## Facts

- Majority owner James W. Galyen and a minority owner agreed to sell all stock of an O’Neill, Nebraska Ford dealership to Douglas W. Trowbridge.
- Galyen also owned a separate Ford-franchised dealership in Atkinson, Nebraska.
- The sale contract included a restrictive covenant allocating new-car business in Holt County, Nebraska:
  - Galyen and his dealership were to discontinue selling and distributing new automobiles and trucks in Holt County by July 1, 1970, and refrain for 15 years from the contract date.
  - For up to three years after July 1, 1967, Galyen could continue new-car sales only if all new vehicles sold were purchased from Trowbridge at specified markups above net invoice cost.
- The purchaser’s successor corporation alleged Galyen and his dealership (1) sold new vehicles during the three-year period without purchasing them from Trowbridge and (2) continued new-vehicle sales in Holt County after July 1, 1970.
- Defendants denied breach and filed cross-claims alleging the purchaser breached the contract and owed damages.

## Issues

1. Whether the 15-year, Holt County restrictive covenant ancillary to the dealership sale was a reasonable and enforceable restraint.
2. Whether the trial court abused its equitable discretion by denying injunctive enforcement of the covenant and awarding damages instead.
3. Whether the trial court’s contract interpretation and damages awards for alleged breaches (and related cross-claims) were proper.

## Decision

- The court upheld the restrictive covenant as reasonable in duration and geographic scope and enforceable as part of the sale of a business and its goodwill.
- The court affirmed the trial court’s refusal to enter an injunction, holding it was within equitable discretion to award damages in lieu of specific performance where supervision would be difficult and likely to produce continued litigation.
- The court largely affirmed the damages awarded for defendants’ breaches and rejected or limited defendants’ cross-claims.

## Legal Principles

- A noncompetition covenant ancillary to the sale of a business is enforceable when reasonably limited in time and territory and designed to protect the purchaser’s acquired goodwill from the seller’s competition.
- Even when a restrictive covenant is valid and breached, a court of equity may deny injunctive relief and award damages in lieu of an injunction when practical enforcement would require ongoing supervision or risk repeated disputes.
- Contract damages for breach may be measured by the purchaser’s lost economic benefit under the bargain, including losses from prohibited competition and from failure to route sales through the purchaser when the contract requires it.

## Conclusion

The court enforced a county-wide, 15-year noncompete tied to the sale of an automobile dealership but approved a monetary remedy rather than an injunction, emphasizing that equitable relief may be withheld when injunctive enforcement would be impractical and damages can reasonably compensate the harm.


D.W. Trowbridge Ford, Inc. v. Galyen, 200 Neb. 103 (Neb. 1978)