Title: Abi-Najm v. Concord Condominium, LLC
Citation: N/A
Docket Number: 091546
State: Virginia
Issuer: Virginia Supreme Court
Date: September 16, 2010

Present:  Koontz, Kinser, Lemons, Goodwyn, Millette, and Mims 
JJ., and Russell, S.J. 
 
PHILLIP ABI-NAJM, ET AL. 
 
v.  Record No. 091546  
OPINION BY JUSTICE DONALD W. LEMONS 
 
 
 
September 16, 2010 
CONCORD CONDOMINIUM, LLC  
 
 
FROM THE CIRCUIT COURT OF ARLINGTON COUNTY 
Benjamin N.A. Kendrick, Judge 
 
 
In this appeal from the dismissal of an action alleging 
breach of contract, fraud in the inducement, and violation of 
the Virginia Consumer Protection Act, Code §§ 59.1-196 et seq. 
(“VCPA” or “the Act”), we consider whether the trial court 
erred when it sustained the demurrers of Concord Condominium, 
LLC (“Concord”) to the complaints of Phillip Abi-Najm (“Abi-
Najm”) and other purchasers of residential condominiums 
(collectively, “the Purchasers”) from Concord on the grounds 
that the Purchasers’ breach of contract claims were barred by 
the merger doctrine, and their fraud in the inducement and VCPA 
claims were barred by the economic loss doctrine.  
I. 
Facts and Proceedings Below 
 
This appeal is comprised of two civil actions filed 
against Concord in the Circuit Court of Arlington County.1  The 
first action was brought by Laura and Bradford Reed, and the  
                     
1 Pursuant to Rule 5:9, the two actions were consolidated 
in this appeal. 
second action was brought by Abi-Najm and 24 co-plaintiffs 
(“the Abi-Najm Complaint,” collectively “the Complaints”).  The 
substantially similar suits contain three counts:  (i) breach 
of contract, (ii) violation of the VCPA, and (iii) fraud in the 
inducement.2  The following factual recitation is taken from the 
Abi-Najm Complaint. 
 
The Purchasers alleged that they were interested in 
purchasing a condominium and met with sales agents for the West 
Village of Shirlington in Arlington County in 2005 and 2006.  
The Purchasers entered into separate purchase agreements 
(“Contracts”), each containing a schedule of standard finishes 
(“Schedule A”) and various addenda.  In pertinent part, 
Schedule A provided that the flooring of each condominium would 
be “Bruce Oak hardwood, 3/4”.”  Schedule A also contained the 
following language:  Concord “may substitute substantially 
equivalent materials and finishes for those specified herein.” 
 
Paragraph 22(a) of the Contract, entitled “MISCELLANEOUS,” 
contained the following provision pertinent to this appeal: 
Notwithstanding anything to the contrary herein, 
acceptance of the deed at settlement shall 
                     
2 In the Complaints, the fraud in the inducement count is 
labeled “Common Law Fraud,” but the facts alleged are more 
accurately characterized as a claim for fraud in the 
inducement.  At oral argument, counsel for the Purchasers 
referred to this count as fraud in the inducement, and we will 
do the same herein.  Abi-Najm and certain of his co-plaintiffs 
also alleged counts for breach of contract and trespass in the 
Abi-Najm Complaint.  Those counts are not part of this appeal. 
 
2
constitute Purchaser’s acknowledgment of full 
compliance by [Concord] with the terms of this 
Agreement.  The terms hereof shall be merged 
into and extinguished by delivery of the deed at 
settlement except for Sections 4(b), 5, 17, 18, 
21, 22 and 23 which shall survive delivery of 
the deed and shall not be merged therein. 
 
 
At the center of this litigation is the Purchasers’ 
allegation that instead of the three-quarter-inch Bruce Oak 
hardwood flooring set forth in Schedule A, Concord delivered 
“prefabricated engineered hardwood, 3/8” [flooring],” and this 
substitution was “not substantially equivalent to Bruce Oak 
hardwood, 3/4”.”  The Purchasers alleged that they did not 
learn of this substitution until after closing on the 
condominiums, nor would a “normal visual inspection” reveal the 
substitution.  The Purchasers alleged that this substitution 
constituted a material breach of the contract for which they 
sought damages in the amount of at least $50,000 per 
condominium, in addition to prejudgment interest and costs. 
 
In their VCPA count, the Purchasers alleged that their 
purchase of the condominiums was a consumer transaction as 
defined by the Act, and Concord’s intentionally false and 
misleading information concerning the flooring constituted 
misrepresentations of a material fact, and fraudulent acts in 
violation of the VCPA.  The Purchasers also alleged that 
Concord had knowledge that the information concerning the 
flooring was untrue, that Concord acted with the intent to 
 
3
deceive the Purchasers, and that Concord willfully concealed 
the flooring substitution.  Finally, the Purchasers alleged 
that Concord “knew or reasonably should have known that its 
disclosure of [the actual flooring material] would have caused 
the [Purchasers] to reconsider or renegotiate the Contracts.”  
As in their breach of contract count, the Purchasers claimed 
damages of $50,000 per condominium, treble damages pursuant to 
Code § 59.1-204(A), and $350,000 in punitive damages, in 
addition to prejudgment interest and costs including attorney’s 
fees. 
 
In their fraud in the inducement count, the Purchasers set 
forth substantially similar allegations as were made in the 
VCPA count, particularly that Concord knowingly misrepresented 
the quality of the flooring it would deliver and that this 
misrepresentation involved a material fact.  The Purchasers 
further alleged that they relied upon those misrepresentations, 
and absent those misrepresentations they would not have entered 
into the Contracts.  They further alleged that in the 
alternative, they would have renegotiated the Contracts.  The 
Purchasers alleged damages of $50,000, and they sought punitive 
damages of $350,000 per condominium, prejudgment interest, 
costs and attorney’s fees under this count. 
 
In response Concord filed demurrers to the Complaints, 
arguing that the breach of contract claims were barred by 
 
4
merger, and the VCPA and fraud in the inducement claims were 
barred by the economic loss rule.  The trial court held a 
hearing on Concord’s demurrers, at the conclusion of which it 
held:  “With respect to the merger clause, if you look at 
paragraph 22(a) of the [Contract], it is pretty clear that the 
merger clause applies.  And claims that merge into the deed 
can, in fact, and do exist in this case.  And as such, there is 
no breach of contract.”  With respect to the Purchasers’ fraud 
in the inducement and VCPA claims, the trial court held that “a 
separate tort . . . does not exist,” and therefore the 
“economic [loss doctrine] as [stated] in Sensenbrenner” 
precludes those causes of action.  Accordingly, the trial court 
entered orders sustaining Concord’s demurrers to the 
Complaints. 
 
The Purchasers timely filed their notice of appeal and we 
granted an appeal on the following assignments of error: 
1. 
The trial court erred when it granted respondent’s demurrer 
and dismissed petitioners’ breach of contract claim on the 
grounds that the claim was barred by the merger doctrine. 
 
2. 
The trial court erred when it granted respondent’s demurrer 
and dismissed petitioners’ claims under the Virginia 
Consumer Protection Act and for fraud in the inducement on 
the grounds that the claims were barred by the economic 
loss doctrine. 
 
 
 
 
 
 
 
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II.  Analysis 
 
A. 
Standard of Review 
 
We apply well-established principles guiding our review of 
a trial court’s judgment sustaining a demurrer. 
“The purpose of a demurrer is to determine 
whether a motion for judgment states a cause of 
action upon which the requested relief may be 
granted.”  Tronfeld v. Nationwide Mut. Ins. Co., 
272 Va. 709, 712, 636 S.E.2d 447, 449 (2006) 
(citing Welding, Inc. v. Bland County Serv. 
Auth., 261 Va. 218, 226, 541 S.E.2d 909, 913 
(2001)).  “A demurrer tests the legal sufficiency 
of facts alleged in pleadings, not the strength 
of proof.”  Glazebrook v. Board of Supervisors, 
266 Va. 550, 554, 587 S.E.2d 589, 591 (2003).  
Accordingly, we accept as true all properly pled 
facts and all inferences fairly drawn from those 
facts.  Id.  “Because the decision whether to 
grant a demurrer involves issues of law, we 
review the circuit court’s judgment de novo.”  
Dreher v. Budget Rent-A-Car Sys., 272 Va. 390, 
395, 634 S.E.2d 324, 326-27 (2006) (citing 
Glazebrook, 266 Va. at 554, 587 S.E.2d at 591.) 
 
Augusta Mutual Ins. Co. v. Mason, 274 Va. 199, 204, 645 S.E.2d 
290, 293 (2007). 
B. 
The Merger Doctrine 
The trial court sustained Concord’s demurrer to the 
Purchasers’ breach of contract action, holding that Section 
22(a), the Contracts’ merger clause, caused Concord’s 
obligations under Schedule A to be merged into and extinguished 
by the deed.  The Purchasers argue that the merger doctrine is 
inapplicable to this case.  For the reasons stated herein, we 
agree with the Purchasers. 
 
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The merger doctrine has been long-recognized by this 
Court.  See Woodson v. Smith, 128 Va. 652, 104 S.E. 794 (1920).  
“The merger doctrine deals with extinguishing a previous 
contract by an instrument of higher dignity,” the deed.  Empire 
Mgmt. & Dev. Co. v. Greenville Assocs., 255 Va. 49, 52, 496 
S.E.2d 440, 442 (1998).  “However, provisions which are 
collateral to the passage of title and not covered by the deed 
are not merged into the deed and survive its execution.”  Beck 
v. Smith, 260 Va. 452, 455, 538 S.E.2d 312, 314 (2000) (citing 
Empire Mgmt., 255 Va. at 54, 496 S.E.2d at 443; Davis v. 
Tazewell Place Assocs., 254 Va. 257, 262-63, 492 S.E.2d 162, 
165 (1997); Miller v. Reynolds, 216 Va. 852, 854-55, 223 S.E.2d 
883, 885 (1976); and Woodson, 128 Va. at 656, 104 S.E.2d at 
795). 
In discussing the doctrine of merger, we have 
explained that a deed “is a mere transfer of 
title.”  Miller, 216 Va. at 855, 223 S.E.2d at 
885.  The deed is the final expression of the 
agreements between the parties as to “every 
subject which it undertakes to deal with,” and 
any conflicts between the terms of prior 
agreements and the terms of the deed are 
resolved by the deed.  Woodson, 128 Va. at 656, 
104 S.E. at 795. 
 
Id. at 456, 538 S.E.2d at 314-15. 
In Woodson, one of our earliest cases addressing the 
merger doctrine, a seller of two parcels of real estate entered 
into two separate contracts of sale, each of which reserved in 
 
7
the seller a right of possession until November 15, 1919.  128 
Va. at 653-54, 104 S.E. at 794.  On February 27, 1919, the 
seller delivered the deeds, which “contain[ed] no reference to 
the antecedent contracts” of sale.  Id. at 654, 104 S.E. at 
794.  The trial court held that the contracts of sale merged 
into the deeds, thereby entitling the grantees to immediate 
possession of the property.  Id. at 655, 104 S.E. at 795. 
We affirmed, observing that the deeds in Woodson 
“contained covenants which by statute in Virginia . . . meant 
that the grantee ‘might at any and all times thereafter, 
peaceably and quietly enter upon and have, hold, and enjoy the 
land conveyed by the deed,’” and therefore “[t]he stipulations 
in the contracts and the covenants in the deeds, as related to 
the question of possession, [were] in patent and irreconcilable 
conflict.”  Id. (quotation marks omitted).  Despite the outcome 
in Woodson, we noted, “[d]oubtless many cases may arise in 
which distinct and unperformed stipulations contained in a 
contract for sale will not be merged in or discharged by deed 
where that instrument is silent upon the subject of such 
stipulations.”  Id. at 656, 104 S.E. at 795. 
Since our decision to uphold the doctrine of merger in 
Woodson, its narrow scope and disfavored status are evident in 
our repeated refusal to apply it to extinguish agreements that 
are not addressed in the deed and collateral to the passage of 
 
8
title.  See Empire Mgmt., 255 Va. at 53-54, 496 S.E.2d at 442-
43 (reversing the trial court’s application of the merger 
doctrine to a rent guarantee in a sales contract, holding that 
the rent guarantee was not covered in the deed and was 
collateral to the passage of title); Davis, 254 Va. at 263, 492 
S.E.2d at 165 (an express warranty contained in a contract for 
sale did not merge with the deed and was enforceable); and 
Miller, 216 Va. at 854, 223 S.E.2d at 884-85 (a condition in 
the purchase contract making the sale contingent upon the 
land’s suitability for percolation and its qualification for a 
building permit did not merge into the deed). 
Our most recent case examining the merger doctrine, Beck, 
concerned a “contract for sale [that] provided that any utility 
easement would ‘not materially and adversely [affect the 
buyers’] intended use of the Property.’ ”  260 Va. at 455, 538 
S.E.2d at 314.  The contract for sale also provided that “the 
representations and warranties of the seller contained in the 
contract ‘SHALL BE DEEMED MERGED INTO THE DEED DELIVERED AT 
SETTLEMENT AND SHALL NOT SURVIVE SETTLEMENT.’ ”  Id.  None of 
the quoted language was repeated in the deed.  Id. 
In Beck, we observed, “not all agreements between the 
parties regarding the purchase and sale of . . . property are 
contained in the deed.”  Id. at 456, 538 S.E.2d at 315.  “Such 
agreements are considered collateral to the sale if they are 
 
9
distinct agreements made in connection with the sale of the 
property, if they do not affect the title to the property, if 
they are not addressed in the deed, and if they do not conflict 
with the deed.”  Id.  Notwithstanding the language of the 
purchase agreement calling for representations and warranties 
to be merged into the deed, we held, “the agreement in the 
contract for sale regarding the impact of utility easements on 
the [buyers’] intended use of the property was collateral to 
the transfer of title, was not merged into the deed, and 
survived the execution of the deed.”  Id. 
In the case before us, the deeds are simply instruments 
intended to convey title to the condominiums to the Purchasers.  
The deeds are silent as to Schedule A.  Therefore, unlike in 
Woodson, in this case there is no “patent and irreconcilable 
conflict” between the Contracts and the deeds.  128 Va. at 655, 
104 S.E. at 795.   
Turning to the Contracts themselves, the flooring 
agreement set forth in Schedule A “is a distinct agreement, 
does not affect the validity or nature of the title conveyed, 
is not addressed in the deed, and does not conflict with the 
terms of the deed.”  Beck, 260 Va. at 456, 538 S.E.2d at 315.  
Accordingly, we hold that the representations in Schedule A are 
collateral to the transfer of title, they are not merged into 
the deed, and therefore they survive delivery of the deed.  
 
10
Based on the foregoing, the trial court erred when it sustained 
Concord’s demurrer to the Complaints on the ground that the 
merger doctrine precluded enforcement of the Contracts.3 
C. 
The Economic Loss Doctrine 
The trial court sustained Concord’s demurrers to the 
Purchasers’ VCPA and fraud in the inducement claims on the 
ground that the economic loss doctrine precluded such claims.  
In determining whether the economic loss doctrine precludes an 
action in tort, we have observed: 
The law of torts is well equipped to offer 
redress for losses suffered by reason of a 
“breach of some duty imposed by law to protect 
the broad interests of social policy.”  Kamlar 
[Corp. v. Haley, 224 Va. 699, 706, 299 S.E.2d 
514, 517 (1983).]  Tort law is not designed, 
however, to compensate parties for losses 
suffered as a result of a breach of duties 
assumed only by agreement.  That type of 
compensation necessitates an analysis of the 
damages which were within the contemplation of 
the parties when framing their agreement.  It 
remains the particular province of the law of 
contracts.  See id. 
                     
3 In the trial court and on appeal to this Court, Concord 
asserts that the language in Schedule A permitting it to 
“substitute substantially equivalent materials and finishes” 
precludes the Purchasers’ breach of contract action, and that 
the flooring substitution was not material to the contract.  
However, in reviewing a circuit court’s ruling sustaining a 
demurrer, “we accept as true all properly pled facts and all 
inferences fairly drawn from those facts.”  Augusta Mutual, 274 
Va. at 204, 645 S.E.2d at 293.  The Purchasers alleged that the 
actual flooring installed by Concord was “not substantially 
equivalent,” and that the substitution was material to the 
Contracts.  Therefore, at this stage of the litigation, a court 
is required to accept the truth of the pleadings, 
notwithstanding what a fact-finder ultimately may determine. 
 
11
 
Sensenbrenner v. Rust, Orling & Neale, Architects, Inc., 236 
Va. 419, 425, 374 S.E.2d 55, 58 (1988).   
More recently we observed, “[t]he law of torts provides 
redress only for the violation of certain common law and 
statutory duties involving the safety of persons and property, 
which are imposed to protect the broad interests of society.”  
Filak v. George, 267 Va. 612, 618, 594 S.E.2d 610, 613 (2004).  
“[L]osses suffered as a result of the breach of a duty assumed 
only by agreement, rather than a duty imposed by law, remain 
the sole province of the law of contracts.”  Id. 
Based on the foregoing, the question whether the economic 
loss doctrine applies requires a court first to determine 
“whether a cause of action sounds in contract or tort,” 
ultimately by ascertaining “the source of the duty violated.”  
Richmond Metro. Auth. v. McDevitt Street Bovis, Inc., 256 Va. 
553, 558, 507 S.E.2d 344, 347 (1998). 
Notwithstanding the limitations on certain tort actions 
created by the economic loss doctrine, it is well-established 
that 
a single act or occurrence can, in certain 
circumstances, support causes of action both for 
breach of contract and for breach of a duty 
arising in tort, thus permitting a plaintiff to 
recover both for the loss suffered as a result 
of the breach and traditional tort damages, 
including, where appropriate, punitive damages.  
 
12
Foreign Mission Bd. v. Wade, 242 Va. 234, 241, 
409 S.E.2d 144, 148 (1991). 
 
Dunn Construction Co., Inc. v. Cloney, 278 Va. 260, 266-67, 682 
S.E.2d 943, 946 (2009). 
As this recapitulation of the law reveals, the question 
before this Court is whether the Purchasers alleged that 
Concord breached a duty owing to them independent of any duties 
assumed by Concord pursuant to the Contracts.  We turn now to 
the Purchasers’ respective claims. 
i. 
The Virginia Consumer Protection Act 
Concord argues that any statutory duties arising under the 
Act “are duties that arise solely by virtue of the [Contracts] 
entered into between the [Purchasers] and Concord.”  We 
disagree. 
The VCPA was enacted with “the intent of the General 
Assembly that [it] shall be applied as remedial legislation to 
promote fair and ethical standards of dealings between 
suppliers and the consuming public.”  Code § 59.1-197.  
Pursuant to Code § 59.1-200(A)(6), the VCPA makes it unlawful 
for “a supplier in connection with a consumer transaction” to 
“[m]isrepresent[] that goods or services are of a particular 
standard, quality, grade, style, or model.”  In pertinent part, 
Code § 59.1-198 defines a “[c]onsumer transaction” as “[t]he 
advertisement, sale, lease, license or offering for sale, lease 
 
13
or license, of goods or services to be used primarily for 
personal, family or household purposes.”  “Goods” are defined 
as “all real, personal or mixed property, tangible or 
intangible.”  Id. (emphasis added).  Lastly, a “[s]upplier” is 
defined as “a seller, lessor or licensor who advertises, 
solicits or engages in consumer transactions.”  Id. 
Based on the plain language of the VCPA, it is unlawful to 
misrepresent that goods are of “a particular standard, quality, 
grade, style, or model.”  Code § 59.1-200(A)(6).  This duty not 
to misrepresent the quality, grade, or style of goods is a 
statutory duty that exists independent of the Contracts entered 
into between the parties to this litigation, viz., the duty is 
“not one existing between the parties solely by virtue of the 
contract.”  Dunn Construction, 278 Va. at 267, 682 S.E.2d at 
946.  Because the Purchasers have alleged that Concord breached 
a duty existing independent of the Contracts, we hold that the 
trial court erred when it sustained Concord’s demurrers to the 
Purchasers’ VCPA claims. 
ii.  Fraud in the Inducement 
“ ‘[A] false representation of a material fact, 
constituting an inducement to the contract, on which the 
purchaser had a right to rely, is always ground for rescission 
of the contract.’ ”  George Robberecht Seafood, Inc. v. 
Maitland Bros. Co., 220 Va. 109, 111-12, 255 S.E.2d 682, 683 
 
14
(1979) (quoting Wilson v. Carpenter, 91 Va. 183, 187, 21 S.E. 
243, 244 (1895)).  “Fraud in the inducement of a contract is 
also ground for an action for damages.”  Id. at 112, 255 S.E.2d 
at 683; see also Augusta Mutual, 274 Va. at 204, 645 S.E.2d at 
293. 
In Lloyd v. Smith, 150 Va. 132, 145, 142 S.E. 363, 365 
(1928), we said that “an action based upon fraud must aver the 
misrepresentation of present pre-existing facts, and cannot 
ordinarily be predicated on unfulfilled promises or statements 
as to future events.  Were the general rule otherwise, every 
breach of contract could be made the basis of an action in tort 
for fraud.”  See also Boykin v. Hermitage Realty, 234 Va. 26, 
29, 360 S.E.2d 177, 178 (1987).  However, “Lloyd placed 
[qualifications] upon the general rule.”  Boykin, 234 Va. at 
29, 360 S.E.2d at 178. 
“[A]n action in tort for deceit and fraud may 
sometimes be predicated on promises which are 
made with a present intention not to perform them 
. . . . [T]he gist of fraud in such case is not 
the breach of the agreement to perform, but the 
fraudulent intent . . . . [T]he fraudulent 
purposes of the promisor and his false 
representation of an existing intention to 
perform . . . is the misrepresentation of a fact 
. . . . [T]he state of the promisor’s mind at the 
time he makes the promise is a fact, and . . . if 
he represents his state of mind . . . as being 
one thing when in fact his purpose is just the 
contrary, he misrepresents a then existing fact.” 
 
 
15
Id. at 29, 360 S.E.2d at 178-79 (quoting Lloyd, 150 Va. at 145-
46, 142 S.E. at 365-66). 
 
In support of its position, Concord cites to a number of 
this Court’s cases where we concluded that the allegations were 
legally insufficient to support an actionable tort claim 
because a contract or an agreement was the source of the duty 
allegedly breached.  See Dunn Construction, 278 Va. at 268, 682 
S.E.2d at 947 (“The fact that the representation was made in 
order to obtain payment . . . does not take the fraud outside 
of the contract relationship.”); Augusta Mutual, 274 Va. at 
206, 645 S.E.2d at 294 (“The duties that [the agent for the 
insurance company] allegedly violated by making fraudulent 
representations . . . arose solely by virtue of the Agency 
Agreement.”); Filak, 267 Va. at 618, 594 S.E.2d at 613 (“[T]he 
plaintiffs’ claim . . . merely sought recovery for losses 
allegedly suffered as a result of [the defendant’s] failure to 
fulfill her oral contract.”); and Richmond Metro. Auth., 256 
Va. at 560, 507 S.E.2d at 348 (“Nothing in the record suggests 
that [the defendant] did not intend to fulfill its contractual 
duties at the time it entered into the [contract].”). 
Unlike these cases, in the instant case the Purchasers 
alleged that Concord had knowledge that its representations 
concerning the flooring were untrue, that Concord acted with 
the intent to deceive the Purchasers, and that Concord 
 
16
willfully concealed the flooring substitution.  The Purchasers 
also alleged that Concord “knew or reasonably should have known 
that its disclosure of [the actual flooring material] would 
have caused the [Purchasers] to reconsider or renegotiate the 
Contracts.”  In short, the Purchasers alleged that Concord made 
misrepresentations of the flooring it promised to install “with 
a present intention not to perform” its obligations.  Boykin, 
234 Va. at 29, 360 S.E.2d at 178.  The fraud alleged by the 
Purchasers was perpetrated by Concord before a contract between 
the two parties came into existence, therefore it cannot 
logically follow that the duty Concord allegedly breached was 
one that finds its source in the Contracts.  Based on the plain 
language of the Complaints, we hold that the Purchasers have 
alleged an actionable claim for fraud in the inducement. 
III.  Conclusion 
 
We hold that the trial court erred when it sustained 
Concord’s demurrers.  Accordingly, we will reverse the 
judgments of the trial court in each case and remand these 
cases for further proceedings consistent with this opinion. 
Reversed and remanded. 
 
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