(40 Sup.Ct.)

the right to engage in it can be made by the Philippine government dependent upon the performance of a particular duty, it is obvious that the exaction of such a duty, as such prerequisite condition, can be neither a denial of due process or a taking of property without compensation.

States are applicable and are controlling upon Congress when it comes to exert, in virtue of the sovereignty of the United States, legislative power over territory not forming ⚫407

States, 221 U. S. 325, 332, 31 Sup. Ct. 590, 55 L. Ed. 753; Ocampo v. United States, 234 U. S. 91, 98, 34 Sup. Ct. 712, 58 L. Ed. 1231.

part of the United States because not *incorporated therein. Downes v. Bidwell, 182 U. [4] Coming to the proposition to which the S. 244, 21 Sup. Ct. 770, 45 L. Ed. 1088; Hacase is therefore ultimately reduced, we see wail v. Mankichi, 190 U. S. 197, 220, 23 Sup. no reason to doubt that the Philippine gov-Ct. 787, 47 L. Ed. 1016; Dorr v. United ernment had the power to deal with the States, 195 U. S. 138, 24 Sup. Ct. 808, 49 L. coastwise trade so as to permit its enjoy-Ed. 128, 1 Ann. Cas. €97; Dowdell v. United ment only by those who were willing to comply with the condition as to free mail carriage, and therefore that no violation of individual right could have resulted from giving effect to such condition. We reach this conclusion because the possession and exercise of such power in the Islands before their cession to the United States, its exertion under the military government of the United States which followed the cession, and its continuance by every form of civil

#406

*government created by Congress for the Islands, compels to that view in the absence of any law expressly providing to the contrary or which by reasonable implication leads to that result.

The error which thus underlies the whole argument becomes more conspicuously manifest by recalling that Congress in the act of 1904 expressly provided that the authority which that act gave should exist only until Congress should otherwise provide, and, besides, that before the passage of that act, Act July 1, 1902, § 86 (32 Stat. 691, 712), provided "that all laws passed by the government of the Philippine Islands shall be reported to Congress, which hereby reserves the power and authority to annul the same." Judgment reversed.

(252 U. S. 23)

PENNSYLVANIA GAS CO. V. PUBLIC
SERVICE COMMISSION, SECOND DIST.,
OF STATE OF NEW YORK et al.

1920.)

No. 330.

THROUGH PIPE LINES TO CONSUMERS IN AN,
OTHER STATE IS "INTERSTATE COMMERCE."

Indeed the conclusion that the power was possessed does not rest alone upon the general consideration stated, since it is additionally sustained by recalling the express provision of the act of Congress of 1904, to which we have previously referred, giving authority for the registry of Philippine vessels and recognizing the power of the (Argued Dec. 8 and 9, 1919. Decided March 1, government of the Philippine Islands to deal with the coastwise trade, an authority which, as it contains no provision tending to the contrary, must be construed as applicable to 1. COMMERCE 33 TRANSMISSION OF GAS and sanctioning the power which had been exerted from the very inception of the American domination, to provide as to that trade for the free carriage of the mails. In other words, in view of the power to impose the burden in question, exerted in the Philippine Islands from the beginning and which was then being exerted under the authority of Congress, the conferring by Congress upon the Philippine government by the act of 1904 of the authority to make regulations concerning such trade was a recognition of the right to make the regulation theretofore made, which was then in force, and which continued to be in force up to the time of the bringing of this suit, without disapproval or change by Congress.

[5] When the authority which the act of 1904 gave is borne in mind it makes it clear that the mistake which underlies the entire argument as to the nonexistence of power here relied upon arises from the erroneous assumption that the constitutional limitations of power which operate upon the authority of Congress when legislating for the United

The transmission and sale of natural gas produced in one state and transported by means of pipe lines and directly furnished to sumers in another state by the company so producing and transporting it is "interstate com

merce."

con

[Ed. Note. For other definitions, see Words and Phrases, First and Second Series, Interstate Commerce.]

2. COMMERCE 10-UNTIL CONGRESS ACTS STATE MAY REGULATE LOCAL MATTERS INDIRECTLY AFFECTING INTERSTATE COMMERCE.

While a state may not directly regulate or burden interstate commerce, until Congress acts under its superior authority, it may protect or regulate matters of local interest, though indirectly affecting such commerce. 3. COMMERCE

10-STATE MAY REGULATE

PRICE OF GAS TRANSMITTED THROUGH PIPE
LINES FROM ANOTHER STATE, IN ABSENCE OF
ACTION BY CONGRESS.

Where a gas company is supplying gas to local consumers, who are reached by the use of the streets of a city in which its pipes are

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

laid, and is performing a service similar to that [tention of the plaintiff in error that the auof a local plant furnishing gas to consumers, thority undertaken to be exercised by the the state may, until Congress asserts its supe- commission, and sustained by the court, was rior power, regulate the price of the gas to conan attempt under state authority to regulate sumers, though it is brought through pipe lines interstate commerce, and violative of the confrom another state by the company so furnishstitutional power granted to Congress over ing it. commerce among the states. The facts are

#28

In Error to the Supreme Court of the undisputed. The plaintiff in error, the PennState of New York. sylvania Gas Company, is a corporation orProhibition proceeding by the Pennsylvania ganized under the laws of the state of PennGas Company against the Public Service Com-sylvania and engaged in transmitting and mission, Second District, of State of New selling natural gas in the state of New York York and others. An order of the Appellate and Pennsylvania. It transports the gas by Division (184 App. Div. 556, 171 N. Y. Supp. pipe lines about fifty miles in length from the 1028), reversing an order of the Special Term source of supply in the state of Pennsylvania (103 Misc. Rep. 37, 169 N. Y. Supp. 820), was into the state of New York. It sells and affirmed by the Court of Appeals of New York delivers gas to consumers in the city of (225 N. Y. 397, 122 N. E. 260), and the peti- Jamestown, in the town of Ellicott, and in the tioner brings error. Affirmed. village of Falconer, all in Chatauqua county, New York. It also sells and delivers natural gas to consumers in the cities of Warren, Corry and Erie in Pennsylvania.

Messrs. John E. Mullin, of Kane, Pa., and Marion H. Fisher, of Jamestown, N. Y., for plaintiff in error.

Messrs. Ledyard P. Hale, of Albany, N. Y., and Louis L. Thrasher, of Jamestown, N. Y., for defendants in error.

#26

*Mr. Justice DAY delivered the opinion of the Court.

[1] We think that the transmission and sale of natural gas produced in one state, transported by means of pipe lines and directly furnished to consumers in another state is interstate commerce within the principles of the cases already determined by this court. West v. Kansas Natural Gas Co., 221 U. S. 229, 31

This writ of error brings before us for con- Sup. Ct. 564, 55 L. Ed. 716, 35 L. R. A. (N. S.) sideration the question whether the Public 1193; Haskell v. Kansas Natural Gas Co., 224 Service Commission of the State of New York U. S. 217, 32 Sup. Ct. 442, 56 L. Ed. 738; has the power to regulate rates at which Western Union Telegraph Co. v. Foster, 247 natural gas shall be furnished by the Pennsyl-U. S. 105, 38 Sup. Ct. 438, 62 L. Ed. 1006, 1 A. vania Gas Company, plaintiff in error, to consumers in the city of Jamestown in the state

*27

L. R. 1278.

This case differs from Public Utilities Commission v. Landon, 249 U. S. 236, 39 Sup. Ct. 268, 63 L. Ed. 577, wherein we dealt with the piping of natural gas from one state to ansec-other, and its sale to independent local gas

of New York. The Court of Appeals of New York (225 N. Y. 397, 122 N. E. 260) held that the Commission had such authority.

The statute of the state of New York, tion 65 Public Service Commission Law (Laws 1910, c. 480), provides:

"Every gas corporation, every electrical corporation and every municipality shall furnish and provide such service, instrumentalities and facilities as shall be safe and adequate and in all respects just and reasonable. All charges made or demanded by any such gas corporation, electrical corporation or municipality for gas, electricity or any service rendered or to be rendered, shall be just and reasonable and not more than allowed by law or by order of the commission having jurisdiction. Every unjust or unreasonable charge made or demanded for gas, electricity or any such service, or in connection therewith, or in excess of that allowed by law or by the order of the commission is prohibited."

companies in the receiving state, and held that the retailing of gas by the local companies to their consumers was intrastate commerce and not a continuation of interstate commerce, although the mains of the local companies receiving and distributing the gas to local consumers were connected permanently with those of the transmitting company. Under the circumstances set forth in that case we held that the interstate movement ended when the gas passed into the local mains; that the rates to be charged by the local companies had but an indirect effect upon interstate commerce and, therefore, the matter was subject to local regulation.

In the instant case the gas is transmitted directly from the source of supply in Pennsylvania to the consumers in the cities and

Consumers of gas, furnished by the plain-towns of New York and Pennsylvania, above tiff in error in the city of Jamestown, New York, filed a complaint demanding a reduction of gas rates in that city. The Public Service Commission asserted its jurisdiction which, as we have said, was sustained by the Court of Appeals of New York.

The federal question presented for our consideration involves the correctness of the con

mentioned. Its transmission is direct, and without intervention of any sort between the seller and the buyer. The transmission is continuous and single and is in our opinion, a transmission in interstate commerce, and

*29

there* fore subject to applicable constitutional limitations which govern the states in dealing

(40 Sup.Ct.)

with matters of the character of the one now before us.

[2] The general principle is well established and often asserted in the decisions of this court that the state may not directly regulate

or. burden interstate commerce. That subject,

so far as legislative regulation is concerned, has been committed by the Constitution to the control of the federal Congress. But while admitting this general principle, it, like others of a general nature, is subject to qualifications not inconsistent with the general rule, which now are as well established as the principle itself.

the state appropriately deals in making reasonable provision for local needs, it cannot be regarded as left to the unrestrained will of individuals because Congress has not acted, although it may have such a relation to interstate commerce as to be within the reach of the federal power. In such case, Congress must be the judge of the necessity of federal action. Its paramount authority always enables it to intervene at its discretion for the complete and effective government of that which has been committed to its care, and, for this purpose and to this extent, in response to a conviction of national need, to displace local laws by substituting laws of its own. The successful working of our constitutional system has thus been made possible."

#31

In dealing with interstate commerce it is not in some instances regarded as an infringement upon the authority delegated to Con- The rates of gas companies transmitting gress, to permit the states to pass laws indi-gas in interstate commerce are not only not rectly affecting such commerce, when need-regulated by Congress, but the Interstate ed to protect or regulate matters of local in- Commerce Act expressly withholds the subterest. Such laws are operative until Con- ject from federal control. Chapter 309, § 7, gress acts under its superior authority by 36 Stat. 539, 544 (Comp. St. § 8563). regulating the subject-matter for itself. In varying forms this subject has frequently been before this court. The previous cases were fully reviewed and deductions made therefrom in the Minnesota Rate Cases, 230 U. S. 352, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18. The paramount authority of Congress over the regulation of interstate commerce was again asserted in those cases. It was nevertheless recognized that there existed in the states a permissible exercise of authority, which they might use until Congress had taken possession of the field of regulation. After stating the limitations upon state authority, of this subject, we said (230 U. S. 402, 33 Sup. Ct. 741, 57 L. Ed. 1511, 48 L. R. A. [N. S.] 1151, Ann. Cas. 1916A, 18):

*30

"But within these limitations there necessarily remains to the states, until Congress acts, a wide range for the permissible exercise of power appropriate to their territorial jurisdiction although interstate commerce may be affected. It extends to those matters of a local nature as to which it is impossible to derive from the constitutional grant an intention that they should go uncontrolled *pending federal intervention. Thus, there are certain subjects having the most obvious and direct relation to interstate commerce, which nevertheless, with the acquiescence of Congress, have been controlled by state Legislature from the foundation of the government because of the necessity that they should not remain unregulated and that their regulation should be adapted to varying local exigencies; hence, the absence of regulation by Congress in such matters has not imported that there should be no restriction but rather that the states should continue to supply the needed rules until Congress should decide

[3] The thing which the state commission has undertaken to regulate, while part of an interstate transmission, is local in its nature, and pertains to the furnishing of natural gas to local consumers within the city of Jamestown in the state of New York. The pipes which reach the customers served are supplied with gas directly from the main of the company which brings it into the state, nevertheless the service rendered is essentially local, and the sale of gas is by the company to local consumers who are reached by the use of the streets of the city in which the pipes are laid, and through which the gas is conducted to factories and residences as it is required for use. The service is similar to that of a local plant furnishing gas to consumers in a city.

This local service is not of that character which requires general and uniform regulation of rates by congressional action, and which has always been held beyond the power of the states although Congress has not legislated upon the subject. While the manner in which the business is conducted is part of interstate commerce, its regulation in the distribution of gas to the local consumers is required in the public interest and has not been attempted under the superior authority of Congress.

affect the interstate business of the company. It may be conceded that the local rates may But this fact does not prevent the state from making local regulations of a reasonable character. Such regulations are always subject to the exercise of authority by Congress enabling it to exert its superior power under the commerce clause of the Constitution.

to supersede them. * * Our system of The principles announced, often reiterated government is a practical adjustment by which in the decisions of this court were applied the national authority as conferred by the Con

stitution is maintained in its full scope without in the judgment affirmed by the Court of Apunnecessary loss of local efficiency. Where the peals of New York, and we agree with that subject is peculiarly one of local concern, and court that until the subject-matter is regulatfrom its nature belongs to the class with which ed by congressional action, the exercise of

authority conferred by the state upon the, government of France for certain explosive Public Service Commission is not violative of shells. The steel was made and the forging the commerce clause of the federal Constitu- done by petitioner in accordance with spection. ifications required by the French government, which specifications were attached to the order from the Midvale Steel Company to petitioner.

Affirmed.

(251 U. S. 507)

WORTH BROS. CO. v. LEDERER, Collector of Internal Revenue.

Inspectors employed by the French government inspected the work done by petitioner, testing the steel and examining the forgings

(Argued Jan. 8 and 9, 1920. Decided March 1, as they passed through petitioner's hands.

1920.)

No. 525.

INTERNAL REVENUE 9-MANUFACTURER OF
SHELL FORGINGS LIABLE TO MUNITIONS TAX
AS MANUFACTURER OF "PARTS OF SHELLS."
A company doing the forging on shell bodies
under an order from a manufacturer of ex-

"Up to the time when the blooms of steel were sliced partly through into billets, the right of inspection was exercised by the French inspector in chief, only whenever he desired to exercise it." Some forgings were rejected, and those that were passed were so marked by the inspector. This was done in accordance with an understanding between petitioner and the Midvale Steel Com

pany.

plosive shells was subject to the tax imposed by Act Sept. 8, 1916, § 301 (Comp. St. § 63364b), on every person manufacturing certain articles and shells, or any part of such The profits upon which the tax was articles, as shell forgings are "parts of shells." claimed in this case was imposed were deMr. Justice Day and Mr. Justice Van Derived solely from the sale of the above-menvanter dissenting. tioned forgings.

On Writ of Certiorari to the United States Circuit Court of Appeals for the Third Circuit.

Action by the Worth Bros. Company against Ephraim Lederer, Collector of Internal Revenue for the First District of Pennsylvania. A judgment for the defendant was affirmed by the Circuit Court of Appeals for the Third Circuit (258 Fed. 533), and plaintiff brings certiorari. Affirmed.

See, also, 250 U. S. 656, 40 Sup. Ct. 15, 63 L. Ed. 1192.

Mr. A. H. Wintersteen, of Philadelphia, Pa., for petitioner.

Mr. Assistant Attorney General Frierson, for respondent.

Mr. Justice MCKENNA delivered the opinion of the Court.

This writ is directed to the judgment of the Circuit Court of Appeals affirming a judgment of the District Court for Lederer, to

508

whom we shall refer as the collector, *in an action by petitioner to recover from him the sum of $74,857.07 exacted as a tax under section 301 of the Munition Manufacturer's Tax Act of September 8, 1916, 39 Stat. 756, 781, (Comp. St. § 63361⁄4b), and paid by petitioner under protest.

A detail of the imposition of the tax and the protest of its payment are unnecessary to give. The other facts were stipulated and it appears from the stipulation that during the taxable year 1916 petitioner made the steel for and did the forging on certain shell bodies under an order from the Midvale Steel Company, to enable the latter company to carry out a contract which it had with the

The Munitions Tax Act provides (section 301, 39 Stat. c. 463, p. 781):

"That every person manufacturing" certain articles and "shells" "or any part of the articles mentioned * * shall pay for each taxable year, in addition to the income tax imposed by title I, an excise tax of twelve and

*509

one-half per centum upon the entire net *profits actually received or accrued for said year from the sale or disposition of such articles manufactured within the United States."

The question is the simple and direct one whether a shell forging under the stipulation and evidence is "any part of a shell" within the meaning of the law. The argument of petitioner in support of a negative answer is very diffuse, pressing considerations which we do not think are relevant.

A shell is a definite article, constituted of materials of a certain kind and quality, assembled and fitted and finished so as to be adequate for its destructive purposes. Is not every element (we use the word for want of a better) in the aggregation or composition or amalgamation (whichever it is) of a shell, a part of it? If not, what is it? And what is the test to distinguish a part from not a part? We use the negative, as an antithetic word does not occur to us to express that something necessary to constitute a thing is not a part of it. Petitioner surmounts the difficulty by contending that the law by its words "any part" of any of the "shells" implies a substantially finished part, as related to the whole structure and to the purpose it is intended to subserve. "Otherwise," counsel say "the word [part] loses all precision and becomes equivalent to the words 'ingredient' or 'material composing or making up.'" And to sustain this view they take us

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

(40 Sup. Ct.)

eral parts." But *counsel go farther and say that the forgings were "not parts of shells in any practical and legal sense because their development was so far short-80 per cent.-1. INTERNAL REVENUE ONE CONTRACT

For other cases see sàme topic and KEY-NUMBER in all Key-Numbered Digests and Indexes