Page images
[blocks in formation]

marily aimed at the freest use of the said park for recreation purposes by the public and for the preservation of the natural conditions and scenic beauties thereof. . . The regulations governing the park shall include provisions for the use of automobiles therein." There is no attempt to give exclusive jurisdiction to the United States, but on the contrary the rights of the State over the roads are left unaffected in terms. Apart from those terms the State denies the power of Congress to curtail its jurisdiction or rights without an act of cession from it and an acceptance by the national government. Fort Leavenworth R. R. Co. v. Lowe, 114 U. S. 525. The statute establishing the park would not be construed to attempt such a result. Leavenworth, Lawrence & Galveston R. R. Co. v. United States, 92 U. S. 733. As the defendant is undertaking to assert exclusive control and to establish a monopoly in a matter as to which, if the allegations of the bill are maintained, the State has not surrendered its legislative power, a cause of action is disclosed if we do not look beyond the bill, and it was wrongly dismissed. The cases cited for the defendant do not warrant any such extension of the power of the United States over land within a State. Utah Power &

Light Co. v. United States, 243 U. S. 389, 404. McKelvey v. United States, 260 U. S. 353, 359. See Omaechevarria v. Idaho, 246 U. S. 343.

It is said, although it does not appear in the record, that the decision below was based upon Robbins v. United States, 284 Fed. 39, in which these regulations were held to be justified by a cession from the State. But the alleged cession is not in this record and the State denies it in the bill. In its argument it maintains that the Acts relied upon by the superintendent do not have the scope attributed to them and asserts that if they had purported to go so far they would have been without authority. The State is entitled to try the question and

Opinion of the Court.

268 U.S.

to require the alleged grant to be proved. As the case can be dealt with more satisfactorily when the exact facts are before the Court we go into no more elaborate discussion now.

Decree reversed.





No. 339. Argued April 27, 1925.-Decided May 11, 1925.

1. An agreement of a public utility with a city to observe specified rates remains binding even after the rates become unremunerative, if the contract does not lack mutuality. P. 233.

2. The fact that the state legislature has power to regulate the rates does not deprive the contract between the utility and the city of mutuality. Id.

86 Fla. 583, affirmed.

CERTIORARI to a decree of the Supreme Court of the State of Florida, affirming a decree enjoining the petitioner from increasing its rates for electric lighting.

Mr. William L. Ransom, with whom Messrs. W. B. Crawford and J. T. G. Crawford were on the briefs, for petitioner.

Mr. P. H. Odom, with whom Mr. J. J. Canon was on the brief, 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, meter measurement, for commercial electric lighting in the city. It alleged a contract in the grant of the petitioner's fran

[blocks in formation]

chise by which the petitioner was bound not to charge more than that sum. The defendant pleaded that in present circumstances the rate prescribed in the ordinance granting the franchise was unreasonably low and that to enforce it would deprive defendant of its property without due process of law contrary to the Constitution of the United States. The plea was overruled and defendant having declined to plead further a decree was entered for the plaintiff by the Circuit Court for Putnam County which subsequently was affirmed by the Supreme Court of the State. 86 Fla. 583.

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 unfettered power of the legislature to regulate the rates. On that ground the defendant contends 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 would be unconstitutional to impose. The argument cannot prevail. Without considering 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 parties when it is left undisturbed. Georgia Railway & Power Co. v. Decatur, 262 U. S. 432, 438. Opelika v. Opelika Sewer Co., 265 U. S. 215, 218. Such a notion logically carried out would impart new and hitherto unsuspected results to the power to amend the Constitution or to exercise eminent domain. There is nothing in this decision inconsistent with Southern Iowa Electric Co. v. Chariton, 255 U. S. 539; San Antonio v. San Antonio Public Service Co., 255 U. S. 547 and Ortega Co. v. Triay, 260 U. S. 103.

Decree affirmed.

Argument for Plaintiff in Error.

268 U.S.



No. 352. Argued April 29, 1925.-Decided May 11, 1925.

1. Where a guaranty company executed a bond guaranteeing the fidelity of the president of a national bank, and another to a depositor of the bank insuring payment of deposits, and the bank thereafter became insolvent through the frauds of the president and the guarantor paid the depositor and took an assignment of the depositor's claim against the bank with approval of the bank's receiver, held that this claim could not be set-off by the guarantor as assignee or subrogee in an action by the receiver upon the bond first mentioned. P. 237.

2. The doctrine of relation is a legal fiction invented to promote justice and never allowed to defeat the collateral rights of third persons. Id.

295 Fed. 847, affirmed.

ERROR to a judgment of the Circuit Court of Appeals affirming a judgment of the District Court in favor of the receiver of a national bank in an action against the surety of one of its officers.

Mr. Walter F. Seay and Mr. Jos. A. McCullough, for the plaintiff in error.

Upon failure of a bank a depositer may off-set any claim the bank may have against the depositor to the extent of the deposit. The Receiver takes the assets of an insolvent bank as a mere trustee and creditor, subject to all claims and defenses that might have been interposed as against the insolvent corporation. Scott v. Armstrong, 146 U. S. 499.

A surety on paying the debt of its principal is entitled to be subrogated to the rights of the creditors in all


Argument for Plaintiff in Error.

or any of the securities, means or remedies which the creditor has for enforcing payment against the principal.

The right of a surety to subrogation begins with the contract of suretyship and relates back to that time, and is not simply inchoate until it pays the debt. Prairie State National Bank v. United States, 164 U. S. 227; Henningson v. U. S. F. & G. Co. 208 U. S. 403; Hardaway v. National Surety Co. 211 U. S. 550; Fidelity & Deposit Co. of Maryland v. Duke, 203 Fed. 661; Cox v. New England Ins. Co. 247 Fed. 955; Wasco County v. New England Eq. Life Ins. Co. et al. 172 Pac. 126.

The closing of the bank, the inability of the bank to pay its depositors, the necessity of plaintiff in error's paying the railway company and its liability to the bank because of the defalcation, in reality all grew out of the same transaction, or act, to wit: the embezzlement.

Courts of equity frequently deviate from the strict rule of mutuality when the justice of the particular case requires it; and the ordinary rule is that where the mutual obligations have grown out of the same transaction, insolvency on the one hand justifies the set-off of the debt due upon the other. Scott v. Armstrong, supra; North Chicago Rolling Mill v. St. Louis Ore & Steel Co., 152 U. S. 594. Fidelity & Deposit Co. v. Duke, 203 Fed. 661; National Bank of the Commonwealth v. Mechanics' National Bank, 94 U. S. 437.

A set-off otherwise valid cannot be considered a preference, as it is only the balance, if any, after the set-off is deducted which can justly be held to form part of the assets of the insolvent. The right of subrogation relates back to the time of the contract of suretyship, and not merely from the time that the debt is paid by the surety or actual liability upon the surety is invoked. This being correct, then this plaintiff in error's right to set-off preceded the failure of the bank and of necessity could not be a preference. Scott v. Armstrong, supra. The

« PreviousContinue »