Opinion ID: 7011518
Heading Depth: 2
Heading Rank: 2

Heading: Sale, Transfer, or Assignment

Text: The second part of our analysis is whether the oil companies’ contribution of assets to Equilon was a sale, transfer, or assignment. The district court focused on the fact that the transaction was a “tax-free exchange” in holding that it was not a sale, transfer, or assignment. While the tax-free nature of the transaction indicates that the transaction was not a sale, we see no reason why such a transaction could not be a transfer. According to the rules of statutory construction, transfer must mean something different than sale or assignment. 18 In common, everyday parlance, transfer has a broad meaning. Webster’s Dictionary defines “transfer” as “[t]o convey or make over the possession or legal title of (e.g., property) to another.” 19 Because Shell and Texaco relinquished their title, possession, and control of the gas stations to Equilon, it makes perfect sense to say they transferred the properties to Equilon. In support of the idea that the oil companies transferred the gas stations, we note that the record contains a copy of a corporate grant deed, which shows that Shell transferred title of its properties to Equilon. The deed states that Shell, as grantor, granted Equilon all of Shell’s rights, title, and interest in the gas stations. We assume that Texaco executed a similar deed. In addition, the individual oil companies did not maintain control of their properties. Both companies submitted forms to the Securities Exchange Commission (SEC) documenting the formation of the limited liability company. In Shell’s SEC form, the company admitted that it does not exercise control over Equi-lon. 20 Texaco’s SEC form stated that Texaco and Shell jointly control Equilon. Therefore, neither company maintained complete control over its former properties. Finally, under the California Corporations Code, Shell and Texaco have no interest in the property of Equilon. Once members contribute assets to an LLC, those assets become capital of the LLC and the members lose any interest they had in the assets. 21 Thus, once Shell and Texaco contributed the gas stations to Equilon, they no longer had an interest in the stations and could not individually exert control over them. The oil companies no longer had title, possession, or control over the properties. Therefore, their contribution was a transfer to Equilon. Because the plain language of the statute is unambiguous, we do not need to resort to the legislative history. We hold that the transaction at issue here was a transfer to another person, Equilon, which triggered the duty to offer the gas stations to the franchisees first. We therefore reverse the district court and remand for further proceedings. REVERSED and REMANDED.