Superior Motels, Inc. v. Rinn Motor Hotels, Inc.

Decision Date29 October 1987
Citation241 Cal.Rptr. 487,195 Cal.App.3d 1032
CourtCalifornia Court of Appeals Court of Appeals
PartiesSUPERIOR MOTELS, INC., Plaintiff, Respondent, and Cross-Appellant, v. RINN MOTOR HOTELS, INC. et al., Defendants, Appellants, and Cross-Respondents. A025611.
Michael G. Zybala, Law Firm of Alex A. Harper, San Diego, William J. Elfving, Mark L. Strombotne, Hoge, Fenton, Jones & Appel, San Jose, Ken Sobel, San Diego, for defendants, appellants and cross-respondents

Glenn E. Miller, Johnston, Miller & Giannini, San Jose, for plaintiff, respondent and cross-appellant.

POCHE, Acting Presiding Justice.

The primary issues arising out of this complex action involving a commercial lease concern whether the appointment of a receiver for a lessee no longer in possession constitutes a material breach justifying termination of the lease and forfeiture of a sublessee's leasehold interests.

BACKGROUND AND PROCEDURAL SEQUENCE

The genesis of this litigation concerns several parcels of real property situated in Sunnyvale, California. Plaintiff Superior Motels, Inc. (Superior) constructed a 100-unit hotel and an adjoining restaurant and cocktail lounge on one of the parcels in 1960. The other parcel remained unimproved. Superior thereafter operated the complex, which was commonly known as the Lamplighter Lodge.

In December of 1967, Superior sold the property and improvements to Lamplighter Properties, which immediately leased them back to Superior. 2 The term of the lease was 20 years, although Superior was granted the privilege to extend it for up to 20 additional years. Superior obligated itself to pay monthly rent of $10,000, plus 8 percent of the gross income generated by the hotel, restaurant, and bar if in excess of $400,000. Superior was prohibited from assigning the lease without Lamplighter's written consent. 3

One of the lease's provisions read as follows: "Either (a) the appointment of a receiver to take possession of all or substantially all of the assets of lessee, or (b) a general assignment by lessee for the benefit of creditors, or (c) any action taken or suffered by lessee under any insolvency or bankruptcy act shall constitute a breach of this lease by lessee."

Superior continued operating the complex until 1969. On April 26th of that year, Superior executed an agreement whereby it assigned its interest in the lease to Royal Executive Inns of America, Inc. (REI), a Nevada corporation. Superior received 125,000 shares of REI capital stock and a cash sum to be determined according to a specified formula. The agreement included these provisions:

"7. In the event of any breach or default by REI of any terms or provisions to be performed by the Lessee under its lease with Lamplighter Properties, which it has assumed, Superior will promptly notify REI if and after it has received notice from Lamplighter Properties, and, thereafter, REI shall have fifteen (15) days to correct the deficiencies referred to in Lamplighter's notice. Should REI fail to do so, in addition to the remedies provided by law, Superior shall have the remedies provided in provision 8 following.

"8. In the event of notice by the Lessor to the Lessee of default or breach of the lease agreement, Superior shall have the same rights of enforcement upon breach or default after the expiration of fifteen (15) days notice as it would have if it were the Lessor, including without limitation the right to cure the default, and the right of re-entry, without Court proceedings at the expiration of sixty (60) days after notice of default."

Lamplighter consented in writing to this assignment, expressly noting that its consent was not intended to relieve Superior of its obligations as lessee required by the lease. REI then entered into possession and operated the complex (now renamed the Royal Executive Inn) without incident for several years.

REI was one of a number of business entities apparently controlled by REI's chairman, Walter Wencke. Between 1969 and 1974 there followed a bewildering procession of corporate acquisitions, name changes, and restructurings, the specifics of which need not be detailed here. During this period one of REI's reincarnations, The Rinn Corporation, sublet the motel and restaurant to a wholly-owned subsidiary named Rinn Motor Hotels, Inc. (Rinn Motor), which in turn subleased the motel to Rinns Sunnyvale Motor Hotel (Rinns Sunnyvale), a joint venture comprised of Rinn Motor and Walter and Dorothy Pabst. 4 The two subleases and the joint venture agreement were all executed on October 1, 1972. In May of 1974, The Rinn Corporation was renamed Sun Fruit, Ltd. (Sun Fruit), which like REI was incorporated in Nevada.

Following execution of the subleases and the joint venture agreement, Mr. Pabst began managing the motel on behalf of Rinns Sunnyvale. The monthly rent payments required by the 1967 master lease between Lamplighter and Superior were forwarded from Rinns Sunnyvale to Rinn Motor and then to Lamplighter.

Unbeknownst to all, Wencke was systematically looting the companies under his control. When matters began to deteriorate, and after Sun Fruit's remaining directors (i.e., Wencke and Richard Mets) were at an impasse, Wencke applied to a Nevada state court and was appointed Sun Fruit's receiver. 5 The order to this effect was filed August 7, 1975.

When the president of Real Estate Equities, Inc., the general partner of Lamplighter (see fn. 2, ante ), learned of this development he urged Superior's president to invoke the anti-receivership provision of the lease. In a letter dated August 22, 1975, Superior advised Sun Fruit that Lamplighter treated the appointment of a receiver as "a violation of the lease," as was the failure to submit an accounting. The letter concluded: "Accordingly, you are hereby notified in accord with Paragraph 8 of our Agreement of April 26, 1969, that if you have not cured these defaults completely within 15 days of this notice, then the undersigned will take over all rights it would have if it were the lessor, and will exercise After 60 days had elapsed, Superior attempted to exercise its right of re-entry but was rebuffed by Pabst and the president of Rinn Motor. The position of the joint venturers was that they had acquired possession by a sublease, which did not require written consent. Moreover, because "Lamplighter Properties has been accepting the rent for nearly three years," Rinns Sunnyvale perceived no "violation of any agreements."

                its right of re-entry as therein provided."   In a subsequent letter dated September 4th, Superior identified "an additional breach of the master lease," specifically "that a 20% interest in the lease has been assigned to others" (i.e., the Pabsts) contrary to the lease provision against assignments not approved in writing.  (See fn. 3, ante.)
                

Superior then served a three-day notice to quit possession on November 18th. Cited in the notice as reasons for this action were Sun Fruit's receivership and the fact that Sun Fruit "claims that it has sublet the above premises to Walter Pabst and/or Rinn Motor.... That is why this notice is directed to all such entities [sic ]." Superior advised that it "hereby declares to elect [to treat] the lease under which you hold possession ... as forfeited."

Receiving no satisfaction, Superior commenced this action by filing a "Complaint To Appoint Receiver, For Unlawful Detainer, To Regain Possession Of Leasehold And For Declaratory Relief" six days later. Named as defendants were Sun Fruit, Rinn Motor, Walter Pabst, and Rinns Sunnyvale. In addition to declaratory relief regarding the validity of the "transfers" of the lease, and the appointment of a receiver, Superior prayed for "a decree of specific performance of plaintiff's right of entry ... and/or for restitution of said premises and that a writ of possession and any and all other applicable writs issue to aid plaintiff in regaining possession of said premises."

On February 9, 1976, Sun Fruit's default was entered by the clerk of the trial court. On October 1st of that year, the trial court conducted a brief hearing on Superior's request to enter a default judgment against Sun Fruit. Sun Fruit did not appear at the hearing, at the conclusion of which judgment was ordered entered as prayed. The judgment filed that same day directed that Superior "shall have and recover possession of the above-described premises from defendant Sun Fruit, Ltd., its officers, agents and employees and all persons holding possession of the premises under or through it or them, and is entitled to a Writ of restitution of said premises from defendant Sun Fruit, Ltd., its officers, agents and employees and all persons holding possession of said premises under or through it or them." The judgment also embodied the trial court's determination that Sun Fruit's leasehold was "hereby declared forfeited."

On December 2-3, 1976, a nonjury trial was conducted on Superior's complaint against Rinn Motor, Rinns Sunnyvale, and Pabst, the remaining defendants (who will be hereafter collectively referred to as such). The trial court received evidence in the form of exhibits and testimony from Wencke, Pabst, and the respective presidents of Superior and Real Estate Equities, Inc. Defendants' general position, as stated in extensive trial briefs, was that forfeiture of their leasehold interests would be inequitable in light of the fact that the only breach of the lease had been committed by Sun Fruit, and that determining their right to possession was not foreclosed by the default judgment against Sun Fruit.

On March 1, 1977, the trial court filed its memorandum of decision announcing the intention to award judgment for Superior. The court and parties were in the course of preparing findings of fact and conclusions of law when they became aware that on March 3d the United...

To continue reading

Request your trial
116 cases
  • Gallo v. Wood Ranch USA, Inc.
    • United States
    • California Court of Appeals Court of Appeals
    • 25 Julio 2022
    ...§ 1511 ["[t]he want of performance" may be "excused" by acts of God or by inducement]; Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1051-1052, 241 Cal.Rptr. 487.) The California Legislature had a good reason for declaring untimely payment a material breach as......
  • Fireman's Fund Ins. Co. v. Allstate Ins. Co.
    • United States
    • California Court of Appeals Court of Appeals
    • 30 Septiembre 1991
    ...supplied by the claimant to his debtor." (Esgro, supra, at p. 1062, 98 Cal.Rptr. 153; see also Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1073, 241 Cal.Rptr. 487.) Esgro involved alleged breach of insurance contracts insuring stores damaged during the 1965 ......
  • Schellinger Bros. v. Cotter, A142201
    • United States
    • California Court of Appeals Court of Appeals
    • 26 Agosto 2016
    ...and circumstances shown in evidence.” (Smith v. Empire Sanitary Dist . (1954) 127 Cal.App.2d 63, 73, 273 P.2d 37 ; see Superior Motels, Inc. v. Rinn Motor Hotels, Inc . (1987) 195 Cal.App.3d 1032, 1051–1052, 241 Cal.Rptr. 487 and authorities cited.) As already noted, the defendant's mental ......
  • Brown v. Grimes
    • United States
    • California Court of Appeals Court of Appeals
    • 27 Enero 2011
    ...v. County of San Bernardino, supra, 176 Cal.App.4th at pp. 529-530, 98 Cal.Rptr.3d 96; Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1051-1052, 241 Cal.Rptr. 487; Whitney Inv. Co. v. Westview Dev. Co. (1969) 273 Cal.App.2d 594, 601, 78 Cal.Rptr. 302 ["Whether ......
  • Request a trial to view additional results
4 books & journal articles
  • Real property torts
    • United States
    • James Publishing Practical Law Books California Causes of Action
    • 31 Marzo 2022
    ...leased premises from a tenant wrongfully withholding or “detaining” the property. Superior Motels, Inc. v. Rinn Motor Hotels, Inc ., 195 Cal. App. 3d 1032, 1066, 241 Cal. Rptr. 487, 505 (1987); Cal. Civ. ProC. Code §1161, et. seq. A tenant is guilty of unlawful detainer when he continues in......
  • Breach of Contract
    • United States
    • James Publishing Practical Law Books Discovery Collection. James' Best Materials - Volume 1 Model Interrogatories
    • 29 Abril 2015
    ...on whether the breach constitutes a material breach of the agreement. ( See generally, Superior Motels v. Rinn Motor Hotels (1987) 195 Cal.App.3d 1032.) In general, the question of whether a breach constitutes a material breach depends on whether the breach goes to the core of the contract ......
  • Breach of Contract
    • United States
    • James Publishing Practical Law Books Model Interrogatories - Volume 1
    • 1 Abril 2016
    ...on whether the breach constitutes a material breach of the agreement. ( See generally, Superior Motels v. Rinn Motor Hotels (1987) 195 Cal.App.3d 1032.) In general, the question of whether a breach constitutes a material breach depends on whether the breach goes to the core of the contract ......
  • Breach of Contract
    • United States
    • James Publishing Practical Law Books Archive Model Interrogatories. Volume 2 - 2014 Contents
    • 14 Agosto 2014
    ...on whether the breach constitutes a material breach of the agreement. ( See generally, Superior Motels v. Rinn Motor Hotels (1987) 195 Cal.App.3d 1032.) In general, the question of whether a breach constitutes a material breach depends on whether the breach goes to the core of the contract ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT