Prospect Development Co. v. Bershader

Present: All the Justices

PROSPECT DEVELOPMENT COMPANY, INC.,
ET AL.
OPINION BY JUSTICE LEROY R. HASSELL, SR.
v. Record No. 981673 June 11, 1999

STEVEN M. BERSHADER, ET AL.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
David T. Stitt, Judge

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

2
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?",

3
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."

4
 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

5
"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,

6
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

7
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

8
[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 . . . ."

9
 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

10
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

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.

11
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

12
 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

13
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

14
 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), § 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

15
 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

16
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 . . . ."

17
4 Richard R. Powell, Powell on Real Property § 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,

18
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.

19
 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

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."

20
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 § 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

21
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.

22
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,

23
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

24
 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

25
against the continuation of the circuit court proceeding

against him. See 11 U.S.C. § 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

26
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

27
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.

28
 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

29
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

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,

30
 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

Easements Differentiated from Real Covenants § 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 § 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 §§ 530-537. However, whether the sales contract
created a restrictive covenant need not and should not be
resolved here because the Bershaders, while seeking

31
trial court against Prospect Development Company, Paul Lucas,

and Alan Seeley enjoining them from clearing or developing

Outlot B.

enforcement of the sales contract, have not argued that the
contract is enforceable as a restrictive covenant.

32