Present: All the Justices
JAMES KLAIBER
v. Record No. 022852
FREEMASON ASSOCIATES, INC., ET AL.
OPINION BY
JUSTICE LAWRENCE L. KOONTZ, JR.
October 31, 2003
RICHARD SIENICKI
v. Record No. 022853
FREEMASON ASSOCIATES, INC., ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
John C. Morrison, Jr., Judge
This consolidated appeal involves two separate suits
asserting various claims for damages arising from the
conveyances of two individual units of a condominium. In each
case, the trial court granted summary judgment in favor of the
defendants on all the claims and dismissed the suits. The
primary issue we consider is whether the trial court erred in
ruling, as a matter of law, that the plaintiffs failed to allege
an injury in each claim and, thus, they could not recover
damages under the facts as stated in the pleadings and
admissions.
BACKGROUND
“Because the trial court granted summary judgment pursuant
to Rule 3:18, our review of the facts is limited to pleadings,
orders, and admissions of the parties.” Andrews v. Ring, 266
Va. 311, 316, 585 S.E.2d 780, 782 (2003). Moreover, we review
those portions of the record in the light most favorable to the
parties against whom summary judgment was granted. Wilby v.
Gostel, 265 Va. 437, 440, 578 S.E.2d 796, 797 (2003).
Summarizing the facts in accord with these principles, the
record shows that in a motion for judgment filed on June 13,
2000 in the Circuit Court of the City of Norfolk (the trial
court), 313 Freemason, A Condominium Association, Inc. (the
Association), James Klaiber, Richard Sienicki, Daniel Khoury,
and Eric and Catherine Steffan, sought damages from Freemason
Associates, Inc., Conley J. Hall, and Thomas M. Dana for alleged
defects in the roof, chimneys, fireplaces, and flues of a four-
unit condominium located at 313 Freemason Street in the City of
Norfolk. Klaiber, Sienicki, Khoury, and the Steffans were at
that time owners of the various individual units of the
condominium and the entire membership of the Association. Hall
and Dana had initially commenced the development of the
condominium. Subsequently they formed Freemason Associates,
Inc., which completed the project, marketed, and sold the
individual units of the condominium.
Klaiber purchased unit four in February 1999 for $200,000.
Sienicki purchased unit one in January 1999 for $135,000.
2
K.B.B. Corp., (K.B.B.), d/b/a Re/Max Central Realty, acted as
the seller’s real estate agent in these transactions.
By an order dated April 18, 2001, the trial court severed
the claims of the individual plaintiffs and the Association, and
directed that each case thereafter proceed independently, except
for purposes of conducting discovery. At that time, Klaiber had
sold his condominium unit for $216,000, and Sienicki had sold
his unit for $170,000. In both transactions, agreements were
executed purporting to continue the voting rights of Klaiber and
Sienicki in the Association with respect to the pending
litigation so that each would bear the costs of any assessment
made by the Association for repairs to the condominium building
but would also receive the proceeds of any settlement reached in
the litigation.
On June 2, 2001, Klaiber and Sienicki separately filed
motions for judgment against Freemason Associates, Inc., Hall,
Dana (collectively hereafter, Freemason), and K.B.B. Asserting
identical theories of actual fraud, fraudulent
misrepresentation, constructive fraud, false advertising under
Code § 59.1-68.3, breach of contract, and breach of the
statutory warranty provided by Code § 55-79.79 of the
Condominium Act, Klaiber and Sienicki each sought compensatory
damages of $380,000. The pleadings did not contain a specific
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factual allegation of the measure by which the alleged damages
were established.
During discovery, it was established that the Association
had paid $37,120 to replace the roof of the condominium and had
incurred ongoing attorney’s fees in the pending litigation. The
Association had imposed special assessments on the individual
unit owners to recover those costs. It was further established
that Klaiber and Sienicki had paid $14,884 each to satisfy those
assessments. In addition, Klaiber had paid $3,852.13 to repair
water damage to his unit resulting from the defective roof, and
Sienicki had paid $155.90 to remove the gas logs in the
fireplace in his unit. Both parties also stated that they
claimed “damages in the amount of any future special assessments
for roof replacement, attorney’s fees and repair and
refurbishment of the fireplaces and chimneys.”
On June 3, 2002, Freemason filed a joint motion for summary
judgment asserting, among other things, that neither Klaiber nor
Sienicki could prove actual damages with respect to any of their
claims because they had sold their units at a “profit” and would
have no further liability with respect to the repair of the
alleged defects in the roof, chimneys, fireplaces, and flues in
question. K.B.B. subsequently filed its own motion for summary
judgment in which it essentially adopted the assertions of the
motion filed by Freemason.
4
Klaiber and Sienicki opposed the motions for summary
judgment, contending that under the previously referenced
agreements with the purchasers of their units they had a
continuing interest in the litigation. They further contended
that they had alleged an adequate measure of their damages
because each had paid the special assessments related to the
“cost of the replacement of the roof, attorney’s fees, and is
subject to their proportionate share of the cost of correcting
the problem with the chimneys, flues and fireplaces.”
Accordingly, notwithstanding the profit each had earned in
selling their units, Klaiber and Sienicki maintained that their
claims were not affected by those sales.
Following oral argument by the parties, the trial court
issued an opinion letter dated August 30, 2002. In pertinent
part, the trial court first determined that Klaiber and Sienicki
could not recover for damages to the roof which was conceded to
be a common element of the condominium. The court then
determined that neither Klaiber nor Sienicki would be permitted
to maintain his various claims with regard to the alleged
defective chimneys, fireplaces, and flues. Relying on Lloyd v.
Smith, 150 Va. 132, 149, 142 S.E. 363, 367 (1928), for the
proposition that “the facts showing the fraud and the resulting
damage must be alleged,” the court concluded that neither
Klaiber nor Sienicki had “alleged an injury” with sufficient
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specificity to recover damages under the three fraud claims.
Implicitly, the court reached this conclusion because they had
sold their units at a profit. Similarly, with respect to the
Code § 59.1-68.3 claim, the trial court found that Klaiber and
Sienicki had not alleged that they had suffered any “loss” as
required by the statute. With respect to the breach of contract
claim, the court found that Klaiber and Sienicki had not alleged
any actual damages resulting from the alleged breach. Finally,
with respect to the breach of warranty claim, the court found
that Klaiber and Sienicki had “suffered no injury” and had no
“standing” to pursue that claim.
In final orders dated September 9, 2002, the trial court
entered summary judgment in favor of Freemason and K.B.B. and
against Klaiber and Sienicki. Both orders adopted by reference
the reasoning of the August 30, 2002 opinion letter. We awarded
appeals to Klaiber and Sienicki, consolidating the appeals for
briefing and argument.
DISCUSSION
A trial court may appropriately grant summary judgment only
in cases in which no material facts are genuinely in dispute.
Rule 3:18; Thurmond v. Prince William Professional Baseball
Club, Inc., 265 Va. 59, 64, 574 S.E.2d 246, 250 (2003); Majorana
v. Crown Central Petroleum Corp., 260 Va. 521, 525, 539 S.E.2d
426, 428 (2000). Moreover, “the decision to grant a motion for
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summary judgment is a drastic remedy.” Turner v. Lotts, 244 Va.
554, 556, 422 S.E.2d 765, 766 (1992); see also Slone v. General
Motors Corporation, 249 Va. 520, 522, 457 S.E.2d 51, 52 (1995).
As previously noted, our review of the record is limited to the
parties’ pleadings, requests for admissions, and
interrogatories. Therefore, “we review the record applying the
same standard the trial court must adopt in reviewing a motion
for summary judgment, accepting as true ‘those inferences from
the facts that are most favorable to the nonmoving party, unless
the inferences are forced, strained, or contrary to reason.’ ”
Dudas v. Glenwood Golf Club, Inc., 261 Va. 133, 136, 540 S.E.2d
129, 130-31 (2001) (quoting Dickerson v. Fatehi, 253 Va. 324,
327, 484 S.E.2d 880, 882 (1997)); see also Carson v. LeBlanc,
245 Va. 135, 139-40, 427 S.E.2d 189, 192 (1993).
As we begin to recite our analysis in this appeal, it is
important to keep in mind that the cases under consideration do
not present us with the issue whether Klaiber and Sienicki
failed to adequately plead facts to support the various legal
theories under which they asserted liability against Freemason
and K.B.B. Rather, our focus is upon the trial court’s ruling
that Klaiber and Sienicki would be unable to prove, as a matter
of law, any injury or resulting damages arising from the acts of
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Freemason and K.B.B. under those claims of liability. 1 As did
the trial court, we will consider seriatim the sufficiency of
the record to show injury and damages under the various theories
of liability in three groups: the fraud claims, the Code
§ 59.1-68.3 claims, and the breach of contract and warranty
claims.
The Fraud Claims
Klaiber and Sienicki alleged in their motions for judgment
that “as a direct and proximate result” of actual fraud,
fraudulent misrepresentation, or constructive fraud by Freemason
and K.B.B., they “suffered damages.” To sustain their claims of
fraud under any of these theories, they were required to plead:
a false representation of a material fact; made intentionally,
in the case of actual fraud, or negligently, in the case of
constructive fraud; reliance on that false representation to
their detriment; and resulting damage. Evaluation Research
Corp. v. Alequin, 247 Va. 143, 148, 439 S.E.2d 387, 390 (1994).
What is more, “[a]n allegation of fraud in the abstract does not
1
In an alternative ruling, the trial court concluded that
Virginia does not recognize an independent cause of action for
fraudulent misrepresentation, as distinct from a cause of action
for actual fraud. Klaiber and Sienicki have assigned error to
this ruling. As will become clear, our resolution of their
other assignment of error regarding their fraud claims renders
the issue moot and, accordingly, we will express no opinion
thereon.
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give rise to a cause of action; it must be accompanied by
allegation and proof of damage.” Community Bank v. Wright, 221
Va. 172, 175, 267 S.E.2d 158, 160 (1980).
In Community Bank, we observed that “ ‘the rule as to what
constitutes damage [for fraud], in any case, may broadly be
stated to be that there is no damage where the position of the
complaining party is no worse than it would be had the alleged
fraud not been committed.’ ” 2 Id. (quoting Cooper v. Wesco
Builders, Inc., 281 P.2d 669, 672 (Idaho 1955)). Where the
alleged fraud occurs in a commercial transaction involving the
transfer of real property, we have more succinctly defined the
measure of damages as “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 [fraudulent]
representation been true.” Prospect Development Co. v.
Bershader, 258 Va. 75, 91, 515 S.E.2d 291, 300 (1999). Similar
to the situation in Prospect Development, Klaiber and Sienicki
did not allege facts to support a conclusion that the actual
2
This rule is different from the rule generally applicable
to trespassory torts, where the measure of damages can be either
the difference in market value of the property before and after
the trespass or the cost of restoring the property to its former
condition, but only if the cost measure of damages is less than
the market value measure of damages. See, e.g., Norview Cars,
Inc. v. Crews, 208 Va. 148, 149 n.1, 156 S.E.2d 603, 605 n.1
(1967).
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value of their condominium units at the time they purchased them
was less than the value those units would have had absent the
fraudulent acts of Freemason and K.B.B. 3 Moreover, to the extent
that Klaiber and Sienicki alleged damages in the form of costs
of repair or replacement of defective elements of the
condominium, we expressly declined to adopt this measure of
damages in fraud cases. Id.
Klaiber and Sienicki contend that their cases can be
distinguished from Prospect Development. They contend that the
damages in that case were premised on a misrepresentation of the
aesthetic condition of adjoining property for which there was no
remedial solution, whereas their damages relate to defects in
the property which are subject to correction through remedial
efforts with ascertainable costs. This is a distinction without
a difference. The fact remains that repair or replacement costs
are not the proper measure of damages for fraud in these cases.
Accordingly, we hold that the trial court did not err in
granting summary judgment in favor of Freemason and K.B.B. on
the claims alleging liability based upon fraud.
3
We also note, as did the trial court, that Klaiber and
Sienicki did not allege that the subsequent purchasers of their
units would have paid more for the units with “working”
fireplaces.
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The Code § 59.1-68.3 Claims
Code § 59.1-68.3 provides, in relevant part, that “[a]ny
person who suffers loss as the result of a violation of
Article 8 (§ 18.2-214 et seq.), Chapter 6 of Title 18.2 . . .
shall be entitled to bring an individual action to recover
damages, or $100, whichever is greater.” The allegations in the
motions for judgment assert that the prerequisite violation here
was the making of untrue, deceptive, and misleading statements
in advertising in violation of Code § 18.2-216.
We have not heretofore addressed the question of the
appropriate measure of damages for a claim arising from a
violation of Code § 59.1-68.3 although we have held that “the
statutory cause of action for false advertising [under this
statute] is not properly analogized to a common law cause of
action for fraud.” Parker-Smith v. Sto Corp., 262 Va. 432, 440,
551 S.E.2d 615, 619 (2001). The statute by its express terms
requires, however, that the plaintiff must “suffer[] loss” in
order to recover damages, either actual or in the statutory de
minimis amount.
Under the procedural posture of this case, we must assume
that Freemason and K.B.B. did in fact make untrue, deceptive,
and misleading statements in advertising, that Klaiber and
Sienicki were thereby induced to purchase their condominium
units, and that they would not have done so in the absence of
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the siren inducement of these unlawful statements. The question
then becomes what “loss” did Klaiber or Sienicki suffer at the
time of that transaction? As with the claims for fraud, simple
logic dictates that the answer is none.
Klaiber and Sienicki were induced to purchase property upon
an assertion of it being in a non-defective condition and, by
their own admission, subsequently sold that property in a known
defective condition at a profit. Under such circumstances,
there is simply no basis upon which a finder of fact could
conclude that they had suffered any loss or damages.
Accordingly, we hold that the trial court did not err in
granting summary judgment in favor of Freemason and K.B.B. with
respect to the Code § 59.1-68.3 claims.
The Breach of Contract and Warranty Claims
The breach of contract and breach of warranty claims,
asserted here only against Freemason, may be considered together
because under the facts of this case “[l]abeling the claim a
breach of warranty rather than a breach of contract does not
alter the nature of the claim.” Waterfront Marine Construction,
Inc. v. North End 49ers Sandbridge Bulkhead Groups A, B and C,
251 Va. 417, 435, 468 S.E.2d 894, 904 (1996). The measure of
damages under either theory would be the same.
Moreover, the measure of damages for breach of contract or
breach of warranty is not necessarily limited to the same
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measure of damages applicable to fraud torts or statutory false
advertising. Under certain circumstances, a party seeking to
restore the benefit of a bargain or to enforce a warranty is
permitted to show that the cost of remedying the breach is the
appropriate measure of damages. “The cost measure is calculated
on the basis of the cost to complete the contract according to
its terms or the cost to repair what has been done so that the
contract terms are met. The cost measure is appropriate unless
the cost to repair would be grossly disproportionate to the
results to be obtained, or would involve unreasonable economic
waste.” Lochaven Co. v. Master Pools by Schertle, Inc., 233 Va.
537, 543, 357 S.E.2d 534, 538 (1987); see also Green v.
Burkholder, 208 Va. 768, 771, 160 S.E.2d 765, 768 (1968); Kirk
Reid Company v. Fine, 205 Va. 778, 789, 139 S.E.2d 829, 837
(1965).
In its August 30, 2002 opinion letter, the trial court
concluded that “Klaiber and Sienicki have not alleged any actual
damages resulting from [Freemason’s] alleged breach” of contract
and that they have “suffered no injury from” the alleged breach
of the statutory warranty. The former conclusion is not
supported by the record when viewed in the light favorable to
Klaiber and Sienicki; the latter conclusion is a premature
determination of a disputed fact. As such, neither can form the
basis to support summary judgment in favor of Freemason.
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It is certainly accurate that their motions for judgment
made only a generalized assertion that Klaiber and Sienicki had
“suffered damages” as a result of the alleged breaches of
contract and statutory warranty. However, in response to
discovery requests, both Klaiber and Sienicki asserted that they
remained liable to the purchasers of their respective
condominium units for costs to repair the chimneys, fireplaces,
and flues. Because repair cost is one form of measure of damage
for breach of contract or warranty, this is an adequate factual
allegation of injury and damage to survive a motion for summary
judgment. Accordingly, we hold that the trial court erred in
granting summary judgment in favor of Freemason with respect to
the claims for breach of contract and breach of warranty
asserted by Klaiber and Sienicki.
Our conclusion that summary judgment was not appropriate
for the breach of contract and breach of warranty claims
requires us to consider a further assignment of error raised by
Klaiber and Sienicki with respect to the trial court’s ruling
that they are barred from seeking damages for the alleged defect
in the roof because it was a common element of the condominium.
The trial court reasoned that because the roof was a common
element, which Klaiber and Sienicki concede, the Condominium Act
gave the unit owners’ association the exclusive right to sue for
the alleged defects. See Code §§ 55-79.53, 55-79.79, and 55-
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79.80. Klaiber and Sienicki contend that the trial court erred
in ruling that the right to sue afforded to a unit owners’
association precluded individual unit owners from maintaining
private causes of action for defects in common elements.
Freemason, though not conceding the issue, contends that when
Klaiber and Sienicki sold their condominium units, they were
required by the terms of the condominium declaration to transfer
all rights in the Association to the new owners. Continuing,
Freemason contends that the attempts to retain or be reassigned
voting rights in the Association, and by extension an interest
in litigating claims relating to common elements, were
ineffective.
We need not address the merits of the parties respective
positions on this issue because subsequent events in the
Association’s suit against Freemason, of which we take judicial
notice, render the point moot. After the trial court ordered
severance of the actions of the individual unit owners from that
of the Association, the Association proceeded with its suit
against Freemason. See Dana v. 313 Freemason, A Condominium
Association, Inc., 266 Va. ___, ___ S.E.2d ___ (2003) (today
decided). In that suit, the trial court ruled that the
Association could proceed only on the claims asserted for the
alleged defect in the roof. The Association ultimately
prevailed at trial and was awarded a judgment for damages,
15
attorney’s fees, and costs against Freemason Associates, Inc.
The Association was further permitted to pierce the veil of that
corporation in order to recover on that judgment from Dana and
Hall. Because we have today affirmed the judgment in that case,
it is a matter of record that fair and complete damages for the
defect in the roof have been assessed. Thus, because Freemason
would be subjected to an impermissible double recovery for the
defective roof, the issue of Klaiber’s and Sienicki’s standing
to seek damages for that condition is rendered moot.
Accordingly, we hold that on remand, Klaiber and Sienicki
will be limited to seeking damages for breach of contract and
breach of warranty only with respect to the alleged defects in
the chimneys, fireplaces, and flues. We emphasize that our
decision today does not address the merits of those claims, but
only whether it was proper for the trial court to award summary
judgment thereon.
CONCLUSION
For these reasons, we will affirm the judgment of the trial
court awarding summary judgment to Freemason and K.B.B. on the
claims for fraud, fraudulent misrepresentation, constructive
fraud, and false advertising under Code § 59.1-68.3. We also
will affirm on different grounds the trial court’s judgment that
Klaiber and Sienicki may not recover damages for the defect in
the roof. We will reverse the trial court’s award of summary
16
judgment in favor of Freemason on the breach of contract and
breach of warranty claims with respect to the alleged defects in
the chimneys, fireplaces, and flues and remand the cases for
further proceedings consistent with the views expressed in this
opinion.
Affirmed in part,
reversed in part,
and remanded.
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