plans and specifications for the proposed improvement made the estimate of cost of the proposed highway to amount to $578,711.10, and an assessment of benefits aggregating $663,457.50, was made.

On December 11, 1919, the defendant entered into an agreement with the contractors, to whom the certificates in controversy were issued in part payment and bonds to secure the faithful performance of the work were executed by the contractors as required by the act.

By acts passed in 1920 additional roads were added to the district and a new assessment of benefits authorized. The plans for the entire work of the original as well as the additional roads involved a cost of $1,663,347.19, and an assessment of benefits was made, amounting to $2,905,241.23, which was confirmed on October 1, 1920.

The total amount of certificates of indebtedness issued by the defendant district is about $281,897.88, which is in addition to $500,000 of bonds previously issued and sold by the district, and the money used to pay the contractors. By an act of the General Assembly of 1923 the original act creating the district was amended by providing that the road should be constructed from Prothro's gin to Booker, and thence northeasterly along the Missouri Pacific Railroad to the county line, as originally planned, and that nothing more should be done on the main line over the hills and beyond the end of the concrete pavement that leads north of North Little Rock, except to complete the bridges and finish the road as a dirt road.

In pursuance of the act of 1923 the commissioners made their plans for the improvement showing an estimated cost for the work done and to be done in the sum of $1,317,957.10, and thereupon an assessment of benefits aggregating $1,909,962 was made and confirmed on August 3, 1923. The validity of this assessment was sustained by the Supreme Court in Massey & Miller v. Arkansas & Missouri Highway District in Pulaski County, 163 Ark. 63, 259 S. W. 387. The work of construction for which the certificates of indebtedness in suit were issued consisted of work upon the main road, and the fact that the work was going on was known to substantially all the landowners in the district, and none of them interposed any objection to the making of the improvement or to the issuance of the said certificates of indebtedness. The first complaint made by the landowners was in December,

1921, seeking to hold the commissioners to a personal account for the misappropriation of the funds of the district, which was some time after all the certificates in controversy were issued in payment of the work; but this suit has not been brought to a hearing. The commissioners have never repudiated the contract, but have always recognized its existence, and the certificates sued on represent the amounts due the contractors according to the terms of the contracts. While the original assessment of benefits aggregating $663,458.50 was in force, the district entered into separate contracts with various contractors to whom the certificates of indebtedness in controversy were issued. There was also filed with the agreed facts a certified copy of the petition by the commissioners filed in the county court in August, 1923, of the assessment of benefits made, amounting to $1,919,962.99, and a certificate of the commissioners levying an annual tax of 5 per cent. of the benefit assessments, and also a certified copy of the order of the county court approving the 1919 assessment and authority granted to issue bonds in the amount of $500,000.

[1] I. Are the plaintiffs entitled to recover, regardless of the invalidity of the certificates, as claimed by their counsel, upon the ground set out in the agreed facts, that they are bona fide holders thereof, having acquired them in due course?

If these certificates had been issued by a natural person or a private corporation, and purchased in due course for a valuable consideration, before maturity, without notice of any infirmities, such holder would clearly be entitled to recover on them.

But this does not apply to a subordinate agency of a state, unless by recitals in the bonds or certificates of indebtedness it is estopped from pleading their invalidity. Buchanan v. Litchfield, 102 U. S. 278, 292, 26 L. Ed. 138; Merchants', etc., Bank v. Bergen County, 115 U. S. 384, 391, 6 S. Ct. 88, 29 L. Ed. 430; Evansville v. Dennett, 161 U. S. 434, 16 S. Ct. 613, 40 L. Ed. 760; Gunnison County Commissioners v. Rollins, 173 U. S. 255, 268, 19 S. Ct. 390, 43 L. Ed. 689. In Merchants' Bank v. Bergen County, supra, it was held, quoting from the syllabus:

"The bona fide holder, for value, of a bond of a municipal corporation, containing no recitals, apparently one of a series issued under authority of an act of the Legislature of the state, but actually issued in excess of the number of bonds authorized

commissioners may annually order a reassessment of the benefits; and in that event, such reassessment shall be filed, advertised and equalized as in the case of the first assessment; but if the district has borrowed money or incurred indebtedness, the total amount of the assessment of benefits shall never be diminished."

[5] By stipulation of counsel it is shown that the 1920 assessment of benefits was in strict conformity with these provisions of this section of the act of 1919. It was approved, after it had been equalized, on October 1, 1920. The first certificates of indebtedness sued on were issued on June 12, 1920, and the others monthly thereafter until April 11, 1921. As was held by the Supreme Court of Arkansas in Averitt v. Dodd, 265 S. W. 70 (opinion filed October 13, 1924): "When the issues in a former action, involving the validity of a contract for the construction of a highway, were not involved in the later action, being different in the two suits, the later action is not precluded by the adjudication in the former action."

[6] The act of 1920 having been held void, for failing to authorize an assessment of benefits, it may be treated as if it had never been enacted, and as the act of 1919 authorized new assessments of benefits annually, it must be held that the 1920 assessment was made in pursuance of section 16 of the act of 1919.

The certificates issued prior to the confirmation of the assessment of benefits of 1920 made on October 1, 1920, as shown by the complaints, in which they are set out, amounted in the aggregate to $97,000, which, added to the $500,000 of bonds issued, only makes a total of $597,000, while the assessment of benefits in 1919 aggregated $663,458.50, or $661,458.50 less than the assessment of benefits, and also less, after deducting 10 per cent. for overhead expenses.

[7] It therefore appears that the certificates of indebtedness in excess of the assessment of benefits made in 1919 were issued after the 1920 assessment had been made, equalized, and confirmed.

It is probable that, but for the reassessments in 1920, the contractors would not have continued the work, if the district was without means to pay them; but, as the reassessment provided the means of payment, they concluded that they could safely proceed with the work and be paid therefor.

In view of the fact that the agreed facts

establish that none of these certificates was issued for the construction of the lateral roads, provided for by the act of 1920; that the roads were constructed in conformity with the terms of the contracts, and the district has the benefit of them; that the assessments for the payment of the entire indebtedness of the district, including all the certificates in suit, are being collected on the basis of 5 per centum annually—it would be a great injustice to deprive the holders of the certificates, and consequently the contractors, who as indorsers would be liable to their transferees, of what is justly due them for their work, while the district is enjoying the benefit of the roads constructed by them. What was said in Douglas County Commissioners v. Bolles, 94 U. S. 104, 24 L. Ed. 46, "Common honesty demands that a debt thus incurred should be paid," and in Tulare Irrigation District v. Sheppard, 184 U. S. 1, 22 S. Ct. 531, 46 L. Ed. 773, in which the facts were similar, applies with force to the instant case.

Other questions have been ably argued; but, in view of the conclusions reached by the court, it is unnecessary to pass on them.

Let there be judgment for the plaintiffs for the face of the certificates and interest.

2. Gas 14(1)-Remunerative past dividends cannot affect right to present fair earnings.

That gas company paid remunerative dividends in past cannot affect its right to earn fair return on its invested capital in present or future.

3. Gas 14(1)-Statutory rate Imposed on gas company held confiscatory.

Findings of a special master that the maxito complainant company held fully supported by mum rate fixed by statute was confiscatory as evidence showing a continuous decrease in net earnings for three years and an actual loss in the last year.

In Equity. Suit by the Brooklyn Union Gas Company against Lewis Nixon, constituting the Public Service Commission of the State of New York, First District, Charles D. Newton, as Attorney General of the State of New York, and Harry E. Lewis,

MAYER, District Judge. 1. Fifteen years ago, the so-called 80-cent gas law was enacted. Laws of 1906, chapter 125. From that time until the very recent enactment of Laws of 1921, chapter 134, there was no public body nor agency which had jurisdiction to regulate the price of gas, beyond the statutory rate, so far as concerned this and certain other gas companies in the city of New York. The World War so completely changed and disturbed economic conditions that standards useful in normal times ceased to be of value. Men of ordinary sense soon learned that prophecy was a lost art, and experience abundantly proved that what was reasonably to be expected in normal times failed to furnish any basis for guidance during the time when not alone the United States, but the entire world, was passing through an extraordinary period, first of war disturbance and then of economic readjustment and rearrangement.

[1] Industrial differences, leading to strikes, here and elsewhere, unusual transportation conditions and difficulties, lessened production in other countries of essential factors, such as oil, or inability free ly to move such factors in the channels of world commerce, and greater uses in other business activities of some of the essentials needed for gas manufacture, all combined to upset those calculations and forecasts which capable business men were accustomed to make in normal times. When, therefore, it is plain that an enterprise held within the limits of a statute to a definite maximum charge has faced and is facing cold facts which spell confiscation, a period much less than would otherwise be necessary may be taken as a test period, and so the courts have held in a number of cases now well familiar to litigants and counsel in this case.

To prolong the period would work a practical injustice. The special master in this

case has based his conclusions on the years 1918, 1919, and 10 months of 1920. Pursuant to the direction of the court, he held his first session on September 8, 1920, and thereafter he held hearings almost continutime, for purposes of expedition, plaintiff ously to February 24, 1921. Prior to that

had furnished defendants with elaborate

data, the failure to furnish which would undoubtedly have considerably prolonged the case before the special master.

To go back of 1918 would not have served any useful purpose, but each year would have added months of hearings, without adding enlightenment as to results. In cases of this kind, expedition, so far as is consistent with a full inquiry, is necessary. If the rate imposed on a public utility fails to yield a fair return, the public suffers in the end by depreciated plant and equipment and the inability to furnish proper service. New money is made more difficult to obtain, and investors become timid.

It is contended, however, that the future indicates a trend toward falling prices. This may prove true, but the extent of the decrease and the time when the decrease will become sufficient to affect materially the actual results is all in the realm of speculation, and the court is concerned only with the facts before it, and not with the uncertainty of guessing what the future will bring. It is therefore held that the test period was sufficient.

2. The master has made a full and thoughtful report. He has resolved every doubt against the plaintiff. He was appointed because, with his experience as a former Deputy Attorney General of this state and as a referee in important special franchise cases, he is familiar with controversies of this character. He saw and heard the witnesses, and his conclusions in weighing the testimony are sound, and are well confirmed by the record. Much of the detail need not be here repeated, for it is well set forth in the report.

[2] 3. The Contingency Fund. There is much argued upon this point. If there were an actual cash contingency fund on hand, it might well be contended that it should now be utilized to carry plaintiff over a confiscatory period. This so-called fund, however, does not exist as cash. It has gone into the property in one form or another. That dividends have been paid in the past does not produce a cash fund in the present. As was said by the statutory court: