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

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. 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…