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and will have no occasion to use for years to come. Spring Valley Water Co. v. San Francisco, 165 Fed. Rep. 697; San Diego L. & T. Co. v. Jasper, 189 U. S. 429; Water District v. Water Co., 99 Maine, 376; S. C., 59 Atl. Rep. 539.

In determining the value of a telephone plant when it charges that a rate ordinance confiscates its property the true method is to ascertain what it would cost to reproduce a plant, then deduct from the reproduction cost the amount the plant in question has depreciated. Knoxville v. Water Co., 212 U. S. 1.

In determining the value of a telephone plant where it claims that a city rate ordinance confiscates its property the value of the franchise should not be considered. Beale and Wyman's Work on Railroad Rate Regulation, § 362; Brunswick & T. Water District v. Maine Water Co., 99 Maine, 371.

Rates charged by telephone companies in other cities of substantially the same size and similarly located as the city in question are a fair criterion in determining the reasonableness of telephone rates. Interstate Com. Comm. v. Southern Railway Co., 115 Fed. Rep. 741; Interstate Com. Comm. v. East Tenn., Va. & Ga. Ry., 85 Fed. Rep. 107.

Mr. William. L. Granbery and Mr. Alexander Pope Humphrey, with whom Mr. Alexander Pope Humphrey, Jr., was on the brief, for appellee.

MR. JUSTICE HOLMES delivered the opinion of the court.

This is a bill to prevent the enforcement of an ordinance of the City of Louisville fixing telephone rates, passed in 1909, after the attempt of the city to deprive the appellee of its franchise, when that seemed likely to fail. See Louisville v. Cumberland Telephone & Telegraph Co., 224 U. S. 649. The question raised is the usual one of con

225 U.S.

Opinion of the Court.

fiscation. In consequence of the conclusion to which we have come we shall make a much more summary statement of the facts than in other circumstances might be necessary. The case was referred to a Master and he reported in favor of the city. He was of opinion that in the first year after the ordinance should go into effect there would be a loss of $30,000, but that in another year or so, in view of the probable increase of subscribers, the company would get back to its former net revenue with a probable continuous increase thereafter, and would earn a sufficient return. The judge was of a different opinion, and for the purposes of the present decision only we shall adopt his figures subject to the changes that we shall state which leave us unprepared to sustain the decree without giving the ordinance a trial to show its actual effect.

The Judge's values were:
Plant, including toll lines ..

$1575000.00 Real estate. ..

162000.00 Supplies on hand ...

18000.00 Working capital.

33000.00

$1788000.00 Gross earnings for 1908, including 15%

of receipts from toll lines. This was
undisputed. .

$325838.30 The court added 10% more of the toll line receipts, making ..

330926.38 The Master was of opinion that the re

maining 85% should be added, mak-,
ing the total gross earnings.

369087.00 For the purpose of such an estimate as

this we think that the toll lines should
be either in or out, and if they are to
be counted in the property upon which
the appellee is not to be prevented by

VOL. CCXXV-28

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$369087.00

law from earning a fair return, as they are above, and the expenses charged to the appellee, the whole return from them should be added to the gross earnings of the appellee. So we take

the total gross earnings as.. Expenses as found by the

Master and accepted by the Judge ...

$216363.07 But this includes amount

charged to the Exchange
for the use of real estate
(less expenses for repairs),
which, in view of the
inclusion of real estate
above, it should not .... 11707.52

$204655.55 Deduct corrected expenses from gross

earnings .

204655.55

$164431.45

Net earnings.
Even if we deduct from the net earnings

a sum estimated by the Judge as neces-
sary above actual expenditures of 1908
to make good average depreciation..

24095.02

$140336.43

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30000.00

$110336.43

which would leave ..
or over six per cent. on the valuation

assumed.

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Suppose now that we leave out the toll lines.
Plant with real estate &c. as above. ... $1788000.00
Deduct toll lines estimated at.

125000.00

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$204655.55 Less toll line

expenses
which if estimated (in the
absence of satisfactory
proof as to their amount)
by dividing expenses, in
proportion to receipts
would be approximately 30000.00

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Which is nearly 7 per cent. or deducting

for loss of custom the first year..

30000.00

$89455.62 which is just above five per cent. on the Judge's valuation,

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We express no opinion whether to cut this telephone company down to six per cent. by legislation would or would not be confiscatory. But when it is remembered what clear evidence the court requires before it declares legislation otherwise valid void on this ground, and when it is considered how speculative every figure is that we have set down with delusive exactness, we are of opinion that the result is too near the dividing line not to make actual experiment necessary. The Master thought that the probable net income for the year that would suffer the greatest decrease would be 8.60 per cent. on the values estimated by him. The Judge on assumptions to which we have stated our disagreement makes the present earnings 51/17 per cent. with a reduction by the ordinance to 3/17 per cent. The whole question is too much in the air for us to feel authorized to let the injunction stand.

Decree reversed without prejudice.

MESSENGER v. ANDERSON.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE

SIXTH CIRCUIT.

No. 150. Argued January 19, 22, 1912.—Decided June 2, 1912.

Where the Circuit Court of Appeals has before it in the second trial

of the same case, a will previously construed by it, and meanwhile the highest court of the State in which the real estate affected is situated has construed the will differently, the Circuit Court of Appeals is not bound to adhere to its previous decision as being the law of the case.

It may follow, and in such a case it should lean toward an agreement with, the state court. In the absence of statute, the phrase "law of the case," as applied to

the effect of previous orders on the later action of the court rendering them in the same case, merely expresses the practice of courts gen

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