v. Consolidated Gas Co. 130 U. S. 396, 32 L. ed. 979, 9 Sup. Ct. Rep. 553; People ex rel. Cooper Union v. Gass, 190 N. Y. 323, 123 Âm. St. Rep. 549, 83 N. E. 64, 13 Ann. Cas. 678; Smyth v. Ames, 169 U. S. 466, 544, 547, 42 L. ed. 819, 848, 18 Sup. Ct. Rep. 418.

master and the court below for fran- L. ed. 560, 566, 17 Sup. Ct. Rep. 198; chises, should be excluded from the Close v. Glenwood Cemetery, 107 U. S. property upon which respondent is en- 466, 476, 27 L. ed. 408, 412, 2 Sup. Ct. titled to a return. Rep. 267; Greenwood v. Union Freight Willcox v. Consolidated Gas Co. 212 | R. Co. 105 U. S. 13, 26 L. ed. 961; Gibbs U. S. 19, 47, 53 L. ed. 382, 397, 48 L.R.A. (N.S.) 1134, 29 Sup. Ct. Rep. 192, 15 Ann. Cas. 1034; Consolidated Gas Co. v. New York, 157 Fed. 849; People v. Albany Ins. Co. 92 N. Y. 461; Lincoln Gas & E. L. Co. v. Lincoln, 182 Fed. 926; Bronx Gas & E. Co. v. Public Service Commission, 190 App. Div. 25, 180 N. Y. Supp. 38; Spring Valley Waterworks v. San Francisco, 192 Fed. 137; Cumberland Teleph. & Teleg. Co. v. Louisville, 187 Fed. 637; Home Teleph. Co. v. Carthage, 235 Mo. 644, 48.L.R.A. (N.S.) 1055, 139 S. W. 547, Ann. Cas. 1912D, 301.

The master and the court below have included in the property upon which respondent is entitled to a return, various properties which are not used and useful in respondent's gas business, and which hould be excluded.

Spring Valley Water Co. v. San Francisco, 165 Fed. 697; San Diego Land & Town Co. v. National City, 74 Fed. 83; Consolidated Gas Co. v. New York, 157 Fed. 860.

The 57th street office building was not an adequate improvement upon the land upon which it was erected, and should not be included in the rate base. Moreover, had respondent rented equivalent office space nearby, there would have been an annual saving of at least $36,000, which should be credited in this case to operating expenses.

Cedar Rapids Gaslight Co. v. Cedar Rapids, 144 Iowa, 426, 48 L.R.A. (N.S.) 1025, 138 Am. St. Rep. 299, 120 N. W. 966, affirmed in 223 U. S. 655, 56 L. ed. 594, 32 Sup. Ct. Rep. 389.

Power to regulate gas rates is a sovereign power of the state; one legislature may not bind a succeeding legislature, and any act of a corporation under a general or special law does not of itself establish a property or a contract right which limits the legislature's power to regulate rates.

The master and the court below erred in failing to follow the rules laid down by this court that, in determining the fair value of respondent's property, depreciation should be deducted.

People ex rel. Kings County Lighting Co. v. Willcox, 156 App. Div. 603, 141 N. Y. Supp. 677, modified in 210 N. Y. 479, 51 L.R.A.(N.S.) 1, 104 N. E. 911; Knoxville v. Knoxville Water Co. 212 U. S. 1, 10, 53 L. ed. 371, 378, 29 Sup. Ct. Rep. 148; Spring Valley Waterworks v. San Francisco, 192 Fed. 184; People ex rel. Brooklyn Heights R. Co. v. State Tax Comrs. 69 Misc. 656, 127 N. Y. Supp. 825; Brooklyn Borough Gas Co. v. Public Service Commission, 17 N. Y. Off. Dept. R. 81, P.U.R.1918F, 335.

The master erred in refusing to admit any testimony showing the tests made by the city of New York concerning the quality of gas furnished by respondent to its consumers prior to 1916. Furthermore, there were many other errors committed by the master in the admission and exclusion of evidence relating to a compliance with the statute in regard to the quality of gas furnished by respondent to its consumers. The evidence allowed in was sufficient to establish that respondent repeatedly violated the statute in regard to candle power, and for this reason alone the bill of complaint should have been dismissed.

North Hempstead v. Public Service Corp. 107 Misc. 19, 176 N. Y. Supp. 621; Mawhinney v. Millbrook Woolen Mills, 105 Misc. 99, 172 N. Y. Supp. 461; 1 Pom. Eq. Jur. 3d ed. § 397; Michigan Pipe Co. v. Freemont Ditch Pipe Line & Reservoir Co. 49 C. C. A. 324, 111 Fed. 284; King County Lighting Co. v. Lewis, 110 Misc. 204, 180 N. Y. Supp. 570; Carmen v. Fox Film Corp. 15 A.L.R. 1209, 269 Fed. 928.

Munn v. Illinois, 94 U. S. 113, 130, 24 L. ed. 77, 85; Smyth v. Ames, 169 U. S. 466, 522, 42 L. ed. 819, 840, 18 Sup. Ct. Rep. 418; Minnesota Rate Cases (Simpson v. Shepard) 230 U. S. 352, 57 L. ed. 1511, 48 L.R.A. (N.S.) 1151, 33 Sup. Ct. Rep. 729, Ann. Cas. 1916A, 18; People v. Budd, 117 N. Y. 1. 4 Chamberlayne, Ev. p. 4025, §§ 2893, 5 L.R.A. 659, 15 Am. St. Rep. 460, 222900; James v. Wharton, 3 McLean, 492. N. E. 670; Covington & L. Turnp. Road Fed. Cas. No. 7,187; Chicago Lumbering Co. v. Sanford, 164 U. S. 578, 596, 41 Co. v. Hewitt, 12 C. C. A. 129, 22 U.

Reversible error was committed in the admission of respondent's books.

App. 646, 64 Fed. 314; Rowland v. Boyle, | U. S. 423, 53 L. ed. 581, 29 Sup. Ct. Rep. 244 U. S. 106, 61 L. ed. 1022, P.U.R. 357; Shepard v. Northern P. R. Co. 184 1917C, 685, 37 Sup. Ct. Rep. 577.

Mr. John P. O'Brien argued the cause, and, with Messrs. James A. Donnelly, Harry Hertzoff, and Alex I. Hahn, filed a brief for Edward Swann:

Defendants have not had a fair trial. Kings County Lighting Co. v. Lewis, 110 Misc. 204, 180 N. Y. Supp. 570; Bennett v. Harris, 68 Misc. 507, 124 N. Y. Supp. 797; Dreyer v. Ershowsky, 156 App. Div. 27, 140 N. Y. Supp. 819; Kleinert v. Federal Brewing Co. 107 App. Div. 485, 95 N. Y. Supp. 406; Hartenstein v. Bindseil, 164 N. Y. Supp. 102. To hold that, while abnormal conditions continued, the complainant must have its profits, while millions were strained to the breaking point to gain a bare subsistence, is to give to the Constitution a meaning its framers never intended.

Steenerson v. Great Northern R. Co. 69 Minn. 353, 72 N. W. 721; Matthews v. Corporation Comrs. 106 Fed. 9; Knoxville v. Knoxville Water Co. 212 U. S. 15, 53 L. ed. 380, 29 Sup. Ct. Rep. 148; Darnell v. Edwards, 244 U. S. 564, 569, 61 L. ed. 1317, 1321, P.U.R.1917F, 64, 37 Sup. Ct. Rep. 701; Kings County Lighting Co. v. Lewis, 110 Misc. 204, 180 N. Y. Supp. 570; Re Consolidated Gas & E. L. & P. Co. (Md.) P.UR.1921A, 649: Re Freeport Gas Co. (l.) P.U.R.1921A, 687; Re Metropolitan West Side Elev. R. Co. (Ill.) P.U.R.1921B, 293; Re Kingston Gas & E. Co. (N. Y. 2d Dist.) P.U.R.1921B, 82.

The judicial power of declaring laws unconstitutional will not be exercised by this court except in the clearest cases.

Fed. 765; Palatka Waterworks Co. v. Palatka, 127 Fed. 161; Sinking Fund Cases, 99 U. S. 700, 718, 25 L. ed. 496, 501; Fletcher v. Peck, 6 Cranch, 128, 3 L. ed. 175; Montana, W. & S. R. Co. v. Morley, 198 Fed. 991.

Complainant's books of account, erroneously admitted in evidence over defendant's objections and exceptions, are not prima facie proof of their contents.

Des Moines Gas Co. v. Des Moines, 238 U. S. 153, 163, 59 L. ed. 1244, 1250, P.U.R.1915D, 577, 35 Sup. Ct. Rep. 811; Knoxville v. Knoxville Water Co. 212 U. S. 1, 8, 53 L. ed. 371, 378, 29 Sup. Ct. Rep. 148; Ex parte Young, 209 U. S. 123, 52 L. ed. 714, 13 L.R.A. (N.S.) 932, 28 Sup. Ct. Rep. 441, 14 Ann. Cas. 764; People ex rel. New York R. Co. v. Public Service Commission, 223 N. Y. 378, P.U.R.1918F, 125, 119 N. E. 848; San Diego Land & Town Co. v. National City, 174 U. S. 739, 754, 43 L. ed. 1154, 1160, 19 Sup. Ct. Rep. 804; Consolidated Safety Pin Co. v. Humbert, 128 N. Y. Supp. 711; New York v. Second Ave. R. Co. 102 N. Y. 572, 55 Am. Rep. 839, 7 N. E. 905; Blum v. Davis, 95 Misc. 140, 159 N. Y. Supp. 207; Pneumatic Signal Co. v. Texas & P. R. Co. 216 N. Y. 374, 110 N. E. 771; The Norma, 15 C. C. A. 553, 35 U. S. App. 421, 68 Fed. 509; Wigmore, Ev. § 1530, p. 1895; 17 Cyc. 394, 395.

Complainant's proof of the details. which enter into the cost of the manufacture and distribution of gas is wholly defective.

Ferguson v. Hubbell, 97 N. Y. 507, 49 Am. Rep. 544; Van Wycklyn v. Brooklyn, 118 N. Y. 424, 24 N. E. 179; Pearce v. Stace, 207 N. Y. 506, 101 N. E. 434; Carlson v. Oceanic Steam Nav. Co. 109 N. Y. 359, 16 N. E. 546.

As the complainant has utterly failed to show that its purchases of oil were reasonably, prudently, and economically made, the amounts alleged to have been paid by it for oil should not be allowed in its operating expenses.

Kings County Lighting Co. v. Lewis, 110 Misc. 204, 180 N. Y. Supp. 570.

Detroit United R. Co. v. Detroit, 248 U. S. 442, 63 L. ed. 348, P.U.R.1919A, 929, 39 Sup. Ct. Rep. 151; Knoxville v. Knoxville Water Co. 212 U. S. 8, 53 L. ed. 378, 29 Sup. Ct. Rep. 148; Minnesota Rate Cases (Simpson v. Shepard) 230 U. S. 352, 419, 57 L. ed. 1511, 1549, 48 L.R.A. (N.S.) 1151, 33 Sup. Ct. Rep. 729, Ann. Cas. 1916A, 18; Ex parte Young, 209 U. S. 123, 165, 52 L. ed. 714, 731, 13 L.R.A. (N.S.) 932, 28 Sup. Ct. Rep. 441, 14 Ann. Cas. 764; Atchison, T. & S. F. R. Co. v. United States, 232 U. S. 199, 221, 58 L. ed. 568, 577, 34 Sup. Ct. Rep. 291; Lincoln Gas & E. L. Co. Willcox v. Consolidated Gas Co. 212 v. Lincoln, 223 U. S. 357, 56 L. ed. 469, U. S. 19, 47, 53 L. ed. 382, 397, 48 L.R.A. 32 Sup. Ct. Rep. 271; Des Moines Gas (N.S.) 1134, 29 Sup. Ct. Rep. 192, 15 Co. v. Des Moines, 238 U. S. 153, 163, 59 Ann. Cas. 1034; Cumberland Teleph. & L. ed. 1244, 1250, P.U.R.1915D, 577, 35 Teleg. Co. v. Louisville, 187 Fed. 637, Sup. Ct. Rep. 811; Railroad Commission | 647; Lincoln Gas & E. L. Co. v. Lincoln, v. Cumberland Teleph. & Teleg. Co. 212 182 Fed. 928; Public Service Gas Co.

The franchises should not be included in the property upon which complainant is entitled to a return.

Γ

People ex rel. New York v. New York R. Co. 217 N. Y. 310, 112 N. E. 49.

the judges, including those who consti-pany because they realized that it had tuted the statutory court, on preliminary the right to continue the occupation of motions for an injunction, regarded a the streets. comparatively short period as sufficient. Springfield Gas & E. Co. v. Barker, 231 Fed. 333; Brooklyn Union Gas Co. v. Nixon, Fed.; Joplin & P. R. Co. v. Public Service Commission, 267 Fed. 584; New York & Queens Gas Co.v. Newton, P.U.R.1921A, 530, 269 Fed. 289; Kings County Lighting Co. v. Nixon, P.U.R.1921A, 737, 268 Fed. 143. In the previous litigation over the 80-cent statute, the circuit court allowed to the complainant the sum of $12,000,000, as the value of its special franchises, including the item of $7,781,000 (157 Fed. 879). This court confined the value to the $7,781,000, at which the franchises had been capitalized.

212 U. S. 47, 53 L. ed. 397, 48 L.R.A. (N.S.) 1134, 29 Sup. Ct. Rep. 192, 15 Ann. Cas. 1034; Gelpeke v. Dubuque, 1 Wall. 175, 206, 17 L. ed. 520, 525; Muhlker v. New York & H. R. Co. 197 U. S. 544, 49 L. ed. 872, 25 Sup. Ct. Rep. 522. Franchises proceed from the state, and not from the municipality, unless the municipality is expressly authorized

to grant them.

New York v. Bryan, 196 N. Y. 165, 89 N. E. 467; People ex rel. New York v. New York R. Co. 217 N. Y. 315, 112 N. E. 49; Pawhuska v. Pawhuska Oil & Gas Co. 250 U. S. 394, 399, 63 L. ed. 1054, 1057, P.U.R.1919E, 178, 39 Sup. Ct. Rep. 526.

Unless expressly limited in the grant, franchises are perpetual.

People v. O'Brien, 111 N. Y. 38, 2 L.R.A. 255, 7 Am. St. Rep. 684, 18 N. E. 692; Southampton v. Jessup, 162 N. Y. 127, 56 N. E. 538; New York C. & H. R. R. Co. v. New York, 202 N. Y. 212, 95 N. E. 638; Northern Ohio Traction & Light Co. v. Ohio, 245 U. S. 574, 585, 62 L. ed. 481, 488, L.R.A.1918E, 865, 38 Sup. Ct. Rep. 196.

Even if it should be conceded, for the sake of the argument, that the city had the power to limit the period during which mains might be laid in the streets, this power would not permit the right and duty of the company to use and maintain the mains which had been laid during the permissible period.

New York v. New York Mut. Gaslight Co. 135 App. Div. 268, 120 N. Y. Supp. 776, affirmed in 207 N. Y. 647, 100 N. E.

427.

In the absence of clear proof to the contrary, this court will presume that the public officials have done their duty, and did not take action against the com

It makes no difference, in a case of this kind, whether the company has a perpetual franchise, or whether it is merely occupying the streets under a revocable license. So long as it is performing its duty which the law places upon it, of supplying the public with gas, with the acquiescence of the municipal authorities, it is entitled to an adequate return upon all its property as a going concern.

Denver v. Denver Union Water Co. 246 U. S. 178, 62 L. ed. 649, P.U.R. 1918C, 640, 38 Sup. Ct. Rep. 278; Detroit United R. Co. v. Detroit, 248 U. S. 429, 435, 63 L. ed. 341, 345, P.U.R.1919A, 929, 39 Sup. Ct. Rep. 151.

Mr. William L. Ransom also argued the cause, and, with Messrs. Charles A. Vilas and Jacob H. Goetz, filed a brief for the Consolidated Gas Company:

The computation of the cost of manufacturing and distributing gas, by which

the district court demonstrated the 80

cent rate confiscatory by a wide margin, proceeded on a basis of such rigorous eliminations and reductions as to leave the appellants (defendants below) with no grounds for assignment of material

errors.

V.

Brooklyn Borough Gas Co. v. Public R. 81, P.U.R.1918F, 358; Re Peoria Co. Service Commission, 17 N. Y. Off. Dept. (I.) P.U.R.1918E, 90; Knowlton Farmington Village Corp. (Me.) P.U.R. 1918E, 891; Re Indianapolis Water Co. (Ind.) P.U.R.1917E, 624; Re Colorado Springs Light, Heat & P. Co. (Colo.) P.U.R.1917F, 411; Re Hydro Electric Light & P. Co. (Ind.) P.U.R.1918A, 334; Nunn v. Sutter-Butte Canal Co. (Cal.) P.U.R.1918E, 588; Bluefield v. Bluefield Waterworks & Improv. Co. (W. Va.) P.U.R.1919A, 790; Re Home Teleph. Co. (Ind.) P.U.R.1919C, 209; Re Champaign & U. Water Co. (Ill.) P.U.R.1919E, 798; Re Capital Teleph. Co. (Mo.) P.U.R.1919E, 592.

The complainant's books of account, some offered by the appellee (complainant below), and others offered by the appellants (defendants below), properly admitted in evidence.

were

Rowland v. Boyle, 244 U. S. 106, 108, 61 L. ed. 1022, 1023, P.U.R.1917C, 685, 37 Sup. Ct. Rep. 577; Givens v. Pierson, 167 Ky. 574, 181 S. W. 324, Ann. Cas. 1917C, 956; 4 Chamberlayne, Ev. §§

3085, 3089; 2 Elliott, Ev. § 460; 3 Jones,, A.L.R. 1415, 265 Fed. 191; Mawhinney Ev. § 569; 2 Wigmore, Ev. § 1630; Des v. Millbrook Woolen Mills, 231 N. Y. Moines Gas Co. v. Des Moines, 199 Fed. 290, 15 A.L.R. 1506, 132 N. E. 93. 204, 238 U. S. 153, 59 L. ed. 1244, P.U.R. 1915D, 577, 35 Sup. Ct. Rep. 811; Northern P. R. Co. v. Keyes, 91 Fed. 47; Feuchtwanger v. Manitowoc Malting Co. 109 C. C. A. 461, 187 Fed. 713; State v. Stephenson, 69 Kan. 405, 105 Am. St. Rep. 171, 76 Pac. 905, 2 Ann. Cas. 841; Corkran v. Rutter, 76 N. J. L. 375, 69 Atl. 954; Squires v. O'Connell, 91 Vt. 35, 99 Atl. 269; San Pedro Lumber Co. v. Reynolds, 121 Cal. 74, 53 Pac. 410; Fielder v. Collier, 13 Ga. 496; Schaefer v. Georgia R. Co. 66 Ga. 39; Minnesota & D. Cattle Co. v. Chicago & N. R. Co. 108 Minn. 470, 122 N. W. 494; Heike v. United States, 112 C. C. A. 615, 192 Fed. 83; Donovan v. Boston & M. R. Co. 158 Mass. 451, 33 N. E. 583; St. Louis & S. F. R. Co. v. Sutton, 169 Ala. 389, 55 So. 989, Ann. Cas. 1912B, 366; Hitchner Wall Paper Co. v. Pennsylvania R. Co. 158 Fed. 1014; Louisville & N. R. Co. v. Daniel, 122 Ky. 256, 3 L.R.A. (N.S.) 1190, 91 S. W. 691; Meyer v. Brown, 130 Mich. 449, 90 N. W. 285; Naas v. Chicago, R. I. & P. R. Co. 96 Minn. 84, 104 N. W. 717; Pittsburg, C. C. & St. L. R. Co. v. Chicago, 242 Ill. 179, 44 L.R.A. (N.S.) 358, 134 Am. St. Rep. 316, 89 N. E. 1022; Reyburn v. Queen City Sav. Bank & T. Co. 96 C. C. A. 373, 171 Fed. 609; Continental Nat. Bank v. First Nat. Bank, 108 Tenn. 374, 68 S. W. 497; Wisconsin Steel Co. v. Maryland Steel Co. 121 C. C. A. 507, 203 Fed. 403; Chesapeake & O. R. Co. v. Stojanowski, 112 C. C. A. 310, 191 Fed. 720; Kings County Lighting Co. v. Nixon, P.U.R.1921A, 737, 268 Fed. 143; New York & Q. Gas Co. v. Newton, P.U.R.1921A, 530, 269 Fed. 277; Butler v. Lewiston, A. & W. Street R. Co. (Me.) P.U.R.1916D, 36.

Appellee is entitled to have its rates such as to earn an adequate return upon the present value of its property; that present value is not identical with, or measured by, the original cost, although the court and master correctly found that the present value substantially exceeded the "original cost" of the property.

Elizabethtown Gaslight Co. v. Public Utility Comrs. 95 N. J. L. 18, 111 Atl. 729; Lincoln Gas & E. L. Co. v. Lincoln, 250 U. S. 256, 63 L. ed. 968, 39 Sup. Ct. Rep. 454; United States ex rel. Kansas City Southern R. Co. v. Interstate Commerce Commission, 252 U. S. 178, 64 L. ed. 517, 40 Sup. Ct. Rep. 187; Municipal Gas Co. v. Public Service Commission, 113 Misc. 751, 186 N. Y. Supp. 541; Joplin & P. R. Co. v. Public Service Commission, 267 Fed. 584; St. Joseph R. Light, Heat, & P. Co. v. Public Service Commission, 268 Fed. 267; Lan- . don v. Court of Industrial Relations, P.U.R.1921A, 807, 269 Fed. 433.

The Federal income tax is chargeable to the operating expenses of a gas corpo

ration.

The court below ruled correctly that no deduction should be made for socalled depreciation, in ascertaining the sum upon which the respondent gas company was entitled to earn a fair return.

Kansas City Southern R. Co. v. United States, 231 U. S. 423, 451, 452, 58 L. ed. 296, 307, 308, 52 L.R.A. (N.S.) 1, 34 Sup. Ct. Rep. 125; Consolidated Gas Co. v. New York, 157 Fed. 854; Nashville, C. & St. L. R. Co. v. United States, 269 Fed. 351; Landon v. Court of Industrial Relations, P.U.R.1921A, 807, 269 Fed. 445; Pacific Gas & E. Co. v. San Francisco, 273 Fed. 937; Knoxville v. Knoxville Water Co. 212 U. S. 1, 53 L. ed. 371, 29 Sup. Ct. Rep. 148; Kansas City Southern R. Co. v. United States, 231 U. S. 423, 58 L. ed. 296, 52 L.R.A. (N.S.) 1, 34 Sup. Ct. Rep. 125; Pioneer Teleph. & Teleg. Co. v. State, 64 Okla. 304, L.R.A.1918C, 138, P.U.R.1918A, 465, 167 Pac. 995; Ben Avon v. Ohio Valley Water Co. 9 Pa. Corp. Rep. 404, reaffirmed in 68 Pa. Super. Ct. 561, P.U.R.1918A, 161, 75 Pa. Super. Ct. 290, see also 253 U. S. 287, 64 L. ed. 908, 40 Sup. Ct. Rep. 527; Lewis's Appeal, 67 Pa. 166; Michigan Minnesota Rate Cases (Simpson Pipe Co. v. Fremont Ditch, Pipe Line & Shepard) 230 U. S. 352, 57 L. ed. 1511, Reservoir Co. 49 C. C. A. 324, 111 Fed. 48 L.R.A. (N.S.) 1151, 33 Sup. Ct. Rep. 284; Nitro Powder Co. v. Agency of 729, Ann. Cas. 1916A, 18; People ex rel. Canadian Power & Foundry Co. New New York R. Co. v. Public Service ComYork Journal, March 29, 1918; Roxford mission, 223 N. Y. 373, P.U.R.1918F, Knitting Co. v. Moore & Tierney, 11125, 119 N. E. 848; Havre de Grace &

Municipal Gas Co. v. Public Service Commission, 113 Misc. 748, 186 N. Y. Supp. 541.

There is no merit in the special defense based on claimed non-compliance by the appellee with the 22-candle power standard, and no merit in the appellants' other contentions arising out of the same subject-matter.

V.