This suit was originally brought by the Indianapolis Water Company to restrain the enforcement of an order of the Public Service Commission of Indiana fixing a temporary schedule of rates pending the Commission's investigation. The District Court of three judges, 28 U.S.C. § 380, 28 U.S.C.A. § 380, denied an interlocutory injunction, and the temporary rates became effective. The Commission on December 30, 1932, adopted a different and permanent schedule of rates to be effective January 1, 1933. The Company then filed an amended and supplemental bill assailing those rates as confiscatory and invoking the Fourteenth Amendment of the Constitution of the United States. An interlocutory injunction was not sought and the case was properly heard in the District Court by a single judge. Indianapolis Water Company v. McCart, 13 F.Supp. 107; Smith v. Wilson, 273 U.S. 388, 47 S.Ct. 385, 71 L.Ed. 699; Stratton v. St. Louis Southwestern Ry. Co., 282 U.S. 10, 51 S.Ct. 8, 75 L.Ed. 135; Healy v. Ratta, 289 U.S. 701, 53 S.Ct. 522, 77 L.Ed. 1459. Pursuant to the Commission's final order, the Company filed the schedule of rates as prescribed, and these rates went into effect on January 1, 1933, and under that order have since been in effect without limitation of time.
The Commission found that the fair value of the Company's property as of November 1, 1932, was not less than $22,500,000 and that the income under the new rates would be 'approximately $1,400,000, or a return slightly in excess of six per cent' on that amount. The District Court appointed a special master, who received evidence between May 1, 1933, and August 10, 1933, and held a further and reopened session on October 18, 1933, when the hearing of evidence was closed. On April 18, 1934, the master offered to receive evidence as to the actual operations of the Company for 1933, but the respective parties informed the master that they did not desire to offer any such testimony. The master filed his report on May 18, 1934. The appraisals before the master were made as of April 1, 1933. He found the fair value of the Company's property to be $20,282,143 as of that date and also as of the time of filing his report. He estimated and found that the income applicable to return for the year 1933 and for a reasonable time thereafter would be $1,294,566.51. He concluded that the rates were not confiscatory.
After a hearing upon exceptions to the master's report, the District Court entered a final decree on November 29, 1935, dismissing the amended and supplemental bill of complaint. 13 F.Supp. 110. The court found that the value of the Company's property was $21,392,821 as of April 1, 1933, and, although the evidence of value had been addressed to that date, the court went further and found in its decree that this amount 'was the fair and reasonable value thereof as of the time of filing the report of the Special Master herein and as of the date of these findings and that such value will continue to be a fair and reasonable value of the plaintiff's used and useful property for a reasonable time in the future.' The court adopted the finding of the master that the income would be not less than $1,294,566.51 for the year 1933 and for a reasonable time thereafter.
Upon appeal, the Circuit Court of Appeals, reviewing the evidence upon disputed points, found that there should be certain increases, amounting to $975,437, in the rate base, making it $22,368,258. The court observed that from April 1, 1933, the valuation date, to the date of the decree of the District Court, November, 29, 1935, thirty-two months had intervened; that this period was no longer one for prophecy but had passed 'from the field of speculation to one of experience'; and that experience had shown that in that period there had been 'a constant and definite trend upward in commodity values.' 7 Cir., 89 F.2d 522, 525, 526. With respect to income, the court said that the amount found by the master for 1933 ($1,294,566.51) was about $57,000 higher than that indicated by the testimony of any witness, but the finding was not overruled in view of the failure of the Company to take advantage of its opportunity to show the actual receipts and disbursements for that calendar year. 7 Cir., 89 F.2d 522, at pages 527, 528. Holding that the District Court had erred in determining in its decree that the valuations as of April 1, 1933, were applicable to the date of the decree in November, 1935, without taking appropriate account of changed conditions in the interval, the court reversed the decree and remanded the cause for further proceedings in accordance with the views expressed in its opinion. 7 Cir., 89 F.2d 522, at page 528.