Court Opinion

ID: 5164704
Source: CourtListenerOpinion
Date Created: 2022-01-02 03:22:17.883895+00
Date Added: 2024-06-11T08:25:47.816762
License: Public Domain

MATTHEWS, Justice,
with whom RABINOWITZ, Chief Justice, joins, dissenting.
It is a well-settled principle of contract law that an assignee steps into the shoes of an assignor as to the rights assigned.1 To*1368day, the court summarily dismisses this principle in a footnote and leaves the as-signee barefoot.
The court’s analysis, set out in three cursory paragraphs is this: (1) Bauer was not a partner; (2) Bauer, as an assignee, was not entitled to interfere in the management of the partnership; (3) Bauer’s assignment entitled him to receive only the profits the Holdens would have received; and (4) Bauer was due nothing because no profits were distributed. These statements are generally correct as far as they go. However, they do not address the issue in dispute: whether the partners owe Bauer a duty of good faith and fair dealing.
The court is correct to state that Bauer’s assignment entitles him to nothing if the partnership decides to forego a distribution. However, this statement leaves unanswered the crucial question that must first be asked: was the partners’ decision to pay Blomfield a “commission,” thereby depleting profits for distribution, a decision made in good faith? Until this question is answered, we cannot know if Bauer was unjustly deprived of that to which he is entitled.
The court dismisses the main issue in a short footnote, stating “[w]e are unwilling to hold that partners owe a duty of good faith and fair dealing to assignees of a partner’s interest.” The court reasons that to find such a duty “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 as-signee. ...” The court is correct in noting that Bauer has no management rights in the partnership. Bauer’s attempt to enforce his right to profits under the assignment is not, however, an interference with the management of the partnership. Requiring the partners to make decisions regarding distributions in good faith does not interfere with management, it merely requires that the partners fulfill their existing contractual duties to act in good faith.
I further disagree with the court’s interpretation of the intent of the statute. The statute’s intent is to assure that an assign-ee does not interfere in the management of the partnership while receiving “the profits to which the assigning partner would otherwise be entitled.” AS 32.05.220(a). As interpreted by the court, the statute now allows partners to deprive an assignee of profits to which he is entitled by law for whatever outrageous motive or reason. The court’s opinion essentially leaves the assignee of a partnership interest without remedy to enforce his right.2
Upon formation of the Blomfield Company/Holden Joint Venture, a contractual relationship arose among the partners.3 This court has held that a covenant of good faith and fair dealing is implied in all cont*1369racts.4 We have noted that the basis for imposing this duty “is a hybrid of social policy and an effort to further the expectations of the contracting parties that the promises will be executed in good faith.” Alaska Pacific, 794 P.2d at 947. The duty of good faith and fair dealing “requires ‘that neither party ... do anything which will injure the right of the other to receive the benefits of the agreement.’ ” Klondike Indus. Corp. v. Gibson, 741 P.2d 1161, 1168 (Alaska 1987) (quoting Guin, 591 P.2d at 1291).
One element of the contract between the Holdens and the partnership is the Hol-dens’ right to receive their share of profits when a distribution is made. As an element of the partnership contract, this right is accompanied by the duty of the parties to deal fairly and in good faith. The partnership has a right to decide not to make a distribution, but in making this decision, the partnership must act in good faith.5
The Holdens assigned to Bauer that part of the partnership contract that entitled the Holdens to receive distributions. Under the law of assignments, Bauer steps into the shoes of the Holdens as to this distribution right. Accompanying this contract right is the partners’ duty to act in good faith. Thus, as the assignee of that element of the contract, the partners owe Bauer a duty of good faith and fair dealing in deciding whether to make a distribution.
Holding that, as a matter of law, the partners owe Bauer a duty of good faith when deciding whether to make a distribution does not resolve the dispute in this case. Whether the decision to pay the “commission” in lieu of making a distribution was made in good faith is a factual question. See 3A Arthur L. Corbin, Cor-bin on Contracts § 654B, at 89 (Supp.1992) (“Good faith always involves questions of fact.... If there is a dispute as to why someone did what he did, there is a question of fact for the jury.”). As the moving party on a motion for summary judgment, the burden is on the partnership to demonstrate that no genuine issue existed as to whether the decision to pay the 5% “commission” was made in good faith.6 The partnership presented little to no evidence on this issue.7 This court should thus re*1370mand to the superior court for a factual determination of whether or not the decision by the partners to pay Blomfield’s “commission” was made in good faith.
The court’s decision today effectively leaves an assignee with no remedy to enforce his right to receive partnership profits. Without such a remedy, his assignment becomes worthless. As I believe this result is contrary to basic contract and assignment law, I dissent from the court’s opinion.

. 6A C.J.S. Assignments § 88 (1975) ("An assign-ee stands in the shoes of the assignor and ordinarily obtains only the rights possessed by the assignor at the time of the assignment, and no more."); United States v. American Natl Bank, 443 F.Supp. 167, 174 (N.D.I11.1977) ("The assign-ee stands in the shoes of its assignor.”); Massey-Ferguson Credit Corp. v. Brown, 173 Mont. 253, 567 P.2d 440, 444 (1977) ("An assignee stands in the shoes of the assignor_”); see also id. § 73 *1368("A valid assignment generally operates to vest in the assignee the same right, title, or interest that the assignor had in- the thing as-signed_”); id. § 76 (“Unless a contrary intention is manifest or inferable, an assignment ordinarily carries with it all rights, remedies, and benefits which are incidental to the thing assigned_”).

. The court notes that the Uniform Partnership Act balances the rights of assignees, assignors, and nonassigning partners. One of the ways in which the U.P.A. accomplishes this is to provide the assignee with the right to petition a court for dissolution of the partnership. The U.P.A. states that upon application of an assignee, the court must decree a dissolution if the partnership was a partnership at will at the time of assignment. U.P.A. § 32(2)(b). Although the Alaska Partnership Act was copied from the U.P.A., due to an error in cross-referencing, it is unclear that an assignee in Alaska has the right to apply for a dissolution. Thus he may be deprived of one of the "balances” that the U.P.A. sets up for his protection.

. See Alan A. Bromberg & Larry E. Ribstein, Partnership § 1.01, at 1:11 (1988) (“Fundamentally, general partnership is a contractual relationship among the partners.”); Grimm v. Pallesen, 215 Kan. 660, 527 P.2d 978, 982 (1974) (" 'It ... has been repeatedly declared that a man cannot be made a partner against his will, by accident, or by the conduct of others, for the reason that partnership is a matter of contract.'”) (quoting Wade v. Hornaday, 92 Kan. 293, 140 P. 870, 871 (1914)); Eder v. Reddick, 46 Wash.2d 41, 278 P.2d 361, 365 (1955) (“A contract of partnership, either express or implied, is essential to the creation of the partnership relationship."); Preston v. State Indus. Accident Comm’n, 174 Or. 553, 149 P.2d 957, 961 (1944) ('"Our law has always treated the partnership relation as founded in voluntary contract.’") (quoting Call v. Linn, 112 Or. 1, 228 P. 127, 129 (1924)).

. Alaska Pacific Assurance Co. v. Collins, 794 P.2d 936, 947 (Alaska 1990) ("A covenant of good faith and fair dealing is an implied component of all contracts as a matter of law.”); Alyeska Pipeline Serv. Co. v. H.C. Price Co., 694 P.2d 782, 788 (Alaska 1985) (“Parties to a contract have mutual obligations of good faith and fair dealing.”); Guin v. Ha, 591 P.2d 1281, 1291 (Alaska 1979) ("In every contract ... there is an implied covenant of good faith and fair dealing....”); see abo Restatement (Second) of Contracts § 205 (1981) ("Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”).

. See Brooke v. Mt. Hood Meadows Oreg., Ltd., 81 Or.App. 387, 725 P.2d 925, 929 (1986) ("Like the corporate director’s fiduciary responsibility to the shareholders for the declaration of dividends, the general partner’s duty to the limited partners in the distribution of profit is discharged by decisions made in good faith that reflect legitimate business concerns.”); see abo Betz v. Chena Hot Springs Group, 657 P.2d 831, 835 (Alaska 1982) (“Absent bad faith, breach of a fiduciary duty, or acts contrary to public policy, we will not interfere with the management decisions of the firm.”); Steven J. Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv.L.Rev. 369, 385-86 (1980) ("The good faith performance doctrine may be said to permit the exercise of discretion for any purpose — including ordinary business purposes — reasonably within the contemplation of the parties.").

. McGee Steel Co. v. State ex rel. McDonald Indus. Alaska, Inc., 723 P.2d 611, 615 (Alaska 1986) ("The moving party bears the burden of demonstrating the absence of any genuine issue of material fact and its entitlement to judgment as a matter of law.”); Stanfill v. City of Fairbanks, 659 P.2d 579, 581 (Alaska 1983) ("In ruling on a motion for summary judgment, all reasonable inferences must be drawn in favor of the non-moving party and against the mov-ant. The burden of proving the absence of any genuine issues of material fact is upon the moving party.”).

. In support of its contention that the decision to pay the “commission” was fair, the partnership argued that the amount paid to Blomfield was the "standard" rate. The only evidence presented by the partnership was the testimony of Blomfield himself that a 5% "commission" was standard. One should view this with some skepticism as Blomfield was dealing with a tenant who was already in the building and did not have to be located or persuaded to move in. Furthermore, the rate Blomfield received is greater than 5% as the rent on which the “com*1370mission" is based is a future stream of income, not a present lump sum. After discounting future rental income to its present value, Blom-field’s "commission" is greater than 5%.