Stambovsky v. Ackley – Case Brief
Stambovsky v. Ackley, 169 A.D.2d 254 (NY App. Div. 1991).
Facts: Ackley (D) knew a house was haunted when he sold it to Stambovsky (P) but did not disclose it. Stambovsky later learned that the house had a reputation for being haunted. Ackley had actually perpetrated the rumor by reporting various occurrences to Reader’s Digest and the local press. P brought suit to have the contract rescinded and the trial court dismissed the complaint. P appealed.
Issue: Under what circumstances may nondisclosure of information by the seller of a house to the buyer entitle the buyer to rescind a contract for sale?
Holding and Rule: If a condition is created by the seller, known by the seller, is unlikely to be discovered by a careful and prudent buyer, and impairs the value of the contract, then nondisclosure of this condition represents a basis for rescission under equity. In this case, Ackley deliberately publicized that his house was haunted. Having informed the public at large that the house was haunted, she owned no less a duty to the buyer. D was estopped from denying the existence of poltergeists and as a matter of law, the house was haunted.
Although New York follows the caveat emptor rule and the buyer is required to inspect the house for any defects, in this case the buyer probably would not have been able to discover that the house was haunted had he inspected it. Since D knew about the problem and did not disclose it to P and P could not have detected it, P was awarded rescission of the contract for sale. The court held that the caveat emptor doctrine only acts against those who do not exercise their rights and who fail to take due care. In this case there was no clue or objective standard to apply to P regarding how the ghosts were to be discovered.
Disposition: Reversed. P was entitled to rescind the contract for sale.