Syester v. Banta

Brief Fact Summary.

Plaintiff, a lonely and elderly widow, brought action against Defendant Arthur Murray Dance Studio, alleging fraud and misrepresentation for nearly $30,000 worth of dance instruction she bought from Defendant. Plaintiff sought damages and rescission of a previous release she signed which dismissed an earlier law suit against Defendant.

Synopsis of Rule of Law.

A party to an agreement may rescind such agreement and recover damages if the agreement was fraudulently entered into. In order to successfully assert a claim of fraud, all elements of the claim must be met.

Facts.

Over a course of six years beginning in 1954, Defendant dance studio managed to sell nearly $30,000 worth of dance instruction to Plaintiff, a widow in her mid to late sixties. Defendant, through a charming young dance instructor, persuaded Plaintiff that she had the potential to become a professional dancer and, despite the fact that Plaintiff made little improvement with her dancing, continued to sell hours to Plaintiff that would eventually go unused. Evidence introduced at trial showed that Defendant, as a method to sell hours of instruction, aggressively and purposefully would lead their clients to believe that they had a future in professional dancing. Plaintiff’s dance instructor was eventually fired in 1960 and shortly thereafter, Plaintiff commenced a suit against Defendant. In effort to get Plaintiff to drop her suit, Defendant re-hired the dance instructor in effort persuaded Plaintiff to drop the law suit against Defendant. After constant attempts to persuade Plain
tiff, the dance instructor was eventually successful in getting Plaintiff to drop the suit. Shortly thereafter, Defendant managed to persuade Plaintiff to sign a release of all claims against Defendant, with a promise that Defendant would be entitled to a refund for $6,090, which was the amount Plaintiff paid for her last batch of instructional lessons. Two years later, Plaintiff was persuaded by Defendant to sign another lease, this one relieving Defendant of the obligation to pay Plaintiff $4,000. Plaintiff then brought this action alleging fraud and misrepresentation and requesting a dismissal of the releases. The trial court awarded plaintiff $14,300 in actual damages and $40,000 in punitive damages.

Issue.

Whether the releases relinquished Plaintiff’s rights to bring this action.
Whether Plaintiff adequately set forth all the necessary elements of a fraud claim.

Held.

The Court held that where a release is procured through fraud or overreaching, such releases are not binding on the party who seeks to impeach them. The Court held that Plaintiff asserted sufficient facts to show that Defendant’s persistent and duplicitous efforts in obtaining the releases rendered them ineffective.
The Court upheld the trial court’s determination that Plaintiff adequately proved each of the required elements for a claim based on fraud. The Court held that the Plaintiff had alleged sufficient facts to meet the required elements of a fraud claim. Those elements are: (1) that the defendants made one or more representations claimed by plaintiff, (2) that said statements, or one or more of them, were false, (3) that said false statements or representations were as to material matters with reference to the entering into the lesson contracts, (4) that the defendants knew the said representations, or one or more of them, were false, (5) that said representations were made with intent to deceive and defraud the plaintiff (6) that the plaintiff believed and relied upon said false representations and would not have entered into the lesson contracts, except for believing and relying upon said misrepresentations, and (7) that the plaintiff was damaged in some amount through relying on said
representations.

Discussion.

A release agreement that is procured from fraudulent misrepresentations or overreaching will not relinquish the rights of the party to such agreement.