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David I Rosenberg Appointed Referee in Oheka Castle Foreclosure

Court advances Oheka foreclosure

By: David Winzelberg April 5, 2019 0

The Oheka Castle property in Huntington took another step towards foreclosure as the judge in the case dismissed defense claims and appointed a referee.

State Supreme Court Judge Elizabeth Emerson granted summary judgment for the 23-acre property's lenders last week while throwing out the claims of Oheka owner Gary Melius that lenders withheld escrow payments and failed to engage in good faith discussions on a possible loan workout agreement.

Judge Emerson also appointed attorney David Rosenberg of Garden City-based Rosenberg Fortuna & Laitman as the referee in the case, tasking him with calculating the total debt that Melius owes, which industry observers say could amount to $35 million or more.

"I'll be discussing with counsel the scheduling of a hearing to determine the amount due under the mortgage and the other issues referred to me by the court," Rosenberg told LIBN.

The dismissal of defense claims and the referee appointment are the latest developments in the three-year-long foreclosure fight between Melius and lender U.S. Bank National Association and its Miami Beach, Fla.-based special loan servicer LNR Partners.

LNR began foreclosure proceedings in June 2016 on the Oheka property, claiming that Melius had defaulted on two commercial mortgage-backed securities loans totaling more than $29.79 million. Melius, who rescued the once-decaying building in the 1980s and turned it into an iconic catering and event space, had countersued to dismiss the foreclosure action and was seeking damages of at least $10 million from LNR.

In January, Judge Emerson appointed Jeffrey Kolessar, vice president of Philadelphia-based GF Management, as the receiver to oversee operations at Oheka. Kolessar gets 2.5 percent of gross revenues from the property as a commission for his services and is entitled to be compensated for "reasonable out-of-pocket expenses," according to court filings.

Melius says he will appeal the court's latest ruling.

"The judge never even let us give a deposition," Melius said. "It's ridiculous."

Originally built for financier Otto Kahn in 1921, the 126-room Oheka–listed on the National Register of Historic Places–was abandoned and crumbling when Melius took ownership in 1984. Over the years he's spent millions in renovations, including more than 450 new windows and doors, 4,000 pieces of slate to repair the roof and the planting of more than 3,000 trees and bushes, according to court papers.

Barring any stay of the proceedings, the foreclosure case will likely continue for several more months before the property can be turned over to its lenders and sold at auction.

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