73 - Affirmative defense in action against transferee of trust assets or to charge trustee in certain cases; "Notice of Lending."

§ 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  andaddress  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.