Syester v. Banta - Brief PDF

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Syester (old lady) v. Banta (owners of dance studio) COURT AND DATE: Iowa Supreme Court (1965) PROCEDURAL HISTORY: The trial court awarded Syester $14,300 in actual damages and $40,000 in punitive damages. ISSUE: Can a contract be deemed unenforceable due to fraudulent misrepresentation? TRIGGER FACTS: Syester (plaintiff) was a lonely widow in her mid-60s when she began taking dance lessons at Arthur Murray Studio, owned by Mr. Theiss and others (the owners) (defendants). The owners counseled instructors to use emotional sales techniques with customers to persuade them to buy lessons. Syester’s instructor falsely assured her that she could become a professional dancer, and awarded her in one year several dance medals that typically took up to a decade to earn. Syvester bought over 4000 hours of lessons at a cost of over $29,000, including three lifetime memberships. After the owners fired Syester’s instructor, Syester quit the studio and sued the owners to get her money back. The owners rehired her instructor, who persuaded Syester to drop her lawsuit and to sign a settlement and release of all claims for a refund of $6,090, much less than her unused balance. Syester then signed a second release promising a refund of $4,000, which was never paid. Syester sued again, alleging fraud and misrepresentation in connection with the settlement and release and the dismissal of the previous lawsuit. The trial court awarded Syester $14,300 in actual damages and $40,000 in punitive damages. The court of appeals affirmed. The owners appealed to the Iowa Supreme Court.

PLAINTIFF’S MAIN ARGUMENTS: DEFENDANT’S MAIN ARGUMENTS: She enjoyed her time at the dance studio. RULE (the law): A contract may be deemed unenforceable due to fraudulent misrepresentation.

HOLDING + REASONING (Smith, J.): Yes. A contract is not binding and enforceable if there was fraud in its execution. A person claiming fraud must establish that the other party knowingly made a material, false representation with the intent to deceive and defraud. The injured party must have believed and relied upon the statement in entering into the contract and suffered damages due to reliance on the false statement. Here, though the owners claimed that they were engaging in mere puffery in describing the settlement and release that Syester signed, Syester furnished evidence meeting all of the requirements of fraud. The first release was merely a partial refund of a vast overcharge, and the owners never paid the second. The consideration for Syvester’s signing these releases was wildly inadequate. The exchange appears to have been a predatory attack on a gullible old woman. Though an award of $40,000 is large, the owners’ greed was shocking enough to serve as evidence of the malice required for an award of exemplary, or punitive, damages, and this amount was completely within the discretion of the jury. Accordingly, the decision of the trial court is affirmed....