Don't Miss
Home / Fulltext Opinions / Supreme Court of Virginia / PROSPECT DEVELOPMENT COMPANY, INC., et al. v. BERSHADER, et al. (59858)

PROSPECT DEVELOPMENT COMPANY, INC., et al. v. BERSHADER, et al. (59858)


PROSPECT DEVELOPMENT COMPANY,
INC., et al.

v.

BERSHADER, et al.


June 11, 1999

Record No. 981673

PROSPECT DEVELOPMENT COMPANY, INC., ET AL.

v.

STEVEN M. BERSHADER, ET AL.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY

David T. Stitt, Judge

Present: All the Justices

OPINION BY JUSTICE LEROY R. HASSELL, SR.


I.

In this appeal of a decree, we consider, among other things,
whether the purchasers of real estate presented sufficient
evidence to prove the sellers’ actual fraud, constructive fraud,
and breach of contract and to establish an easement by estoppel
in certain of the sellers’ land.

II. PROCEEDINGS

Steven M. Bershader and his wife, Marguerite F. Godbold (the
Bershaders), filed their second amended bill of complaint against
Prospect Development Company, Inc. ("Prospect
Development"), Alan Huntley Seeley, and Paul F. Lucas. The
Bershaders alleged that the defendants breached a real estate
sales contract and committed acts of actual and constructive
fraud. The Bershaders sought compensatory and punitive damages,
injunctive relief, and attorney’s fees and costs. The Bershaders
also requested a declaration that they owned a negative easement
in certain real property. The defendants filed responsive
pleadings in which they denied liability.

At the conclusion of an ore tenus hearing, the
chancellor held that the defendants had breached the real estate
sales contract and that they had committed acts of actual and
constructive fraud upon the Bershaders. The chancellor also held
that the Bershaders owned a negative easement in certain real
property and granted an injunction to enforce the rights accorded
by the easement. The chancellor awarded the Bershaders
compensatory damages and attorney’s fees, but refused to award
punitive damages. Prospect Development and Seeley appeal.

III. FACTS

When the chancellor hears evidence ore tenus, his
decree is entitled to the same weight as a jury verdict, and we
are bound by the chancellor’s findings of fact unless they are
plainly wrong or without evidence to support them. Rash v.
Hilb, Rogal & Hamilton Co., 251 Va. 281, 283, 467
S.E.2d 791, 793 (1996). Additionally, we will review the evidence
and all reasonable inferences fairly deduced therefrom in the
light most favorable to the Bershaders, the prevailing parties
below. Id.

In the spring of 1993, the Bershaders, who were looking for a
new home, visited the Bennett Farms subdivision in Fairfax
County. This subdivision is also referred to as Southern Oaks.
The Bershaders met with Nancy Brown, a sales agent for Prospect
Development, which was the developer of the subdivision. The
Bershaders, who are naturalists and birdwatchers, wanted to
purchase a home on a lot with a natural woodland environment.
Brown was aware of the Bershaders’ interests in wildlife and
birds, and she knew that the Bershaders wanted a lot which would
provide them with privacy and a natural woodland environment.

Brown showed the Bershaders a plat of the Southern Oaks
subdivision that identified Lot 23 and an adjacent lot identified
as "Outlot B." Outlot B was designated on the plat as
"preserved land." Brown informed the Bershaders that
the parcel was designated "preserved land" because it
had not "passed" a water percolation test. Brown told
the Bershaders that a house could not be constructed upon Outlot
B because the lot "did not perk." Brown gave the
Bershaders a brochure which contained a plat of a portion of the
subdivision. On this plat, Lot 23 was adjacent to Outlot B, and
Outlot B was designated as "preserved land."

The Bershaders had a subsequent meeting with Brown. They asked
her particular questions about the phrase "preserved
land" because they had never seen that designation on a
plat. Brown told them that Outlot B "had been tested and
perked and it would not perk and so it could not be built
upon." In response to the Bershaders’ question, "what
did perk mean?", Brown replied that "you needed to have
a septic field located on the lot and because it didn’t perk,
[Prospect Development] couldn’t locate a septic field on the lot
and so [Prospect Development] would not be able to build any
house on it and it would not be developed." Brown further
told the Bershaders that "there was no possibility of any
development or any . . . house being sited on [Outlot
B]."

The chancellor also received evidence that the Fairfax County
Health Department will not approve the construction of a septic
field on a lot if the results of a water percolation test are not
acceptable. The test determines the rate of water absorption in
soil and provides a measurement of the allowable rate of sewage
application to a soil absorption system.

The Bershaders subsequently met with Seeley, a vice-president
of Prospect Development. Brown had informed the Bershaders that
Seeley was the "project engineer" for the subdivision.
Seeley told the Bershaders that Outlot B would not
"perk" and that a house could not be constructed upon
the lot. When Ms. Godbold asked Seeley whether Outlot B’s
designation as "preserved land" could change, Seeley
responded that "once it’s been tested it’s done and it’s
— it never is going to be developed upon."

The Bershaders also met Paul Lucas, an agent of Prospect
Development, who actively participated in the marketing and sales
of the lots in the subdivision. The Bershaders asked Lucas about
Outlot B’s designation as "preserved land." Lucas
stated that the lot would not "perk" and, therefore, a
house could not be constructed upon the lot.

The Bershaders requested that Prospect Development reduce the
price of Lot 23 because it did not percolate well, and for that
reason, many trees on the lot would have to be removed so that a
triple septic field could be constructed upon the lot. Seeley
rejected the Bershaders’ request for a reduction of the price and
required that they pay a "premium" of $15,000 for Lot
23. Seeley informed the Bershaders that Lot 23 was adjacent to
Outlot B which was "preserved land," and that they
would have a view of the natural woodland environment as well as
privacy. Seeley told the Bershaders that Prospect Development
"could build this [house] for you elsewhere and you wouldn’t
have to pay that lot premium then, but then it wouldn’t be next
to the preserved land."

In May 1993, the Bershaders met with Seeley, and Mr. Bershader
"pressed" Seeley about the meaning of Outlot B’s
designation as "preserved land." Seeley told the
Bershaders that Outlot B "had been tested and that it
. . . didn’t perk and it couldn’t be developed."
Seeley stated that Outlot B "cannot be developed, can never
be developed." During the meeting, Seeley became angry
because Mr. Bershader continued to "press" him about
the meaning of the designation "preserved land."
According to Mr. Bershader, Seeley "almost got into a
rage. . . . He said what are you afraid of,
[Outlot B has] been tested, we’ve tested it, we’ve tested it, it
— it can’t be developed, it’s preserved land, what the hell
are you afraid of."

James Koutris purchased Lot 24 in the Bennett Farms
subdivision. Lot 24 is also adjacent to Outlot B. Koutris
testified that Nancy Brown informed him that Outlot B was
"preserved land" and that a house could not be
constructed on that lot because "it did not perk."
Brown gave Koutris a brochure which indicated that Outlot B was
"preserved land."

Unbeknownst to the Bershaders, water percolation tests had not
been performed on Outlot B, and Prospect Development had always
intended to construct a house on Outlot B. Even though Prospect
Development and its representatives repeatedly informed
prospective buyers in 1993 that a house could not be constructed
on Outlot B, Seeley conceded that at the time he told the
Bershaders that Outlot B "would not perk," he knew that
no water percolation tests had been performed. He admitted that
all percolation tests on Outlot B were conducted after the sale
of Lot 23 to the Bershaders. William Vermilye, an employee of the
Fairfax County Health Department, testified that no water
percolation tests were performed on Outlot B until 1996.

The Bershaders also did not know that according to the tax
records of Fairfax County Department of Tax Administration,
Outlot B was classified as "B" which meant for purposes
of Fairfax County’s tax records, the lot was "a buildable
lot." Brown testified that she was surprised when she later
learned that Prospect Development had designated Outlot B as a
buildable lot.

The Bershaders signed a contract to purchase Lot 23 with
improvements thereon for $500,000. The purchase price included a
lot premium of $15,000 because Lot 23 was adjacent to Outlot B,
which was "preserved land." The designation of Outlot B
as "preserved land" was an integral part of the
Bershaders’ decision to purchase Lot 23.

The Bershaders closed on Lot 23 in October 1993. A house,
constructed on that property, was situated so that the Bershaders
would have an optimal view of the "preserved land." The
Bershaders expended approximately $115,000 for landscaping
"to naturalize their entire lot to match the ‘preserved
land’" on Outlot B. They spent an additional $67,000 to
create a "park-like" atmosphere on their lot. The
chancellor found that the Bershaders built a house with the
natural environment they desired.

In March 1997, the Bershaders and other residents of the
Bennett Farms subdivision learned Prospect Development had
submitted a resubdivision plat to Fairfax County, and Prospect
Development sought to "resubdivide" Outlot B so that a
house could be constructed upon that lot. The County approved
Prospect Development’s request over the Bershaders’ written
objections and, in May 1997, Prospect Development’s agents began
to remove trees from Outlot B in preparation for construction.
The Bershaders obtained a temporary injunction from the
chancellor which prohibited Prospect Development from disturbing
the lot until further order of the court.

Following the ore tenus hearing, the chancellor
issued a written opinion. The chancellor specifically found that
"Seeley’s credibility as a witness [was] poor. His testimony
was disingenuous at times, particularly when he attempted to
distinguish between statements made in his individual capacity as
opposed to his statements or actions taken by Prospect, of which
he was Vice President. In testimony which the [chancellor] found
to be incredible, Seeley denied that he had personally referred
to Outlot B as ‘preserved land’ in conversations with the
Bershaders, but did not deny that Prospect had referred to Outlot
B as ‘preserved land.’ The [chancellor] also found that Seeley
manifested a cavalier attitude about lying to prospective
purchasers and lenders."

IV. BREACH OF CONTRACT

The defendants argue that the chancellor erred in holding that
Prospect Development breached its real estate sales contract with
the Bershaders. The defendants contend that the Bershaders’
evidence of the representations of Prospect Development’s agents
regarding Outlot B was inadmissible. Continuing, the defendants
assert that the contract contains (1) no reference to Outlot B
and (2) an integration clause which provides that in the absence
of an amendment in writing, the contract contains the final and
entire agreement between the parties. Responding, the Bershaders
contend that the phrase "premium lot" is ambiguous and,
therefore, parol evidence was admissible to explain the meaning
of this phrase. We agree with the Bershaders.

The Bershaders and Prospect Development executed a contract
for the sale of real property and the improvements thereon for a
price of $500,000. Paragraph 3 of the contract states in part:
"IMPROVEMENTS AND OPTIONS. Sales price to include a house
built by SELLER known as Rosewood Elevation "D"
together with the following optional extras:
 . . . premium lot . . . ."

The real estate sales contract did not define the term
"premium lot." The chancellor properly allowed the
admission of parol evidence so that the parties could explain the
meaning of this term. As we have stated:

"[I]t is equally as elementary that the [parol
evidence] rule does not apply where the writing on its
face is ambiguous, vague or indefinite or does not embody
the entire agreement. In such a case, parol evidence is
always admissible, not to contradict or vary the terms,
but to establish the real contract between the
parties."

Georgiades v. Biggs, 197 Va. 630, 634, 90 S.E.2d
850, 854 (1956); see e.g. Cascades N. Venture,
Ltd. Partnership
v. PRC, Inc., 249 Va. 574, 579, 457
S.E.2d 370, 373 (1995).

Our review of the evidence of record clearly demonstrates that
the lot that the Bershaders purchased was described as a
"premium lot" because it was adjacent to
"preserved land." For example, Seeley told the
Bershaders that if they did not wish to pay $15,000 for a premium
lot, Prospect Development would construct a house on another lot
that would not be adjacent to "preserved land."

It is true, as the defendants assert, that the real estate
sales contract contains an integration clause. However, the
integration clause does not prohibit the admission of parol
evidence which does not contradict or vary the terms of the real
estate contract, but rather explains the meaning of the term
"premium lot."[1]

V. ACTUAL FRAUD

The defendants argue that the evidence is not sufficient to
support the chancellor’s finding that they committed acts which
constituted actual fraud. The Bershaders argue, and we agree,
that there is more than sufficient evidence to support the
chancellor’s finding of actual fraud.

We have stated that a "litigant who prosecutes a cause of
action for actual fraud must prove by clear and convincing
evidence: (1) a false representation, (2) of a material fact, (3)
made intentionally and knowingly, (4) with intent to mislead, (5)
reliance by the party misled, and (6) resulting damage to the
party misled." Bryant v. Peckinpaugh, 241 Va.
172, 175, 400 S.E.2d 201, 203 (1991); Winn v. Aleda
Constr. Co.
, 227 Va. 304, 308, 315 S.E.2d 193, 195 (1984). We
hold, as shown by the evidence summarized in Section III of this
opinion, that the Bershaders proved by clear and convincing
evidence each of the elements necessary to establish a cause of
action for actual fraud.

The defendants repeatedly told the Bershaders that:
percolation tests were performed on Outlot B, the percolation
tests were not successful, the lot was designated as
"preserved land" and, therefore, a house could never be
constructed upon the lot. The defendants assert that these
statements cannot support an action for actual fraud because the
statements are merely assertions about future events. The
defendants’ contention is without merit. Certainly, the
defendants’ statements that percolation tests had been performed
on Outlot B and those tests were not successful are neither
opinions nor statements about future events.

VI. CONSTRUCTIVE FRAUD

The defendants assert that the Bershaders failed to prove
constructive fraud by clear and convincing evidence. Essentially,
the defendants contend that any statements the Bershaders relied
upon are opinions and statements of future events, not
preexisting facts. We disagree with the defendants’ contentions.

In Blair Constr., Inc. v. Weatherford, 253 Va.
343, 346-47, 485 S.E.2d 137, 138-39 (1997), we stated:

"’[T]he elements of a cause of action for
constructive fraud are a showing by clear and convincing
evidence that a false representation of a material fact
was made innocently or negligently, and the injured party
was damaged as a result of his reliance upon the
misrepresentation. Evaluation Research Corp. v. Alequin,
247 Va. 143, 148, 439 S.E.2d 387, 390 (1994); accord
Nationwide Mut. Ins. Co. v. Hargraves, 242
Va. 88, 92, 405 S.E.2d 848, 851 (1991); Kitchen v.
Throckmorton, 223 Va. 164, 171, 286 S.E.2d 673,
676 (1982). Additionally, "[a] finding of
. . . constructive fraud requires clear and
convincing evidence that one has represented as true what
is really false, in such a way as to induce a reasonable
person to believe it, with the intent that the person
will act upon this representation." Alequin,
247 Va. at 148, 439 S.E.2d at 390.’ Mortarino v. Consultant
Eng. Services
, 251 Va. 289, 295, 467 S.E.2d 778, 782
(1996).

"Additionally, ‘fraud must relate to a present or
a pre-existing fact, and cannot ordinarily be predicated
on unfulfilled promises or statements as to future
events.’ Patrick v. Summers, 235 Va. 452,
454, 369 S.E.2d 162, 164 (1988) (quoting Soble v. Herman,
175 Va. 489, 500, 9 S.E.2d 459, 464 (1940))."

We will not restate the evidence summarized in Section III of
this opinion. We hold that the Bershaders proved each of the
elements of constructive fraud by clear and convincing evidence.

Additionally, the defendants’ statements that Prospect
Development had conducted water percolation tests on Outlot B and
such tests were not successful are neither opinions nor
statements of future events. Rather, these representations are
factual statements. Furthermore, the statement that Outlot B
failed to pass a water percolation test is an unambiguous
representation of the present quality or character of the
property and, thus, is a representation of fact, and not a mere
expression of opinion. See Mortarino, 251 Va. at
294, 467 S.E.2d at 781; see also Bergmueller
v. Minnick, 238 Va. 332, 337, 383 S.E.2d 722, 724 (1989).

VII. EASEMENT BY ESTOPPEL

The chancellor, applying Oney v. West Buena Vista
Land Co.
, 104 Va. 580, 584, 52 S.E. 343, 344 (1905), held
that the Bershaders established that they have a negative
easement that had been created by estoppel, and the chancellor
entered a decree that required Prospect Development to record the
easement in favor of the Bershaders in the chains of title to Lot
23 and Outlot B. The chancellor also entered an injunction to
enforce the easement. The defendants argue that the chancellor
erred because an easement by estoppel cannot be created based
upon the evidence of record. We disagree.

We have stated that an easement is "a privilege without
profit, which the owner of one tenement has a right to enjoy in
respect of that tenement in or over the tenement of another
person; by reason whereof the latter is obliged to suffer, or
refrain from doing something on his own tenement for the
advantage of the former." Stevenson v. Wallace,
68 Va. (27 Gratt.) 77, 87 (1876). We have also stated:

"’Easements correspond to the servitudes of the
civil law, and consist (1) of privileges on the part of
one person to use the land of another (the servient
tract) in a particular manner and for a particular
purpose, or (2) of rights to demand that the
owner of the servient tract refrain from certain uses of
his own land
, the privileges or rights in either case
not being inconsistent with a general property in the
owner of the servient tract. The easement further
involves the right of freedom in its exercise from
interference by the owner of the servient tract or other
persons. Examples of easements are rights of way, of
drainage, or light and air, etc.’ [Footnotes omitted] 1
Minor on Real Property (2d Ed., Ribble),
Sect. 87."

Bunn v. Offutt, 216 Va. 681, 684, 222 S.E.2d
522, 525 (1976) (emphasis added); Walters v. Smith,
186 Va. 159, 172, 41 S.E.2d 617, 623 (1947).

We have recognized that "[e]asements may be created by
express grant or reservation, by implication, by estoppel
or by prescription." Bunn, 216 Va. at 684, 222 S.E.2d
at 525 (emphasis added). We have specifically applied the
doctrine of an easement by estoppel in at least two instances. In
the first instance, we held that a property owner had an easement
by estoppel to use an alley owned by another. Walters, 186
Va. at 173, 41 S.E.2d at 624. In doing so, we stated:

"’Easements are sometimes created by estoppel;
for example, if the vendor of land actually or
constructively makes representations as to the
existence of an easement appurtenant to the land sold to
be enjoyed in land which the vendor has not sold. Thus,
where a vendor describes the land sold as bounded on a street
described as running through the vendor’s unsold land,
the vendor is, as against his vendee, (though not
necessarily as against the public, or third persons),
estopped to deny the existence of such a street, the
conveyance practically creating a private right of way
over the vendor’s land along the route described
in favor of the grantee.’"

Id. at 172, 41 S.E.2d at 623.

In the second instance, we considered whether certain property
owners had an easement by estoppel to use a bridge. Oney
v. West Buena Vista Land Co., supra. The appellee,
a landowner, subdivided a large tract into blocks, lots, streets,
and alleys and recorded a plat which showed a bridge which
connected the streets of the subdivision with the streets of the
town of Buena Vista, across a stream. J. L. Oney purchased a mill
shown on the plat, and he paid approximately double the amount
the property would have been worth without the designation on the
plat of the bridge. 104 Va. at 581-82, 52 S.E. at 343.

After construction of the bridge, Oney and other property
owners in the subdivision, as well as the public, used the bridge
for many years. Subsequently, the bridge needed repair, and Oney
and others subscribed to a fund to repair the bridge. West Buena
Vista sold the bridge, and the purchasers began to demolish it.
Oney sought a bill in equity to enjoin the removal of the bridge.
104 Va. at 582-83, 52 S.E. at 344.

Reversing a decree which dismissed Oney’s bill, we held that
under these circumstances, Oney had an easement to use the
bridge. We stated that it would be "manifestly unjust to
permit [the land company], after having used this bridge as an
inducement to [Oney] and others to buy its property, and
permitted its use as stated, to remove [the bridge] and thereby
deprive these purchasers of a valuable and indispensable easement
to their property." 104 Va. at 586, 52 S.E. at 345. We
observed in Jones v. Beavers, 221 Va. 214, 219, 269
S.E.2d 775, 778 (1980), that this Court applied principles of
estoppel in holding that Oney owned an easement to use the
bridge.

We have never had occasion to apply an easement by estoppel to
the second class of easements described earlier as "rights
to demand that the owner of the servient tract refrain from
certain uses of his own land
." Bunn, 216 Va. at
684, 222 S.E.2d at 525. This is an easement in which the owner of
the servient tract agrees to refrain from certain uses of his
land. One commentator has described this type of easement,
referred to as a negative easement, as follows:

"[A] negative easement consists solely of a veto
power. The easement owner has, under such an easement,
the power to prevent the servient owner from doing, on
his premises, acts which, but for the easement, the
servient owner would be privileged to do. Thus, such an
easement may assure its owner access of light to his
windows or to a solar energy device from the servient
land, by giving the owner power to prevent the creation
on the servient land of structures obstructing such
access . . . ."

4 Richard R. Powell, Powell on Real Property
Sect. 34.02[2][c] (Patrick J. Rowan, ed. 1998). Thus, a
negative easement does not bestow upon the owner of the
dominant tract the right to travel physically upon the servient
estate, but rather requires that the owner of the servient estate
refrain from undertaking certain activities on the servient
estate which the owner would otherwise be entitled to perform.

We hold that the Bershaders have established that they have a
negative easement in Outlot B, created by principles of estoppel
arising from the representations and inducements of Prospect
Development’s agents. Here, just as in Oney, it would be
manifestly unjust to permit Prospect Development to construct a
house upon Outlot B. Relying upon the defendants’ numerous
representations and inducements that Outlot B would always remain
as "preserved land," and that "there was no
possibility" a house would be constructed on Outlot B, the
Bershaders paid $500,000 to purchase Lot 23 with a house
constructed thereon to enjoy the view and privacy afforded by
Outlot B’s status as "preserved land."

We have recognized that there are two classes of easements,
easements appurtenant and easements in gross. An easement
appurtenant, often referred to as a pure easement, has both a
dominant and servient estate and is capable of being transferred
and inherited. Lester Coal Corp. v. Lester, 203 Va.
93, 97, 122 S.E.2d 901, 904 (1961). "Such an easement passes
with the land to which it is appurtenant." Id. An
easement in gross, sometimes called a personal easement, is not
appurtenant to any estate in land, but, rather, "the
servitude is imposed upon land with the benefit thereof running
to an individual. Such an easement cannot be transferred by the
individual to whom it is originally given, nor can it pass by
inheritance." Id. We have held that "[a]n
easement is never presumed to be merely personal, and it will not
be held to be in gross, unless it plainly appears that the
parties so intended." Id.

Applying these principles here, we hold that there is no
evidence in the record before this Court that the Bershaders’
easement, created by principles of estoppel, was intended to be
an easement in gross. Thus, the Bershaders’ easement is
appurtenant and "passes with the land."

The defendants assert that the Bershaders do not have an
ownership interest in Outlot B, and they do not have the right
"to set foot on Outlot B . . . [and the] deed
conveyed no rights in Outlot B." However, these facts do not
defeat the Bershaders’ easement by estoppel. As we have already
stated, an easement may prohibit the owner of the servient estate
from performing certain acts upon that estate. Bunn, 216
Va. at 684, 222 S.E.2d at 525.

We reject the defendants’ assertion that the creation of an
easement by estoppel under the facts and circumstances of this
case is violative of the statute of frauds. The statute of frauds
"will not be applied when the result is to cause a fraud or
perpetrate a wrong, because the object of the statute is to
prevent frauds." Drake v. Livesay, 231 Va.
117, 120, 341 S.E.2d 186, 188 (1986); Murphy v. Nolte
& Co.
, 226 Va. 76, 81, 307 S.E.2d 242, 245 (1983).

VIII. COMPENSATORY DAMAGES

The chancellor awarded the Bershaders damages in the amount of
$34,000 which represented the costs of replacing trees that the
defendants had removed from Outlot B before the chancellor issued
the temporary injunction. The defendants contend that the
chancellor erred in awarding the Bershaders $34,000 in damages. [2] The Bershaders respond,
however, that the chancellor properly awarded them damages based
upon the loss of the trees removed from Outlot B. We disagree
with the Bershaders.

Generally, a person who acquired property by virtue of a
commercial transaction and who has been defrauded by false
representations is entitled to recover as damages the difference
between the actual value of the property at the time the contract
was made and the value that the property would have possessed had
the representation been true. See Carstensen v. Chrisland
Corp.
, 247 Va. 433, 444-45, 442 S.E.2d 660, 666-67 (1994); Long
& Foster Real Estate, Inc.
v. Clay, 231 Va. 170,
176, 343 S.E.2d 297, 301 (1986); see also Restatement
(Second) of Torts
Sect. 549 (1992).

The Bershaders, however, did not present evidence which
established the difference between the value of Lot 23 at the
time they executed the real estate sales contract and the value
of Lot 23 had it been adjacent to "preserved land."
Rather, the Bershaders presented the testimony of William C.
Harvey, II, who qualified as an expert on the subject of land
valuation and appraisal. He testified that the market value of
the Bershaders’ property decreased after the trees were removed
from Outlot B. His opinion, however, was based upon the cost of
replacing the trees that the defendants had removed from Outlot
B.

We have not permitted this measure of damages in a fraud case,
and we decline to do so in this case. As we have recognized in
condemnation proceedings, which we acknowledge are vastly
different from actions for constructive or actual fraud, the
replacement cost rule could permit a landowner to recover
compensation which far exceeds the value of the real property. See
State Highway Comm’r v. Allmond, 220 Va. 235, 239,
257 S.E.2d 832, 834-35 (1979); State Highway Comm’r v. Parr,
217 Va. 522, 524-25, 230 S.E.2d 253, 255 (1976).

IX. ATTORNEY’S FEES

The Bershaders incurred and paid $151,378 in attorney’s fees.
The chancellor awarded them $151,378 for their incurred
attorney’s fees and $20,000 for future attorney’s fees the
Bershaders were expected to incur in their efforts to satisfy the
judgment. The defendants argue that the chancellor erred in
awarding attorney’s fees in a suit based upon common law
doctrines of fraud, estoppel, and breach of contract. The
defendants contend that the Bershaders have failed to identify
any contract or statute which provides for the payment of their
attorney’s fees, and in the absence of such authorization, the
chancellor cannot make an award of attorney’s fees. Responding,
the Bershaders contend that the chancellor was entitled to grant
them complete relief, which included an award of attorney’s fees.

The general rule in this Commonwealth is that in the absence
of a statute or contract to the contrary, a court may not award
attorney’s fees to the prevailing party. Gilmore v. Basic
Industries, Inc.
, 233 Va. 485, 490, 357 S.E.2d 514, 517
(1987). There are, however, certain exceptions to this rule. For
example, we have permitted a prevailing party, who prosecuted a
cause of action for malicious prosecution or false imprisonment,
to recover attorney’s fees. Burruss v. Hines, 94
Va. 413, 420, 26 S.E. 875, 878 (1897); Bolton v. Vellines,
94 Va. 393, 404, 26 S.E. 847, 850 (1897).

We have held that "where a breach of contract has forced
the plaintiff to maintain or defend a suit with a third person,
he may recover the counsel fees incurred by him in the former
suit provided they are reasonable in amount and reasonably
incurred." Owen v. Shelton, 221 Va. 1051,
1055-56, 277 S.E.2d 189, 192 (1981); accord Fidelity
Nat. Title Ins. Co.
v. Southern Heritage Title Ins.
Agency, Inc.
, 257 Va. 246, 253-54, 512 S.E.2d 553, 557-58
(1999); Hiss v. Friedberg, 201 Va. 572, 577-78, 112
S.E.2d 871, 875-76 (1960). We have permitted a trustee, who
defended his trust in good faith, to recover attorney’s fees from
the estate, Cooper v. Brodie, 253 Va. 38, 44, 480
S.E.2d 101, 104 (1997), and we have approved an award of
attorney’s fees in certain cases involving alimony and support
disputes even though such awards of attorney’s fees were neither
authorized by statute nor by contract. See Carswell
v. Masterson, 224 Va. 329, 331-32, 295 S.E.2d 899, 900-01
(1982); Alig v. Alig, 220 Va. 80, 86, 255 S.E.2d
494, 498 (1979); McKeel v. McKeel, 185 Va. 108,
116-17, 37 S.E.2d 746, 750-51 (1946); McClaugherty v. McClaugherty,
180 Va. 51, 69, 21 S.E.2d 761, 768 (1942); Heflin v. Heflin,
177 Va. 385, 399-400, 14 S.E.2d 317, 322 (1941).

We hold that in a fraud suit, a chancellor, in the exercise of
his discretion, may award attorney’s fees to a defrauded party.
When deciding whether to award attorney’s fees, the chancellor
must consider the circumstances surrounding the fraudulent acts
and the nature of the relief granted to the defrauded party.
Here, the chancellor did not abuse his discretion in awarding
attorney’s fees incurred and paid by the Bershaders which, in
this instance, total $151,378. The evidence of record, summarized
in Section III of this opinion, demonstrates that the defendants
engaged in callous, deliberate, deceitful acts that the
chancellor described as a pattern of misconduct, which misled the
Bershaders as well as other purchasers of property in the
subdivision. Indeed, had the chancellor failed to award
attorney’s fees to the Bershaders, their victory would have been
hollow because, as the chancellor observed:

"I’m simply unable to see the equity involved in
[holding that the defendants] actually defrauded [the
Bershaders but they are] going to have to spend
. . . over $171,000 in attorneys’ fees
. . . . To say that this case was hotly
contested by the defendants I think is something of an
understatement. It was certainly hotly contested in all
respects by the defense. And it was not a precise,
surgical defense in this case. It was a global,
comprehensive, all inclusive — basically defend
everything and deny everything. And I’m not by saying
that faulting the attorneys. That was the position taken
by the defendants themselves. . . . It did
take an enormous amount of effort by the complainants to
prove their case in this situation."

The defendants also argue that the chancellor erred because he
awarded the Bershaders $20,000 in attorney’s fees which were the
estimated costs of collection of the judgment "without
regard to whether the services were successful, necessary or even
proper." Continuing, the defendants point out that the
"entire judgment of $205,378 has now been secured by a cash
[appeal] bond which [has] been paid into the Circuit Court. There
will be no costs of collection of any portion of the judgment
that may be affirmed." The Bershaders do not respond to this
assertion.

We hold that the chancellor erred by awarding the Bershaders
$20,000 in anticipated attorney’s fees for collection of the
judgment. The defendants have secured a cash appeal bond which
has been paid into the circuit court and, hence, the Bershaders
will not incur those attorney’s fees.

X. PAUL LUCAS

Paul Lucas, who was named as a defendant in the amended bill
of complaint but is not an appellant in this proceeding, filed a
suggestion of bankruptcy in December 1997. The filing of the
bankruptcy petition operated as an automatic stay against the
continuation of the circuit court proceeding against him. See
11 U.S.C. Sect. 362(a)(1) (1993). The chancellor, however,
entered a judgment against Prospect Development, Seeley, and
Lucas, jointly and severally. Defendants, Prospect Development
and Seeley, argue on appeal that the chancellor erred in
rendering a judgment against Lucas. We do not consider this issue
because Prospect Development and Seeley cannot assert this issue
on behalf of Lucas, who is not a party to this appeal.

XI. DIRECTIONS

We will affirm those portions of the chancellor’s decree which
hold that the defendants breached the real estate sales contract
with the Bershaders and that the defendants committed actual and
constructive fraud. We will affirm that portion of the decree
which establishes that the Bershaders have a negative easement in
Outlot B. We will also affirm that portion of the decree which
grants permanent injunctive relief and requires Prospect
Development to record an easement in favor of the Bershaders in
the chains of title to Lot 23 and Outlot B. We will reverse that
portion of the decree that awards damages of $34,000 to the
Bershaders. We will modify the decree to reduce the award of
attorney’s fees from $171,378 to $151,378. Since the defendants
have not assigned error to the balance of the chancellor’s
decree, we will affirm all portions of the decree that are not
modified or reversed.

Affirmed in part, reversed in part,modified in part,and
final judgment.


JUSTICE LACY, with whom CHIEF JUSTICE CARRICO and JUSTICE
KINSER join, concurring in part and dissenting in part.

I concur in the majority’s opinion except for that portion
affirming the trial court’s grant of a negative easement by
estoppel. Count IV of the bill of complaint alleged that the
sales agreement between Prospect Development and the Bershaders
provided that Outlot B would not be cleared or developed. The
Bershaders alleged that Prospect Development breached this
agreement and sought specific performance of the contract. The
trial court found that the sales contract was breached and
granted specific performance "to the extent" that it
found an easement by estoppel, and it awarded permanent
injunctive relief to the Bershaders.

I agree with the trial court and the majority that Prospect
Development breached its contract and that an award of specific
performance and injunctive relief was appropriate; however, under
the pleadings and facts of this case, it is unnecessary for this
Court to sanction a new cause of action for "negative
easements by estoppel" because awarding specific performance
of the sales contract and permanent injunctive relief enforces
the rights the Bershaders acquired in the purchase of Lot 23 from
Prospect Development. Furthermore, in my opinion, the facts of
this case are insufficient to support the creation of an
easement. Therefore, I respectfully dissent.

In their bill of complaint, the Bershaders alleged that
"[t]he parties agreed that as a condition to the purchase of
the Property by the Bershaders, the adjoining ‘Preserved Land’
would not be cleared and/or developed." As evidence of this
alleged contractual obligation of Prospect Development, the
Bershaders offered the "New Home Agreement of Sale."
The agreement provides that the sale price would "include a
house built by SELLER known as ROSEWOOD ELEVATION "D"
together with the following optional extras: . . . PREMIUM LOT .
. . ." Finding that the term "premium lot" was
ambiguous, the trial court properly admitted parol testimony to
clarify that term. The parol testimony established that the
Bershaders paid an additional $15,000 in return for the promise
that Prospect Development would not develop Outlot B. Thus, the
sales agreement, as clarified by parol testimony, contains a written
promise with respect to the use of land that Outlot B would not
be developed by Prospect Development. Such a promise is
specifically enforceable and should be enforced in this case.

The easement created by the trial court and affirmed by the
majority was based on this contract as well as oral
representations made by Prospect Development. In my opinion,
however, neither the contract nor the oral representations relied
on by the Bershaders, the trial court, and the majority are
sufficient to give rise to an easement, by estoppel or otherwise.
An easement is the right of one person over the use of another’s
land. The oral representations in this case — that Outlot B
was designated as preserved land because it would not perk and
could not be developed — even if true, do not imply or
suggest that the Bershaders have any right to prevent the
development of that parcel. Rather, these representations reflect
that a third party, the government, has utilized its regulatory
power to limit use of the land. Any change in the regulations or
the extension of a sewer system to the area would affect whether
Outlot B would perk or whether it could be developed. The
Bershaders have no right to affect either of these contingencies
and, in the event either occurs, the reasons for the preserved
lot designation for Outlot B would no longer exist.

In this regard, the designation of Outlot B as preserved land
is analogous to the zoning classification of a parcel of land. A
purchaser of land has no right to enforce continuation of a
specific zoning classification on an adjacent parcel. Unless such
purchaser takes measures to secure in himself the right to
control the use of a neighboring parcel, the purchaser relies on
the zoning classification at his peril. See Town of
Vienna Council v. Kohler
, 218 Va. 966, 976, 244 S.E.2d 542,
548 (1978). Therefore, even though the Bershaders were induced to
purchase their lot through oral representations that Outlot B was
"preserved land" which did not perk and could not be
developed, these representations did not give rise to any right
in the Bershaders or any owner of Lot 23 to prevent the
development of Outlot B.[3]

The right which the Bershaders did acquire to prevent
development of Outlot B was the right to enforce the written
contract promise not to develop Outlot B against the promisor,
Prospect Development. [4]
And, as I said earlier, the trial court, the majority, and I all
agree that the Bershaders are entitled to enforcement of this
contractual right, in this case through specific performance.[5]

In summary, the Bershaders were induced to purchase Lot 23 by
the fraudulent representations made by Prospect Development that
Outlot B was preserved land because it did not perk and could not
be developed and are thus entitled to recover under their fraud
counts in their bill of complaint. Prospect Development breached
the contract for sale and the Bershaders are entitled to specific
performance of the contract. However, in my opinion, the
Bershaders are not entitled to an easement by estoppel.

Accordingly, I would reverse the trial court’s judgment
establishing an easement by estoppel and ordering such easement
entered in the chains of title for Lot 23 and Outlot B. I would
affirm the permanent injunction issued by the trial court against
Prospect Development Company, Paul Lucas, and Alan Seeley
enjoining them from clearing or developing Outlot B.

 

 

FOOTNOTES:

[1]
We do not consider the defendants’ argument that the Bershaders’
breach of contract claim is unenforceable because of the statute
of limitations and the statute of frauds. These contentions are
not the subject of the defendants’ assignment of error which
states: "The Circuit Court erred in finding that Prospect
Development Company, Inc. breached its sales contract with Steven
Bershader and Marguerite Godbold." Rule 5:27.

[2]
The chancellor stated in his written opinion that: "The
Bershaders requested compensatory damages in the amount of
$500,000 and punitive damages in the amount of $350,000. The
Court finds that an additional monetary award of compensatory
damages is not necessary given the relief awarded by the
Court."

[3]
These statements, however, as previously discussed were false,
and they are the basis for the Bershaders’ recovery under their
fraud counts.

[4]
Because we do not recognize the doctrine of promissory estoppel,
an oral promise not to develop the land would be unenforceable
due to noncompliance with the Statute of Frauds.

[5]
This written promise potentially creates a common law
"restrictive covenant," or "promise with respect
to the use of land" rather than negative easement. See
Jon W. Bruce & James W. Ely, Jr., The Law of Easements and
Licenses in Land
, Easements Differentiated from Real
Covenants Sect. 1.07 (rev. ed. 1995). Although similar to an
easement in effect, a restrictive covenant arises from a contract
rather than from documents of conveyance. See Oney v.
West Buena Vista Land Co.
, 104 Va. 580, 52 S.E. 343 (1905); Walters
v. Smith
, 186 Va. 159, 41 S.E.2d 617 (1947); Uriel Reichman, Toward
a Unified Concept of Servitudes
, 55 So. Cal. L.Rev. 1177
(1982). Such a contractual obligation creates in the promisee a
property right in the land of the promisor, enforceable by
specific performance. Restatement of Property Sect. 522 cmt. b
(1944). Furthermore, the burden of such a "restrictive
covenant" would be enforceable against Prospect’s successors
in estate if the party seeking enforcement (the Bershaders or
their successors in estate) could establish the elements that it
"touches and concerns" the land, that there be
horizontal privity, vertical privity, notice, and intent.
Restatement of Property Sects. 530-537. However, whether the
sales contract created a restrictive covenant need not and should
not be resolved here because the Bershaders, while seeking
enforcement of the sales contract, have not argued that the
contract is enforceable as a restrictive covenant.

Scroll To Top