Is this a potential case for malicious prosecution and could I sue in small claims for malicious prosecution?

[zddoodah]

Out of curiosity, what would damages ordinarily entail?

$$$ (i.e., a financial loss - typically, it's the money you spent defending yourself, but that obviously isn't an issue in a small claims action).

Does the stress of litigation, having libelous claims made about me, etc, count?

In a more extreme case, maybe. I haven't researched whether emotional distress type damages are available in a malicious prosecution case.

I have a question about that case law cited, Pace v. Hillcrest Motor Co. Is case law always taken as precedent that future rulings should be based on?

Decisions of the California Supreme Court are binding on all courts in the state. Decisions of a California Court of Appeal are binding on all lower courts in the state. A party can try to make an argument that there ought to be an exception under particular facts. Alternatively, a party can appeal and make an argument that an appellate court precedent ought to be overruled or that, e.g., District 1 ought not follow a case (like Pace) decided by District 2. However, the proposition for which Pace stands is non-controversial and over 40 years old. I doubt any other court would not follow it.