Legislation

Search OpenLegislation Statutes
This entry was published on 2014-09-22
The selection dates indicate all change milestones for the entire volume, not just the location being viewed. Specifying a milestone date will retrieve the most recent version of the location before that date.
SECTION 73
Affirmative defense in action against transferee of trust assets or to charge trustee in certain cases; "Notice of Lending
Lien (LIE) CHAPTER 33, ARTICLE 3-A
§ 73. Affirmative defense in action against transferee of trust assets
or to charge trustee in certain cases; "Notice of Lending." 1. In any
action against a person to whom trust assets have been transferred, to
recover assets diverted from the trust or to recover damages for the
diversion, a transferee named in a "Notice of Lending" filed as provided
in subdivision three of this section shall be entitled to show by way of
defense that the transfer was made as security for or in consideration
of or in repayment of advances made to or on behalf of the trustee in
accordance with such notice of lending and that prior to the making of
such advances the transferee procured from the trustee the written
agreement of the trustee that he will receive the advances and will hold
the right to receive such advances as trust funds to be first applied to
the payment of trust claims as defined in section seventy-one of this
chapter, and that he will apply the same to such payments only, before
using any part of such advances for any other purpose. Subject to
subdivision four of this section, if such defense is established, the
transferee shall be entitled to a credit for the amount of the advances
with respect to which it is so established, to the extent that such
amount does not exceed the maximum amount specified in the notice of
lending filed as provided in subdivision three.

2. In any action in which it is sought to charge a trustee personally
with liability by reason of a diversion of trust assets, the trustee
shall be entitled to show by way of defense that the transfer
constituting the diversion was made to a transferee named in a "Notice
of Lending" filed as provided in subdivision three and that the transfer
was made as security for or in consideration of or in repayment of
advances made to him as trustee or on his behalf as trustee in
accordance with such notice of lending, and that such advances were
actually applied for a purpose of the trust as stated in subdivision one
or subdivision two of section seventy-one of this chapter. Subject to
subdivision four of this section, if such defense is established, the
trustee shall be entitled to a credit against any personal liability by
reason of such transfer, for the amount of the advances with respect to
which it is established, to the extent that such amount does not exceed
the maximum amount specified in the notice filed as provided in
subdivision three.

3. (a) If funds are advanced to or on behalf of a trustee, for the
purposes of the trust, either the trustee or the person advancing the
funds may file a "Notice of Lending" as provided in this subdivision. In
the case of advances to an owner or to a contractor or subcontractor for
one or more projects for the improvement of real property including a
home improvement, the notice shall be filed in the office of the county
clerk of each county where the real property improved or to be improved
to which the notice relates is situated. Such clerk shall enter the
facts relating to the notice in the "lien docket" or in another book
provided by him for such purpose. Each such notice shall be indexed by
the name of the trustee to whom or on whose behalf the advances are
made. In the case of advances to a contractor or subcontractor for one
or more projects involving a public improvement, the notice shall be
filed with the head of each department or bureau having charge of
construction of an improvement to which the notice relates and with the
financial officer of each public corporation or other officer or person
charged with the custody and disbursement of the corporate funds
applicable to the contract for each such public improvement.

(b) A notice filed pursuant to this section is effective for the
purposes of this section with respect to advances made on the day of
filing or subsequently, or made not more than five days before the date
of filing. The notice must contain: (1) a statement of the name and
address of the person making the advances, (2) a statement of the name
and address of the person to whom or on whose behalf they are made, and
whether he is owner, contractor or subcontractor, (3) in the case of
advances relating to one specific project for the improvement of real
property including a home improvement or one specific public
improvement, a description, sufficient for identification, of the
improvement and of the real property involved for which the advances are
made, and in the case of a notice of lending relating to several or
undetermined projects for the improvement of real property including a
home improvement or for public improvements, a statement of each county
wherein the real property is or may be situated, (4) the date of any
advance made on or before the date of filing for which the notice is
intended to be effective, (5) in the case of a notice of lending
relating to several or undetermined projects, the date the notice will
terminate, which termination date shall not be more than two years after
the date the notice is filed, and (6) the maximum balance of advances
outstanding to be permitted by the lender pursuant to the notice. If
real property is required to be specifically identified hereunder, the
identification shall be sufficient if it includes the name of the record
owner and the location of the real estate by street and number and town
or city or, if the real estate is in the city of New York, by county,
except that if the real estate is in the city of New York or counties of
Nassau or Onondaga, where the block system of recording or registering
and indexing conveyances is in use, the notice must also specify the
block in which the real estate is situated.

(c) A "Notice of Lending" may be continued in effect for advances made
beyond the stated termination date by filing within sixty days prior to
the termination date a subsequent notice entitled "Second Notice of
Lending" or "Third Notice of Lending", which identifies the prior notice
to which it relates and otherwise conforms to the requirements of
paragraph (b) of subdivision three of this section. The term "Notice of
Lending" as used in this section includes any amendments but if any
amendment increases the maximum balance of advances outstanding to be
permitted by the lender, it is effective as to the increased amount only
with respect to advances made not more than five days before the date of
filing the amended notice or thereafter.

(d) A "Notice of Assignment" meeting the requirements of subdivision
two of section fifteen of this chapter and filed pursuant to subdivision
one of said section shall be deemed for all purposes a "Notice of
Lending" complying with the requirements of this section.

4. Notwithstanding that the transferee, or the trustee, establishes a
defense as provided in subdivision one or subdivision two of this
section, he shall be allowed no credit by reason of such defense if it
is shown that a written demand by a trust beneficiary for a verified
statement of the amount of advances actually made to the trustee was
served personally or by registered or certified mail on the transferee,
or the trustee as the case may be, and that he failed to comply
therewith within ten days after receipt of the demand, provided, that if
either the transferee or the trustee complies with a demand so served on
him, such compliance shall be sufficient as to the other.

5. Notwithstanding any provision of this chapter or of any other law
to the contrary, moneys received pursuant to a notice of lending by an
owner, contractor or subcontractor shall be deemed to be trust assets.