Stanford Law School - Robert Crown Law Library

Filed 2/2/04

IN THE SUPREME COURT OF CALIFORNIA

CASA HERRERA, INC.,
Plaintiff and Appellant,
S111998
v.
) Ct.App.
4/1
D038326
NASSER BEYDOUN et al.,
San
Diego
County
Defendants and Respondents. )
Super. Ct. No. GIC760127

A court resolves an action for breach of contract and fraud in favor of a
defendant by applying the parol evidence rule. That defendant subsequently files
a malicious prosecution action against the plaintiffs in the breach of contract
action and others. We now consider whether the termination of the breach of
contract and fraud action based on the parol evidence rule satisfies the favorable
termination element of a malicious prosecution claim. We conclude it does.
I.
A.
In 1994, respondent Am Mex Food Industries, Inc. (Am Mex)—which was
owned by respondent Nasser Beydoun—purchased an oven and related equipment
from appellant Casa Herrera, Inc. (Casa Herrera or appellant) for manufacturing
tortillas for sale to its distributors. As stated in the written sales contract, Casa
Herrera promised that the oven would produce 1,500 dozen 10-ounce tortillas per
hour, 1,800 dozen 8-ounce tortillas per hour, and 2,000 dozen 6-ounce tortillas per
1

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hour.1 The contract also gave Am Mex 10 days to operate the oven after its
installation and to return it if dissatisfied.
Casa Herrera delivered the oven to Am Mex, but Am Mex did not sign the
written acceptance within 10 days after its installation because of difficulties in
operating the oven. Casa Herrera then made some repairs and provided Am Mex
with additional instructions on how to operate the oven. Over a month after the
installation of the oven, Am Mex and Beydoun signed the acceptance
“acknowledging they had observed the oven in operation and were satisfied with
the quantity and quality of production.”
Am Mex began experiencing financial difficulties and was unable to
service its debt to respondent Valle De Oro Bank (Valle), the predecessor to
respondent Community First National Bank (collectively, the banks). Valle filed
an action to enforce its security interest in Am Mex’s assets and obtained the
appointment of a receiver. The receiver eventually sold Am Mex’s assets,
including the oven, to Circle Foods.
Shortly after the appointment of the receiver, Am Mex and Beydoun sued
Casa Herrera, asserting causes of action for breach of contract and fraudulent
misrepresentation. As the basis for both causes of action, they alleged that Casa
Herrera had promised the oven would produce 1,500 dozen 16-ounce tortillas per
hour even though Casa Herrera knew the oven did not and could not do so.
At trial, the court, after hearing opening statements, granted Casa Herrera’s
motion for a nonsuit against Beydoun on the ground that Beydoun lacked standing
to sue. After Am Mex presented its case, the trial court directed a verdict for Casa

1
The weights refer to the weight of one dozen tortillas.
2

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Herrera “on the ground[] that Am Mex had no standing to pursue said claims as
they had been sold and assigned to Circle Foods pursuant to a written contract.”
The Court of Appeal affirmed. But instead of relying on lack of standing,
the court held that “there was no substantial evidence to support the claims for
breach of contract or fraud.” In support, the court found that the written sales
contract between Am Mex and Casa Herrera was “integrated on the rates of
guaranteed production, and the language specifying a guaranteed rate of 1500
dozen per hour for 10-ounce tortillas is not reasonably susceptible to the
interpretation that the parties agreed to a guaranteed rate of 1500 dozen per hour
for 16-ounce tortillas.” The court then concluded that the “parol evidence rule
barred Am Mex from attempting to show Casa Herrera breached a promise (or
fraudulently promised) to provide an oven producing 16-ounce tortillas at the rate
of 1500 dozen per hour.”
B.
Following the Court of Appeal’s decision, Casa Herrera filed the instant
action against Beydoun, Am Mex, the banks, and Tom Ferrara, a director and
officer of Valle (collectively respondents), asserting, among other things, causes
of action for malicious prosecution.2 As part of its malicious prosecution claims,
Case Herrera alleged that the Court of Appeal opinion in Beydoun v. Casa
Herrera, Inc. (Jan. 10, 2000, D030061) [nonpub. opn.] constituted a termination
on the merits in its favor.
The banks and Ferrera, joined by Am Mex and Beydoun, moved for
judgment on the pleadings, contending, as a matter of law, Casa Herrera could not

2
Although the banks and Ferrera were not parties to the underlying action,
Casa Herrera alleged that they “encouraged and advocated the continuation of the”
action.
3

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establish the favorable termination element of a malicious prosecution claim.
Citing Hall v. Harker (1999) 69 Cal.App.4th 836, 845 (Hall), the banks claimed
that “a resolution . . . based on the parol evidence rule cannot be a favorable
termination . . . so as to support a subsequent action for malicious prosecution.”
The trial court agreed and dismissed the malicious prosecution claims with
prejudice.
The Court of Appeal reversed.3 Declining to follow Hall, the court
concluded that “when an action is terminated because the parol evidence rule
mandates the defendant’s liability be determined by the provision embodied in the
written contract rather than by any prior inconsistent oral promises, the action has
been terminated for reasons that do reflect on the merits of the plaintiff’s
underlying claim that the underlying defendant was responsible or liable for
allegedly breaching his contractual obligations.” In reaching this conclusion, the
court observed that “the parol evidence rule is not an evidentiary rule but is instead
a rule that fixes duties and establishes rights and responsibilities among persons by
declaring that the law will hold parties to their written agreements rather than to
prior representations or promises inconsistent with the written agreement.”
We granted review to determine whether a termination based on the parol
evidence rule constitutes a favorable termination for malicious prosecution
purposes, and conclude that it does.

3
Casa Herrera also asserted a cause of action under Code of Civil Procedure
section 1908 against the banks. The trial court dismissed this cause of action with
prejudice, and the Court of Appeal affirmed. The parties do not challenge this
aspect of the Court of Appeal’s ruling.
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II.
“[I]n order to establish a cause of action for malicious prosecution of either
a criminal or civil proceeding, a plaintiff must demonstrate ‘that the prior action
(1) was commenced by or at the direction of the defendant and was pursued to a
legal termination in his, plaintiff’s, favor [citations]; (2) was brought without
probable cause [citations]; and (3) was initiated with malice [citations].’ ”
(Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 871 (Sheldon Appel),
quoting Bertero v. National General Corp. (1974) 13 Cal.3d 43, 50.)
“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 [of malicious
prosecution].” (Jaffe v. Stone (1941) 18 Cal.2d 146, 150.) Thus, “[i]t is hornbook
law that the plaintiff in a malicious prosecution action must plead and prove that
the prior judicial proceeding of which he complains terminated in his favor.”
(Babb v. Superior Court (1971) 3 Cal.3d 841, 845.)
To determine “whether there was a favorable termination,” we “look at the
judgment as a whole in the prior action . . . .” (Sagonowsky v. More (1998) 64
Cal.App.4th 122, 129.) “It is not essential to maintenance of an action for
malicious prosecution that the prior proceeding was favorably terminated
following trial on the merits.” (Lackner v. LaCroix (1979) 25 Cal.3d 747, 750
(Lackner).) Rather, “[i]n order for the termination of a lawsuit to be considered
favorable to the malicious prosecution plaintiff, the termination must reflect the
merits of the action and the plaintiff’s innocence of the misconduct alleged in the
lawsuit.” (Pender v. Radin (1994) 23 Cal.App.4th 1807, 1814.) For example, a
termination is favorable for malicious prosecution purposes where the court in the
underlying action: (1) granted summary judgment and issued sanctions because
the claim was meritless (Mattel, Inc. v. Luce, Forward, Hamilton & Scripps
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(2002) 99 Cal.App.4th 1179, 1191); (2) granted summary judgment because there
was insufficient evidence to establish a triable issue of fact (Sierra Club
Foundation v. Graham (1999) 72 Cal.App.4th 1135, 1149-1150 (Sierra Club)); or
(3) held that the defendant, as a matter of law, violated no duty to the plaintiff
(Ray v. First Federal Bank (1998) 61 Cal.App.4th 315, 318 (Ray)).
However, a “ ‘favorable’ termination does not occur merely because a party
complained against has prevailed in an underlying action. . . . If the termination
does not relate to the merits—reflecting on neither innocence of nor responsibility
for the alleged misconduct—the termination is not favorable in the sense it would
support a subsequent action for malicious prosecution.” (Lackner, supra, 25
Cal.3d at p. 751, fn. omitted.) Thus, a “technical or procedural [termination] as
distinguished from a substantive termination” is not favorable for purposes of a
malicious prosecution claim. (Ibid.) Examples include dismissals (1) on statute of
limitations grounds (id. at pp. 751-752; Warren v. Wasserman, Comden &
Casselman (1990) 220 Cal.App.3d 1297, 1303 (Warren)); (2) pursuant to a
settlement (Dalany v. American Pacific Holding Corp. (1996) 42 Cal.App.4th 822,
828-829); or (3) on the grounds of laches (Asia Investment Co. v. Borowski (1982)
133 Cal.App.3d 832, 838-839).
With these standards in mind, we now turn to the Court of Appeal’s
decision terminating the underlying breach of contract and fraud action. (See Ray,
supra, 61 Cal.App.4th at pp. 318-319 [holding “that the appellate decision . . .
both marked and constituted favorable termination of that case”].) In affirming
the judgment in favor of appellant, the Court of Appeal found that “there was no
substantial evidence to support the [underlying] claims for breach of contract or
fraud.” Ostensibly, this finding reflects on the merits and appellant’s innocence of
the wrongful conduct alleged in the underlying action. (See Sierra Club, supra, 72
Cal.App.4th at pp. 1149-1150.) Nonetheless, respondents contend the termination
6

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was procedural or technical because the Court of Appeal refused to consider
evidence of prior negotiations in light of the parol evidence rule. According to
respondents, under Lackner the parol evidence rule is a procedural defense like the
statute of frauds, and a termination based on that rule does not reflect on
appellant’s innocence. (See Lackner, supra, 25 Cal.3d at p. 751.) As explained
below, we disagree and find that a termination based on the parol evidence rule is
a substantive termination in the malicious prosecution context.
The parol evidence rule is codified in Civil Code section 16254 and Code of
Civil Procedure section 1856.5 (See Marani v. Jackson (1986) 183 Cal.App.3d

4
Civil Code section 1625 provides that: “The execution of a contract in
writing, whether the law requires it to be written or not, supersedes all the
negotiations or stipulations concerning its matter which preceded or accompanied
the execution of the instrument.”
5
Code of Civil Procedure section 1856 states that: “(a) Terms set forth in a
writing intended by the parties as a final expression of their agreement with
respect to such terms as are included therein may not be contradicted by evidence
of any prior agreement or of a contemporaneous oral agreement. [¶] (b) The
terms set forth in a writing described in subdivision (a) may be explained or
supplemented by evidence of consistent additional terms unless the writing is
intended also as a complete and exclusive statement of the terms of the agreement.
[¶] (c) The terms set forth in a writing described in subdivision (a) may be
explained or supplemented by course of dealing or usage of trade or by course of
performance. [¶] (d) The court shall determine whether the writing is intended
by the parties as a final expression of their agreement with respect to such terms as
are included therein and whether the writing is intended also as a complete and
exclusive statement of the terms of the agreement. [¶] (e) Where a mistake or
imperfection of the writing is put in issue by the pleadings, this section does not
exclude evidence relevant to that issue. [¶] (f) Where the validity of the
agreement is the fact in dispute, this section does not exclude evidence relevant to
that issue. [¶] (g) This section does not exclude other evidence of the
circumstances under which the agreement was made or to which it relates, as
defined in [Code of Civil Procedure] Section 1860, or to explain an extrinsic
ambiguity or otherwise interpret the terms of the agreement, or to establish
illegality or fraud. [¶] (h) As used in this section, the term agreement includes
deeds and wills, as well as contracts between parties.”
7

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695, 701 (Marani).) It “generally prohibits the introduction of any extrinsic
evidence, whether oral or written, to vary, alter or add to the terms of an integrated
written instrument.” (Alling v. Universal Manufacturing Corp. (1992) 5
Cal.App.4th 1412, 1433 (Alling).) The rule does not, however, prohibit the
introduction of extrinsic evidence “to explain the meaning of a written contract . . .
[if] the meaning urged is one to which the written contract terms are reasonably
susceptible.” (BMW of North America, Inc. v. New Motor Vehicle Bd. (1984) 162
Cal.App.3d 980, 990, fn. 4 (BMW).)
Although the rule results in the exclusion of evidence, it “is not a rule of
evidence but is one of substantive law.” (Estate of Gaines (1940) 15 Cal.2d 255,
264, italics added.) Of course, our prior characterization of the parol evidence rule
as a substantive rule of law is not necessarily dispositive in the malicious
prosecution context. (See Grant v. McAuliffe (1953) 41 Cal.2d 859, 865
[“ ‘ “Substance” and “procedure” . . . are not legal concepts of invariable content’
. . . and a statute or other rule of law will be characterized as substantive or
procedural according to the nature of the problem for which a characterization
must be made”].) But a careful examination of the underlying nature of the rule
demonstrates that it should be so.
Unlike traditional rules of evidence, the parol evidence rule “does not
exclude evidence for any of the reasons ordinarily requiring exclusion, based on
the probative value of such evidence or the policy of its admission. The rule as
applied to contracts is simply that as a matter of substantive law, a certain act, the
act of embodying the complete terms of an agreement in a writing (the
‘integration’), becomes the contract of the parties. The point then is, not how the
agreement is to be proved, because as a matter of law the writing is the
agreement.” (Estate of Gaines, supra, 15 Cal.2d at pp. 264-265.) Thus, “[u]nder
[the] rule[,] the act of executing a written contract . . . supersedes all the
8

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negotiations or stipulations concerning its matter which preceded or accompanied
the execution of the instrument.” (BMW, supra, 162 Cal.App.3d at p. 990, italics
added.) And “[e]xtrinsic evidence cannot be admitted to prove what the
agreement was, not for any of the usual reasons for exclusion of evidence, but
because as a matter of law the agreement is the writing itself. [Citation.]” (Ibid.)
“Such evidence is legally irrelevant and cannot support a judgment.” (Marani,
supra, 183 Cal.App.3d at p. 701.)
The parol evidence rule therefore establishes that the terms contained in an
integrated written agreement may not be contradicted by prior or contemporaneous
agreements. In doing so, the rule necessarily bars consideration of extrinsic
evidence of prior or contemporaneous negotiations or agreements at variance with
the written agreement. “[A]s a matter of substantive law such evidence cannot
serve to create or alter the obligations under the instrument.” (Tahoe National
Bank v. Phillips (1971) 4 Cal.3d 11, 23 (Tahoe National Bank).) In other words,
the evidentiary consequences of the rule follow from its substantive component—
which establishes, as a matter of law, the enforceable and incontrovertible terms of
an integrated written agreement.
Thus, by applying the parol evidence rule, the Court of Appeal, in effect,
held that the written sales agreement was the only existing agreement of the
parties. (See Estate of Gaines, supra, 15 Cal.2d at pp. 264-265.) As a
consequence of this substantive holding, the court refused to consider extrinsic
evidence suggesting that the parties’ agreement had included a term promising that
the oven would produce 1,500 dozen 16-ounce tortillas per hour. Such evidence
was irrelevant as a matter of law. (See Marani, supra, 183 Cal.App.3d at p. 701.)
After defining the terms of the parties’ agreement by applying the parol evidence
rule, the court then found that appellant did not breach the contract or commit
fraud. As such, the Court of Appeal necessarily resolved the underlying action on
9

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the merits, and its decision reflects on appellant’s innocence of the alleged
misconduct. The decision therefore constitutes a favorable termination for
malicious prosecution purposes.
Respondents’ reliance on language in Lackner analogizing a termination on
statute of limitations grounds to a termination based on the statute of frauds
(Lackner, supra, 25 Cal.3d at p. 751), and their attempts to equate the statute of
frauds to the parol evidence rule are unavailing. Although “[t]he evidentiary
consequences of the statute of frauds . . . are in many respects similar to those of
the parol evidence rule” (Ellis v. Klaff (1950) 96 Cal.App.2d 471, 475-476) and
“both aim to secure purity of evidence” (Alameda County Title Ins. Co. v. Panella
(1933) 218 Cal. 510, 515 (Alameda County Title)), the differences between the
rules confirm that a termination based on the parol evidence rule is substantive—
and not technical or procedural—for malicious prosecution purposes.
The statute of frauds “demands that every material term of an agreement
within its provisions be reduced to written form, whether the parties desire to do
so or not.” (Ellis v. Klaff, supra, 96 Cal.App.2d at p. 476.) Thus, under the statute
of frauds, the written agreement “serves only to prevent the contract from being
unenforceable” (Hale v. Bohannon (1952) 38 Cal.2d 458, 465); it does not
necessarily establish the terms of the parties’ contract. Indeed, the sole “object of
the statute of frauds is to prevent perjured testimony in proof of purported
contracts of important types, and the statute applies only to those enumerated
types.” (2 Witkin, Cal. Evidence (4th ed. 2000) Documentary Evidence, § 63, p.
183.)
By contrast, under the parol evidence rule, all prior or contemporaneous
“oral negotiations are merged in the written contract, which is conclusive in the
absence of a plea of actual fraud or mistake.” (Alameda County Title, supra, 218
Cal. at p. 515.) The written agreement supersedes these negotiations and becomes
10

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the parties’ sole agreement (see Estate of Gaines, supra, 15 Cal.2d at pp. 264-
265), and extrinsic evidence may not “add to, detract from, or vary the terms of”
that agreement (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968)
69 Cal.2d 33, 39). As such, the rule “applies to any type of contract, and its
purpose is to make sure that the parties’ final understanding, deliberately
expressed in writing, shall not be changed.” (2 Witkin, Cal. Evidence, supra,
Documentary Evidence, § 63, p. 183.)
Thus, the parol evidence rule, unlike the statute of frauds, does not merely
serve an evidentiary purpose; it determines the enforceable and incontrovertible
terms of an integrated written agreement. (See Alling, supra, 5 Cal.App.4th at p.
1433 [“The parol evidence rule is not merely a rule of evidence concerned with the
method of proving an agreement; it is a principle of substantive law”].) By
defining the terms of the parties’ agreement, the rule is necessarily substantive—
and not procedural or technical—in the malicious prosecution context. Indeed, its
substantive nature is further demonstrated by the fact that, unlike the statute of
frauds (Lackner, supra, 25 Cal.3d at p. 751), “we cannot consistently subjugate
[the parol evidence] rule to the principles of objection and waiver codified in the
Evidence Code” (Tahoe National Bank, supra, 4 Cal.3d at p. 23). Likewise, the
doctrine of estoppel may preclude the application of the statute of frauds but has
no force against the parol evidence rule. (Alameda County Title, supra, 218 Cal.
at pp. 515-516.)
As such, the reasoning of Hall, supra, 69 Cal.App.4th 836, is not
persuasive. In Hall, the Court of Appeal reasoned that the “resolution of the
underlying case based on the parol evidence rule cannot be a favorable
termination” because the rule “cannot erase the existence of the [collateral]
agreements, if they actually took place.” (Id. at p. 845.) But this reasoning
betrays a misunderstanding of the parol evidence rule. The parol evidence rule
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establishes that an integrated written agreement supersedes any prior or
contemporaneous promise at variance with the terms of that agreement. (BMW,
supra, 162 Cal.App.3d at p. 990.) Thus, any alleged oral agreement regarding the
oven’s capacity no longer exists because the written sales contract, as a matter of
law, has replaced it. The Court of Appeal’s decision in the underlying action
therefore establishes that appellant could not have breached any extant
agreement—enforceable or unenforceable. In doing so, the decision necessarily
“show[s] the innocence of . . . [appellant of the alleged misconduct] in the prior
action”—breaching the sales agreement and fraudulently exaggerating the oven’s
production capacity. (Warren, supra, 220 Cal.App.3d at p. 1303.)
Respondents’ reliance on a comment to section 530 of the Restatement
Second of Torts is misplaced. Although the comment states that a promise made
without the intention to perform may still support a cause of action for fraud, even
though the promise “is unprovable and so unenforceable under the parol evidence
rule” (Rest.2d Torts, § 530, com. c), we rejected this proposition long ago. (See
Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, 263-264.) And,
despite some criticism, our courts have consistently rejected promissory fraud
claims premised on prior or contemporaneous statements at variance with the
terms of a written integrated agreement.6 (See, e.g., Wang v. Massey Chevrolet
(2002) 97 Cal.App.4th 856, 867-871, 873 [following Pendergrass but holding that
the parol evidence rule does not bar claims for violations of Civ. Code, § 1770,
subd. (a)(14) and Bus. & Prof. Code, § 17200]; Alling, supra, 5 Cal.App.4th at

6
In Pacific State Bank v. Greene (2003) 110 Cal.App.4th 375, 392, the Court
of Appeal recognized an exception to this rule for “misrepresentations of fact over
the content of an agreement at the time of execution . . . .” Even assuming that
such an exception exists, it does not apply here because there is no allegation that
appellant misrepresented the contents of the written sales agreement.
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p. 1436; Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216
Cal.App.3d 388, 419; Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465,
483-486.) Because the parol evidence rule effectively immunizes appellant from
liability for prior or contemporaneous statements at variance with the written sales
contract, the Court of Appeal’s decision tends to show appellant’s innocence of
fraud. (See Lackner, supra, 25 Cal.3d at p. 751, fn. 2 [“A termination
‘inconsistent with wrongdoing’ implies a lack of wrongful conduct and thus
innocence—a favorable termination”].)
In this respect, Berman v. RCA Auto Corp. (1986) 177 Cal.App.3d 321, is
instructive. In Berman, a court terminated the underlying fraud action because the
alleged misstatements were protected by the litigation privilege codified in Civil
Code section 47. In the subsequent malicious prosecution action, the Court of
Appeal concluded that the termination was favorable because the litigation
privilege provides “absolute protection from liability” for statements made in the
course of a judicial proceeding. (Berman, at p. 324.) As such, the “Legislature
has in effect said that suits based on privileged statements are suits which are
without merit.” (Id. at p. 325.) Similarly, the parol evidence rule, as a practical
matter, provides “absolute protection from liability” for prior or contemporaneous
statements at variance with the terms of a written integrated agreement.7 (Berman,
at p. 324.) Because the Legislature, by codifying the rule, has “in effect” stated
that suits based on such statements “are without merit,” a termination based on the
rule is favorable for malicious prosecution purposes. (Id. at p. 325.)

7
Indeed, neither the doctrine of waiver (see Tahoe National Bank, supra, 4
Cal.3d at p. 23) nor the doctrine of estoppel (see Alameda County Title, supra, 218
Cal. at pp. 515-516) affects this protection.
13

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By contrast, Robbins v. Blecher (1997) 52 Cal.App.4th 886, is
distinguishable. In Robbins, the defendants in the malicious prosecution action
had filed an alter ego action against the plaintiffs in the malicious prosecution
action after obtaining an antitrust judgment against a corporation owned by the
plaintiffs. (Id. at pp. 890-891.) After the reversal of the antitrust judgment, the
defendants voluntarily dismissed the alter ego action as moot. (Id. at p. 891.) The
plaintiffs responded by filing a malicious prosecution action, contending that the
dismissal constituted a favorable termination because the defendants could no
longer establish an element of the alter ego action after the reversal of the antitrust
judgment. (Id. at p. 894.) The Court of Appeal disagreed and affirmed the
dismissal of the malicious prosecution action. According to the court, the
defendants voluntarily dismissed the action because they “had simply lost standing
to pursue” the alter ego action. (Ibid., italics added.) Thus, in dismissing the
action, the defendants had not conceded that the plaintiffs “had done nothing
wrong; they had merely conceded that” they “[were] no longer in a position to
complain of [plaintiffs’] wrongdoing.” (Ibid.) Unlike the dismissal in Robbins,
the Court of Appeal in the underlying action in this case did not rely on a technical
or procedural defense like lack of standing. Instead, the court applied a
substantive rule of contract law and resolved the action on its merits. (See ante, at
pp. 9-13.)
Finally, public policy considerations do not compel a different result.
Concerns over the potential chilling effect of our decision on breach of contract
actions due to judicial confusion over the parol evidence rule are readily assuaged
by stringent enforcement of the probable cause element of the malicious
prosecution tort. Indeed, by requiring courts “to make an objective determination
of the ‘reasonableness’ of the defendant’s conduct” (Sheldon Appel, supra, 47
Cal.3d at p. 878) or to determine “whether any reasonable attorney would have
14

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thought the claim tenable” (id. at p. 886), the probable cause requirement
adequately protects the breach of contract plaintiff’s “interest ‘in freedom from
unjustifiable and unreasonable litigation’ ” (id. at p. 878).
The policy considerations cited in Lackner are also not relevant here. In
Lackner, we held that a termination on statute of limitations grounds did not
constitute a favorable termination in the malicious prosecution context. (Lackner,
supra, 25 Cal.3d at p. 751.) In reaching this conclusion, we observed that strong
policy considerations militated against a contrary holding. For example, we noted
that the statute of limitations defense seeks to avoid litigation over stale claims and
that allowing the malicious prosecution claim to proceed would put “in question
the same stale issues.” (Id. at p. 752.) We also noted that the statute of limitations
is a defense and may only be used as a “ ‘ “shield” ’ ”—and not as a
“ ‘ “sword.” ’ ” (Ibid.)
Neither consideration, however, applies here. Unlike the statute of
limitations, the parol evidence rule does not seek to avoid litigation over stale
claims. Thus, our concern in Lackner is not implicated here. In any event, finding
a termination based on the parol evidence rule to be favorable does not put “in
question the same stale issues” to be avoided by the rule. (Lackner, supra, 25
Cal.3d at p. 752.) Like the court in the underlying action, the court in the
malicious prosecution action will have to consider the extrinsic evidence in order
to determine whether the malicious prosecution defendant had an objectively
reasonable basis for filing the underlying action in light of the parol evidence rule.
(See Alling, supra, 5 Cal.App.4th at p. 1434 [“ ‘The matters to which the court
must address itself in determining whether the evidence of an oral agreement
should go to the jury are such questions as (1) whether the written agreement
appears to state a complete agreement; (2) whether the alleged oral agreement
directly contradicts the writing; (3) whether the oral agreement might naturally be
15

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made as a separate agreement; [and] (4) whether the jury might be misled by the
introduction of the parol testimony’ ”].) Moreover, unlike the statute of
limitations, the parol evidence rule is not a procedural defense but a substantive
principle of law. (See ante, at pp. 9-13.) Thus, there is no policy consideration
precluding its use as a sword rather than a shield.
Although malicious prosecution suits are disfavored, we will not bar such
suits for that reason alone. As we stated long ago, “we should not be led so astray
by the notion of a ‘disfavored’ action as to defeat the established rights of the
plaintiff by indirection; for example, by inventing new limitations on the
substantive right, which are without support in principle or authority, or by
adopting stricter requirements of pleading that are warranted by the general rules
of pleading. In brief, the public policy involved has properly served, over many
years, to crystallize the limitations on the tort, and the defenses available to the
defendant. Having served that purpose, it should not be pressed further to the
extreme of practical nullification of the tort and consequent defeat of the other
important policy which underlies it of protecting the individual from the damage
caused by unjustifiable criminal [and civil] prosecution[s].” (Jaffe v. Stone, supra,
18 Cal.2d at pp. 159-160.) Accordingly, we hold that terminations based on the
parol evidence rule are favorable for malicious prosecution purposes. In doing so,
we disapprove of Hall v. Harker, supra, 69 Cal.App.4th 836, to the extent it is
inconsistent with our opinion here.
16

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III.
We affirm the judgment of the Court of Appeal.
BROWN, J.
WE CONCUR:

GEORGE,
C.J.
KENNARD,
J.
BAXTER,
J.
WERDEGAR,
J.
CHIN,
J.
MORENO,
J.
17

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See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Casa Herrera v. Beydoun
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted

XXX 103 Cal.App.4th 83
Rehearing Granted

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Opinion No.

S111998
Date Filed: February 2, 2004
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Court:

Superior
County: San Diego
Judge: Ronald S. Prager

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Attorneys for Appellant:

Meisenheimer, Herron & Steele, Matthew V. Herron, Robert M. Steele; Post Kirby Noonan & Sweat,
Michael J. Kirby and Matthew P. Nugent for Plaintiff and Appellant.

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Attorneys for Respondent:

Gibson, Dunn & Crutcher, Theodore J. Boutrous, Jr., Julian W. Poon, Gregory D. Brown, Nicola T. Hanna
and Michele L. Maryott for Defendants and Respondents Community First National Bank and Tom
Ferrara.

Ira S. Carlin for Defendants and Respondents Nasser Beydoun and Am Mex Food Industries, Inc.

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Counsel who argued in Supreme Court (not intended for publication with opinion):

Matthew V. Herron
Meisenheimer, Herron & Steele
550 West C Street, Suite 1760
San Diego, CA 92101-3545
(619) 233-4122

Theodore J. Boutrous, Jr.
Gibson, Dunn & Crutcher
333 S. Grand Avenue, Suite 4700
Los Angeles, CA 90071-3197
(213) 229-7000

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Opinion Information

Date:	Docket Number:
Mon, 02/02/2004	S111998

Disposition
Feb 2 2004	Opinion: Affirmed

Dockets
Dec 6 2002	Petition for review filed   respondents Community First National Bank and Tom Ferrara
Dec 10 2002	Received:   in San Diego from counsel for respondents (Nasser Beydoun & Am Mex Foods Industries, Inc.) received late joinder to petition for review. Counsel to send application for relief from default.
Dec 11 2002	Record requested
Dec 11 2002	Received Court of Appeal record   one doghouse
Dec 23 2002	Application for relief from default filed   from counsel for respondents Nasser Beydoun and Am Mex Foods Industries, Inc.
Dec 23 2002	Joinder to petition filed   (with permission) by counsel for respondents (Nasser Beydoun & Am Mex Foods Industries, Inc.).
Dec 26 2002	Answer to petition for review filed   appellant Casa Herrera, Inc. [wrong cover color: white]
Jan 22 2003	Petition for Review Granted (civil case)   Votes: George, CJ., Kennard, Baxter, Werdegar, Chin, Brown and Moreno, JJ.
Jan 28 2003	Certification of interested entities or persons filed   respondents Community First National Bank and Tom Ferrara
Feb 4 2003	Certification of interested entities or persons filed   by resps Beydoun and Am Mex Food
Feb 13 2003	Certification of interested entities or persons filed   by aplt Casa Herrera
Feb 21 2003	Opening brief on the merits filed   respondents Community First National Bank and Tom Ferrara
Mar 17 2003	Received document entitled:   Joinder of resps Beydoun and Am Mex to opening brief on the merits of Community 1st Nat. Bank and Ferrara.
Mar 17 2003	Received:   resps' (Beydoun and Am Mex) application for relief from default re late joinder.
Mar 21 2003	Request for extension of time filed   by aplt to file the answer brief on the merits. to 4/23.
Mar 26 2003	Extension of time granted   to 4-23-03 for aplt to file the answer brief on the merits. No further extensions of time will be granted.
Apr 22 2003	Answer brief on the merits filed   by Appellant
May 12 2003	Reply brief filed (case fully briefed)   by respondents Community First National Bank and Tom Ferrara
Oct 30 2003	Case ordered on calendar   12-2-03, 2pm, San Jose
Dec 2 2003	Cause argued and submitted
Feb 2 2004	Opinion filed: Judgment affirmed in full   Majority opinion by Brown, J. -------------joined by George, C.J., Kennard, Baxter, Werdegar, Chin, Moreno JJ.
Feb 27 2004	Note: Mail returned (unable to forward)   opinion mailed to Nicola Hanna
Mar 5 2004	Remittitur issued (civil case)

Briefs
Feb 21 2003	Opening brief on the merits filed
Apr 22 2003	Answer brief on the merits filed
May 12 2003	Reply brief filed (case fully briefed)

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