Mullane v. Central Hanover Bank

Facts

The Central Hanover Bank & Trust Co. ("the bank"), which is based in New York, pooled together 113 small trusts into one large common trust fund pursuant to Section 100-c of the New York State Banking Law. It thereafter filed a Petition before a New York court to settle its first account in connection with the common trust fund. Under Section 100-c of the New York State Banking Law, the only notice required to be given to the beneficiaries of the trusts making up the common trust fund was a publication in a local newspaper. Kenneth Mullane ("Mullane"), who was appointed as a special guardian and attorney for those parties known or unknown who had any interest in the income of the fund, objected to the adequacy of the publication in affording the defendants due process.

Issue

Whether or not publication is sufficient notice.

Held

No. Notice by publication is not adequate notice in the present case.

Ratio Decidendi

The means used in the service of notice must be reasonably certain to actually inform the affected parties. The means used in the service of notice must be reasonably certain to inform those who are affected. If such means are not possible, then the alternate means adopted must not be substantially less likely to inform the concerned parties. A large number of cases brought before the court on the issue of notice involves those served by publication. In any, case, the bank has a record of the names and addresses of the income beneficiaries. It has not been shown that the bank has made any serious effort to inform the said beneficiaries personally of the settlement proceedings through the said addresses.

Pennoyer v. Neff

Facts:

Marcus Neff ("Neff"), a resident of California, hired John H. Mitchell ("Mitchell"), an Oregon lawyer. Mitchell subsequently sued Neff before a state court in Oregon to collect $300.00 in unpaid attorney's fees. Summons were served upon Neff by publication in an Oregon newspaper. Neff failed to appear in court to defend his interests. Consequently, the court rendered a default judgment against Neff. At the time the judgment was rendered, Neff did not own any property in Oregon. However, he was eventually granted a landholding in the said state. To satisfy the judgment, the court ordered the seizure and auction of the landholding owned by Neff. Sylvester Pennoyer won in the auction. Neff then instituted an action to recover his property before a federal court in Oregon on the ground that the state court did not acquire jurisdiction over him.

Issue:

Whether or not the state court acquired jurisdiction over Neff.

Held:

No. Since the suit is one in personam, the service of summons upon the defendant through publication is not enough for the state court to acquire jurisdiction over him. Moreover, the defendant's property must have been brought under court custody at the commencement of the suit.

Ratio Decidendi:

In rem and in personam suits distinguished; Substituted service by publication ineffective in actions in personam. Substituted service by publication is valid only in suits which are in rem in character, or those actions in which the jurisdiction pertains to the property. However, in suits which are in personam, or those actions which seek to determine only the personal rights and obligations of the defendant, substituted service by publication is ineffectual for any purpose. Legal processes within one state cannot be effective in another state. Neither service by publication within the state nor extra-territorial service will cure this.

Jurisdiction over a non-resident dependent on the presence of his or her property within the forum state. A state does not have jurisdiction over a non-resident who does not have any property within its territorial jurisdiction since the court's jurisdiction over the defendant is only incidental to its jurisdiction over the property. Hence, for a suit against a non-resident to prosper, he or she must have property within the forum state which must brought under the control of the court at the beginning of the suit. Otherwise, the judgment is void and cannot be rendered valid thought the subsequent acquisition of property within the forum state by the defendant. Furthermore, if the n0n-resident's property is not immediately seized, the defendant could easily frustrate the suit by disposing of the said property.