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DONNELLY, et al. v. DONATELLI & KLEIN, et al.



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DONNELLY, et al.

v.

DONATELLI & KLEIN, et al.


September 17, 1999

Record No. 982204

 

JOHN C. DONNELLY, ETC.

v.

DONATELLI & KLEIN, INCORPORATED, ET AL.

 

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY

Gerald Bruce Lee, Judge

Present: All the Justices

OPINION BY CHIEF JUSTICE HARRY L. CARRICO


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, 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
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." 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 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,
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 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
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 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 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
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."

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 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)).

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.

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 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." 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 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 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. 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."

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 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:

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 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.

 

FOOTNOTES:

[1] Wilson Brothers, Incorporated
later became a limited partner.

[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] The FPR Entities include First
Potomac Realty Investment Limited Partnership, First Potomac
Realty Investment Trust, Inc., FPR Realty Limited Partnership,
FPR – GP Realty, Inc., FPR Holdings Limited Partnership, and
FPR – GP Holdings, Inc.

[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 Investment Limited Partnership. As noted previously in the
text, the return of the units has been accomplished.

 

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