Ribeiro v. R.O.A.M., Inc. (In re R.O.A.M., Inc.)

14 B.R. 963, 1981 Bankr. LEXIS 2639
CourtUnited States Bankruptcy Court, D. Nevada
DecidedNovember 4, 1981
DocketBankruptcy No. 80-00844; Adv. No. 81-0006
StatusPublished

This text of 14 B.R. 963 (Ribeiro v. R.O.A.M., Inc. (In re R.O.A.M., Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Nevada primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ribeiro v. R.O.A.M., Inc. (In re R.O.A.M., Inc.), 14 B.R. 963, 1981 Bankr. LEXIS 2639 (Nev. 1981).

Opinion

OPINION AND DECISION

BERT M. GOLDWATER, Bankruptcy Judge.

This is an action by a landlord to vacate the automatic stay or, in the alternative, for assumption of a sublease covering the foyer of a restaurant and payment of rent. The defendant-debtor has counterclaimed for damages against the landlord-plaintiff arising out of the restaurant lease between the same parties.

Plaintiff (Ribeiro) and defendant (Joe’s) entered into a sublease for a restaurant on April 5, 1979.1 The lease contract provided for the construction of a restaurant building and parking on the leased premises.

For the first five lease years, rent of the restaurant area was at a base monthly sum of $1,838 for the land plus a building rental percentage applied to the “cost of construction” not exceeding $520,000. Until April 30, 1980, this was to be V12 per month computed upon the interim construction loan which was committed at 13V2% interest plus 1% making the rental IV24 per month times the loan. From May 1, 1980 through the end of the construction loan period, this was to be 1% plus the rate of interest in effect on the construction loan on that date. For the period from the end of the construction loan period through the end of the fifth lease year, the parties contemplated a new loan called a “permanent loan” on which monthly rental was to be computed on $520,000 at the rate of interest obtained plus 2%.2 The lessee was granted thirty days to secure a more advantageous loan for the landlord, else the loan proposed by the landlord would be accepted by the lessor.

On May 15, 1979, Ribeiro and Joe’s formed a partnership, R-T Enterprises (RT). The partnership subleased from Ribeiro an area of the restaurant lobby for the purpose of operating a slot machine concession. The rental was $1,838 per month which was 1% of the land value of $183,000 for the entire parcel of land owned by Ri-beiro and Arroyo.3 The partnership agreement provided that Ribeiro had an option to withdraw, in which event Joe’s was to purchase his interest at a price to be determined by the terms of the agreement. An initial contribution of $10,000 was to be made and the parties agreed on a percentage of contribution and partnership profits, 75% to Ribeiro and 25% to Joe’s.

[965]*965The partnership applied for a gambling license in December 1979. The parties agreed June 29, 1979 to an amendment of the slot machine concession sublease that, in the event a gambling license was not approved, the restaurant lease would be deemed amended so as to increase the base rent in the latter lease from $1,838 to $2,297.50 the first year and additional amounts each year until the rent reached $3,676 (2 X $1,838) in the fourth year of the restaurant lease. A gambling license was received in January 19804 and the slot machine concession was operated in the restaurant foyer with a lease of the slot machines from Bally Company. Each partner contributed the required percentage of expense for coins, license fees, and incidental expenses. On August 21, 1980, Ribeiro demanded from Joe’s its contribution to the capital of the partnership of R — T to enable the partnership to pay its rent obligations (Exhibit CC). The partnership agreement provided that failure to make the contribution gave rise to a right of the other partner to purchase the partnership interest of the defaulting partner and if not purchased the partnership would be dissolved.

Ribeiro gave notice of withdrawal from R-T to be effective October 31, 1980, but the partnership had been dissolved by failure of Joe’s to make its contribution and Ribeiro to purchase its interest. The slot machines remained on the premises until April 1981. Bally applied all income from the slot machines on its rental agreement. No profit remained for the partners. No rent was paid to Ribeiro on the slot machine sublease but, until the machines were removed by Bally, jackpots were shared 75/25 between Ribeiro and Joe’s in the event the jackpot amount to be paid a winner exceeded the mechanical payout of coin in the machine.5

The parties assumed the slot machine concession would be profitable and Ribeiro would receive rent. No provision was made for rent in the event of dissolution or unprofitable operation. Joe’s contends there was no partnership because the requested capital contribution was not made and Ri-beiro’s interest was not purchased, thereby liquidating and dissolving the partnership pursuant to the partnership agreement.

In its counterclaim Joe’s seeks damages for breach of the restaurant lease because (1) failure of the landlord to repair defective construction and installation of mechanical air conditioning and heating, (2) for harassment and interference with the tenant’s business, (3) for adjustment of rent, and (4) for an injunction against further interference.

THE R-T PARTNERSHIP

The partnership commenced upon receipt of a gambling license in January 1980 with installation of slot machines in February. On August 21,1980, Ribeiro, by his attorney Maupin, demanded Joe’s contribution, stating Joe’s was liable for 25% of the expenses, rent to Ribeiro being the major share. When Joe’s failed to make the contribution as demanded, Ribeiro did not purchase Joe’s interest and the partnership was dissolved by its terms. It continued to wind up or “down” until the slot machines were removed by Bally in April 1981.

On Ribeiro’s complaint for damages:

1. Ribeiro’s attempt to withdraw in October 1980 was at a time when the partnership was already dissolved and winding up. Thus, the rent for R-T to Ribeiro is $1,838 per month from September 1979 until rejection of the lease in May 1981 of which 25% is a claim of Ribeiro against Joe’s for $9,649.50. In addition, rejection of the lease entitles Ribeiro to a claim for damages in the amount of rent reserved by the lease for one year from the date of surrender (25% X $1,838 X 12) or the sum of $5,514 pursuant to 11 U.S.C. § 502(b)(7)(A).

2. Ribeiro is entitled to the return of possession of the area reserved in the slot machine sublease because of the rejection and surrender of R-T in May 1981.

[966]*966THE COUNTERCLAIMS

I. Breach of contract for construction of restaurant under lease

Ribeiro constructed the restaurant with a heating and air conditioning system which did not function satisfactorily for fifteen months. Joe’s complained constantly from the spring of 1980 until the system was properly repaired in May 1981. The problem involved an imbalance in the system and the failure of mechanical operation due to miswiring which caused malfunction. In turn, because Ribeiro had ordered but refused to pay a subcontractor for necessary work required by the Reno building code of installing pans under sewer lines in basement areas where food was handled, the subcontractor refused for some time in 1980 to perform any warranty work on the system.

The malfunction of the heating and air conditioning system caused the thermostats to receive hot and cold air and to use excessive amounts of electrical power. Expert testimony of a power company engineer was that there was expense for heating and cooling which varied on a monthly basis considering factors of outdoor weather temperature.

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Cite This Page — Counsel Stack

Bluebook (online)
14 B.R. 963, 1981 Bankr. LEXIS 2639, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ribeiro-v-roam-inc-in-re-roam-inc-nvb-1981.