Stambovsky v. Ackley
169 A.D.2d 254 (N.Y. App. Div. 1991) (1991)
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Rule of Law:
Where a seller creates a condition that materially impairs the value of a property and is peculiarly within their knowledge or unlikely to be discovered by a prudent purchaser, the seller's nondisclosure constitutes a basis for the buyer's equitable remedy of rescission.
Facts:
- For nine years, Helen Ackley and her family lived in a house in Nyack, New York, and claimed to have seen poltergeists on numerous occasions.
- Ackley actively publicized these supernatural occurrences, reporting them in a national publication (Reader's Digest) and the local press.
- These promotional efforts by Ackley fostered a public reputation in the local community that the house was haunted.
- In 1989, the house was included in a local walking tour and described in a newspaper article as a "riverfront Victorian (with ghost)."
- Jeffrey Stambovsky, a resident of New York City, was unfamiliar with the folklore of Nyack.
- Stambovsky entered into a contract to purchase the house from Ackley.
- After signing the contract, Stambovsky discovered the house's reputation for being haunted.
Procedural Posture:
- Jeffrey Stambovsky sued Helen Ackley in the Supreme Court, New York County (a trial court), seeking rescission of the real estate contract.
- The Supreme Court granted Ackley's motion to dismiss the complaint pursuant to CPLR 3211 (a) (7).
- Stambovsky (appellant) appealed the dismissal to the Supreme Court, Appellate Division, First Department.
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Issue:
Does a seller's failure to disclose that a house is widely reputed to be haunted, a condition the seller created and publicized, constitute a basis for the buyer to seek rescission of the real estate contract?
Opinions:
Majority - Rubin, J.
Yes. A seller's failure to disclose a condition they created which materially impairs the property's value and is unlikely to be discovered by a prudent buyer provides a basis for rescission. New York's strict rule of caveat emptor does not apply where fairness and common sense dictate an exception. A buyer cannot be expected to discover a property's paranormal reputation through a reasonable inspection. Because the seller, Ackley, created the condition by publicizing the haunting, she is estopped from denying its existence and took unfair advantage of the buyer's ignorance. This condition materially impairs the property's value, and equity will not suffer a wrong to be without a remedy; therefore, rescission is an appropriate remedy.
Dissenting - Smith, J.
No. The seller's silence does not constitute a basis for rescission because New York law strictly adheres to the doctrine of caveat emptor in real estate transactions between parties dealing at arm's length. The seller is under no duty to speak unless there is a confidential or fiduciary relationship, or some act of active concealment, none of which were alleged here. The parties were represented by counsel and signed a contract with a merger clause, disclaiming reliance on any outside statements. The doctrine of caveat emptor should not be discarded for a reason as insubstantial as a poltergeist.
Analysis:
This case creates a narrow, equitable exception to the traditional, rigid doctrine of caveat emptor ('let the buyer beware') in New York real estate law. It establishes that a seller may have a duty to disclose a non-physical condition they created if it materially affects the property's value and is undiscoverable through ordinary means. This decision, often called the 'Ghostbusters ruling,' is significant for recognizing that psychological stigma can be a legally cognizable defect and signals a judicial willingness to provide equitable remedies when rigid common law rules lead to unfair outcomes.
