Stambovsky, plaintiff, discovered to his horror that the home he recently contracted to purchase, which resided in Nyack, New York, was widely renown for being infested by poltergeists. The defendant seller and members of her family allegedly reported the poltergeists on numerous occasions over the past nine years. The plaintiff, not being a local, could not readily learn of the poltergeists before purchasing the home. Unknown to the plaintiff, the defendant, Ackley, advertised the home as a haunted house via Reader’s Digest, which is a national publication, and the local newspaper in 1977. Furthermore, the defendant seller did not disclose the poltergeists to the plaintiff before executing the contract of sale. Plaintiff brought this action in pursuit of rescission of the contract of sale.
The Supreme Court of New York dismissed the complaint, holding that the plaintiff had no legal remedy in the jurisdiction. The plaintiff now appeals.
Whether a seller has a duty to disclose to the buyer the existence of a condition created by the seller that decreases the value and resale potential of a home and is unlikely to be discovered, per caveat emptor, by the buyer prior to the purchase.
Where a condition created by the seller materially impairs the value of the contract and is peculiarly within the knowledge of the seller of unlikely to be discovered by a prudent purchaser exercising due care with respect to the subject transaction, nondisclosure constitutes a basis for rescission as a matter of equity.
First off, the court notes how the presence of the poltergeists affects both the value and resale potential of the home. The extent of the impairment will also be presumed for the purpose of reviewing the dismissal of the case. Moreover, according to the court, a real estate broker is not under a duty to disclose to a potential buyer the phantasmal reputation of the premises and that no legal remedy exists for fraudulent misrepresentation of such a topic. Judge Rubin, however, asserts that the broker, while not liable for mere silence, is nonetheless bound by the rule of caveat emptor, i.e. the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made. Even though the doctrine of caveat emptor imposes the duty of discovery on the buyer alone, the vendor still maintains a duty to disclose information to the buyer if a confidential or fiduciary relationship exists between the parties, per Moser v. Spizzirro, or the even if conduct of the seller constitutes active concealment. In other words, if common sense and fairness dictate that an exception to caveat emptor is warranted, the evolution of the law will not be inhibited by the application of a legal maxim. On the other hand, if the plaintiff did indeed fail his duty to investigate the home as a reasonably prudent person would, caveat emptor prevents him from seeking a rescission, e.g. Rodas v. Manitaras. A reasonably prudent person would likely not discover the presence of a poltergeist after a meticulous investigation of the home, hence the plaintiff should not be barred from seeking relief. All other case precedent thus far in New York deals with the presence of physical conditions, whereas this case involves a paranormal condition that is nonetheless regarded as haunted as a matter of law. The present condition materially impairs the value and potential for resale of the home and the seller failed to disclose it to the buyer prior to the purchase. Regardless of the defendant’s posited defense of a merger’s “as is” clause barring recovery, the clause refers to merely physical or tangible phenomena, as opposed to paranormal. Therefore, the seller’s nondisclosure of the condition constitutes a legal basis for an equitable remedy, such as rescission of the contract, on behalf of the plaintiff.
The Appellate Division, First Department, of New York reversed the dismissal of the case by the Supreme Court and reinstated the complaint seeking rescission without costs. The court’s decision, in my opinion, represents both a lawful and equitable remedy for such an atypical case as this one. As the court stated in the opinion, this was the first instance in New York history of a paranormal condition affecting a purchase. Ultimately, the public policy reasoning is clear, a buyer should not be rigidly held to performance of a contract that they executed in absence of the entirety of the pertinent details.