Present: Carrico, C.J., Compton, Lacy, Hassell, Keenan, 

Koontz, JJ., and Whiting, Senior Justice 

MAUREEN K. HAGAN, ET AL. 

v. Record No. 961332 OPINION BY JUSTICE ELIZABETH B. LACY 

 February 28, 1997 

ADAMS PROPERTY ASSOCIATES, INC. 

 FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 

Theodore J. Markow, Judge 

 In this appeal, we consider whether a transfer of real 

property from its owner to a limited liability company in which 

the owner is a member constitutes the sale of the property, 

entitling a real estate broker to a commission authorized by a 

listing agreement between the owner and broker. 

 Ralph E. and Maureen K. Hagan (collectively "Hagan") owned 

the Stuart Court Apartments (the property) in Richmond. On 

April 30, 1994, Hagan executed an agreement with Adams Property 

Associates, Inc. (Adams), giving Adams the exclusive right to 

sell the property for $1,600,000. The agreement provided that 

if the property was "sold or exchanged" within one year, with 

or without Adams' assistance, Hagan would pay Adams a fee of 

six percent of the "gross sales amount." Before the year 

expired, Hagan, Roy T. Tepper, and Lynn Parsons formed a 

limited liability company, Hagan, Parsons, & Tepper, L.L.C. 

(HPT). By deed dated April 23, 1995, Hagan transferred the 

property to HPT. 

 Adams filed a motion for judgment seeking recovery of a 

commission from Hagan pursuant to the April 1994 agreement. 

The trial court held that Adams was entitled to a commission 

because the transfer of the property to HPT constituted a sale 
of the property. Hagan appealed both the determination that a 

sale of the property occurred and the amount of the commission 

awarded. 

 Hagan first contends that transfer of legal title to the 

property to HPT represented his contribution to the 

capitalization of a new company, and capitalization of a new 

venture should not be classified as the sale of property, 

citing Southpace Properties, Inc. v. Acquisition Group, 5 F.3d 

500, 504 (11th Cir. 1993); Cooley Investment Co. v. Jones, 780 

P.2d 29, 31 (Colo. App. 1989); Miller, Cowherd & Kerver, Inc. 

v. De Montejo, 406 So.2d 1196, 1198 (Fla. App. 1981); and 

McElhinney v. Belsky, 69 A.2d 178, 181 (Pa. Super. 1949). 

Hagan also asserts that the transfer did not constitute a sale 

because he did not receive any present valuable consideration 

for his contribution. Hagan contends that, while his 

contribution determined what share of the ownership of the 

company he was entitled to receive, a new business such as HPT 

"involves an expectation of future profits and is always 

speculative." We disagree. 

 When Hagan transferred the property to HPT, he received 

more than an interest in the new company. Under the terms of 

the operating agreement executed in conjunction with the 

formation of HPT, HPT agreed to assume all liabilities existing 

on the property, which included the $1,028,000 unpaid balance 

on a first deed of trust note on the property. The record does 

not indicate whether the holder of the first deed of trust note 

released Hagan and substituted HPT as the obligor on the note. 
 Even assuming such substitution did not occur, Hagan 

nevertheless received substantial relief from his debt 

obligation because, upon assuming all liabilities on the 

property, HPT became liable to Hagan for any amount Hagan would 

have had to pay the holder of the first deed of trust note. 

Also as part of the property transfer transaction, HPT executed 

a second deed of trust on the property securing a note payable 

to Hagan for $323,000. This note was due and payable when the 

property was subsequently sold, and it had priority over 

payments to anyone other than the beneficiary of the first deed 

of trust. Thus, in exchange for transfer of title to the 

property, Hagan received relief from his debt on the first deed 

of trust note as well as the benefit of a second deed of trust 

note and an interest in HPT. These benefits received by Hagan 

constituted valid consideration. Brewer v. Bank of Danville, 

202 Va. 807, 815, 120 S.E.2d 273, 279 (1961). 

 Furthermore, the cases relied on by Hagan for the 

proposition that the contribution of property to a limited 

liability company is not a sale but the capitalization of a new 

company are inapposite. Those cases involved the 

capitalization of a partnership or entity governed by 

partnership law. As noted in those cases, a partnership is not 

an entity separate from the partners themselves; thus, in such 

circumstances, there is no transfer of property from one person 

to another, but only a change in the form of ownership. 

Southpace, 5 F.3d at 504; Cooley, 780 P.2d at 31; De Montejo, 

406 So.2d at 1198; McElhinney, 69 A.2d at 181. In this case, 
however, the new venture was a limited liability company, not a 

partnership. 

 Under the Virginia Limited Liability Company Act, Code 

§§ 13.1-1002 through 13.1-1073, a limited liability company is 

an unincorporated association with a registered agent and 

office. §§ 13.1-1002, -1015. It is an independent entity 

which can sue and be sued and its members are not personally 

liable for the debt or actions of the company. §§ 13.1-1009, -

1019. In contrast to a partnership, a limited liability 

company in Virginia is an entity separate from its members and, 

thus, the transfer of property from a member to the limited 

liability company is more than a change in the form of 

ownership; it is a transfer from one entity or person to 

another. Accordingly, we agree with the trial court's 

conclusion that Hagan transferred the title of the property in 

exchange for valuable consideration and that this transfer was 

a sale of the property. 

 Hagan also complains that in calculating the commission 

due Adams, the trial court used the wrong components to 

determine the gross sales amount. The trial court calculated 

the gross sales amount to be the sum of debt relief Hagan 

received from HPT, $1,028,000, plus the amount of the second 

deed of trust note which Hagan received from HPT, $323,000.1 

 

 1 The parties agree that an arithmetic error occurred in 

the trial court's calculation of the commission and that the 

proper figures under the court's finding are a gross sales 

amount of $1,351,000 which results in a six percent commission 

of $81,060. 
Hagan first asserts that the gross sales amount should be the 

fair market value of the debt, which is $775,000, the amount 

Tepper and Parsons paid for the first deed of trust note when 

they purchased it in June, 1995. We disagree. 

 The status of Hagan's indebtedness was altered when he 

transferred the property to HPT under the terms of the 

operating agreement, not when Tepper and Parsons individually 

purchased the first deed of trust note. The gross sales amount 

is the consideration which Hagan received from HPT, not an 

amount agreed upon between some other buyer and seller at 

another time.2

 

 Finally, Hagan asserts that the second deed of trust note 

should not have been included as part of the gross sales amount 

because it was not due until the property was sold and was 

subordinate to the first deed of trust note and future 

development loans. Under these circumstances, Hagan claims, 

the second deed of trust note had no present value. Again we 

disagree. Whether the second deed of trust note would 

ultimately result in a payment of $323,000 to Hagan is not 

relevant to the measure of the value ascribed to the 

transaction by the parties at the time of the transaction. 

There is nothing speculative about a second deed of trust note 

in the amount of $323,000. It was part of the agreement 

 

 2Hagan also argues that his debt relief was only the 

difference between the original amount of the note, $1,028,000, 

and the $775,000 purchase price of the note. This position is 

based on Hagan's contention that he had continuing liability 

for the first deed of trust note, a contention we addressed, 

supra. 
surrounding the transfer of ownership of the property and 

represented a portion of the amount Hagan was willing to accept 

for the property. Thus, the trial court properly considered 

the second deed of trust note as consideration received by 

Hagan for the sale of the property and properly included it as 

part of the gross sales amount for purposes of calculating the 

amount of commission due Adams. 

 Accordingly, we will affirm the judgment of the trial 

court holding that Hagan's transfer of title to the property to 

HPT was a sale of the property, that Adams was entitled to a 

commission on the gross sales amount, and that the gross sales 

amount is the debt relief plus the second deed of trust note 

Hagan received, $1,028,000 and $323,000, respectively, 

resulting in a commission of $81,060. 

Affirmed.