This is a direct appeal, under section 266 of the Judicial Code (28 USCA § 380), from a final decree, following an interlocutory decree, of a District Court of three judges for Southern Ohio, 33 F.(2d) 318. The decree enjoined appellants, the superintendent of public works of Ohio, a state officer, the city of Toledo, certain villages in Ohio, and the board of county commissioners of Lucas county, Ohio, from draining or otherwise interfering with the flow of water in a section of the Miami & Erie Canal in such manner as to interfere with rights of appellee to take surplus water from the canal under certain leases and a grant acquired by it or its assignors from the state. Appellee contends that the act of the Ohio Legislature of May 11, 1927, under which appellants purport to act, is in violation of the Federal Constitution.
The section of the canal in question extends from a point on the Maumee river northeasterly along the river to Toledo and thence to Lake Erie. The water from the river enters this section of the canal at its western end and flows past the Providence Mills involved in No. 675, Kirk v. Providence Mill Co., 279 U.S. 807, 49 S.C.t. 511, 73 L. Ed. -. Some 16 miles from the inlet is a side cut through which water may be discharged into the river and so diverted from the rest of the canal. The section from the inlet to this side cut is described as 'lineal part 2.' Appellee's plant is located on lineal part 1, which extends from the side cut northeasterly to the outlet at Toledo, and is thus dependent for its supply of water on a continuous flow through lineal part 2.
The several leases were granted by the state, acting through its board of public works, in 1895, 1901, two in 1903, and 1906. Each for a specified consideration or a stipulated rental, purported to grant for a period of 30 years, with privilege of renewal, the right to take from the canal specified amounts of water for hydraulic purposes. In 1910 the lease of 1895 was supplemented and amended to provide for an increased amount of water. For present purposes, we may assume that all rights under these leases and any extension or renewal of them are vested in appellee, and that each has been from time to time properly renewed at the expiration of its term.
The canal in question and the waters passing through it are the property of the state, and all the leases were granted under the provisions of the Act of March 23, 1840 (38 Ohio Laws, p. 87), authorizing upon specified terms, disposition for hydraulic purposes of the surplus waters of the canals of the state not required for navigation. By section 22 of that act it was provided that no right to use the waters should be disposed of 'except such as shall accrue from the surplus water of the canal * * * after supplying the full quantity necessary for the purposes of navigation,' and by section 23 it was enacted that the leases should contain, as did the present leases in substance, a stipulation that the state or its authorized agents 'may at any time resume the privilege or right to the use of water, or any portion thereof, whenever it may be deemed necessary for the purpose of navigation, or whenever its use for hydraulic purposes shall be found in any manner to interfere with and injuriously affect the navigation. * * *'
Following the acquisition of its first lease in 1900, appellee constructed a small hydraulic electric plant on land adjacent to lienal part 1. In 1910, appellee, having secured three of the other leases, reconstructed its plant, and, pursuant to an agreement with the state, improved the canal at large expense, and is now using the water from it in the business of generating and selling electric light and power.