Case Name: MORYKWAS v. McKNIGHT
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1971-12-06
Citations: 37 Mich. App. 304
Docket Number: Docket No. 6380
Parties: MORYKWAS v. McKNIGHT
Judges: Before: V. J. Brennan, P. J., and J. H. Gillis and O’Hara, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 37
Pages: 304–307

Head Matter:
MORYKWAS v. McKNIGHT
Contracts — Fraud—After-acquired Information — Duty to Disclose.
Contracts for sale of a trailer park and transfer of a liquor license were properly rescinded because of the sellers’ actionable fraud where the two contracts were one transaction, the sales agreement called for a current health department license without any record of violations, after the closing of the trailer park portion of the sale, but before the closing of the liquor license part, the sellers learned from the health department that the drain field, a part of the septic tank system, was inadequate for the number of units in the park, that there was insufficient area to enlarge the sewage system, and the sellers not only did not disclose the information to the buyers, but affirmatively concealed it by representing that the health official only required covering the standing water.
Reference for Points in Headnote
17 Am Jur 2d, Contracts § 501.
Appeal from Lapeer, James P. Churchill, J.
Submitted Division 2 November 2, 1971, at Detroit.
(Docket No. 6380.)
Decided December 6, 1971.
Complaint by Henry and Betty Morykwas against William and Katherine McKnight for rescission of contract and an accounting of monies involved in the transaction. Judgment for plaintiffs. Defendants appeal.
Affirmed.
Kembel, Levin & Lewis, for plaintiffs.
William J. Drillock (by Daniel E. Atkins), for defendants.
Before: V. J. Brennan, P. J., and J. H. Gillis and O’Hara, JJ.
Former Supreme Court Justice, sitting on the Court of Appeals by assignment pursuant to Const 1963, art 6, § 23 as amended in 196?,

Opinion:
O'Hara, J.
Defendants appeal of right a judgment entered by the trial court ordering that two contracts of sale be rescinded and that an accounting of certain monies involved in the transaction be made.
Reduced to their common denominator, the defendants' assignments of error may be thus phrased: whether on our de novo review the evidence clearly preponderates against the trial court's finding that the contracts of sale should be rescinded because of defendants' actionable fraud.
Two contracts of sale were necessary in this single transaction because one involved real property upon which the sellers operated a trailer coach park. This activity is regulated by the Michigan Department of Health. On the park site, the sellers also operated a retail store which was licensed for the sale of beer and wine. This license is commonly called an "S.D.M." or specially designated merchant. This activity comes within the supervision of the Michigan Liquor Control Commission. When premises are licensed as above noted, transfer of the license requires Liquor Control Commission approval.
It is perfectly apparent to us that the two contracts were, in fact, and by the intention of the parties, one transaction.
The trailer park portion of the sale was closed on March 10, 1967; the part involving the retail store and the S.D.M. license was closed on May 17, 1967. In the interlude between the closings, health officials visited-the-camp site. The purchasers were not present on that occasion. The sales agreement had called for a transfer of a current health department license without any record of violations against it.
The state health representatives found that the drain field, a part of the septic tank system, was inadequate for the number of units the park serviced. There was water standing in the drain field, and the department officials informed the sellers that they could not continue operating the same number of units. There was insufficient area to enlarge the sewage system.
The sellers not only did not disclose this order to the purchasers, they affirmatively concealed it. They represented that the health officials only required covering the standing water with earth fill. They further told the purchasers not to apply for a health department license until the following year.
The record amply supports the finding that defendants fraudulently concealed existence of the septic field problem, and fraudulently induced plaintiffs to refrain from applying for a new license since such application would have brought these matters to light prior to completion of the sale of the store. In so doing, defendants breached their duty to disclose after-acquired information which rendered inaccurate or misleading prior representations which were true at the time originally made. See Strand v. Librascope, Inc. (ED Mich, 1961), 197 F Supp 743, 754.
We find the defense that the representations of the sellers were true when made, as opposed to the after-discovered infirmity violating the conditions of sale, singularly unpersuasive.
The trial court's finding of actionable fraud finds adequate support in tbe record. Perforce, the order granting rescission was proper.
Affirmed. Costs to plaintiffs.
All concurred.