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New York Supreme Court, Appellate Division - 169 A.D.2d 254
Tags: Contracts, Misrepresentation, Caveat emptor
tl;dr:
In one sentence, the case involves a buyer suing to get out of his house purchase contract because the seller, who'd publicly claimed the house was haunted, didn't mention this during the sale.Video Summary
Case Summary
In the 1991 case Stambovsky v. Ackley, the New York Supreme Court Appellate Division addressed if a home buyer could cancel a contract due to the seller not disclosing the house's reputation for being haunted. The dispute centered on whether a seller must disclose non-physical defects that could negatively impact the property's value.
Jeffrey Stambovsky agreed to buy a Victorian house in Nyack, New York, from Helen Ackley for $650,000. He later discovered that Ackley had widely publicized her belief that the house was haunted by ghosts. Stambovsky claimed he wouldn't have agreed to buy the house had he known, and sued for a contract rescission and a return of his down payment.
Ackley argued that she had no disclosure duty regarding the alleged haunting, and Stambovsky was bound by the legal principle of "caveat emptor", meaning "let the buyer beware." The trial court dismissed Stambovsky's complaint. However, on appeal, the appellate court reversed the decision.
The appellate court held that Stambovsky could seek contract rescission on equitable grounds. They narrowly interpreted caveat emptor, reasoning Ackley's promotional efforts created a condition impairing the property's value. They also ruled she couldn't deny the ghost claims since she had reported them in publications.
This case highlights how equity can override contractual principles and how courts address novel issues in contract law, such as non-physical defects and paranormal phenomena. It's a widely cited example of disclosure and caveat emptor in contract law education.
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The court granted the plaintiff's request for rescission of a contract of sale for a haunted house, as the buyer was not expected to know about the house's reputation. The seller is estopped from denying the existence of the spectral apparitions seen in the house, and the buyer may seek rescission of the contract of sale and recovery of his down payment based on the spirit of equity. The court found that the real estate broker had no duty to disclose the haunted reputation of the property to the buyer, and the buyer has no chance of succeeding in a fraudulent misrepresentation claim against the seller. The caveat emptor doctrine in New York real estate transactions means that the seller has no obligation to disclose any information about the property unless there is a confidential or fiduciary relationship between the parties or some conduct on the part of the seller that constitutes "active concealment." However, equity may refuse to compel the buyer to complete the contract if a material fact is concealed. The court found that the notion that a haunting is a condition that can be ascertained upon reasonable inspection of the premises should be removed from legal precedent to avoid impractical consequences.
The plaintiff seeks to rescind a contract to purchase a residential property due to alleged material misrepresentations by the defendant and their real estate broker. The misrepresentations involve the failure to disclose that the property was believed to be haunted by poltergeists. However, the principle of caveat emptor applies in New York State, meaning the seller of a real property does not have an obligation to disclose information in arm's length transactions. Unless the seller's silence is accompanied by an act of deception, it is not considered concealment. The parties in this case engaged in an arm's length transaction, and the plaintiff did not allege that the defendants deceived them through any specific act other than their failure to disclose information. Therefore, the doctrine of caveat emptor applies, and the plaintiff did not allege that the defendants prevented them from fulfilling their responsibilities under this doctrine.
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