N.Y. LIE Law § 73 — New York Code / Act LIE / Article 3-A / Section 73
Affirmative defense in action against transferee of trust assets or to charge trustee in certain cases; "Notice of Lending
Status: in_force

§ 73. Affirmative defense in action against transferee of trust assets\nor to charge trustee in certain cases; "Notice of Lending." 1. In any\naction against a person to whom trust assets have been transferred, to\nrecover assets diverted from the trust or to recover damages for the\ndiversion, a transferee named in a "Notice of Lending" filed as provided\nin subdivision three of this section shall be entitled to show by way of\ndefense that the transfer was made as security for or in consideration\nof or in repayment of advances made to or on behalf of the trustee in\naccordance with such notice of lending and that prior to the making of\nsuch advances the transferee procured from the trustee the written\nagreement of the trustee that he will receive the advances and will hold\nthe right to receive such advances as trust funds to be first applied to\nthe payment of trust claims as defined in section seventy-one of this\nchapter, and that he will apply the same to such payments only, before\nusing any part of such advances for any other purpose. Subject to\nsubdivision four of this section, if such defense is established, the\ntransferee shall be entitled to a credit for the amount of the advances\nwith respect to which it is so established, to the extent that such\namount does not exceed the maximum amount specified in the notice of\nlending filed as provided in subdivision three.\n  2. In any action in which it is sought to charge a trustee personally\nwith liability by reason of a diversion of trust assets, the trustee\nshall be entitled to show by way of defense that the transfer\nconstituting the diversion was made to a transferee named in a "Notice\nof Lending" filed as provided in subdivision three and that the transfer\nwas made as security for or in consideration of or in repayment of\nadvances made to him as trustee or on his behalf as trustee in\naccordance with such notice of lending, and that such advances were\nactually applied for a purpose of the trust as stated in subdivision one\nor subdivision two of section seventy-one of this chapter. Subject to\nsubdivision four of this section, if such defense is established, the\ntrustee shall be entitled to a credit against any personal liability by\nreason of such transfer, for the amount of the advances with respect to\nwhich it is established, to the extent that such amount does not exceed\nthe maximum amount specified in the notice filed as provided in\nsubdivision three.\n  3. (a) If funds are advanced to or on behalf of a trustee, for the\npurposes of the trust, either the trustee or the person advancing the\nfunds may file a "Notice of Lending" as provided in this subdivision. In\nthe case of advances to an owner or to a contractor or subcontractor for\none or more projects for the improvement of real property including a\nhome improvement, the notice shall be filed in the office of the county\nclerk of each county where the real property improved or to be improved\nto which the notice relates is situated. Such clerk shall enter the\nfacts relating to the notice in the "lien docket" or in another book\nprovided by him for such purpose. Each such notice shall be indexed by\nthe name of the trustee to whom or on whose behalf the advances are\nmade. In the case of advances to a contractor or subcontractor for one\nor more projects involving a public improvement, the notice shall be\nfiled with the head of each department or bureau having charge of\nconstruction of an improvement to which the notice relates and with the\nfinancial officer of each public corporation or other officer or person\ncharged with the custody and disbursement of the corporate funds\napplicable to the contract for each such public improvement.\n  (b) A notice filed pursuant to this section is effective for the\npurposes of this section with respect to advances made on the day of\nfiling or subsequently, or made not more than five days before the date\nof filing. The notice must contain: (1) a statement of the name and\naddress of the person making the advances, (2) a statement of the name\nand address of the person to whom or on whose behalf they are made, and\nwhether he is owner, contractor or subcontractor, (3) in the case of\nadvances relating to one specific project for the improvement of real\nproperty including a home improvement or one specific public\nimprovement, a description, sufficient for identification, of the\nimprovement and of the real property involved for which the advances are\nmade, and in the case of a notice of lending relating to several or\nundetermined projects for the improvement of real property including a\nhome improvement or for public improvements, a statement of each county\nwherein the real property is or may be situated, (4) the date of any\nadvance made on or before the date of filing for which the notice is\nintended to be effective, (5) in the case of a notice of lending\nrelating to several or undetermined projects, the date the notice will\nterminate, which termination date shall not be more than two years after\nthe date the notice is filed, and (6) the maximum balance of advances\noutstanding to be permitted by the lender pursuant to the notice. If\nreal property is required to be specifically identified hereunder, the\nidentification shall be sufficient if it includes the name of the record\nowner and the location of the real estate by street and number and town\nor city or, if the real estate is in the city of New York, by county,\nexcept that if the real estate is in the city of New York or counties of\nNassau or Onondaga, where the block system of recording or registering\nand indexing conveyances is in use, the notice must also specify the\nblock in which the real estate is situated.\n  (c) A "Notice of Lending" may be continued in effect for advances made\nbeyond the stated termination date by filing within sixty days prior to\nthe termination date a subsequent notice entitled "Second Notice of\nLending" or "Third Notice of Lending", which identifies the prior notice\nto which it relates and otherwise conforms to the requirements of\nparagraph (b) of subdivision three of this section. The term "Notice of\nLending" as used in this section includes any amendments but if any\namendment increases the maximum balance of advances outstanding to be\npermitted by the lender, it is effective as to the increased amount only\nwith respect to advances made not more than five days before the date of\nfiling the amended notice or thereafter.\n  (d) A "Notice of Assignment" meeting the requirements of subdivision\ntwo of section fifteen of this chapter and filed pursuant to subdivision\none of said section shall be deemed for all purposes a "Notice of\nLending" complying with the requirements of this section.\n  4. Notwithstanding that the transferee, or the trustee, establishes a\ndefense as provided in subdivision one or subdivision two of this\nsection, he shall be allowed no credit by reason of such defense if it\nis shown that a written demand by a trust beneficiary for a verified\nstatement of the amount of advances actually made to the trustee was\nserved personally or by registered or certified mail on the transferee,\nor the trustee as the case may be, and that he failed to comply\ntherewith within ten days after receipt of the demand, provided, that if\neither the transferee or the trustee complies with a demand so served on\nhim, such compliance shall be sufficient as to the other.\n  5. Notwithstanding any provision of this chapter or of any other law\nto the contrary, moneys received pursuant to a notice of lending by an\nowner, contractor or subcontractor shall be deemed to be trust assets.\n