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buyer, and the “Sellers”, comprising the same entities and
individuals as the seller group. Under the covenant not to
compete, “Each Seller” agreed not to compete with JSL for 5
years. The covenant not to compete states that JSL shall pay the
$500,000 consideration for the covenant not to compete “to
Sellers, c/o Franklin W. Briggs”, with $333,400 payable on
October 27, 1988, and the balance payable in four annual
installments of $42,400 each, commencing October 27, 1989.
On November 4, 1988, pursuant to an agreement with ACT, JSL
made a wire transfer to ACT's attorney, Glenn L. Hess (Hess), of
$840,960. Hess deposited these funds into a client trust fund
account. Of this amount, $510,560 was the cash payable at the
closing, and $330,400 was the initial payment for the covenant
not to compete. On November 7, 1988, pursuant to ACT’s
instructions, Hess issued four checks from the client trust fund
account as follows:
Payee Amount
ACT $309,666.66
Daniell 132,823.33
Gay 132,823.33
Towers Development 265,646.68
Total 840,960.00
The $265,646.68 check to Towers Development represented
distributions to petitioner and Briggs of $132,823.34 each.4
4 Instead of receiving their shares of the proceeds
directly, petitioner and Briggs had directed that their checks be
made payable to Towers Development.
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