(45 S.Ct.)

(Argued April 16, 1925. Decided May 11, 1925.) icy issued in 1901, payable to Mrs. Frick

"The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property. *** (f) To the extent of the amount receivable by Suit by Adelaide H. C. Frick and others out by the decedent upon his own life; and to the executor as insurance under policies taken against C. G. Lewellyn, formerly Collector the extent of the excess over $40,000 of the of Internal Revenue for the Twenty-Third amount receivable by all other beneficiaries as District of Pennsylvania. Decree for plain-insurance under policies taken out by the detiffs (298 F. 803), and defendant brings er- cedent upon his own life." ror. Affirmed.

We do not propose to discuss the limits of the powers of Congress in cases like the present. It is enough to point out that at least there would be a very serious question to be answered before Mrs. Frick and Miss Frick could be made to pay a tax on the transfer of his estate by Mr. Frick. There would be another if the provisions for the liability of beneficiaries were held to be separable and it was proposed to make the estate pay a transfer tax for property that Mr. Frick did not transfer. Acts of Congress are to be construed if possible in such a way as to avoid grave doubts of this kind. Panama R. R. Co. v. Johnson, 264 U. S. 375, 390, 44 S. Ct. 391, 68 L. Ed. 7-18. Not only are such doubts avoided by construing the statute as refer#252

ring only to transactions taking place after it was passed, but the general principle "that laws are not to be considered as applying to cases which arose before their passage" is preserved, when to disregard it would be to impose an unexpected liability that if known might have induced those concerned to avoid it and to use their money in other ways. Schwab v. Doyle, 258 U. S. 529, 534, 42 S. Ct. 391, 66 L. Ed. 747, 26 A. L. R. 1454. This

case and the following ones, Union Trust Co. v. Wardell, 258 U. S. 537, 42 S. Ct. 393, 66 L. Ed. 753, Levy v. Wardell, 258 U. S. 542,

42 S. Ct. 395, 66 L. Ed. 758, and Knox v. Mc

Elligott, 258 U. S. 546, 42 S. Ct. 396, 66 L.
Ed. 760, go far toward deciding the one now
before us.
They also indicate that the Rev-
enue Act of 1924, c. 234, § 302(h); 43 Stat.
253, 305, making (g) (the equivalent of (f)
above) apply to past transactions, does not
help but if anything hinders the Collector's
construction of the present law. Smietanka
v. First Trust & Savings Bank, 257 U. S. 602,
42 S. Ct. 223, 66 L. Ed. 391.
Decree affirmed.

(268 U. S. 232)

Bill by the City of Palatka, Fla., against the Southern Utilities Company. Decree for plaintiff was affirmed by the Supreme Court of the State of Florida (86 Fla. 583, 99 So. 236), and the defendant brings certiorari. Affirmed.

Messrs. Wm. L. Ransom, of New York City, J. T. G. Crawford, of Jacksonville, Fla., and W. B. Crawford, of Orlando, Fla., for petitioner.

Mr. P. H. Odom, of Jacksonville, Fla., for respondent.

Mr. Justice HOLMES delivered the opinion of the Court.

The City of Palatka brought this bill to restrain the petitioner, the Southern Utilities Company, from charging more than ten cents per kilowatt, metre measurement, for commercial electric lighting in the city. It alleged a contract in the grant of the pe

*233

titioner's franchise by which the petitioner
was bound not to charge more than that sum.
cumstances the rate prescribed in the ordi-
The defendant pleaded that in present cir-
nance granting the franchise was unreason-
ably low and that to enforce it would deprive
defendant of its property without due pro-
the United States. The plea was overruled
cess of law contrary to the Constitution of
and defendant having declined to plead fur-
ther a decree was entered for the plaintiff
by the Circuit Court for Putnam County
which subsequently was affirmed by the Su-
86 Fla. 583, 99
preme Court of the State.

So. 236.
The Supreme Court held that the City had
power to grant the franchise and to make the
contract and that it had no power of its own
motion to withdraw, but it concedes the unfet-
tered power of the legislature to regulate the
rates. On that ground the defendant con-
tends that there is a lack of mutuality and
therefore that it is free and cannot be held
to rates that in the absence of contract it
The

SOUTHERN UTILITIES CO. v. CITY OF would be unconstitutional to impose.

PALATKA, FLA.

(Argued April 27, 1925. Decided May 11,

1925.) No. 339.

Electricity 11-City's contract with public utility, fixing rate, not as between parties, lacking in mutuality because of power of Legislature.

Contract between city and public utilities company, fixing rates, is valid between parties, where not disturbed by Legislature in exercise of its power to regulate rates; such contract not being void for want of mutuality because of such power of Legislature.

argument cannot prevail. Without consid-
ering whether an agreement by the Company
in consideration of the grant of the franchise
might not bind the Company in some cases,
even if it left the city free, it is perfectly
plain that the fact that the contract might
be overruled by a higher power does not
destroy its binding effect between the par-
Georgia
ties when it is left undisturbed.
Railway & Power Co. v. Decatur, 262
U. S. 432, 438, 43 S. Ct. 613, 67 L. Ed. 1065;
Opelika v. Opelika Sewer Co., 265 U. S. 215,
218, 44 S. Ct. 517, 67 L. Ed. 983. Such a no-
tion logically carried out would impart new
and hitherto unsuspected results to the pow-
er to amend the Constitution or to exercise
eminent domain. There is nothing in this de-

On Writ of Certiorari to the Supreme cision inconsistent with Southern Iowa ElecCourt of the State of Florida.

tric Co. v. Chariton, 255 U. S. 539, 41 S. Ct.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(45 S.Ct.)

400, 65 L. Ed. 764, San Antonio v. San Antonio Public Service Co., 255 U. S. 547, 41 S. Ct. 428, 65 L. Ed. 777, and Ortega Co. v. Triay, 260 U. S. 103, 43 S. Ct. 44, 67 L. Ed. 153.

Decree affirmed.

(268 U. S. 234)

UNITED STATES FIDELITY & GUARANTY
CO. v. WOOLDRIDGE.

(Argued April 29, 1925. Decided May 11,
1925.)

No. 352.

Banks and banking 77(4)-Surety company held not entitled to set off claim against bank, to which it had become subrogated, against its liability on bond to indemnify bank against default of its president.

Guaranty company, sued by receiver on bond given to indemnify bank against default of its president, which had previously, as surety on bond given by bank to guarantee deposit of railroad, paid railroad amount of its claim and become subrogated to railroad's rights against bank, held not entitled to set off such claim against its liability on bond.

the Bank, and in addition took an assign. ment of such rights, which was approved by the plaintiff on February 1. An agreement of the parties was filed, that the facts alleged were true and that the only question for the Court was "whether or not under the facts alleged, the defendant is entitled as against the plaintiff to set off the demand it holds as assignee or subrogee of the Gulf, Colorado & Santa Fé Railway Company." Thus the answer and the agreement confine the issue before us to the rights of the defendant Guaranty Company by way of subrogation or assignment. The District Court and the Circuit Court of Appeals gave judgment for the plaintiff for $25,000 interest and costs and denied the defendant's right. 295 F. 847.

The two bonds were wholly independent transactions and were not brought into mutual account by any agreement of the parties. The Guaranty Company after the insolvency of the Bank could not have bought a claim against the Bank and used it in setoff. Scott v. Armstrong, 146 U. S. 499, 511, 13 S. Ct. 148, 36 L. Ed. 1059; Davis v. Elmira Savings Bank, 161 U. S. 275, 290, 16 S. Ct.

In Error to the United States Circuit Court 502, 40 L. Ed. 700; Yardley v. Philler, 167 of Appeals for the Fifth Circuit.

Action by A. P. Wooldridge, receiver of the National Bank of Cleburne, against the United States Fidelity & Guaranty Company. To review a judgment of the Circuit Court of Appeals (295 F. 847), affirming a judgment of the District Court for plaintiff, defendant brings error. Affirmed.

Messrs. W. F. Seay, of Dallas, Tex., and Joseph A. McCullough, of Baltimore, Md., for plaintiff in error.

#236

U. S. 340, 360, 17 S. Ct. 835, 42 L. Ed. 192. The receiver contends that that is the position of the defendant here, because it was only a guarantor and was only liable upon the default of the President of the Bank that

*238

produced the insolvency. The Court *below treated the claim of the Railway Company against the Bank as acquired by the defend. ant after the insolvency. The defendant, however, contends that upon its payment to the Railway Company its subrogation related

*Mr. Ellis Douthit, of Fort Worth, Tex., for back to the date of its contract; and we will

defendant in error.

Mr. Justice HOLMES delivered the opin

ion of the Court.

The National Bank of Cleburne, Texas, became insolvent through the frauds of its president and closed its doors on October 17, 1921. On November 1 following the defendant in er

*237

ror was appointed receiver, and on April *14, 1922, began this suit upon a bond executed by the plaintiff in error on August 28, 1921, binding it to indemnify the Bank for losses of this character to the extent of $25,000. The Guaranty Company pleaded in set-off that on August 24, 1921, it became surety for the Bank upon another bond to the Gulf, Colorado & Santa Fé Railway Company, conditioned upon payment by the Bank to the Railway Company of the Company's deposits in the Bank, and that on January 16, 1922, it paid to the Railway Company $23,312.51 and as matter of law became subrogated to the rights of the Company against

assume for purposes of argument that this
is true. But suppose it is, the right of the
Railway Company was simply that of a de-
positor, a right to share with other unsecured
creditors in the assets of the Bank, of which
the bond now in suit was a part. There
would be no equity in allowing the Railway
Company a special claim against this bond.
We will assume that if the Railway Company
had insured the honesty of the Bank's offi
cers the Bank might have offset the obliga-
tion of the company against its claim as a
depositor. But it is impossible to treat the
succession of the defendant to the Railway
Company's claim as effecting such an abso-
lute identification with the Railway Com-
pany that one and the same person insured
the Bank and made the deposits. The doc-
trine of relation "is a legal fiction invented
to promote the ends of justice.
* It is
never allowed to defeat the collateral rights
of third persons, lawfully acquired." John-
ston v. Jones, 1 Black, 209, 221, 17 L. Ed. 117.
Judgment affirmed.

*

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

case is here on writ of error.

(268 U. S. 258)
COCKRILL et al. v. PEOPLE OF STATE OF Judicial Code (Comp. St. § 1214).
CALIFORNIA.
(Argued March 6, 1925. Decided May 11,
1925.)

No. 182.

1. Aliens 10-Constitutional law 249, 311 Prima facie presumption created by Alien Land Law held not repugnant to due process or equal protection clauses of federal Constitution.

The rule of evidence created by California Alien Land Law, § 9, providing that a prima facie presumption arises that a conveyance is made with intent to avoid escheat, where property is taken in name of a person other than an alien ineligible to citizenship, who furnished the consideration for the purchase, is not repugnant to the due process or equal protection

clauses of the federal Constitution.

2. Aliens 10-Prima facie presumption created by Alien Land Law does not violate treaty with Japan.

The rule of evidence created by California Alien Land Law, § 9, providing that a prima facie presumption arises that conveyance is made to avoid escheat, where property is taken in name of a person other than an alien ineligible to citizenship, who furnished the consideration for the purchase, does not violate article 1, subd. 3, of the Treaty between United States and Japan, providing that citizens of contracting parties shall enjoy, in the territories of the other, the same rights and privileges as granted native citizens, since the treaty does not furnish protection to Japanese subjects against the application of a rule of evidence created by a state law that is not given them by the due process or equal protection clauses of the Fourteenth Amendment.

Section 237,

Under the Alien Land Law, Japanese subjects who are not eligible to citizenship un

*260

der the laws of the United States are not permitted to acquire, use, or control agricultural lands in California. Statutes of California 1921, p. lxxxiii; Treaty of Feb

ruary 21, 1911 (37 Stat. 1504); Porterfield V. Webb, 263 U. S. 225, 44 S. Ct. 21, 68 L. Ed. 278; Webb v. O'Brien, 263 U. S. 313, 44 S. Ct. 112, 68 L. Ed. 318; Frick v. Webb, 263 U. S. 326, 44 S. Ct. 115, 68 L. Ed. 323; Terrace v. Thompson, 263 U. S. 197, 44 S. Ct. 15, 68 L. Ed. 255. Section 9 provides:

"Every transfer of real property, or of an interest therein, though colorable in form, shall be void as to the state and the interest thereby conveyed or sought to be conveyed shall escheat to the state if the property interest involved is of such a character that an alien mentioned in section two hereof [one not eligible to citizenship under the laws of the United States] is inhibited from acquiring, possessing, enjoying or transferring it, and if the conveyance is made with intent to prevent, evade or avoid escheat as provided for herein. A prima facie presumption that the conveyance is made with such intent shall arise upon proof of

* * *

of a person other than the persons mentioned the taking of the property in the name in section two hereof if the consideration is paid or agreed or understood to be paid by an

alien mentioned in section two hereof. *

Section 10 provides that, if two or more persons conspire to effect a transfer of real property or of any interest therein in violation of the provisions of the statute, they shall be punishable by fine or imprisonment or both.

Plaintiff in error Cockrill is an American, and Ikada is a Japanese subject not eligible to citizenship. They entered into an agreeand to take title in the name of Cockrill. ment to purchase certain agricultural lands Ikada furnished the money which was paid on account of the purchase price, and, upon the making of the contract, took possession of the property. Cockrill had no interest that he made the contract with the seller in the land; and the prosecution maintained and intended to take the deed and hold the

*261

land in trust for Ikada. But *plaintiffs in error represented that the land was being acquired for and was to be owned by the chil

Mr. Justice BUTLER delivered the opin- dren of Ikada, who are natives of the Unition of the Court.

Plaintiffs in error were convicted in the superior court of Sonoma county, Cal., of conspiracy to effect a transfer of real property in violation of the Alien Land Law of that state. Judgment was affirmed by the District Court of Appeal. People v. Cockrill, 62 Cal. App. 22, 216 P. 78. A petition to have the case heard and determined in the Supreme Court of California was denied. The

ed States and entitled to take and hold such
lands. See Estate of Tetsubumi Yano, 188
Cal. 645, 649, 206 P. 995. The court included
in its charge to the jury the above quoted
provisions of section 9. Plaintiffs in error
assert that the rule of evidence so declared
violates the equal protection clause of the
Fourteenth Amendment and also the treaty
between the United States and Japan.
[1] It is not, and could not reasonably be,

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(45 S.Ct.)

use, and control of the land for agricultural purposes are withheld from ineligible Japanese constitutes a reasonable and valid basis for the rule of evidence.

[2] It is the third paragraph of article 1 of the Treaty that plaintiffs in error contend is violated. The treaty provision is:

"The citizens or subjects of each of the high tories of the other, the most constant proteccontracting parties shall receive, in the territion and security for their persons and property, and shall enjoy in this respect the same rights and privileges as are or may be granted to native citizens or subjects, on their submitting themselves to the conditions imposed upon the native citizens or subjects." Subdi

suggested that the statute is repugnant to the due process clause. It does not operate to preclude any defense. The inference that payment of the purchase price by one from whom the privilege of acquisition is withheld, and the taking of the land in the name of one of another class, are for the purpose of getting the control of the land for the ineligible alien is not fanciful, arbitrary, or unreasonable. There is a rational connection between the facts and the intent authorized to be inferred from them. The statute involves no attempt to relieve the prosecution of the burden of proving guilt beyond reasonable doubt. It merely creates a presumption which may be overcome by evidence sufficient to raise a reasonable doubt. See Yee Hem v. United States, 268 U. S. 178, 45 S. Ct. 470, 69 L. Ed. decided April 27, It is plain that the treaty does not fur1925; Mobile, J. & K. C. R. Co. v. Turnip-nish any protection to Japanese subjects in seed, 219 U. S. 35, 43, 31 S. Ct. 136, 55 L this country against the application of a Ed. 78, 32 L. R. A. (N. S.) 226, Ann. Cas. rule of evidence created *by state enactment 1912A, 463; People v. Rodriquez, 182 Cal. that is not given them by the due process teenth Amendment. As the law does not conand equal protection clauses of the Fourtravene these constitutional provisions, it must be held not to violate the treaty. Judgment affirmed.

197. 187 P. 423.

vision 3.

*263

The statute is not repugnant to the equal protection clause. The rule of evidence applies equally and without discrimination to all persons-to citizens and eligible aliens as well as to the ineligible. In the application of the law at the trial, no distinction was made between the citizen and the Japanese. Plaintiffs in error maintain that invalidity results from the fact that, where payment of the NORTH LARAMIE LAND CO. v. HOFFMAN purchase price is made by an ineligible alien, the law creates a presumption of a purpose

*262

to prevent, evade, or avoid escheat, while no such presumption arises where such payment is made by a citizen or eligible alien. But there are reasonable grounds for the distinction. Conveyances to ineligible Japanese are void as to the state and the lands conveyed escheat. Payment by such aliens for agricultural lands taken in the names of persons not of that class reasonably may be given a significance as evidence of intent to

(268 U. S. 276)

et al. (Argued April 14, 1925. Decided May 11, 1925.)

No. 323.

1. Courts 366(1)-Supreme Court controlled by state Supreme Court's holding that procedure complied with state statutes.

State Supreme Court's holding that procedure followed in laying out highway complied with state statutes (Comp. St. Wyo. 1910, §§ 2516, 2525 as amended by Laws 1913, c. 73), is binding on United States Supreme Court.

2. Courts 366(1)-State Supreme Court's construction of state statute binding on Supreme Court.

Construction placed on Road Act Wyo. (Comp. St. 1910, § 2524) as to time for filing objections to laying out of road and claims for ming, held binding on Supreme Court of United damages, by Supreme Court of state of WyoStates.

avoid escheat not attributable to like acts of
persons who have the privilege of owning
such lands. The equal protection clause
does not require absolute uniformity, or pro-
hibit every distinction in the laws of the
state between ineligible aliens and other per-
sons within its jurisdiction. The state has
a wide discretion and may classify persons
on bases that are reasonable and germane
having regard to the purpose of the legisla-
tion. Truax v. Corrigan, 257 U. S. 312, 337,
42 S. Ct. 124, 66 L. Ed. 254, 27 A. L. R. 375.
This is well illustrated by the Alien Land
Laws. Terrace v. Thompson, supra, 218 (44
S. Ct. 15); Porterfield v. Webb, supra, 233
(44 S. Ct. 21); Webb v. O'Brien, supra, 324 S.
(44 S. Ct. 112); Frick v. Webb, supra, 333
(44 S. Ct. 115). The fact that in California
all privileges in respect of the acquisition,

3. Constitutional law 209-State statute not violative of Constitution unless it is a denial of fundamental rights of citizens in its practical effect.

State statute is not violative of Const. U.

Amend. 14, unless in some substantial way when viewed in the light of its practical appliit infringes fundamental rights of citizens, cation to affairs of men as ordinarily conducted.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes