P.2d 219;  Serna v. Superior Court (1985) 40 Cal.3d 239, 251, 219 Cal.Rptr. 420, 707 P.2d 793), or on speedy trial grounds (id., at p. 252, 219 Cal.Rptr. 420, 707 P.2d 793), constitutes a favorable termination.   However, we find instructive the approach of some other jurisdictions which have considered the issue.

The Supreme Court of Montana in Miller v. Watkins (1982) 200 Mont. 455, 653 P.2d 126, relied upon Lackner v. LaCroix, supra, 25 Cal.3d 747, 159 Cal.Rptr. 693, 602 P.2d 393, in concluding that the dismissal with prejudice of a criminal case for lack of a speedy trial “does reflect on the merits of the case and can be considered as a termination in favor of Watkins.”  (653 P.2d at p. 130.)

The court in Miller cited language in Lackner to the effect that a dismissal for failure to prosecute a civil action does reflect on the merits of the action and that such reflection arises from the natural assumption that one does not simply abandon a meritorious action once instituted.   The court in Miller thus drew the inference from the denial of speedy trial rights that the prosecutor failed to diligently prosecute the action, and an inference from the failure to diligently prosecute is that the prosecutor believed that the action was not meritorious.   This line of reasoning as to the dismissal of a criminal case is made more explicit in Brown v. Town of Henrietta (1983) 118 Misc.2d 133, 459 N.Y.S.2d 996.

In Brown, a New York court addressed the issue of whether a prosecution for violation of a municipal ordinance which was dismissed in the “furtherance of justice” because of delays in prosecution constituted a favorable termination.   In dismissing the prior charge, the court's “exact words were ‘[t]his dismissal was not on the merits of the charge, but solely because of the delays in prosecuting.’ ”  (459 N.Y.S.2d at p. 998.)   The court in the ensuing malicious prosecution action denied defendant's motion for summary judgment:  “Such a disposition [dismissal in the furtherance of justice] can be brought about without the consent of the defendant as a matter of judicial discretion based upon some ‘compelling factor.’  ․ The so called ‘compelling factor’ may or may not take into consideration the merits.   If the ‘compelling factor’ were a weak set of facts, defective pleadings, refusal of the complainant to go forward and/or failure to prosecute within the prescribed time limits, obviously the merits would have been passed upon, either directly or indirectly.   Were the compelling factor the health of the defendant, the cooperation of the defendant, or compromise between the parties, then the disposition would not be on the merits.  [¶] Therefore, a dismissal in the ‘furtherance of justice’ cannot be branded as a determination in favor of the defendant without investigating the facts which led to the disposition.   Each case must be evaluated separately to determine whether a dismissal in the ‘furtherance of justice’ was or was not on the merits.  [¶] ․ Since the ‘compelling factor’ which led to the dismissal in the ‘furtherance of justice’ was the delay in prosecution, the Court, in essence, granted a dismissal for lack of speedy trial and labeled it a ‘dismissal in the furtherance of justice.’   The ‘compelling factor’ which the Court took into consideration related to the motive of the prosecutor in failing to bring the matter to trial and as such, must be labeled as a termination based upon the merits and in favor of the accused.”  (459 N.Y.S.2d at pp. 998–999.)

A similar result was reached on the issue by the court in Rich v. Baldwin (1985) 133 Ill.App.3d 712, 88 Ill.Dec. 748, 479 N.E.2d 361.   The court in Rich discussed Miller, Brown, and other cases, citing the following language from Loeb v. Teitelbaum (1980) 77 A.D.2d 92, 432 N.Y.S.2d 487, 494:  “ ‘While there certainly is a distinction between a voluntary or formal abandonment by a prosecutor and a dismissal brought about by his neglect or unexcused failure to proceed, the difference is more apparent than real, for in both circumstances the criminal charges have been terminated by the prosecutor's nonpursuit of the charges against the accused.   In each case, the failure to proceed to the merits compels an inference of such an unwillingness or inability to do so as to imply a lack of reasonable grounds for the prosecution.’ ”  (88 Ill.Dec. at p. 751, 479 N.E.2d at p. 364.) ⁴

 The rule we distill from the above authorities, guided principally by Jaffe, Lackner, and Minasian, is that a dismissal of a criminal proceeding for delay in prosecution may be a favorable termination for purposes of a malicious prosecution action if the manner of termination reflects “the opinion of someone, either the trial court or the prosecuting party” (Stanley v. Superior Court (1982) 130 Cal.App.3d 460, 464–465, 181 Cal.Rptr. 878), that the accused is innocent.

 In the context of the instant appeal from summary judgment, the issue is whether Farmers met its burden of showing that there was no dispute of fact that the manner of termination of the prior criminal action did not reflect the opinion of the court or the prosecutor that Cook was innocent.   As reasonable inferences can be drawn from our record to support the conclusion that there was a favorable termination, summary judgment was inappropriately granted.  (See Code Civ.Proc., § 437c, subd. (c).)

A reasonable inference can be drawn from the manner of termination of the underlying criminal action that the prosecutor was of the opinion that the action lacked merit.   As pointed out by the court in dismissing the criminal action against Cook, the warrant for Cook's arrest was not placed in the computer and “no one else was assigned to even look at this matter”;  there was an eight-month delay from the time a complaint was filed and arrest warrant issued to the time of his arrest.   Moreover, neither the police nor the prosecutor interviewed Cook, although Cook was apparently able to be reached by telephone and had maintained the same home address at all pertinent times.

It is also clear from our record that in granting Cook's motion to dismiss the criminal action, the court found prejudice.   Although Cook's declaration establishing prejudice is not part of our record, it was before the trial court in the criminal action and that court apparently concluded that one or two of the prosecution's main witnesses (Caves and Littlejohn) could not be found and the car was no longer available for inspection, which inspection “could have revealed material facts to the defense case.”   A reasonable inference from our record is that the police or the prosecutor not only allowed key witnesses to disappear, but allowed Farmers to dispose of the car.   The failure of key prosecution witnesses to keep in touch with the prosecution reflects on those witnesses' lack of credibility.   If the prosecution witnesses are not credible, such fact tends to indicate Cook's innocence.   Moreover, reasonable inferences from Farmers' failure to retain the car are that Farmers itself did not expect the case to go to trial and did not consider it to have merit.   By reciting some of the inferences supporting a conclusion that the manner of termination reflected on Cook's innocence, we do not intend to imply that there are no contrary inferences that could be drawn from the instant record.   However, we need not set out all the competing reasonable inferences in this case;  it is sufficient to conclude that such contradictory inferences create a triable issue of fact on the issue of favorable termination such that Farmers' motion for summary judgment should have been denied.

III

DENIAL OF SANCTIONS

 On this appeal, Cook also appeals from that part of the summary judgment which denied his request for sanctions against Farmers pursuant to Code of Civil Procedure section 128.5 and provisions of the Civil Discovery Act of 1986.   Cook requested sanctions because Farmers attached to its motion for summary judgment an arbitrator's award and other items to which Cook objected.   While the trial court sustained Cook's objections to the items, and did not consider them in ruling on the motion, the trial court nonetheless denied Cook's motion for sanctions.

Although the order denying sanctions was included as part of the judgment, such order is not logically related to the summary judgment.   Treating it as an independent order, we question whether it is independently appealable under Code of Civil Procedure section 904.1, subdivision (b).  (See Lubetzky v. Friedman (1991) 228 Cal.App.3d 35, 44–45, 278 Cal.Rptr. 706.)   We also question whether such order is properly reviewable on appeal from the summary judgment pursuant to Code of Civil Procedure section 906.   Appellant fails to establish how the order denying sanctions “involves the merits or necessarily affects the judgment or order appealed from or which substantially affects the rights of a party.”  (Code Civ.Proc., § 906.)

 Were we to conclude the order denying sanctions to be reviewable, we would find that appellant has failed to establish the trial court abused its discretion in the matter.

DISPOSITION

The summary judgment is reversed and the trial court is directed to deny the motion for summary judgment.   Appellant is entitled to his costs on appeal.

LILLIE, Presiding Justice.

JOHNSON and FRED WOODS, JJ., concur.