After months of delays, the owners of Northwoods restaurant in Annapolis have scrapped plans to buy the recently closed Rustic Inn restaurant on West Street and convert it to a steak house.
Gonzalo Fernandez and Russell Brown, owners of Northwoods on Melvin Avenue, had planned to open their second restaurant and call it Westwoods, but said they tired of waiting for Rustic Inn owner Ronald J. Dalgliesh to solve his financial woes.
"We spent way too much money for nothing," Fernandez said yesterday. "We lost interest in it. We didn't think it would be a good deal."
Fernandez and Brown, along with a third partner joining them in the venture, dropped plans soon after three Rustic Inn partners filed involuntary bankruptcy against principal owner Dalgliesh, claiming he owed them $90,000.
Dalgliesh, though, says Fernandez and Brown knew about the likelihood of a bankruptcy filing when they signed a sales contract with him four months ago. Their decision to scrap the plans violates that contract, he said.
In that contract, Dalgliesh said yesterday, he warned the partners he might need to seek bankruptcy protection because his bank, First Federal Savings Bank of Annapolis, had been taken over by federal regulators.
Dalgliesh says he was forced to close his restaurant early -- Sept. 18 -- after an attorney for Fernandez and Brown told newspapers the Rustic Inn was set to close.
After the October bankruptcy filing, a judge approved sale of the inn to Fernandez, Brown and the third partner, Bruce Golder. But by that time, the partners had lost interest in buying the former continental restaurant and thought better of sinking more money into the deal, Fernandez said. They had spent about $11,000 in legal fees, menus, building inspections and hiring staff.
For one thing, contrary to their original plans, the partners would have had to restart a restaurant that had closed, Fernandez said. For another, they had counted on opening the 90-seat restaurant as early as last July, converting its upper level into a banquet hall and starting to take reservations for end-of-year holiday parties.
Fernandez said he believed Dalgliesh was up front with them and never anticipated such problems.
But Dalgliesh says he can't understand why the partners backed out of the deal, after signing a second sales contract a month ago.
"I don't understand it, unless there was another motive," he said.
This is the partners' second attempt at expanding their restaurant business, which they began with Northwoods in 1985.
More than a year ago, they tried to move into the Reynolds Tavern, owned by the Maryland Historical Trust. But because of the previous lease-holder's problems with the IRS, the partners could get nothing more permanent than a month-to-month lease, Fernandez said.
For now, Fernandez and Brown said they plan to continue to run Northwoods, expanding it by 20 to 30 seats.
"We're going to cool off for a little while," Fernandez said. "If an opportunity comes up, we'll take it."