Thanks to:
Amanul Haque <ahaque@psa.pencom.com>
To allow for "chown" command to allow regular users to give away file
ownership, you need to set the following in /etc/system :
set rstchown=0
Note that this setting needs to be set in both the server and the
client.  And if the server is not a solaris machine, there needs to be a
similar facility.
I found the following document on sunsolve:
Document ID: 1201
SYNOPSIS:  File owner and group under POSIX environments
SYMPTOMS:
The owner of a file cannot change ownership to anyone else.
DETAIL DESCRIPTION:
An error indication occurs while trying to give away a file indicating
current ownership or groupness.  The shell invocation "chown ..  .."
will print "not owner".  A library function usage may fail for either
owner or group This situation has been historically true in BSD based
systems only "root" can change file ownership.  System V based systems
only required current ownership. 
SOLUTION SUMMARY:
The POSIX standard allows for either the System V (current owner) or BSD
(root only) characteristic to be configured.  The token
_POSIX_CHOWN_RESTRICTED is used to indicate BSD behavior.  Configuration
of either behavior is controlled by "rstchown" kernel general
parameter. 
The default state is 1 (BSD behavior).  The /etc/system file is where
the configuration may be set.  The format of the file entry is:
set rstchown=0
The system must be rebooted to reconfigure the kernel to recognize any
of the changed parameters. 
References:
Stevens, W. Richard, 1992 Advanced Programming in the UNIX
         Environment, Addison-Wesley, Reading, PA
         ISBN 0-201-56317-7
Sunsoft, 1993, SunOS Administering Security, Performance,
         and Accounting for x86
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