trust accounts

Fanny A. Lattan died intestate in March 1900. Beginning in 1886 she and her sister Angelica Lattan each maintained numerous accounts at the Irving Savings Institution, some in their individual names and others titled in trust for named beneficiaries. It was her practice to draw from all these accounts at will, whether they were kept in her name as trustee or otherwise, and to close them and open others as she saw fit. She kept the pass books and no beneficiary named in any account ever drew therefrom except upon drafts signed by her. On January 2, 1886 she opened account number 42,728 by depositing $355, the entry reading "Fanny A. Lattan, trustee for Emile R. Lattan, depositor." Two further deposits were made in this account. Twelve drafts were drawn against it between January 1886 and July 1898. The account was closed by her individual draft on July 8, 1898 and the proceeds used to open two new accounts, one of which was titled in trust for Emile R. Lattan. On September 19, 1890 she opened account number 51,556 titled in trust for Emile R. Lattan with a $462.03 deposit drawn largely from other trustee accounts. She later added two more deposits before closing the account in November 1894 and transferring the balance to an account in trust for Lewis H. Lattan. Emile R. Lattan was the son of Lewis H. Lattan, who in 1884 had turned over property worth about $20,000 to his sisters Angelica and Fanny for management without instructions. No accounting was ever rendered to Lewis. Fanny never informed Emile of any of the accounts on which he later relied, and he learned of them only more than a year after her death. Of the thirty-one accounts she maintained across seven banks, she paid the closing balances to the named beneficiaries in only two instances; in all others, including the accounts involving Emile, she treated the funds as her own. Angelica Lattan was appointed administratrix of Fanny's estate and died on April 10, 1901, leaving the present administrator as sole representative. The personal property was inventoried at $32,950.08 and exceeded $40,000 at final distribution. Emile R. Lattan filed a claim against the estate asserting an interest in the trust accounts; the surrogate dismissed the claim on the merits. The Appellate Division reversed and allowed the claim, after which the Court of Appeals granted review.