## Facts

- Albertina Gustafson visited a Payless drug store in Salem, Oregon, while visiting family.
- Gustafson picked up a carton of cigarettes and carried it openly while shopping.
- A cashier told her cigarettes had to be paid for at a different register; while looking for it, Gustafson became distracted and left to meet her husband.
- Gustafson exited the store without paying and without passing through checkout aisles, still holding the cigarettes in plain view.
- Outside, she waited for her husband and then placed her purchases, including the cigarettes, in the back of the truck in plain view.
- A store security officer (Yaw) confronted Gustafson about the unpaid item; Gustafson apologized, said she forgot to pay, and returned to the store when asked.
- Once inside, Yaw called police; Gustafson was arrested and charged with second-degree theft.
- Gustafson was acquitted and then sued Payless for malicious prosecution (and related claims).
- A jury found for Gustafson and awarded compensatory damages and $25,000 punitive damages; the trial court denied Payless’s directed-verdict motion asserting probable cause as a matter of law.

## Issues

1. Whether, on the facts assumed on review of a denied directed-verdict motion, Payless had probable cause as a matter of law to initiate or continue the theft prosecution.
2. Whether evidence permitted the jury to find malice for malicious prosecution where probable cause was lacking.

## Decision

- The Oregon Supreme Court affirmed the judgment for Gustafson.
- The court held Payless lacked probable cause as a matter of law under the facts favorable to Gustafson.
- The court held the evidence allowed the jury to infer malice from the want of probable cause and the surrounding circumstances.
- The denial of Payless’s directed-verdict motion was upheld.

## Legal Principles

- Probable cause in malicious prosecution follows Restatement (First) of Torts § 662: the initiator must (1) reasonably believe the accused acted as alleged and (2) correctly (or, in limited circumstances, through counsel) believe the conduct constituted the charged offense.
- Probable cause requires both subjective belief in guilt and an objectively reasonable basis for that belief.
- In malicious prosecution actions, probable cause is a question of law for the court, decided on the historical facts found (or, on directed-verdict review, assumed in the nonmovant’s favor).
- Probable cause is a complete defense to malicious prosecution.
- Malice is not established solely by lack of probable cause, but a marked absence of probable cause, along with circumstances of the prosecution, can support a jury inference of malice.

## Conclusion

The court sustained liability for malicious prosecution because, considering Gustafson’s open possession of the merchandise, lack of concealment, immediate apology, and cooperation, a reasonable person would not have believed she intended theft; the want of probable cause, together with the circumstances, permitted the jury to find malice and to award damages.


Gustafson v. Payless Drug Stores Nw., Inc., 269 Or. 354, 525 P.2d 118 (1974)