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MULLANE VS.

CENTRAL HANOVER
BANK & TRUST CO., TRUSTEE, ET AL.
399 US 306 (1950)
ANGELICA BELLADONNA C. LEONOR
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REPORT CONTENTS
QUICK DEFINITIONS &
FACTS OF THE CASE ISSUES
BACKGROUND

FOREIGN ELEMENT APPELANT’S CONTENTION

COURT’S RULING DOCTRINE ESTABLISHED


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LET’S DEFINE SOME TERMS


WHAT IS TRUST? A grantor puts money into
It is a legal arrangement a trust and then gives up
whereby a person transfers control over it to a trustee,
his legal title to a property to who manages the trust
another to be administered by not for the grantor or
the latter for the benefit of a trustee, but rather for the
third party. beneficiary.
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In New York, there


used to have a lot of
small- scale trusts.
Accordingly, they
were expensive and
difficult to manage.
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To address such issue, New York in 1937 passed a statute


authorizing trust companies to pool small trust funds into a
larger common trust fund, thus making it possible to
diversify trust investments and perhaps to reduce
administrative costs
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Under this law a trust company may, with approval of the State
Banking Board, may establish a common fund and, within
prescribed limits, invest therein the assets of an unlimited
number of estates, trusts or other funds of which it is a
trustee. Each participating trust shares ratably in the common
fund, but exclusive management and control is in the trust
company as trustee, and neither a fiduciary nor any beneficiary
of a participating trust is deemed to have ownership in any
particular asset or investment of this common fund.
What is an action to settle a trustee's 7

account?
An action to settle a trustee's account is brought to
determine the propriety of the trustee's management of
the trust funds. If there has been any mismanagement,
the trustee is personally liable for resulting loss.
facts:
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Central Hanover Bank, a The said common trust fund


trust company in New York was composed of 113
which had exclusive participating trusts with
management and control of numerous beneficiaries who
a common trust fund were residents of different
established under the NY states.
Banking Law, petitioned for a
judicial settlement of
accounts.
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One statutory requirement


was that the trust company To give notice of each
conduct regular accounting, the trust
accountings, which, when company was required to
approved by the court, publish four weekly
newspaper advertisements
would bind all beneficiaries that did not name individual
of the pooled trusts as to beneficiaries.
any matter set forth in the
account.
Kenneth
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Mullane
A lawyer was appointed as guardian ad litem for the income
beneficiaries in an accounting for a common trust fund
established by the Central Hanover Bank and Trust Company,
challenged the constitutional validity of the judgment
purporting to bind beneficiaries who received no notice of the
proceeding.
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Mullane argued that:


notice by publication, permitted under the applicable
statute was inadequate to afford the beneficiaries due
process under the Fourteenth Amendment and that
therefore jurisdiction was lacking.
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Central Hanover argued that:


to ascertain and locate every beneficiary of the trusts
invested in the common fund would be difficult and
burdensome.
13

Is notice by publication of a

ISSUE: judicial settlement to unknown


beneficiaries of a common trust
reasonable notice under the due
process requirements of the
Fourteenth Amendment?
Ruling:
REASON? 14

it would usually be
impossible to settle a
To settle a trustee's trustee's account if total
account a court must jurisdiction in personam
have jurisdiction in were necessary because
personam of the trustee, there would be no one
but personal jurisdiction place where the trustee
of the beneficiaries is could get jurisdiction of
not necessary. all the beneficiaries.
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Reliance on the Forum State’s Interest


Whether such a proceeding for settlement of accounts be
technically in personam, in rem, or quasi in rem, the interest of each
state in providing means to close trusts that exist by the grace of
its laws and are administered under the supervision of its courts is
such as to establish beyond doubt the right of its courts to
determine the interests of all claimants, resident or non
resident, provided its procedure accords full opportunity to
appear and be heard.
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HOWEVER…
common trust funds would not be required to send
notice to all beneficiaries, but would be required to
notify those whose names and addresses were in
their records
Likewise…
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The Supreme Court held that notice by publication is sufficient for


persons whose addresses are unknown as there is no other way to
notify them. \

The Court recognized the practical difficulties and costs that would
be attendant on frequent investigations into the status of great
numbers of beneficiaries, many of whose interests in the common
fund are so remote as to be ephemeral; and the Court had no
doubt that such impracticable and extended searches are not
required in the name of due process.
But…
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As to known present beneficiaries of known place of residence,


however, notice by publication stands on a different footing.

Exceptions in the name of necessity do not sweep away the rule


that within the limits of practicability notice must be such as is
reasonably calculated to reach interested parties. Where the
names and post office addresses of those affected by a
proceeding are at hand, the reasons disappear for resort to
means less likely than the mails to apprise them of its pendency.
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DOCTRINE ESTABLISHED
Judicial settlement of accounts required by the New York
Banking Law § 100-c(12) is incompatible with the
requirements of the Fourteenth Amendment as the
Supreme Court held that due process required notice by
mail to every beneficiary whose names and addresses are
known.
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THANK YOU!
Any questions?
Don’t ask me! Just kidding.