Case Title: Comtois v. Rogers

Citation: 

Docket Number: 101128

State: virginia

Court: Virginia Supreme Court

Date: 2011-09-16T00:00:00Z

Document:
PRESENT:  Kinser, C.J., Lemons, Goodwyn, Millette, and Mims, JJ. 
 
MARK C. COMTOIS, ET AL. 
 
 
 
 
 
 
 
 OPINION BY  
v. 
Record No. 101128 
  
    
JUSTICE WILLIAM C. MIMS 
 
 
 
 
 
 
 
   September 16, 2011 
L. LAWTON ROGERS, III  
 
FROM THE CIRCUIT COURT OF THE CITY OF ALEXANDRIA 
Nolan B. Dawkins, Judge 
 
 
In this appeal, we consider whether the circuit court 
erroneously failed to perform an accounting of a partnership 
prior to ordering its judicial dissolution. 
I. 
BACKGROUND AND MATERIAL PROCEEDINGS BELOW 
L. Lawton Rogers, III and Joseph Killeen shared a 
successful law practice in the partnership of Rogers & Killeen 
until Killeen’s death in 1998.  Rogers thereafter continued the 
practice as a sole proprietorship with Mark C. Comtois, D. 
Joseph English, and Patrick D. McPherson, who had been hired as 
associates between 1996 and 1998.  In December 1999, Rogers 
approached the three associates (collectively, “the Plaintiffs”) 
to form a new partnership that retained the name Rogers & 
Killeen (“the Firm”).  The Plaintiffs agreed and the four 
attorneys signed a partnership agreement backdated to April 1, 
1999. 
Paragraph 3.2 of the partnership agreement required “[e]ach 
Partner [to] deposit to the account of the Firm an equal share 
of the capitalization of the Firm and the financial records of 
 
2 
the Firm shall reflect the Capital Account of each Partner 
individually.”  Paragraph 3.1 provided that “[t]he 
capitalization of the Firm may be referred to in accounting 
records and balance sheets as ‘Net Worth’, ‘Capital Accounts’ or 
‘Partner’s Equity’.” 1  (Id.) Paragraph 3.3 required each partner 
to make his capital contribution within five days of a call for 
capital and Paragraph 3.4 provided that any partner who failed 
to do so would be in default, thereby losing his right to 
participate in the management of the Firm and subjecting himself 
to possible expulsion.  Paragraph 3.5, captioned “Interest On 
Capital Contributions,” provided that interest would be paid on 
each partner’s equity in the firm.  Specifically, it stated: 
To encourage the adequate capitalization of the 
Firm and the interest of the Partners in the 
financial success of the Firm which will 
accompany the investment by each Partner of 
capital in the Firm, the Firm shall pay to each 
Partner on the last day of each calendar month as 
interest a sum equal to one percent (1%) of such 
Partners’s [sic] Capitol [sic] Account during 
that month.  Interest shall be paid 
notwithstanding the fact that the payment thereof 
shall reduce the cash available to the Firm and 
trigger a new call for capital. 
 
                                                 
 
1 In addition to the account into which each partner 
deposited his capital contribution, representing his equity in 
the Firm, Paragraph 7.4 of the partnership agreement provided 
that each partner would have an income account.  That paragraph 
also provided that overdrawn capital and income accounts “shall 
be considered by the Firm as accounts receivable”; conversely, 
underdrawn accounts “shall be considered by the Firm as accounts 
payable.” 
 
3 
The partners also agreed to capitalize the Firm by each 
contributing $150,000.  The Plaintiffs borrowed some of their 
contributions from Rogers and Rogers’ wife:  English and 
McPherson each borrowed the full $150,000; Comtois borrowed 
$100,000.  Each Plaintiff signed a note securing his 
indebtedness with his interest in the Firm.  The respective 
notes provided that interest on the outstanding balance would 
accrue at the rate of 12% per year.  The notes also provided 
that the interest payable by the Firm on the respective 
partner’s equity under Paragraph 3.5 of the partnership 
agreement would be deposited in Rogers’ capital account as 
payment toward the debt.   
In late 2000, all four partners joined Carter Ledyard & 
Milburn LLP.  The partners did not dissolve the Firm because 
they were awaiting a large payment from an unresolved contingent 
fee case.  In 2002, the partners moved from Carter Ledyard & 
Milburn LLP to Duane Morris LLP.  The Firm remained extant but 
inactive.  After 2002, the Firm paid no interest on the 
partners’ equity.   
In December 2008, Rogers and his wife filed an amended 
complaint against the Plaintiffs demanding repayment of the 
notes.2  In February 2009, the Plaintiffs filed a separate 
                                                 
 
2 Rogers subsequently non-suited additional claims in his 
amended complaint. 
 
4 
complaint asserting that Rogers had overdrawn his capital 
account by $611,147.00 and that this amount was an account 
receivable owed to the Firm under Paragraph 7.4 of the 
partnership agreement.  In their complaint, the Plaintiffs 
sought a final accounting, judgment against Rogers in favor of 
the Firm in the amount of $611,147.00, the distribution of the 
Firm’s assets equally among the partners, and the judicial 
dissolution of the Firm.  By agreement of the parties, the 
circuit court consolidated the two cases and heard evidence in a 
three-day bench trial. 
The circuit court thereafter issued a letter opinion in 
which it found that the Firm owed all the partners 1% monthly 
interest on their equity from the date the Firm ceased paying 
such interest.  It then further found that the Plaintiffs had 
not paid Rogers and his wife any interest due under their 
respective notes since the Firm had ceased paying interest on 
their equity, but determined that the Plaintiffs’ failure to pay 
Rogers and his wife was offset by the Firm’s failure to pay the 
Plaintiffs. 
Accordingly, the circuit court ruled that because English 
and McPherson’s equity was equal to their debts under their 
notes, their obligations to pay interest under their notes was 
canceled out by the Firm’s obligation to pay them interest on 
 
5 
their equity.3  To the extent English and McPherson had repaid 
Rogers and his wife any amounts beyond the interest accrued or 
due to them from the Firm on their equity, such repayments would 
be applied to reduce their outstanding principal balances due 
under the notes. 
Similarly, the circuit court found that Comtois’ obligation 
to pay annual interest on the outstanding balance of his debt 
under his note was canceled out by the Firm’s obligation to pay 
him interest on his equity.  Moreover, because Comtois had only 
borrowed $100,000 of his $150,000 equity, he was entitled to be 
paid the monthly interest on the $50,000 he personally 
contributed to the account.  The court found each partner liable 
for 25% of the unpaid interest due to Comtois if the Firm’s 
assets were insufficient to pay it.  The court also found that 
Rogers was entitled to be paid monthly interest on his entire 
$150,000 contribution and found each partner liable for 25% of 
this obligation. 
The circuit court directed all the parties to audit the 
payments the Plaintiffs had made to Rogers and his wife and to 
                                                 
 
3 The Firm was obligated by the partnership agreement to pay 
English and McPherson interest on their capital contributions.  
In their respective notes, English and McPherson had assigned 
their right to receive these interest payments to Rogers and his 
wife as payment of the interest due under the notes.  The 
circuit court reasoned that English’s and McPherson’s failures 
to pay Rogers and his wife interest as required by the notes was 
subsumed by the Firm’s failure to pay English and McPherson 
interest as required by the partnership agreement. 
 
6 
propose a final order providing for the payment of any 
outstanding balance under the notes, plus 12% annual interest 
until paid in full.  The court made no finding with respect to 
the Plaintiffs’ allegations that Rogers’ capital account was 
overdrawn or that he owed the Firm any money as a result.  
Finally, the court found that the Plaintiffs had met their 
burden of proof that the Firm should be judicially dissolved. 
Rogers and his wife and the Plaintiffs were unable to agree 
to the amounts of their respective obligations and therefore 
proposed competing final orders to the circuit court.  The court 
held a hearing on the parties’ proposals, after which it entered 
a final order.  The final order found that Comtois had paid 
$77,951 in principal under his note and owed an outstanding 
balance of $22,049; that McPherson had paid $93,951 in principal 
under his note and owed an outstanding balance of $56,049; and 
that English had paid $75,951 in principal and owed an 
outstanding balance of $74,049.  The court entered judgment 
against each Plaintiff in favor of Rogers and his wife for the 
outstanding balances he owed, plus 12% interest per year on 
those balances until paid in full.4 
                                                 
 
4 No party assigns error to the court’s factual findings as 
to the amount of principal each Plaintiff had paid or to the 
outstanding balance each Plaintiff owed Rogers and his wife 
under their respective notes. 
 
7 
In its final order, the circuit court also awarded Rogers 
$129,500.00 in unpaid 1% monthly interest on his equity in the 
Firm, the liability for which was to be divided equally among 
the four partners.  The court awarded Comtois $43,000 in unpaid 
1% monthly interest only on $50,000 in equity he had not 
borrowed, the liability for which was also to be divided equally 
among the four partners.  It awarded English and McPherson no 
unpaid interest on their equity because their entire 
contributions had been borrowed.  The court therefore 
specifically ordered English and McPherson each to pay Rogers 
$32,500.00 and Comtois $10,750.00 in unpaid interest on equity; 
finding that Rogers’ liability to Comtois partially offset 
Comtois’ liability to Rogers, it ordered Comtois to pay Rogers 
$21,500.00 in unpaid interest on equity.5 
Finally, the court ordered the partnership judicially 
dissolved. 
The Plaintiffs objected to the final order and we awarded 
them this appeal.6 
 
                                                 
 
5 No party assigns error to the portion of the court’s order 
calculating each partner’s share of Rogers’ unpaid interest on 
equity as $32,250, even though four equal shares of $129,500 
amount to $32,375 each. 
 
6 Rogers and his wife also objected to the final order and 
we awarded them an appeal, Record No. 101132, which we dismiss 
by separate, unpublished order for the reasons set forth 
therein. 
 
8 
II. ANALYSIS 
The Plaintiffs assign error to the circuit court’s judgment 
on three grounds.  First, they assert that the circuit court 
ordered the judicial dissolution of the Firm without performing 
an accounting and settlement of the partners’ accounts.  Second, 
they assert that by failing to perform the required accounting, 
the circuit court failed to require Rogers to repay his 
allegedly overdrawn, negative capital account or award the 
Plaintiffs the balances of their underdrawn, positive capital 
accounts.  Third, they assert that the circuit court erred in 
awarding Rogers $129,500 in unpaid interest on his capital 
account balance when his account allegedly was overdrawn with a 
negative balance.  We address this third assignment first. 
A.  INTEREST ON ROGERS’ EQUITY 
The Plaintiffs assert that the circuit court erred by 
awarding Rogers interest on his capital account balance when the 
account allegedly was overdrawn.  Their assignment of error thus 
challenges the circuit court’s interpretation of the interest 
obligation set forth in the partnership agreement.  “We review 
the interpretation of a contract de novo.”  Uniwest Constr., 
Inc. v. Amtech Elevator Servs., 280 Va. 428, 440, 699 S.E.2d 
223, 229 (2010). 
When the terms in a contract are clear and 
unambiguous, the contract is construed according 
to its plain meaning.  Words that the parties 
 
9 
used are normally given their usual, ordinary, 
and popular meaning.  No word or clause in the 
contract will be treated as meaningless if a 
reasonable meaning can be given to it, and there 
is a presumption that the parties have not used 
words needlessly. 
 
Id. (quoting PMA Capital Ins. Co. v. US Airways, Inc., 271 Va. 
352, 358, 626 S.E.2d 369, 372-73 (2006)). 
The Plaintiffs’ argument on this assignment is founded on 
an interpretation that the interest payable by the Firm under 
Paragraph 3.5 of the partnership agreement accrues on the 
balance of each partner’s respective total contributions to the 
Firm.  The Plaintiffs contend that such contributions include 
deferred or uncollected salary, fees, and other earnings, which 
their forensic expert described at trial as capital 
contributions.7  He testified that, “[A] capital account balance 
is increased by capital contributed to the firm and increased by 
a share of income allocated to a partner, and it’s decreased by 
distributions to a partner from the firm and losses allocated to 
a partner.”  While his statement may be correct as an accounting 
principle, it exposes a critical semantic divergence between a 
“capital account” as contemplated by the partnership agreement 
and each partner’s capital in the Firm under standard accounting 
practices. 
                                                 
 
7 Each of the Plaintiffs had such deferred or uncollected 
salary, fees, and other earnings between 2000 and 2002, which 
according to their forensic expert should be applied to their 
capital accounts. 
 
10 
Under Paragraph 3.1, each partner’s “capital account” is 
defined as that amount he contributes to the capitalization of 
the firm.  Under that paragraph, “[t]he total capitalization of 
the Firm shall be determined by the Partners.”  Under Paragraph 
3.2, the partners must contribute to the Firm’s capitalization 
equally:  “Each Partner shall deposit to the account of the Firm 
an equal share of the capitalization of the Firm and the 
financial records of the Firm shall reflect the Capital Account 
of each Partner individually.”  (Emphasis added.)  Under 
Paragraph 3.3, capital contributions are made only after a call 
for capital.  Under Paragraph 3.4, a partner’s failure to make 
his equal contribution within five days of such a call for 
capital suspends his participation in the management of the Firm 
and places his continued role as a partner in jeopardy. 
Based on these provisions it is clear that the phrase 
“capital account” as contemplated by Paragraph 3.5 includes only 
the partners’ equal contributions to the capitalization of the 
Firm:  their equity in the Firm as opposed to any undrawn 
surplus in the income accounts provided for in Paragraph 7.4.  
While it may be standard accounting practice to apply such 
undrawn surpluses – in the form of salary, fees, and other 
earnings a partner may be entitled to receive but has not 
actually withdrawn – to the partner’s capital account, there is 
no provision in the partnership agreement directing that those 
 
11 
undrawn surpluses be included in the equity on which the Firm is 
required to pay interest under Paragraph 3.5.  The partnership 
agreement does not provide for voluntary, unilateral increases 
in a partner’s equity.  To the contrary, under Paragraphs 3.1 
and 3.2 of the partnership agreement the total capitalization of 
the Firm must be determined by the partners collectively, and 
must remain equal among all of them; the agreement thus provides 
only for mandatory increases through calls for additional 
capitalization shared equally among the partners.  There were no 
such calls for capital. 
Accordingly, though Rogers’ capital or income accounts may 
or may not have been overdrawn according to standard accounting 
practices as the Plaintiffs allege, there was no reduction in 
his partner’s equity as contemplated by the partnership 
agreement, just as there was no increase in the Plaintiffs’ 
respective equity regardless of any undrawn surpluses in their 
capital or income accounts.  The partners’ equity remained an 
equal $150,000 at all times after the execution of the 
partnership agreement and concomitant agreement that each 
partner contribute $150,000 in capital.  The interest to which 
each partner was entitled under Paragraph 3.5 thus accrued only 
on his initial $150,000 contribution notwithstanding any 
deposits or withdrawals from the income accounts provided for in 
Paragraph 7.4. 
 
12 
We therefore will affirm the portion of the circuit court’s 
judgment awarding Rogers interest on his $150,000 capital 
contribution. 
B.  ACCOUNTING AND SETTLEMENT 
The Plaintiffs argue that the circuit court correctly found 
that they had met their burden for an order of judicial 
dissolution of the partnership under Code § 50-73.117 but then 
erroneously failed to perform an accounting and winding up of 
the Firm’s business, including the settlement of the partners’ 
accounts that is required by Code § 50-73.123.  The Plaintiffs 
thereby raise the question of whether the circuit court failed 
to do that which Code § 50-73.123 required it to do after it 
determined a judicial dissolution was warranted under Code § 50-
73.117.  This question presents an issue of statutory 
interpretation, which we review de novo.  Jones v. Williams, 280 
Va. 635, 638, 701 S.E.2d 405, 406 (2010). 
Code § 50-73.123(A) directs the circuit court to ascertain 
the value of a partnership’s assets and liabilities and apply 
the assets “to discharge its obligations to creditors, 
including, to the extent permitted by law, partners who are 
creditors.”  Thereafter, “[a]ny surplus shall be applied to pay 
in cash the net amount distributable to partners in accordance 
with their right to distributions under subsection B.”  Id.  
Code § 50.73-123(B) states that 
 
13 
[e]ach partner is entitled to a settlement of all 
partnership accounts upon winding up the 
partnership business. In settling accounts among 
the partners, the profits and losses that result 
from the liquidation of the partnership assets 
shall be credited and charged to the partners’ 
accounts. The partnership shall make a 
distribution to a partner in an amount equal to 
any excess of the credits over the charges in the 
partner's account. A partner shall contribute to 
the partnership an amount equal to any excess of 
the charges over the credits in the partner's 
account that is attributable to an obligation for 
which the partner is liable under § 50-73.96. 
 
Historically, an accounting was a term of art describing a 
particular remedy in equity available “against any agent, 
trustee, committee[, or] partner.”8  John L. Costello, Virginia 
Remedies § 16.01[1] (3d ed. 2005).  Such an equitable accounting 
included two steps.  “First, the account is to be stated; this 
is a determination of who owes what.  Second, the account is to 
be settled; this is the payment by the debtor of the money found 
to be owing.”  W. Hamilton Bryson, Bryson on Civil Procedure 
§ 12.03[2][c] (4th ed. 2005). 
Although Code § 50-73.123 does not explicitly direct the 
circuit court to perform the historical equitable accounting as 
an incident to a judicial dissolution, the steps required by 
Code § 50-73.123(A) and (B) are identical to those comprised by 
                                                 
 
8 Code § 8.01-31 also affords a statutory right to an 
accounting “against any fiduciary or by one joint tenant, tenant 
in common, or coparcener for receiving more than comes to his 
just share or proportion, or against the personal representative 
of any such party.” 
 
14 
the historical accounting in equity.  Moreover, it simply is 
common sense that the liabilities of the partnership must be 
satisfied and that any residual surplus be distributed among the 
partners, in that order.  The winding up of a partnership’s 
business incident to a judicial dissolution thus necessarily 
includes the completion of an accounting.  See Spencer W. 
Symons, 4 Pomeroy’s Equity Jurisprudence § 1421 (5th ed. 1941) 
(An accounting is “necessary to a final and complete relief” in 
a judicial dissolution.) 
The Plaintiffs alleged in their complaint that Rogers had 
overdrawn his accounts while their own respective accounts were 
underdrawn.9  Paragraph 7.4 of the partnership agreement provided 
that “[o]verdrawn accounts shall be considered by the Firm as 
accounts receivable and underdrawn accounts shall be considered 
by the Firm as accounts payable.”  Accordingly, the complaint 
sought an accounting that would result in Rogers repaying the 
allegedly overdrawn balance of his accounts and the 
corresponding distribution of their underdrawn accounts. 
                                                 
 
9 The difference between partners’ equity on which interest 
accrued under Paragraph 3.5 of the partnership agreement and 
capital and income accounts as contemplated by Paragraph 7.4 is 
immaterial here.  The Plaintiffs’ allegation that Rogers 
overdrew his capital account is sufficient to embrace both his 
capital and income accounts.  The Plaintiffs’ allegation is 
clear:  Rogers’ withdrawals from the Firm created a deficit in 
his accounts and this deficit is an account receivable due to 
the Firm under Paragraph 7.4, regardless of whether it is 
charged to his capital or income account. 
 
15 
Although the Plaintiffs adduced evidence to support the 
allegations of their complaint, the circuit court neither made 
factual findings as to the value of the partners’ respective 
account balances nor directed the repayment of any excessive 
withdrawals or distribution of any surplus.  Both the letter 
opinion and the final order focus on the Plaintiffs’ obligation 
to repay Rogers and his wife under the terms of their respective 
notes and the Firm’s obligation to pay unpaid interest on the 
partners’ equity.  Both are silent as to the value of the 
principal balances of the partners’ accounts in the Firm, 
whether the Firm had any surplus after the satisfaction of its 
outstanding liabilities, if any, and whether any partner either 
owed any amount to the Firm or was entitled to any distribution 
from it.10 
                                                 
 
10 Rogers argued below that some portion of the amount by 
which his accounts allegedly were overdrawn was attributable to 
the partners’ agreement that the Firm’s entire operating loss 
for 1999 should be charged to his accounts but that the 
Plaintiffs had agreed that this one-time charge would not need 
to be repaid.  The circuit court found there was no evidence of 
an agreement by the partners that such a charge need not be 
repaid and no party has assigned error to that finding.  
However, the circuit court never determined whether Rogers’ 
accounts were in fact overdrawn or by what amount, whether he 
had an obligation to repay any overdrawn balance to the Firm, or 
how such a repayment would ultimately be distributed among the 
partners during the settlement of their accounts required by 
Code § 50-73.123(B).  Similarly, the court never determined 
whether the Plaintiffs’ respective accounts were in fact 
underdrawn or by what amount, and whether they were entitled to 
distributions of their respective balances. 
 
16 
Accordingly, it is clear that the circuit court failed to 
perform the accounting necessarily inherent in a winding up of 
the Firm’s business and prerequisite to a settlement of its 
accounts among the partners and its final judicial dissolution.  
We therefore will vacate the court’s judgment insofar as it 
fails to account for all the assets and liabilities of the Firm, 
including the principal balances of each partner’s accounts, and 
fails to provide for the distribution of any residual surplus.  
We will remand the case for further proceedings consistent with 
this opinion, including factual findings as to the satisfaction 
of any outstanding liabilities of the Firm, the extent of any 
residual surplus, the value of each partner’s accounts based on 
his respective contributions and withdrawals, and the proportion 
to which any partner either is liable to the Firm or is entitled 
to a distribution from the Firm based on the provisions of the 
partnership agreement. 
III.  CONCLUSION 
For the foregoing reasons, we will vacate the judgment of 
the circuit court and remand for an accounting and settlement of 
the Firm’s assets and liabilities.  We will affirm the portion 
of the judgment awarding Rogers unpaid interest on his $150,000 
capital contribution to the Firm. 
Affirmed in part, 
vacated in part, 
and remanded.