HENRY L. DOHERTY & CO. v. GOODMAN(1935)
[294 U.S. 623, 624] Mr. Frederick W. Lehmann, Jr., of Des Moines, Iowa, for appellant.
Mr. Joseph I. Brody, of Des Moines, Iowa, for appellee.
Mr. Justice McREYNOLDS delivered the opinion of the Court.
In 1926, Henry L. Doherty, citizen of New York, trading as Henry L. Doherty & Co., established an office at Des Moines, Polk county, Iowa, and there through agents carried on the business of selling corporate securities throughout the state. E. A. King, designated as district manager, took charge of this office in January, 1929, and continued to direct its affairs during the time here important. Under him were clerks and stock salesmen, paid directly from New York.
A salesman operating from the Des Moines office, September 1, 1929, negotiated in that city a sale of stock to appellee Goodman, and out of this the present controversy arose. The only power or authority expressly conferred upon King by Doherty was to sell securities and supervise other employees; he never in terms consented that service of process upon this agent should constitute service upon himself.
Section 11079, Iowa Code 1927, also 1931, in effect since 1851, provides: 'When a corporation, company, or individual has, for the transaction of any business, an office or agency in any county other than that in which the principal resides, service may be made on any agent or clerk employed in such office or agency, in all actions growing out of or connected with the business of that office or agency.'
July 31, 1931, appellee Goodman commenced an action against Doherty in the District Court, Polk county, wherein he sought only a personal judgment for damages arising out of the sale contract of September 1, 1929. The usual summons or notice commanding the defendant to appear was served upon district manager King.
Doherty appeared specially. He challenged the jurisdiction of the court; claimed he had not been within the state; King had no authority to accept service of process [294 U.S. 623, 626] in his behalf; the alleged service was ineffective; and that to hold otherwise would deprive him of rights guaranteed by the Federal Constitution. The District Court, relying upon Code, 11079, overruled the special plea and held the service adequate. Doherty made no further appearance. Judgment against him was affirmed by the Supreme Court (255 N. W. 667).
The cause is here by appeal. Appellant insists that, if construed as applicable to him, a citizen of another state never in Iowa, in the circumstances disclosed by the record, section 11079 offends the Federal Constitution, section 2, art. 4, and section 1, Fourteenth Amendment.
The Supreme Court affirmed the action of the trial court upon authority of Davidson v. Henry L. Doherty & Co. (1932) 214 Iowa, 739, 241 N.W. 700, 701, 91 A.L.R. 1308. The opinion in that cause construed section 11079, and, among other things, said:
Iowa treats the business of dealing in corporate securities as exceptional, and subjects it to special regulation. Laws 1913, c. 137; Laws 1921, c. 189; Laws 1929, c. 10, approved Mar. 19, 1929. The last- cited act requires reg- [294 U.S. 623, 628] istration and written consent for service of process upon the secretary of state. See Merrick v. N. W. Halsey & Co., 242 U.S. 568 , 37 S.Ct. 227. Doherty voluntarily established an office in Iowa and there carried on this business. Considering this fact, and accepting the construction given to section 11079, we think to apply it as here proposed will not deprive him of any right guaranteed by the Federal Constitution.
Flexner v. Farson, 248 U.S. 289 , 39 S.Ct. 97, much relied upon, does not sustain appellant's position. There the service was made upon one not then agent for the defendants; here the situation is different. King was manager of the appellant's office when the sale contract was made; also when process was served upon him. Moreover, under the laws of Iowa, neither her citizens nor nonresidents could freely engage in the business of selling securities.
The power of the states to impose terms upon nonresidents, as to activities within their borders, recently has been much discussed. Hess v. Pawloski, 274 U.S. 352 , 47 S.Ct. 632; Wuchter v. Pizzutti, 276 U.S. 13 , 48 S.Ct. 259, 260, 57 A.L.R. 1230; Young v. Masci, 289 U.S. 253 , 53 S.Ct. 599, 88 A.L.R. 170. Under these opinions it is established doctrine that a state may rightly direct that nonresidents who operate automobiles on her highways shall be deemed to have appointed the secretary of state as agent to accept service of process, provided there is some 'provision making it reasonably probable that notice of the service on the secretary will be communicated to the nonresident defendant who is sued.'
So far as it affects appellant, the questioned statute goes no farther than the principle approved by those opinions permits. Only rights claimed upon the present record are determined. The limitations of section 11079 under different circumstances we do not consider.