Present: All the Justices
JOHN C. DONNELLY, ETC.
OPINION BY
v. Record No. 982204 CHIEF JUSTICE HARRY L. CARRICO
September 17, 1999
DONATELLI & KLEIN,
INCORPORATED, ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Gerald Bruce Lee, Judge
This appeal involves the Plaza 500 Limited Partnership
(the Partnership), which was formed in 1987 for the purpose
of owning, developing, leasing, and otherwise dealing with
a 34-acre tract of land improved with approximately 500,000
square feet of office/warehouse facilities in Fairfax
County. At the time the Partnership was formed, it was
composed of Donnelly-McKnight, Inc. (Donnelly-McKnight) and
Donatelli & Klein, Incorporated (Donatelli & Klein) as
general partners and John C. Donnelly (Donnelly), William
H. McKnight (McKnight), Louis T. Donatelli (Donatelli),
William M. Harvey (Harvey), and DKEPA #7, a Maryland
general partnership, as limited partners. 1
Plaza 500 was the fifth partnership created by
Donnelly-McKnight and Donatelli & Klein to acquire and
develop commercial real estate. Beginning in the mid-
1980s, Donnelly and McKnight, both real estate appraisers,
1
Wilson Brothers, Incorporated later became a limited
partner.
would locate an undervalued property and join with
Donatelli and his firm, Donatelli & Klein, in forming a
partnership to own and manage the property. Donnelly and
McKnight contributed the equity in the property and
Donatelli provided the financial backing in the form of his
financial guaranty.
The arrangement among the parties with respect to
Plaza 500 is the subject of a limited partnership agreement
(the Agreement) dated October 22, 1987. Section 9 of the
Agreement is styled “Legal Title to Partnership Property;
Power of General Partners; Indemnities.” In pertinent
part, Paragraph B of Section 9 provides as follows:
The general partners, acting in their capacity as
general partners for and on behalf of the Partnership,
and subject to Section 10 hereof, shall have the
right, power and authority . . . to manage, lease,
sell, mortgage, convey, improve, alter, renovate,
refinance, grant easements on or dedicate the property
of the Partnership . . . . All decisions, including
the time and amounts of cash calls, shall be made by
the unanimous vote of the general partners.
Paragraph C of Section 9 pertains to “any party
dealing with the general partners with respect to any
property of the Partnership.” Paragraph C provides in
pertinent part as follows:
Subject to the provisions of Section 10 hereof, every
contract, agreement, deed, mortgage, lease, promissory
note or other instrument or document executed by the
general partners with respect to any property of the
Partnership shall be conclusive evidence in favor of
2
any person relying thereon or claiming thereunder that
. . . the general partners were duly authorized and
empowered to execute and deliver such instrument or
document for and on behalf of the Partnership.
Notwithstanding the foregoing, either of the general
partners may execute a contract, agreement, deed,
mortgage, lease, promissory note or other instrument
or document on behalf of the Partnership, and such
execution shall be deemed to bind the Partnership,
provided that such execution has been specifically
authorized pursuant to a written consent or resolution
joined by both general partners.
Section 10 of the Agreement, to which both Paragraphs
B and C of Section 9 are subject, is styled “Management of
Business.” Paragraph A of Section 10 provides in pertinent
part as follows:
All decisions in the management of the business,
affairs and assets of the Partnership shall be made by
the general partners by unanimous vote of the general
partners. No limited partner . . . shall have or
exercise any rights in connection with the management
of the Partnership business. In the event of any
disagreement between the general partners as to any
matter, which continues after consultation between the
general partners, general partner Donatelli & Klein,
Incorporated shall determine the matter in dispute in
its sole discretion.
(Emphasis added.)
The italicized language, referred to by the parties as
a “tie-breaker provision,” was included in the Agreement
upon Donatelli’s insistence. In a meeting held before the
Agreement was executed, with Donatelli, Donnelly, McKnight,
and Harvey in attendance, Donatelli stated that “he wanted
to control the partnership and have decision-making power.”
3
Donnelly and McKnight said they “did not want that.” The
“resolution [of the question] is contained in the
partnership agreement.”
The effect of the tie-breaker provision is the crucial
issue in the present litigation, which began on July 3,
1997, when Donnelly, in his role as a limited partner,
filed a bill of complaint derivatively on behalf of the
Partnership. Named as parties defendant were Donatelli &
Klein, Donatelli, his wife, Ann K. Donatelli, and D&K
Management, Inc. (D&K Management) 2 (collectively, the
Donatelli Parties), as well as Donnelly-McKnight, 3 McKnight,
Harvey, Wilson Brothers, Incorporated, and DKEPA #7.
In his bill of complaint, Donnelly asserted against
the Donatelli Parties claims of breach of contract, breach
of fiduciary duty, tortious conversion, and conspiracy.
Donnelly alleged that the Donatelli Parties had charged
excessive fees for various services rendered to the
Partnership. Donnelly prayed for the return of the excess
amounts to the Partnership, an accounting, a declaratory
judgment, an injunction removing Donatelli & Klein as a
2
D&K Management is owned and operated by Louis T.
Donatelli, his wife, Ann K. Donatelli, and his son, Douglas
J. Donatelli.
3
Although a defendant below and an appellee here, Donnelly-
McKnight, Inc. adopts the opening brief of the appellant,
John C. Donnelly.
4
general partner and prohibiting the Donatelli Parties from
making further payments to themselves, and the appointment
of a receiver to manage the affairs of the Partnership
during the pendency of the litigation.
In September 1997, while Donnelly’s bill of complaint
was pending, Donatelli & Klein informed Donnelly and
Donnelly-McKnight of an opportunity to refinance on more
reasonable terms the existing encumbrance on the Plaza 500
property. Donatelli & Klein sought the approval of
Donnelly and Donnelly-McKnight to a refinancing of the
Plaza 500 property with a new lender in conjunction with a
proposal to contribute that property and other commercial
properties to the formation of an umbrella property real
estate investment trust (UPREIT) in return for the issuance
of units of limited partnership interest. Donatelli &
Klein consulted with Donnelly and Donnelly-McKnight “on
numerous occasions” concerning the proposal for refinancing
of the existing encumbrance and the creation of an UPREIT.
However, in a letter to Donatelli & Klein’s counsel dated
September 23, 1997, Donnelly voiced objection to the
proposal.
In December 1997, Donatelli & Klein entered into a
transaction involving a number of entities it created,
5
referred to by the parties as “the FPR Entities.” 4 As part
of this transaction, Donatelli & Klein conveyed the Plaza
500 property by special warranty deed to FPR Holdings
Limited Partnership (FPR Holdings). In return, the
Partnership received partnership units in First Potomac
Realty Investment Limited Partnership. This latter
organization owns related entities and through such
ownership controls four commercial properties, including
Plaza 500.
The Plaza 500 property and the three other commercial
properties were used as collateral for a portion of a loan
of approximately $58 million made to the FPR Entities by
Credit Suisse First Boston Mortgage Capital, L.L.C. (Credit
Suisse). Of the amount loaned, $32,175,000.00 encumbered
the Plaza 500 property in a cross-collaterization with the
other properties covered by the $58 million loan. In
connection with the loan, FPR Holdings executed a credit
line deed of trust, an assignment, and a pledge agreement.
By letter dated January 8, 1998, Donatelli & Klein
notified the Plaza 500 partners that the Partnership’s
property had been conveyed to FPR Holdings. Donnelly then
4
The FPR Entities include First Potomac Realty Investment
Limited Partnership, First Potomac Realty Investment Trust,
Inc., FPR Realty Limited Partnership, FPR – GP Realty,
6
filed an amended bill of complaint and a second amended
bill of complaint. He also sought a preliminary injunction
restraining Donatelli & Klein from any further efforts to
convey the Plaza 500 property to the FPR Entities. The
chancellor denied the injunction, but in a “Stipulation and
Order” approved by the chancellor on February 12, 1998,
Donatelli & Klein agreed that it would “exercise no
authority as general partner of Plaza 500 Limited
Partnership . . . without the express approval of Defendant
Donnelly-McKnight, Inc. . . . as general partner of Plaza
500” and that “[t]he status quo [would] be maintained
pending trial or further order of [the] Court.”
In his second amended bill of complaint, Donnelly
added the FPR Entities as defendants, as well as Credit
Suisse and several other parties. Donnelly also added a
count in rescission and prayed that the conveyance by
Donatelli & Klein to FPR Holdings and the Credit Suisse
deed of trust, assignment, and pledge agreement be held
void “for lack of authority and/or because such conveyances
are fraudulent.”
Hence, the proceedings below involved two separate
claims: first, that the Donatelli Parties had charged
Inc., FPR Holdings Limited Partnership, and FPR – GP
Holdings, Inc.
7
excessive fees for services rendered to the Partnership,
and, second, that the Donatelli & Klein conveyance to FPR
Holdings was unauthorized and should be rescinded.
With respect to the first claim, the chancellor found
that certain of the fees charged by the Donatelli Parties
were excessive or unauthorized. The chancellor held
against Donatelli & Klein for breach of the Agreement,
breach of fiduciary duty, and tortious conversion, against
Donatelli for breach of fiduciary duty, and against
Donatelli, his wife, Ann, and D&K Management for tortious
conversion. In his final decree, the chancellor entered
judgment in favor of Donnelly, derivatively on behalf of
the Partnership, against Donatelli & Klein and D&K
Management, jointly and severally, in the amount of
$546,962.00 plus prejudgment interest. Of that amount, a
judgment for $304,922.00 plus prejudgment interest was also
entered against Donatelli and his wife, Ann, jointly and
severally. The chancellor decreed further that Donatelli
and his wife should return to the Partnership units of
First Potomac Realty Investment Limited Partnership with an
assigned value of $744,000.00 and that a $900,000.00
leasing commission charged by the Donatelli Parties
associated with the renewal of a lease was not to be
charged against the Partnership or the FPR Entities. The
8
record shows that the monetary judgments have been paid and
released and that the $744,000.00 units in First Potomac
Realty Investment Limited Partnership have been returned to
the Partnership. No issue has been raised on appeal
concerning these matters.
With respect to the claim for rescission, the
chancellor first found that the language of Sections 9 and
10 of the Agreement was unambiguous and, accordingly, that
the language should be construed according to “the plain
meaning” rule. See Berry v. Klinger, 225 Va. 201, 208, 300
S.E.2d 792, 796 (1983). The chancellor then proceeded to
hold as a matter of law that the conveyance of the Plaza
500 property by Donatelli & Klein to FPR Holdings “was
authorized by the . . . Agreement” and was “valid,” that
the cross-collaterization of the Credit Suisse loan was
“valid and enforceable,” and that the Credit Suisse deed of
trust, assignment, and pledge agreement were “authorized
under the . . . Agreement and enforceable.” Accordingly,
the chancellor held in favor of “the ‘Donatelli
Defendants’” on the counts of the second amended bill of
complaint involving conspiracy and in favor of “the
‘Donatelli Defendants,’” “the ‘FPR Defendants,’” and Credit
Suisse on the counts involving rescission, removal of
Donatelli & Klein as a general partner, and the appointment
9
of a receiver. 5 We awarded Donnelly this appeal to review
the chancellor’s action concerning the claim for
rescission.
On appeal, Donnelly stresses the heading of Section 9
of the Agreement, “Legal Title to Partnership Property;
Power of General Partners; Indemnities.” Donnelly also
quotes Section 9(B)’s language granting the general
partners power to “manage, lease, sell, mortgage, convey,
improve, alter, renovate, refinance, grant easements on or
dedicate the property of the Partnership.” Donnelly then
quotes the admonition contained in Section 9(B) that “[a]ll
decisions, including the time and amounts of cash calls,
shall be made by the unanimous vote of the general
partners.”
Next, Donnelly cites Section 9(C) and states that it
“describes the binding authority of the general partners to
execute documents” in favor of third parties. Donnelly
accents the last sentence of Section 9(C), which provides
that “[n]otwithstanding the foregoing, either of the
general partners may execute [documents in favor of third
parties] and such execution shall be deemed to bind the
5
The chancellor awarded Donnelly “a limited accounting” to
ensure compliance with the provision of the final decree
relating to the return of the units in First Potomac Realty
10
Partnership, provided that such execution has been
specifically authorized pursuant to a written consent or
resolution joined by both general partners.”
Finally, Donnelly recognizes the existence of Section
10(A), which provides that in the event of disagreement
between the general partners which continues after
consultation between them, Donatelli & Klein “shall
determine the matter in dispute in its sole discretion.”
Donnelly emphasizes, however, that Section 10 is headed
“Management of Business.”
From the foregoing, Donnelly argues that “the only
reasonable construction of Paragraph 10.A., which is
referenced in paragraphs 9.B. and 9.C., is that it applies
merely to day-to-day management of the partnership business
and not to fundamental decisions like leasing, refinancing
and conveying the property.” Donnelly also argues that
Sections 9(B) and 9(C) are made subject to Section 10
“merely to clarify that as to day-to-day management of the
business, [Donatelli & Klein] could exercise discretion
after consultation with Donnelly-McKnight, notwithstanding
the language in paragraph 9 that otherwise requires
unanimous consent of both general partners.”
Investment Limited Partnership. As noted previously in the
text, the return of the units has been accomplished.
11
Donnelly correctly states that it is a question of law
subject to de novo review whether the chancellor properly
found the language of Sections 9 and 10 to be unambiguous.
See Gordonsville Energy, L.P. v. Virginia Elec. & Power
Co., 257 Va. 344, 352-53, 512 S.E.2d 811, 816 (1999);
Tuomala v. Regent University, 252 Va. 368, 374, 477 S.E.2d
501, 505 (1996). Donnelly is also correct in saying that
we are not bound by the chancellor’s construction of the
contractual provisions and that we are presented the same
opportunity as the chancellor to consider the provisions.
Id. However, after giving the chancellor’s finding de novo
review and considering the contractual provisions on our
own, we affirm the chancellor’s finding.
Section 10 is labeled “Management of Business,” not
“Day-to-Day Management of Business,” as Donnelly would have
us read the heading. And, while labels may be helpful in
determining contractual intent, they are not controlling.
See Commonwealth v. E. W. Yeatts, Inc., 233 Va. 17, 24, 353
S.E.2d 717, 721 (1987) (divining legislative intent not
contest of labels but exercise in common sense
interpretation of statutory language).
Furthermore, the content of Section 10 is much more
expansive than its heading. By its terms, Section 10
encompasses decisions related not only to the management of
12
the business but also to the management of the “affairs and
assets of the Partnership,” and the authority granted
Donatelli & Klein to make a decision in its sole discretion
after consultation with Donnelly-McKnight extends to “any
disagreement . . . as to any matter.” (Emphasis added.)
The parties could not have made their intention more
explicit. We agree with the chancellor, therefore, in his
conclusion that Section 10(A) conferred power upon
Donatelli & Klein to determine, in its sole discretion and
after consultation with Donnelly-McKnight, the dispute
concerning the refinancing of Plaza 500 and the conveyance
of the Partnership assets to FPR Holdings.
Donnelly argues, however, that in attempting to
reconcile the apparent conflict between Sections 9 and 10
of the Agreement, the chancellor failed to apply well-
recognized rules of contract construction. In this
connection, Donnelly cites Bott v. N. Snellenburg & Co.,
177 Va. 331, 14 S.E.2d 372 (1941), for the rule that
“‘where there is a repugnancy, a general provision in a
contract must give way to a special one covering the same
ground.’” Id. at 339, 14 S.E.2d at 375 (quoting Harrity v.
Continental-Equitable Title & Trust Co., 124 A. 493, 495
(Pa. 1924)).
13
There are several difficulties with this argument.
First, we do not agree there is conflict between Sections 9
and 10. Paragraphs A and B, the pertinent paragraphs of
Section 9, are both made subject to Section 10; “subject
to” means “subordinate, subservient, inferior, obedient to;
governed or affected by.” Black’s Law Dictionary 1425 (6th
ed. 1990). This, alone, obviates any possibility of
conflict between Sections 9 and 10.
Second, Section 9 is operative when the general
partners are in agreement on a given matter while the part
of Section 10 that gives Donatelli & Klein authority to act
alone is operative only when the general partners disagree.
Hence, with Sections 9 and 10 operating within their
respective spheres, they do not cover the same ground and
there is no basis for conflict.
Third, Donnelly is mistaken about what is general and
what is specific. The provisions in Paragraphs A and B of
Section 9 are general in nature while the provision in
Section 10 giving Donatelli & Klein sole discretion to act
is specific, confined to the one situation where the
general partners disagree following consultation between
them. Hence, the general provisions of Section 9 must give
way to the specific provision of Section 10.
14
What has been said should be sufficient to answer
Donnelly’s next argument, viz., the chancellor failed to
observe the rule enunciated in Berry that “[t]he court must
give effect to all of the language of a contract if its
parts can be read together without conflict [and, where]
possible, meaning must be given to every clause.” 225 Va.
at 208, 300 S.E.2d at 796. As we have just demonstrated,
Sections 9 and 10 can be read together without conflict and
meaning can be given to both sections when permitted to
operate within their respective spheres. We thus give
effect to all the language of Sections 9 and 10.
Donnelly also notes that in determining Donatelli &
Klein had “authority to convey the Partnership Property
without Donnelly-McKnight’s consent, the Chancellor relied
on the ‘plain meaning rule’ emphasizing the use of the
words ‘subject to’ where paragraphs 9.B. and 9.C. reference
paragraph 10.A.” However, Donnelly complains, the
chancellor “did not apply the same [rule] when considering
the last provision of paragraph 9.C.” That provision, with
Donnelly’s emphasis added, states as follows:
Notwithstanding the foregoing, either of the general
partners may execute a contract, agreement, deed,
mortgage, lease, promissory note or other instrument
or document on behalf of the Partnership, and such
execution shall be deemed to bind the Partnership,
provided that such execution has been specifically
15
authorized pursuant to a written consent or resolution
joined by both general partners.
This, Donnelly says, “is a clear statement of what is
required for one general partner to execute deeds and
mortgages on behalf of the Partnership,” viz., “a joint
resolution of both general partners or a written consent of
Donnelly-McKnight.”
This argument, however, overlooks the fact, as
discussed above, that the Agreement provides two separate
spheres of operation for decisions of the general partners,
one where the general partners agree and the other where
they disagree. The applicability of the
“[n]otwithstanding” provision of Section 9(C) obviously is
predicated upon the existence of an agreement — it speaks
only in terms of consent and joint resolution — a situation
that does not prevail here.
Furthermore, the provision clearly is for the
protection of third parties who deal with the Partnership
and not the partners themselves. Section 9(C) is directed
to “any party dealing with the general partners with
respect to any property of the Partnership,” and the
interests of third parties are not at issue in this appeal.
Finally, it bears repeating that Section 9(C) is
expressly made “[s]ubject to the provisions of Section 10.”
16
Donnelly argues, however, that because the “[s]ubject to”
language precedes the “[n]othwithstanding” clause in
Section 9(C), the latter nullifies the former and
eliminates Section 10 from consideration. But this
interpretation would have the effect of making the
“[n]otwithstanding” clause read “[n]otwithstanding the
provisions of Section 10,” and that, in our opinion, would
be an impermissible reading. Rather, we think the
“[n]otwithstanding” clause, which envisions the situation
where a formal document has been executed by one general
partner, was intended to apply only to the language
immediately preceding it in Section 9(C), which envisions
the situation where a formal document has been executed by
both general partners.
Donnelly argues further that because the provision in
Section 10(A) concerning the determination of disputed
matters was included in the Agreement upon Donatelli’s
insistence, the provision must be strictly construed
against Donatelli & Klein as though it was the draftsman.
Donnelly cites Martin & Martin, Inc. v. Bradley
Enterprises, 256 Va. 288, 504 S.E.2d 849 (1998), in support
of his argument. However, as stated in Martin, the rule is
that “[i]n the event of an ambiguity in the written
contract, such ambiguity must be construed against the
17
drafter of the agreement.” Id. at 291, 504 S.E.2d at 851
(emphasis added). Here, the chancellor found there was no
ambiguity in the Section 10(A) provision, and we agree, so
the Martin rule does not apply. In any event, we find that
a strict construction of the provision would not produce a
different result.
Donnelly next argues that “the transfer of Plaza 500’s
Property to the entities created by Donatelli for the
purported purpose of forming a real estate investment trust
also constitutes a change in the business of the
partnership which, pursuant to paragraph 17.F.(1)(v)
required the unanimous consent of all of the partners,
general and limited.” However, we fail to see how Section
17(F) benefits Donnelly.
In pertinent part, Section 17(F) provides as follows:
Each limited partner . . . does hereby appoint [the
general partners], either of whom may act alone, as
. . . attorneys-in-fact, in such limited partner’s
name and behalf, to prepare an amendment to this
Agreement and to sign . . . and acknowledge any and
every such amendment . . ., where such an amendment is
necessary to reflect any of the following:
. . . .
(v) a change in the character of the business of
the Partnership by unanimous written consent of all
partners[.]
Rather than requiring the unanimous written consent of all
the partners themselves, Section 17(F) permits a general
18
partner, acting alone, to provide the written consent of
the limited partners. This is the sort of conduct by a
general partner, acting alone, that Donnelly abjures.
As noted previously, the chancellor found that the
language of Sections 9 and 10 of the Agreement was not
ambiguous, yet he permitted the parties to introduce an
abundance of parol evidence in the form of oral testimony
and numerous exhibits. Neither party has assigned error to
the admission of the parol evidence and each relies upon
different parts of it in the arguments.
Donnelly says that the parol evidence “overwhelmingly
corroborates [his] interpretation of [the] Partnership
Agreement.” We disagree with Donnelly. At best, from
Donnelly’s standpoint, the parol evidence produces a
standoff.
Donnelly presented the testimony of himself,
McKnight, and Harvey. Donnelly testified concerning one
instance when he was asked at “the last hour” by Donatelli
& Klein to sign a lease, with the explanation that it was
“extremely important [to] get a signed lease” immediately
or run the risk of losing the business opportunity.
McKnight testified concerning the effect of the
change that was made upon Donatelli’s insistence to
include the tie-breaker provision in the Agreement.
19
McKnight said it was his understanding that “Donatelli
& Klein would have discretion, after consultation with
[Donnelly-McKnight], if we couldn’t agree on day-to-
day management issues, to make the decision.” When
asked “how one partner can bind the other partner in
terms of signing deeds and things of that nature,”
McKnight responded by referring to the
“[n]otwithstanding the foregoing” provision of Section
9(C) of the Agreement, which relates to the authority
of one general partner to execute deeds and other
formal papers “provided that such execution has been
specifically authorized pursuant to a written consent
or resolution joined by both general partners.”
Harvey testified it was his understanding of
“Donatelli’s decision-making role” that “Donatelli would
consult with Mr. Donnelly and Mr. McKnight, and if they
couldn’t agree, then Mr. Donatelli would have final
decision-making authority on all operating issues.” By
“operating issues,” Harvey said he meant “[m]anagement of
the property, contracts, those types of things . . . but as
to refinancing and sale, . . . it would take the
concurrence of both the Donatelli side and the Donnelly-
McKnight side.”
20
Donnelly also introduced fifty-five contracts, leases,
and other documents, including a “CONSENT” given to a
potential lender, that had been signed by both Donatelli &
Klein and Donnelly-McKnight over a ten-year period.
According to Donnelly, in these exhibits, the parties
evidenced by their own practice that both Donatelli & Klein
and Donnelly-McKnight “were required to sign all such
contracts, leases and mortgages and any other documents
affecting title to the Plaza 500 Property.”
Further, Donnelly asserts that the Donatelli Parties
“admitted at trial that, until they secretly conveyed away
the Partnership’s property in December 1997, they can
recall no other instances in the ten years of the
Partnership’s existence, where [Donatelli & Klein] signed
any leases, deeds, or mortgages without the approval and
consent in writing of Donnelly-McKnight.” However, it is
worthy of note that Donnelly points to no evidence in the
record of any disagreement between the general partners
concerning any leases, deeds, or mortgages in the ten-year
existence of the Partnership until the advent of the
current refinancing/UPREIT dispute in 1997.
In his turn, Donatelli testified it was his
understanding that, under the terms of the Agreement, he
had “the last word.” In addition, Donatelli introduced
21
into evidence a series of letters Donnelly or his counsel
addressed to Donatelli over a period of some two years,
with the purpose of securing an amendment to Section
10(A)’s provision granting power to Donatelli & Klein to
determine disputed matters in its sole discretion. The
chancellor specifically noted two of the letters in the
course of his oral opinion upholding the power of control
granted Donatelli & Klein by Section 10(A). Dated March
29, 1993, the first letter stated as follows:
Paragraph 10 A of the partnership agreement for
Plaza 500, provides that all decisions as to the
management of the business, affairs and assets of
Plaza 500 are to be made by unanimous vote of the
general partners, but that Donatelli & Klein,
Incorporated shall have the right to resolve any
dispute arising between the general partners which
continue after consultation. This provision is of
concern to me, and I believe it affects you and your
heirs as well.
In the event a trustee is appointed by a bank or
court to hold your partnership interest, Paragraph 10
A may permit such an individual to make decisions with
respect to the property which would affect both our
interests. . . .
I am therefore requesting that you agree, by
signing the enclosed copy of this letter, not to
exercise the authority purported to be granted to
Donatelli & Klein in Paragraph 10 A, and that . . .
you will not make any decision in the management of
the business, affairs, or assets of Plaza 500 without
obtaining my consent or that of Donnelly-McKnight
. . . .
(Emphasis added.) The second letter, dated April 19, 1993,
stated as follows:
22
I wrote to you on March 29, 1993 pertaining to
revisions to Paragraph 10A of the partnership
agreement for Plaza 500. . . .
You have indicated today that you are too busy to
address the revisions. Accordingly, I have.
Paragraph 10A will, effective immediately, be
revised to read (pertaining to decision making
capacities):
It is hereby agreed that neither Donatelli &
Klein, Incorporated, nor its successors or assigns,
shall make any decisions in the management of the
business affairs and assets of Plaza 500 Limited
Partnership without obtaining the consent of John C.
Donnelly & Donnelly-McKnight, Inc.
Donnelly did not identify the source of his purported
authority to revise the Agreement ex parte. Be that as it
may, these letters, as the chancellor observed, “revealed
that [Donnelly] was well aware that [Donatelli & Klein] had
the right to resolve any dispute arising between the
general partners which continues after consultation.”
The final letter in the series is also revealing on
Donnelly’s awareness that Donatelli & Klein’s power to
resolve disputed matters was not limited to day-to-day
management of the Partnership’s business. Dated March 6,
1995, the letter was written from Donnelly’s counsel to
Donatelli, and it listed eight matters Donnelly “would like
to have addressed” concerning the Partnership. The eighth
matter was stated as follows: “Donatelli & Klein, Inc.
shall consult with Donnelly-McKnight, Inc. as to all
23
partnership decisions. In the event of a disagreement,
there should be a provision for arbitration between the
partners, the cost of which would be paid by the
partnership.” (Emphasis added.)
Hence, if there remains any doubt or uncertainty about
the extent of the power granted to Donatelli & Klein by
Section 10(A), “the interpretation placed thereon by the
parties themselves is entitled to great weight and will be
followed if that may be done without violating applicable
legal principles.” Dart Drug Corp. v. Nicholakos, 221 Va.
989, 995, 277 S.E.2d 155, 158 (1981) (quoting O’Quinn v.
Looney, 194 Va. 548, 552, 74 S.E.2d 157, 159 (1953)).
Donnelly has not cited any legal principle the chancellor
violated in giving great weight to the interpretation
Donnelly placed upon Section 10(A) in his letters to
Donatelli & Klein.
Donnelly’s remaining arguments turn on whether
Donatelli & Klein had the authority to make the conveyance
of the Plaza 500 property to FPR Holdings. Since we agree
with the chancellor that the Agreement granted Donatelli &
Klein such authority, we need not consider the remaining
arguments, and we will affirm the decree appealed from.
Affirmed.
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