PRESENT:   All the Justices

WAIKOLOA LIMITED PARTNERSHIP

v.   Record No. 031909  OPINION BY JUSTICE BARBARA MILANO KEENAN
                                    June 10, 2004
GEORGE A. ARKWRIGHT, ET AL.

             FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
                   Gaylord L. Finch, Jr., Judge


      In this appeal involving the dissolution of two limited

partnerships, we consider whether the chancellor erred in

requiring one limited partner to purchase the partnership

interests of certain other limited partners.

      The following facts are relevant to this appeal.    In

December 1969, four Virginia limited partnerships, Eiwa Waikoloa

Investment Syndicate (Eiwa), Ehiku Waikoloa Investment Syndicate

(Ehiku), Ewalu Waikoloa Investment Syndicate (Ewalu), and Eono

Waikoloa Investment Syndicate (Eono), purchased about 891 acres

of undeveloped land in Waikoloa, Hawaii.   Each of the four

partnerships owned an undivided percentage interest in the whole

of the property.   Eiwa owned a 10 percent interest in the

property, and Ehiku owned a 25 percent interest.   Ewalu and Eono

owned respective interests of 15 percent and 50 percent.

      Joseph D. and Jane A. Coker, husband and wife, served as

general partners for each of the four partnerships.     Joseph was

the “managing general partner” responsible for conducting

partnership operations and was the “real estate expert” on whose
expertise the limited partners relied.   Jane was primarily

responsible for maintaining the business records for each of the

partnerships.

     George A. Arkwright, Robert Faust, and Chalmers A.

Loughridge, Trustee of the Ruth Loughridge Trust (collectively,

the minority partners), are limited partners in the Eiwa and

Ehiku partnerships.   Arkwright and Faust each own a 5 percent

interest in the Eiwa partnership.    Loughridge owns a 12 percent

interest in the Ehiku partnership.

     This appeal concerns the partnership agreements of Eiwa and

Ehiku, each of which provided for automatic dissolution of the

partnership on the “retirement, adjudication of insanity or

bankruptcy, or death of a general partner.”   Paragraph 19 of

each agreement further provided, in relevant part:

     Upon dissolution of the partnership, the general
     partners, or if the dissolution be caused by
     retirement, insanity, bankruptcy, or death of one
     general partner, then the remaining or surviving
     general partners, shall proceed with dispatch to sell
     or liquidate the assets of the partnership and, after
     paying all liabilities to creditors of the
     partnership, distribute the net proceeds among the
     partners in proportion to their interests. . . . In
     the event partners assuming a majority of at least
     sixty (60%) per cent of the total partnership
     interests shall determine that they wish to purchase
     the assets of the dissolved partnership, such majority
     partners shall have the absolute option and right to
     purchase the interests of the minority partners in
     such assets. . . . Within sixty (60) days after all
     . . . written [appraisals] have been rendered, the
     majority partners shall notify the minority partners
     in writing of their decision whether to exercise the


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     option. . . . Settlement shall be completed within
     thirty (30) days after notice of the exercise of the
     option.

     In November 1987, Joseph Coker required emergency surgery

to remove a blood clot from his brain.    Before this operation,

Joseph executed a general power of attorney appointing Jane as

his “agent and attorney-in-fact.”     Joseph never fully recovered

from the surgery and, as a result, he could no longer manage the

partnerships’ business affairs.

     In February 1988, Jane, individually and as Joseph’s

attorney-in-fact, entered into a memorandum agreement with Myron

D. Bruns.   The memorandum agreement stated that Bruns would be

“responsible for [the] complete management” of each of the four

partnerships, and further provided for transfer of management

duties back to Joseph should he, “by judgement of professionals,

be able to resume management of the investments.”

     Thereafter, Jane notified all the limited partners in the

four partnerships that Joseph was “no longer able to continue

the management of the investments.”    She informed the partners

that Bruns had assumed these management responsibilities, and

that she and Joseph would “remain as general partners/directors”

and “retain all the responsibilities” outlined in the

partnership agreements.

     In October 1991, Bruns obtained a real estate appraisal

(the 1991 appraisal) that fixed the market value of the property


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at $8,700,000.   In 1994, Bruns formed Waikoloa Limited

Partnership (Waikoloa), a Virginia limited partnership, for the

purpose of restructuring the interests of the limited partners

in the four original partnerships.   Jane sent a letter to all

the limited partners informing them that Waikoloa had been

created, among other reasons, to “combine the four syndicates

into one new partnership” and to “clarify and protect the

interest of all [p]artners should dissolution be triggered by

[Joseph’s] condition.”

     Under the Waikoloa partnership agreement, Waikoloa

Properties, Inc., was named as the corporate general partner of

the new partnership.   The limited partners of Eiwa, Ehiku,

Ewalu, and Eono were informed that they could become limited

partners in Waikoloa by assigning their interests in the four

original partnerships to Waikoloa.

     Ultimately, all the limited partners of the four original

partnerships, except for the minority partners, assigned their

partnership interests to Waikoloa.   By these assignments,

Waikoloa acquired 100 percent of the partnership interests in

Ewalu and Eono, and became the majority limited partner in Eiwa

and Ehiku, acquiring respective interests of 90 percent and 88

percent in those partnerships.

     After Jane Coker died in April 1998, Waikoloa sought to

exercise the “buyout provision” detailed in Paragraph 19 of both


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the Eiwa and Ehiku partnership agreements.   In April 1999,

Waikoloa obtained an appraisal (the 1999 appraisal) that placed

the “gross undiscounted market value” of the property at

$3,655,000.   Waikoloa sought to purchase the minority partners’

interests based on the 1999 appraisal.    The minority partners

declined Waikoloa’s request.

     Waikoloa filed an amended bill of complaint against the

minority partners in the circuit court asking the chancellor,

among other things, to affirm Waikoloa’s “right to purchase,

subject to its exercise of the Purchase Option, the minority

interests” of the minority partners, and to require the minority

partners to “promptly sell” their interests to Waikoloa.1     In

response, the minority partners filed a cross-bill in which they

asked the chancellor to declare that the four original

partnerships were dissolved upon Joseph Coker’s “de facto

retirement” in 1988, and that Waikoloa must pay the minority

partners for their respective interests in an amount based on

the value of the property at that time.

     The chancellor referred the case to a commissioner in

chancery, directing the commissioner to receive evidence and to

report his findings to the court.    After conducting an


     1
       The original complainants in the amended bill of complaint
included Waikoloa, Eiwa, Ehiku, Waikoloa Properties, Inc., and
the liquidating trustee, Coker Properties, LC. However,
Waikoloa is the only complainant before this Court on appeal.

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evidentiary hearing, the commissioner submitted a report in

which he found in favor of the minority partners.

     In his report, the commissioner stated that “there [was] no

question” that Joseph Coker effectively retired as a general

partner of Eiwa and Ehiku in February 1988.   The commissioner

found that under the terms of Paragraph 19 of the partnership

agreements, all four original partnerships were dissolved at

that time.   The commissioner further found, in relevant part:

     [I]n accordance with [P]aragraph 19 . . . it was the
     duty of Jane A. Coker as the remaining general partner
     to proceed with dispatch to sell or liquidate the
     assets of the partnership and, after paying all
     liabilities to creditors of the partnership,
     distribute the net proceeds among the partners in
     proportion to their interests.

     Based on the 1991 appraisal, the commissioner valued the

property at $8,700,000.   After making discounts from that amount

for the “bulk sale” of the property and the real estate

commissions that would be incurred, the commissioner found that

Loughridge should be paid $208,800 for his partnership interest,

and that Arkwright and Faust each should receive $34,800 for

their partnership interests.   The commissioner also concluded

that the minority partners should be paid interest on their

judgment amounts from December 1992 “at the judgment rate until

paid.”   However, the commissioner did not specify who should be

responsible for paying these amounts to the minority partners.




                                 6
     Waikoloa filed various exceptions to the commissioner’s

report.   Waikoloa asserted that if the commissioner’s finding

that Joseph Coker effectively retired in February 1988 was

correct, then “the only ruling that can be supported by the

evidence is that . . . all of the assets of all [four]

partnerships should be promptly sold . . . and all . . . of the

limited partners should share on a pro-rata basis in the net

proceeds of the sale.”   Waikoloa also contended that a monetary

judgment could not be imposed against it because the

commissioner did not find that Waikoloa had engaged in any

“wrongdoing.”

     The chancellor overruled Waikoloa’s exceptions and adopted

the commissioner’s findings “in their entirety.”   The chancellor

additionally held that Waikoloa “must perform its duties under

the partnership agreement[s]” and “pay the [minority partners]

for their interests in the original partnerships in the amounts

[set] by the [c]ommissioner.”

     Waikoloa filed a motion for reconsideration on the ground

that the chancellor’s ruling imposed on Waikoloa “the duties,

obligations and liabilities of a general partner.”   The

chancellor denied Waikoloa’s motion.   Waikoloa appeals.

     Waikoloa argues that the chancellor’s holding contradicts

both the plain language of the partnership agreements and the

commissioner’s finding that “it was the duty of Jane A. Coker as


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the remaining general partner to proceed with dispatch to sell

or liquidate” the partnerships’ assets.   Waikoloa asserts that

because the majority partners did not exercise their buyout

option in 1988, the general partner was required to sell and

distribute the partnerships’ assets.   Waikoloa also contends

that Jane Coker’s failure to liquidate and sell the

partnerships’ assets cannot transform Waikoloa’s desire to

acquire the minority partners’ interests under the 1999

appraisal into an obligation to purchase those interests.

     In response, the minority partners contend that because

Waikoloa asked the chancellor to require the minority partners

to sell their interests to Waikoloa, this appeal merely reflects

Waikoloa’s dissatisfaction with the buyout price fixed by the

chancellor.   The minority partners also argue that the

chancellor did not impose liability on Waikoloa for Jane Coker’s

breach of duty but properly used the 1991 appraisal to fix the

buyout prices based on the uncontested finding that the

partnerships dissolved in 1988.   We disagree with the minority

partners’ arguments.

     We begin our analysis by examining the language of the

partnership agreements, which establishes the parties’

contractual rights.    When the terms of the parties’ contracts

are unambiguous, the interpretation of those terms presents a

question of law.   Musselman v. The Glass Works, L.L.C., 260 Va.


                                  8
342, 346, 533 S.E.2d 919, 921 (2000); Pollard & Bagby, Inc. v.

Pierce Arrow, L.L.C., III, 258 Va. 524, 528, 521 S.E.2d 761, 763

(1999); Gordonsville Energy, L.P. v. Virginia Elec. & Power Co.,

257 Va. 344, 352-53, 512 S.E.2d 811, 816 (1999).

     We conclude that the language of Paragraph 19 is plain and

unambiguous.   Therefore, we will construe the contractual terms

in accordance with their plain meaning.   See Standard Banner

Coal Corp. v. Rapoca Energy Co., LP, 265 Va. 320, 325, 576

S.E.2d 435, 437 (2003); Shepherd v. Davis, 265 Va. 108, 118, 574

S.E.2d 514, 520 (2003); Pocahontas Mining Ltd. Liab. Co. v.

Jewell Ridge Coal Corp., 263 Va. 169, 173, 556 S.E.2d 769, 771

(2002).   Because our interpretation of the contracts presents a

question of law, we are not bound by the chancellor’s

construction of the contractual terms but we independently

consider the language contained within the four corners of the

parties’ agreements.   Standard Banner Coal Corp., 265 Va. at

324-25, 576 S.E.2d at 437; Eure v. Norfolk Shipbuilding &

Drydock Corp., 263 Va. 624, 631, 561 S.E.2d 663, 667 (2002); TM

Delmarva Power, L.L.C. v. NCP of Va., L.L.C., 263 Va. 116, 119,

557 S.E.2d 199, 200 (2002); Wilson v. Holyfield, 227 Va. 184,

187-88, 313 S.E.2d 396, 398 (1984).

     A chancellor’s function is to construe the contracts made

by the parties, not to make new contracts for them.   Standard

Banner Coal Corp., 265 Va. at 325, 576 S.E.2d at 437; Cave Hill


                                 9
Corp. v. Hiers, 264 Va. 640, 646, 570 S.E.2d 790, 793 (2002);

Wilson, 227 Va. at 187, 313 S.E.2d at 398.    In the present case,

however, the chancellor deviated from these basic principles and

imposed a result that effectively created new partnership

agreements for the parties.

     The plain language of Paragraph 19 provides that on

dissolution, the general partner “shall proceed with dispatch to

sell or liquidate the assets of the partnership.”    Thus, when

the partnerships dissolved in 1988 upon Joseph Coker’s effective

retirement, Jane Coker, as the remaining general partner, became

obligated to sell or liquidate the assets of the partnerships.

     Jane’s failure to take this action did not provide a basis

for the chancellor’s imposition of a duty on Waikoloa to

purchase the minority partners’ interests in accordance with the

1991 appraisal of the property.     Waikoloa was not a party to the

original partnership agreements and was not even in existence at

the time the dissolutions occurred in 1988.    Since its creation

in 1994, Waikoloa was merely a limited partner in Eiwa and

Ehiku.

     In addition, Waikoloa never assumed the duties of a general

partner for any of the dissolved partnerships.    Waikoloa’s

members simply transferred to Waikoloa their interests as

limited partners in those original partnerships.    Thus, Waikoloa

was a successor in interest to certain limited partners of Eiwa


                               10
and Ehiku, but was not a successor in interest to the

partnerships themselves or to the partnerships’ general

partners.

    Because Waikoloa did not assume or acquire the duties of a

general partner of the dissolved Eiwa and Ehiku partnerships,

Waikoloa had no obligation or authority to act under the terms

of Paragraph 19 of those partnership agreements.   Thus, we

conclude that the chancellor erred in holding that Waikoloa had

“duties under the partnership agreement[s]” to “pay the

[minority partners] for their interests in the original

partnerships.”

    Our conclusion is not altered by the minority partners’

argument that Waikoloa imposed a duty of purchase on itself by

pleading that it was willing and able to purchase the minority

partners’ interests at a purchase price based on the 1999

appraisal.   Waikoloa’s willingness to purchase the minority

partners’ interests at the lower prices supported by the 1999

appraisal did not create a legal obligation to act under

Paragraph 19 of the Eiwa and Ehiku partnership agreements.

    We likewise disagree with the minority partners’ contention

that the chancellor acted properly because he merely ordered the

accomplishment of that which “Jane Coker should have done,”

thereby ensuring that the minority partners would receive the

sums to which they would have been entitled under the 1991


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appraisal.   A chancellor must have a cognizable basis for

granting equitable relief and is not authorized to take a

particular course of action simply because he thinks that such

action is just and appropriate.     See Tiller v. Owen, 243 Va.

176, 179, 413 S.E.2d 51, 53 (1992).    Here, the chancellor had no

cognizable basis under the partnership agreements, partnership

law, or otherwise, for imposing a duty of purchase on Waikoloa.

Thus, it was error for him to require that Waikoloa pay the

amounts fixed by the commissioner under the 1991 appraisal as

compensation for the minority partners’ interests.

    For these reasons, we will affirm that portion of the

chancellor’s judgment holding that dissolution of the original

four partnerships occurred in 1988, and that it was Jane Coker’s

duty, as the remaining general partner, to sell or liquidate the

assets of the partnerships.   We will reverse the remainder of

the chancellor’s judgment, and enter final judgment in favor of

Waikoloa.2

                                           Affirmed in part,
                                           reversed in part,
                                           and final judgment.




    2
        Because neither party in its brief in this appeal
requested that we remand the case to the chancellor to conduct
dissolution proceedings, we do not consider such relief.

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