Business Associations Keyed to Hamilton
Premier Van Schaack Realty, Inc. v. Sieg
Facts
Sieg (Defendant) owned real estate and had a listing agreement with Premier Van Schaack Realty, Inc. (Premier) (Plaintiff). During the term of the listing agreement, Plaintiff introduced Defendant to several people (collectively, DVJ) who offered to buy the property. However, the sale never closed. A few months afterwards, still during the term of the agreement, DVJ proposed forming an LLC, to be called MJTM, with Defendant. The parties signed an operating agreement under which Defendant would convey his property to MJTM and would receive a 40 percent interest in the LLC and a preferential return of 9 percent on future profits. The agreement also provided that Defendant had a beginning balance of $670,000 in his initial capital contribution account, that MJTM assumed $580,000 of Defendant’s debt, that the property was worth $1.3 million, that the other members of MJTM would not encumber the property without Defendant’s approval, and that, “No Member shall be personally liable to any other Member for the return of any part of the Members’ Capital Contributions.” After Defendant transferred title to the LLC, it borrowed $1.413 million secured by a lien on the property. All of the members of MJTM personally guaranteed the loan, and, with the proceeds from this loan, MJTM paid off a $300,000 loan to Defendant secured by the property. When Plaintiff learned of Defendant’s transactions with MJTM, it demanded its commission of 7 percent on $1.3 million, claiming that the transaction constituted a sale or exchange as required by the listing agreement. When Defendant refused to pay, Plaintiff brought suit. Defendant claimed that his contribution of the property was not an exchange or sale, but an investment. Plaintiff sought payment of its commission, but the trial court granted summary judgment to Defendant, finding that the transaction lacked consideration and, therefore, was not a sale or exchange. The state’s intermediate appellate court granted review.
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