the Twenty-Third district of Pennsylvania, | an excise tax of twelve and one-half per centum to recover the sum of $271,062.62, with inter- upon the entire net profits actually received or est from December 29, 1917, paid to him, un- accrued for said year from the sale or disposi der a demand made by him, as collector for tion of such articles manufactured within the United States. an excise tax assessed under section 301 of "Comp. St. § 63361⁄4b. title III of the Act of September 8, 1916, The act is explicit in its declaration; perknown as "munition manufacturer's tax." plexity and controversy come over its appliPetitioner made a verified return under pro- cation. One must be a "person manufacturtest, reciting its belief that the tax should be ing" to incur the tax, but who is to be reabated for the following reasons: (1) It (peti-garded as such person in the sense of the tioner) did not manufacture munitions; (2) act? Or to put it another way, when is the munitions taxed were manufactured by "manufacturing" (the word of the act) done. certain independent contractors; (3) the profit derived by petitioner was from the sale of the munitions, not from their manufacture. The tax was not abated and petitioner paid it under protest.


*The facts are stipulated: Petitioner, through its president, who went to England, entered into three contracts with the British government dated, respectively, January 26, September 29, and October 7, 1915, for the manufacture and delivery f. a. s. New York, of a certain number of high explosive shells. The work to complete the shells consisted of the following operations: (1) Obtaining suitable steel in bar form; (2) cutting or breaking the bars to proper length; (3) converting the bars or slugs into a hollow shell forging by means of a hydraulic press; (4) turning the shell upon a lathe to exact dimensions; (5) closing one end of the forging to form the nose of the shell; (6) drilling out the case of the shell and inserting a base plate; (7) threading the nose of the shell and inserting the nose bushing and inserting in the nose bushing a wooden plug to protect the thread thereof; (8) cutting a groove around the circumference of the shell and inserting thereon a copper driving band and turning the band to required dimensions; (9) varnishing, greasing, and crating the completed shell.

Petitioner was not equipped, nor did it have facilities, for doing any of the described work except the manufacture of steel suitable for the shells in bar form, and, therefore, to procure the manufacture of the shells it (petitioner) did certain work and entered into numerous contracts in relation to the various steps in making a completed

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and when is "manufactured" (the word of the act) attained? In elucidation of the words, the specifications enumerate nine operations to produce a shell, that is a completed shell (except for explosive charge and detonating device), such as petitioner contracted to deliver to the British government. And all of the operations are asserted to be necessary and all must be performed seemingly by the same person in order that he may be designated as a "person manufacturing." We put aside for the purpose of testing the contention the provision of the act making a person manufacturing "any part of any of the articles mentioned" subject to "a tax."

The contention reduces the act to a practical nullity on account of the ease of its evasion. Besides petitioner minimizes what it did. It was the contractor for the delivery of shells, made the profits on them and the profits necessarily reimbursed all expendi tures on account of the shells. It was such profits that the act was intended to reachprofits made out of the war and taxed to defray the expense of the war. Or, as expressed by the Court of Appeals, Congress "felt that the large abnormal profits incident to these war contracts created a remunerative field for temporary taxation." Petitioner, it is true, used the services of others, but they were services necessary to the discharge of its obligations and to the acquisition of the profits of such discharge. And petitioner kept


control throughout-never took its hands off, was at pains to express the fact, and retained its ownership of all of the materials fur nished by it, and the completed shell belonged to it until delivered to the British government. And further, the steel furnished by it was advanced above a crude state-advanced to slugs. The nicking by an outside company we consider of no consequence, for after nicking they were redelivered to petitioner and by it "broken or separated" into slugs.

And petitioner supplied its respective subcontractors with other materials-"transit plugs," "fixing screws," and "copper tubing." It is, of course, the contention of petitioner that this was furnishing, not manufacturing, and that the literal meaning of words can be insisted on in resistance to a taxing statute. We recognize the rule of construction. but it cannot be carried to reduce the statute to empty declarations. And, as we have already said, petitioner's conten

(40 Sup.Ct.)

tion would so reduce it. How universal must the manufacturing be? Will the purchase of an elemental part destroy it? And how subsidiary must the work of the subcontractor be not to relieve the contractor-take from him the character of a "person manufacturing"? And such is the tangle of inquiries we encounter when we undertake to distinguish between what a contractor to deliver a thing does himself and what he does through others as subsidiary to his obligation.

It is after all but a question of the kind or degree of agency-the difference, to use counsel's words, between "servants and general agents" and "brokers, dealers, middlemen or factors." And this distinction between the agents counsel deems important and expresses it another way as follows:

"Every person manufacturing' means the person doing the actual work individually, or through servants or general agents and that the ownership of the material worked upon does not alter this meaning of the word."


*We are unable to assent to this meaning of the word. It takes from the act a great deal of utility and makes it miss its purpose. Of course it did not contemplate that "person manufacturing" should use his own handsit contemplated the use of other aid and instrumentalities, machinery, servants, and general agents; availing thereby of the world's division of labor, but it contemplated also the world's division of occupations, and in this comprehensive way, contemplated that all of the world's efficiency might be availed of, and when availed of for profits, the latter

could not thereby escape being taxed.


(251 U. S. 511) FORGED STEEL WHEEL CO. v. LEWELLYN, Collector of Internal Revenue. (Argued Jan. 8 and 9, 1920. Decided March 1, 1920.)

No. 526.


Munitions Tax Act, § 301 (Comp. St. § 63364 b), imposing a tax on the profits of every person manufacturing shells "or any part" of part, and applies to a manufacturer of rough them, is not limited to a substantially finished steel shell forgings, constituting a hollow steel body of shell form, from which shells are manufactured by another party, for whom they are manufactured under contract.


Where a case involved only propositions of law, it was not error for the Circuit Court

of Appeals to reverse the judgment of the District Court, without remanding the case for a new trial, especially where there was no objection and no request for a remand.

Mr. Justice Day and Mr. Justice Van Devanter dissenting.

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Action by the Forged Steel Wheel Company against C. G. Lewellyn, Collector of Internal versed by the Circuit Court of Appeals (258 Revenue. A judgment for plaintiff was reFed. 533), and plaintiff brings error.



See, also, 250 U. S. 657, 40 Sup. Ct. 15, 63 L. Ed. 1193.

Messrs. George B. Gordon, of Pittsburgh, Pa., and George Sutherland, of Salt Lake City, Utah, for petitioner.

where, indeed, was the hardship of it? The tax was on profits and measured by them. [2] It is, however, alleged, and the stipulation shows, that the subcontracting companies paid a tax on their profits and profits were testified to be the difference between what was paid the subcontracting companies for the work and their cost in doing it. And it thus appears, it is urged, that petitioner has been taxed upon the theory that it manufactured the shells and the contracting com- *Mr. Justice MCKENNA delivered the opinpanies "have been taxed for actually per-ion of the Court. forming all the manufacturing necessary to complete the same shells."

But it is a sufficient answer to say that the tax here in issue is the tax on the profits of the petitioner, not on the profits of the subcontractors. The question whether such subcontractors were correctly assessed concerns them and not the petitioner who is resisting a tax on the profits actually made by him and none other.

Mr. Assistant Attorney General Frierson, for respondent.


Action brought by petitioner against Lewellyn, Collector of Internal Revenue in the District Court for the Western District of Pennsylvania, to recover the sum of $246,920.18 exacted from petitioner as a tax under the Munitions Tax Act, and paid under protest. Interest was also prayed from November 27, 1917.

The tax was exacted upon the ground (and it was so alleged) that that sum was the tax

We consider further discussion unneces- on the amount of the net profits received by sary.

Judgment affirmed.

Mr. Justice DAY and Mr. Justice VAN DEVANTER dissent.

petitioner from the manufacture and sale of certain steel forgings used in the manufacture of shells.

The circumstances said to show the tax to have been illegally exacted were detailed, of

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

which there was denial by the collector, and upon issues thus formed the case was tried to a jury, which, in submission to the instructions of the court, returned a verdict for petitioner for the amount prayed. Judgment upon the verdict for the sum of $263,258.06 was reversed by the Circuit Court of Appeals.

[1] The Court of Appeals considered in one opinion this case and Carbon Steel Co. v. Lewellyn and Worth Bros. Co. v. Lederer, 258 Fed. 533. The last two cases we have just decided (251 U. S. 501, 40 Sup. Ct. 283, 64 L. Ed. -; 251 U. S. 507, 40 Sup. Ct. 282, 64 L. Ed.), and we can immediately say that, if this case does not differ from them in its facts, it does not in principle. It will turn, as they did, upon the construction of section 301 of the Munitions Tax Act (39 Stat. 756, 78i [Comp. St. § 63364b]) which imposes upon "every person manufacturing shells *or any part" [italics ours] of them, a tax of 121⁄2 per cent. for each taxable year upon the entire net profits received or accrued for such years from the sale or disposition of the shells manufactured in the United States. The contention in the Worth Case was explicitly, as it is in this case, that the words "any part," as used in the act, "mean a substantially finished part"-a part, as there said, which has relation "to the whole structure and to the purpose it is in


tended to subserve." Here it is said:

"The fundamental idea of a manufactured article is that it must be so nearly completed as to be serviceable for the purpose for which it was designed."

Steel Wheel Company's work was a hollow steel body or shell form, of suitable composition, shape, and length, from which to make, to the British government standards, the high exsuch shell forms was about 170 pounds. To plosive projectiles contracted for. The weight of make this shell form suitable for use as a shell the contractor to whom the Forged Steel Wheel Company then delivered it was required to dress, bore, and machine it down to 77 pounds; this required some 27 distinct and separate processes."

facts, and consideration of the opinion of the The court, after further comment on the District Court and its reasoning, and distinguishing the cases that influenced the District Court, said:

"But in the excise law in question Congress is dealing with the imposing of taxes as the main object, and with the work done as a mere incident to aid in determining the tax. In that aspect the quantum of the work done is immaterial.”

And again:

"The crucial question is not the quantum of the manufacture measured by steps, but the fact of manufacture resulting in profits."

Replying to the contention that the purpose of Congress was not to tax any one but the manufacturer of a completed shell or the maker of a completed part of a shell, and that the forging of the Wheel Company was not a completed part of a shell, the Court of Appeals said:

"It is manifest that, standing alone, the statute neither expresses nor implies any warrant generic words 'any part' to the restricted, speor implication for limiting the broad, inclusive, cific, qualified term 'any completed part.'"

The reasoning of the Worth Case, covers, therefore, the contention here, and rejects it, if, as we have said, the facts be the same, and we think they are. There are some circum- The Court of Appeals also considered the stances of complexity, but they are easily re- rule of construction that statutes levying taxsolved and do not disturb the principle of de-es should not be extended by implication becision. Of the facts the Court of Appeals


"From the proofs it appears the British government made contracts with certain persons whereby the latter agreed to supply it with high explosive shells in compliance with the specifications, requirement, and inspection of the said government. To fulfill such shell contract the contractor made subcontracts with the Forged Steel Wheel Company, by which the latter agreed to manufacture and furnish to said contractor, rough steel sheel forgings of the character provided in the contract, as to chemical constituents, tensile strength, size, shape, etc. To fulfill its contract, the Forged Steel Wheel Company either made, had made, or bought in the market, the grade of steel required. This steel was of a common commercial type known as rounds. These rounds it nicked and broke into eighteen-inch lengths, which it then heated and put through two forging processes, by the first of which a hole was pierced from one end of the round to within two inches of the other; by the second, the round was lengthened by

yond the clear import of their language and the cases from which the rule was deduced.

The rule was conceded; its application to the present controversy was denied.


*For the sake of brevity we consider only the cited decisions of this court. They are Tide Water Oil Co. v. United States, 171 U. S. 210, 218, 18 Sup. Ct. 837, 43 L. Ed. 139; Worthington v. Robbins, 139 U. S. 337, 11 Sup. Ct. 581, 35 L. Ed. 181; Anheuser-Busch Association v. United States, 207 U. S. 556, 28 Sup. Ct. 204, 52 L. Ed. 336. These were customs cases, and the statutes were given an interpretation on account of their purpose. They are, besides, not in point. In the first one the statute had the words "wholly manufactured," and, giving effect to them, it was decided that boxes made from shooks imported from Canada, though nailed together and the sides of the boxes thus formed trimmed in the United States, were not boxes "wholly manufactured" in the United States, and endraw*ing it through three successive rings of a titled, upon being exported, to a drawback hydraulic press. The output of the Forged' under a statute which allowed a drawback on


(40 Sup.Ct.)


articles "wholly manufactured of materials | 3. CARRIERS 280(7)-LIABLE TO
imported." The Worthington Case was cited.
In that case a duty was exacted upon "white
hard enamel" under a statute which imposed
a duty of 25 per cent. upon "watches, watch
cases, watch movements, parts of watches
and watch materials." This on the conten-
tion of the government that the enamel fell
under the head of "watch materials." The
contention was rejected; it being conceded
that the enamel was used for many other pur-
poses than for watch faces. In the Anheuser-


A railroad company was liable for an injury sustained by an employé traveling on a pass through its willful or wanton negligence, though the pass contained a release of liability for injuries.

On Writ of Certiorari to the Court of Appeals of Lucas County, State of Ohio.

Action by Wilbur H. Mohney against the Α New York Central Railway Company. judgment for plaintiff was affirmed by the Ohio Court of Appeals, and defendant brings

Busch Case a claim of drawback upon corks
exported with bottled beer was rejected. The
ground of the claim was that the corks were
subjected to a special treatment to be fit for
use, and hence it was contended that they
should be regarded as "imported materials L. Ed. 419.



See, also, 248 U. S. 554, 39 Sup. Ct. 10, 63

used in the manufacture of articles Messrs. Howard Lewis, John H. Doyle, manufactured or produced in the United and Frederick W. Gaines, all of Toledo, Ohio, States"-that is, the bottled beer. We replied for petitioner. "a cork put through the claimant's process is still a cork." The cases, therefore, do not sustain the contention for which they are cited.

[2] Objection is made to the action of the Circuit Court of Appeals in simply reversing the judgment of the District Court and not remanding the case for a new trial. There


was no objection made to that action and no request for a remand of the case, and besides there was nothing to retry. The case involves only propositions of law. Judgment affirmed.

Mr. Albert H. Miller, of Toledo, Ohio, for respondent.

Mr. Justice CLARKE delivered the opinion of the Court.

The respondent, whom we shall refer to as the plaintiff, brought suit against the petitioner, defendant, to recover damages for severe injuries which he sustained in a rearend collision on defendant's railroad, which he averred was caused by the gross negli


gence of the engineer of the train following that on which he was a passenger, in failing to look for and heed danger signals, which

Mr. Justice DAY and Mr. Justice VAN DE- indicated that the track ahead was occupied. VANTER dissent.

(252 U. S. 152)


(Argued Jan. 27, 1920. Decided March 1, 1920.)


No. 196.


Where a railroad employé, traveling on his employer's train from Toledo to Youngstown, used an annual pass good only between Toledo and Cleveland, intending to pay his fare in cash between Cleveland and Youngstown, between which points the train ran over the tracks of a different company, the validity of a release of liability for personal injuries contained in the pass was governed by the state law, though at Youngstown he intended to take another train of his employer for a point outside the state. 2. CONTRACTS 147(1) TERMS CANNOT BE CHANGED BY PARTY'S MENTAL PURPOSE. The mental purpose of one of the parties to a written contract cannot change its terms.

The plaintiff was employed by the defendant as an engineer, with a run between Air Line Junction, at Toledo, and Collingwood, a suburb of Cleveland, wholly within the state of Ohio. As an incident to his employment he was given an annual pass, good between Air Line Junction and Collingwood, which contained the release following:

"In consideration of receiving this free pass, cach of the persons named thereon, using the same, voluntarily assumes all risk of accidents, and expressly agrees that the company shall not be liable under any circumstances, whether of negligence of itself, its agents, or otherwise, for any injury to his or her person, or for any loss or injury to his or her property, and that as for him or her, in the use of this pass, he or she will not consider the company as a common carrier, and liable to him or her as such.

"And, as a condition precedent to the issuing and use thereof, each of the persons named on the face of this pass states that he or she is not prohibited by law from receiving free transportation, and that the pass will be lawfully used."

Having been informed that his mother had died at her home near Pittsburgh, Pa., the plaintiff, desiring to attend her funeral, applied to the defendant for, and obtained, a pass for himself and wife from Toledo to

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

Youngstown, Ohio, via Ashtabula, and was promised that another pass for himself and wife would be left with the agent of the company at Youngstown, good for the remainder, the interstate part, of the journey to Pittsburgh. But the line of the defendant via Ashtabula to Youngstown was much longer and required a number of hours more for the journey than it did to go via Cleveland, using the Erie Railroad from that city to Youngstown, and for this reason, the record shows,


the plaintiff Mohney, before leaving home, decided that his wife should not accompany him and that he would make the journey by a train of the defendant, which used its own rails to Cleveland, and from Cleveland to Youngstown used the tracks of the Erie Railroad Company, and at Youngstown returned to the road of the defendant, over which it ran to Pittsburgh. The transportation which he had received via Ashtabula could not be

used over the shorter route and therefore the

plaintiff presented his annual pass for transportation from Toledo to Cleveland, intending | to pay his fare from Cleveland to Youngstown over the Erie Railroad, leave the train at the Erie station at Youngstown, inquire

by telephone as to the time and place of the burial of his mother, and then go to the New York Central station, a half mile away, obtain the pass which was to be left there for him, and go forward to Pittsburgh on the next convenient train.

The train on which Mohney was a passenger was wrecked between Toledo and Cleveland. It had come to a stop at a station and the second section of the train ran past two block signals, indicating danger ahead, and collided with the rear car of the first section, in which Mohney was riding, causing him serious injury.

The Supreme Court of the state denied a motion for an order requiring the Court of Appeals to certify the record to it for review and the case is here on writ of certiorari.

The propriety of the use of the annual pass by Mohney for such a personal journey and that the release on it was not valid under Ohio law, were not questioned, and the sole defense urged by the railroad company was, and now is, that his purpose to continue his journey to a destination in Pennsylvania rendered him an interstate passenger, subject to federal law from the time he entered the train at Toledo and that the release on the pass was valid, under 234 U. S. 576, 34 Sup. Ct. 964, 58 L. Ed. 1476, supra.

The three freight cases on which the defendant relies for its contention that the plaintiff was an interstate passenger when injured, all proceed upon the principle that the essential character of the transportation and not the purpose, or mental state, of the shipper determines whether state or national law applies to the transaction involved.

Thus, in Coe v. Errol, 116 U. S. 517, 6 Sup. Ct. 475, 29 L. Ed. 715, the owner's state of mind in relation to the logs, his intent to export them, and even his partial preparation to do so, did not exempt them from state taxation, because they did not pass withthey had "been shipped, or entered with a common carrier for transportation to another state, or had been started upon such transportation in a continuous route or jour

in the domain of the federal law until


In Southern Pacific Terminal Co. v. Inter

state Commerce Commission and Young, 219 U. S. 498, 527, 31 Sup. Ct. 279, 288 (55 L. Ed.


310), the cotton seed *cake and meal, although billed to Galveston, were "all destined for

export and by their delivery to the Galveston, Harrisburg & San Antonio Railway they

must be considered as having been delivered to a carrier for transportation to their foreign destination.

The case was tried on stipulated facts and the testimony of the plaintiff. The trial court concluded that Mohney, at the time he was injured, was on an intrastate journey using an intrastate pass, and that by the law of Ohio the release upon it was void as against public policy. Thereupon, a jury before, comes under Coe v. Errol, 116 U. s. ing waived, the court entered judgment in 517 [6 Sup. Ct. 475, 29 L. Ed. 715]." The mental purpose of Young, and his attempted plaintiff's favor. practice by intrastate billing, was to keep

The state Court of Appeals, differing with the trial court, concluded that Mohney was an interstate passenger when injured and that the release on the pass was valid, under the ruling in Charleston Western Carolina Railway Co. v. Thompson, 234 U. S. 576, 34 Sup. Ct. 904, 58 L. Ed. 1476. But the court went further and affirmed the judgment on


two grounds; by a divided *court, on the ground that the pass was issued to Mohney as part consideration of his employment, and, all judges concurring for the reason that "we are clearly of the opinion that the negligence in this case, under the evidence, was willful and wanton." For these reasons it was held that the release on the pass did not constitute a defense to the action.


The case, there

within the domain of the state law, but his contracts, express and implied, brought the discrimination complained of in the case within the scope of the Interstate Commerce


In Ohio Railroad Commission v. Worthington, Receiver, 225 U. S. 101, 32 Sup. Ct. 653, 56 L. Ed. 1004, the commission attempted to regulate the rate on "lake cargo coal," because it was often billed from the mines to Huron, or other ports within the state; but this court found that the established "lake cargo coal" rate was intended to apply, and in practice did apply, only "to such coal as was in fact placed on vessels for carriage beyond the state," and obviously "by every fair test, transportation of this coal from the mines

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