Klaiber v. Freemason Associates, Inc.

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.

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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.

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 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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