Palisoc v. Poblete

OPINION OF THE COURT

(February 25, 2014)

Michael and Benjamin Palisoc2 appeal the Superior Court’s May 2,2013 Order, which entered summary judgment in favor of Dr. Vincente Poblete. For the reasons that follow, we affirm the May 2, 2013 Order.

1. STATEMENT OF FACTS AND PROCEDURAL POSTURE

In October 2007, Santos Chuidian, Benjamin, and Benjamin’s son, Michael, approached Poblete and Dr. Cosme Baretta about opening a Filipino restaurant to cater to the large Filipino population among cruise ship crew members in St. Thomas. Poblete and Baretta agreed to provide the capital to finance the venture. It was also agreed that Chuidian and Benjamin would work at the restaurant as the general manager and head chef, respectively, and Michael would handle various office duties. That same month, the articles of incorporation were filed and the required business licenses and permits were secured to open their establishment. On December 5, 2007, the men opened The Barrio Fiesta in St. Thomas.

Barrio was essentially divided into two establishments, each side with its own cash register. One side of Barrio provided the sale of grocery items, telephone rentals, internet access and phone cards, while the other side served as a restaurant. Donato Valeza worked the grocery-side cash register and Chuidian and Michael worked the restaurant cash register. Each cash register was equipped to automatically generate sales reports through a computer system known as the Z-Out Drawer Count Report; however, shortly after Barrio’s opening, the cash registers frequently became out of order. Eventually, the grocery cash register remained out of order for a long period of time. As a result, the grocery cash register was used primarily as a cash drawer.

*611At the end of each day, Valeza placed the cash receipts from the sale of phone cards in an envelope and gave it to Michael. Michael and Chuidian then counted the rest of the grocery register’s cash sales to create daily financial reports of the earnings. These funds would ultimately be added with the earnings from the restaurant and given to Poblete to deposit in the bank.

Operating in this manner, suspicion arose that Michael and Chuidian were not accurately reporting the daily sales. First, Michael and Chuidian were observed to convene privately for several hours before arriving at a final tally for the daily financial reports. Second, Poblete’s son, Jose, accessed the computer cash register and found the existence of multiple sale summary reports that Chuidian never provided to Poblete. Third, Jose found numerous empty envelopes labeled “phone cards” in a desk drawer. Jose also observed that the Z-Out Drawer Count Report, which was supposed to be run once at the close of every business day, was being run several times a day, suggesting that attempts were being made to manipulate the reports.

Poblete and Baretta called a meeting on January 12, 2008, to address these concerns. There are differing accounts of the events at this meeting. According to Poblete, the meeting was called to discuss the cash register concerns and to reassign Chuidian and Michael away from cash and computer operations. Chuidian, on the other hand, claimed that at the meeting Poblete announced that nOn-management employees, with the exception of Michael, would be getting a percentage of the company’s profits and these profits would be taken from Chuidian’s ownership share of Barrio.

Six days later, on January 18, 2008, a second meeting was held. Chuidian did not attend and was terminated from Barrio. Michael was demoted and a month later left Barrio. Sometime after the January 18, 2008 meeting, accounting clerk Ethel Ramirez analyzed Barrio’s records. She found eleven instances — between December 18, 2007, and December 30, 2007 — in which proceeds from phone card sales were not turned over to Poblete. Poblete reported his suspicion of embezzlement to the Virgin Islands Department of Justice.

Special Agent Kenneth Schulterbrandt, Jr., was assigned to the case and performed an investigation in which he interviewed multiple witnesses and personally analyzed Barrio’s records. Based on his investigation, Agent Schulterbrandt concluded that probable cause existed *612to charge Chuidian and Michael with the crimes of embezzlement, grand larceny, and forgery. Assistant Attorney General Denise Counts concurred with Agent Schulterbrandt’s findings and sought an arrest warrant for Chuidian and Michael, which was issued by a Superior Court judge on January 16, 2009. As a result, the People filed an Information charging Michael with embezzlement, grand larceny, and forgery. His first prosecution resulted in a hung jury. In his second prosecution, the jury acquitted Michael of all charges.3

Following his acquittal, Michael and his father, Benjamin, both filed the present civil action against Poblete. Michael alleged malicious prosecution while Benjamin alleged intentional infliction of emotional distress. Poblete moved for summary judgment on both counts. On May 2, 2013, the Superior Court, following a hearing on the motion, entered an Order granting Poblete’s motion for summary judgment. Michael and Benjamin timely filed a notice of appeal on May 13, 2013.

II. DISCUSSION

A. Jurisdiction and Standard of Review

This Court has jurisdiction over this appeal pursuant to title 4, section 32(a) of the Virgin Islands Code, which provides that “[t]he Supreme Court shall have jurisdiction over all appeals arising from final judgments, final decrees or final orders of the Superior Court, or as otherwise provided by law.” Because the Superior Court granted Poblete’s motion for summary judgment and, in so doing, adjudicated all of the claims of each party, the May 2, 2013 Order is a final order within the meaning of section 32. Sealey-Christian v. Sunny Isle Shopping Ctr., Inc., 52 V.I. 410, 418 (V.I. 2009).

This Court exercises plenary review of a Superior Court’s grant of summary judgment. Williams v. United Corp., 50 V.I. 191, 194 (V.I. 2008). “On review, we apply the same test that the lower court should have utilized.” Id. “Because summary judgment is a drastic remedy, it should be granted only when ‘the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter *613of law.’ ” Id. (quoting former wording of Fed. R. Civ. R 56(c)). “When reviewing the record, this Court must view the inferences to be drawn from the underlying facts in the light most favorable to the nonmoving party, and we must take the non-moving party’s conflicting allegations as true if ‘supported by proper proofs.’ ” Joseph v. Hess Oil V.I. Corp., 54 V.I. 657, 664 (V.I. 2011) (quoting Williams, 50 V.I. at 194-95). “[T]o survive summary judgment, the nonmoving party’s evidence must amount to more than a scintilla, but may amount to less (in the evaluation of the court) than a preponderance.” Id.

B. Malicious Prosecution

In deciding whether the trial court erred in dismissing Michael’s malicious prosecution claim at the summary judgment stage, we begin our analysis by determining the elements of a malicious prosecution action that Michael was required to sufficiently prove. Sealey-Christian, 52 V.I. at 419 (explaining that summary judgment may be entered against a party who fails to sufficiently show the existence of an element essential to that party’s case on which that party will bear the burden of proof at trial). There is only one prior disposition by this Court that mentions, in passing, the elements for a malicious prosecution cause of action. Seales v. Devine, S. Ct. Civ. No. 2007-0040, 2008 V.I. Supreme LEXIS 23 (V.I. Mar. 3, 2008) (unpublished). In that case, this Court quoted the Restatement (Second) of Torts § 653 which dictates that a defendant is subject to liability for malicious prosecution if: “(a) he initiates or procures the proceedings without probable cause and primarily for a purpose other than that of bringing an offender to justice, and (b) the proceedings have terminated in favor of the accused.” Id. 2008 V.I. Supreme LEXIS 23'at *4 n.1 (quoting RESTATEMENT (SECOND) OF TORTS § 653 (1977)). But Seales did not apply RESTATEMENT (SECOND) OF Torts § 653; rather, it noted that what the plaintiff had labeled as a cause of action for “malicious prosecution” had been a misnomer for the “wrongful initiation of civil proceedings” tort. Id. 2008 V.I. Supreme LEXIS 23 at *4. Therefore we have yet to formally adopt the elements of a malicious prosecution cause of action.

This Court is vested with the “supreme judicial power of the Territory,” which includes “the power to . . . modify the common law.” Banks v. Int’l Rental & Leasing Corp., 55 V.I. 967, 978 (V.I. 2011) (quoting 4 V.I.C. § 21). In determining the appropriate common law rule, *614we consider three non-dispositive factors: “(1) whether any Virgin Islands courts have previously adopted a particular rule; (2) the position taken by a majority of courts from other jurisdictions; and (3) most importantly, which approach represents the soundest rule for the Virgin Islands.” Simon v. Joseph, 59 V.I. 611, 623 (V.I. 2013) (citing Matthew v. Herman, 56 V.I. 674, 680-81 (V.I. 2012)).

In reviewing case law of the Virgin Islands, we note that the District Court of the Virgin Islands has stated that “a successful cause of action for malicious prosecution requires that the [djefendant (1) initiate[ ] the institution of criminal proceedings; (2) without probable cause; (3) primarily for a purpose other than bringing an offender to justice.” Greene v. V.I. Water & Power Auth., No. 1:06-CV-11, 2012 U.S. Dist. LEXIS 144382 (D. V.I. Oct. 5, 2012) (unpublished); see also Charleswell v. Bank of N.S., 44 V.I. 36, 41 (V.I. Super. Ct. 2001) (citing Deary v. Three Unnamed Police Officers, 746 F.2d 185, 194 n. 11 (3d Cir. 1984) and Restatement (Second) of Torts § 653 (1977). Additionally, several jurisdictions have adopted the malicious prosecution elements from Restatement (Second) of Torts § 653 verbatim.4 Moreover, many other jurisdictions have cited to and relied on the comments from Restatement (Second) of Torts § 653, but articulate the elements in slightly different ways.5 Thus, the majority of jurisdictions have adopted the Restatement’s position on malicious prosecution in some form.

*615Most importantly, we find that the soundest rule for the Virgin Islands is to adopt the following elements for a malicious prosecution cause of action: (1) the initiating of or procuring of a criminal proceeding against the plaintiff by the defendant; (2) the absence of probable cause for the proceeding; (3) malicious intent on the part of the defendant; and (4) termination of the proceeding in favor of the plaintiff. We also adopt *616Restatement (Second) of Torts § 653 for its commentary analysis in applying these elements. This rule we now adopt protects an important public interest, specifically, the interest in citizens making good faith reports of criminal conduct to the authorities. This interest is balanced by the elements requiring the absence of probable cause and the presence of malice, which prevent an individual from using the legal system in a vindictive or harmful way. Furthermore, while jurisdictions vary in the language and number of elements used in their respective descriptions of the malicious prosecution cause of action, most of them essentially incorporate all the elements we have adopted.

C. The Summary Judgment Award

On appeal, Michael argues that the trial court erred in granting Poblete’s motion for summary judgment because the trial court erred in its application of the probable cause standard for malicious prosecution claims.6 When analyzing the existence of probable cause, the Superior Court stated that “probable cause was in fact determined in this case in the eyes of the investigatory ... in the eyes of the Assistant Attorney Generaiy ... and in the eyes of the [Superior Court judge]” who presided over the criminal case. (J.A. 76.) But the correct analysis for determining probable cause in a malicious prosecution case is whether Poblete, not the police, the prosecutor or the judge, reasonably believed (a) that the person whom he accused has acted or failed to act in a particular manner, (b) that those acts or omissions constitute the offense that he charges against the accused, and (c) that he is sufficiently informed as to the law and the facts to justify him in initiating or continuing the prosecution. RESTATEMENT (Second) OF Torts § 662 (1977); Charleswell, 44 V.I. at 42 (“Although a Judge of the Territorial Court found probable cause to charge [pjlaintiff with forgery . . . that fact does not go to the issue of whether the [defendant] was justified in calling the police and thereby instigating a criminal investigation.”) (emphasis omitted). Thus, we agree with *617Michael that the Superior Court misapplied the probable cause standard. See Charleswell, 44 V.I. at 42; Hirth v. Hall, 1981-NMCA 050, 96 N.M. 58, 627 P.2d 1257, 1259 (1981) (“it may be said that the defendant has probable cause only when a reasonable man in his position would believe, and the defendant does in fact believe, that he has sufficient information as to both the facts and the applicable law to justify him in initiating the criminal proceeding” (quoting Restatement (Second) of Torts § 662 cmt. j)); D’Angelo v. Mussler, 290 S.W.3d 75, 80 (Ky. Ct. App. 2009) (the question of lack of probable cause “is to be determined in the light of those facts that the [complainant in the underlying proceedings] knows or reasonably believes to exist at the time when he acts”).

Nevertheless, the Superior Court’s error was harmless since Poblete was entitled to summary judgment even when analyzed under the correct standard. V.I.S.Ct.R. 4(i) (“No error or defect in any ruling or order or in anything done or omitted by the Superior Court... is ground for granting relief or reversal on appeal where its probable impact... is sufficiently minor so as not to affect the substantial rights of the parties.”). In this case, there is no evidence that Poblete acted unreasonably by contacting the police and directing their attention to Michael.7 The evidence is undisputed that Michael handled a significant amount of cash every day and was one of two employees responsible for preparing financial reports of the daily earnings. Poblete had serious concerns about Michael’s reporting based on Jose’s findings and Michael’s suspicious behavior. Poblete only contacted the police after accounting clerk Ramirez verified his suspicions by finding evidence of misappropriation in Barrio’s records.8 Therefore, the record establishes that Poblete reasonably *618believed that Michael was misappropriating company funds and thus had sufficient probable cause to report his suspicions to the Virgin Islands Department of Justice.9 As a result, Michael failed to sufficiently prove the second element of a malicious prosecution claim, the lack of probable cause.10

Michael also failed to sufficiently establish the existence of any material dispute as to another element essential to his case on which he would bear the burden of proof at trial: the defendant’s initiation or procurement of a criminal proceeding. Regarding this element, comment “g” to section 653, “Influencing a public prosecutor,” is instructive and provides in relevant part:

When a private person gives to a prosecuting officer information that he believes to be true, and the officer in the exercise of his uncontrolled discretion initiates criminal proceedings based upon that information, the informer is not liable under the rule stated in this Section even though the information proves to be false and his belief was one that a reasonable man would not entertain. The exercise of the officer’s *619discretion makes the initiation of the prosecution his own and protects from liability the person whose information or accusation has led the officer to initiate the proceedings.

If, however, the information is known by the giver to be false, an intelligent exercise of the officer’s discretion becomes impossible, and a prosecution based upon it is procured by the person giving the false information. In order to charge a private person with responsibility for the initiation of proceedings by a public official, it must therefore appear that his desire to have the proceedings initiated . .. was the determining factor in the official’s decision to commence the prosecution, or that the information furnished by him upon which the official acted was known to be false.

Restatement (Second) of Torts § 653 cmt. g (emphasis added). Therefore, to prove that Poblete initiated or procured the criminal proceeding, Michael must demonstrate that Poblete’s desire to have the criminal proceedings initiated was the determining factor in the government commencing prosecution or that Poblete provided false information to the police. Since there is no evidence that Poblete provided false information to the police, Michael must prove that Poblete’s complaint was the determining factor for the criminal prosecution. We agree with those other jurisdictions that have adopted the RESTATEMENT (SECOND) OF Torts § 653 and define “determining factor” as something more than active participation or consultation on part of the defendant, such as by urging or insisting that the prosecution be brought.11

*620Here, viewing the facts in the light most favorable to Michael, there is ample evidence indicating that the government’s decision to prosecute Michael was based on its own independent investigation12 and that Poblete’s desire to bring suit was not the determining factor. The record indicates that after Poblete reported his suspicion to the government, and the government acted in uncontrolled discretion by investigating and initiating criminal proceedings. There is no evidence indicating that Poblete provided false information to the police or urged or encouraged the police to arrest Michael. Therefore, Michael also cannot sufficiently prove the first element of malicious prosecution. Accordingly, we find no reason to disturb the summary judgment award.

III. CONCLUSION

For the reasons discussed, we affirm the trial court’s grant of summary judgment.