Case Study

Week 4

Case 9-6 Stambovsky v. Ackley and Ellis Realty

Aziz Abdullayev

Keller Graduate School of Management

MGMT 520
Case 9-6 Stambovsky v. Ackley and Ellis Realty

Supreme Court, Appellate Division, State of New York 169 A.D.2d 254 (1991)

Parties :

Plaintiff is Jeffrey Stambovsky.

Defendants is Ackley Family and Ellis Realty.

Facts

In 1991 Stambovsky got into a contract with Helen Ackley who was represented by Ellis Realty

to purchase house in Nyack, New York. However before sale closure. Stambovsky learned that

the house was reputed as hunted, possessed by poltergeist. He discovered that house was

mentioned in a couple of magazines over the years. Moreover owners, Ackneys were

interviewed by local newspaper.House was described as “Riverfront Victorian Ghost House” and

was a part of walking tours of Nyack. After discovery Stambovsky sued Ackney and Ellis Realty

demanding to rescind the contract and refund of his down payment.

Procedure

When Stambovsky file a complaint to rescind contract and full refund in Supreme Court of New

York County, complain was dismissed. Defendants argue that seller was not under duty to

disclose phantasmal reputation of the house. Court decided that there was no fraudulent

representation. Moreover according to Doctrine of Caveat Emptor buyer is responsible to do his

of due diligence and research to access the value and fitness of the purchase.

Issue
Main issue in this case is if there is enough ground to rescind the contract. Does haunted

reputation of the house bring the value of the property down?

Explain the applicable law(s).

“The doctrine of caveat emptor 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.”( Legal Environment of Business: Critical Thinking

Approach . Kubasek,Brennan,Browne, p.266)

Rule of Law or Legal Principle has been applied in Supreme Court ,Appellate Division, NYS

“Rule of law is a principle under which all persons, institutions, and entities are accountable to

laws that are:

 Publicly promulgated

 Equally enforced

 Independently adjudicated

 And consistent with international human rights principles.”

(Overview - Rule of Law. (n.d.). Retrieved from https://www.uscourts.gov/educational-

resources/educational-activities/overview-rule-law)

Holding

Initially Supreme Court of State of New York has ruled that Stambovsky has no ground to

rescind the contract due to the fact that buyer should have done his of research about property’s
reputation.” New York law fails to recognize any remedy for damages incurred as a result of the

seller’s mere silence, applying instead the strict rule of caveat emptor. Therefore, the theoretical

basis for granting relief, even under the extraordinary facts of this case, is elusive if not

ephemeral.” (Legal Environment of Business: Critical Thinking Approach .

Kubasek,Brennan,Browne, p.265)

However later on in Court of Appeals Judge ruled in favor of plaintiff, Stambovsky , ordering

rescission of contract and full refund of down payment. Court based its decision that seller has

deliberately fostered the public belief that her house was haunted. Even though she has no duty

to inform potential buyer of property reputation. Ackney’s failure to disclose the fact in order to

gain financial benefit from the purchase and take advantage of buyer’s ignorance was considered

offensive to court’s sense of equity.

Reasoning

Reason for Supreme Court to rule in favor of Plaintiff and dismiss the doctrine of caveat

emptor in this case was purely because caveat emptor applies material facts. There would be

unfair to give a seller advantage in this case. Even though a thorough inspection of the house

would not reveal its paranormal reputation in the neighborhood.

I believe Court of appeal has made correct decision on rescinding the contract and ordered full

refund of down payment to Strambovsky. Simply because it’s humanly right to disclose any

information that might potentially bring the harm to potential buyer even though that information

is rumor or paranormal. Moreover as described in this case house had become a part of walking

tours of Nyack. Imagine you being disturbed at your own home by spectators all the time.
References

1. “Legal Environment of Business: Critical Thinking Approach”

Kubasek,Brennan,Browne,

2. Overview - Rule of Law. (n.d.). Retrieved from https://www.uscourts.gov/educational-

resources/educational-activities/overview-rule-law

3. Due To The Infamous 'Ghostbusters Ruling' This New York House Is Legally Haunted.

(n.d.). Retrieved from https://www.ranker.com/list/ghostbusters-ruling-new-york/april-a-

taylor