A mortgage company called into city court over housing code violations will take a plea deal conditioned on its promise not to dump a financial penalty on the house’s new owners.

The case of American General Home Equity Inc., prior owner of 38 Harvey Ave., was set to go to trial Tuesday. Instead, Judge Thomas DiMillo tentatively approved a guilty plea that the company’s attorney, Melissa A. Tocha, mailed in.

American General Home Equity, 5875 S. Transit Road, was cited this past April for 10 exterior violations at the abandoned, two-family Harvey Avenue house it took possession of by foreclosure last year. The company never responded to the city’s directives to correct problems ranging from damaged roof and foundation to lack of paint and electrical problems, so it was summoned to court in late July.

A clear-cut case of property maintenance failure became dicey after the mortgage company sold the house and urged its brand new owners, Patrick and Terri Smith Dibley of 33 Harvey Ave., to ask to the city to go easy on the mortgage company.

It’s because when the Dibleys bought the house for $100 in late August, they’d signed an agreement stating they personally would take responsibility for the outstanding violations — and would pay any fines resulting from the company’s conviction on any code charges. The couple said they did not know, at the time, that the house was a target of court action and didn’t find out until they sought a building permit from the city to begin repairs.

Lockport housing court seeks redress from whoever owned property at the time it was cited for violations, not whoever owns it currently. Prosecutor Matthew Brooks argued the company should answer for its failure to make repairs when asked — and then he found himself in the awkward position of pursuing justice at the expense of the Dibleys, who’d bought the rundown house so they could fix it up. Whatever money they had to spend on fines was money they would not spend on repairs, the sides agreed.

Before he found out about the contract provision holding the Dibleys financially responsible, Brooks had offered American General a plea deal reducing 10 code violations to six noise violations. For its guilty plea and a maximum fine of $750, promised by DiMillo, the company could walk away. The company wouldn’t agree to fines and refused to plead guilty to anything at its Sept. 2 court date, insisting on a trial instead.

Only then did the mortgage company acknowledge the court case to the Dibleys, they said, in a phone call from a representative warning them they’d better show up for the trial because they were on the hook, too, as per the contract. The couple went public with their dilemma soon after.

Behind the scenes, city officials angered by the mortgage company’s apparent dodging maneuver pressed Brooks to keep pursuing the company while also shielding the Dibleys. Ultimately, city attorneys said, the pointed suggestion made to American General is that when the time arrived for sentencing in the case, community service, or jail time, could be handed down to a company executive just as easily as fines on the corporation.

American General’s letter to the court said it wants to take the previously offered plea deal. Brooks said the city will consent on one condition: that the company pledge, in writing, not to try exacting payment of any fines from the Dibleys. A company manager already signed a waiver, he added, but the city wants the agreement notarized for additional legal weight.

“I guess you could call it a happy ending,” Brooks said. “If American General pays the fines, it will have made good on its responsibility to deal with the problems that developed on its watch.”

The case is now adjourned until Nov. 25.