author: Mr. Justice Black Mr. Justice Marshall, Mr. Justice Harlan :

text:
    FIRST AGRICULTURAL NATIONAL BANK OF BERKSHIRE COUNTY v. STATE TAX COMMISSION.
    No. 755.
    Argued April 22, 1968.
    Decided June 17, 1968.

      Ronald H. Kessel argued the cause for appellant. With him on the brief were John P. Weitzei and Alex J. McFarland.

      Alan J. Dimond, Assistant Attorney General of Massachusetts, argued the cause for appellee. With him on the brief were Elliot L. Richardson, Attorney General, Walter H. Mayo III, Assistant Attorney General, and Mark L. Cohen, Deputy Assistant Attorney General.
    Briefs of amici curiae were filed by James Lawrence White for the Colorado Bankers Assn.; by William C. Sennett, Attorney General, John J. Gain, Assistant Attorney General, and Edward T. Baker and George W. Keitel, Deputy Attorneys General, for the Commonwealth of Pennsylvania; by Louis J. Lefkowitz, Attorney General, Ruth Kessler Toch, Solicitor General, and Robert W. Bush, Assistant Attorney General, for the State of New York, and by James F. Bell and Brian C. Elmer for the National Association of Supervisors of State Banks.
   Mr. Justice Black

delivered the opinion of the Court.

The principal issue raised by this case concerns the extent to which States may tax a national bank. The Supreme Judicial Court for the Commonwealth of Massachusetts held that appellant, First Agricultural National Bank of Berkshire County, was subject to Massachusetts’ recently enacted sales and use taxes on purchases for its own use of tangible personal property. For reasons to be stated we believe this decision was erroneous, and we reverse.

As long ago as 1819, in the historic case of M'Culloch v. Maryland, 4 Wheat. 316, this Court declared unconstitutional a state tax on the bank of the United States since, according to Chief Justice Marshall, this amounted to a “tax on the operation of an instrument employed by the government of the Union to carry its powers into execution.” 4 Wheat., at 436-437. A long line of subsequent decisions by this Court has firmly established the proposition that the States are without power, unless authorized by Congress, to tax federally created, or, as they are presently called, national, banks. Owensboro Nat. Bank v. Owensboro, 173 U. S. 664, 668; Des Moines Nat. Bank v. Fairweather, 263 U. S. 103, 106; First Nat. Bank v. Hartford, 273 U. S. 548, 550; Iowa-Des Moines Nat. Bank v. Bennett, 284 U. S. 239, 244. As recently as 1966, Mr. Justice Fortas, speaking for a unanimous Court, thought this ancient principle so well established that he used national banks as an example in holding the American Red Cross immune from state taxation:

“In those respects in which the Red Cross differs from the usual government agency — e. g., in that its employees are not employees of the United States, and that government officials do not direct its everyday affairs — the Red Cross is like other institutions — e. g., national banks — whose status as tax-immune instrumentalities of the United States is beyond dispute.” Department of Employment v. United States, 385 U. S. 355, 360. (Emphasis added.)

The decision below recognized the strong precedents against taxation, but the Massachusetts Supreme Judicial Court was of the opinion that the status of national banks has been so changed by the establishment of the Federal Reserve System that they should no longer be considered nontaxable by the States as instrumentalities of the United States. Essentially the reasoning of the Supreme Judicial Court is that under present-day conditions and regulations there is no substantial difference between national banks and state banks; and the implication of this is, of course, that national banks lack any unique quality giving them the character of a federal instrumentality. Because of pertinent congressional legislation in the banking field, we find it unnecessary to reach the constitutional question of whether today national banks should be considered nontaxable as federal instrumentalities.

As will be seen, Congress has been far from reluctant to pass legislation in the banking field. There are important committees on banking and currency in both Houses which continually monitor banking affairs and propose new legislation when changes are felt to be needed. For purposes of this case, the most important piece of banking legislation is 12 U. S. C. § 548 which originated as part of the Act of June 3, 1864, c. 106, § 41, 13 Stat. 111. This section allows state taxation of national banks in any one of four specified ways in addition to taxes on their real estate. Before this legislation was originally enacted in 1864, there was sharp controversy in the Congress over the extent to which the States should be allowed to tax national banks. A vocal opponent to any state taxation of national banks was the powerful Senator Sumner of Massachusetts, who said:

“If you allow the State to interfere with the proposed system [of national banks] in any way, may they not embarrass it? Where shall they stop? Where will you run a line?
“Now, sir, every consideration, every argument which goes to sustain this great judgment [M‘Culloch v. Maryland] may be employed against the proposed concession to the States of the power to tax this national institution in any particular, whether directly or indirectly.” Cong. Globe, 38th Cong., 1st Sess., 1893-1894 (1864).

On the other side, proposed amendments expressly permitting much broader state and local taxation of national banks were introduced, debated, and rejected by the Congress. Among these was an amendment introduced in the House which would have made national banks subject, without exception, to all state and local general taxes on personal as well as real property:

“And the said associations or corporations shall severally be subject to State and municipal taxation upon their real and personal estate, the same as persons residing at their respective places of business are subject to such taxation by State laws.” Cong. Globe, 38th Cong., 1st Sess., 1392 (1864).

The result of this conflict was that the legislation, when finally passed, was a compromise which permitted state taxation of national banks in certain ways, but prohibited all other forms of state taxation. Senator Fessenden, Chairman of the Finance Committee, clearly defined the compromise that was being enacted:

“If the Senator reads this bill he will perceive that all the power of taxation upon the operations of the bank itself, all upon the circulation, all upon the deposits, all upon everything which can properly be made by a tax is reserved to the General Government ; that the States cannot touch it in any possible form; that they are limited and controlled; the simple right is given them to say that the property which their own citizens have invested in it shall contribute to State taxation precisely as other property.” Cong. Globe, 38th Cong., 1st Sess., 1895 (1864).

It seems clear to us from the legislative history that 12 U. S. C. § 548 was intended to prescribe the only ways in which the States can tax national banks. And this is certainly not a novel interpretation of the section, as shown by previous decisions of this Court. As early as 1899 the Court declared:

“This section [R. S. §5219, 12 U. S. C. § 548], then, of the Revised Statutes is the measure of the power of a State to tax national banks, their property or their franchises. By its unambiguous provisions the power is confined to a taxation of the shares of stock in the names of the shareholders and to an assessment of the real estate of the bank. Any state tax therefore which is in excess of and not in conformity to these requirements is void.” Owensboro Nat. Bank v. Owensboro, 173 U. S. 664, 669.

A more complete explanation of § 548 and its meaning appears in this Court’s opinion in Bank of California v. Richardson, 248 U. S. 476, where it was said:

“There is also no doubt from the section [R. S. § 5219, 12 U. S. C. § 548] that it was intended to comprehensively control the subject with which it dealt and thus to furnish the exclusive rule governing state taxation as to the federal agencies created as provided in the section. . . .
“Two provisions in apparent conflict were adopted. First, the absolute exclusion of power in the States to tax the banks, the national agencies created, so as to prevent all interference with their operations, the integrity of their assets, or the administrative governmental control over their affairs. Second, preservation of the taxing power of the several States so as to prevent any impairment thereof from arising from the existence of the national agencies created, to the end that the financial resources engaged in their development might not be withdrawn from the reach of state taxation ....
“The first aim was attained by the non-recognition of any power whatever in the States to tax the federal agencies, the banks, except as to real estate specially provided for, and, therefore, the exclusion of all such powers. The second was reached by a recognition of the fact that, considered from the point of view of ultimate and beneficial interest, every available asset possessed or enjoyed by the banks would be owned by their sto.ckholders and would be, therefore, reached by taxation of the stockholders as such. . . 248 U. S., at 483.

Finally, so there can be no doubt, consider these words of the Court in Des Moines Bank v. Fairweather, 263 U. S. 103:

“This section [R. S. § 5219, 12 U. S. C. § 548] shows, and the decisions under it hold, that what Congress intended was that national banks and their property should be free from taxation under state authority, other than taxes on their real property and on shares held by them in other national banks; and that all shares in such banks should be taxable to their owners, the stockholders, much as other personal property is taxable . . ." 263 U. S., at 107.

Thus, at least since the Owensboro decision, supra, in 1899, it has been abundantly clear that 12 U. S. C. § 548 marks the outer limit within which States can tax national banks. Now this Court is asked to change what legislative history and prior decisions have established is the precise meaning of an Act of Congress. This we cannot do. For, as we pointed out above, the banking field has traditionally been an area of particular congressional concern marked by legislation responsive to new problems. This can be illustrated by the history of § 548 alone. It was originally passed in 1864 because the 1863 Currency Act contained no provision for state taxation of national banks or their shares. In 1868 a technical amendment was made to the section. Then in 1923 a substantive amendment was made which, among other things, authorized the state taxation of national bank income and dividends. Another important part of this amendment was the declaration that “bonds, notes, or other evidences of indebtedness” in the hands of individual citizens were not to be considered “moneyed capital . . . coming into competition with the business of national banks.” Just two years before, this Court had ruled in Merchants’ Nat. Bank of Richmond v. Richmond, 256 U. S. 635 (1921), that such bonds and notes were moneyed capital in competition with national banks and thus covered by § 548. Senator Pepper, who spoke for the amendment, made clear that it was offered as a response to this Court’s decision which had placed an erroneous interpretation on the section. Then again in 1926, § 548 was amended to permit States to levy franchise and excise taxes on national banks measured by the entire income (including income from tax-exempt securities) of the banks. Finally, in 1950, a bill was sent to the Senate Committee on Banking and Currency which expressly permitted the levying of state sales and use taxes on national banks, but Congress did not pass it.

Because of § 548 and its legislative history, we are convinced that if a change is to be made in state taxation of national banks, it must come from the Congress, which has established the present limits.

With this primary question out of the way, there is one additional issue which must be resolved. The court below held, contrary to appellant’s contention, that the Massachusetts sales tax is not imposed upon the bank as a purchaser, but is a tax upon vendors who sell tangible personal property to the bank. Of course if this is true, the bank cannot object if a particular vendor decides to pass the burden of the tax on to it through an increased price. But if this is not true, and if the tax is on the bank as a purchaser, then, because it is a national bank, appellant is exempt under 12 U. S. C. § 548. Because the question here is whether the tax affects federal immunity, it is clear that for this limited purpose we are not bound by the state court’s characterization of the tax. See Society for Savings v. Bowers, 349 U. S. 143, 151, and the cases cited therein. And essentially the question for us is: On whom does the incidence of the tax fall? See Kern-Limerick, Inc. v. Scurlock, 347 U. S. 110, 121-122. Also see Carson v. Roane-Anderson Co., 342 U. S. 232.

It would appear to be indisputable that a sales tax which by its terms must be passed on to the purchaser imposes the legal incidence of the tax upon the purchaser. See Federal Land Bank v. Bismarck Lumber Co., 314 U. S. 95, 99. Subsection 3 of the Massachusetts sales tax provides:

“Reimbursement for the tax hereby imposed shall be paid by the purchaser to the vendor and each vendor in this commonwealth shall add to the sales price and shall collect from the purchaser the full amount of the tax imposed by this section, or an amount equal as nearly as possible or practicable to the average equivalent thereof; and such tax shall be a debt from the purchaser to the vendor, when so added to the sales price, and shall be recoverable at law in the same manner as other debts.” Acts and Resolves, 1966, c. 14, § 1, subsec. 3. (Emphasis added.)

This subsection reads to us as a clear requirement that the sales tax be passed on to the purchaser. And this interpretation is reinforced by subsection 23 which pro-Mbits as unlawful advertising the holding out by any vendor that he will assume or absorb the tax on any sale that he may make. We cannot accept the reasoning of the court below that simply because there is no sanction against a vendor who refuses to pass on the tax (assuming this is true), this means the tax is on the vendor. There can be no doubt from the clear wording of the statute that the Massachusetts Legislature intended that this sales tax be passed on to the purchaser. For our purposes, at least, that intent is controlling. And it seems clear to us that the force of the law, especially the language in subsection 3, is such that, regardless of sanctions, businessmen will attempt, in their everyday commercial affairs, to conform to its provisions as written.

For these reasons we reverse and hold that appellant is immune from both the Massachusetts use and sales taxes.

Reversed.

MR. Justice Fortas took no part in the consideration or decision of this case.

Mr. Justice Marshall,

with whom Mr. Justice Harlan and Mr. Justice Stewart join,

dissenting.

I would make clear that the Constitution of its own force does not prohibit Massachusetts from applying its uniform sales and use taxes to, among other things, appellant’s wastebaskets. It seems to me necessary to decide that constitutional question in order properly to interpret 12 U. S. C. § 548, upon which the Court bases its decision. Moreover, the refusal to decide the issue gives further life to a largely outmoded doctrine.

Mr. Justice Brandéis rightly cautioned that “[i]n cases involving constitutional issues . . . this Court must, in order to reach sound conclusions, feel free to bring its opinions into agreement with experience and with facts newly ascertained, so that its judicial authority may . . . ‘depend altogether on the force of the reasoning by which it is supported/ ” I think that in light of the present functions and role of national banks they should not in this day and age be considered constitutionally immune from nondiscriminatory state taxation, and that § 548 should not be construed as giving them a statutory immunity from the taxes here involved.

I.

A. The starting point of the constitutional inquiry is, of course, M‘Culloch v. Maryland, 4 Wheat. 316 (1819). That case involved a state statute applicable to any bank established in Maryland “without authority from the State,” i. e., the Second Bank of the United States, chartered by Congress in 1816. It prohibited the circulation of notes (currency) by such a bank except on payment of a 2% stamp tax, or, alternatively, upon the payment annually to the State of $15,000. Substantial monetary penalties were provided for violations of the statute, for which the State had sued cashier M'Culloch. In a celebrated opinion Chief Justice Marshall, a principal architect of our federalism, struck down the Maryland statute.

In Osborn v. Bank of the United States, 9 Wheat. 738 (1824), M‘Culloch was applied to strike down an Ohio statute that attempted to extract an annual tax of $50,000 from each branch of a business operating in the State without its authority. The statutes found unconstitutional in both of those cases were patently discriminatory against the Second Bank of the United States (the Ohio statute specifically mentioned it), for the taxes did not apply to state-chartered banks. Chief Justice Marshall, however, did not limit his opinions in the two cases to discriminatory taxation, and they were applied by the Court in Owensboro Nat. Bank v. Owensboro, 173 U. S. 664 (1899), with little independent analysis to hold that Kentucky could not collect a nondiscriminatory franchise tax from a national bank. There was no discussion of the possible differences between federal functions performed by the kind of national bank involved there, which existed by virtue of legislation enacted in 1863 and 1864, and the quite distinct functions performed by the Second Bank of the United States involved in M'Culloch and Osborn.

Virtually all of the later cases in which national banks have been held to be federal instrumentalities immune from state taxation depend upon these three cases. One could, and perhaps should, read M‘Culloch and Osborn simply for the principle that the Constitution prohibits a State from taxing discriminatorily a federally established instrumentality. On that view, Chief Justice Marshall’s statement that “the power to tax involves the power to destroy,” M‘Culloch v. Maryland, supra, at 431, did not relate to a principle entirely necessary to the decision. As Mr. Justice Frankfurter pointed out in reference to what he called that “seductive cliché”:

“The web of unreality spun from Marshall’s famous dictum was brushed away by one stroke of Mr. Justice Holmes’s pen: 'The power to tax is not the power to destroy while this Court sits.’ ”

Absent an examination of the differences between the bank involved in Owensboro and the Second Bank of the United States involved in M‘Culloch and Osborn, the Owensboro decision might be justified upon either of the following grounds: its alternative holding that the statute that is now § 548 constituted congressional delineation of the permissible scope of the power of the State to tax a national bank, or perhaps that the particular franchise tax was invalid as applied because it was based upon a valuation that included the national bank’s required investment in nontaxable bonds of the United States. Or one might view Owensboro, in holding a nondiscriminatory tax invalid, as simply incorrect.

Such a- limited view of those hoary cases would, of course, require a re-evaluation of the validity of the doctrine of intergovernmental tax immunities — a doctrine which does not rest upon any specific provisions of the Constitution, but rather upon this Court’s concepts of federalism. See M‘Culloch v. Maryland, supra, at 426; Graves v. New York ex rel. O’Keefe, 306 U. S. 466, 487-492 (1939) (Frankfurter, J., concurring); T. Powell, Vagaries and Varieties in Constitutional Interpretation, c. IV (1956). I have no doubt that Congress could provide (and has provided, see infra, at 362) statutory immunity from state taxation for the federal instrumen-talities it may establish. See, e. g., United States v. City of Detroit, 355 U. S. 466, 474 (1958); Maricopa County v. Valley Nat. Bank, 318 U. S. 357, 361 (1943); Railroad Co. v. Peniston, 18 Wall. 5, 37-38 (1873) (concurring in judgment). Given that congressional power, there is little reason for this Court to cling to the view that the Constitution itself makes federal instrumentalities immune from state taxation in the absence of authorizing legislation. The disparate kinds of instrumental-ities and forms of state taxation create difficulties for ad hoc resolution of the immunity issue by this Court based only upon abstract concepts of federalism. See generally Powell, Waning of Intergovernmental Tax Immunities, 58 Harv. L. Rev. 633 (1945); Powell, Remnant of Intergovernmental Tax Immunities, 58 Harv. L. Rev. 757 (1945). As the Court has sometimes realized:

“Wise and flexible adjustment of intergovernmental tax immunity calls for political and economic considerations of the greatest difficulty and delicacy. Such complex problems are ones which Congress is best qualified to resolve.” United States v. City of Detroit, 355 U. S., at 474.

B. The Court has never indicated any great desire to reconsider in toto the doctrine of the constitutional immunity of federal instrumentalities from state taxation. The Court has, however, noted the trend in its decisions toward restricting “the scope of immunity [from taxes] of private persons seeking to clothe themselves with governmental character,’ Oklahoma Tax Comm’n v. Texas Co., 336 U. S. 342, 352 (1949). The wisdom of that trend counsels, I think, a rejection of the constitutional argument in this case.

As the Court said last Term, “there is no simple test for ascertaining whether an institution is so closely related to governmental activity as to become a tax-immune instrumentality,” Department of Employment v. United States, 385 U. S. 355, 358-359 (1966) (holding Red Cross immune). Various formulations of the controlling test have been used to determine whether institutions or individuals are immune: whether they “have been so incorporated into the government structure as to become instrumentalities of the United States and thus enjoy governmental immunity,” United States v. Boyd, 378 U. S. 39, 48 (1964); whether they “are arms of the Government deemed by it essential for the performance of governmental functions,” and “are integral parts of [a government department and] . . . share in fulfilling the duties entrusted to it,” Standard Oil Co. v. Johnson, 316 U. S. 481, 485 (1942) (Army post-exchanges immune); whether they have been so “assimilated by the Government as to become one.of its constituent parts,” United States v. Township of Muskegon, 355 U. S. 484, 486 (1958); and whether the institution is regarded “virtually as an arm of the Government,” Department of Employment v. United States, supra, at 359-360.

Under those general rubrics, the Court has looked to various specific factors and characteristics to determine the status of the specific institution: whether it is organized for private profit, and whether the Government has retained such control over it so that “it could properly be called a 'servant’ of the United States in agency terms,” United States v. Township of Muskegon, supra, at 486; whether it was organized to effectuate a specific governmental program, Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U. S. 95, 102 (1941) ; whether its ownership, substantially or totally, lies in the Government, Clallam County v. United States, 263 U. S. 341, 343 (1923); Railroad Co. v. Peniston, 18 Wall., at 32; whether government officials handle and control its operations, Standard Oil Co. v. Johnson, supra; whether its officers or any significant portion of them are appointed by the Government, Department of Employment v. United States, supra; compare Railroad Co. v. Peniston, supra; whether the Government gives it significant financial aid, whether it is charged by law with carrying out some of the Government’s international commitments, and whether it performs “functions indispensable to the workings” of a governmental unit, Department of Employment v. United States, supra, at 359.

Under any of those rubrics and applying the factors listed above — a list not intended to be exhaustive — a national bank cannot be considered a tax-immune federal instrumentality. It is a privately owned corporation existing for the private profit of its shareholders. It performs no significant federal governmental function that is not performed equally by state-chartered banks. Government officials do not run its day-to-day operations nor does the Government have any ownership interest in a national bank.

Appellant points to two factors as leading to the conclusion that national banks are federal instrumentalities: that they “owe their very existence to congressional legislation,” and that they are subject to extensive federal regulation. But the fact that institutions “owe their existence to,” i. e., are chartered by, the Government, has been definitely rejected as a basis alone for determining they should be tax immune. Railroad Co. v. Peniston, supra; cf. Broad River Power Co. v. Query, 288 U. S. 178 (1933). Similarly, a whole host of businesses and institutions are subject to extensive federal regulation and that has never been thought to bring them within the scope of the “federal instrumentalities” doctrine. The plain fact is that one could hold that national banks have a constitutional tax-immune status today only by mechanically applying the three seminal cases of M'Culloch, Osborn, and Owensboro. It is instructive, therefore, to examine the functions performed by the national banks involved in those cases.

The Second Bank of the United States, involved in M’Culloch and Osborn, would clearly be a federal instrumentality under the Court’s most recent discussion of the doctrine (Department of Employment, supra): the United States owned 20% of its capital stock (the remainder being owned by private persons); the President appointed five of its 25 directors, and the Government, as a shareholder, participated in the election of the others; the Secretary of the Treasury was required to deposit all of the public funds in the bank, unless he could give reasons to Congress why he should not do so; the bank was required to transmit funds for the United States without charge; the bank issued currency which was established as legal tender for all debts owing to the Government; and the bank clearly acted as the fiscal agent of the Government, handling its foreign exchange transactions. See P. Studenski & H. Krooss, Financial History of the United States 83-88, 103-106 (2d ed. 1963); Federal Reserve System, Banking Studies 7-8, 18, 39-41 (1941).

Even the national bank involved in Owensboro might warrant tax-immune status were it in existence today. It was established pursuant to the National Currency Acts of 1863 and 1864 which were enacted largely to bolster the Union’s financial status, shaky because of the Civil War. Banking Studies, supra, at 43-46. Most importantly, from the standpoint of analyzing the federal functions such banks served, national banks under the Civil War legislation, to which national banks today trace their history, had important and significant functions concerning currency. They were authorized to issue currency, printed for them by the Treasury Department, and such currency was established as legal tender for all debts owing to, or payable by, the Government. To insure the stability of the national currency by insuring the stability of the issuing banks, as well as to provide a ready market for the Government, each such national bank was required to secure its currency by depositing United States bonds with the Treasury Department. Banking Studies, supra, 14-16, 41-46; Studenski & Krooss, supra, 154-155.

All of this was radically changed with the passage of the Federal Reserve Act of 1913, 38 Stat. 251, as amended, 12 U. S. C. § 221 et seq., and by subsequent developments with respect both to the Federal Reserve System and to national banks. To capsulize those developments greatly, suffice it to say that the Federal Reserve banks (and System) are now the monetary and fiscal agents of the United States. 12 U. S. C. § 391. By 1935, the power of national banks to issue currency had ceased and now Federal Reserve banks are the only banking institutions that can do so. Banking Studies, supra, at 240; Federal Reserve System, The Federal Reserve System: Purposes and Functions c. X (5th rev. ed. 1967). The diminished importance of national banks as federal functionaries was compensated for by the enactment of legislation designed to make them more competitive with state banks, e. g., branch banking, 44 Stat. 1228 (1927), as amended, 12 U. S. C. § 36 (c); fiduciary powers, 76 Stat. 668 (1962), 12 U. S. C. § 92a; rate of interest on loans, 48 Stat. 191 (1933), as amended, 12 U. S. C. § 85; capitalization, 48 Stat. 185 (1933), 12 U. S. C. § 51; and interest on time and savings deposits, 44 Stat. 1232 (1927), 12 U. S. C. §371.

To be sure, the Federal Reserve System could not function without national banks, which are required to be members therein, 12 U. S. C. § 222, and in that sense they are part and parcel of the establishment and effectuation of the national fiscal and monetary policies. But, in my view, that does not make them sufficiently quasi-public to enjoy the tax-immune status of federal instrumentalities. If that alone were enough, then it would seem that state banks which elect to join the Federal Reserve System should also be tax-immune federal instrumentalities.

In any event, there is little difference today between a national bank and its state-chartered competitor: the ownership, control and capital source of each is private; each exists for private profit. More importantly, neither may issue legal tender:

“With the passing of the national bank notes, the United States lost much of the difference between the national banking system and the state banking systems. Except for automatic membership in the Federal Reserve System, different examining boards, and more or less different standards of examination, appraisal, and the like, the main point of differentiation between the national banking system and any [state] . . . banking system . . . was formerly the privilege of currency issue.” J. Paris, Monetary Policies of the United States, 1932-1938, at 96 (1938).

Today the national banks perform no significant fiscal services to the Federal Government not performed by their state competitors. Any federally insured bank, state or national, may be a government depository. 12 U. S. C. § 265. The principal checking accounts of the Government are carried today, not by national banks, but by the Federal Reserve banks. When a new issue of government securities is offered, the Federal Reserve banks receive the applications of purchasers. When government securities are to be redeemed or exchanged, the transactions are handled by the Federal Reserve banks. Those banks administer for the Treasury the tax and loan deposit accounts of the banks in their respective districts. See The Federal Reserve System: Purposes and Functions, supra, at 225-234, 274-277; Banking Studies, supra, 260-265.

In Graves v. New York ex rel. O’Keefe, 306 U. S., at 483, Mr. Justice Stone wrote for the Court:

“[T]he implied immunity of one government and its agencies from taxation by the other should, as a principle of constitutional construction, be narrowly restricted. For the expansion of the immunity of the one government correspondingly curtails the sovereign power of the other to tax, and where that immunity is invoked by the private citizen it tends to operate for his benefit at the expense of the taxing government and without corresponding benefit to the government in whose name the immunity is claimed.”

That is precisely the situation here; I would heed those words and hold that national banks, today, are not immune from nondiscriminatory state taxation as federal instrumentalities. I might also add that I am a bit mystified that under the Court’s decisions in this field the Federal Government in practical effect must pay a state tax in dealing with its contractors (who pass the tax on to the Government), see, e. g., Alabama v. King & Boozer, 314 U. S. 1 (1941), but that a national bank, a private profit-making corporation, is constitutionally immune from state taxation.

II.

The Court holds that 12 U. S. C. § 548, ante, at 341, n. 3, “was intended to prescribe the only ways in which the States can tax national banks.” Ante, at 343. I would be less than candid not to acknowledge that that holding has the virtue of being supported by substantial precedent. But that seems to me to be its only virtue. That interpretation of § 548 has its judicial origin in the Owensboro case. Given the constitutional premise of Owensboro, that interpretation would be quite clearly correct. But since I reject the constitutional premise so far as national banks today are concerned, it seems to me § 548 ought to be examined freshly, for the “immunity formerly said to rest on constitutional implication [should not] . . . now be resurrected in the form of statutory implication.” Oklahoma Tax Comm’n v. United States, 319 U. S. 598, 604 (1943).

Section 548 expressly mentions four specified types of taxes: those on national bank shares, on dividends on shares in the hands of stockholders, on the income of the bank, and taxes “according to or measured by” a bank’s income. It provides that the imposition of any one of the four listed taxes “shall be in lieu of the others.” That statement, together with language of the section omitted in the Court’s note as not pertinent {ante, at 341-342, n. 3), makes clear that the purpose of the section was to insure the competitive equality of the banks with other businesses by preventing the bank or its shareholders from being subjected to more than one of the four enumerated types of taxes, other than real property taxes, so as to prevent multiple taxation of the same income, unless the States taxed the income of other businesses in similar multiple fashion. See 12 U. S. C. § 548, subsections 1 (b), (c), and (d), supra, n. 10. All that the majority can point to in the legislative history of § 548 is that the Congress was well aware of M‘Culloch v. Maryland. And that decision specifically stated the following:

“This opinion does not deprive the States of any resources which they originally possessed. It does not extend to a tax paid by the real property of the bank, in common with the other real property within the State, nor to a tax imposed on the interest which the citizens of Maryland may hold in this institution, in common with other property of the same description throughout the State.” (4 Wheat., at 436.)

I view § 548 as congressional delineation of those areas of state taxation of national banks permitted by the M‘Cul-loch decision itself. I would hold that the section was “merely designed to insure that the inherent taxing powers which were recognized in” that case — “e. g., the power to tax the real property of the banks as well as the privately owned shares — be exercised in a nondiscriminatory fashion.” Liberty Nat. Bank v. Buscaglia, 21 N. Y. 2d 357, 370, 235 N. E. 2d 101, 108 (1967). As this Court said in Tradesmens Nat. Bank v. Oklahoma Tax Comm’n, 309 U. S. 560, 567 (1940), “the various restrictions [§ 548] . . . places on the permitted methods of taxation are designed to prohibit only those systems of state taxation which discriminate in practical operation against national banking associations or their shareholders as a class.”

Moreover, whatever else may be said of the statute, it most assuredly does not provide specifically that it is the sole measure of the State’s power of taxation. One could argue that, given the state of constitutional law as it then existed, Congress saw no need to say specifically in § 548 that national banks were immune from state taxation except as that section permitted. Aside from the misreading of M'Culloch that such a view entails, the constitutional immunity of federal in-strumentalities was just as plain when Congress provided statutory immunity for such agencies as, e. g., the Federal Reserve banks, 38 Stat. 258 (1913), 12 U. S. C. § 531; Federal land banks, 39 Stat. 380 (1916), 12 U. S. C. § 931; many other federal banking institutions; the Reconstruction Finance Corporation, 47 Stat. 9 (1932), 15 U. S. C. § 607; and the Public Housing Administration, 50 Stat. 890 (1937), 42 U. S. C. § 1405 (e), and a host of government-owned corporations.

It is not without relevance in construing § 548, it seems to me, that the kinds of state taxes here involved did not exist at the time the section was adopted and were not a significant factor in the raising of state revenue until the early 1930’s, subsequent to the last amendment of § 548 in 1926. See generally H. R. Rep. No. 565, 89th Cong., 1st Sess., 608 (1965). I think we should be reluctant to interpret a statute having such narrow scope as § 548 as encompassing such a broad prohibitory application. It seems to me that we would do far better to recognize that the Constitution does not prohibit nondiscriminatory state taxation of national banks, and that § 548 limits only the kinds of taxes -specifically set forth therein. Only in that way is Congress free to re-evaluate the situation. That is, so far as construing § 548 is concerned, in practical effect the issue is who shall bear the burden of seeking congressional action. I would put the burden where it ought to be, namely, on the private profit-making corporation that seeks exemption from nondiscriminatory state taxation.

Finally, a major national banking policy has been to foster competitive equality of national and state banks. See, e. g., First Nat. Bank v. Walker Bank, 385 U. S. 252 (1966); Lewis v. Fidelity & Deposit Co., 292 U. S. 559 (1934). We ought, if other considerations are not decisive, to promote rather than retard that strong policy.

For the reasons stated, I would affirm.

Mr. Justice Harlan :

In addition to the reasons given in my Brother Marshall's opinion, which I have joined, I would affirm the judgment below on the basis of that part of Justice Reardon’s opinion for the Supreme Judicial Court of Massachusetts which upheld the application of Massachusetts’ use tax to national banks. See - Mass. -, ---, 229 N. E. 2d 245, 251-260.

       Acts and Resolves, 1966, e. 14, §§ 1 and 2.

       The Federal Reserve Act of December 23, 1913, c. 6, 38 Stat. 251, 12 U. S. C. § 221 et seq.

       This section provides in pertinent part:
      "The legislature of each State may determine and direct, subject to the provisions of this section, the manner and place of taxing all the shares of national banking associations located within its limits. The several States may (1) tax said shares, or (2) include dividends derived therefrom in the taxable income of an owner or holder thereof, or (3) tax such associations on their net income, or (4) according to or measured by their net income ....
      “1. (a) The imposition by any State of any one of the above four forms of taxation shall be in lieu of the others ....
      “3. Nothing herein shall be construed to exempt the real property of associations from taxation in any State or in any subdivision thereof, to the same extent, according to its value, as other real property is taxed.”

       Act of February 25, 1863, c. 58, 12 Stat. 665.

       Act of February 10, 1868, c. 7, 15 Stat. 34.

       Act of March. 4, 1923, c. 267, 42 Stat. 1499.

       64 Cong. Rec. 1454 (1923).

       Act of March 25, 1926, c. 88, 44 Stat. 223.

       See Hearing on S. 2547 before the Subcommittee on Federal Reserve Matters of the Senate Committee on Banking and Currency, 81st Cong., 2d Sess., 9 (1950).

       The reductio ad absurdum in the text is, unlike most, somewhat accurate. One item upon which, appellant informed its supplier, it should not have to pay the sales tax was a wastebasket (as well as, e. g., “1 Box 5x7 Index Cards”). The record does not reveal the extent of appellant’s liability for use taxes; appellant paid a total of $575.66’ in sales taxes for the three months of the year 1966 that are specifically at issue here.

         Burnet v. Coronado Oil & Gas Co., 285 U. S. 393, 412-413 (1932) (dissenting opinion), quoting from Passenger Cases, 7 How. 283, 470 (1849) (Taney, C. J.).

        Graves v. New York ex rel. O’Keefe, 306 U. S. 466, 489, 490 (1939) (concurring opinion), quoting from Panhandle Oil Co. v. Knox, 277 U. S. 218, 223 (1928) (dissenting opinion).

        Owensboro might also be viewed simply as- prohibiting a franchise tax, i. e., as holding that a State may not condition the privilege to operate within its borders granted to the bank by Congress, by exacting that kind of tax. (Such a tax is permissible under 12 U. S. C. § 548, as amended after Owensboro, see Tradesmens Nat. Bank v. Tax Comm’n, 309 U. S. 560 (1940).) The taxes in M'Cul-loch and Osborn, apart from their discriminatory aspects, might be similarly viewed: the Maryland tax was directly upon the bank’s operations, and alternatively upon its privilege to operate within the State; the Ohio tax in Osborn was also a condition upon the bank’s privilege to transact business there. While the language and holdings of later cases go well beyond that limited view, that view would seem preferable to me to interpreting those constitutional decisions as flatly prohibiting all forms of state taxation, aside from exceptions listed in M'Culloch, 4 Wheat., at 436 (see infra, at 361).

       Act of February 25, 1863, 12 Stat. 665 (“An Act to provide a national Currency . . .”); Act of June 3, 1864, 13 Stat. 99 (“An Act to provide a National Currency . . .”).

       See n. 5, supra; see also revenue acts, Act of March 3, 1865, §§ 6, 7, 13 Stat. 484; Act of July 13, 1866, § 9, 14 Stat. 146.

       As of December 31, 1966, membership in the Federal Reserve System was composed of 1,351 state-chartered, and 4,799 national, banks. The Federal Reserve System: Purposes and Functions, supra, at 24-25.

       Accord, Indian Motorcycle Co. v. United States, 283 U. S. 570, 580 (1931) (Stone, J., dissenting).

       Compare the rejection of a national bank’s contention that it, as a federal instrumentality, should be exempt from the federal labor laws, NLRB v. Bank of America, 130 F. 2d 624, 627 (C. A. 9th Cir. 1942) (footnote omitted):
      “It is a privately owned corporation, privately managed and operated in the interest of its stockholders. . . . The United States did not create it, but has merely enabled it to be created. . . .”

       The relevant omitted portions of § 548 read:
      “1. (a) . . .
      “(b) In the case of a tax on said shares the tax imposed shall not be at a greater rate than is assessed upon other moneyed capital in the hands of individual citizens of such State coming into competition with the business of national banks: Provided, That bonds, notes, or other evidences of indebtedness in the hands of individual citizens not employed or engaged in the banking or investment business and representing merely personal investments not made in competition with such business, shall not be deemed moneyed capital within the meaning of this section.
      “(c) In case of a tax on or according to or measured by the net income of an association, the taxing State may, except in case of a tax on net income, include the entire net income received from all sources, but the rate shall not be higher than the rate assessed upon other financial corporations nor higher than the highest of the rates assessed by the taxing State upon mercantile, manufacturing, and business corporations doing business within its limits: Provided, however, That a State which imposes a tax on or according to or measured by the net income of, or a franchise or excise tax on, financial, mercantile, manufacturing, and business corporations organized under its own laws or laws of other States and also imposes a tax upon the income of individuals, may include in such individual income dividends. from national banking associations located within the State on condition that it also includes dividends from domestic corporations and may likewise include dividends from national banking associations located without the State on condition that it also includes dividends from foreign corporations, but at no higher rate than is imposed on dividends from such other corporations.
      “(d) In case the dividends derived from the said shares are taxed, the tax shall not be at a greater rate than is assessed upon the net income from other moneyed capital.
      “2. The shares of any national banking association owned by nonresidents of any State shall be taxed by the taxing district or by the State where the association is located and not elsewhere; and such association shall make return of such shares and pay the tax thereon as agent of such nonresident shareholders.”

        E. g., federal intermediate credit banks, 12 U. S. C. §1111; Federal Home Loan Bank, 12 U. S. C. § 1433; federal savings and loan associations, 12 U. S. C. § 1464 (h).

        E. g., Federal Deposit Insurance Corp., 12 U. S. C. § 1825. See Government Corporation Control Act of 1945, 59 Stat. 597, as amended, 31 U. S. C. § 841 et seg.


source: Caselaw Access Project

author: Mr. Justice Harlan MR. Justice Black, Mr. Justice White,

license: Public Domain

text:
    MANCUSI, WARDEN v. DeFORTE.
    No. 844.
    Argued April 25, 1968.
    Decided June 17, 1968.

      Michael H. Rauch, Assistant Attorney General of New York, argued the cause for petitioner. With him on the brief were Louis J. Lefkowitz, Attorney General, and Samuel A. Hirshowitz, First Assistant Attorney General.

      James L. Lekin argued the cause and filed a brief for respondent.
   Mr. Justice Harlan

delivered the opinion of the Court.

In 1959 the respondent, Frank DeForte, a vice president of Teamsters Union Local 266, was indicted in Nassau County, New York, on charges of conspiracy, coercion, and extortion, it being alleged that he had misused his union office to “organize” owners of juke boxes and compel them to pay tribute. Prior to the return of the indictment, the Nassau County District Attorney’s office issued a subpoena duces tecum to Local 266, calling upon it to produce certain books and records. The subpoena was served upon the Union at its offices. When the Union refused to comply, the state officials who had served the subpoena conducted a search and seized union records from an office shared by DeForte and several other union officials. The search and seizure were without a warrant and took place despite the protests of DeForte, who was present in the office at the time. Over DeForte’s objection, the seized material was admitted against him at trial. He was convicted.

On direct appeal to the New York courts, DeForte unsuccessfully argued, inter alia, that the seized material was constitutionally inadmissible in state proceedings under the rule laid down in Mapp v. Ohio, 367 U. S. 643, because the search and seizure occurred without a warrant. DeForte subsequently brought a federal habeas corpus proceeding, in which he made the same contention. The United States District Court for the Western District of New York denied the writ, 261 F. Supp. 579, but on appeal the Court of Appeals for the Second Circuit reversed and directed that the writ issue. 379 F. 2d 897. We granted certiorari, 390 U. S. 903, to consider the State’s contention that the Court of Appeals erred in upsetting this state conviction. Concluding that the Court of Appeals was right, we affirm.

I.

It is desirable at the outset to make clear what is and what is not involved in this case. The decision below was based solely upon a finding that DeForte’s Fourth and Fourteenth Amendment rights, see Ker v. California, 374 U. S. 23, 30-34, were violated by the search and seizure, and that the seized material was therefore inadmissible under Mapp. It is on this ground alone that DeForte argues for affirmance. Consequently, there is no occasion to consider whether DeForte might successfully have asserted his Fifth Amendment right against self-incrimination with respect to the use against him of the seized records. Cf. United States v. White, 322 U. S. 694; Wilson v. United States, 221 U. S. 361. Nor is there any need to inquire whether DeForte could have asserted a Fourth or Fifth Amendment claim on behalf of the Union, for he did not do so. Moreover, this is not a case in which it is necessary to decide whether the traditional doctrine that Fourth Amendment rights “are personal rights, and . . . may be enforced by exclusion of evidence only at the instance of one whose own protection was infringed by the search and seizure,” Simmons v. United States, 390 U. S. 377, at 389, should be modified. Cf. id., at 390, n. 12. For DeForte claims that under the traditional rule he does have standing to challenge the admission against him at trial of union records seized from the office where he worked. The questions for decision, then, are whether DeForte has Fourth Amendment standing to object to the seizure of the records and, if so, whether the search was one prohibited by the Fourth Amendment.

II.

We deal, first, with the question of “standing.” The Fourth Amendment guarantees that “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.” The papers which were seized in this case belonged not to DeForte but to the Union. Hence, DeForte can have personal standing only if, as to him, the search violated the “right of the people to be secure in their . . . houses . ...” This Court has held that the word “houses,” as it appears in the Amendment, is not to be taken literally, and that the protection of the Amendment may extend to commercial premises. See, e. g., See v. Seattle, 387 U. S. 541; Go-Bart Importing Co. v. United States, 282 U. S. 344; Silverthorne Lumber Co. v. United States, 251 U. S. 385.

Furthermore, the Amendment does not shield only those who have title to the searched premises. It was settled even before our decision in Jones v. United States, 362 U. S. 257, that one with a possessory interest in the premises might have standing. See, e. g., United States v. Jeffers, 342 U. S. 48. In Jones, even that requirement was loosened, and we held that “anyone legitimately on premises where a search occurs may challenge its legality . . . when its fruits are proposed to be used against him.” 362 U. S., at 267. The Court’s recent decision in Katz v. United States, 389 U. S. 347, also makes it clear that capacity to claim the protection of the Amendment depends not upon a property right in the invaded place but upon whether the area was one in which there was a reasonable expectation of freedom from governmental intrusion. See 389 U. S., at 352. The crucial issue, therefore, is whether, in light of all the circumstances, DeForte’s office was such a place.

The record reveals that the office where DeForte worked consisted of one large room, which he shared with several other union officials. The record does not show from what part of the office the records were taken, and DeForte does not claim that it was a part reserved for his exclusive personal use. The parties have stipulated that DeForte spent “a considerable amount of time” in the office, and that he had custody of the papers at the moment of their seizure.

We hold that in these circumstances DeForte had Fourth Amendment standing to object to the admission of the papers at his trial. It has long been settled that one has standing to object to a search of his office, as well as of his home. See, e. g., Gouled v. United States, 255 U. S. 298; United States v. Lefkowitz, 285 U. S. 452; Goldman v. United States, 316 U. S. 129; cf. Lopez v. United States, 373 U. S. 427; Osborn v. United States, 385 U. S. 323. Since the Court in Jones v. United States, supra, explicitly did away with the requirement that to establish standing one must show legal possession or ownership of the searched premises, see 362 U. S., at 265-267, it seems clear that if DeForte had occupied a “private” office in the union headquarters, and union records had been seized from a desk or a filing cabinet in that office, he would have had standing. Cf. Go-Bart Importing Co. v. United States, 282 U. S. 344; Silverthorne Lumber Co. v. United States, 251 U. S. 385. In such a “private” office, DeForte would have been entitled to expect that he would not be disturbed except by personal or business invitees, and that records would not be taken except with his permission or that of his union superiors. It seems to us that the situation was not fundamentally changed because DeForte shared an office with other union officers. DeForte still could reasonably have expected that only those persons and their personal or business guests would enter the office, and that records would not be touched except with their permission or that of union higher-ups. This expectation was inevitably defeated by the entrance of state officials, their conduct of a general search, and their removal of records which were in De-Forte’s custody. It is, of course, irrelevant that the Union or some of its officials might validly have consented to a search of the area where the records were kept, regardless of DeForte’s wishes, for it is not claimed that any such consent was given, either expressly or by implication.

Our conclusion that DeForte had standing finds strong support in Jones v. United States, supra. Jones was the occasional occupant of an apartment to which the owner had given him a key. The police searched the apartment while Jones was present, and seized narcotics which they found in a bird’s nest in an awning outside a window. Thus, like DeForte, Jones was not the owner of the searched premises. Like DeForte, Jones had little expectation of absolute privacy, since the owner and those authorized by him were free to enter. There was no indication that the area of the apartment near the bird’s nest had been set off for Jones’ personal use, so that he might have expected more privacy there than in the rest of the apartment; in this, it was like the part of DeForte’s office where the union records were kept. Hence, we think that our decision that Jones had standing clearly points to the result which we reach here.

III.

The remaining question is whether the search of De-Forte’s office was “unreasonable” within the meaning of the Fourth Amendment. The State does not deny that the search and seizure were without a warrant, and it is settled for purposes of the Amendment that “except in certain carefully defined classes of cases, a search of private property without proper consent is ‘unreasonable’ unless it has been authorized by a valid search warrant.” Camara v. Municipal Court, 387 U. S. 523, 528-529. We think it plain that the state officials’ possession of a district attorney’s subpoena of the kind involved here does not bring this case within one of those “carefully defined classes.” The State has not attempted to justify the search and seizure on that ground, and the New York courts have themselves said as a matter of state law that “[a district attorney’s] subpoena duces tecum confers no right to seize the property referred to in the subpoena . . . .” Amalgamated Union, Local 224 v. Levine, 31 Misc. 2d 416, 417, 219 N. Y. S. 2d 851, 853.

Moreover, the subpoena involved here could not in any event qualify as a valid search warrant under the Fourth Amendment, for it was issued by the District Attorney himself, and thus omitted the indispensable condition that “the inferences from the facts which lead to the complaint'. .. be drawn by a neutral and detached magistrate instead of being judged by the officer engaged in the often competitive enterprise of ferreting out crime.’ Johnson v. United States, 333 U. S. 10, 14.” Giordenello v. United States, 357 U. S. 480, 486. In Silverthorne Lumber Co. v. United States, 251 U. S. 385, a corporate office was searched for papers which the corporation had refused to deliver in response to a New York District Attorney’s subpoena, apparently similar to the one in this case. Speaking for the Court, Mr. Justice Holmes not only held that the seizure of the papers was unjustified but characterized it as “an outrage.” Id., at 391. The objections of both the corporation and the officer were sustained. Thus, there can be no doubt that under this Court's past decisions the search of DeForte's office was “unreasonable” within the meaning of the Fourth Amendment.

The judgment of the Court of Appeals is

Affirmed.

MR. Justice Black,

with whom Mr. Justice Stewart joins,

dissenting.

Until this case was decided just now it has been the law in this country, since the federal Fourth Amendment exclusionary rule was adopted in 1914, that a defendant on trial for a crime has no standing or substantive right to object to the use of papers and documents against him on the ground that those papers, belonging to someone else, had been taken from the owner in violation of the Fourth Amendment. Heretofore successful objection to use of such papers as evidence has been left to the owner whose constitutional rights had been invaded. In Wilson v. United States, 221 U. S. 361, decided in 1911, this Court in an exhaustive opinion by Mr. Justice Hughes, later Chief Justice, applied that principle by denying the benefit of the Fourth and Fifth Amendments to a corporate officer, even one who had helped to prepare the corporate papers summoned to be produced. In United States v. White, 322 U. S. 694, decided in 1944, this Court applied the same principle in rejecting a claim of a union officer that the use of union papers and documents against him under a subpoena duces tecum would incriminate him. And indeed the Court in today creating its new rule is unable to cite a single previous opinion of this Court holding to the contrary.

In creating this new rule against the use of papers and documents which speak truthfully for themselves, the Court is putting up new hurdles and barriers bound to save many criminals from conviction. I should not object to this new rule, however, if I thought it was or could be justified by the Fourth or any other constitutional amendment. But I do not think it can. The exclusionary rule itself, even as it applies to the exclusion of the defendant’s own property when illegally seized, has had only a precarious tenure in this Court. See Adams v. New York, 192 U. S. 585 (1904); Weeks v. United States, 232 U. S. 383 (1914); and my concurring opinion in Mapp v. Ohio, 367 U. S. 643, 661 (1961). I wish to repeat here what I have indicated before, that this seems to me a rather inopportune time to create a single rule more than the Constitution plainly requires to block conviction of guilty persons by keeping out probably the most reliable kind of evidence that can be offered.

A corporate or union official suffers no personal injury when the business office he occupies as an agent of the corporation or union is invaded and when records he has prepared and safeguarded as an agent are seized. The invasion by the Government may disrupt the functioning of the office, prevent employees from performing their duties, and result in disclosure of business matters the company or union wished to keep secret. But all these are injuries only to the corporation or union as such. The organization has every right to challenge such intrusions whenever they occur — if the seizure is illegal, the records obtained can be suppressed in a prosecution against the organization, and if no prosecution is initiated, the organization can obtain return of all the documents by bringing a civil action. See, e. g., Go-Bart Importing Co. v. United States, 282 U. S. 344 (1931). Such intrusions, however, involve absolutely no invasion of the “personal privacy” or security of the agent or employee as an individual, and he accordingly has no right to seek suppression of records that the corporation or union itself has made no effort to regain.

The cases decided by this Court have, until today, uniformly supported this view and rejected the sweeping new exclusionary rule now advanced by the Court. Nor in my judgment does any one of the cases relied on by the Court provide support for its holding. The Court’s basic premise is that if the union papers had been taken directly from a desk used by DeForte in a union office used only by him, his standing would have been clear, without regard to any other circumstances. I have found no past decision by this Court to that effect. Neither Silverthorne Lumber Co. v. United States, 251 U. S. 385 (1920), nor Go-Bart Importing Co. v. United States, 282 U. S. 344 (1931), mentions the question of standing at all, and it is hard to see how the Court’s inference can be drawn from these cases since in both the party seeking suppression of the documents was in fact the owner of them. Although in Silverthorne the objections had been raised by both the corporation and one of its officers, standing was never even mentioned from the beginning to the end of the opinion, and the Court treated both parties as the “owners” of the documents. 251 U. S., at 391. Consequently, the Court’s use of Mr. Justice Holmes’ reference to “outrage” in no way supports the Court’s holding today, directly or indirectly.

Jones v. United States, 362 U. S. 257 (1960), also fails to sustain the Court’s position. In that case the petitioner had been arrested in a friend’s apartment and was charged with possession of narcotics found there. This Court was troubled about the “dilemma” that would be created by requiring the petitioner, in order to secure suppression of the narcotics, to swear that they were taken from his possession, thus confessing his guilt of the very offense charged against him. To avoid this situation the Court held that petitioner could make his motion to suppress without swearing to possession, either because of the dilemma itself or because as a guest in the apartment he had the “legally requisite interest in the premises.” 362 U. S., at 263. The Court today puts great stress on the statement in Jones that “anyone legitimately on premises where a search occurs may challenge its legality . . . when its fruits are proposed to be used against him.” 362 U. S., at 267. With deference I must point out that this sweeping dictum is taken somewhat out of context and cannot possibly have the literal meaning attributed to it. It would be quite a hyperbole, I think, to say that the Jones opinion suggested that just any person who happened to be in a house against which an unreasonable search was perpetrated could ask to have all evidence obtained by that search excluded from evidence against him. As was asked by the court below, would that dictum enable a janitor to escape the use of evidence illegally seized from his boss? The Court apparently recognizes this problem even now, for DeForte clearly was “legitimately on [the] premises” and thus his standing should be obvious, under its reading of Jones, without the Court’s extended discussion of “reasonable expectation” and the related limiting tests. This reasoning in terms of “expectations,” however, requires conferring standing without regard to whether the agent happens to be present at the time of the search or not, a rather remarkable consequence of the statement in Jones. In fact the Court’s opinion indicates to me that the Court is preparing the way to use Jones to eliminate entirely the requirement for standing to raise a search and seizure question and to permit a search to be challenged at any time, at any place, and under all circumstances, regardless of the defendant’s relationship to the person or place searched or to the things seized. Any such step would elevate the Fourth Amendment to a position of importance far above that of any other constitutional provision, compare Flast v. Cohen, ante, p. 83, and would make it more difficult for the government to convict guilty persons who can make no claim to redress in any form since they suffered no invasion of any kind by the search itself. I would prefer to return to Jones itself, where we made quite clear throughout the opinion that while common-law concepts of property ownership were not controlling, standing was not automatically conferred on “anyone legitimately on [the] premises.” We stressed:

“In order to qualify as a 'person aggrieved by an unlawful search and seizure’ one must have been a victim of a search or seizure, one against whom the search was directed, as distinguished from one who claims prejudice only through the use of evidence gathered as a consequence of a search or seizure directed at someone else.” 362 U. S., at 261.

In the present case I think it is entirely clear that the search was not “directed” against DeForte personally, but was addressed to and aimed at the Union and designed to secure from the Union papers belonging to the Union. The search occurred in a large room, which DeForte shared with a number of others, and the records were not taken from files and drawers used exclusively by him for his own private purposes. The police had been investigating a large conspiracy perpetrated through the Union and at the time were primarily interested in getting more information about the operation of the Union. The records taken were those that had been listed in a subpoena addressed to the Union itself, and since the Union had raised no objection to- the subpoena, it was under a duty to turn over the records. Compare Hale v. Henkel, 201 U. S. 43 (1906).

Undoubtedly, I suppose, even if the Union’s papers here should be returned either to the Union or to the defendant, the State could, on a new trial, summon the papers and get them and use them. A rule which encourages such circumvention as that is hardly the kind of principle to which this great Court should give birth. I disclaim any responsibility whatever for the new rule.

Mr. Justice White,

dissenting.

Although the Fourth Amendment perhaps protects the individual’s private desk in a union office shared with other officers or employees, I dissent from the Court’s extension of the protected area to the office door.

       Those appeals culminated in a petition for certiorari to this Court, which was denied sub nom. De Grandis v. New York, 375 U. S. 868.

       DeForte’s petition for certiorari following direct appeal was denied in 1963, more than two years after the Court’s decision in Mapp v. Ohio. Under the rule laid down in Linkletter v. Walker, 381 U. S. 618, DeForte is entitled to invoke the exclusionary principle established in Mapp. See 381 U. S., at 622 and n. 5.

       The petitioner, Mancusi, is the warden of the New York State prison in which DeForte is confined.

       The fact that the seized papers belonged to the Union does not imply of itself that an individual could never have personal standing to object to their admission against him. For example, state officers conceivably might have seized the papers during a search of DeForte’s home, and in that event we think it clear that he would have had standing. Wilson v. United States, 221 U. S. 361, is by no means to the contrary, for in that case there was no physical search at all. The only Fourth Amendment standing question in Wilson was whether a corporate officer had personal standing to object to a subpoena duces tecum addressed to the corporation, on the ground that it was overbroad. See 221 U. S., at 375-376.

       The petitioner contends that this holding was not intended to have general application, but that it was devised solely to solve the particular dilemma presented in Jones: that of a defendant who was charged with a possessory offense and consequently might have to concede his guilt in order to establish standing in the usual way. However, this limited reading of Jones overlooks the fact that in Jones standing was held to exist on two distinct grounds: “(1) [The circumstance that] possession both convicts and confers standing, eliminates any necessity for a preliminary showing of an interest in the premises searched or the property seized .... (2) Even ■were this not a prosecution turning on illicit possession, the legally requisite interest in the premises was here satisfied . . . .” 362 U. S., at 263. (Emphasis added.) Thus, the second branch of the holding, with which we are here concerned, was explicitly stated to be of general effect.

       See Joint Appendix 51-52.

       See also Stoner v. California, 376 U. S. 483; United States v. Jeffers, 342 U. S. 48; McDonald v. United States, 335 U. S. 451; Agnello v. United States, 269 U. S. 20.

       A copy of the subpoena appears in the Joint Appendix, at 22. The subpoena was signed by the District Attorney and directed to the Union as a witness in a criminal action. It ordered the Union to appear before the District Attorney forthwith, and to bring with it specified union records. The subpoena appears to have been issued under the authority of N. Y. Code Crim. Proc. §§ 609-613.

       See also In re Atlas Lathing Corp., 176 Misc. 959, 29 N. Y. S. 2d 458; Hagan, Impounding and the Subpoena Duces Tecum, 26 Brooklyn L. Rev. 199, 210-211 (1960).

       See n. 8, supra.

       The Court’s opinion in Davis v. United States, 328 U. S. 582, does contain dicta to the effect that there is a lesser right to privacy when government officials have a “right” to inspect the seized items. See, e. g., id., at 593. However, the only holding in Davis was that there had been a valid consent- to the search; the case “did not involve a search warrant issue.” See v. City of Seattle, 387 U. S. 541, 545, n. 7.

       It is, of course, immaterial that the State might have been able to obtain the same papers by means which did not violate the Fourth Amendment. As Mr. Justice Holmes stated in Silverthorne Lumber Co. v. United States, supra, at 392: “[T]he rights . . . against unlawful search and seizure are to be protected even if the same result might have been achieved in a lawful way.”

       See also Hale v. Henkel, 201 U. S. 43 (1906); Grant v. United States, 227 U. S. 74 (1913); Essgee Co. v. United States, 262 U. S. 151 (1923); Goldstein v. United States, 316 U. S. 114 (1942); Davis v. United States, 328 U. S. 582 (1946); Wong Sun v. United States, 371 U. S. 471 (1963); Wild v. Brewer, 329 F. 2d 924 (C. A. 9th Cir. 1964).

       Since the State had obtained a subpoena for these documents even before the search, the new subpoena would not be an invalid “fruit” of the illegal seizure. Compare Silverthorne, supra.


author: Mr. Justice Stewart Mr. Justice Black, Mr. Justice Harlan,

text:
    LEE et al. v. FLORIDA.
    No. 174.
    Argued May 2, 1968.
    Decided June 17, 1968.

      Edward R. Kirkland argued the cause and filed a brief for petitioners.

      Wallace E. Allbritton, Assistant Attorney General of Florida, argued the cause for respondent. With him on the brief was Earl Faircloth, Attorney General.
   Mr. Justice Stewart

delivered the opinion of the Court.

The three petitioners were convicted in a Florida trial court for violating the state lottery laws. Their con-victims were affirmed by a Florida district court of appeal, and the Supreme Court of Florida denied further review. We granted certiorari to consider the application of § 605 of the Federal Communications Act of 1934, 48 Stat. 1103, 47 U. S. C. § 605, to the circumstances of this case. That statute provides:

“[N]o person not being authorized by the sender shall intercept any communication and divulge . . . the existence, contents, substance, purport, effect, or meaning of such intercepted communication to any person . . .

In the summer of 1963 petitioner Lee ordered the installation of a private telephone in the house where he lived near Orlando, Florida. The local telephone company informed him that no private lines were available, and he was given a telephone on a four-party line instead. A week later, at the direction of the Orlando police department, the company connected a telephone in a neighboring house to the same party line. The police attached to this telephone an automatic actuator, a tape recorder, and a set of earphones. The equipment was connected directly to the wall outlet in such a way that the police could hear and record all conversations on the party line without the necessity of lifting the receiver on their telephone. This arrangement not only afforded the police continuous access to all of Lee’s outgoing and incoming calls, but also eliminated the telltale “click” that would otherwise have warned conversing parties that someone else on the line had picked up a receiver. Further, the arrangement insured that noises in the house occupied by the police would not be heard by anyone else on the line. For more than a week the police used this equipment to overhear and record telephone calls to and from Lee’s residence, including calls made to Lee by the other two petitioners from private as well as public telephones.

At the petitioners’ trial, several of these recordings were introduced in evidence by the prosecution over objection by defense counsel. In affirming the convictions, the state appellate court said that “there were no state or federal statutes applicable in Florida which would make wiretapping illegal and inadmissible in evidence . ...”

We disagree. There clearly is a federal statute, applicable in Florida and every other State, that made illegal the conduct of the Orlando authorities in this case. And that statute, we hold today, also made the recordings of the petitioners’ telephone conversations inadmissible as evidence in the Florida court.

I.

Section 605 of the Federal Communications Act speaks, not in terms of tapping a wire, but in terms of intercepting and divulging a communication. The State concedes that the police “divulged” the petitioners’ conversations within the meaning of the statute. But, it argues, the police cannot be deemed to have “intercepted” the telephone conversations, because people who use party lines should realize that their conversations might be overheard.

This is not a case, however, where the police merely picked up the receiver on an ordinary party line, and we need not decide whether § 605 would be applicable in those circumstances. For here the police did much more. They deliberately arranged to have a telephone connected to Lee’s line without his knowledge, and they altered that connection in such a way as to permit continuous surreptitious surveillance and recording of all conversations on the line. What was done here was a far cry from the police activity in Rathbun v. United States, 355 U. S. 107, a case heavily relied upon by the respondent. There we found no interception where “a communication [is] overheard on a regularly used telephone extension with the consent of one party to the conversation,” ibid., and where the “extension had not been installed there just for this purpose but was a regular connection, previously placed and normally used.” Id., at 108. We viewed that situation as though one of the parties to the telephone conversation had simply “held out his handset so that another could hear out of it.” Id., at 110-111. In the present case, by contrast, there was neither “the consent of one party” nor a “regularly used” telephone “not . . . installed . . . just for [the] purpose” of surveillance. The conduct of the Orlando police, deliberately planned and carried out, clearly amounted to interception of the petitioners’ communications within the meaning of § 605 of the Federal Communications Act.

II.

The remaining question is whether the recordings that the police obtained by intercepting the petitioners’ telephone conversations were admissible in evidence in the Florida trial court, notwithstanding the express prohibition of federal law against divulgence of recordings so procured.

Section 605 was enacted as part of the Federal Communications Act of 1934, 48 Stat. 1103, six years after the Court had said in Olmstead v. United States, 277 U. S. 438, 465, that “Congress may of course [legislate to] protect the secrecy of telephone messages by making them, when intercepted, inadmissible in evidence . . . .” In Nardone v. United States, 302 U. S. 379, the Court was first called upon to decide whether § 605 had indeed served to render evidence of intercepted communications inadmissible in a federal trial. In that case the Government urged that “a construction be given the section which, would exclude federal agents since it is improbable Congress intended to hamper and impede the activities of the government in the detection and punishment of crime.” 302 U. S., at 383. In reversing the judgment of conviction, the Court’s answer to that argument was unequivocal:

“[T]he plain words of § 605 forbid anyone, unless authorized by the sender, to intercept a telephone message, and direct in equally clear language that ‘no person’ shall divulge or publish the message or its substance to ‘any person.’ To recite the contents of the message in testimony before a court is to divulge the message. The conclusion that the act forbids such testimony seems to us unshaken by the government’s arguments.
“Congress may have thought it less important that some offenders should go unwhipped of justice than that officers should resort to methods deemed inconsistent with ethical standards and destructive of personal liberty. The same considerations may well have moved the Congress to adopt § 605 as evoked the guaranty against practices and procedures vio-lative of privacy, embodied in the Fourth and Fifth Amendments of the Constitution.” 302 U. S., at 382, 383.

Fifteen years later, in Schwartz v. Texas, 344 U. S. 199, the Court considered the question whether, despite § 605, telephone communications intercepted by state officers could lawfully be received in evidence in state criminal trials. That case was decided in the shadow of Wolf v. Colorado, 338 U. S. 25, which shortly before had held that “in a prosecution in a State court for a State crime the Fourteenth Amendment does not forbid the admission of evidence obtained by an unreasonable search and seizure.” 338 U. S., at 33. The Court in Schwartz recognized that the problem before it was “somewhat different” from the one that had been presented in Wolf, “because the introduction of the intercepted communications would itself be a violation” of federal law. 344 U. S., at 201. But the Court nonetheless concluded that state .trial courts were not required to reject evidence violative of § 605. For if, as Wolf had held, state courts were free to accept evidence obtained in violation of the Federal Constitution, the Court reasoned that they could not be required to reject evidence obtained and divulged in violation of a federal statute. That was the thrust of the Schwartz opinion:

“Although the intercepted calls would be inadmissible in a federal court, it does not follow that such evidence is inadmissible in a state court. Indeed, evidence obtained by a state officer by means which would constitute an unlawful search and seizure under the Fourth Amendment to the Federal Constitution is nonetheless admissible in a state court, Wolf v. Colorado, 338 U. S. 25, while such evidence, if obtained by a federal officer, would be clearly inadmissible in a federal court. Weeks v. United States, 232 U. S. 383.” Ibid.

The fact that a state official would be violating the express terms of the federal statute by the very act of divulging the intercepted communications as evidence for the prosecution at the trial, the Court in Schwartz said, was “simply an additional factor for a state to consider in formulating a rule of evidence for use in its own courts.” Ibid. But in Benanti v. United States, 355 U. S. 96, five years later, the Court returned to the teaching of Nardone in giving emphatic recognition to the language of the statute that itself makes illegal the divulgence of intercepted communications. In Benanti the Court held inadmissible in a federal trial communications that had been intercepted by state officers. “Section 605,” the Court said, “contains an express, absolute prohibition against the divulgence of intercepted communications.” 355 U. S., at 102.

After the Benanti decision, therefore, the only remaining support for Schwartz v. Texas, supra, was the holding in Wolf v. Colorado, supra, that state courts, unlike federal courts, were free to decide for themselves whether to condone violations of federal law by accepting the products of such violations as evidence. That doctrinal underpinning of the Schwartz decision was, of course, completely removed by Mapp v. Ohio, 367 U. S. 643, which overruled Wolf and squarely held that evidence obtained by state officers in an unreasonable search is inadmissible in a state criminal trial.

In view of the Nardone and Benanti decisions, the doctrine of Schwartz v. Texas cannot survive the demise of Wolf v. Colorado, supra. In the Mapp case, the Court in overruling Wolf imposed a judicially devised exclusionary rule in order to insure that a State could not adopt rules of evidence calculated to permit the invasion of rights protected by federal organic law. In the present case the federal law itself explicitly protects intercepted communications from divulgence, in a court or any other place.

But the decision we reach today is not based upon language and doctrinal symmetry alone. It is buttressed as well by the “imperative of judicial integrity.” Elkins v. United States, 364 U. S. 206, 222. Under our Constitution no court, state or federal, may serve as an accomplice in the willful transgression of “the Laws of the United States,” laws by which “the Judges in every State [are] bound . . . .”

Finally, our decision today is counseled by experience. The hope was expressed in Schwartz v. Texas that “[enforcement of the statutory prohibition in § 605 can be achieved under the penal provisions” of the Communications Act. 344 U. S., at 201. That has proved to be a vain hope. Research has failed to uncover a single reported prosecution of a law enforcement officer for violation of § 605 since the statute was enacted. We conclude, as we concluded in Elkins and in Mapp, that nothing short of mandatory exclusion of the illegal evidence will compel respect for the federal law “in the only effectively available way — by removing the incentive to disregard it.” Elkins v. United States, 364 U. S., at 217.

Reversed.

Mr. Justice Black,

dissenting.

In 1937, Nardone v. United States, 302 U. S. 379, held that 47 U. S. C. § 605 forbids the introduction of intercepted and divulged telephone conversations in federal courts. In Schwartz v. Texas, 344 U. S. 199 (1952), this Court held, however, that the section does not forbid the use of such evidence in state criminal trials, saying: “[W]e do not believe that Congress intended to impose a rule of evidence on the state courts.” 344 U. S., at 203. I thought the holding in Schwartz was correct then and still think so. The Court holds, however, that § 605 now compels state courts to exclude such intercepted telephone messages from state trials. The effect of this holding is to overrule Schwartz v. Texas. The Court’s holding is made despite the fact that Congress itself has not changed the section. Nor does Mapp v. Ohio, 367 U. S. 643 (1961), undermine Schwartz as the Court intimates, for in Schwartz we dealt, as we do here, with conduct that violates only a federal statute and so deserves only the sanctions contemplated by that statute. The Communications Act explicitly provides for penal sanctions, 47 U. S. C. § 501, and some civil remedies might be implied as a matter of federal law, cf. J. I. Case Co. v. Borak, 377 U. S. 426 (1964). But the creation by statute of a federal substantive right does not mean that the States are required by the Supremacy Clause to give every procedural trial remedy afforded by federal courts or that failure to afford such remedies renders the State “an accomplice in the willful transgression of 'the Laws of the United States.’ ” Ante, at 386.

I think it would be more appropriate for the Court to leave this job of rewriting § 605 to the Congress. Waiting for Congress to rewrite its law, however, is too slow for the Court in this day of the rapid creation of new judicial rules, many of which inevitably tend to make conviction of criminals more difficult. I cannot agree that there is the slightest justification for overruling Schwartz and would affirm these Florida gambling convictions.

Mr. Justice Harlan,

whom Mr. Justice White joins,

dissenting.

Congress has ample power to proscribe any particular use of intercepted telephone conversations. The question here is simply whether § 605 of the Communications Act proscribes basing state criminal convictions on such interceptions. This statutory question does not involve any constitutional exclusionary rule, cf. Mapp v. Ohio, 367 U. S. 643, or the supervisory power of this Court over the lower federal courts, cf. Weeks v. United States, 232 U. S. 383.

More than 15 years ago, in Schwartz v. Texas, 344 U. S. 199, this Court decided that § 605 did not render state convictions based on such interceptions invalid. Although arguments can be made that this decision was incorrect, the matter is hardly without difficulty. It is not at all obvious that a statute which by its terms prohibits only interception and divulgence of conversations, meant also to prohibit state-court reliance on the perfectly probative evidence gained thereby.

It disserves the proper relation between this Court and Congress to change the long-standing interpretation of a federal statute in the absence of much more convincing evidence than is here adduced that the Court originally mistook what Congress intended. The importance of the principle of stare decisis of course varies with the nature of the question. It is at its highest in a case such as the present: Congress has considered the wiretapping problem many times, each time against what it naturally assumed to be a stable background of statute law. To vary that background with the inclinations of members of this Court is to frustrate orderly congressional consideration of statutory problems. I would therefore adhere to Schwartz.

Since the Court does not reach petitioners’ further contention that the interception violated their constitutional rights, I am content to dissent from the Court’s determination of the statutory question and not to express views that would, at this stage, be academic.

       Lee v. State, 191 So. 2d 84.

       389 U. S. 1033. Issues under the Fourth and Fourteenth Amendments were also presented in the petition for certiorari. We do not reach those issues.

       The record does not show how or why this house was made available to the Orlando police.

       191 So. 2d, at 85. The court went on to say that “wiretapping is illegal in Florida” by reason of the Florida Constitution. However, the court found that what the police did in this ease did not amount to “wiretapping” within the scope of the state constitutional prohibition. The court based its conclusions upon several previous Florida cases: Perez v. State, 81 So. 2d 201; Williams v. State, 109 So. 2d 379; Griffith v. State, 111 So. 2d 282; Barber v. State, 172 So. 2d 857.

       A party-line user’s privacy is obviously vulnerable, but it does not necessarily follow that his telephone conversations are completely unprotected by § 605. In many areas of the country private telephone lines are not available; in other areas they are available only at higher rates than party lines. There is nothing in the language or history of § 605 to indicate that Congress meant to afford any less protection to those who, by virtue of geography or financial hardship, must use party-line telephones.

       Section 605 prohibits interception and divulgence of intrastate as well as interstate communications. Weiss v. United States, 308 U. S. 321.

       It was not until two Terms later, in Elkins v. United States, 364 U. S. 206, that the Court repudiated the “silver platter doctrine,” under which evidence obtained by state officers in violation of the Fourth and Fourteenth Amendments could be received as evidence in federal courts.

       See also the second Nardone case, Nardone v. United States, 308 U. S. 338.

       “[I]t cannot be lawful to authorize what is an illegal act. . . . [I]f the police officer violates the Federal statute by tapping wires notwithstanding a warrant issued out of this court pursuant to New York law — if that act be illegal — those who set the act in motion have condoned if not instigated illegality. . . . [T]he warrant itself partakes of the breach, willful or inadvertent, of the Federal law. Such breach may not find sanction in the orders of courts charged with the support of the law of the land and with enforcing that law!” In re Telephone Communications, 9 Misc. 2d 121, 126, 170 N. Y. S. 2d 84, 89 (N. Y. Sup. Ct.).
      See also Application for Interception of Telephone Communications, 23 Misc. 2d 543, 198 N. Y. S. 2d 572 (N. Y. Ct. Gen. Sess.).
      Compare Judge Waterman's concurring opinion in Pugach v. Dollinger, 277 F. 2d 739 (denying injunction against state officer for violating § 605), aff’d per curiam, 365 U. S. 458:
      “It is therefore presumptuous to assume that any New York State trial judge will acquiesce to the commission of a crime against the United States in his presence in his courtroom by a witness testifying under oath.” 277 F. 2d, at 745.

       “[T]he Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” Art. VI, U. S. Const.

       Compare Wolf v. Colorado, 338 U. S. 25, at 30-31.

       In Pugach v. Klein, 193 F. Supp. 630, a defendant in a state criminal case attempted unsuccessfully to initiate a criminal prosecution against state officers for violations of § 605. See also Simons v. O’Connor, 187 F. Supp. 702 (denying damages in action against state officer for violation of § 605).

      There seem to be only three reported prosecutions of private individuals for violations of § 605. United States v. Gruber, 123 F. 2d 307; United States v. Gris, 247 F. 2d 860; Elkins v. United States, 364 U. S. 206.

        Nardone v. United States, 302 U. S. 379, established that divul-gence of intercepted communications in court was a violation of § 605. The Court went on to hold that a federal conviction resulting from such a violation was itself improper. The Court did not, however, make it clear whether the Act required that result by its own force or the Court was simply imposing that result by virtue of its supervisory power.