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Conclusions as to Value
It is undisputed that petitioner acquired a covenant not to
compete from Mr. Markley that had economic reality. As to
whether petitioner acquired something else of value, Mr. Markley
testified as follows at trial:
Q. And would you have given up this business for
nothing?
A. No. Would I have given up the business?
Q. Would you have given up the business, if someone
had said, I would like to just take it over, but I am
sorry, I can't pay you anything for it. Would that
have been attractive to you?
A. No.
Q. What would it have taken for you to agree to that
proposition?
A. To sell the business?
Q. To turn it over--to sell the business.
A. Well, it took $500,000 is what it took.
Apart from the $500,000, Mr. Markley received payment from
petitioner based on the cost of the new vehicles, the fair market
value of the used cars, and the return value for the spare parts.
Essentially, payment to Mr. Markley for terminating a profitable
business (Markley testified that he personally made a minimum of
$120,000 a year) was included in the $500,000, of which $490,000
was allocated to the noncompetition covenant. We find that a
part of the $490,000 was to compensate Mr. Markley for
terminating his franchise with Chrysler.
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Last modified: May 25, 2011