515 S.E.2d 291 (Va. 1999), 981673, Prospect Development Co., Inc. v. Bershader

Docket Nº:981673
Citation:515 S.E.2d 291, 258 Va. 75
Opinion Judge:[6] The opinion of the court was delivered by: Justice Leroy R. Hassell, Sr.
Party Name:PROSPECT DEVELOPMENT COMPANY, INC., et al. v. Steven M. BERSHADER, et al.
Case Date:June 11, 1999
Court:Supreme Court of Virginia
 
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Page 291

515 S.E.2d 291 (Va. 1999)

258 Va. 75

PROSPECT DEVELOPMENT COMPANY, INC., et al.

v.

Steven M. BERSHADER, et al.

No. 981673

Supreme Court of Virginia.

June 11, 1999.

Page 292

[Copyrighted Material Omitted]

Page 293

[258 Va. 79] George F. Trowbridge, Jr. (Michael A. Mays, on briefs), for appellants.

R. Peyton Mahaffey (Daniel P. Lyon; McCandlish & Lillard, on brief), Fairfax, for appellees.

Present: All the Justices.

HASSELL, Justice.

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.

  1. 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 [258 Va. 80] 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

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    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 [258 Va. 81] 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

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    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 [258 Va. 82] 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.

    [258 Va. 83] 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...

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