Mullane v Central Hanover Bank

Mullane v Central Hanover Bank & Trust. 339 US 306 (1950) This controversy questions the constitutional sufficiency of notice to beneficiaries on judicial settlement of accounts by the trustee of a common trust fund established under the New York Banking Law. Notes:  High overheads have made administration of small trusts undesirable to corporate trustees. In order that donors and testators of moderately sized trusts may not be denied the service of corporate fiduciaries, some 30 states (not NY) have permitted pooling of small trust estates into one fund for investment administration. o Testator: a person who has made a will; esp. a person who dies leaving a will. o Donor: Settlor: A person who makes a settlement of property; esp. one who sets up a trust.  The income, capital gains, and losses are shared by the constituent trusts in proportion to their contribution. Facts:  Jan. 1946 Central Hanover Bank and Trust Company established a common trust, and in March 1947 it petitioned the Surrogates Court for a Settlement of its first account as common trustee.  There were 113 trusts: half inter vivos (between the living. A trust that is created and takes effect during the settlor’s lifetime) half testamentary (trust created by a will and takes effect when the settlor (testator) dies.) participated in the common trust fund, gross of which was nearly 3 million dollars. o Some of the beneficiaries were not residents of NY state.  The only Notice give to beneficiaries was by publication In a local Newspaper in strict compliance with the minimum requirements of NY Banking Law §100-c(12) {page 147 top} Analysis   We are met at the outset with a challenge to the power of the state – the right of its courts to adjudicate at all as against those beneficiaries who reside without the state of NY. o It is contended that the proceeding is on in personum in that the decree affects neither title to nor possession of any res (“thing” an obj, interest or status, as opposed to a person), but adjudges only personal rights of the beneficiaries to surcharge their trustee for negligence or breach of trust. o It is said under pennoyer v. neff the Surrogate (court in NY that deals w/ trusts) is w/o jurisdiction as to nonresidents upon whom personal service of process was not made. Fiduciary accounts have sometimes been termed in rem, sometimes quasi in rem or sometimes “in the nature of a proceeding in rem” It is unclear how NY courts would classify current proceeding; o Has characteristics of both in rem and in personum o Regardless of how it would be classified, it is still subject to the 14th amendment.      Holding  o This proceeding means to close trusts that exist by the grace of state law and are administered under the supervision of the courts to determine the interests of all claimants, resident or nonresident, provided its procedure accords full opportunity to appear and be heard. There are two ways in which this proceeding does or may deprive beneficiaries of property: o It may cut off their rights to have the trustee answer for negligent or illegal impairments of their interests, o Their interests are presumably subject to diminution in the proceeding by allowance of fees and expenses to one who, in their names but w/o their knowledge, may conduct a fruitless or uncompensatory contest. Holding: “the fundamental requisite of due process of law is the opportunity to be heard” o The right to be heard has little reality or worth unless on is informed that the matter is pending and can choose for himself whether to appear or default, acquiesce or contest. Fundamental requirement of due process: o Notice is reasonably calculated to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.  Must reasonably convey required information  Must give reasonable time to make appearance. In this case the beneficiaries caretaker becomes their adversary The statutory notice is inadequate, not because in fact it fail to reach everyone, but b/c under the circumstances it is not reasonably calculated to reach those who could easily be informed by other means at hand. We hold that the notice of judicial settlement of accounts required by the NYBank law is incompatible with the requirements of the 14th amendment as a basis for adjudication depriving known persons whose whereabouts are also known for substantial property rights. o Judgment reversed and cause remanded for further proceedings not inconsistent with this opinion. Notes and Problems 1. a. They may have believed that in any in rem action, constructive notice is appropriate based on Pennoyer. b. The court says that the in rem/in personam distinction no longer matters when it comes to notice. 2. All beneficiaries who have an address on file must be served notice by mail (probably certified mail). If a beneficiary cannot reasonably be located, constructive service may be substituted. 3. a. It seems that the court cares about whether it appears you sincerely intend to give other parties notice of a pending lawsuit or if you’re just going through the motions. If you need to give someone notice in Alaska and you’re in Hawaii, mail would probably be okay. However, if you’re in Drinko and you need to give notice to someone at the Union, you should probably walk over and serve them personally. I don’t think this decision bans service of process by regular mail at all. I think it can be deemed adequate based on the circumstances. I think you’d be safer with certified mail, though. On the other hand, the present case deals with a “large number of small interests” rather than a small number of large interests. The bigger the interest, perhaps, the greater the need for personal service. b. The rule seems to be that you either need to provide adequate actual notice, or pick the least bad of your “feasible” constructive alternatives. Individual notice may not be necessary if it is onerously expensive and there exists an alternative form of notice that is much cheaper, yet only a little less likely to provide actual notice. I think, in the end, the court simply has to balance the competing interests of fairness and efficiency just like they always do. 4. It’s a safe assumption. I guess constructive service of process could be a good procedural ploy, but you don’t want to risk losing jurisdiction because you could have just mailed the dude. 5. a. So sometimes “process” really means “jurisdiction”. b. If you don’t get proper notice, the result is that the court that issued the notice will not have jurisdiction. pp. 149-154: Notes and Problems on Service of Process 1. So if you don’t waive service, you have to pay for the more expensive second try. Plus, you get extra time to respond if you waive service. If service isn’t waived or can’t be waived, then you get into the more formal requirements. 2. a. First, the plaintiff must file a complaint with the court. Then the plaintiff presents a summons to the clerk to sign and seal. The plaintiff sends to the defendant by first class mail Forms 1-A and 1-B along with two copies of the complaint and a self-addressed stamped envelope. b. The lawyer should say that there are good reasons to go ahead and waive service of process because of the cost of formal service and the benefit of having longer to respond. Even if the defendant plans to default, waiving service won’t affect that decision. c. The defendant has at least until October 1st to respond. d. If service of process is waived, the defendant has 60 days from the date the waiver request was sent to respond instead of 20 days from the date formal process is served; therefore, the plaintiff’s motion to enter a default should be denied. e. f. g. h. i. This is when the plaintiff should move to enter a default, and it would be successful. The plaintiff shouldn’t request a waiver of service, because it would open the door to the defendant responding after the statute of limitations had already expired. The instructions on the reverse side of Form 1-B explain that “[i]t is not good cause for a failure to waive service that a party believes that the complaint is unfounded, or that the action has been brought in an improper place or in a court that lacks jurisdiction over the subject matter of the action or over its person or property”. The defendant was told that even if the lawsuit has no merit, he must waive service of process or else incur the costs. It appears that the United States is excluded from the group of possible parties to a suit that may waive service of process. The plaintiff must know what state the defendant is in, because the proper form of service of process may vary by state. 3. a. The plaintiff should try to show good cause for the failure, because then under Rule 4(m) the court may extend the time limit. b. It would seem that the court has the discretion to extend the period for service of process, but if the plaintiff shows good cause the court must extend this time period. 4. a. b. 5. So it appears that notice is necessary but not sufficient for personal jurisdiction. Since waiving service doesn’t keep a defendant from making jurisdictional arguments, the defendant can waive and then make a jurisdictional argument that he would probably win. c. Here are the four tiers: i. Personal jurisdiction over anyone whom the forum’s state court would have jurisdiction ii. Personal jurisdiction over someone joined under Rule 14 or 19 (including the 100-mile bubble) iii. Personal jurisdiction over anyone in the country when a statute says that’s possible iv. Personal jurisdiction over foreign defendants who don’t have minimum contacts with any one forum but have minimum contacts when aggregated over all the states Here are issues in regard to service process on foreign defendants. a. The Hague Convention allows people to serve process on foreign defendants. b. There may be a problem due to delays occurring because translation of the documents is necessary. c. The plaintiff should submit her request to serve process to Italy’s Central Authority. If the plaintiff uses mail service, she risks having this service found to be inadequate under Rule 4(f) because it is illegal in Italy. It’s probably not worth running that risk if you can just seize assets in the United States. If there are no assets in the United States, the risk is definitely not worth running. You should do things the right way. d. The defendant might raise the defense that the service of process was illegal in the defendant’s own county even though it was legal in the United States. Thus, the defendant would argue, the judgment is not binding in its home country. 6. a. b. c. Sewer service suxx! Defendants can be “wily”. Yep, the Westlaw guy showed us that one.