In defense of a foreclosure lawsuit on Oheka Castle, its owner Gary Melius is suing to dismiss the action and seeks damages of at least $10 million from the property’s loan servicing firm.

The legal wrangling is the latest chapter in the continuing saga of Oheka and the controversial Melius, who rescued the once-decaying building in the 1980s and turned it into an iconic catering and event space. Two-and-a-half years after he was shot in the face in a still-unsolved attack in Oheka’s parking lot, Melius is now struggling to keep from being dethroned as the castle’s owner.

Miami Beach, Fla.-based LNR Partners began foreclosure proceedings in June on the 23-acre Oheka property in Cold Spring Hills, claiming that Melius had defaulted on two commercial mortgage-backed securities loans totaling more than $29.79 million. The foreclosure lawsuit filed by LNR asserts that Melius failed to keep up with payments required by the loans’ cash management agreement, specifically charging that Melius paid only a portion of the $3.1 million annual “base lease” rent that was supposed to be paid into an escrow account. LNR also contends that Melius stopped making any payments, including required monthly debt service, after November 2015.

In a countersuit filed by Melius’ attorney Michael Alpert last week in Suffolk County Supreme Court, Melius claims that LNR failed to engage in good faith discussions on a possible loan workout agreement because the special servicer wanted to complete a development deal with Gale International and Jack Nicklaus’ golf course design firm to lease Oheka and purchase the adjoining 168-acre Cold Spring Country Club.

Melius says he entered into negotiations with Gale and Nicklaus in September 2015 on the deal for the castle and the country club, in which Melius would get a downpayment of $37 million and $3.2 million a year for a 99-year lease of the castle property. In addition, Melius would retain 50 percent of a planned 190-unit condominium development slated to be built on 13 acres of land owned by the golf club and about 9 acres of Oheka property. The castle was to be used as the clubhouse as part of the planned redesign of the Cold Spring layout.

Sources say Gale has separately contracted to buy the country club for about $65 million, but the purchase deal is now on hold, though discussions between the developer and the club continue.

“Projects of this size have complex negotiations during the planning stages but we remain optimistic that a positive result can be achieved for all parties involved,” Stan C. Gale, chairman and CEO of Gale International, said in an emailed statement. He added that the Cold Spring project will bring “international recognition to Long Island” for its world class golf community.

Melius’ counterclaim asserts that Gale had a “prior business and/or personal relationship” with executives of the Starwood Capital Group, LNR’s parent firm and that the commencement of the foreclosure action “has impeded, impaired, and interfered with” Melius’ ability to complete the development deal.

“They’ve conspired to steal the property,” Melius told LIBN. “They were in cahoots.”

Melius was also miffed because he wanted to continue to live in his apartment inside the castle, but he said Gale had other plans.

“I was going to stay there but he wanted me to move out,” Melius said.

The counterclaim to the foreclosure action contends that at various times from 2013 to 2015, the lenders “refused to disburse” funds from a cash management account that was set up to support the castle’s operating expenses, forcing Melius to incur “significant out-of-pocket expenses” for operations and maintenance.

“They’re holding $2.5 million of my money in a reserve account,” he said.

While an LNR spokesman said via email that it does not comment on pending litigation, industry observers say its role as special servicer is to act on behalf of the CMBS trust to maximize the recovery of non-performing loans to the noteholders.

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.

The Cold Spring club property was originally part of the Kahn estate. In the fall of 2006, Melius made a bid to buy the club for about $90 million, but the deal never came to fruition.

Despite the legal mess, Melius said he still plans to negotiate a workout with Oheka’s lender and is seeking a new partner for the planned condo development. But attorney Howard Stein, of Certilman Balin Adler & Hyman, who represents the Cold Spring CC, said the club retains control of the project.

“Obviously no development on the property could go forward without the cooperation of the club, since the club owns the majority of the development site and holds all of the development rights,” Stein said.