Mullane v. Central Hanover Bank & Trust Co.

Facts

Rising overhead had made small trusts undesirable to corporate trustees. New York's Banking Law let a trust company pool small trusts into one common fund for investment. Each judicial settlement of the trustee's accounts bound everyone with any interest in the fund. In January, 1946, Central Hanover Bank and Trust Company set up such a fund. During the accounting period, 113 trusts took part, and the fund's gross capital was nearly three million dollars. There were many beneficiaries, some outside New York. When each trust first invested, the bank had mailed notice to each adult of sound mind whose name and address it then knew and who shared in that trust's income or would have shared in its principal had it then become distributable. It included a copy of the statute's notice and accounting provisions. The bank kept the income beneficiaries' names and addresses on its books and periodically remitted their income. In March, 1947, the bank petitioned the Surrogate's Court to settle its first account. The only notice was what the statute required: publication in a local newspaper at least once a week for four successive weeks. The notice did not name the beneficiaries. It gave the trust company's name and address, the fund's name and date of establishment, and a list of the participating trusts. The court appointed Mullane special guardian and attorney for everyone not otherwise appearing who had or might later have an interest in the fund's income, and Vaughan for those interested in principal.

Issues

1. Can a New York court settle a common trust fund's accounts in a decree that binds beneficiaries who live outside the State and were not personally served?
2. Is notice by newspaper publication enough for beneficiaries who could not be found with due diligence, whose interests are conjectural or future, or who could be discovered by investigation but do not come to the trustee's knowledge in the ordinary course of business?
3. Is notice by newspaper publication alone enough for known beneficiaries whose names and addresses the trustee has on its books?

Holding

New York's courts could settle the fund's accounts against all beneficiaries, resident or nonresident, if the procedure gave full opportunity to appear and be heard. Publication was enough for beneficiaries whose interests or addresses the trustee did not know. For known persons whose whereabouts were also known, the statutory notice was incompatible with the Fourteenth Amendment as a basis for a decree depriving them of substantial property rights; the trustee had to make a serious effort to inform them personally, at least by ordinary mail.