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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.
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 and Prospect Development executed a contract for the sale of land and a house built thereon, based on repeated representations by defendants, the developer and its vice president, that an adjacent lot would not be built upon because it did not pass percolation tests. In fact, no such tests were performed until after the contract was signed. Subsequently, defendants' obtained county approval to build a house on the lot. The Bershaders sought an injunction to bar the construction. 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 appealed.
Did the Bershaders present 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?
The court 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." The court found that the Bershaders proved by clear and convincing evidence each of the elements necessary to establish a cause of action for actual fraud. The court affirmed all aspects of the relief granted except for 1) the award of compensatory damages for cost of replacing removed trees on the adjacent lot, because the proper measure of damages was the change in value of the land; and 2) the portion of the attorney fees for costs of collecting the judgment, because defendants had secured a cash appeal bond that was paid into the court.