refusing to construe partnership agreement as a matter of law in a way that was “potentially oppressive towards the limited partners ... [and would] give the managing general partner the authority to drastically dilute the limited partners’ [interests] so as to work a practical forfeiture.”
How later courts described this case
- refusing to construe partnership agreement as a matter of law in a way that was “potentially oppressive towards the limited partners ... [and would] give the managing general partner the authority to drastically dilute the limited partners’ [interests] so as to work a practical forfeiture.”
- finding that contractual amendments giving a managing general partner authority to dilute membership units without consent “work[ed] as a practical forfeiture”
- stating that courts should avoid, when possible, a construction that is unreasonable, oppressive, or inequitable
- managing general partner’s construction of a limited partnership agreement provides “the managing general partner the authority to drastically dilute the limited partner’s $50,000 units so as to work a practical forfeiture”
Written by the judges who cited it.
The opinion
ROBERTSON, Justice,
dissenting.
I respectfully dissent. Article XV(c) of the original agreement provides that any amendment which will “adversely affect the general liabilities of the limited partners, or change the method of allocation of the profits or losses or the distribution of the partnership funds or assets shall require consent in writing of all limited partners.” Article XV(d) provides that any other action by the general partners requires only a two-thirds approval by the limited partners. The majority here agrees with Reilly’s contention that a fact question exists because it is not clear as to whether XV(c) or (d) should be used in the present situation. By reaching such a conclusion, the majority violates the rule of Fox v. Thoreson, 398 S.W.2d 88, 92 (Tex.1966). Fox holds that when construing a contract, language should be given its plain grammatical meaning unless it appears clear that the parties intended a different interpretation. The language of this provision *531 is clear on its face, thus it should be enforced as written.
Reilly is essentially arguing that a change in method has occurred because the new agreement allows the managing partner to create an infinite number of limited partners, and also allows him to dilute the value of each limited partnership unit by not requiring each unit to cost $50,000. Section VIII of the original contract, entitled “Allocation of Profits and Losses,” clearly states what the method of allocation will be. The managing partner will get a set amount and the limited partners and other general partners will get a proportionate share depending on the number of units they own. Changing the potential number of limited partners in no way changes the method of allocation of profits and losses. The only thing that changes is the percentage which each limited partner will receive, thus a different “amount” rather than a different “method” is contemplated by the amended agreements. A method is a design, plan, scheme, form, style, course, line, modus operandi, practice, procedure, process, routine, manner, mode, system or technique used in attaining an end. See Webster’s Collegiate Thesaurus page 519 (1976).
I agree with the court of appeals that the clear and unambiguous language of the agreement provides that only a change of the method of allocation would require a unanimous vote. For example, if the managing partner was to receive a greater proportion of the profits or losses, that would need a unanimous vote of the limited partners. Or, if the general partners were to receive twice as much as the limited partners, that too would require unanimous consent. Merely changing the amount each partner is entitled to under the method used requires only two-thirds vote. The same analysis serves for the distribution of the assets. Just because Reilly receives less for his share does not mean the method of distribution has been changed. There is no ambiguity in the language, and thus no fact question exists. In my judgment, the agreement clearly gives the managing partner the power to do what was attempted here. In addition, Reilly is amply protected by having the preemptive right to buy a proportionate number of shares to keep the value of his interest the same. I would affirm the judgment of the court of appeals which held that there was no need for a unanimous vote.
KILGARLIN and GONZALEZ, JJ., join in this dissenting opinion.