Lenawee County Board Of Health V Messerly

331 N.W.2d 203 (Mich. 1982)

Facts

Messerly (D1) acquired one acre plus 600 square feet of land. A three-unit apartment building was situated on the 600-foot portion. The predecessor in title, Mr. Bloom, had installed a septic tank on the property without a permit and in violation of applicable health codes. D1 used the building as an income investment until 1973 when they sold a three-unit apartment building to James Barnes who used it in the same manner. D1 had a land sale contract with Barnes and with the permission of D1 Barnes sold the one acre but retained the building. Eventually the building was offered for sale but Barnes defaulted on the land sale contract. Pickles (D2) was interested in the building but did not like the Barnes-D1 deal and Barnes executed a quitclaim deed and conveyed the property back to D1. After inspecting the property, D2 executed a land sale contract with D1 on March 21, 1977 for a purchase price of $25,500. Six days after the sale, D2 discovered raw sewage seeping out of the ground. The Board of Health (P) condemned the property because the owner prior to D1 had installed a septic tank in violation of health codes. D2 had not known of the illegal installation when it purchased the property from D1 on a land sale contract. Under the D1 and D2 contract, there was a clause that D1 had examined the property and had accepted it in its present condition 'as is'. When no payments were made on the land sale contract, D1 filed a cross complaint against D2 for foreclosure, sale of the property, and a deficiency judgment. D2 sought rescission of the contract on grounds of mutual mistake. The trial court denied rescission and awarded D1 a judgment against D2 on the land contract. The Court of Appeals reversed the trial court’s decision on the ground that the parties had made a mutual mistake as to a basic element of the collateral. D1 appealed.