In a typical class at the University of Virginia School of Law, students may study landmark court cases, unearth the complexities of civil procedure – or even hear a ghost story from professor John Setear.
One such ghost story centers around Stambovsky v. Ackley, a case involving a Victorian house in Nyack, New York, which the Supreme Court of New York declared “legally haunted” in 1991. The decision, commonly referred to as the “‘Ghostbusters’ ruling,” came after would-be buyers sued to recover their deposit upon learning about the home’s supernatural history.
UVA Law professor John Setear includes ghost stories in his lessons. (Contributed photo)
Though the buyer was unaware of the alleged haunting, the seller had advertised the home’s paranormal activity, discussing it in the media and featuring the home in haunted tours. Because of how the judiciary considers the facts of a case on appeal, the appellate court eventually declared that “as a matter of law, the house is haunted.” The phrase and case made history, and Stambovsky has been taught in law school classrooms across the country ever since.
We asked Setear to shed light on this spooky side of contract law.
Q. Can you explain the proceedings of this case?
A. Generally, in contract law, you can get out of a contract if one party defrauds the other. That’s usually when someone affirmatively says something false. A related circumstance is “failure to disclose,” which means a party fails to say something true. In real estate deals, that’s often important because sellers won’t mention termites or ghosts.
The “‘Ghostbusters’ ruling” centers around this New York house. (Contributed photo)
This is a case about whether the failure to disclose that the house is haunted allows the buyer to back out of the contract without penalty. New York has a rule called caveat emptor – “let the buyer beware” – which expects buyers to research and ask questions about the product they’re buying. In this case, however, the court says it doesn’t apply because the seller advertised to others – but not the buyer – that the house was haunted.
Q. What protections do people have if they purchase a property with undisclosed issues, such as alleged hauntings?
A. The general rule in contracts is that if you fail to disclose something important and it’s difficult for the other party to find it out, the uninformed party can get out of the deal. If you’re in a state with caveat emptor, like New York, the buyer must ask questions and find out everything for themselves. It puts a lot of burden on them. If they forget to ask whether a home has termites or ghosts, and it turns out that it does, they’re stuck.
Q. Do you teach any other cases with frightening facts?
A. Reed v. King is a California case about a real estate deal in which the seller failed to disclose that a woman and her four children were murdered inside the house. This was before the time of the internet, so the court says the buyer wouldn’t necessarily be able to find out about the murders on their own. The complaint also says that, due to the murder, there was a drop in the market value of the home. That wasn’t a big issue in Stambovsky v. Ackley, but it was important to the California court. In Reed, the court also let the buyer out of the deal.
