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CASE
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HOLDING
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REASONING
DICTA
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Burzysnki, Kristen 8/16/2023For Educational Use OnlyStambovsky v. Ackley, 169 A.D.2d 254 (1991)572 N.Y.S.2d 672, 60 USLW 2070 © 2023 Thomson Reuters. No claim to original U.S. Government Works.1169 A.D.2d 254Supreme Court, Appellate Division,First Department, New York.Jeffrey M. STAMBOVSKY, Plaintiff–Appellant,v.Helen V. ACKLEY and EllisRealty, Defendants–Respondents.July 18, 1991.SynopsisPurchaser of home brought action against vendor and brokerfor rescission and damages. The Supreme Court, New YorkCounty, Lehner, J., dismissed, and purchaser appealed. TheSupreme Court, Appellate Division, Rubin, J., held that: (1)vendor was estopped to deny existence of poltergeists onthe premises, so that house was haunted as a matter of law;(2) equitable remedy of rescission was available; (3) vendorwho had undertaken to inform the public at large about theexistence of poltergeists had a duty to inform purchaser;(4) haunting is not a condition which can and should beascertained by reasonable inspection of the premises; but (5)there was no cause of action against the broker.Affirmed as modified.Smith, J., dissented and filed an opinion in which Milonas,J.P., concurred.Procedural Posture(s): On Appeal; Motion to Dismiss;Motion to Dismiss for Failure to State a Claim.Attorneys and Law Firms**674 *255 William M. Stein, of counsel (Hood & Stein,attorneys), Haverstraw, for plaintiff-appellant.Andrew C. Bisulca, of counsel (Mann, Mann & Lewis, P.C.,attorneys), Nyack, for defendant-respondent Helen V. Ackley.Jeffrey J. Ellis, of counsel (Quirk & Bakalor, P.C., attorneys),New York City, for defendant-respondent Ellis Realty.Before MILONAS, J.P., and ROSS, KASSAL, SMITH andRUBIN, JJ.OpinionRUBIN, Justice.Plaintiff, to his horror, discovered that the house he hadrecently contracted to purchase was widely reputed tobe *256 possessed by poltergeists, reportedly seen bydefendant seller and members of her family on numerousoccasions over the last nine years. Plaintiff promptlycommenced this action seeking rescission of the contractof sale. Supreme Court reluctantly dismissed the complaint,holding that plaintiff has no remedy at law in this jurisdiction. The unusual facts of this case, as disclosed by the record,clearly warrant a grant of equitable relief to the buyer who,as a resident of New York City, cannot be expected to haveany familiarity with the folklore of the Village of Nyack.Not being a “local,” plaintiff could not readily learn that thehome he had contracted to purchase is haunted. Whether thesource of the spectral apparitions seen by defendant seller areparapsychic or psychogenic, having reported their presencein both a national publication (“Readers’ Digest”) and thelocal press (in 1977 and 1982, respectively), defendant isestopped to deny their existence and, as a matter of law, thehouse is haunted. More to the point, however, no divinationis required to conclude that it is defendant’s promotionalefforts in publicizing her close encounters with these spiritswhich fostered the home’s reputation in the community. In1989, the house was included in a five-home walking tourof Nyack and described in a November 27th newspaperarticle as “a riverfront Victorian (with ghost).” The impactof the reputation thus created goes to the very essence of thebargain between the parties, greatly impairing both the valueof the property and its potential for resale. The extent of thisimpairment may be presumed for the purpose of reviewingthe disposition of this motion to dismiss the cause of actionfor rescission (Harris v. City of New York, 147 A.D.2d 186,188–189, 542 N.Y.S.2d 550) and represents merely an issueof fact for resolution at trial. While I agree with Supreme Court that the real estate broker,as agent for the seller, is under no duty to disclose **675 toa potential buyer the phantasmal reputation of the premisesand that, in his pursuit of a legal remedy for fraudulentmisrepresentation against the seller, plaintiff hasn’t a ghostof a chance, I am nevertheless moved by the spirit of equity
Burzysnki, Kristen 8/16/2023For Educational Use OnlyStambovsky v. Ackley, 169 A.D.2d 254 (1991)572 N.Y.S.2d 672, 60 USLW 2070 © 2023 Thomson Reuters. No claim to original U.S. Government Works.2to allow the buyer to seek rescission of the contract of saleand recovery of his downpayment. New York law fails torecognize any remedy for damages incurred as a result of theseller’s mere silence, applying instead the strict rule of caveatemptor. Therefore, the theoretical basis for granting relief,even under the extraordinary facts of this case, is elusive ifnot ephemeral.*257 “Pity me not but lend thy serious hearing to what Ishall unfold” (William Shakespeare, Hamlet, Act I, Scene V[Ghost] ). From the perspective of a person in the position of plaintiffherein, a very practical problem arises with respect to thediscovery of a paranormal phenomenon: “Who you gonna’call?” as the title song to the movie “Ghostbusters” asks.Applying the strict rule of caveat emptor to a contractinvolving a house possessed by poltergeists conjures upvisions of a psychic or medium routinely accompanying thestructural engineer and Terminix man on an inspection ofevery home subject to a contract of sale. It portends thatthe prudent attorney will establish an escrow account lestthe subject of the transaction come back to haunt him andhis client—or pray that his malpractice insurance coverageextends to supernatural disasters. In the interest of avoidingsuch untenable consequences, the notion that a hauntingis a condition which can and should be ascertained uponreasonable inspection of the premises is a hobgoblin whichshould be exorcised from the body of legal precedent and laidquietly to rest. It has been suggested by a leading authority that the ancientrule which holds that mere non-disclosure does not constituteactionable misrepresentation “finds proper application incases where the fact undisclosed is patent, or the plaintiffhas equal opportunities for obtaining information which hemay be expected to utilize, or the defendant has no reason tothink that he is acting under any misapprehension” (Prosser,Law of Torts § 106, at 696 [4th ed., 1971] ). However, withrespect to transactions in real estate, New York adheres tothe doctrine of caveat emptor and imposes no duty upon thevendor to disclose any information concerning the premises(London v. Courduff, 141 A.D.2d 803, 529 N.Y.S.2d 874)unless there is a confidential or fiduciary relationship betweenthe parties (Moser v. Spizzirro, 31 A.D.2d 537, 295 N.Y.S.2d188, affd., 25 N.Y.2d 941, 305 N.Y.S.2d 153, 252 N.E.2d 632;IBM Credit Fin. Corp. v. Mazda Motor Mfg. (USA) Corp., 152A.D.2d 451, 542 N.Y.S.2d 649) or some conduct on the partof the seller which constitutes “active concealment” (see, 17East 80th Realty Corp. v. 68th Associates, 173 A.D.2d 245,569 N.Y.S.2d 647 [dummy ventilation system constructedby seller]; Haberman v. Greenspan, 82 Misc.2d 263, 368N.Y.S.2d 717 [foundation cracks covered by seller] ).Normally, some affirmative misrepresentation (e.g., TahiniInvs., Ltd. v. Bobrowsky, 99 A.D.2d 489, 470 N.Y.S.2d 431[industrial waste on land allegedly used only as farm]; Jansenv. Kelly, 11 A.D.2d 587, 200 N.Y.S.2d 561 [land containingvaluable minerals allegedly acquired for use as campsite] ) or*258 partial disclosure (Junius Constr. Corp. v. Cohen, 257N.Y. 393, 178 N.E. 672 [existence of third unopened streetconcealed]; Noved Realty Corp. v. A.A.P. Co., 250 App.Div. 1,293 N.Y.S. 336 [escrow agreements securing lien concealed] )is required to impose upon the seller a duty to communicateundisclosed conditions affecting the premises (contra, Youngv. Keith, 112 A.D.2d 625, 492 N.Y.S.2d 489 [defective waterand sewer systems concealed] ). Caveat emptor is not so all-encompassing a doctrine ofcommon law as to render every act of non-disclosure immunefrom redress, whether legal or equitable. “In regard to thenecessity of giving information which has not been asked,the rule differs somewhat at law and in equity, and while thelaw courts would permit no recovery of damages against avendor, because of mere concealment of facts under certaincircumstances, yet if the vendee refused **676 to completethe contract because of the concealment of a material facton the part of the other, equity would refuse to compelhim so to do, because equity only compels the specificperformance of a contract which is fair and open, and inregard to which all material matters known to each have beencommunicated to the other” (Rothmiller v. Stein, 143 N.Y.581, 591–592, 38 N.E. 718 [emphasis added] ). Even as aprinciple of law, long before exceptions were embodied instatute law (see, e.g., UCC 2–312, 2–313, 2–314, 2–315; 3–417[2][e] ), the doctrine was held inapplicable to contagionamong animals, adulteration of food, and insolvency of amaker of a promissory note and of a tenant substituted foranother under a lease (see, Rothmiller v. Stein, supra, at 592–593, 38 N.E. 718 and cases cited therein). Common law is notmoribund. Ex facto jus oritur (law arises out of facts). Wherefairness and common sense dictate that an exception shouldbe created, the evolution of the law should not be stifled byrigid application of a legal maxim.
Burzysnki, Kristen 8/16/2023For Educational Use OnlyStambovsky v. Ackley, 169 A.D.2d 254 (1991)572 N.Y.S.2d 672, 60 USLW 2070 © 2023 Thomson Reuters. No claim to original U.S. Government Works.3 The doctrine of caveat emptor requires that a buyer actprudently to assess the fitness and value of his purchase andoperates to bar the purchaser who fails to exercise due carefrom seeking the equitable remedy of rescission (see, e.g.,Rodas v. Manitaras, 159 A.D.2d 341, 552 N.Y.S.2d 618).For the purposes of the instant motion to dismiss the actionpursuant to CPLR 3211(a)(7), plaintiff is entitled to everyfavorable inference which may reasonably be drawn fromthe pleadings (Arrington v. New York Times Co., 55 N.Y.2d433, 442, 449 N.Y.S.2d 941, 434 N.E.2d 1319; Rovello v.Orofino Realty Co., 40 N.Y.2d 633, 634, 389 N.Y.S.2d 314,357 N.E.2d 970), specifically, in this instance, that he methis obligation to conduct an inspection of the premises anda search of available public records with respect *259 totitle. It should be apparent, however, that the most meticulousinspection and the search would not reveal the presence ofpoltergeists at the premises or unearth the property’s ghoulishreputation in the community. Therefore, there is no soundpolicy reason to deny plaintiff relief for failing to discover astate of affairs which the most prudent purchaser would notbe expected to even contemplate (see, Da Silva v. Musso, 53N.Y.2d 543, 551, 444 N.Y.S.2d 50, 428 N.E.2d 382).The case law in this jurisdiction dealing with the duty ofa vendor of real property to disclose information to thebuyer is distinguishable from the matter under review. Themost salient distinction is that existing cases invariably dealwith the physical condition of the premises (e.g., London v.Courduff, supra [use as a landfill]; Perin v. Mardine RealtyCo., 5 A.D.2d 685, 168 N.Y.S.2d 647 affd. 6 N.Y.2d 920,190 N.Y.S.2d 995, 161 N.E.2d 210 [sewer line crossingadjoining property without owner’s consent] ), defects in title(e.g., Sands v. Kissane, 282 App.Div. 140, 121 N.Y.S.2d634 [remainderman] ), liens against the property (e.g., NovedRealty Corp. v. A.A.P. Co., supra ), expenses or income (e.g.,Rodas v. Manitaras, supra [gross receipts] ) and other factorsaffecting its operation. No case has been brought to this court’sattention in which the property value was impaired as theresult of the reputation created by information disseminatedto the public by the seller (or, for that matter, as a result ofpossession by poltergeists). Where a condition which has been created by the sellermaterially impairs the value of the contract and is peculiarlywithin the knowledge of the seller or unlikely to be discoveredby a prudent purchaser exercising due care with respect tothe subject transaction, nondisclosure constitutes a basis forrescission as a matter of equity. Any other outcome placesupon the buyer not merely the obligation to exercise carein his purchase but rather to be omniscient with respect toany fact which may affect the bargain. No practical purposeis served by imposing such a burden upon a purchaser. Tothe contrary, it encourages predatory business practice andoffends the principle that equity will suffer no wrong to bewithout a remedy. Defendant’s contention that the contract of sale, particularlythe merger or “as is” clause, bars recovery of the buyer’s**677 deposit is unavailing. Even an express disclaimer willnot be given effect where the facts are peculiarly within theknowledge of the party invoking it (Danann Realty Corp. v.Harris, 5 N.Y.2d 317, 322, 184 N.Y.S.2d 599, 157 N.E.2d597; Tahini Invs., Ltd. v. Bobrowsky, supra ). Moreover, afair reading of the merger clause reveals that it expressly*260 disclaims only representations made with respect to thephysical condition of the premises and merely makes generalreference to representations concerning “any other matter orthings affecting or relating to the aforesaid premises”. Asbroad as this language may be, a reasonable interpretationis that its effect is limited to tangible or physical mattersand does not extend to paranormal phenomena. Finally, ifthe language of the contract is to be construed as broadlyas defendant urges to encompass the presence of poltergeistsin the house, it cannot be said that she has delivered thepremises “vacant” in accordance with her obligation under theprovisions of the contract rider.To the extent New York law may be said to require somethingmore than “mere concealment” to apply even the equitableremedy of rescission, the case of Junius ConstructionCorporation v. Cohen, 257 N.Y. 393, 178 N.E. 672, supra,while not precisely on point, provides some guidance. In thatcase, the seller disclosed that an official map indicated twoas yet unopened streets which were planned for constructionat the edges of the parcel. What was not disclosed was thatthe same map indicated a third street which, if opened, woulddivide the plot in half. The court held that, while the sellerwas under no duty to mention the planned streets at all, havingundertaken to disclose two of them, he was obliged to revealthe third (see also, Rosenschein v. McNally, 17 A.D.2d 834,233 N.Y.S.2d 254). In the case at bar, defendant seller deliberately fosteredthe public belief that her home was possessed. Having
Burzysnki, Kristen 8/16/2023For Educational Use OnlyStambovsky v. Ackley, 169 A.D.2d 254 (1991)572 N.Y.S.2d 672, 60 USLW 2070 © 2023 Thomson Reuters. No claim to original U.S. Government Works.4undertaken to inform the public at large, to whom she hasno legal relationship, about the supernatural occurrences onher property, she may be said to owe no less a duty to hercontract vendee. It has been remarked that the occasionalmodern cases which permit a seller to take unfair advantageof a buyer’s ignorance so long as he is not actively misledare “singularly unappetizing” (Prosser, Law of Torts § 106, at696 [4th ed. 1971] ). Where, as here, the seller not only takesunfair advantage of the buyer’s ignorance but has createdand perpetuated a condition about which he is unlikely toeven inquire, enforcement of the contract (in whole or inpart) is offensive to the court’s sense of equity. Applicationof the remedy of rescission, within the bounds of the narrowexception to the doctrine of caveat emptor set forth herein, isentirely appropriate to relieve the unwitting purchaser fromthe consequences of a most unnatural bargain.Accordingly, the judgment of the Supreme Court, New York*261 County (Edward H. Lehner, J.), entered April 9, 1990,which dismissed the complaint pursuant to CPLR 3211(a)(7), should be modified, on the law and the facts and in theexercise of discretion, and the first cause of action seekingrescission of the contract reinstated, without costs.Judgment, Supreme Court, New York County (Edward H.Lehner, J.), entered on April 9, 1990, modified, on the lawand the facts and in the exercise of discretion, and the firstcause of action seeking rescission of the contract reinstated,without costs.All concur except MILONAS, J.P. and SMITH, J., whodissent in an opinion by SMITH, J.SMITH, Justice (dissenting).I would affirm the dismissal of the complaint by the motioncourt.Plaintiff seeks to rescind his contract to purchase defendantAckley’s residential property and recover his down payment.Plaintiff alleges that Ackley and her real estate broker,defendant Ellis Realty, made material misrepresentations ofthe property in that they failed to disclose that Ackley believedthat the house was haunted by poltergeists. Moreover, Ackleyshared this belief with her community and the general**678 public through articles published in Reader’s Digest(1977) and the local newspaper (1982). In November 1989,approximately two months after the parties entered into thecontract of sale but subsequent to the scheduled October 2,1989 closing, the house was included in a five-house walkingtour and again described in the local newspaper as beinghaunted.Prior to closing, plaintiff learned of this reputation andunsuccessfully sought to rescind the $650,000 contract of saleand obtain return of his $32,500 down payment without resortto litigation. The plaintiff then commenced this action for thatrelief and alleged that he would not have entered into thecontract had he been so advised and that as a result of thealleged poltergeist activity, the market value and resaleabilityof the property was greatly diminished. Defendant Ackley hascounterclaimed for specific performance.“It is settled law in New York that the seller of real propertyis under no duty to speak when the parties deal at arm’slength. The mere silence of the seller, without some act orconduct which deceived the purchaser, does not amount to aconcealment that is actionable as a fraud (see Perin v. MardineRealty Co., Inc., 5 A.D.2d 685, 168 N.Y.S.2d 647, aff’d., 6N.Y.2d 920, 190 N.Y.S.2d 995, 161 N.E.2d 210; Moser v.Spizzirro, 31 A.D.2d 537, 295 N.Y.S.2d 188, aff’d., 25 N.Y.2d941, 305 N.Y.S.2d 153, 252 N.E.2d 632). The buyer has theduty to satisfy himself as to the quality of his bargain pursuantto the doctrine of caveat emptor, which in New York State stillapplies to real estate transactions.” London v. Courduff, 141A.D.2d 803, 804, 529 N.Y.S.2d 874, app. dism’d., 73 N.Y.2d809, 537 N.Y.S.2d 494, 534 N.E.2d 332 (1988).The parties herein were represented by counsel and dealt atarm’s length. This is evidenced by the contract of sale which,inter alia, contained various riders and a specific provision*262 that all prior understandings and agreements betweenthe parties were merged into the contract, that the contractcompletely expressed their full agreement and that neitherhad relied upon any statement by anyone else not set forthin the contract. There is no allegation that defendants, bysome specific act, other than the failure to speak, deceived theplaintiff. Nevertheless, a cause of action may be sufficientlystated where there is a confidential or fiduciary relationshipcreating a duty to disclose and there was a failure to disclosea material fact, calculated to induce a false belief. County ofWestchester v. Welton Becket Assoc., 102 A.D.2d 34, 50–51,478 N.Y.S.2d 305, aff’d., 66 N.Y.2d 642, 495 N.Y.S.2d 364,
Burzysnki, Kristen 8/16/2023For Educational Use OnlyStambovsky v. Ackley, 169 A.D.2d 254 (1991)572 N.Y.S.2d 672, 60 USLW 2070 © 2023 Thomson Reuters. No claim to original U.S. Government Works.5485 N.E.2d 1029 (1985). However, plaintiff herein has notalleged and there is no basis for concluding that a confidentialor fiduciary relationship existed between these parties to anarm’s length transaction such as to give rise to a duty todisclose. In addition, there is no allegation that defendantsthwarted plaintiff’s efforts to fulfill his responsibilities fixedby the doctrine of caveat emptor. See London v. Courduff,supra, 141 A.D.2d at 804, 529 N.Y.S.2d 874.Finally, if the doctrine of caveat emptor is to be discarded,it should be for a reason more substantive than a poltergeist.The existence of a poltergeist is no more binding upon thedefendants than it is upon this court.Based upon the foregoing, the motion court properlydismissed the complaint.All Citations169 A.D.2d 254, 572 N.Y.S.2d 672, 60 USLW 2070End of Document© 2023 Thomson Reuters. No claim to original U.S. Government Works.
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