Mullane v. Central Hanover Bank & Trust Co.

Brief Fact Summary. Appellee, a bank located in New York, set up a trust covering 113 participants and sent notice by publication to all known and unknown beneficiaries regarding Appellee’s application for judicial settlement of the trust, as required under a New York statute. Upon first distribution of the trust, Appellee would mail notice to known beneficiaries that could benefit from the interest or principal. Appellant, guardian of the beneficiaries, appealed, arguing that notice by publication alone violated the beneficiaries’ due process rights under the Fourteenth Amendment.

Synopsis of Rule of Law. Notice must be “reasonably calculated under all the circumstances, to apprise interested parties of the action and give them an opportunity to object.

Facts. Appellee, Central Hanover Bank & Trust, set up common fund pursuant to a New York statute allowing the creation of common funds for distribution of judicial settlement trusts. There were 113 participating trusts. Appellee petitioned for settlement of its first account as common trustee. Some of the beneficiaries were not residents of New York. “Notice” was by publication for four weeks in a local newspaper. Appellee had notified those people by mail that were of full age and sound mind who would be entitled to share in the principal if the interest they held became distributable. Appellant was appointed as special guardian and attorney for all persons known or unknown not otherwise appearing who had or might thereafter have any interest in the income of the common trust fund. Appellee was appointed to represent those interested in the principal. Appellant appeared specially, objecting that notice by publication, permitted under the applicable statute was inadequate to afford t
he beneficiaries due process under the Fourteenth Amendment and that therefore jurisdiction was lacking.

Issue. Is notice by publication of a judicial settlement to unknown beneficiaries of a common trust reasonable notice under the due process requirements of the Fourteenth Amendment?
Is notice by publication to all of the beneficiaries of a common trust whose residences are known reasonable notice under the due process requirements of the Fourteenth Amendment?

Held. First issue: Yyes. Second issue: Nno.
Whether or not the action is in personam or in rem, the court can determine the interests of all claimants as long as there is a procedure allowing for notice and an opportunity to be heard.

There has to be notice and opportunity for a hearing appropriate to the nature of the case. The claimants at issue could potentially be deprived of property here, as the proposed disposition cuts off their rights to sue for negligent or illegal impairments of their interests. In addition, the court’s decision appoints someone who, without their knowledge, could use the trust to obtain the fees and expenses necessary for a sham proceeding.

There need not be personal service because the state has an interest in settling trusts. “Notice has to be reasonably calculated, under all the circumstances, to apprise interested parties of the pending action and afford them an opportunity to present their objections.” You do not have to notify all the beneficiaries when the trust concerns many small interests. Sending notice to most of them will protect their interests sufficiently.

The New York Banking Law, however, that does not require notice to all persons whose whereabouts are known, violates the due process clause of the Fourteenth Amendment because contacting beneficiaries by mail at their last known address is not particularly burdensome.

Dissent. Justice Burton: Omitted from casebook.

Discussion. The majority’s opinion illustrates that notice by publication will not suffice only because it would be burdensome for the plaintiff to notify all parties involved. If the plaintiff knows of a way to contact the parties, then the plaintiff must bear that expense. Mailing notice to an address, if known, will suffice. Notice by publication will suffice only if there is no practical way of knowing the identity or location of the party.