case of personal property he really only gets the balance, with a credit as a matter of convenient bookkeeping to the amount of the tax. In the case of real estate he receives, properly speaking, an equity. He can pay the tax and get the land freed from the incumbrance, or the State can foreclose the lien and he will receive the balance. In either case the only natural way to treat him is as a recipient of a net amount. The condition of the devolution of the property is the receipt of the transfer tax by the State."

This decision, it seems to us, is not only logical but eminently fair. It would be ridiculous to exempt a legacy or devise in the computation of one's income and then permit the legatee or devisee to deduct from other income the tax paid on such legacy or devise. The decision is also in accord with the decision of the U. S. Supreme Court in the case of United States v. Perkins, 163 U. S. 625, at p. 630, where the court said:

"The legacy becomes the property of the United States only after it has suffered a diminution to the amount of the tax, and it is only upon this condition that the Legislature assents to a bequest of it."

IS CONGRESS OBSTRUCTING REFORM IN JUDICIAL PROCE DURE?

Inquiry is not infrequently inade of us concerning the failure of the bills in Congress to give the Supreme Court of the United States power to make rules of pleading and practice governing the law side of Federal courts. Some inside information was given concerning the attitude. of Congress toward these measures by Hon. Walter George Smith of Philadelphia, former president of the American Bar Association, in an address before the California Bar Association on June 7, 1918. We quote what Mr. Smith has to say on this subject:

"The reproach of an undue conservatism directed against our profession has been to some extent deserved in the past, but that there is among the great majority of lawyers an earnest desire to meet the evident needs of a readjustment of practice and procedure will be evident to anyone who skims the pages of the reports of the national, state and local Bar Associations throughout the country. Since 1912 a sys

tematic effort has been made by the American Bar Association, through its Committee on Uniform Judicial Procedure, to bring about a general uniformity in federal and state procedure by an amendment to the statutes of the United States, which would give to the Supreme Court the power to make rules of practice in common-law procedure, as it has already done in equity. Repeatedly the bill has reached late stages in Congress, only to be laid over because of the objection of a Senator or Senators who are unconvinced by the authority of the most respectable associations, including the American Bar Association and the State Bar Associations of New York, Massachusetts, Alabama, Oregon, Maryland, MissisSippi, South Dakota, Pennsylvania and many others (46 in all), as well as the National Conference of Commissioners on Uniform State Laws, and eminent teachers from the leading law schools. It should be obvious that if a simple and elastic set of rules governing and completing a procedure were formulated and put in force in all of the federal courts, it would not be long before, by reason of their intrinsic excellence, they would be adopted under authority of the necessary legislation by the state courts. But it is held up by those who seek to reform the practice of our courts on a theory which is directly contrary to the spirit of our constitutional tripartite division of the functions of government, a spirit which is imbued with distrust of the judicial department and presses against it to the very verge, if not beyond, of unconstitutional legislation. It is the spirit which would, if possible, concentrate in the Legislature all of the powers of government and make it submissive to the emotions of the populace rather than the delegated authority to speak for it with measured and dispassionate judgment. Instead of giving to the courts the full responsibility to which, under the law, they are always to be held to a strict account, harassing obstacles are sought to be thrown in their way and in

sidious efforts to undermine their power are incessantly made by uneducated or prejudiced people who fail to find the safeguard of constitutional democracy in the strength of popular confidence in the courts as the oracles of justice." A. H. R.

question, the case cannot be considered a strong authority.

BRITISH COURTS.

A litigant, and especially one who is defending himself, is entitled to state in defense everything which is pertinent to the issue raised by the pleadings. If what is stated in defense is pertinent to that issue and especially if it is relevant thereto, the litigant is presumed to have acted in bona fide and in pursuance of his undoubted right and privilege to defend himself from attack. The occasion, in short, is one which is highly privileged and in which the litigant will be completely protected unless it be clearly and specifically averred and proved that he was actuated by malice in making the statement. If the statement complained of is manifestly impertinent to the issue raised by the pleadings the occasion is not privileged; the case is then one of ordinary slander in which no privilege is enjoyed by the defender and in which he is presumed to have acted maliciously. These general principles have been so well established that we rarely meet with an action of judicial slander, such as was before the court in Mitchell v. Smith. In defense to an action for breach of contract the defender made averments of fraud in consequence of which the slander action referred to was raised. The Lord Ordinary (Anderson) held the action irrelevant, but the First Division, by a majority, held that the averments made were relevant to infer malice and remitted the case back to the Lord Ordinary. The judges composing the majority were Lords MacKenzie and Cullen; Lord Sands was the dissenting judge. There being thus two judges on each side of the

(1) 1919. 2 S. L. T. 117.

them; he did not believe in their truth and never intended to establish any of the statements complained of; they were put on record not with the view of maintaining his defense, but for the oblique purpose of intimidating the pursuer and compelling him to abandon his action rather than allow the statements to be widely circulated and made the subject of public comment. These averments were as above stated held to be of such a character as to entitle the pursuer to the opinion of a jury.

Britain Steamship Co. v. The King was a Petition of Right against the Admiralty brought with the object of determining the respective liability of the Crown and the underwriters in certain classes of losses during the war. During the war British ships were usually protected against loss in two ways, by an ordinary policy of marine insurance in the case of "sea risks," and by the Crown-either by special policy or otherwise, according to the relationship of the ship to the Government service-against risks arising out of "warlike operations." In a large number of cases, however, the loss has been due to some cause which is at once a "sea risk" and connected with "warlike operations," and the question of liability in all such cases depends on whether or not the "warlike operations" were the causa proxima of the sea risk. In the case before the court a ship was lost by what unquestionably was an ordinary sea risk. But in fact she was wholly in the service and under the control of the Admiralty when lost, having been requisitioned by the Director of Transport and chartered for Admiralty service. The underwriters

(2) 1919. 1 K. B. 575.

claimed that, as she was completely under Admiralty control for war use, “warlike operations" must be held to be the causa proxima of any and every sea risk and loss she might suffer. This is arguable enough in view of the long line of cases where stranding or collision of a ship obeying the directions of a convoy has been held to be the result of "warlike operations," but the court refused to give so wide an extension to a doubtful principle, and held that the operations were not the causa proxima of the loss.

We would call attention to the decision of the Court of Appeals in Woodall v. Pearl Insurance Co. Ld. It was an action for recovery of insurance money and the policy contained the usual clause of reference to arbitration. The company had refused to pay on the grounds that the assured had misstated his occupation or in any event had changed his occupation during the continuance of the policy without informing the company; and also on the case coming into court, the company pleaded that the action was excluded by the arbitration clause. The court held that arbitration was a condition precedent to action, that is, they decided that the merits of the claim should be submitted to arbitration and thereafter if necessary the amount awarded in the arbitration could be sued for.

The case is of special interest in relation to two other important cases of arbitration clauses in contracts, which are referred to in the judges' opinions. The first of these, decided that where a person or an insurance company is repudiating a contract in the sense that it is disputing the existence of any binding contract at all, then the whole contract is involved and even though the contract contains an arbitration clause action in court, not arbitration, is the proper remedy. The other case decides that where a person or insurance

Preliminary.-Within the past two years many public utilities have, because of the increased cost of labor and war-time prices, applied for increase of rates and resistance thereto has been made upon the ground that to grant such increase would be an impairment of the obligation of contract forbidden by the Federal Constitution. This resistance has been ruled upon variantly by the courts, some of them distinguishing between a municipality granting rights upon. a condition precedent and that arising out of private contract. Incidentally the question of a long term arrangement with a municipality and that for a definite but brief term. The effect of the state's police power has been alluded to in practically all of the cases.

Rates in Private Contract and in Franchise. The Supreme Court, in a case where a corporation had a contract with a public service corporation to supply it with electric light and power at certain rate for a term of five years and during said term the railroad commission of Georgia authorized an increase in rates, held the public service corporation not bound by its

contract.1 The court said, citing Manigault v. Springs, that "It is the settled law of this court that the interdiction of statutes impairing the obligation of contracts does not prevent the state from (properly) exercising such powers *** for the general good of the public though contracts previously entered between individuals may thereby be affected." And further, quoting from Louisville & N. R. Co. v. Mottley, it was said that "Contracts must be understood as made in the rightful exercise of the rightful authority of government, and no obligation of a contract can extend to the defeat of legitimate government authority." This was stated as to a contract lawful when made, but made unlawful afterward under interstate commerce clause, but it would seem to be equally true under rightful exercise of a state's police power. A late work by the author of this article1 speaking of discrimination lawful under one classification at the time it is made, says: "But no contract can be the basis for such a discrimination, whether prior or contemporaneous, as it comes under the power to regulate the utility itself." There are cited in support of this many U. S. Supreme Court cases and among them the Mottley case supra. But it is also clear, that the right to disregard the obligation of contract has been expressly declared, when the exercise of a state's police power is involved. Thus the opinion in United Dry Goods Co. case supra, says: "It is settled that neither the 'contract' clause nor the 'due process' clause has the effect of overriding the power of the state to establish all regulations***; that this power can neither be abdicated, nor bargained away, and is inalienable even by express grant; and that all contract and property rights

are held subject to its fair exercise," excerpt from a former decision.5

6

Later than all of the cases above spoken of is a decision by the U. S. Supreme Court, which held, that, where a municipal ordinance granted a street railway a franchise which obligated the railway to give service at a certain rate for fares, that this constitutes in Ohio an absolute bar against any change of rate, one party thereto objecting. There is not in the opinion in this case any reference whatever to the case in 248 U. S. 60, nor to any of the cases it cites, and both opinions were by a unanimous count. As this opinion appears to distinguish between private contract rates and franchise rates, in their alterable effect, it becomes necessary to examine more particularly the exact purport of the latter, especially as there are variant rulings in state courts as to the effect of a franchise in the fixing of rates for public utilities.

Particular Bearing of the Columbus Case.-Justice Day says: "The insistence on the part of the city is that, under the controlling laws of Ohio, in force when these ordinances were passed and accepted, and the terms of the ordinances, binding contracts were created *** for the period of twenty-five years upon the terms and conditions set forth in the ordinances. *** Whether these ordinances constituted such contracts depends upon the proper construction of the statutes of Ohio in force at the time, and the terms of the ordinances in question." Then he refers to a prior decision, wherein it was said: "In reason, the conclusion that contracts were engendered would seem to result from the fact that the provisions as to rates of fare were fixed in ordinances for a stated time and no reservation was made of a right

(5) Atlantic C. L. R. Co. v. Goldsboro, 232 U. S. 548, 558, 34 Sup. Ct. 364, 58 L. ed. 721.

(6) Columbus Ry. P. & L. Co. v. Columbus,

I 249 U. S. 399, 39 Sup. Ct. 349, P. U. R. 1919D, 239. (7) Cleveland v. Cleveland City R. Co., 194 U. S. 517, 24 Sup. Ct. 756, 48 L. ed. 1102.