Title: Donnelly v. Donatelli & Klein Inc.
Citation: N/A
Docket Number: 982204
State: Virginia
Issuer: Virginia Supreme Court
Date: September 17, 1999

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 
 
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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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