In Stambovsky v. Ackley, the New York Appellate Division addressed whether a seller and/or broker had a duty to disclose the purported presence of ghosts in property. The court found that neither party had a legal duty to disclose the ghosts, but granted the equitable remedy of rescission holding that the seller, who promoted stories about the ghosts in local and national publications, could not deny their existence.
Stambovsky (Buyer) contracted to purchase a home from Ackley (Seller) through Ellis Realty (Broker). Buyer lived in New York City, over an hour from the location of the property on Long Island. Prior to closing, Buyer learned that the house was reputed to be possessed by poltergeists. Neither Seller nor Broker had disclosed this information to Buyer, who sued them for rescission and damages. During the previous decade, the paranormal activity had been featured once in Readers' Digest and twice in the local press. The New York Supreme Court dismissed the complaint, holding that Buyer had no remedy at law. Buyer appealed.
The New York Appellate Division, stated that "New York adheres to the doctrine of caveat emptor and imposes no duty upon the vendor to disclose any information concerning the premises, . . . unless there is a confidential or fiduciary relationship between the parties." Caveat emptor ("buyer beware") requires that a buyer act prudently to assess the fitness and value of his purchase and operates to bar the purchaser who fails to exercise due care from seeking the equitable remedy of rescission. Generally, some affirmative misrepresentation or partial disclosure is required to impose upon the seller a duty to communicate undisclosed conditions affecting the premises. The court noted that caveat emptor applied differently to law than in equity. It stated that "where a condition which has been created by the seller materially impairs the value of a contract and is peculiarly within the knowledge of the seller or 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."
The New York Appellate Division granted rescission to Buyer on the basis that Seller deliberately fostered the public belief that her home was possessed. It noted that "having taken to inform the public at large, to whom she has no legal relationship, about the supernatural occurrences on her property, she may be said to owe no less a duty to her contract vendee." It also noted that "where, as here, the seller not only takes unfair advantage of the buyer's ignorance but has perpetuated a condition about which he is unlikely even to inquire, enforcement of the contract (in whole or in part) is offensive to the court's sense of equity. Thus, the court concluded that Buyer, who lived in New York City, could not have been expected to have any familiarity with the folklore of the Village of Nyack, and not being a "local," he could not readily learn that the home was haunted. Thus, the court granted rescission.
Regarding Broker, the New York Appellate Division concluded, with virtually no discussion, only that, as agent for Seller, he was under no duty to disclose to a potential buyer the phantasmal reputation of the premises.
Stambovsky v. Ackley, 169 A.D.2d 254, 572 N.Y.S.2d 672 (1991).