## Facts

- Frog Jump Gin Company operated as a partnership; after Lyle Putnam’s death, Carolyn Putnam succeeded to his interest, leaving Carolyn Putnam and the Charltons each with a one-half partnership interest.
- By 1976 the partnership was heavily indebted; Carolyn Putnam sought to exit the business and be relieved of partnership debt.
- John and Maurine Shoaf agreed to acquire Putnam’s one-half interest and, by agreement, assumed personal liability for all partnership debts, including pre-entry debts.
- As part of the transaction, Putnam and the Charltons each contributed $21,000 to the partnership account.
- Putnam conveyed her entire partnership interest to the Shoafs by quitclaim deed covering her interest in the partnership’s real and personal property; partnership assets were held in the partnership name.
- After the Shoafs entered the partnership, they discovered the former bookkeeper had embezzled funds through forged checks.
- The partnership sued the bookkeeper and banks that honored forged checks and obtained a $68,000 judgment.
- Putnam (and later her estate) claimed entitlement to one-half of the recovery because the wrongdoing occurred while she was a partner; the disputed half of the judgment became the subject of this case.

## Issues

1. Whether a former partner who conveyed her entire partnership interest may claim a share of a later partnership recovery on a cause of action accruing during her tenure as partner.

## Decision

- The Court of Appeals affirmed dismissal of the estate’s claim.
- The court held that the conveyance of Putnam’s entire partnership interest transferred all her rights in partnership property, including the partnership’s cause of action and resulting judgment.
- The estate had no legal or equitable entitlement to any portion of the $68,000 recovery.

## Legal Principles

- A partner’s transferable interest is an undivided interest in the partnership’s profits and surplus, not ownership of specific partnership assets.
- Partnership causes of action arising from injury to the partnership are partnership property; recovery belongs to the partnership and is shared by the partners who own the partnership interest at the time of recovery.
- A complete transfer of a partner’s partnership interest passes the transferor’s rights in partnership property and claims, including assets that were unknown or unrealized at the time of transfer.
- A conveyance of partnership property held in the partnership name is made in the partnership’s name, not as a conveyance of individual partners’ specific property interests.
- Absent an express reservation, a former partner cannot impose an equitable claim (such as a constructive trust or lien) on later-realized partnership assets solely because the underlying misconduct occurred during the former partner’s tenure.

## Conclusion

Because Putnam sold and conveyed her entire partnership interest to the Shoafs, she retained no ownership interest in partnership property or claims; the embezzlement-related judgment was a partnership asset belonging to the partnership as held by the Charltons and the Shoafs when the recovery was obtained.


Putnam v. Shoaf, 620 S.W.2d 510 (Tenn. Ct. App. 1981)