PREMIER VAN SCHAACK REALTY, INC. V. SIEG
51 P.3d 24 (2002)



FACTS: Sieg (D) entered into a brokerage agreement with Premier Van Schaack Realty's (P) assignor whereby he agreed that if Premier (P) located a potential buyer and he sold property to that party, Premier would be entitled to a percentage of the sale price. In March 1997, a Premier agent introduced Sieg to various individuals with whom Sieg ultimately formed an LLC. Sieg transferred some of his property to the LLC. When Premier learned about the transfer, it demanded its commission on the "sale."


ISSUE: If a party retains a substantial ownership interest after a transaction has occurred, that is equivalent to his ownership before the transaction, is that a sale or exchange?

RULE: If a party retains a substantial ownership interest after a transaction has occurred, that is equivalent to his ownership before the transaction that is not a sale or
exchange.

HOLDING (Greenwood, Judge) P must show the following to prevail:
1) that there was a party who was ready, willing, and able to buy or exchange the Property;
(2) that D agreed to a sale or exchange; and
(3) that the sale or exchange occurred during the term of the Agreement. P must show the following to prevail:

Plaintiffs Argument P argues that D received consideration from MJTM in several different ways. D received a 40% interest in MJTM in exchange for the Property, D was entitled to a 9% preferentia return from MJTM on all future profits and D had a beginning balance of $670,000 in his initial capital contribution account. MJTM also promised to assume $580,000 of D's debt.

Defendants Argument
D argues that the interest in MJTM cannot serve as consideration because D maintained an ownership interest in the Property. D also argues that the alleged debt relief fails as
consideration because D was personally liable for his personal debt plus the debt of MJTM to Zions Bank. D retained a substantial ownership interest in the Property that caused him to assume the risks of an investor instead of the risks of a seller. D still retained a significant ownership interest in the Property, including the potential value of its future sale and the present right to prevent MJTM from encumbering the Property without his permission.

ANALYSISThe value of D's interest in MJTM is directly tied to the value of the Property because the Property is the only asset MJTM owned. Because D retained such a substantial ownership interest in the Property, the transaction between D and MJTM does not constitute a sale or exchange as contemplated in the Agreement. P argues that, unlike the partnership and joint venture, a limited liability company is a separate legal entity that is able to buy property in its own name. P argues that if a seller of property transfers his property to a limited liability company or to a corporation of which he is the sole shareholder, such a transaction would constitute a sale or exchange. D's credit to his capital contribution account and debt assumption roughly approximate the $1.3 million value of the Property. The preferential interest in future profits and the Zions Bank loan reflect the investment nature of the transaction. "Where the owner retains essentially the same ownership interest in the property as he had prior to the conveyance, with plans to develop the property by improving it with the possibility of future gains or losses, and can prevent the record owner from encumbering the property without his permission, such a transaction is not a sale or exchange. D continued to have substantially the same ownership interest in the Property after the deed to MJTM was executed, there was no consideration and a sale or exchange as contemplated in the Agreement did not occur. Affirmed.