It is enough for legal malice if it be the result of any improper or sinister motive and in disregard of the rights of others. Exemplary damages may be awarded where defendant acts maliciously, but malice may be inferred where defendant's act is illegal or improper; where the nature of the illegal act is such as to negative any inference of feeling toward the person injured, and is in fact consistent with a complete indifference on the part of defendant. Liability for exemplary damages is not based upon the maliciousness of the defendant but is based, rather, upon the separate substantive principle that illegal or improper acts ought to be deterred by the exaction from the defendant of sums over and above the actual damage he has caused.
The elderly widow first went to the dance studio as a gift from a friend. On her second visit, she was sold a small course of lessons. Thereafter, the studio sold the widow more than 4,000 hours of instruction, including 3 lifetime memberships, and told her falsely that she could be a professional dancer. Upon the widow's filing of a lawsuit, the owners persuaded her to settle for a relatively insignificant amount and drop the action. A second release for more money was obtained, but nothing was paid on that release. The widow filed a second action for fraud and misrepresentation in the several sales to her and in obtaining the dismissal of the previous lawsuit and the releases. The jury returned a verdict for the widow.
May a settlement in court be voided on the basis of fraud or overreaching?
On appeal, the court held that the evidence was adequate to find there was a concerted effort constituting fraudulent overreaching. The general rule is that a settlement is binding and effectual if fairly entered into without fraud or overreaching. But in this case the jury was convinced that there was a predatory play on the vanity and credulity of an elderly widow. The question of exemplary damages was properly submitted to the jury, and the evidence of shocking greed and avariciousness supported the award of such damages.