Case Law Hall of Fame: “As a Matter of Law, the House is Haunted”

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Here’s a worthwhile addition to the Hall of Fame that may just come in handy these days as well. In Stambovsky v. Ackley (1991), New York’s Appellate Division held that a homebuyer could try to get out of a $650,000 sale contract based on his argument that he learned only after signing that the house was haunted by poltergeists.

The court agreed that the plaintiff could not sue the realtor and seller for fraud, because they had no legal duty to disclose the “phantasmal reputation of the premises.” But, applying its equitable powers, it ruled that he should at least be able to seek recission on the grounds that the omitted fact was one that could have affected the property’s value. Exactly what effect a haunting might have on a house value was something that a jury would have to figure out later, the court said, but it ruled that the recission claim could go forward.

Arguably, this haunting might actually have increased the value, or at least you might conclude that from the fact that the owner had previously advertised the spirits’ presence, getting the home included in a walking tour and also covered in a story by Reader’s Digest. But if the owner profited from those efforts, she paid for it later, since the court ruled that having reported the spirits’ presence so widely, she was now “estopped to deny their existence and [so], as a matter of law, the house is haunted.” (Note: previous sentence carefully drafted to avoid use of the phrase, “came back to haunt her.”)

A dissenting judge said that in New York, the rule in real-estate transactions was still caveat emptor, “let the buyer beware.” (That was in 1991 — whether it is or is not the rule now, I have no idea.) He suggested that, since the owner had shared her belief in poltergeists with the public at large for at least twelve years, there was no reason give the buyer here the benefit of the doubt.  “[I]f the doctrine of caveat emptor is to be discarded,” the court said, “it should be for a reason more substantive than a poltergeist. The existence of a poltergeist is no more binding upon the defendants than it is upon this court.”

It would be nice to think that homebuyers in trouble would get some mileage out of precedent like this, but you know it will end up benefiting somebody on Wall Street. “Come to find out, Lehman Brothers was built right on top of an ancient Indian burial ground.  We had no idea.”