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First National Acceptance Co. v. City of Utica

United States District Court, N.D. New York

June 16, 2014


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[Copyrighted Material Omitted]

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For First National Acceptance Company, Plaintiff: James P. Evans, LEAD ATTORNEY, Hiscock, Barclay Law Firm - Syracuse Office, Syracuse, NY.

For City of Utica, New York, Defendant, Cross Claimant: John P. Orilio, Office of Corporation Counsel - City of Utica, Utica, NY; Joan K. Harris, City of Utica - Corporation Counsel, Utica, NY.

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Thomas J. McAvoy, Senior United States District Judge.

Before the court are the motions for summary judgment of Plaintiff First National Acceptance Company (" First National" ) and City of Utica, New York, in this matter involving the demolition of a building on property in the City of Utica of which Plaintiff was the mortgagee. See dkt. #s 25, 26. The parties have submitted briefing and evidence on the issues raised in their motions.


This case concerns the demolition of an apartment building on property owned by Defendant John Gosnell[2] in the City of Utica, New York. At the times relevant to this action, Defendant John Gosnell possessed

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fee simple title to the real property at issue, located at 2102 Highland Avenue, Utica, New York. (Plaintiff's Statement of Material Facts in Support of Motion for Summary Judgment (" Plaintiff's Statement" ) at ¶ 1). The property consisted of 9800 square feet. (Id. at ¶ 2). Improvements included a 4,895 square foot multiple dwelling. (Id.). The building contained eight apartments. (Id.).

On September 13, 1999, Gosnell granted Private Mortgage Investment Services, Inc. (" PMISI" ) a mortgage security interest in the property and building. (Id. at ¶ 3). The property and building were security for Gosnell's obligation to repay a $143,200.00 loan pursuant to a mortgage note issued that day. (Id.). PMISI recorded the mortgage and the underlying mortgage note in the Oneida County Clerk's office on September 15, 1999. (Id.). The mortgage obligated Gosnell to safeguard the property and the dwelling on the property from waste, damage and loss. (Id. at ¶ 4). Gosnell was required to make payments for as long as the debt remained unpaid. (Id.).

PMISI assigned its rights and interest in the mortgage to Plaintiff First National through two agreements. (Id. at ¶ 5). The first, a statement of collateral assignment of interest as security, was recorded with the Oneida County Clerk on May 1, 2001. (Id.). The second, an assignment of seller[s]'s interest in real estate, which was recorded with the Oneida County Clerk on October 10, 2000.[3] (Id.). As a result of these agreements, First National assumed and owns all of PMISI's rights and interests in Gosnell's mortgage and the underlying mortgage note. (Id. at ¶ 6).

The City of Utica's official records demonstrate the City's knowledge of First Nation's mortgage on the Highland Avenue property. (Id. at ¶ 7). Among those records are a Notice of Redemption issued to First National as a payee on the mortgage of the Property on May 3, 2003. (Id.). The Tax Assessor's correspondence with First National on September 30, 2005 also demonstrates this knowledge. (Id.). Defendant argues that Plaintiff has produced no evidence that " any City of Utica official, officer or employee had knowledge of the mortgage at the time Plaintiff alleges its constitutional rights were violated." (Defendant's Statement of Material Facts (" Defendant's Statement" ), dkt. # 29-2, at ¶ 7). Defendant does not cite to the record for this claim. (Id. at ¶ 7).

The building in question was a multiple dwelling as defined by N.Y. Multiple Dwelling Law § 4(7). (Plaintiff's Statement at ¶ 8). Defendant argues that it was not required to follow this statute in reference to that structure, and that the Multiple Dwelling Law is not relevant to this proceeding. (Defendant's Statement at ¶ ¶ 8-17). A proceeding seeking demolition of such a building, Plaintiff contends, is governed by the Multiple Dwelling Law. (Plaintiff's Statement at ¶ 8). Multiple Dwelling Law § 309 is titled " Repairs, vacation and demolition of buildings." (Id. at ¶ 9). The chapter sets out the criteria and processes to be used by a municipality to determine whether the dwelling constituted an " untenanted hazard," and whether to order that the building be repaired or demolished. (Id.). The law provides that municipalities may take action to cause the

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repair or demolition of a multiple dwelling unit in two cases: (1) where the municipality has determined a structure to be a public nuisance that is " dangerous to life or health; " or (2) where the municipality has determined the structure to be an " untenanted hazard," defined as multiple dwelling that had been untenanted for at least 60 days and either is not " guarded continuously by a resident caretaker or has any exterior openings not sealed in a manner approved by the department and is afire hazard or in a condition dangerous or detrimental to human life, health or morals." (Id. at ¶ 10).

A municipality may order the owner of a multiple dwelling to remove a nuisance within twenty-one days, as long as the owner of the property has been provided notice and an opportunity to be heard. (Id. at ¶ 11). Section 309(1)(b) permits the municipality to seek an order from the New York Supreme Court compelling the property's owner to do so. (Id.). At no time relevant to this action did the City ever serve Gosnell with notice that the City had determined the building or any part of the building to be dangerous. (Id. at ¶ 12).

Section 309(2)(a) of the Multiple Dwelling Law defines an " untenanted hazard" as " a multiple dwelling . . . which has been untenanted for a period of 60 days or more and either is not guarded continuously by the department and is a fire hazard or in a condition dangerous or detrimental to human life." (Id. at ¶ 13). When municipalities determine that a building is an " untenanted hazard," the municipality is required to provide written notice of that determination to the owners of the property, as well as any who hold a mortgage on that property " at the address of such owner appearing in the record of such mortgage in the office in which mortgages are registered in the county in which such premises are located." (Id. at ¶ ¶ 14-15). The law requires the notice to provide a description of the dwelling, the manner in which the building constituted an untenanted hazard, and to provide an order that the dwelling be demolished. (Id. at ¶ 16). The person named in the notice must certify in 10 days whether that person will carry out the order to demolish. (Id.). If the owner does not carry out the demolition within 21 days after service of notice, the law requires the municipality to serve a second notice on the owner and every mortgage holder. (Id. at ¶ 17). The municipality is to apply to the Supreme Court of the county in which the premises are located for an order declaring that an untenanted hazard exists and providing permission to demolish such premises. (Id. at ¶ 17). Only the Supreme Court can issue such orders, and only after the municipality had determined that all required notices and orders had been served on the building's owners and mortgage holders. (Id. at ¶ 18).

Utica's City Code also contained provisions addressing standards for housing and buildings and for enforcement of those standards at the relevant times. (Id. at ¶ 19).[4] Section 2-12-92 and 2-12-100 address buildings the City has determined are " unsafe buildings" as defined in the Building Code. (Id. at ¶ 20). These codes provide definitions of unsafe buildings and buildings unfit for human habitation. (Id. at ¶ 21). In addition, only the Commissioner of Codes may declare buildings unsafe. (Id.). The Commissioner can make such a determination only after receiving a

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written report from the Building Inspector stating that building suffers from one or more the following conditions: it is structurally unsound; badly dilapidated, decayed, vermin-infested or otherwise unfit for human habitation; lacks sufficient light, air sanitation facilities, or heat facilities; lacks sufficient facilities for egress in case of fire or panic; or that the building is vacant and open at the doors and windows. (Id. at ¶ 22).

According to the ordinance in place at the relevant time, a finding by the Codes Commissioner that the building is unsafe creates a requirement that the owner be served with notice of that finding. (Id. at ¶ 23). The notice must contain: a description of the premises; a statement of the particular reasons for the unsafe nature of the building; an order that the owner begin repair or demolition within 30 days and that such work be completed within 60 days; the date, time and place of a hearing on the Commissioner's finding that the building was unsafe, which had to be held at least five days after the service of the notice; a warning that a failure to comply with the order to repair or demolish would lead the Commissioner to act to do so and then assess the costs on the owner through a special proceeding. (Id.). The City Code requires the notice to be served on the owner " or some one (1) of the owners, executors, legal representatives, agents, lessees, or any other person having a vested or contingent interests in the premises." (Id. at ΒΆ 24). Such service can come either personally or ...

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