Source: https://supreme.justia.com/cases/federal/us/198/424/
Timestamp: 2019-04-21 10:51:36+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 198 › Board of Trade v. Hammond Elevator Co.
The authorities, holding that the right of appeal to this Court from the circuit court, under § 5 of the Act of March 3, 1891, is limited to cases where the jurisdiction of the federal court as a federal court is put in issue and that questions of jurisdiction applicable alike to the state and the federal courts are not within its scope, apply to questions arising after a valid service has been made, and not to the question of whether jurisdiction has or has not been acquired by proper service.
This Court can review by appeal under § 5 a judgment of the circuit court dismissing the bill on the sole ground that jurisdiction had never been acquired over the defendant, a foreign corporation, for lack of proper service of process.
A Delaware corporation having its principal office in Indiana, and continuously carrying on a grain and stock brokerage business through the same persons in Illinois under an arrangement practically equivalent to agency, held, under the circumstances of this case, and in view of the statutes of Illinois as to service on foreign corporations, to be carrying on business in Illinois, and that service on such persons of process in a suit against it in the Circuit Court of the United States for Illinois was sufficient.
This is an appeal directly to this Court from a decree of the circuit court dismissing, for want of jurisdiction, a bill filed by the Board of Trade of the City of Chicago, an Illinois corporation, against the Hammond Elevator Company, a Delaware corporation, and a citizen of that state.
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.
This motion of the elevator company was referred to a master to take testimony, and report the same with his conclusions of law. The master filed his report in the circuit court, recommending that the motion of the defendant to quash the service of process be sustained; whereupon counsel for plaintiff stated in open court that he was unable to make any other or different service upon the defendant, and it was ordered that the bill be dismissed as to the Hammond Elevator Company. The bill was also dismissed as to the Western Union Telegraph Company, which had been made a party by an amendment to the original bill. Thereupon appellant appealed to this Court upon the same question of jurisdiction, praying that the appeal be allowed and said question be certified, which was done.
The circuit court dismissed this appeal upon the ground that it had never acquired jurisdiction over the Hammond Elevator Company by the service of process upon Albert M. Babb and the members of the firm of Battle & Dickes, because they were not officers of the elevator company which was a Delaware corporation, and had its principal place of business in the State of Indiana.
"in any case in which the jurisdiction of the court is in issue; in such cases, the question of jurisdiction alone shall be certified to the Supreme Court from the court below for decision."
The proper construction 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 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, 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.
"The question of jurisdiction which the statute permits to be certified to this Court directly must be one involving the jurisdiction of the circuit court as a federal court, and not simply its general authority as a judicial tribunal to proceed in harmony with established rules of practice governing courts of concurrent jurisdiction as between each other."
"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 ancillary or pro interesse suo proceedings, and those governing courts of concurrent jurisdiction as between themselves, was alone involved."
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.
the defendant by a valid service of process. In such a case, there would be an entire want of jurisdiction, and a judgment rendered without jurisdiction can be reviewed on a writ of error directly sued out to this Court."
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 Pacific Ry. Co., 198 U. S. 95, 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.
While the case under consideration is distinguishable from Shepard v. Adams, we think it is concluded by the case last cited, and therefore hold that we have jurisdiction to review the action of the circuit court in dismissing this bill.
2. The merits in the case are contained in the certificate of the district judge, and involve the jurisdiction of the circuit court over the Hammond Elevator Company, by reason of the service in the State of Illinois upon Babb or Battle & Dickes, as agents of such company, and whether the service of process upon them gave the court jurisdiction over the company.
By the law of Illinois, Rev.Stat. c. 32, sec. 26, "foreign corporations, and the officers and agents thereof, doing business in this state, shall be subjected to all the liabilities" of domestic corporations, and by c. 110, sec. 5, "may be served with process by leaving a copy thereof with . . . any agent of said company found in the county."
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.
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.
It is admitted by the defendant's counsel that the defendant does not desire to be subject to suit before the state and federal courts of every state and district where it has correspondents, and that it has endeavored to arrange and conduct its business so as to avoid such contingency.
The relations of the correspondent with the elevator company are in each case fixed by formal contract, to the effect that the parties shall deal as principals, and that the relations of principal and agent shall neither exist or be held to exist. There is no evidence that the correspondents Babb and Battle & Dickes have claimed or represented themselves to be agents of the defendants.
"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 Colony v. Pease, 194 Ill. 98; Commercial Ins. Co. v. Ives, 56 Ill. 402; Union Ins. Co. v. Chipp, 93 Ill. 96; Ind. Ins. Co. v. Hartwell, 123 Ind. 177; Planters' Ins. Co. v. Myers, 55 Miss. 479; Sprague v. Ins. Co., 69 N.Y. 128.
"there can be no question that towards the customer the correspondent bears the relation of agent to his principal. The customer knows that the correspondent is not selling the stocks to him, or buying stocks from him, but is merely taking his orders for transmission. Hence, the correspondent's charge to the customer for his services is properly called a commission. The customer does not direct the correspondent from whom he is to purchase, or to whom he is to sell, as the latter is at liberty to purchase from or sell to the defendant, or elsewhere, as he chooses. In point of fact, perhaps, because of the facilities offered by the private wire, he almost invariably does purchase from or sell to the defendant."
" First. In all cases where I shall purchase from, or contract to purchase from, or shall sell to, or contract to sell to, said Hammond Elevator Company any commodity, I will receive and pay for the commodity purchased, or contracted to be purchased, from it, and will deliver the commodity sold, or contracted to be sold, to it."
" Seventh. That I am not, and will not represent myself as being, agent for said Hammond Elevator Company, but will represent that I have no authority to act for it. It is not responsible for anything that may be done by me."
correspondent. All its statements are rendered to the correspondent. All its charges are made against, and all its credits entered in favor of, the correspondent. Indeed, so far as the evidence shows, there is no ground for claiming that the defendant knows that the correspondent has any customers, or that he is not dealing solely on his own account."
Notwithstanding these protestations and excessive precautions used to prevent the correspondent's 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 charging 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 granter 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's paying a fixed sum of $50 per month for the use of the wire.
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.
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.
It results that the decree dismissing the bill as to the Hammond Elevator Company must be reversed, and the case be remanded for further proceedings.
THE CHIEF JUSTICE, MR. JUSTICE HARLAN, and MR. JUSTICE DAY dissented upon the first point.

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