Bauer v. Blomfield Co./Holden Joint Venture

OPINION BURKE, Justice. William J. Bauer, assignee of a partnership interest, sued the partnership and the individual partners, claiming that partnership profits were wrongfully withheld from him. The superior court granted summary judgment to the partnership and individual partners, and dismissed Bauer’s complaint with prejudice. We affirm. I In 1986 William Bauer loaned $800,000 to Richard Holden and Judith Holden. To secure the loan, the Holdens assigned to Bauer “all of their right, title and interest” in a partnership known as the Blomfield Company/Holden Joint Venture. The other members of the partnership — Charles Alfred (Chuck) Blomfield, Patricia A. Blom-field, Charles Anthony (Tony) Blomfield and Richard H. Monsarrat — consented to the assignment. According to the consent document, their consent was given “[p]ur-suant to AS 32.05.220.” 1 When the Holdens defaulted on the loan, Bauer sent the following notice to the partnership members: “William Bauer hereby gives notice that he is exercising his rights to receive all distributions of income and principal from the Blomfield Company/Holden Joint Venture Partnership.” Thereafter, for a time, the partnership income share payable to the Holdens was paid monthly to Bauer. In January, 1989 the partners stopped making income payments to Bauer. They, instead, agreed to use the income of the partnership to pay an $877,000 “commission” to partner Chuck Blomfield. Bauer was not a party to this agreement; he was notified of the agreement after the fact by means of a letter dated January 10, 1989. Bauer was not asked to consent to the agreement, and he never agreed to forego payment of his assigned partnership income share or to pay part of the “commission” to Blomfield. The amount Bauer would have received, had the “commission” not been paid, was $207,567. Blomfield’s $877,000 commission represented five percent of the increased gross rental income earned by the partnership from lease extensions obtained from the [1367] state by Blomfield on partnership properties leased by the state. These and other lease extensions were obtained when a private claim made against the state by Chuck Blomfield and Patricia Blomfield for $1,900,000 was settled. Other lease extensions thus obtained were on properties not owned by the partnership; these properties were owned by the Blomfields and were leased by them to the state. One of the conditions upon which Chuck and Patricia Blomfield based their settlement was the agreement of the partners to pay Chuck Blomfield an $877,000 commission for the lease extensions that he obtained on the partnership’s properties. II Insisting that his assigned right to the Holdens’ share of the partnership’s income had been violated, Bauer filed suit in superior court against the partnership and all of the partners except the Holdens. Bauer sought declaratory and injunctive relief, and damages. His various claims were dismissed, with prejudice, when the court concluded that Bauer’s assignment from the Holdens did not make him a member of the partnership. Therefore, he was not entitled to complain about a decision made with the consent of all the partners. This appeal followed. III [1,2] The assignment to Bauer of the Holdens’ “right, title and interest” in the • partnership, did not, in and of itself, make Bauer a partner in the Blomfield Company/Holden Joint Venture. See AS 32.05.-220. We are unpersuaded by Bauer’s argument that he should be considered a de facto partner. As the Holdens’ assignee, Bauer was not entitled “to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions or to inspect the partnership books.” AS 32.05.-220(a).2 The “interest" that was assigned to Bauer was the Holdens’ “share of the [partnership’s] profits and surplus.” AS 32.05.210.3 The assignment only entitled Bauer to “receive ... the [partnership] profits to which the [Holdens] would otherwise be entitled.’’ AS 32.05.220(a) (emphasis added). Because all of The Blom-field Company/Holden Joint Venture partners agreed that Chuck Blomfield was entitled to receive an $877,000 commission, to be paid out of partnership income, we agree with the superior court’s conclusion that there were no partnership profits which the Holdens, and thus Bauer, were entitled to receive until the commission was fully paid. AFFIRMED. MATTHEWS, J., with whom RABINOWITZ, C.J., joins, dissenting. Footnotes [1] AS 32.05.220 provides: (a) A conveyance by a partner of a partner's interest in the partnership does not by itself dissolve the partnership, nor as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions or to inspect the partnership books, but it entitles the assignee to receive in accordance with the assignee's contract the profits to which the assigning partner would otherwise be entitled. (b) In the case of a dissolution of the partnership, the assignee is entitled to receive the assignor's interest and may require an account from the date only of the last account agreed to by all of the partners. [2] We are unwilling to hold that partners owe a duty of good faith and fair dealing to assignees of a partner’s interest. To do so would undermine the clear intent of AS 32.05.220(a). Partners should be able to manage their partnership without regard for the concerns of an assignee, who may have little interest in the partnership venture. As commentators have explained: The U.P.A. rules concerning assignment of partnership interests and the rights of assignees balance the interests of assignees, assignors, and nonassigning partners in a way that is suited to the very closely held business. Although the assignee’s impotence obviously limits the market value of the partners’ interest, the partners need to be protected from interference by unwanted strangers. Alan R. Bromberg and Larry E. Ribstein, Partnership § 3:61 (1988). [3] AS 32.05.210 provides: "A partner's interest in the partnership is the partner’s share of the profits and surplus.”