What Law Students Learn About Haunted Houses

In a typical class at the University of Virginia School of Law, students may study tales of landmark court cases, unearth the complexities of civil procedure, or even hear a ghost story from Professor John Setear.

Stambovsky v. Ackley involves a Victorian house in Nyack, New York, which was declared “legally haunted” by the Supreme Court of New York in 1991. This decision, commonly referred to as the “Ghostbusters” ruling, came after the would-be buyer sued to recover their deposit upon learning about the home’s supernatural history.

Though the buyer didn’t know about the alleged haunting, the seller had advertised the home’s paranormal activity, discussing it in the press 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.

Setear, the Class of 1962 Professor of Law, answers questions about the holding, shedding light on the spooky side of contract law.

Can you explain the proceedings of this case?

Generally, in contracts 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 that’s true. In real estate deals, that’s often important because sellers won’t mention termites or ghosts.

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 — or “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.

I’m glad that the case is about a haunted house, which is an attention-getter, because I also use the case to teach some legal rules that are a little bit dry. This case was decided “on the papers,” which means that it didn’t get to trial or anywhere near it. The buyer filed a complaint about why they should get out of the deal, and then the defendant filed an answer saying caveat emptor means the buyer should lose, no matter what undisclosed problems there might be with the house. The lower court agreed with the seller and dismissed the case immediately.

The plaintiffs appealed this pre-trial dismissal of the case. On appeal, the court only has these court papers, not a trial record or anything else to prove any facts. The legal rule in that situation is that the court must assume that the buyer could prove in a trial everything the buyer said in their complaint. Since the buyer said the house was haunted in the complaint, the appeals court has to assume that the house is haunted. “As a matter of law” here really just means “because we have to believe the buyer at this point in the case.” If the appeals court agrees with the seller, however, the case is over. But because the buyer won, what happens next in the case depends on what happens at trial. The case isn’t over, even though the buyer won the appeal, which is important for my students to understand. [The case was settled out of court, with the seller, Helen Ackley, ultimately refunding half of the buyer Jeffrey Stambovsky’s down payment and selling the house to another buyer.]

What protections do people have if they purchase a property with undisclosed issues, such as alleged hauntings?

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.

Do you teach any other cases with frightening facts?

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.

Only some states require the disclosure of supernatural activity in real estate laws. Do you think more should?

I don’t personally believe in ghosts, so that seems to me like you’re just letting people with irrational beliefs get out of deals. But even if you allow a supernatural phenomenon to let someone get out of a deal, they still have to convince a jury that the house is haunted and is frightening to them, or that its haunted status has caused a drop in market value.

If a house is legally declared haunted, do the ghosts have any tenant rights?

I ain’t afraid of no ghosts, so I would just evict them and worry about lawsuits later.