## Facts

- Steven M. Bershader and Marguerite F. Godbold sought a home in a wooded, private setting and visited a residential subdivision developed by Prospect Development Company, Inc.
- Prospect’s sales agent and later Prospect’s vice president represented that the adjacent parcel (Outlot B), shown on the plat as “preserved land,” had failed percolation testing and could not and would never be developed.
- No percolation tests had been performed on Outlot B, and Prospect intended to build a home there.
- Relying on these statements, the buyers purchased Lot 23 and a new home at a price that included a $15,000 premium due to its adjacency to the “preserved land.”
- After closing, the buyers spent about $115,000 on landscaping designed to integrate their property with the undeveloped adjacent parcel.
- Prospect later sought and obtained county approval to resubdivide Outlot B to allow construction and began tree removal.
- The buyers obtained a temporary injunction and filed an equity action alleging breach of contract and actual and constructive fraud, seeking damages, permanent injunctive relief, attorney’s fees, and a declaration of a negative easement over Outlot B.
- After an ore tenus hearing, the chancellor found breach of contract, actual and constructive fraud, declared a negative restrictive easement in Outlot B, permanently enjoined development inconsistent with that restriction, awarded compensatory damages and attorney’s fees, and denied punitive damages.

## Issues

1. Whether the evidence supported findings of actual fraud, constructive fraud, and breach of contract regarding representations about adjacent land.
2. Whether equity could recognize and enforce a negative restrictive easement (negative servitude) by estoppel over Outlot B based on oral representations and purchaser reliance.
3. Whether a court of equity could award attorney’s fees for fraudulent conduct absent statutory or contractual authorization.
4. Whether the compensatory damages and attorney’s fee amounts were proper in light of the relief granted.

## Decision

- The court affirmed the findings of breach of contract, actual fraud, and constructive fraud.
- The court affirmed the declaration and enforcement of a negative restrictive easement in Outlot B and the permanent injunction.
- The court reversed the compensatory damages award.
- The court upheld an attorney’s fee award in principle but reduced the amount and modified the decree accordingly.

## Legal Principles

- Under ore tenus review, a chancellor’s factual findings are treated with the weight of a jury verdict and will not be disturbed unless plainly wrong or unsupported by evidence.
- Fraud must be based on a present or pre-existing fact; however, statements framed as based on prior testing and current site conditions can be actionable misrepresentations of existing fact, not mere predictions.
- Actual fraud requires a knowing, material misrepresentation made to induce reliance, with justifiable reliance and resulting damage; constructive fraud requires a material misrepresentation relied upon to the plaintiff’s detriment without proof of intent to deceive.
- Equity may impose and enforce a negative servitude by estoppel when a landowner’s representations foreseeably induce purchasers to pay a premium and incur substantial expenditures in reliance on the promise that adjacent land will remain undeveloped, even if no written easement appears in the contract or deed.
- Although the American Rule generally bars fee shifting, a court of equity may award attorney’s fees as part of relief in an appropriate fraud case to make the plaintiff whole; the amount must be reasonable and proportionate to the circumstances and other remedies.

## Conclusion

The court sustained liability for fraud and breach arising from a developer’s false representations about adjacent “preserved land,” enforced a negative restriction on development by estoppel through injunctive relief, but limited monetary recovery by reversing compensatory damages and reducing the attorney’s fees award.


Prospect Dev. Co. v. Bershader, 258 Va. 75, 515 S.E.2d 291 (Va. 1999)