Prospect Development Co. v. Bershader
258 Va. 75, 515 S.E.2d 291 (1999)
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Rule of Law:
A seller's oral and written representations that an adjacent parcel of land will remain undeveloped, which induce a buyer to purchase property at a premium in reliance on those representations, can create a negative easement by estoppel over the seller's land.
Facts:
- Steven Bershader and Marguerite Godbold, who are naturalists, sought to purchase a home in a natural woodland environment from developer Prospect Development Company, Inc.
- Prospect Development's agents, including Nancy Brown, Alan Seeley, and Paul Lucas, showed the Bershaders Lot 23, which was adjacent to a parcel designated on plats and brochures as 'Outlot B, preserved land'.
- Prospect Development's agents repeatedly told the Bershaders that Outlot B could not be developed because it had failed percolation tests required for a septic system and that it would 'never be developed'.
- Unbeknownst to the Bershaders, no percolation tests had been performed on Outlot B at the time of these representations, and Prospect Development intended to build on it.
- Relying on these representations, the Bershaders purchased Lot 23 for $500,000 in May 1993, which included paying a $15,000 'premium' specifically because the lot was adjacent to the 'preserved land'.
- The Bershaders built their home and invested over $180,000 in landscaping to complement the natural view of Outlot B.
- In March 1997, Prospect Development began removing trees from Outlot B in preparation for constructing a house on it.
Procedural Posture:
- Steven and Marguerite Bershader filed a bill of complaint against Prospect Development Company, Inc., Alan Seeley, and Paul Lucas in a Virginia Circuit Court (trial court).
- The complaint alleged breach of contract, actual fraud, and constructive fraud, and sought damages, injunctive relief, and a declaration of a negative easement.
- After an ore tenus hearing, the chancellor (trial judge) found for the Bershaders on all counts.
- The chancellor's decree held that the defendants had breached the contract and committed fraud, established a negative easement in favor of the Bershaders over Outlot B, and awarded compensatory damages, attorney's fees, and a permanent injunction.
- Prospect Development and Seeley (appellants) appealed the chancellor's decree to the Supreme Court of Virginia, with the Bershaders as appellees.
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Issue:
Does a seller's repeated representation that an adjacent lot is 'preserved land' that cannot be developed, upon which a buyer relies when purchasing their property, create a negative easement by estoppel preventing the seller from later developing that adjacent lot?
Opinions:
Majority - Justice Hassell
Yes, the seller's representations create a negative easement by estoppel. The court held that where a seller's representations and inducements about adjacent land are relied upon by a buyer to their detriment, it would be manifestly unjust to permit the seller to act contrary to those representations. The court found that the Bershaders proved actual fraud by clear and convincing evidence, as Prospect's agents made intentional, false representations of material fact (that percolation tests were performed and failed) to mislead the Bershaders into paying a premium for their lot. The court also affirmed the finding of constructive fraud and breach of contract, holding that parol evidence was admissible to explain the ambiguous contract term 'premium lot'. The doctrine of easement by estoppel was extended to create a negative easement, which is an appurtenant right that runs with the land, preventing Prospect from developing Outlot B. This prevents the statute of frauds from being used to perpetrate a fraud.
Concurring-in-part-and-dissenting-in-part - Justice Lacy
No, the facts are insufficient to support the creation of a negative easement by estoppel. While Prospect Development clearly breached its contract and committed fraud, the appropriate remedy is specific performance of the sales contract and permanent injunctive relief against the developer, not the creation of a new property right. The representations about Outlot B not 'perking' were based on governmental regulatory status, which could change, and did not grant the Bershaders a permanent right to control the use of the adjacent parcel. Creating a negative easement by estoppel is an unnecessary and overreaching step when a contractual remedy would provide the Bershaders with the full benefit of their bargain against the party that wronged them, without encumbering the land for all future owners.
Analysis:
This decision is significant for formally recognizing in Virginia that the doctrine of easement by estoppel can be applied to create a negative easement—a right to prevent a landowner from using their property in a certain way. It establishes that a developer's sales representations can create durable property rights that run with the land, even if not explicitly written into the deed. The ruling serves as a powerful tool for purchasers who rely on promises regarding adjacent land and as a stark warning to developers about the binding nature of their marketing claims. The dissent underscores the legal tension between enforcing a personal, contractual promise (via specific performance) and creating a permanent, real property right (an easement) that binds subsequent owners.
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