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IV. Noncompetition Agreement: Matthew B. West, Inc.
Mr. Johnston argues that he should not have to recognize
$290,000 allocated to the covenant not to compete with Matthew B.
West, Inc. The Johnstons do not dispute that the aurora asset
sale agreement included Mr. Johnston’s covenant not to compete or
that the $396,936 payment from Matthew B. West on January 5,
1995, included the $290,000 allocated to Mr. Johnston’s covenant
not to compete.25 The Johnstons assert, however, that creditors
were paid with the proceeds of the sale and that Mr. Johnston was
a bona fide creditor for the sum of $200,000 that he loaned to
Don Johnston, Inc.26 In short, the Johnstons are attempting to:
(1) Assign $290,000 of the sales proceeds to Don Johnston, Inc.,
and (2) then reallocate or recast the payment to Mr. Johnston
individually as a return of capital rather than compensation.
25Although the Johnstons stipulated that Johnston, Inc.,
received $396,181 on Jan. 5, 1995, from Matthew B. West, Inc.,
they argue on brief that it received $396,936 from the sale. We
cannot account for the $755 difference, which for our purposes,
is irrelevant. We note, however, that the same $755 difference
($754 after accounting for rounding) exists between the bill of
resale recap and the amount paid by Matthew B. West, Inc., on
Jan. 5, 1995. See supra note 20.
26The Johnstons assert that Don Johnston, Inc., borrowed
$250,000 from Wilson Motor Co. on Nov. 9, 1992. Mr. Johnston
testified that he had “funds in at Wilson Ford” and that it was
his personal funds with Wilson Ford that were used to make the
loan from Wilson Ford to Don Johnston, Inc. On brief, the
Johnstons indicate that Wilson Motor Co. was wholly owned by
Donald Johnston. We note, however, that the exhibits referenced
by the Johnstons on brief do not support Mr. Johnston’s assertion
that he had personal money in Wilson Motor Co. and that, in turn,
his personal money was used to lend Don Johnston, Inc., $250,000.
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