Source: https://caselaw.findlaw.com/us-supreme-court/198/424.html
Timestamp: 2019-04-23 07:06:33+00:00

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BOARD OF TRADE OF CITY OF CHICAGO v. HAMMOND ELEVATOR CO.
The basis of the bill was that the appellant had a property right in the quotation of prices in transactions made within its exchange; that the defendant had entered into a conspiracy with others to steal and was using such quotations, and prayed an injunction. A subpoena was issued in the usual form, requiring the Hammond Elevator Company to appear and answer the bill, and was afterwards returned by the marshal as [198 U.S. 424, 425] served within the northern district of Illinois by delivering a copy of the same 'to Albert M. Babb, agent for the Hammond Elevator Company at Peoria,' and also 'by reading the same to and within the presence and hearing of John L. Dickes, a member of the firm of Battle & Dickes, agents of said company,' as well as upon Battle. On the day following the service the elevator company entered a special appearance, and moved the court to set aside the service of the subpoena by the marshal, on the ground that the return was untrue in fact and insufficient in law, and prayed judgment of the court whether it should be compelled to appear or plead to the bill of complaint, because it had not been served with process, and because the defendant was not, at the date of filing the bill, or at any other time, within the state of Illinois; that it is not a resident of such state, but is a Delaware corporation, and its principal place of business is outside the state of Illinois.
Mr. Henry S. Robbings for appellant.
[198 U.S. 424, 429] Messrs. Lloyd Charles Whitman, Jacob J. Kern, and John A. Brown for appellee.
The proper constuction of this section has been the subject of frequent consideration in this court, and it has been definitely settled that it must be limited to cases where the jurisdiction of the Federal court, as a Federal court, is put in issue, and that questions of jurisdiction applicable to the state courts, as well as to the Federal courts, are not within its scope.
The earliest reported case on this subject is that of the World's Columbian Exposition v. United States, 6 C. C. A. 58, 18 U. S. App. 42, 56 Fed. 654, in which the circuit court, sitting in equity, granted an injunction to prevent the opening of the Exposition grounds on Sunday. On appeal to the circuit court of appeals the chief justice held that as [198 U.S. 424, 433] the power of the circuit court to hear the cause was not denied, the appellant contending only that the United States had not made a case cognizable in a court of equity, the jurisdiction of the circuit court was not in issue within the intent and meaning of the act. In Smith v. McKay, 161 U.S. 355 , 40 L. ed. 731, 16 Sup. Ct. Rep. 490, it was held, following the prior case, that the question whether the remedy was at law or in equity did not involve the jurisdiction of the Federal court as such, and the case was dismissed. A similar ruling was made in Blythe v. Hinckley, 173 U.S. 501 , 43 L. ed. 783, 19 Sup. Ct. Rep. 497.
In Bache v. Hunt, 193 U.S. 523 , 48 L. ed. 774, 24 Sup. Ct. Rep. 547, Hunt, as receiver, filed an intervening petition for the reimbursement of certain amounts paid by him as receiver in the extinguishment of prior claims, which certain railroad bonds and stocks had been deposited to secure. A decree was made in his favor, and an appeal was taken to this court. It was said that 'the jurisdiction of the circuit court was only questioned in respect to its general authority as a judicial tribunal, and not in respect to its power as a court of the United States. The established rules of practice as to bringing in parties to anciallary or pro interesse suo proceedings, and those governing courts of concurrent jurisdiction as between themselves, was alone involved.' The appeal was dismissed.
In Courtney v. Pradt. 196 U.S. 89 , 25 Sup. Ct. Rep. 208, 49 L. ed. 398, a citizen of Wisconsin, [198 U.S. 424, 434] duly qualified as an executor in that state, was sued as such in Kentucky. Pradt demurred on the ground that the court had no jurisdiction, and the circuit court of the United States, to which the case had been removed, sustained the demurrer and dismissed the suit. It was said that the court had power to so adjudicate, and that the question decided was not one of the jurisdiction of the circuit court as a court of the United States, but one with respect to the law of Kentucky. The case was dismissed.
That paragraph is doubtless broader than the exigency of the case required, as the question involved was the validity of the service of process in the Federal court as distinguished from the state court; but in the recent case of Remington v. Central P. R. Co. 198 U.S. 95 , 25 Sup. Ct. Rep. 577, 49 L. ed. --, it was accepted as applicable to the case of the validity of a summons from a state court, served upon a director of a railroad company in a state other than that in which the company was incorporated. The court denied a motion to set the service aside, whereupon the case was removed into the circuit court of the United States, and the defendant renewed its motion to set aside the summons. The motion was granted, and the action was dismissed for want of jurisdiction of the defendant. It was held, upon the authority of Shepard v. Adams that this court had authority to review the judgment on writ of error.
The company maintains a place of business at Hammond, Indiana, and had under lease from the Western Union Telegraph Company the exclusive use, during business hours, of certain telegraph wires running from Hammond to certain offices in different cities in Illinois, including Peoria and Aurora, where the parties served with process lived. In the lease of these wires, signed by defendant, the offices of these 'correspondents' are designated as offices of the defendant, and are contained upon regular printed forms prepared by the company. The cost or rental of these wires was paid to the telegraph company by the defendant. Over these wires the defendant caused to be transmitted continuous market quotations of the New York stock exchange to persons standing in relation of Babb and Battle & Dickes who are called 'correspondents,' and who posted these quotations upon blackboards in their respective offices.
Customers resorting to the correspondents' offices, and desiring to trade in any one of the sixty different stocks whose quotations are posted, give a verbal or written order to buy or sell certain grain or stocks, which is transmitted by the correspondent in his own name over the private wire of the correspondent running into his office from the office of the defendant at Hammond, as an offer by the correspondent to buy from or sell to the defendant. Sometimes the price is mentioned by the customer, and sometimes not. In the latter case it is understood that the trade is to be at whatever the market is. When the order is given the correspondent exacts from the customer such margin as he sees fit, unless the customer already has money on deposit with the correspondent, or is of known financial responsibility. Defendant accepts these orders when the state of the market justifies, by return message over the same wire, the contents of which are communicated by the correspondent to the customer. The individuality of each trade is preserved throughout by a number [198 U.S. 424, 437] given to it by the correspondent's operator at the outset. The correspondent, upon receipt of this return message, gives the trader a memorandum showing the trade and the price to which his margin carries it, and except in case of a losing trade, where he has failed to protect himself by securing from the customer a sufficient margin, the correspondent neither participates in the loss nor the profit incurred in the trade. He derives as his compensation a fixed sum, whether the trade results in a profit to the defendant or to the customer. Through daily statements and daily settlements of the balance shown thereby, the correspondent remits to the defendant, through its local bank, whatever amounts are shown to be due from him to the defendant for margins, wire service, etc. When the trader wishes to close a trade thus opened, the correspondent, in like manner, receives and transmits the order over his wire to the Hammond Company, giving to the telegram the number of the order already given to the trade. The order is executed at Hammond the same way as the opening order.
The fact, however, that the relations between the defendant and its correspondents are, as between themselves, expressly disclaimed to be those of principal and agent, is not decisive of their relations so far as third parties dealing with them upon the basis of their being agents are concerned. Connecticut Mut. L. Ins. Co. v. Spratley, 172 U.S. 602 , 43 L. ed. 569, 19 Sup. Ct. Rep. 308. As was said [198 U.S. 424, 438] in this case, of the agents whose authority to receive service of process was denied by the defendants (p. 615, L. ed. p. 573, Sup. Ct. Rep. p. 313): 'In such case it is not material that the officers of the corporation deny that the agent was expressly given such power, or assert that it was withheld from him. The question turns upon the character of the agent, whether he is such that the law will imply the power and impute the authority to him, and if he be that kind of an agent, the implication will be made, notwithstanding a denial of authority on the part of the other officers of the corporation. . . . In the absence of any express authority the question, depends upon a review of the surrounding facts and upon the inferences which the court might properly draw from them.' See also Italian-Swiss Agri. Colony v. Pease, 194 Ill. 98, 62 N. E. 317; Commercial Ins. Co. v. Ives, 56 Ill. 402; Union Ins. Co. v. Chipp, 93 Ill. 96; Indiana Ins. Co. v. Hartwell, 123 Ind. 177, 24 N. E. 100; Planters' Ins. Co. v. Myers, 55 Miss. 479, 30 Am. Rep. 521; Sprague v. Holland Purchase Ins. Co. 69 N. Y. 128.
Notwithstanding these protestations and excessive precautions used to prevent the correspondent being held as agent, the method of business shows that the party really interested in the transaction is the defendant, and that the correspondents are compensated as if they were agents, and not principals. The correspondent charges his customers a commission of one-eighth of a cent a bushel on grain. The defendant keeps a regular book account with its correspondents, and, in addition to charaging up the margin against him, it makes an arbitrary charge on each deal, which is called on the statement of the correspondent 'wire service,'-meaning a charge for the use of the private wire. This charge for wire service is a regular fixed percentage of the commission charged by the correspondent, which indicates that it is a commission under the guise of wire service, and such a charge upon any transaction of magnitude would be an exorbitant charge for use of the wire. An ordinary charge for wire service would depend upon the length of the message and distance transmitted, wholly irrespective of the amount of the transaction. But in this case, when a charge is made on a transaction involving a hundred shares, the charge is ten times grater than for a trade involving ten shares. This indicates something more than a charge made for the actual use of the wire, the amount of the service being the same in each case. The significance of this wire service is the more marked by the fact of the defendant company paying a fixed sum of $50 per month for the use of the wire.
The findings, moreover, show that while the correspondent takes the orders from his customers, he transmits them directly to the defendant, and no trade is effected until the return mes- [198 U.S. 424, 441] sage is received by the correspondent. While the identity of the customer is not disclosed to the elevator company, it is preserved by a number appropriate to each order; and there can be no doubt that any legal liability of the trader arising out of the transaction could be enforced by the defendant against the customer as soon as his identity was discovered. It is apparent from these transactions that the real trading is done between the customer and the elevator company, and that the functions of the correspondents are really those of agents, and not of principals. There must be two principals, and only two, in every such transaction. Obviously the customer is one of them. We think it equally obvious that the elevator company is the other one, and that the profits appropriate to the transaction belong to the elevator company, and not to the correspondent, who is paid a commission for his services. If the correspondent be not the principal in this transaction, he must be the agent of one party or the other, and as his office is continuously open for the transaction of business, where he receives and executes orders, collects margins, and deposits them to the credit of the defendant in a local bank, and apparently his transactions are entirely with the defendant, it would seem that he was rather the agent of the elevator company than of the customer,-a conclusion which is fortified by the fact that the correspondent is compensated by a percentage of the amount charged the customer under the name of commission for the privilege of trading.
The real transaction in this case is undoubtedly artfully disguised, but notwithstanding the fact that the order is made and accepted at Hammond, and the margin is charged up at Hammond against the correspondent, and the profits or losses made there, we are of the opinion that in receiving, transmitting, and reporting orders to the customers, receiving their margins, and settling with them for the profits or losses incident to each transaction, the correspondent is really 'doing business' as the agent of the elevator company in Illinois, and may be properly treated as its agent for the service of [198 U.S. 424, 442] process. It is evident that if these correspondents be not regarded as agents in these transactions, it is possible for the defendant to establish similar correspondents in a dozen cities in at least a dozen states of the Union, and an enormous business be built up, in which the defendant company is the real principal, with no possibility of being sued except in the states of Indiana and Delaware.
If these correspondents were admitted to be agents of the elevator company it is not perceived how their methods of doing business would be materially changed. They would maintain an office in their own cities; would receive and transmit to their principals offers for trades made to them, and report their acceptance or refusal, as is frequently done with respect to policies by agents of insurance companies; would receive and deposit the margins and attend to the settlement of differences. In fact, their position is analogous to that of an ordinary insurance agent, with power to receive applications and premiums, deliver policies, and settle losses, and whose acts are binding on the principal, notwithstanding a provision in the application for the policy declaring such party shall be the agent of the insured.

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