572 N.Y.S.2d 672
Stambovsky, a resident of New York City, entered into a contract to purchase a house located in the Village of Nyack from defendant Ackley.1 Shortly after contracting, Stambovsky discovered to his horror that the house was widely reputed to be possessed by poltergeists.2 These apparitions had reportedly been seen by Ackley and members of her family on numerous occasions over the preceding nine years.3
Ackley had actively publicized the presence of these spirits.4 She reported their existence in a national publication, Readers’ Digest, and in the local press in 1977 and 1982, respectively.5 As a result of these efforts, the house gained a reputation in the community as haunted.6 In 1989, the property was featured in a five-home walking tour of Nyack and was described in a November 27 newspaper article as a riverfront Victorian with a ghost.7
Upon learning of this reputation, Stambovsky promptly commenced an action in the Supreme Court, New York County, seeking rescission of the contract of sale and recovery of his down payment.8 The Supreme Court dismissed the complaint pursuant to CPLR 3211(a)(7) on April 9, 1990.9 Stambovsky then appealed to the Appellate Division.10
Whether a purchaser of real property may obtain rescission of the contract of sale based on the seller's failure to disclose the property's reputation as haunted, where the seller had previously publicized that reputation to the public?11
Where a condition created by the seller materially impairs the value of the 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.12 The doctrine does not require the buyer to be omniscient.13
Yes. Application of the rule to the established facts shows that rescission is available.14 Ackley created the impaired condition by publicizing the poltergeists through Readers’ Digest and local press reports as well as the 1989 walking tour description, which materially impaired the property's value and resale potential for Stambovsky.15 This reputation was peculiarly within Ackley's knowledge and could not be discovered by Stambovsky through reasonable inspection or title search, given his status as a New York City resident unfamiliar with Nyack folklore.16
The nondisclosure therefore supplies an equitable ground for rescission of the contract and recovery of the down payment.17
The purchaser may obtain rescission of the contract of sale based on the seller's nondisclosure.18