N.Y. Lien Law § 77: Action to enforce trust

§ 77. Action to enforce trust. 1. A trust arising under this article

may be enforced by the holder of any trust claim, including any person

subrogated to the right of a beneficiary of the trust holding a trust

claim, in a representative action brought for the benefit of all

beneficiaries of the trust. An action to enforce the trust may also be

maintained by the trustee. In any such action, except as otherwise

provided in this article, the practice, pleadings, forms and procedure

shall conform as nearly as may be to the practice, pleadings, forms and

procedure in a class action as provided in article nine of the civil

practice law and rules; provided, however, that in determining whether

the prerequisites of a class action have been satisfied, the provisions

of paragraph one of subdivision (a) of section nine hundred one of such

law and rules may be waived at the discretion of the court.

2. Such action may be maintained at any time during the improvement of

real property, or home improvement, or public improvement and successive

actions may be maintained from time to time during the improvement

provided no other such action is pending at the time of the commencement

thereof. No such action shall be maintainable if commenced more than one

year after the completion of such improvement or, in the case of

subcontractors or materialmen, after the expiration of one year from the

date on which final payment under the claimant's contract became due,

whichever is later, except an action by the trustee for final settlement

of his accounts and for his discharge.

3. (a) The relief granted in any such action may include any or all of

the following:

(i) Relief to compel an interim or final accounting by the trustee; to

identify and recover trust assets in the hands of any person together

with interest accrued thereon from the time of the diversion. Interest

shall be computed at the rate equal to the underpayment rate set by the

commissioner of taxation and finance pursuant to subsection (e) of

section one thousand ninety-six of the tax law, minus four percentage

points; to set aside as a diversion any unauthorized payment, assignment

or other transfer, whether voluntary or involuntary; to enjoin a

diversion; to recover damages for breach of trust or participation

therein;

(ii) Enforcement on behalf of the trust of any right of action

constituting a trust asset;

(iii) Determination of the existence and amount of any trust asset or

of any trust claim;

(iv) An order terminating or limiting the authority of the trustee in

the application of trust assets or of any trust asset, or directing the

time and manner of application of a trust asset or part thereof;

(v) An order requiring the trustee to give security to ensure the

proper distribution of the trust assets, either during the pendency of

the action or thereafter, or to furnish assurance therefor in any other

manner, if it appears that there is danger that such assets or asset

will be dissipated before judgment or diverted from trust purposes;

(vi) An order for distribution of any trust assets available for

distribution, either with respect to the entire trust or with respect to

particular assets of the trust, or for retention of particular assets

for future distribution. Where the holder of any trust assets is a

trustee or a transferee who received the assets with the knowledge that

they were trust funds, an order for distribution and retention for

future distribution of any trust assets shall include the amount of

diverted funds plus interest from the time of the diversion to the date

of such order;

(vii) Settlement of the interim or final account of the trustee;

(viii) Final discharge of the trustee at the termination of the trust,

or discharge of the trustee with respect to the application of specific

trust assets;

(ix) Such other and further relief as to the court may seem necessary

and proper;

(x) Any provisional or ancillary relief incident to any of such

relief.

(b) Any relief pursuant to subparagraphs (i), (ii), (iii), (iv), (v),

(ix), or (x) of paragraph (a) shall be deemed to be for the benefit of

the entire class of trust beneficiaries, including persons who may

become trust beneficiaries at any time before the termination of the

trust. Except as provided in subdivision four of this section, relief

pursuant to subparagraph (vi) shall also be deemed to be for the benefit

of such entire class, but unless the court shall otherwise direct, only

those persons shall be entitled to share in any distribution of the

trust assets who are trust beneficiaries at the time of entry of the

judgment under which distribution is to be made and who have appeared in

the action or filed their claims in such manner and within such time as

the court shall direct, and whose claims are due and payable at the date

for distribution as set by the order of the court and either are

undisputed by the trustee or have been determined in the action.

4. If an action to enforce a trust of which the owner is trustee is

commenced before the completion or abandonment of the improvement of

real property, or home improvement, or if an action to enforce a trust

of which a contractor or subcontractor is trustee is commenced before

the completion or abandonment of the performance by the trustee under

the contract or subcontract, the judgment therein may provide for

distribution of the assets then available for distribution among trust

beneficiaries whose claims are then payable, and who have appeared in

the action or who file their claims within such time as the court shall

direct, and the judgment shall so provide unless the court shall

determine that in the circumstances equity requires that distribution be

deferred to await maturity of other trust claims.

5. If the action to enforce a trust of which a contractor or

subcontractor is trustee is brought after the completion or abandonment

of the performance of the contract or subcontract but before the

completion of the improvement the court may direct that the action be

continued to await events by reason of which additional trust assets may

become available.

6. For the purposes of any distribution of trust assets, the court may

direct that trust claims shown upon a schedule or schedules filed by the

trustee shall be deemed to have been filed in the action.

7. An action brought under this article shall not be compromised or

discontinued nor dismissed by consent, by default or for failure to

prosecute, except with the approval of the court. On any application for

such approval notice shall be given in such manner as the court shall

direct.

8. Subject to subdivisions three and four of this section, in any

distribution of trust assets pursuant to order or judgment in an action

to enforce a trust, the following classes of trust claims shall have

preference, in the order named: (a) trust claims for taxes and for

unemployment insurance and other contributions, due by reason of

employments, and for amounts of taxes withheld or required to be

withheld; (b) trust claims of laborers for daily or weekly wages; (c)

trust claims for benefits and wage supplements; (d) claims for any

amounts of wages of laborers for daily or weekly wages (other than

claims for amounts of taxes deducted and withheld, constituting trust

claims for such amounts) actually deducted from payments thereof,

pursuant to law or agreement, for remittance to any person on behalf of

the laborer or in satisfaction of his obligation, to the extent that

such person is entitled to assert, as a trust claim, the claim the

laborer would otherwise have for such amount.

Except as provided in this subdivision, trust claims entitled to share

in any distribution of trust assets pursuant to order of the court shall

share pro rata.