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Judge coy about Mitsui decision

Michael Schneider

A request for a preliminary injunction to prevent Mitsui Trust and Banking Co., Ltd. from selling its interest in the state line Embassy Suites Hotel was granted Wednesday by El Dorado Superior Court Judge Patrick Riley.

A much anticipated April 20 minute order released by the court Wednesday was carefully worded to reveal none of the details. However, a fax from Riley to the Tahoe law firm of Scarpello and Alling, LTD. obtained by the Tahoe Daily Tribune , revealed details of the court’s actions. Scarpello and Alling’s attorney Richard Glasson represents the hotel’s developers who sued Mitsui.

According to the faxed document, the judge ordered interest payments to be made and a bond to cover $450,000 in attorney fees be posted by KOAR-Tahoe Partners, a limited partnership.

“Having carefully reviewed the factual contentions of both sides, I have concluded that there is a possibility that the plaintiff (KOAR) will prevail and such is of sufficient strength as to cause me to grant the preliminary injunction sought by the plaintiff,” Riley wrote in the document dated April 29 and titled, “Ruling on order to show cause re: preliminary injunction.”

The case involving ownership of the hotel will likely go to trial in July, according to the judge.

Riley said, at an April 20 hearing, the trial would begin July 14 and be done no later than Aug. 21. The judge said the trial would be in South Lake Tahoe.

KOAR-Tahoe Partners, L.P., the hotel’s developers, built the Embassy Suites on the California/Nevada state line in the early 1990s. A $53 million construction loan from Mitsui financed the construction.

KOAR failed to meet the bank’s contract terms in July, 1997, when the seven-year loan matured. The developers opted to pursue a conversion of half the hotel’s units to time shares, announcing they would use the proceeds to pay the loan.

Mitsui, not wanting to be involved in the conversion, opted to sell the overdue loan to a third party. When KOAR learned of this in December 1997, the group filed suit against the bank to prevent the sale.

A temporary restraining order against the sale of the note was granted by El Dorado Superior Court Judge Suzanne Kingsbury in January. As the legal maneuvers continued, attorneys for Mitsui challenged and disqualified Kingsbury, two hearings were held before Riley, one in March and one in April.

KOAR attorneys argued for the preliminary injunction and a civil trial. Mitsui attorneys argued the judge should dissolve the order and allow the bank to proceed with the sale of the overdue loan.

Attorneys for the bank also argued, should the case got to trial, that KOAR be required to pay overdue interest on the loan.

Mitsui attorneys said KOAR stopped paying interest on the loan when it went into default last summer. Interest accrued at $18,000 a day on the $53 million loan, according to Mitsui attorneys.

In the document faxed by Glasson, Riley wrote, as a condition of the injunction, the court will require KOAR to either bring current all unpaid interest from Jan. 20, or to provide a bond sufficient to cover unpaid interest from Jan. 20, and future interest for one year from that date.

Riley ruled, in Glasson’s faxed documents, the interest must be current, or a bond filed, by May 15.

KOAR must also provide a $450,000 bond for Mitsui attorneys fees. KOAR attorney Tim Tosta called the decision a mixed bag, saying the amount of interest to be paid is high in his estimation.

Attorneys for Mitsui said their main focus, if their client cannot sell the loan, was that the judge require KOAR to pay owed interest.

“If they (KOAR) have to pay interest – that’s good,” said a Mitsui attorney.

The conversion of half the hotel’s rooms to time shares is scheduled to begin Friday. The process is expected to take about five years and KOAR said it will raise $35 million.

Tahoe Daily Tribune E-mail: tribune@tahoe.com

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