author:
V. J. Brennan, J.
      Mackenzie, J.

text:
    LENAWEE COUNTY BOARD OF HEALTH v MESSERLY
    Docket No. 44690.
    Submitted January 2, 1980, at Lansing.
    Decided July 1, 1980.
    Leave to appeal applied for.
    William H. Messerly and Martha B. Messerly purchased certain reeil property in Lenawee County, Michigan. Subsequently, the Messerlys used the dwelling as income property, and sold the property on a land contract to James E. Barnes. Barnes and his wife Joan L. Barnes resided on the property for three months then moved outside Lenawee County. Thereafter, the Barneses fell behind in their land contract payments and the property was listed for sale. Subsequently, Carl A. Pickles and his wife Nancy L. Pickles executed a purchase agreement for the property, intending to use it as income property. Before signing the agreement the Pickleses inspected the apartment units and walked the property. The Barneses gave the Pickleses a quitclaim deed to cancel their obligation to the Messerlys on the land contract. Thereafter, the Messerlys and the Pickleses executed a land contract. A few days later, the Pickleses visited the property to meet the tenants and while walking the property discovered raw sewage surfacing at the northeast corner of the barn. Thereafter, a sanitation expert was contacted, tests were run, and the Lenawee County Health Department condemned the property as unfit for human habitation.
    When the Pickleses discontinued payments on the land contract, the Messerlys, as defendants in an action brought by the Lenawee County Health Department, filed a cross-complaint against the Pickleses for foreclosure and a deficiency judgment. Thereafter, the Pickleses counterclaimed, alleging failure of consideration, failure to disclose, misrepresentation and willful concealment by Mr. Barnes. The Pickleses sought recission of the land contract and restitution. The Lenawee Circuit Court, Harvey W. Moes, J., determined that the Pickleses had no cause of action against either the Messerlys or the Barneses. Foreclosure of the land contract by the Messerlys was approved and judgment was entered against the Pickleses. The Pickleses appeal. Held:

      References for Points in Headnotes

       17 Am Jur 2d, Contracts §§ 485, 501 et seq.

    [2, 4, 7] 17 Am Jur 2d, Contracts §§ 143, 501. 54 Am Jur 2d, Mistake, Accident, or Surprise § 16. 77 Am Jur 2d, Vendor and Purchaser § 51.

       17 Am Jur 2d, Contracts §§ 144, 501. 54 Am Jur 2d, Mistake, Accident, or Surprise § 16.

       77 Am Jur 2d, Vendor and Purchaser §§ 51, 57-59.

       77 Am Jur 2d, Vendor and Purchaser § 210.

       17 Am Jur 2d, Contracts § 102.

       77 Am Jur 3d, Vendor and Purchaser § 542.

      1. Recission is an equitable remedy which is not a matter of right but rests in the sound discretion of the trial court. A mutual mistake as to the subject matter of a contract is ground for recission of the contract unless the injured party can be adequately compensated for the mistake. Generally, courts have allowed recission of a land contract where the quality of a mistake was such that it resulted in a conveyance of essentially different property than originally contemplated by the contracting parties. Recission has generally been denied where the property conveyed was in essence identical to that contracted for. The recognized justifications for recission of a land contract, mutual mistake, failure of consideration, or innocent misrepresentation, are in reality distinctions without a difference where the purchasers have at bottom agreed to pay a great deal of money for rental property which does not, in fact, exist. The Pickleses purchased real estate as income property which is devoid of any value whatsoever. Recission of the land contract between the Messerlys and the Pickleses is a proper remedy.
    2. Generally, courts will not inquire into the adequacy of consideration in an agreed-upon exchange. Equity will, however, grant relief where the inadequacy of consideration is so gross as to shock the conscience of the court.
    3. The finding of no cause of action by the trial judge is affirmed as to the Barneses.
    Reversed.
    Mackenzie, J., concurred with the majority that the trial judge’s finding of no cause of action as to the Barneses should be affirmed. She dissented in part in that she would also affirm the trial judge’s refusal to grant recission of the land contract between the Messerlys and the Pickleses. She considers recission to be a matter of grace, and not óf right, granted in the sound discretion of the trial court. She notes that the land contract makes no mention of the intended use of the property. Furthermore, there is no indication that a sewage problem existed either before the land contract was executed or at the time of execution. She would find that the trial court correctly denied recission to the Pickleses, who received essentially the same property they bargained for, and failed to prove that any mistake or failure of consideration existed at the time the parties entered into the contract.
    Opinion of the Court
    1. Contracts — Recission — Equity — Discretion.
    Recission is an equitable remedy which is not a matter of right but rests in the sound discretion of the trial court.
    2. Contracts — Vendor and Purchaser — Land Contracts — Mutual Mistake — Recission — Courts.
    Michigan courts recognize mutual mistake as a ground for recission of a contract, including land contracts.
    3. Contracts — Recission — Mutual Mistake — Subject Matter.
    A mutual mistake as to the subject matter of a contract is ground for recission of the contract unless the injured party can be adequately compensated for the mistake.
    4. Vendor and Purchaser — Land Contracts — Recission — Mistake — Courts.
    Generally, courts have allowed recission of a land contract where the quality of a mistake was such that it resulted in a conveyance of essentially different property than originally contemplated by the contracting parties; recission has generally been denied where the property conveyed was in essence identical to that contracted for.
    5. Vendor and Purchaser — Contracts — Real Property.
    The intended use of property is a basic, essential or material element and not a collateral element of a contract for the sale of real estate.
    6. Contracts — Consideration — Adequacy — Courts — Equity.
    Generally, courts will not inquire into the adequacy of consideration in an agreed-upon exchange; equity will, however, grant relief where the inadequacy of consideration is so gross as to shock the conscience of the court.
    7. Vendor and Purchaser — Land Contracts — Recission — Justification.
    The recognized justifications for recission of a land contract are mutual mistake, failure of consideration, or innocent misrepresentation.

      Concurrence in Part, Dissent in Part by Mackenzie, J.
    8. Contracts — Recession — Discretion — Courts.

      Recission of a contract is not a matter of right but a matter of grace to be granted or denied within the sound discretion of the trial court.

    9. Property — Contracts — Real Property — Value.

      The value of real property acquired in a business transaction is a collateral matter which will not provide a basis for avoidance of a contract should the investment fail.

      Force & Baldwin, for plaintiff.

      Robertson, Bartlow & DesChenes, P.C. (by Michael J. Sauter), for defendants.
    Before: Allen, P.J., and V. J. Brennan and Mackenzie, JJ.
   V. J. Brennan, J.

This is an appeal of right from a judgment of no cause of action against Mr. and Mrs. Pickles entered on January 25, 1979, in Lenawee County Circuit Court, amended to include a permanent injunction on April 3, 1979, and from a March 30, 1979, order denying their motion for a new trial.

The pertinent parties involved in this action are: Mr. and Mrs. Pickles, land contract vendees of property located at 6184 Sand Creek Highway, Sand Creek, Lenawee County, Michigan; Mr. and Mrs. Messerly, land contract vendors of this property; and Mr. and Mrs. Barnes, intermediate parties and former land contract vendees on a land contract with the Messerlys with respect to the identical property.

The Pickleses bought income producing real estate from the Messerlys on a land contract. Several days after executing the land contract, the Pickleses discovered raw sewage on the surface of their land. Following an inspection and tests, the Lenawee County Health Department condemned the property as unfit for human habitation.

The following uncontested facts were developed at trial. In June, 1971, the Messerlys acquired the property at issue from Mr. Bloom. When they inquired about the sanitation system, Mr. Bloom informed them that he never had any problem with the functioning of the system, that the septic tank was located beside the steps and that the drainage field was behind the barn. In fact, unbeknownst to the Messerlys, in 1968 or 1969, Mr. Bloom, in the course of remodeling, replaced an existing septic tank with a 500-gallon septic tank without the required permit from the Lenawee County Health Department. The Messerlys used the dwelling as income property. They did not reside on the premises and only visited the property a few times between 1971 and 1977. In September, 1973, the Messerlys had the septic system cleaned as a general maintenance procedure. They never noticed any problems with the sewage disposal system and received no complaints from tenants.

Mr. Barnes purchased the property from the Messerlys on land contract in November, 1973. The Messerlys never discussed the adequacy of the sanitation system with either Mr. or Mrs. Barnes, who lived in one of the apartments from January, 1974, until March, 1974. Thereafter, Mr. and Mrs. Barnes resided outside Lenawee County. As intended, they used the dwelling as three-family income property and occasionally visited the property. In 1976, with permission of the Messerlys, Mr. and Mrs. Barnes sold off one acre for $1,500. Mr. and Mrs. Barnes fell behind in their land contract payments in 1976, and the property was listed for sale.

In March, 1977, the Pickleses executed a purchase agreement for the property, intending to use it as income property. Before signing the agreement, the Pickleses inspected the apartment units and walked the property. Mr. and Mrs. Barnes gave the Pickleses a quitclaim deed to cancel their obligation to the Messerlys on the land contract. On March 21, 1977, the Messerlys and the Pickleses executed a land contract obligating Mr. and Mrs. Pickles to pay $25,500 for the property in monthly installments of $225. The following Saturday the Pickleses went out to the property to meet the tenants and while walking the property discovered raw sewage surfacing at the northeast corner of the barn. A sanitation expert was contacted, tests were run, and the Lenawee County Health Department subsequently condemned the property as unfit for human habitation.

When Mr. and Mrs. Pickles made no payments on the land contract, the Messerlys, as defendants in the action brought by the Lenawee County Health Department, filed a cross-complaint against the Pickleses for foreclosure and a deficiency judgment. The Pickleses counterclaimed on January 19, 1978. Count I of their counterclaim alleged failure of consideration, and Count II alleged willful concealment, failure to disclose and misrepresentation on behalf of Mr. Barnes. The Pickleses sought rescission of the land contract and restitution.

Following a bench trial which began on August 8, 1978, the trial judge issued an opinion on October 30, 1978, in which he determined that Mr. and Mrs. Pickles had no cause of action against either the Messerlys or Mr. and Mrs. Barnes. Foreclosure of the land contract by the Messerlys was approved, and judgment was entered against Mr. and Mrs. Pickles for $25,943.09.

The trial judge found and the parties concurred that there was absolutely no fraud or misrepresentation, innocent or otherwise, on the part of the Messerlys or Mr. and Mrs. Barnes concerning the sewer system. In his opinion, the trial judge stated:

"The record is completely and unequivocally void of any person in privity with or any party having knowledge of any sewer problem whatsoever. All parties likewise had no knowledge whatsoever that the sewer system, as installed, was in violation of a code. There is absolutely no indication whatsoever that anyone kept silent about any condition. There is further no indication that anyone misled, intentionally or unintentionally, anyone else by any statement concerning conditions. There is also no indication or testimony that anyone was prevented from making a complete inquiry or examination of the property. There is further no indication or testimony that any purchaser was prevented from talking with any tenants and in fact the testimony is just exactly the opposite. Physical examination and inspection was made and conversation was held by Pickles with tenants while the owners-landlord-sellers were not present.”

We find ample support in the record for the trial judge’s finding of no cause of action as to Mr. and Mrs. Barnes._

We do not, however, concur with the trial judge’s findings as to the liability of Mr. and Mrs. Messerly. On appeal, the Pickleses argue that rescission is warranted on the basis of mutual mistake as to the subject matter of the contract. Their mutual mistake argument is closely tied to their claim of failure of consideration argued below. The Pickleses claim that they thought they were purchasing, and the Messerlys thought they were selling, income property. What they received, however, was property with no value.

Rescission is an equitable remedy which is not a matter of right but rests in the sound discretion of the trial court. Hathaway v Hudson, 256 Mich 694; 239 NW 859 (1932).

Michigan courts recognize mutual mistake as a ground for rescission of a contract. Fred L Alpert Industries, Inc v Oakland Metal Stamping Co, 3 Mich App 101; 141 NW2d 671 (1966), rev’d on other grounds, 379 Mich 272; 150 NW2d 765 (1967), Teeter v Teeter, 332 Mich 1; 50 NW2d 716 (1951), Schwaderer v Huron-Clinton Metropolitan Authority, 329 Mich 258, 271; 45 NW2d 279 (1951), Kutsche v Ford, 222 Mich 442; 192 NW 714 (1923). Mutual mistake is also recognized as grounds for rescission of a land contract. Harris v Axline, 323 Mich 585, 589; 36 NW2d 154 (1949), A & M Land Development Co v Miller, 354 Mich 681; 94 NW2d 197 (1959).

The basis for rescission on the ground of mistake is often stated as that found in the Restatement of Contracts, § 502, p 961:

"Even though there is no such mistake as would deprive the acts of the parties of any effect on their contractual relations under the rules stated in §§ 49, 71, 456, where parties on entering into a transaction that affects their contractual relations are both under a mistake regarding a fact assumed by them as the basis on which they entered into the transaction, it is voidable by either party if enforcement of it would be materially more onerous to him than it would have been had the fact been as the parties believed it to be, except
"(a) where the welfare of innocent third persons will be unfairly affected, or
"(b) where the party seeking to avoid the transaction can obtain reformation or performance of the bargain according to the actual intent of the parties when the transaction was entered into, or
"(c) where it is possible by compensation to the party injured by the mistake to put him in as good a position as if the transaction had been what he supposed it to be, and such compensation is given.”

Under the Restatement, basic materiality is ascertained with reference to the intent of the contracting parties: Did the parties mistakenly assume the existence of a basic fact in formulating the contract? Would the parties have contracted had they known of the existing situation? According to the Restatement, if the mistake does not pertain to the intrinsic basic nature of the bargain, but rather goes to a collateral matter, there is no mistake entitled to rescission, since the contracting parties received essentially that which was bargained for.

The Michigan Supreme Court adopted the Restatement view in Harris v Axline, supra, wherein the Court stated that "[a] mutual mistake as to the subject matter of a contract is ground for rescission of the contract, unless the injured party can be adequately compensated for the mistake”. 323 Mich 585, 589.

In general, courts have allowed rescission of a land contract where the quality of a mistake was such that it resulted in a conveyance of essentially different property than that originally contemplated by the contracting parties; by the same token, rescission has generally been denied where the property conveyed was in essence identical to that contracted for.

The issue presented here is whether the asserted mutual mistake went to a basic element of the contract or to a collateral matter. We are of the opinion that the mistake here went to a basic contractual element. The Messerlys intended to sell and the Pickleses intended to purchase rental income property. What the Pickleses received, however, was property with no value either as income property or as a single-family residence. As previously stated, the property was condemned by the Lenawee County Health Department as unfit for human habitation. At trial, Werner Sommer, a registered engineer and land surveyor, testified that although approximately 600 square feet were available on the property for the installation of a tile field for a sanitary disposal system, a minimum of 2,000 square feet would be required for installation of an ordinance-approved sanitary system to accommodate a three-family unit. Mr. Frederick Kesslar testified that based on U. S. Public Health Service figures and occupancy of two people in each of the dwelling’s five bedrooms, 2,000 square feet would be required under ideal soil conditions for a leach bed. The only alternative is a "pump and haul” system using two 1,000 or 1,500 gallon tanks to be pumped on alternate days. No other above or below ground system could accommodate even a single family residence on the property. According to Mr. Dwyer, a real estate appraiser, the projected gross annual income of the fully occupied dwelling was $5,760. Annual expenses of $3,110.42 would result in a net income of $2,649.58. The annual cost of a "pump and haul” sewage disposal system would be $5,400, more than double the annual net income. Mr. Dwyer added that the cost of demolition of existing improvements would exceed the value of the land. The most probable use of the site, if vacant, would be sale to an adjacent landowner.

We find that the sale and purchase of the real estate as income producing property was a basic, and not a collateral, element of the land contract entered into between the Messerlys and the Pickleses.

In Kroninger v Anast, 367 Mich 478; 116 NW2d 863 (1962), land contract vendees brought suit for rescission on the ground that they were unable to use the real estate purchased for the purpose and to the extent that the vendor had represented. The vendor had used the building as a seven-family apartment for a number of years when the city passed an ordinance prohibiting its use as such. The vendor continued to use the building as an apartment with no interference from the city, and subsequently sold it to the vendee as a seven-family dwelling. Quoting from the trial court’s opinion, the Supreme Court affirmed rescission of the land contract:

"These representations as to the use that could be made of the building involved in the contract were of the essence of the contract and were of such a character that it cannot be said that the minds of the parties met. This renders the contract between the parties void and rescission must be granted.” 367 Mich 478, 481.

We do not find that A & M Land Development Co v Miller, 354 Mich 681; 94 NW2d 197 (1959), compels a conclusion contrary to the one we reach here. In A & M Land, the Court denied rescission to plaintiff, purchaser of a subdivision containing 91 lots. That case is clearly distinguishable from the instant one. After building on 49 lots, the land purchaser attempted to rescind the contract as to the remaining lots when he found they were unsuitable for building. Fraud, failure of consideration and mistake were alleged. The Supreme Court denied rescission on the basis of fraud, since it was not proven. The Court dismissed the failure of consideration claim since the proofs did not establish that all of the lots were unsuitable for building or that plaintiff would necessarily be precluded from continuing building operations in the future. The claim of mistake, mutual or otherwise, was similarly found without merit since the Court found "no mistake as to the form or substance of the contract between the parties, or the description of the property constituting the subject matter. * * * The fact that it may be of less value than the purchaser expected at the time of the transaction is not a sufficient basis for the granting of equitable relief, neither fraud nor reliance on the misrepresentation of material facts having been established.” Id., 693, 694.

In the instant case, however, plaintiff purchased real estate as income property which is devoid of any value whatsoever.

Closely related to their allegation of mutual mistake is the Pickleses’ contention that the useless property they received for $25,500 constitutes total failure of consideration.

As a general principle of contract law, courts will not inquire into the adequacy of consideration in an agreed-upon exchange. Rose v Lurvey, 40 Mich App 230, 234; 198 NW2d 839 (1972). Equity will, however, grant relief where the inadequacy of consideration is "so gross as to shock the conscience of the Court”. Wroblewski v Wroblewski, 329 Mich 61, 67; 44 NW2d 869 (1950), Olson v Rasmussen, 304 Mich 639, 643; 8 NW2d 668 (1943), Hake v Youngs, 254 Mich 545, 550; 236 NW 858 (1931), Rose v Lurvey, supra.

Citing McGhee v Wells, 57 SC 280, 285; 35 SE 529, 531 (1900), Texas Co v Northrup, 154 Va 428, 443; 153 SE 659, 663 (1930), and Sherman v Glick, 71 Or 451, 461; 142 P 606, 609 (1914), the Rose Court defined grossly inadequate consideration as follows:

" 'Grossly inadequate consideration does not mean simply less than the actual value of the property. It means a consideration so far short of the real value of the property as to shock a correct mind.’
" 'An inequality so strong, gross and manifest, that it must be impossible to state it to a man of common sense without producing an exclamation at the inequality of it.’
" 'But if the inadequacy is so great as to shock a conscientious person, it alone may furnish sufficient ground for annulling the conveyance.’ ” 40 Mich App 230, 235-236.

The Rose Court allowed rescission of a land contract on the basis that the transfer of equity in property worth $12,000 for $1.05 was an "inequality so strong as to amount to a gross inadequacy of consideration”. 40 Mich App 230, 236. We find that test met here, where the Pickleses agreed to pay $25,500 for property represented as income-producing property but which in fact had a negative value.

Kroninger v Anast, supra, allowed rescission based on innocent misrepresentation and not mutual mistake. Kroninger, however, does indicate that the Supreme Court found under circumstances comparable to the instant case that the represented use of property is a basic, essential, or material element and not- a collateral element of a contract for the sale of real estate.

The drawn issues of mutual mistake, or failure of consideration, or innocent misrepresentation are in reality distinctions without a difference where the purchasers in both cases have at bottom agreed to pay a great deal of money for something, in both cases rental property, which does not, in fact, exist.

Under the circumstances of this case, we find rescission of the contract the proper remedy.

Reversed.

Allen, P.J., concurred.

Mackenzie, J.

(concurring in part, dissenting in part). I agree with the majority that the trial judge’s finding of no cause of action as to the former land contract vendees, Mr. and Mrs. Barnes, should be affirmed. As to appellees, Mr. and Mrs. Pickleses’ land contract vendees, I would also affirm the trial judge in refusal to grant rescission of the land contract.

Rescission is not a matter of right but a matter of grace, to be granted or denied within the sound discretion of the trial court. Harris v Axline, 323 Mich 585; 36 NW2d 154 (1949). I am not convinced from a de novo review of the record that the trial judge’s refusal to grant the appellants’ claim for rescission was an abuse of discretion.

The real issue presented by appellants is whether the asserted mutual mistake went to an intrinsic element of the contract or to a collateral matter. This was the position presented in A & M Land Development Co v Miller, 354 Mich 681; 94 NW2d 197 (1959), a case involving an action for damages, partial rescission, an accounting and other equitable relief, alleging fraud, misrepresentation, failure of consideration and mistake. The defendant in A & M, engaged in the business of buying and selling land, listed for sale certain subdivision lots, indicating that the lots were ready to build on. The plaintiff, a residential construction company, purchased some of the lots after having inspected the property. The defendant furnished to the plaintiff’s officers an engineering report showing that percolation tests on the property had been performed and that the soils were constituted of sand, gravel, and yellow clay. The lots turned out to be unsuitable for building purposes as a result of inadequate conditions for the installation of sewage disposal facilities. The Supreme Court discerned no fraud or misrepresentation and denied rescission, stating that there was no failure of consideration just because the lots became unsuitable for construction. Having received the same property for which he contracted, the plaintiff was not permitted to complain of his poor investment. The Court’s position in A & M is that the value of real property acquired in a business transaction is a collateral matter which will not provide a basis for avoidance of a contract should the investment fail.

In Diedrich v Northern Illinois Publishing Co, 39 Ill App 3d 851; 350 NW2d 857 (1976), rescission was disallowed where the action to rescind was brought two and one-half years after possession under the contract was taken; the structure used as income property was more than 70 years old; one of the purchasers had expertise in real estate matters and the other purchaser was an attorney; the property was purchased "as is”; there were no representations as to the condition of the plumbing and no prior problems with the plumbing had been experienced; and the seller had no idea that the existence of a septic tank (as opposed to a sewer) would be important to the plaintiffs. The Appellate Court of Illinois noted that the existence of the septic tank related only to the value of the house and to the profit that the plaintiffs had hoped to obtain from it. The Court cited A & M as persuasive, reasoning that the need for stability in contracts requires the result obtained and emphasizing that the doctrine of mutual mistake is not to be employed as a substitute for the doctrine of misrepresentation.

In the instant case the land contract makes no mention of the intended use of the property. There is no indication that a sewage problem even existed either before the land contract was executed or at the time of execution. Tenants had apparently lived on the property for seven or eight years while the septic system functioned properly. The vendee could have requested that the contract contain guarantees or representations by the vendors with regard to the legality or adequacy of the sanitation system on the property. Had such representations been sought and refused, the vendee had the option of conducting an investigation to determine whether the property would serve the purpose for which the vendee was making the purchase. The contract did not contain such representations. The only pertinent provision in the contract was a disavowal of an intention to guarantee: "Purchaser has examined this property and agrees to accept same in its present condition. There are no other written or additional oral understandings”.

I would find that the trial court correctly denied rescission to Mr. and Mrs. Pickles, who received essentially the same property they bargained for and failed to prove that any mistake or failure of consideration existed at the time the parties entered into the contract.

       The Lenawee County Health Department filed a complaint on July 25, 1977, requesting temporary and permanent injunctions forbidding human habitation until sewage disposal on the property was improved. A temporary injunction was issued on October 24, 1977, and the parties stipulated at trial to permit issuance of a permanent injunction. Plaintiff Board of Health was permitted to withdraw from the suit.

       The parties stipulated at trial that the Pickleses are in default in the amount of $25,943.09.

       Mr. and Mrs. Barnes testified that after purchasing the real estate they lived in one of the apartments from January, 1974, until March, 1974, and that they thereafter resided outside of Lenawee County. Although they visited the property occasionally, they never mowed the grass themselves and collected all rent payments by mail. They also stated they were never aware of any sanitation problems and never concealed any knowledge as to the adequacy of the septic system. When some sewage backed up into a bathroom in December, 1974, they had the septic system pumped. Although a slight odor remained in one bathroom, they had no reason to believe that the problem had not been alleviated, and no complaints from tenants were received.
      On March 20, 1977, after the purchase agreement was signed but before the land contract was executed, Mr. Pickles asked Mr. Barnes about the location and condition of the septic tank and drain field. Mr. and Mrs. Barnes informed the Pickleses that they did not know specifically where the septic tank was, that it was in the area of the barn, that they had no problems with it, that they had had the septic tank pumped in 1974, and that as far as they knew, the system was in good working condition.

       The pleadings below set forth the Pickleses theory as failure of consideration. However, it appears that the trial judge considered the failure of consideration issue to be essentially rooted in an allegation of mutual mistake. While issues not pleaded or otherwise presented to the trial court are not available for use on appeal, Long Mfg Co, Inc v Wright-Way Farm Service, Inc, 39 Mich App 546; 197 NW2d 862 (1972), rev’d on other grounds, 391 Mich 82 (1974), we address the issue of mutual mistake as one "otherwise presented to the trial court”.
      We further note that an exception to the general rule that an issue not raised before the trial court cannot be raised on appeal exists where the issue has been fully briefed, and this Court in the interest of justice chooses to consider it. Turner v Ford Motor Co, 81 Mich App 521, 525, fn 2; 265 NW2d 400 (1978).


source: Caselaw Access Project

author: Danhof, C.J.

license: Public Domain

text:
    McGHEE v GMC TRUCK & COACH DIVISION, GENERAL MOTORS CORPORATION
    Docket No. 44814.
    Submitted April 8, 1980, at Detroit.
    Decided July 2, 1980.
    Robert L. McGhee purchased a used GMC truck tractor from GMC Truck & Coach Division, a division of General Motors Corporation (GMC). McGhee, an experienced mechanic, was attempting to remove the tractor’s transmission for repair and in doing so tilted the tractor’s cab forward using the tractor’s cab-tilting mechanism. The cab fell from the frame to the ground and sustained substantial damage. A subsequent inspection revealed that the cab frame had previously broken and been repaired and that those repairs had apparently failed prior to McGhee’s purchase of the tractor. McGhee brought an action for damages against GMC claiming breach of express and implied warranties, fraud and negligence. The Wayne Circuit Court, John Cozart, Jr., J., granted summary judgment in favor of the defendant. McGhee appeals. Held:

    1. The documents of sale of the tractor contain disclaimers of warranty which comply with statutory requirements for such disclaimers and therefore preclude holding the defendant liable for any breach of implied warranties of merchantability or of fitness for an intended purpose.
    2. The salesman’s statement that the tractor was in "good condition” was a general expression of opinion, made in the sale of a used machine to a knowledgeable buyer, and did not create any express warranty.

      References for Points in Headnotes

       67 Am Jur 2d, Sales §§ 461, 463, 465, 468, 469.
    Implied warranty of fitness for particular purpose as including fitness for ordinary use. 83 ALR3d 656.
    What are "merchantable” goods within meaning of UCC §2-314 dealing with implied warranty of merchantability. 83 ALR3d 694.

       67 Am Jur 2d, Sales §§ 434, 435, 440, 443 et seq.

    What constitutes "affirmation of fact” giving rise to express warranty under UCC § 2-313(l)(2). 94 ALR3d 729.

       37 Am Jur 2d, Fraud and Deceit §§ 12 et seq., 177 et seq., 432 et seq.

       67 Am Jur 2d, Sales § 734 et seq.

      3. The plaintiff in his deposition testimony indicated only two representations by defendant’s salesman, regarding the tractor’s transmission and its load-pulling capacity. His testimony also indicated that both of the representations were correct. The plaintiff is bound by his testimony. Therefore, the plaintiff failed to make out a case of fraud.
    4. The complaint failed to state a cause of action for negligence, because the relationship between the parties was contractual and there was no allegation of personal injury or damage to property other than the subject goods; that is, the tractor itself. The plaintiff’s rights are limited to those provided by the Uniform Commercial Code.
    Affirmed.
    1. Sales — Warranties — Implied Warranties — Contracts — Statutes.
    Warranties of merchantability and fitness for a buyer’s intended use arise by implication but may be negated by contrary contractual terms which meet specific statutory requirements (MCL 440.2316[2], [3]; MSA 19.2316[2], [3]).
    2. Sales — Salesman’s Representations — Warranties — Express Warranties.
    The general expression of a salesman that a machine is in "good condition”, in the sale of a used machine to a knowledgeable buyer, does not create an express warranty.
    3. Fraud — Elements of Fraud.
    The general rule is that to constitute actionable fraud it must appear: (1) that the defendant made a material misrepresentation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by the plaintiff; (5) that the plaintiff acted in reliance upon it; and (6) that he thereby suffered injury.
    4. Negligence — Pleading — Cause of Action — Sale of Goods.
    A complaint arising from the malfunction of purchased goods does not state a cause of action for negligence where the foundation of the relationship between the parties is contractual and there is no allegation of personal injury or damage to property other than the subject goods themselves; the buyer’s rights in such a case are limited to those provided by the Uniform Commercial Code.

      Ross, Soloy & Kochansky, for plaintiff.

      Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. (by Jonathan N. Wayman), for defendant.
    Before: Danhof, C.J., and Cynar and Mackenzie, JJ.
   Danhof, C.J.

This action arose out of the plaintiffs 1974 purchase of a used 1969 model GMC truck tractor from the defendant. The defendant had summary judgment on all counts of the complaint.

The incident that precipitated suit occurred when the plaintiff, an experienced truck driver and mechanic, attempted to remove the tractor’s transmission for repair shortly after the purchase. Using the tractor’s mechanism designed for the purpose, he was tilting the cab forward when it toppled from the tractor frame onto the ground, sustaining substantial damage. Subsequent inspection revealed that the cab frame had broken and been repaired some time earlier. The repairs had apparently failed before the plaintiff purchased the unit. The tractor was eventually repossessed, repaired and sold by the defendant for $7,000, $2,000 less than the price the plaintiff had paid for it.

The plaintiff claimed that he was damaged in the following particulars:

"A. Plaintiff expended considerable time and money in attempting to repair the tractor.
"B. Plaintiff lost a lucrative hauling contract due to his inability to get a truck, and lost considerable profits.
"C. Plaintiff has been put out of the trucking business and will continue to sustain loss of profit.
"D. Plaintiff has lost the use of his down payment and is incurring interest expenses on the unpaid balance of the tractor.
"E. Plaintiff’s truck sustained severe damages which has [sic] required and will further require money for its repair.”

Compensatory and exemplary relief was demanded in the amount of $750,000.

Count I of the complaint alleged that defendant breached an "express warranty” created by GMC’s media advertising and its salesman’s statements that he had examined the unit, particularly the engine, and found it to be in "good condition”. Count II, entitled "implied warranty”, asserted that the plaintiff had relied on the skill of the defendant’s salesman to select a unit suitable for the plaintiff’s intended purpose, which was the hauling of construction debris, thus giving rise to an implied warranty of fitness. This count claims that the physical defects, including mechanical difficulties, in the tractor rendered it unfit for the plaintiff’s uses. The complaint contained no reference to the documents by which the sale was made.

In response, the defendant relied on the sale documents, including a "retail order form” and an "installment sale contract”. The order form, in the nature of an offer to purchase, described the tractor and set forth the price upon which the plaintiff and the salesman had agreed. It was stamped on its face with the proviso "SOLD (AS IS)” in letters approximately one-fourth inch tall. On the reverse side, "additional terms and conditions” included the following, printed in red ink:

"9. There are no express warranties, made by the Seller herein, on the vehicle or chassis described on the face hereof except that in the case of a new vehicle or chassis the printed General Motors new vehicle warrant delivered to Purchaser with such vehicle or chassis shall apply and the samé is hereby made a part hereof as though fully set forth herein. In case of a used vehicle or chassis, the applicability of an existing manufacturer’s warranty thereon, if any, shall be determined solely by the terms of such warranty.
"10. Any used motor vehicle sold to Purchaser by Seller under this Order is sold at the time of delivery by Seller without any guarantee or warranty, expressed or implied, including any implied warranty of merchantability or fitness for a particular purpose, as to its condition or the condition of any part thereof except as may be otherwise specifically provided in writing on the face of this Order or in a separate writing furnished to Purchaser by Seller.”

The installment sale contract indicated that the plaintiff paid $2,000 down on the purchase and financed the balance of the price through the defendant. The reverse side of this document contained "additional terms”, most printed nine lines to the inch. In boldface print seven and one-half lines to the inch, the document provided:

"7. It is mutually understood and agreed that: (a) there is no implied warranty of merchantability, no implied warranty of fitness for a particular purpose and no implied warranty which extends beyond the description of said property on the face hereof; (b) except where the undersigned sellér is also the manufacturer of said property and, as such manufacturer, issued to buyer or to a prior buyer of said property said manufacturer’s separate written new product warranty in respect thereof and said warranty is in effect at the date hereof, there are no express warranties and no representations, promises or statements have been made by said seller in respect of said property unless endorsed hereon or incorporated herein by reference hereon; but said seller’s obligations under any express warranty made and evidenced as aforesaid shall continue in accordance with the terms thereof and regardless of whether said seller shall have transferred and assigned to another said seller’s rights hereunder; and (c) buyer will not assert against any subsequent holder as assignee of this contract any claim or defense which the buyer may have against a manufacturer or seller other than the undersigned seller of said property or any component, accessory or part thereof.”

The defendant’s motion for summary judgment on Counts I and II was based on GCR 1963, 117.2(3), claiming that there existed between the parties no genuine issue as to any material fact. By stipulation of the parties, the trial court decided the motion on the depositions of the plaintiff and the defendant’s salesman, in lieu of affidavits. In his deposition, the plaintiff acknowledged the execution of the documents on which the defendant relied for its defense. He testified that he had understood that no warranties were made with respect to the engine or transmission of the truck, and that he had been free to try the cab tilt mechanism when he inspected the unit at the defendant’s place of business.

Warranties of merchantability and fitness for a buyer’s intended use arise by implication but may be negated by contrary contractual terms meeting the requirements of MCL 440.2316(2), (3); MSA 19.2316(2), (3):

"(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that 'There are no warranties which extend beyond the description on the face hereof.’
"(3) Notwithstanding subsection (2)
"(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like 'as is’, 'with all faults’ or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and
"(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
"(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.”

The documents that embody the agreement in this case meet the statutory requirements and therefore operate to preclude liability for breach of any implied warranty. We also observe that the plaintiffs freedom to inspect the tractor, including the tilt cab, precludes his recovery under his implied warranty claim.

The express warranty claim apparently relies on the defendant’s salesman’s statements that the unit was in "good condition”. In the sale of a used machine to a knowledgeable buyer, this general expression of opinion cannot be held to create any express warranty.

Count IV of the complaint was entitled "fraud and deceit”, and alleged that the statements and advertisements upon which the plaintiff relied for his warranty claim were known to be false and were made by the defendant in order to induce the plaintiff to purchase the tractor. Like the motion for summary judgment on Counts I and II, the defendant’s motion on this count was brought under GCR 1963, 117.2(3) and relied on the depositions of the plaintiff and the salesman.

" 'The general rule is that to constitute actionable fraud it must appear: (1) That defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he thereby suffered injury. Each of these facts must be proved with a reasonable degree of certainty, and all of them must be found to exist; the absence of any one of them is fatal to a recovery.’ ” Michael v Jones, 333 Mich 476, 479; 53 NW2d 342 (1952).

The deposition of the defendant’s salesman indicates the defendant did not advertise the qualities of its used trucks, but merely listed them for sale in trade' publications. The plaintiff’s deposition indicates only two representations by the salesman: That the tractor’s engine compression was satisfactory and that it had the capacity to pull the load the plaintiff meant to haul. The plaintiff admitted at various points in his deposition that both representations proved to be correct, in testimony that varied from his complaint:

"Q If I understand your testimony, the real heart of. the problem here was the transmission. That was the heart of the problem of the vehicle from your standpoint?
“A [the plaintiff] That was it.
"Q And plus whatever it was that caused the cab to go?
"A At this point I’m not arguing about the transmission or any other part of the tractor. I’m arguing about the frame of the tractor.
"When he said that it wasn’t guaranteed, he would’nt repair the transmission, I have nothing to say because I understands this.
"But when the cab broke, that is the problem right there. I don’t care nothing about the engine. If the engine had went out, I would have did the same thing— had it fixed.”
"Q So [the salesman] talked about its capacity?
"A Right.
"Q Did you have any problems with its capacity?
"A Yes, because the transmission wouldn’t stay in gear and the clutch was slipping.
"Q Well, but in terms of being able to haul a certain weight—
"A (Interposing) It would have been able.
"Q It would have been able?
"A Yes, if it wasn’t for the transmission, sure. Yes, it would with no problems.
"Q Now, I believe you said earlier that in buying a truck, naturally you look at the engine, you look at the transmission—
"A (Interposing) You run the engine, you drive the truck around, you check the transmission. If it is permitted, you will take the truck out on the highway and pull some loads with it. But a number of times you are not allowed because they don’t, have insurance to cover it.”
"If the tractor had lasted, even if the cab hadn’t broken, the transmission meant nothing. Like I say, I’m a mechanic, and most work I can do myself. If the cab hadn’t broke, today I would be in good shape, because that engine in that truck was good. I am a General Motors man, period. I am a General Motors man. That’s all I owned is General Motors, and that is the main reason I had this, because I was looking for something from General Motors because they give better service.”

The plaintiff’s testimony is binding on him. Stefan v White, 76 Mich App 654; 257 NW2d 206 (1977).

We conclude that summary judgment was proper under GCR 1963, 117.2(3) on Counts I, II and IV of the complaint. The plaintiff, an experienced truck mechanic, understood no warranties to have been made as to the running parts of the tractor. He was in a position to be undeceived, if such a term may be used, by the salesman’s comment that the truck was in "good condition”. Neither the defendant nor the plaintiff discovered the defective cab mounting before the sale. They so structured the terms of the sale as to lay the risk of hidden mechanical defects on the plaintiff, who admittedly understood this to be the case. While perhaps unusual, and certainly surprising to the plaintiff, the hidden defect in the cab is of the same nature as the worn transmission, which the plaintiff understood was his own risk. There is no showing of fraud or breach of warranty that would justify proceeding to trial in this matter.

Count III of the complaint, "negligence”, asserted that the defendant was liable to the plaintiff for shortcomings in the following particulars:

"A. In affirmatively stating that the tractor was capable of hauling loads.
"B. In failing to advise and warn Plaintiff of the tractors defects known to Defendant.
"C. In failing to adequately inspect the said tractor prior to its sale to Plaintiff.
"D. In failing to apprise and warn Plaintiff that this tractor had sustained defects from previous users to such an extent that the frame had to be welded to give it stability.”

On this count, summary judgment was granted under the terms of GCR 1963, 117.2(1), failure to state a claim upon which relief can be granted. Such a motion tests the legal sufficiency of the complaint.

We agree that no cause of action is stated in the complaint, where the foundation of the relationship between the parties is contractual and no personal injury or damage to property other than the subject goods themselves is alleged. While there is some disagreement among courts on this point, we believe that the better view is expressed in SM Wilson & Co v Smith International, Inc, 587 F2d 1363, 1376 (CA 9, 1978):

"Where the suit is between a non-performance seller and an aggrieved buyer and the injury consists of damage to the goods themselves and the costs of repair of such damage or a loss of profits that the deal had been expected to yield to the buyer, it would be sensible to limit the buyer’s rights to those provided by the Uniform Commercial Code. See Keeton, Torts, Annual Survey of Texas Law, 25 SW L J 1, 5 (1971); Franklin, When Worlds Collide: Liability Theories and Disclaimers in Defective-Product Cases, 18 Stan L Rev 974, 996-97, 1012-14 (1966). To treat such a breach as an accident is to confuse . disappointment with disaster. Whether the complaint is cast in terms of strict liability in tort or negligence should make no difference.”

The sound reasoning that underlies this position was set forth in Mid-Continent Aircraft Corp v Curry County Spraying Service, Inc, 572 SW2d 308, 312 (Tex, 1978), in which a used airplane failed and crashed without injury to its pilot:

"The nature of the loss resulting from damage that a defective product has caused to itself has received the attention of several commentators. Dean Page Keeton writes:
" 'A distinction should be made between the type of "dangerous condition” that causes damage only to the product itself and the type that is dangerous to other property or persons. A hazardous product that has harmed something or someone can be labeled as part of the accident problem; tort law seeks to protect against this type of harm through allocation of risk. In contrast, a damaging event that harms only the product should be treated as irrelevant to policy considerations directing liability placement in tort. Consequently, if a defect causes damage limited solely to the property, recovery should be available, if at all, on a contract-warranty theory.’
"The Uniform Commercial Code was adopted by the Legislature as a comprehensive and integrated act to facilitate the continued expansion of commercial practices. * * * For sales of products the above purpose is carried out by Article 2 of the Code, which supplies a complete framework of rights and remedies for transacting parties. In light of the Code’s scope and purpose, its terms should not be nullified by applying strict liability when the parties have contracted otherwise. Such an expansion of strict liability would frustrate the Code’s purposes of codifying the law of commercial transactions by displacing its applicability in all cases where the sale of faulty products is involved. Some losses resulting from product transactions are best covered by contract liability under the Code.”

This reasoning is persuasive. Summary judgment was properly granted.

Affirmed. Costs to appellee.

       We observe that only the plaintiffs acceptance of this procedure made it proper to hear the motion without supporting affidavits from the defendant. Brooks v Reed, 93 Mich App 166; 286 NW2d 81 (1979), Ewing v Alexander, 93 Mich App 179; 285 NW2d 808 (1979).


author: M. J. Kelly, J.

text:
    NORTHLAND INSURANCE COMPANY v SNY
    Docket No. 45174.
    Submitted April 1, 1980, at Lansing.
    Decided July 2, 1980.
    Plaintiff, Northland Insurance Company, brought an action seeking a declaratory judgment that defendant, Luren C. Sny, by his failure to notify the plaintiff without unreasonable delay of an accident, had waived the right to arbitrate his claim for benefits under the insurance policy issued by plaintiff. Defendant moved for summary judgment. The Saginaw Circuit Court, Eugene Snow Huff, J., granted defendant’s motion for summary judgment and ordered the parties to proceed to arbitration. Plaintiff appeals. Held:

    Summary judgment was properly granted in favor of defendant insured. The true nature of the dispute is whether defendant insured’s delay in notifying plaintiff insurer of his claim acted as a waiver which would bar recovery under the insurance policy. Such a question must be resolved by arbitration pursuant to the arbitration provisions of the insurance policy rather than by the courts.
    Affirmed.
    Insurance — Arbitration and Award — Notification of Claim — Waiver — Declaratory Judgment.
    Summary judgment is properly granted in favor of an insured in an action by an insurer seeking a declaratory judgment that the insured, by his delay in notifying the insurer of an accident, waived his right to arbitrate his claim under the insurance policy; the true nature of the dispute is whether the insured’s conduct will operate to bar recovery under the policy, a question which must be resolved at arbitration rather than by the court.
    References for Points in.Headnotes

       22 Am Jur 2d, Declaratory Judgments § 93. 44 Am Jur 2d, Insurance §§ 1711,1713,1916-1919.
    Laches or statute of limitations as bar to arbitration under agreement. 37 ALR2d 1125.

      Smith & Brooker, P.C. (by Thomas A. Connolly), for plaintiff.

      LeFevre, Swartz & Wilson, for defendant.
    Before: Bashara, P.J., and M. J. Kelly and D. R. Freeman, JJ.

       Circuit judge, sitting on the Court of Appeals by assignment.

   M. J. Kelly, J.

Plaintiff filed suit seeking a declaratory judgment that defendant had waived the right to arbitrate his claim for uninsured motorist benefits under an insurance policy with plaintiff due to unreasonable delay in notifying plaintiff of the accident out of which defendant’s claim arose. A Saginaw County circuit judge granted defendant’s motion for summary judgment and, under GCR 1963, 769.2(2), ordered the parties to proceed to arbitration. Plaintiff appeals.

Plaintiff argues that the circuit court, should have determined whether the defendant’s conduct operated as a waiver of his right to arbitrate his claim, rather than leaving the resolution of that question to the arbitrator. We disagree. GCR 1963, 769.2(4) provides that an order for arbitration shall not be refused on the ground that the claim lacks merit. Thus plaintiff’s claim that defendant has waived the right to arbitration must be resolved at arbitration and not by the court. Public policy favors arbitration and arbitration clauses are liberally construed with all doubts in favor of arbitration. Campbell v Community Service Ins Co, 73 Mich App 416; 251 NW2d 609 (1977).

The true dispute between the parties is whether defendant’s conduct will operate to bar recovery of uninsured motorist benefits from plaintiff. Under the three-part test used by this Court to test the arbitrability of particular issues, we find that (1) there is an arbitration agreement contained in the contract between the parties; (2) the disputed issue is arguably within the arbitration clause; and (3) the dispute is not expressly exempted from arbitration by the terms of the contract. See Detroit Automobile Inter-Ins Exchange v Reck, 90 Mich App 286, 290; 282 NW2d 292 (1979), lv den 407 Mich 870 (1979), Clinton Twp v Contrera, 92 Mich App 297; 284 NW2d 787 (1979). Thus, the dispute is arbitrable and the summary judgment was properly granted. See Lanzo Construction Co v Port Huron, 88 Mich App 443, 450; 276 NW2d 613 (1979), lv den 406 Mich 999 (1979).

Affirmed.


author: Cynar, J. Danhof, C.J.

text:
    PEOPLE v WILLIAMS
    Docket No. 45602.
    Submitted April 8, 1980, at Detroit.
    Decided July 2, 1980.
    Ralph E. Williams was convicted of four counts of armed robbery and one count of possession of a firearm during the commission of a felony in Recorder’s Court of Detroit, Joseph A. Gillis, J. He appeals, alleging that his conviction under the felony-firearm statute is violative of double jeopardy protections, that he was improperly charged with four counts of armed robbery, each arising out of a single transaction, that his convictions and sentences on those charges also violate double jeopardy protections, and that he should have been charged with one count of bank robbery instead of armed robbery. Held:

    1. The mandatory consecutive sentence imposed upon conviction for possession of a firearm during the commission of a felony is not violative of double jeopardy protections.
    2. There was no abuse of prosecutorial discretion or error of law in the selection of the statute under which the defendant would be charged, as the facts supported a charge under either of two applicable statutes.
    3. The episode in question constituted one transaction from which only a single charge of armed robbery could arise, and the charging of multiple counts was an abuse of prosecutorial discretion.
    Affirmed in part; reversed in part.
    Danhof, C.J., dissented. He would hold that where each count charged is factually distinguishable and can be supported by independent testimony, and where there is a logical basis for separate charges for separate acts wrongful as to separate persons, one transaction can permissibly be divided into factually separate offenses. He would affirm.
    References for Points in Headnotes
    [1] 21 Am Jur 2d, Criminal Law § 547.
    [2, 4, 5, 7, 8] 21 Am Jur 2d, Criminal Law § 9. 41 Am Jur 2d, Indictments and Informations § 226 et seq.

    [3] 21 Am Jur 2d, Criminal Law § 8.

       21 Am Jur 2d, Criminal Law § 189.

      Opinion of the Court
    1. Criminal Law — Felony-Firearm — Double Punishment.
    A mandatory consecutive sentence imposed upon conviction for possession of a firearm during the commission of a felony is not violative of double jeopardy protections.
    2. Criminal Law — Abuse of Prosecutorial Discretion — Criminal Charges — Factual Support — Error of Law.
    No abuse of prosecutorial discretion or error of law will be found in charging a defendant under one of two applicable statutes where the charge is supported by the facts in the case.
    3. Criminal Law — Separate Acts — Multiple Sources — Contemporaneous Acts — Single Offense.
    The taking of property from different sources at the same time and at the same place constitutes one offense.
    4. Criminal Law — Robbery — Abuse of Prosecutorial Discretion — Single Transaction — Multiple Counts.
    A prosecutor abused his discretion in charging a defendant with multiple counts of armed robbery arising out of one transaction from which only one count of bank robbery could have been charged.
    Dissent by Danhof, C. J.
    5. Criminal Law — Charges — Multiple Offenses — Single Transaction.

      A prosecutor may charge a defendant with multiple offenses arising from the same transaction.

    6. Criminal Law — Single Transaction — Single Prosecution — Multiple Offenses.

      All offenses arising out of the same transaction must be tried in a single prosecution.

      7. Criminal Law — Single Transaction — Characteristics — Crimes.

      Crimes committed in a continuous time sequence which display a single intent and goal are part of the same transaction.

    8. Criminal Law — Single Transaction — Multiple Offenses — Separate Acts — Separate Charges.

      One transaction may permissibly be divided into factually separate offenses where each count is factually distinguishable and can be supported by independent testimony and where there is
      a logical basis for the separate charges for separate acts wrongful as to separate persons.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, William L. Cahalan, Prosecuting Attorney, Edward R. Wilson, Principal Attorney, Appeals, and Paul G. Briino, Assistant Prosecuting Attorney, for the people.

      George Stone, for defendant on appeal.
    Before: Banhof, C.J., and Cynar and Mackenzie, JJ.
   Cynar, J.

Defendant was convicted by a jury of four counts of armed robbery, MCL 750.529; MSA 28.797, and one count of felony-firearm, MCL 750.227b; MSA 28.424(2). Defendant was sentenced to four concurrent terms of from 23 to 50 years imprisonment on the armed robbery conviction, with the mandatory two-year consecutive sentence imposed on the felony-firearm count. Defendant appeals as of right.

Defendant first contends that his conviction for felony-firearm is violative of double jeopardy protections. This issue has been resolved against defendant’s position in Wayne County Prosecutor v Recorder’s Court Judge, 406 Mich 374; 280 NW2d 793 (1979), app dis sub nom Brintley v Michigan, 444 US 948; 100 S Ct 418; 62 L Ed 2d 317 (1979).

Next, defendant argues that he was improperly charged with four counts of armed robbery instead of one count, where each count arose out of a single transaction, i.e., the robbing of a single bank. Defendant also contends that his convictions and sentences on the above charges violate double jeopardy protections.

In relation to his former contention defendant additionally argues that he should have been charged under MCL 750.531; MSA 28.799 with one count of bank robbery, as opposed to any charge of armed robbery. We find no abuse of prosecutorial discretion or error of law in charging defendant with armed robbery, as opposed to bank robbery, as it is clear that defendant could have been charged under either statute on the facts here. Genesee Prosecutor v Genesee Circuit Judge, 386 Mich 672, 683; 194 NW2d 693 (1972).

As to the multiple charge question, it is not so readily dismissed. The majority rule is that the taking of property from different sources at the same time and at the same place constitutes but one offense. Anno: Single or separate larceny predicated upon stealing property from different owners at the same time, 37 ALR3d 1407, 1410. Michigan apparently follows this rule, as shown by the language used by the Court in People v Johnson, 81 Mich 573, 576; 45 NW 1119 (1890). As we see it, the episode in question here constituted but one transaction, a single occurrence or offense, from which but a single charge of armed robbery could arise. Had bank robbery been charged, it is patently obvious that only one count thereof could have been charged. Granting the prosecutor discretion to charge armed robbery in lieu of bank robbery, it does not follow that the prosecutor may abuse that discretion by resort to the artifice of charging multiple counts of armed robbery from a unitary episode such as occurred in the case at bar.

Accordingly, we affirm defendant’s felony-firearm conviction, as well as one count of armed robbery, and the sentences imposed thereupon. We reverse defendant’s convictions for three counts of armed robbery and vacate the sentences given pursuant thereto.

Affirmed in part; reversed in part.

Mackenzie, J., concurred.

Danhof, C.J.

(dissenting). While I agree with the majority that defendant’s felony-firearm conviction does not constitute double jeopardy and that there was no abuse of prosecutorial discretion or error of law in charging defendant with armed robbery, as opposed to bank robbery, I must respectfully dissent from the majority’s conclusion that defendant could not be convicted of four counts of armed robbery on these facts.

The incident occurred on March 20, 1979, at a Detroit branch of the Detroit Bank & Trust Co. Two men wearing ski masks entered the bank in the morning, firing a shot. One, armed with a shotgun, stopped by the door. The other (later identified as defendant) jumped over the counter and, at gun point, entered the cage of teller number three and took money from her drawer. He then entered the cage of teller number four and took money and bus tickets from her drawer. Finally, he entered the cage of teller number five and took money from that teller and the teller trainee. The men then left the bank in a green Pinto and were soon apprehended by the police.

In resolving defendant’s claim, we should look to the traditional application of double jeopardy protection as a restraint on courts and prosecutors imposing double punishment for a single criminal act.

It is settled that a prosecutor may charge a defendant with multiple offenses arising from the same transaction. See People v Tobey, 401 Mich 141; 257 NW2d 537 (1977). The Michigan Supreme Court has held that all offenses arising out of the same transaction must be tried in a single prosecution. People v White, 390 Mich 245; 212 NW2d 222 (1973). To determine whether the commission of more than one crime is part of the same transaction this Court has looked to whether the crimes were committed in a continuous time sequence and whether they display a single intent and goal. People v Robertson, 67 Mich App 603, 605; 242 NW2d 24 (1976).

In the instant case, it is clear that there was one transaction; the question is whether it is divisible into four armed robberies.

I believe this multiple charge does not violate the tests of People v Jankowski, 408 Mich 79; 289 NW2d 674 (1980), People v Stewart (On Rehearing), 400 Mich 540; 256 NW2d 31 (1977), People v Martin, 398 Mich 303; 247 NW2d 303 (1976), because the individual armed robberies are not factually necessarily included within the others; each count is factually distinguishable and can be supported by independent testimony. For example, it is not factually or logically impossible for defendant to be found guilty of armed robbery of teller number three without at the same time being guilty of armed robbery of teller number four, etc.

I agree that one offense cannot be divided into several parts according to time and conduct, but here one transaction was permissibly divided into four factually separate offenses. There is a logical basis to the charges because of the different interests advanced by bank robbery versus armed robbery prosecutions. The bank robbery statute is intended to "protect structures intentionally constructed to protect valuables”. People v Ferguson, 60 Mich App 302, 305; 230 NW2d 406 (1975). On the other hand, the purpose of the armed robbery statute is to protect persons from assaultive takings by means of dangerous weapons.

Defendant’s reliance on People v Johnson, 81 Mich 573; 45 NW 1119 (1890), is misplaced. While that case may represent Michigan’s alignment with the majority rule that the taking of property from different sources at the same time and at the same place constitutes but one larceny (see Anno: Single or separate larceny predicated upon stealing property from different owners at the same time, 37 ALR3d 1407, 1410), that situation is distinguishable. The larceny charges in those cases focus on a single act of taking property which belongs to several owners; there is only one taking. However, in the instant case, the focus is on multiple assaults and multiple takings within one transaction. The present convictions do not rest on proof of one act which is wrongful as to different persons. Rather, there are separate acts wrongful as to separate persons.

I would hold that defendant’s four convictions of armed robbery do not constitute double jeopardy on the facts of this case.


text:
    BOARD OF EDUCATION, HUDSON AREA SCHOOLS v KING
    Docket No. 45984.
    Submitted May 8, 1980, at Lansing.
    Decided July 2, 1980.
    Defendant Richard King filed a grievance pursuant to provisions in a contract with plaintiff, Board of Education, Hudson Area Schools. Plaintiff pursued the grievance procedure under protest, arguing the grievance arose on January 22, 1979, but prior to ratification of the contract providing the procedure, and, thus, defendant King lacked standing or basis for the grievance. Plaintiff then brought suit in Lenawee Circuit Court seeking injunctive relief against King, the Hudson Education Association and the Lenawee County Education Association taking the matter to arbitration. The circuit court ordered defendants to show cause why a preliminary injunction should not issue and issued a temporary restraining order prohibiting defendants from pursuing the grievance to arbitration. Following a hearing on the motion for the preliminary injunction, the lower court, Rex B. Martin, J., ordered the temporary restraining order dissolved and dismissed the cause with prejudice. Plaintiff appealed. Held:

    The effective date of the contract which contained the arbitration agreement was January 22, 1979, and was not qualified as to any particular hour. It was arguably intended to be effective at the start of the day of ratification. Plaintiff’s actions regarding defendant King, which occurred prior to but on the same day as the effective date of the contract, will not be found to bar arbitration.
    Affirmed.
    1. Arbitration — Contracts — Provisions — Exemptions.
    The arbitrability of a particular dispute under a contract is determined through a three-stage inquiry: 1) whether the contract contains an arbitration agreement, 2) whether the claim, on its face, is arguably related to the contract, and 3) whether the dispute is expressly exempt by the terms of the contract.

      References for Points in Headnotes

       5 Am Jur 2d, Arbitration and Award §§ 15, 54.
    Matters arbitrable under arbitration provisions of collective labor contract. 24 ALR2d 752.

      2. Arbitration — Labor Relations — Contracts — Effective Date — Grievance.
    Arbitration is not barred where a contract clearly contains an arbitration clause and the claim is arguably related to the contract and is not expressly exempted by the terms of the contract, notwithstanding the fact that a grievance arises on the same day as, but prior to, ratification of the contract, in the absence of a qualification as to the particular hour the contract is to take effect.

      Baker, Durst, Marr & Nelson, for plaintiff.

      Foster, Swift, Collins & Coey, P.C. (by James A. White and Stephen O. Schultz), for defendants.
    Before: Cynar, P.J., and M. J. Kelly and T. Gillespie, JJ.

       Circuit judge, sitting on the Court of Appeals by assignment.

   M. J. Kelly, J.

On April 24, 1979, plaintiff filed a complaint in Lenawee County Circuit Court seeking injunctive relief against the defendants. On the same date, the court ordered defendants to show cause why a preliminary injunction should not issue. A temporary restraining order, prohibiting defendants from pursuing a grievance to arbitration, was also issued on that date.

On April 30, 1979, a hearing on the motion for preliminary injunction was held and on May 8, 1979, the lower court issued an opinion dissolving the temporary restraining order. On June 20, 1979, an order dissolving the temporary restraining order and dismissing the cause with prejudice was signed by the lower court.

On July 9, 1979, plaintiff appealed the lower court’s dismissal of the cause. On October 9, 1979, defendants filed a motion to dismiss the appeal which we denied on February 14, 1980.

The facts of the controversy are not in dispute. In previous years, the Hudson Area Schools Board of Education had entered into collective bargaining contracts with defendant Hudson Education Association. The last contract expired on August 31, 1978. At that time, the teachers of Hudson Area Schools voted to allow Lenawee County Education Association to be their representative. Over the next several months, the plaintiff and defendant Lenawee County Education Association negotiated a contract. Also during that time period, plaintiff was attempting to cut its budget in order to avoid an expected deficit. On January 22, 1979, plaintiff held a meeting where it was decided to reduce defendant Richard King’s position to a 3/5-time position with corresponding pay effective February, 1979. Richard King was a probationary teacher of industrial arts. Later in the same board meeting, a contract with the Lenawee County Education Association was ratified. The contract’s stated effective date was January 22, 1979.

Defendant Richard King filed a grievance pursuant to the contract. Plaintiff went through the grievance procedure under protest, arguing that since King’s position was reduced prior to ratification of the prospective contract, King did not have standing or basis for the grievance. Plaintiff filed this suit seeking an injunction against the defendants’ taking the matter to arbitration, the final stage of the grievance procedure.

Plaintiff now appeals the lower court’s holding that the parties must proceed to arbitration.

The trial court relied primarily on Nolde Bros, Inc v Local No 358, Bakery & Confectionary Workers Union, AFL-CIO, 430 US 243; 97 S Ct 1067; 51 L Ed 2d 300 (1977), as a basis for denying plaintiffs prayer for injunctive relief. In Nolde, contract negotiations following expiration of the employment contract were unsuccessful and plaintiff informed defendant that the latest offer was unacceptable and that plaintiff intended to close business operations permanently. Plaintiff paid the employees all wages due but refused severance pay as required by the expired contract and declined to arbitrate the claim for severance pay on the ground that the contractual obligation to arbitrate had expired when the union terminated the contract. The Nolde Court noted that it would be absurd to hold that termination of the agreement automatically extinguishes a party’s duty to arbitrate grievances arising under the contract. If that were the case, the court continued, arbitration processes initiated but not completed prior to expiration of the contract would be void.

We agree with plaintiff that Nolde, supra, is distinguishable from the present case since the dispute in Nolde concerned an accrued and vested right to severance pay upon termination whereas the dispute here did not "arise under” the expired contract. We must, therefore, disagree with the rationale underlying the trial court’s decision to order arbitration.

Our inquiry does not end there; we must still consider the threshold question of the very existence of an arbitration agreement included within a binding contract in effect when the grievance arose. Kaleva-Norman-Dickson School Dist v Kaleva-Norman-Dickson School Teacher's Ass’n, 393 Mich 583, 587; 227 NW2d 500 (1975), GCR 1963, 769.2. The record herein indicates that the decisions to alter defendant’s full-time status and to ratify the proposed contract were made at the same board meeting. Plaintiffs submit that since the decision with respect to defendant King occurred prior to contract approval, there was no existing contract requiring arbitration of his grievance. This is true only if the day commences somewhere in the middle. The effective date of the new contract was January 22, 1979, without qualification as to any particular hour; we therefore conclude that at the time of ratification it was arguably intended to be effective when the day started. Plaintiffs cannot now successfully avoid arbitration of defendant’s grievance by claiming that as a matter of law the day started after King’s status was altered.

Generally, the arbitrability of a particular dispute is determined through a three-stage inquiry: (1) whether there is an arbitration agreement within the contract between the parties; (2) whether the claim is on its face or arguably related to the contract; and (3) whether the dispute is expressly exempt by the terms of the contract. Miller v Swanson, 95 Mich App 36, 39; 289 NW2d 875 (1980). In view of the above analysis regarding the existence of a binding contract which clearly contains an arbitration clause and finding no bar to arbitration based upon the second and third stages of inquiry, we affirm the trial court’s order that the parties proceed to arbitration.

Affirmed.


text:
    PEOPLE v FRIDAY
    Docket No. 46194.
    Submitted May 7, 1980, at Lansing.
    Decided July 2, 1980.
    Leave to appeal applied for.
    Johnny Friday was convicted of armed robbery and kidnapping following a nonjury trial before the Monroe Circuit Court, William J. Weipert, Jr., J. Evidence was presented at trial which showed that defendant forced the victim at gunpoint to enter the victim’s truck and ordered the victim to drive defendant to Detroit, which was 45 miles away. Shortly after entering the truck, defendant demanded the victim’s money. After taking the victim’s money, the defendant ordered the victim to continue to drive the defendant the remaining 40 miles to downtown Detroit. Defendant testified that the trip to Detroit was part of a con game which he was perpetrating upon the victim and that no gun was used as part of the illegal con game scheme. Defendant appeals. Held:

    1. The rule that movement of a victim which is merely incidental to the commission of an underlying lesser offense is insufficient to satisfy the asportation element of kidnapping is also applicable to the situation, as here, where the underlying offense is equal to kidnapping. Here, however, the asportation of the victim was not merely incidental to the armed robbery in that the confinement and movement of the victim continued long after the completion of the armed robbery and clearly increased the risk of harm to the victim beyond that incident to the armed robbery alone. The evidence was sufficient to establish the asportation element of kidnapping.
    2. While the trial court’s findings of fact were abbreviated, remand for elaboration of those findings of fact is not necessary, since such remand would serve no useful purpose.
    3. There was no abuse of discretion on the part of the prosecutor by his refusal to administer a polygraph examination as requested by the defendant. The prosecutor has no obligation to consent to such a request. Further, in view of defendant’s criminal background, any polygraph examination results would have been of questionable reliability and, indeed, would have been highly suspect.

      References for Points in Headnotes
    [1, 2] 1 Am Jur 3d, Abduction and Kidnapping §§ 11, 12.
    Seizure or detention for purpose of committing rape, robbery, or similar offense as constituting separate crime of kidnapping. 43 ALR3d 699.

       1 Am Jur 2d, Abduction and Kidnapping § 30.

       5 Am Jur 2d, Appeal and Error § 974.

       29 Am Jur 2d, Evidence §§ 831, 831.5.

      Affirmed.
    1. Kidnapping — Asportation — Other Offenses — Incidental Movement.
    The rule that movement of a victim which is merely incidental to the commission of an underlying lesser offense is insufficient to satisfy the asportation element of kidnapping is applicable in a case where the underlying offense is equal to kidnapping.
    2. Kidnapping — Asportation — Armed Robbery — Incidental Movement.
    The asportation necessary to establish kidnapping is sufficiently proven where the proofs show that the confinement and movement of the victim continued long after the completion of an armed robbery and that such further confinement clearly increased the risk of harm to the victim beyond that incident to the armed robbery.
    3. Courts — Findings of Fact — Remand.
    Remand to the trial court for elaboration of its abbreviated findings of fact is not mandated where such remand would serve no useful purpose.
    4. Criminal Law — Prosecuting Attorneys — Polygraph Examination — Abuse of Discretion.
    An abuse of prosecutorial discretion is not established where the prosecutor refuses to administer a requested polygraph examination where, because of the defendant’s background, any polygraph results might have been highly suspect; the prosecutor, in any event, is under no obligation to consent to a request for a polygraph examination.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, Michael W. LaBeau, Prosecuting Attorney, and James G. Petrangelo, Assistant Prosecuting Attorney, for the people.

      Gail Rodwan, Assistant State Appellate Defender, for defendant on appeal.

      Before: Cynar, P.J., and M. J. Kelly and T. Gillespie, JJ.

       Circuit judge, sitting on the Court of Appeals by assignment.

   M. J. Kelly, J.

After a bench trial, the defendant was convicted of armed robbery, contrary to MCL 750.529; MSA 28.797, and kidnapping, contrary to MCL 750.349; MSA 28.581. He was sentenced to two concurrent terms of imprisonment of 10 to 20 years. Defendant appeals as of right.

The trial testimony of the complaining witness established that the defendant approached the complainant at a highway rest stop, placed a gun in his back and ordered him to get into his truck. Once inside, the defendant demanded that complainant drive to Detroit. The defendant sat with a gun in his lap during the ride and, after approximately five minutes had elapsed, he demanded the complainant’s money. He took approximately $260 from the complainant’s wallet. Forty minutes and 40 miles later, they reached downtown Detroit, where the defendant exited from the truck.

The defendant did not deny his presence at the truck stop, but he did offer a different version of the events. The 24-year-old defendant, who had been a heroin addict for ten years, testified that he had been playing "Murphy” con games on truck drivers for the past eight years and that he had been doing the same with the complainant. The confidence scheme involved enticing drivers to pay him for goods such as television sets and radios that he could obtain for them at a substantially reduced price. The defendant would then take their money and inform them that he was required to travel to a different location to retrieve the goods. He would then leave and never return. The defendant claimed that he was riding to Detroit with the complainant in order to obtain the goods that he had already sold to a number of truck drivers, including the complaining witness. In order to establish defendant’s consistent method of operation, the defense offered evidence of a number of his previous convictions and arrests, all arising out of the same type of activities. The defendant denied ever having used a gun in any of his illegal schemes.

On appeal defendant urges reversal of his kidnapping conviction on the ground that the evidence was insufficient to prove the essential element of asportation independent of confinement and movement incidental to commission of the armed robbery. In advancing this position defendant relies heavily on People v Adams, 389 Mich 222, 238; 205 NW2d 415 (1973), in which the Supreme Court enunciated the following guidelines for evaluation of evidence pertinent to the asportation element of kidnapping:

"2. The movement element is not sufficient if it is 'merely incidental’ to the commission of another underlying lesser crime.
"4. If the movement adds either a greater danger or threat thereof, that is a factor in considering whether the movement adequately constitutes the necessary legal asportation, but there could be asportation without this element of additional danger so long as the movement was incidental to a kidnapping and not a lesser crime.
"5. Where appropriate, secret confinement or some other nonmovement factor may supply a necessary alternative to asportation to complete statutory kidnapping.
"6. Whether or not a particular movement constitutes statutory asportation or whether there is an appropriate alternative element must be determined from all the circumstances under the standards set out above and is a question of fact for the jury.”

Although the decision is framed in terms of the underlying offense being a "lesser” crime, there is currently a split of authority regarding the applicability of the Adams criteria to cases involving coequal offenses. Compare People v Hardesty, 67 Mich App 376; 241 NW2d 214 (1976), lv den 397 Mich 875 (1976), with People v Worden, 71 Mich App 507; 248 NW2d 597 (1976), and People v Barker, 90 Mich App 151; 282 NW2d 266 (1979), lv gtd 407 Mich 902 (1979). We agree with Judge Riley’s conclusion in Barker, supra, 156, that "those decisions holding Adams applicable to coequal offenses represent the better reasoned approach”.

Our review of the evidence in the instant case convinces us that the movement of the victim was incidental to kidnapping rather than to the armed robbery. Defendant forced the complainant into the truck at gunpoint and ordered him to drive to Detroit. After traveling approximately five minutes, defendant demanded that the driver turn over the money in his wallet. Although the robbery was complete at that point, the driver proceeded another 40 miles to downtown Detroit at the direction of defendant, who continued to hold the gun in his lap. The underlying offense was substantially facilitated by the confinement; however, the additional distance traveled and the time that elapsed subsequent to its completion were not arguably incidental to it. Rather, the continued confinement and movement were necessary to effect a kidnapping. Furthermore, the duration of the 45-mile trip to Detroit at gunpoint clearly increased the risk of harm to the victim beyond that incident to the armed robbery. See People v Baker, 60 Mich App 309, 312; 230 NW2d 409 (1975).

Defendant’s additional contentions do not require extensive discussion. The trial court’s findings of fact, while abbreviated, do not necessitate remand, since no useful purpose would be served. People v Jackson, 81 Mich App 18; 264 NW2d 101 (1978).

Defendant’s claim that the prosecutor abused his discretion in refusing to administer the requested polygraph examination is without merit. Although the polygraph has been increasingly recognized as a useful investigative device, a prosecutor is under no obligation to administer such an examination, the results of which are inadmissible as evidence. See People v Barbara, 400 Mich 352; 255 NW2d 171 (1977). A prosecutor who agrees to the administering of a polygraph examination and to a dismissal of charges if defendant passes the examination in exchange for defendant’s plea of guilty should the defendant fail the examination is bound to uphold the bargain even if it is subsequently determined that the examination may have been unreliable. People v Reagan, 395 Mich 306; 235 NW2d 581 (1975), and cases cited therein. The reliability of the test results diminishes when the subject has an extensive criminal background as noted in Barbara, supra, 398:

"Thus, even proponents of the device agree:
" '[T]he polygraph will not detect the witness who makes honest misstatements of fact, and it may not detect the hardened individual who recognizes no responsibility to conform to moral codes or standards of the community.’ Richardson, Modern Scientific Evidence (2d ed), § 10.3, p 310.”

Since the defendant herein admitted that he had been a career criminal all his adult life, the results of a polygraph might have been highly suspect.

Moreover, the complainant’s version of the events was bolstered by another witness who claimed to have been victimized in an almost identical manner by the defendant. In light of the strong evidence against the defendant, the questionable value of a polygraph examination in his particular case, and the fact that, in any event, the prosecutor is under no obligation to consent to such a request, we reject defendant’s claim of prosecutorial abuse of discretion.

Affirmed.