## Facts

- William J. Bauer loaned $800,000 to Richard and Judith Holden.
- To secure the loan, the Holdens assigned to Bauer “all of their right, title and interest” in their interest in the Blomfield Company/Holden Joint Venture, an Alaska partnership.
- The other partners consented to the assignment, referencing Alaska’s partnership statute governing assignments of partnership interests (AS 32.05.220).
- After the Holdens defaulted, Bauer notified the partnership that he was exercising his right to receive all income distributions otherwise payable to the Holdens, and the partnership made payments to him for a period.
- In January 1989, the partnership stopped making distributions to Bauer and instead agreed to pay partner Charles A. “Chuck” Blomfield an $877,000 commission out of partnership income.
- The commission was tied to increased rental income from lease extensions Chuck Blomfield obtained from the State of Alaska on partnership properties.
- Bauer was not asked to consent to the commission arrangement and was informed after the agreement.
- Bauer contended that absent the commission, he would have received $207,567 in distributions.

## Issues

1. Whether an assignee of a partner’s interest, even with the other partners’ consent and language assigning “all right, title and interest,” becomes a partner or otherwise gains management-related rights.
2. Whether an assignee has standing to challenge, or recover damages from, a unanimous partnership decision that eliminates or reduces distributions the assignee expected to receive.
3. Whether partners owe fiduciary-type duties to a non-partner assignee that restrict unanimous decisions about allocating partnership income.

## Decision

- The Alaska Supreme Court affirmed summary judgment for the partnership and the individual partner-defendants.
- The court held that the assignment did not make Bauer a partner; he was an assignee only.
- Because Bauer was not a partner, he could not complain about a decision made with the consent of all partners, including the decision to pay the commission from partnership income.
- Bauer therefore could not recover the distributions he claimed he would have received absent the commission payment.

## Legal Principles

- An assignment of a partner’s interest transfers only the assignor’s economic interest (the right to receive the assignor’s share of profits and surplus as distributed), not partner status or management rights.
- Consent by the other partners to an assignment recognizing the transfer of an economic interest does not, without more, admit the assignee as a partner or grant participatory rights.
- A non-partner assignee generally lacks standing to challenge internal partnership business decisions, even if those decisions reduce or eliminate distributions.
- Fiduciary obligations associated with partnership governance run among partners; a non-partner assignee cannot invoke partner-level fiduciary constraints to attack a unanimous allocation of partnership income.

## Conclusion

The court concluded that Bauer remained only an assignee entitled to receive distributions, if any, that the partners decided to make, and he could not challenge the partners’ unanimous decision to divert partnership income to a commission that effectively eliminated his expected payments.


Bauer v. Blomfield Co./Holden Joint Venture, 849 P.2d 1365 (Alaska 1993)