Opinion ID: 845821
Heading Depth: 2
Heading Rank: 1

Heading: The Common-law Meaning of Mutual Mistake of Fact

Text: This Court follows the principle that when a statute dealing with the same subject uses a common-law term and there is no clear legislative intent to alter the common law, this Court will interpret the statute as having the same meaning as under the common law. Pulver v. Dundee Cement Co., 445 Mich. 68, 75, 515 N.W.2d 728 (1994). Moreover, common-law meanings are assumed to apply even in statutes dealing with new and different subject matter, to the extent that they appear fitting and in the absence of evidence to indicate contrary meaning. 2B Singer, Statutes and Statutory Construction (6th ed.), § 50:03, p. 152. Here, because there is nothing in MCL 211.53a or the General Property Tax Act (GPTA), MCL 211.1 et seq., that shows a legislative intent to alter the meaning the term mutual mistake of fact has acquired in our law, we will examine how Michigan's common law uses the term mutual mistake of fact. Additionally, we are also cognizant that it is a well-established rule of statutory construction that the Legislature is presumed to be aware of judicial interpretations of existing law when passing legislation. Pulver, supra at 75, 515 N.W.2d 728. Moreover, because mutual mistake of fact is a legal term, resort to a legal dictionary to determine its meaning may also be helpful. People v. Jones, 467 Mich. 301, 304-305, 651 N.W.2d 906 (2002). Mistake is defined as 1. An error, misconception, or misunderstanding; an erroneous belief. 2. Contracts. The situation in which the parties to a contract did not mean the same thingor when one or both, while meaning the same thing, formed untrue conclusions about the subject matter of the contractas a result of which the contract may be rendered void. [Black's Law Dictionary (7th ed.).] Moreover, mutual mistake is defined as 1. A mistake in which each party misunderstands the other's intent.  Also termed bilateral mistake. 2. A mistake that is shared and relied on by both parties to a contract.  A court will often revise or nullify a contract based on a mutual mistake about a material term.Also termed (in sense 2) common mistake. [ Id. ] Further, mistake of fact is defined as [a] mistake about a fact that is material to a transaction. Id. Accordingly, it is discernable from the various definitions set forth above that the term mutual mistake of fact is not limited to one particular area of the law; however, it is most commonly applicable to the law of contracts. As such, we disagree with the Court of Appeals majority and the MTT that contract law, or any other area of the law for that matter, has no place in our duty to ascertain the Legislature's intent and give effect to the common-law term mutual mistake of fact. Many law students are introduced to the law of mistake in their first-year contracts course by reading our decision in Sherwood v. Walker, 66 Mich. 568, 33 N.W. 919 (1887)the famous barren cow case. In Sherwood, the parties contracted for the sale of a cow, and both parties believed and understood that the cow was barren and, thus, useless for breeding. After the contract was entered into, but before delivery, it was discovered that the cow was pregnant. Because the fertile cow was worth considerably more than the agreed-upon price, the defendants refused to deliver the cow. The plaintiff sued for replevin and secured a favorable judgment. On appeal, this Court reversed that judgment, opining that the trial court should have instructed the jury that if it found that both parties understood that the cow was barren at the time of contracting and it was later discovered that the cow was not barren, then the defendants had a right to rescind under a theory of mutual mistake of fact. Id. at 578, 33 N.W. 919. While acknowledging that this was a close case, this Court concluded: But it must be considered as well settled that a party who has given an apparent consent to a contract of sale may refuse to execute it, or he may avoid it after it has been completed, if the assent was founded, or the contract made, upon the mistake of a material fact,such as the subject-matter of the sale, the price, or some collateral fact materially inducing the agreement; and this can be done when the mistake is mutual. . . .    The difficulty in every case is to determine whether the mistake or misapprehension is as to the substance of the whole contract, going, as it were, to the root of the matter, or only to some point, even though a material point, an error as to which does not affect the substance of the whole consideration. Kennedy v. Panama, etc., Mail Co., L.R. 2 Q.B. 580, 588. [ Sherwood, supra at 576-577, 33 N.W. 919.] In light of these principles, this Court held that a mutual mistake of fact occurred. Specifically, the Sherwood Court reasoned that the mistake was mutual, and that the mistake went to the whole substance of the parties' agreement. In this regard, this Court observed that the parties would not have made the contract of sale except upon the understanding that the cow was barren; therefore, the mistake went to the very nature of the thing. Id. at 577, 33 N.W. 919. Our review of our precedents involving the law of mistake indicates that the peculiar and appropriate meaning that the term mutual mistake of fact has acquired in our law has not changed since Sherwood, supra . See, e.g., Lee State Bank v. McElheny, 227 Mich. 322, 327-328, 198 N.W. 928 (1924); Goldberg v. Cities Service Oil Co., 275 Mich. 199, 266 N.W. 321 (1936); Lake Gogebic Lumber Co. v. Burns, 331 Mich. 315, 49 N.W.2d 310 (1951); McCleery v. Briggs, 333 Mich. 522, 525, 53 N.W.2d 361 (1952); Gordon v. City of Warren Planning & Urban Renewal Comm., 388 Mich. 82, 88-89, 199 N.W.2d 465 (1972). And the term's meaning was not intended to be altered when the Legislature imported the common-law term mutual mistake of fact into MCL 211.53a. Accordingly, the phrase mutual mistake of fact must be construed and understood consistent with its peculiar meaning. Therefore, consistent with our case law, we interpret the phrase mutual mistake of fact in MCL 211.53a to mean an erroneous belief, which is shared and relied on by both parties, about a material fact that affects the substance of the transaction.