- Appellant/Plaintiff: Jeffrey M. Stambovsky
- Respondent/Defendant: Helen V. Ackley et al.
Court and Date:
Appellate Division 1st Department of the Supreme Court of New York - July 18, 1991
Facts and Holding:
Mr. Stambovsky appealed the dismissal of his complaint by the Supreme Court of New York. The initial complaint sought to rescind a contract to purchase a house from the seller defendant, which the buyer plaintiff later discovered had a reputation as being possessed by ghosts. According to the record, the appellant was not a “local” and had no familiarity with the folklore of the Village of Nyack, New York, where the property is located. Consequently, the plaintiff was unaware of the phantasmagorical reputation of the house that the defendant and her family members created for around nine years.
Whether the source of the "spectral apparitions" seen by the defendant was parapsychic or psychogenic, the Court held that the defendant could not deny their existence because having reported their presence in both a national publication and the local press made the house haunted as a matter of law. The Court established that the spectral reputation of the house came from the defendant's promotional efforts in publicizing her close encounters with these spirits.
The Court concluded that, under equity principles, the plaintiff was allowed to seek rescission of the contract and recover his down payment. The ghostly reputation of the house impacted both the value of the property and its resale potential. Thus, it also affected the deal between the defendant seller and the plaintiff buyer. Although the real estate broker had no duty to disclose facts about the reputation of the house, the plaintiff was in no position to establish through a reasonable inspection of the property that it was affected by “paranormal circumstances”.
Under the caveat emptor doctrine, the buyer must act prudently and assess the fitness and value of the purchased property, barring the purchaser who fails to exercise due care from seeking the equitable remedy of rescission. In this case, the plaintiff met his obligation by conducting a reasonable inspection of the premises and searching the available public records concerning the title. In the words of the Court: “...It should be apparent, however, that the most meticulous inspection and the search would not reveal the presence of [ghosts] at the premises or unearth the property's ghoulish reputation in the community. Therefore, there is no sound policy reason to deny plaintiff relief for failing to discover a state of affairs which the most prudent purchaser would not be expected to even contemplate…”.
To the extent that (i) the reputational condition of the house was created by the seller; (ii) such reputational condition materially impaired the value of the contract; (iii) it was peculiarly within the knowledge of the seller defendant; and (iv) it was unlikely to be discovered by a prudent purchaser exercising due care; nondisclosure of such information constituted a basis for rescission as a matter of equity.
Finally, the court noted that the defendant informed the public-at-large, to whom she had no legal relationship, about the supernatural occurrences on her property. Therefore, she owed no less a duty to her contracting counterparty, the buyer plaintiff. The seller defendant not only took unfair advantage of the buyer's ignorance but also created a reputational condition about which he was unlikely to inquire. Thus, enforcement of the contract would be offensive to the court's sense of equity.
Based on all the above, the Appellate Court modified the judgment of the Supreme Court, reinstating the cause of action seeking rescission of the contract.
[Last updated in September of 2021 by the Wex Definitions Team]