Deutsche Bank, the only one to lose.

Changed locks and on-site inspections do not a property owner make. At least not in New York State Supreme Court Justice John Curran’s courtroom.

In 2008, the City of Buffalo and Mayor Byron Brown filed a lawsuit against 36 lenders in an effort to recoup money the city spent to demolish houses on which the lenders had started foreclosure proceedings but then abandoned the process, because they decided the value of the properties did not justify the cost of maintenance and liability.

The city sued not only to recoup the money but to hold the lenders publicly accountable for maintaining houses on which they begin foreclosure proceedings, according to statements made in the press by then Corporation Counsel Alisa Lukasiewicz.

The suit sought to recoup money for costs related to 58 properties. Some of the actions later were discontinued, meaning that there was likely a settlement. Some of the houses may still be in litigation. Curran ruled last April that the lenders were not mortgagees in possession of nine of 10 houses addressed in a request for summary judgment filed by defendants.

Citing five different cases—two from 1908, one from 1937, one from 1939, and one from 2001—Curran said that for a mortgagee to become a mortgagee in possession, and responsible for the maintenance of the house, they had to do more than change the locks, enter and inspect the property, or accept insurance money to be put towards the mortgage.

Curran said he was sympathetic to the difficult position that the city is in as a matter of social and economic policy. “However, my conclusion is that as a matter of law the defendants here, except for one I’ll address in just a minute, have established, as a matter of law, that they are in fact not mortgagees in possession, under the law of New York as it exists today,” Curran said.

The exception was 223 Stanislaus Street, the only case where a motion to dismiss was not granted. In that case, Curran viewed Deutsche Bank as the mortgagee in possession because the bank bought the house in its own auction after no other bids were put forth. Curran ruled that the bank’s argument that the referee never delivered the deed was not good enough.

Sherree Meadows is an attorney in the Legal Aid Bureau of Buffalo, Inc., a not-for-profit group that provides legal counsel and representation for people who can’t afford a lawyer.

She is nervous about what Curran’s ruling means for her clients in Housing Court. Meadows has represented many clients who thought that they had lost their house to foreclosure only to find out that not only did they still own the house but they were responsible for code violations or demolition costs years after they’d vacated the property. This happens when the bank fails to complete a foreclosure, she said.

“Now it’s stripped,” Meadows said. “It’s totally dilapidated. Someone could be harmed or hurt in a fire there, and they’d be responsible…[and] they have no homeowner’s insurance because they can’t get any because it’s vacant.”

If a bank changes the locks, posts no trespassing signs, or boards up the building, then they have exhibited control over the house and are responsible under New York State Property Maintenance Code, Meadows said—even if the bank decides later not to complete the foreclosure process.

“The definition in the code is apparently now in conflict with this decision, and I don’t know where the courts are going to go,” Meadows said.

The case law that Curran cited is largely from a time in history when the banking industry was much simpler, Meadows said.

Cindy Cooper was the sole lawyer for the city and had to sift through a mountain of paper with the help of a few paralegals, while each of the 36 lenders had at least one lawyer was working on the case.

Buried at the bottom of the third of three boxes full of affidavits and motions, Artvoice found three sealed documents: the defendants’ joint memorandum of law in opposition to plaintiffs’ motion for further discovery, served January 20, 2010; the affidavit of Timothy W. Hoover in opposition to plaintiffs’ motion, served January 20, 2010, for further discovery on behalf of all defendants; and another unidentified sealed document, parts one and two, filed by Curran’s office with the city’s law department.

The various parties involved—the law department, the lenders and their lawyers, Lukasiewicz—failed to respond or declined to comment.

We’ve requested access to the sealed documents under the Freedom of Information Law and are awaiting a response from the city. The city confirmed that they received the request.

—justin sondel