Case Title: Klaiber v. Freemason Associates

Citation: 

Docket Number: 022852

State: virginia

Court: Virginia Supreme Court

Date: 2003-10-31T00:00:00Z

Document:
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 
 
12
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, 
 
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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 
 
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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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