Procedure: Neff sued Pennoyer in a federal trial court to recover his land. Trial court held for Neff, and Pennoyer appealed to the Supreme Court.

Issue: Was service by publication effective to give Oregon jurisdiction over nonresident Neff?

Rule: Physical presence is the basis of jurisdiction in personam (in theory).

Holding: Service by publication was not adequate to give Oregon jurisdiction over a nonresident. Therefore the service was invalid and the State did not authorize the sale of property in controversy. The property is restored to Neff.

Rationale: The State possess exclusive jurisdiction over persons and property within its territory. No State can exercise direct jurisdiction and authority over persons or property without its territory. Service by publication is sufficient when the parties are located within the state, but when the object of service is to determine personal rights and obligations of the defendants, constructive service of a nonresident is not effective.

Policy/Notes: A State may authorize proceedings to determine the status of one of its citizens toward a nonresident. The State may require nonresidents to appoint an agent for receipt of service within the state. Or the nonresident can designate a place where such service may be made and notice given. The state can also appoint agents to represent nonresidents.

in personam – suits "against the person"

in rem – suits "against the thing"

Basis of jurisdiction is presence of property.