The highest bidder at a public auction at the Chautauqua County Courthouse this week may become the owner of the Ramada Jamestown Hotel.
At 11:30 a.m. Thursday, the hotel premise will be sold at the auction, which does not include any equipment or furniture inside the hotel. The State Bank of Texas is the plaintiff in the case against Kaanam, LLC and Milind Oza, hotel owner. Carl Person, Oza's attorney, said the auction is the consequence for failure to reorganize during bankruptcy proceedings. In September 2010, Oza voluntarily filed for Chapter 11 bankruptcy in Western New York Bankruptcy Court.
''(The building) went into foreclosure,'' Person said. ''We had a defense in the litigation process, but we failed to prevail.''
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The judgment in favor of the State Bank of Texas states the business is allowed to recoup money loaned to Oza for purchase of the hotel in 2007, and incidental costs like attorney fees. The loan from the State Bank of Texas to use toward the purchase of the hotel was for more than $1.9 million.
Even with the judgment to sell the property through an auction, the case may not be over. Person said his client is appealing the decision.
''This may account for anyone buying the property that it still will be subject to litigation,'' he said. ''It may be a problem in selling the property. In the long run, we believe we will win in litigation.''
Franklin Heller, Damon Morey attorney handling the case for the State Bank of Texas, said the appeal will have no affect on the auction Thursday. He said the case being appealed is on a promissory note between the State Bank of Texas and Oza, not on the mortgage loan.
''No (the appeal) shouldn't have any affect on the foreclosure,'' Heller said. ''I have not seen any appeal on the foreclosure judgment. The sale is scheduled for (Thursday).''
Person said Heller's argument in court is that the promissory note and the mortgage are two separate loans. Person said, in his opinion, it is all the same loan.
''They broke it up in different ways, but it is still one bank and one borrower,'' Person said.
Person said Oza will win the appeal because the State Bank of Texas allegedly didn't loan all the money they were scheduled to, which led to problems in upgrading the hotel. According to Person, the State Bank of Texas didn't lend $433,000 to Oza for hotel upgrades causing him to have a shortage of working capital.
''The withholding of this $433,000 in loan proceeds guaranteed that the defendants' newly purchased hotel business would fail,'' stated Oza's affidavit dated July 4.
Person alleges this isn't the first time the State Bank of Texas has done this in financing a hotel.
''They don't lend the money they promised and it forecloses and then they take it over,'' he said. ''They have done this before. They (State Bank of Texas) own hotels. This is their method of doing business.''
Person said Oza lost the case because the merits of the case weren't heard.
''The matter was never heard on the merits. They saw all the evidence, it is not that they didn't see the evidence, but they disregarded it and just went by default. (The judge) ruled we were in default, in his opinion, we didn't have the right to assert our defense.''
Person said he hopes the appeal will be resolved in the next four months.