author: Mr. Justice Black Mr. Justice Stewart,

text:
    HUGHES v. WASHINGTON.
    No. 15.
    Argued November 6, 1967.
    Decided December 11, 1967.

      Charles B. Welsh argued the cause for petitioner. With him on the briefs was John Gavin.

      Harold T. Hartinger, Assistant Attorney General of Washington, argued the cause for respondent. With him on the brief were John J. O’Connell, Attorney General, and J. R. Pritchard and John R. Miller, Assistant Attorneys General.

      Assistant Attorney General Weisl argued the cause for the United States, as amicus curiae, urging reversal. With him on the brief were Solicitor General Marshall, Robert S. Rifkind, Roger P. Marquis and George S. Swarth.

   Mr. Justice Black

delivered the opinion of the Court.

The question for decision is whether federal or state law controls the ownership of land, called accretion, gradually deposited by the ocean on adjoining upland property conveyed by the United States prior to statehood. The circumstances that give rise to the question are these. Prior to 1889 all land in what is now the State of Washington was owned by the United States, except land that had been conveyed to private parties. At that time owners of property bordering the ocean, such as the predecessor in title of Mrs. Stella Hughes, the petitioner here, had under the common law a right to include within their lands any accretion gradually built up by the ocean. Washington became a State in 1889, and Article 17 of the State’s new constitution, as interpreted by its Supreme Court, denied the owners of ocean-front property in the State any further rights in accretion that might in the future be formed between their property and the ocean. This is a suit brought by Mrs. Hughes, the successor in title to the original federal grantee, against the State of Washington as owner of the tidelands to determine whether the right to future accretions which existed under federal law in 1889 was abolished by that provision of the Washington Constitution. The trial court upheld Mrs. Hughes’ contention that the right to accretions remained subject to federal law, and that she was the owner of the accreted lands. The State Supreme Court reversed, holding that state law controlled and that the State owned these lands. 67 Wash. 2d 799, 410 P. 2d 20 (1966). We granted certiorari. 385 U. S. 1000 (1967). We hold that this question is governed by federal, not state, law and that under federal law Mrs. Hughes, who traces her title to a federal grant prior to statehood, is the owner of these accretions.

While the issue appears never to have been squarely presented to this Court before, we think the path to decision is indicated by our holding in Borax, Ltd. v. Los Angeles, 296 U. S. 10 (1935). In that case we dealt with the rights of a California property owner who held under a federal patent, and in that instance, unlike the present case, the patent was issued after statehood. We held that

“[t]he question as to the extent of this federal grant, that is, as to the limit of the land conveyed, or the boundary between the upland and the tideland, is necessarily a federal question. It is a question which concerns the validity and effect of an act done by the United States; it involves the ascertainment of the essential basis of a right asserted under federal law.” 296 U. S., at 22.

No subsequent case in this Court has cast doubt on the principle announced in Borax. See also United States v. Oregon, 295 U. S. 1, 27-28 (1935). The State argues, and the court below held, however, that the Borax case should not be applied here because that case involved no question as to accretions. While this is true, the case did involve the question as to what rights were conveyed by the federal grant and decided that the extent of ownership under the federal grant is governed by federal law. This is as true whether doubt as to any boundary is based on a broad question as to the general definition of the shoreline or on a particularized problem relating to the ownership of accretion. See United States v. Washington, 294 F. 2d 830, 832 (C. A. 9th Cir. 1961), cert. denied, 369 U. S. 817 (1962). We therefore find no significant difference between Borax and the present case.

Recognizing the difficulty of distinguishing Borax, respondent urges us to reconsider it. Borax itself, as well as United States v. Oregon, supra, and many other cases, makes clear that a dispute over title to lands owned by the Federal Government is governed by federal law, although of course the Federal Government may, if it desires, choose to select a state rule as the federal rule. Borax holds that there has been no such choice in this area, and we have no difficulty in concluding that Borax was correctly decided. The rule deals with waters that lap both the lands of the State and the boundaries of the international sea. This relationship, at this particular point of the marginal sea, is too close to the vital interest of the Nation in its own boundaries to allow it to be governed by any law but the “supreme Law of the Land.”

This brings us to the question of what the federal rule is. The State has not attempted to argue that federal law gives it title to these accretions, and it seems clear to us that it could not. A long and unbroken line of decisions of this Court establishes that the grantee of land bounded by a body of navigable water acquires a right to any natural and gradual accretion formed along the shore. In Jones v. Johnston, 18 How. 150 (1856), a dispute between two parties owning land along Lake Michigan over the ownership of soil that had gradually been deposited along the shore, this Court held that “[l]and gained from the sea either by alluvion or dereliction, if the same be by little and little, by small and imperceptible degrees, belongs to the owner of the land adjoining.” 18 How., at 156. The Court has repeatedly reaffirmed this rule, County of St. Clair v. Lovingston, 23 Wall. 46 (1874); Jefferis v. East Omaha Land Co., 134 U. S. 178 (1890), and the soundness of the principle is scarcely open to question. Any other rule would leave riparian owners continually in danger of losing the access to water which is often the most valuable feature of their property, and continually vulnerable to harassing litigation challenging the location of the original water lines. While it is true that these riparian rights are to some extent insecure in any event, since they are subject to considerable control by the neighboring owner of the tideland, this is insufficient reason to leave these valuable rights at the mercy of natural phenomena which may in no way affect the interests of the tideland owner. See Stevens v. Arnold, 262 U. S. 266, 269-270 (1923). We therefore hold that petitioner is entitled to the accretion that has been gradually formed along her property by the ocean.

The judgment below is reversed, and the case is remanded to the Supreme Court of Washington for further proceedings not inconsistent with this opinion.

Reversed and remanded.

Mr. Justice Marshall took no part in the consideration or decision of this case.

Mr. Justice Stewart,

concurring.

I fully agree that the extent of the 1866 federal grant to which Mrs. Hughes traces her ownership was originally measurable by federal common law, and that under the applicable federal rule her predecessor in title acquired the right to all accretions gradually built up by the sea. For me, however, that does not end the matter. For the Supreme Court of Washington decided in 1966, in the case now before us, that Washington terminated the right to oceanfront accretions when it became a State in 1889. The State concedes that the federal grant in question conferred such a right prior to 1889. But the State purports to have reserved all post-1889 accretions for the public domain. Mrs. Hughes is entitled to the beach she claims in this case only if the State failed in its effort to abolish all private rights to seashore accretions.

Surely it must be conceded as a general proposition that the law of real property is, under our Constitution, left to the individual States to develop and administer. And surely Washington or any other State is free to make changes, either legislative or judicial, in its general rules of real property law, including the rules governing the property rights of riparian owners. Nor are riparian owners who derive their title from the United States somehow immune from the changing impact of these general state rules. Joy v. St. Louis, 201 U. S. 332, 342. For if they were, then the property law of a State like Washington, carved entirely out of federal territory, would be forever frozen into the mold it occupied on the date of the State’s admission to the Union. It follows that Mrs. Hughes cannot claim immunity from changes in the property law of Washington simply because her title derives from a federal grant. Like any other property owner, however, Mrs. Hughes may insist, quite apart from the federal origin of her title, that the State not take her land without just compensation. Chicago, B. & Q. R. Co. v. Chicago, 166 U. S. 226, 236-241.

Accordingly, if Article 17 of the Washington Constitution had unambiguously provided, in 1889, that all accretions along the Washington coast from that day forward would belong to the State rather than to private riparian owners, this case would present two questions not discussed by the Court, both of which I think exceedingly difficult. First: Does such a prospective change in state property law constitute a compensable taking? Second: If so, does the constitutional right to compensation run with the land, so as to give not only the 1889 owner, but also his successors — including. Mrs. Hughes — a valid claim against the State?

The fact, however, is that Article 17 contained no such unambiguous provision. In that Article, the State simply asserted its ownership of “the beds and shores of all navigable waters in the state up to and including the line of ordinary high tide, in waters where the tide ebbs and flows, and up to and including the line of ordinary high water within the banks of all navigable rivers and lakes.” In the present case the Supreme Court of Washington held that, by this 1889 language, “[l]ittoral rights of upland owners were terminated.” 67 Wash. 2d 799, 816, 410 P. 2d 20, 29. Such a conclusion by the State's highest court on a question of state law would ordinarily bind this Court, but here the state and federal questions are inextricably intertwined. For if it cannot reasonably be said that the littoral rights of upland owners were terminated in 1889, then the effect of the decision now before us is to take from these owners, without compensation, land deposited by the Pacific Ocean from 1889 to 1966.

We cannot resolve the federal question whether there has been such a taking without first making a determination of our own as to who owned the seashore accretions between 1889 and 1966. To the extent that the decision of the Supreme Court of Washington on that issue arguably conforms to reasonable expectations, we must of course accept it as conclusive. But to the extent that it constitutes a sudden change in state law, unpredictable in terms of the relevant precedents, no such deference would be appropriate. For a State cannot be permitted to defeat the constitutional prohibition against taking property without due process of law by the simple device of asserting retroactively that the property it has taken never existed at all. Whether the decision here worked an unpredictable change in state law thus inevitably presents a federal question for the determination of this Court. See Demorest v. City Bank Co., 321 U. S. 36, 42-43. Cf. Indiana ex rel. Anderson v. Brand, 303 U. S. 95. The Washington court insisted that its decision was “not startling.” 67 Wash. 2d 799, 814, 410 P. 2d 20, 28. What is at issue here is the accuracy of that characterization.

The state court rested its result upon Eisenbach v. Hatfield, 2 Wash. 236, 26 P. 539, but that decision involved only the relative rights of the State and the upland owner in the tidelands themselves. The Eisen-bach court declined to resolve the accretions question presented here. This question was resolved in 1946, in Ghione v. State, 26 Wash. 2d 635, 175 P. 2d 955. There the State asserted, as it does here, that Article 17 operated to deprive private riparian owners of post-1889 accretions. The Washington Supreme Court rejected that assertion in Ghione and held that, after 1889 as before, title to gradual accretions under Washington law vested in the owner of the adjoining land. In the present case, 20 years after its Ghione decision, the Washington Supreme Court reached a different conclusion. The state court in this case sought to distinguish Ghione: The water there involved was part of a river. But the Ghione court had emphatically stated that the same “rule of accretion . . . applies to both tidewaters and fresh waters.” 26 Wash. 2d 635, 645, 175 P. 2d 955, 961. I can only conclude, as did the dissenting judge below, that the state court’s most recent construction of Article 17 effected an unforeseeable change in Washington property law as expounded by the State Supreme Court.

There can be little doubt about the impact of that change upon Mrs. Hughes: The beach she had every reason to regard as hers was declared by the state court to be in the public domain. Of course the court did not conceive of this action as a taking. As is so often the case when a State exercises its power to make law, or to regulate, or to pursue a public project, pre-existing property interests were impaired here without any calculated decision to deprive anyone of what he once owned. But the Constitution measures a taking of property not by what a State says, or by what it intends, but by what it does. Although the State in this case made no attempt to take the accreted lands by eminent domain, it achieved the same result by effecting a retroactive transformation of private into public property — without paying for the privilege of doing so. Because the Due Process Clause of the Fourteenth Amendment forbids such confiscation by a State, no less through its courts than through its legislature, and no less when a taking is unintended than when it is deliberate, I join in reversing the judgment.

         Jones v. Johnston, 18 How. 150 (1856); County of St. Clair v. Lovingston, 23 Wall. 46 (1874).

       In Ker & Co. v. Couden, 223 U. S. 268 (1912), Mr. Justice Holmes, writing for the Court, held that under the governing Spanish law, lands added to the shore by accretion in the Philippines belonged to the public domain rather than to the adjacent estate.

       It has been held that a State -may, without paying compensation, deprive a riparian owner of his common-law right to utilize the flowing water, St. Anthony Falk Water Power Co. v. Water Comm’rs, 168 U. S. 349 (1897), or to build a wharf over the water, Shively v. Bowlby, 152 U. S. 1 (1894). It has also been held that the State may fill its tidelands and thus block the riparian owner’s natural access to the water. Port of Seattle v. Oregon & W. R. Co., 255 U. S. 56 (1921).


source: Caselaw Access Project

author: Mr. Justice Stewart Mr. Justice Douglas,

license: Public Domain

text:
    UNITED STATES v. CORRELL et ux.
    No. 113.
    Argued November 14, 1967.
    Decided December 11, 1967.

      Solicitor General Griswold argued the cause for the United States. On the briefs were former Solicitor General Marshall, Assistant Attorney General Rogovin, Harris Weinstein, Gilbert E. Andrews and Edward Lee Rogers.

      William L. Taylor, Jr., argued the cause for respondents. On the brief was Carl A. Swafford.

    Briefs of amici curiae, urging affirmance, were filed by Leonard L. Silverstein and Sherwyn E. Syna for the Bureau of Salesmen’s National Associations, and by Raphael Sherfy for the Manufacturing Chemists’ Association, Inc.
   Mr. Justice Stewart

delivered the opinion of the Court.

The Commissioner of Internal Revenue has long maintained that a taxpayer traveling on business may deduct the cost of his meals only if his trip requires him to stop for sleep or rest. The question presented here is the validity of that rule.

The respondent in this case was a traveling salesman for a wholesale grocery company in Tennessee. He customarily left home early in the morning, ate breakfast and lunch on the road, and returned home in time for dinner. In his income tax returns for 1960 and 1961, he deducted the cost of his morning and noon meals as “traveling expenses” incurred in the pursuit of his business “while away from home” under § 162 (a) (2) of the Internal Revenue Code of 1954. Because the respondent’s daily trips required neither sleep nor rest, the Commissioner disallowed the deductions, ruling that the cost of the respondent’s meals was a “personal, living” expense under § 262 rather than a travel expense under § 162 (a)(2). The respondent paid the tax, sued for a refund in the District Court, and there received a favorable jury verdict. The Court of Appeals for the Sixth Circuit affirmed, holding that the Commissioner’s sleep or rest rule is not “a valid regulation under the present statute.” 369 F. 2d 87, 90. In order to resolve a conflict among the circuits on this recurring question of federal income tax administration, we granted certiorari. 388 U. S. 905.

Under §162 (a) (2)^ taxpayers “traveling . . . away from home in the pursuit of a trade or business” may deduct the total amount “expended for meals and lodging.” As a result, even the taxpayer who incurs substantial hotel and restaurant expenses because of the special demands of business travel receives something of a-windfall, for at least part of what he spends on meals represents a personal living expense that other taxpayers must bear without -receiving any deduction at all. Not surprisingly, therefore, Congress did not extend the special benefits of § 162 (a) (2) to every conceivable situation involving business travel. It made the total cost of meals and lodging deductible only if incurred in the course’ of travel that- takes the taxpayer “away from home.” The problem before us involves the meaning of that limiting' phrase.

In resolving that problem, the Commissioner has avoided the wasteful litigation and continuing uncertainty that would inevitably accompany any purely case-by-case approach to the question of whether a particular taxpayer was “away from home” on a particular day. Rather than requiring “every meal-purchasing taxpayer to take pot luck in the courts,” the Commissioner has consistently construed travel “away from home” to exclude all trips requiring neither sleep nor rest, regardless of how many cities a given trip may have touched, how many miles it may have covered, or how many hours it may have consumed. By so interpreting the statutory phrase, the Commissioner has achieved not only ease and certainty of application but also substantial fairness, for the sleep or rest rule places all one-day travelers on a similar tax footing, rather than discriminating against intracity travelers and commuters, who of course cannot deduct the cost of the meals they eat on the road. See Commissioner v. Flowers, 326 U. S. 465.

Any rule in this area must make some rather arbitrary distinctions, but at least the sleep or rest rule avoids the obvious inequity of permitting the New Yorker who makes a quick trip to Washington and back, missing neither his breakfast nor his dinner at home, to deduct the cost of his lunch merely because he covers more miles than the salesman who travels locally and must finance all his meals without the help of the Federal Treasury. And the Commissioner’s rule surely makes more sense than one which would allow the respondent in this case to deduct the cost of his breakfast and lunch simply because he spends a greater percentage of his time at the wheel than the commuter who eats breakfast on his way to work and lunch a block from his office.

The Court of Appeals nonetheless found in the “plain language of the statute” an insuperable obstacle to the Commissioner’s construction. 369 F. 2d 87, 89. We disagree. The language of the statute — “meals and lodging ... away from home” — is obviously not self-defining. And to the extent that the words chosen by Congress cut in either direction, they tend to support rather than defeat the Commissioner’s position, for the statute speaks of “meals and lodging” as a unit, suggesting — at least arguably — that Congress contemplated a deduction for the cost of meals only where the travel in question involves lodging as well. Ordinarily, at least, only the taxpayer who finds it necessary to stop for sleep or rest incurs significantly higher living expenses as a direct result of his business travel, and Congress might well have thought that only taxpayers in that category should be permitted to deduct their living expenses while on the road. In any event, Congress certainly recognized, when it promulgated §162 (a)(2), that the Commissioner had so understood its statutory predecessor. This case thus comes within the settled principle that “Treasury regulations and interpretations long continued without substantial change, applying to unamended or substantially reenacted statutes, are deemed to have received congressional approval and have the effect of law.” Helvering v. Winmill, 305 U. S. 79, 83; Fribourg Nav. Co. v. Commissioner, 383 U. S. 272, 283.

• Alternatives to the Commissioner’s sleep or rest rule are of course available. Improvements might be imagined. But we do not sit as a committee of revision to perfect the administration of' the tax laws. Congress has delegated to the Commissioner, not to the courts, the task of prescribing “all needful rules and regulations for the enforcement” of the Internal Revenue Code. 26 U. S. C. § 7805 (a). In this area of limitless factual variations, “it is the province of Congress and the Commissioner, not the courts, to make the appropriate adjustments.” Commissioner v. Stidger, 386 U. S. 287, 296. The role of the judiciary in cases of this sort begins and ends with assuring that the Commissioner’s regulations fall within his authority to implement the congressional mandate in some reasonable manner. Because the rule challenged here has not been shown deficient on that score, the Court of Appeals should have sustained its validity. The judgment is therefore

Reversed.

Mr. Justice Marshall took no part in the consideration or decision of this case.

Mr. Justice Douglas,

with whom Mr. Justice Black and Mr. Justice Fortas concur,

dissenting.

The statutory words “while away from home,” 26 U. S. C. §162 (a)(2), may not in my view be shrunken to “overnight” by administrative construction or regulations. “Overnight” injects a time element in testing deductibility, while the statute speaks only in terms of geography. As stated by the Court of Appeals:

“In an era of supersonic travel, the time factor is hardly relevant to the question of whether or not travel and meal expenses are related to the taxpayer’s business and cannot be the basis of a valid regulation under the present statute.” Correll v. United States, 369 F. 2d 87, 89-90.

I would affirm the judgment below.

       Since Mr. and Mrs. Correll filed a joint income tax return, both are respondents here. Throughout this opinion, however, the term “respondent” refers only to Mr. Correll.

       “(a) In General. — There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including—
      “(2) traveling expenses (including the entire amount expended for meals and lodging) while away from home in the pursuit of a trade or business ...” § 162 (a) (2) of the Internal Revenue Code of 1954, 26 U. S. C. §162 (a)(2) (1958 ed.).

       “Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses.” § 262 of the Internal Revenue Code of 1954, 26 TJ. S. C. § 262.

       After denying the Government’s motion for a directed verdict, the District Judge charged the jury that it would have to “determine under all the facts of this case whether or not” the Commissioner’s rule was “an arbitrary regulation as applied to these plaintiffs under the facts in this ease.” He told the jury to consider whether the meal expenses were “necessary for the employee to properly perform the duties of his work.” “Should he have eaten them at his home rather than . . . away from home in order to properly carry on his business or to perform adequately his duties as an employee of this produce company [?]” “You are instructed that the cost of meals while on one-day business trips away from home need not be incurred while on an overnight trip to be deductible, so long as the expense of such meals . . . proximately results from the carrying on the particular business involved and has some reasonable relation to that business.” Under these instructions, the jury found for the respondent. The District Court denied the Government's motion for judgment notwithstanding the verdict.

       The decision below conflicts with that of the First Circuit in Commissioner v. Bagley, 374 F. 2d 204, but is in accord with that of the Eighth Circuit in Hanson v. Commissioner, 298 F. 2d 391, reaffirmed in United States v. Morelan, 356 F. 2d 199, 208-210.

       Prior to the enactment in 1921 of what is now §162 (a) (2), the Commissioner had promulgated a regulation allowing a deduction for the cost of meals and lodging away from home, but only to the extent that this cost exceeded “any expenditures ordinarily required for such purposes when at home.” Treas. Reg. 45 (1920 ed.), Art. 292, 4 Cum. Bull. 209 (1921). Despite its logical appeal, the regulation proved so difficult to administer that the Treasury Department asked Congress to grant a deduction for the “entire amount” of such meal and lodging expenditures. See Statement of Dr. T. S. Adams, Tax Adviser, Treasury Department, in Hearings on H. R. 8245 before the Senate Committee on Finance, 67th Cong., 1st Sess., at 50, 234 — 235 (1921). Accordingly, §214 (a)(1) of the Revenue Act of 1921, c. 136, 42 Stat. 239, for the first time included the language that later became § 162 (a) (2). See n. 2, supra. The section was amended in a respect not here relevant by the Revenue Act of 1962, §4 (b), 76 Stat. 976.

       Because § 262 makes “personal, living, or family expenses” nondeductible, see n. 3, supra, the taxpayer whose business requires no travel cannot ordinarily deduct the cost of the lunch he eats away from home. But the taxpayer who can bring himself within the reach of § 162 (a) (2) may deduct what he spends on his noontime meal although it costs him no more, and relates no more closely to his business, than does the lunch consumed by his less mobile counterpart.

       Such was the approach of the Tax Court in Bagley v. Commissioner, 46 T. C. 176, 183, vacated, 374 F. 2d 204; of the Eighth Circuit in Hanson v. Commissioner, 298 F. 2d 391, 397; and evidently of the Sixth Circuit in this case, see 369 F. 2d 87, 90.

        Commissioner v. Bagley, 374 F. 2d 204, 207.

       The Commissioner’s interpretation, first expressed in a 1940 ruling, I. T. 3395, 1940-2 Cum. Bull. 64, was originally known as the overnight rule. See Commissioner v. Bagley, supra, at 205.

       The respondent lived in Fountain City, Tennessee, some 45 miles from his employer’s place of business in Morristown. His territory included restaurants in the cities of Madisonville, Engel-wood, Etowah, Athens, Sweetwater, Lake City, Caryville, Jacksboro, La Follette, and Jellico, all in eastern Tennessee.

       The respondent seldom traveled farther than 55 miles from his home, but he ordinarily drove a total of 150 to 175 miles daily.

       The respondent’s employer required him to be in his sales territory at the start of the business day. To do so, he had to leave Fountain City at about 5 a. m. He usually finished his daily schedule by 4 p. m., transmitted his orders to Morristown, and returned home by 5:30 p. m.

       The rules proposed by the respondent and by the two amici curiae filing briefs on his behalf are not exceptional in this regard. Thus, for example, the respondent suggests that § 162 (a) (2) be construed to cover those taxpayers who travel outside their “own home town,” or outside “the greater . . . metropolitan area” where they reside. One amicus stresses the number of “hours spent and miles traveled away from the taxpayer’s principal post of duty,” suggesting that some emphasis should also be placed upon the number of meals consumed by the taxpayer “outside the general area of his home.”

       See Amoroso v. Commissioner, 193 F. 2d 583.

         The statute applies to the meal and lodging expenses of taxpayers “traveling . . . away from home.” The very concept of “traveling” obviously requires a physical separation from one’s house. To read the phrase “away from home” as broadly as a completely literal approach might permit would thus render the phrase completely redundant. But of course the words of the statute have never been so woodenly construed. The commuter, for example, has never been regarded as “away from home” within the meaning of § 162 (a) (2) simply because he has traveled from his residence to his place of business. See Commissioner v. Flowers, 326 U. S. 465, 473. More than a dictionary is thus required to understand the provision here involved, and no appeal to the “plain language” of the section can obviate the need for further statutory construction.

       See Commissioner v. Bagley, 374 F. 2d 204, 207, n. 10.

       The taxpayer must ordinarily “maintain a home for his family at his own expense even when he is absent on business,” Barnhill v. Commissioner, 148 F. 2d 913, 917, and if he is required to stop for sleep or rest, “continuing costs incurred at a permanent place of abode are duplicated.” James v. United States, 308 F. 2d 204, 206. The same taxpayer, however, is unlikely to incur substantially increased living expenses as a result of business travel, however far he may go, so long as he does not find it necessary to stop for lodging. One amicus curiae brief filed in this case asserts that “those who travel considerable distances such as [on] a one-day jet trip between New York and Chicago” spend more for “comparable meals [than] those who remain at their home base” and urges that all who travel “substantial distances” should therefore be permitted to deduct the entire cost of their meals. It may be that eating at a restaurant costs more than eating at home, but it cannot seriously be suggested that a taxpayer’s bill at a restaurant mysteriously reflects the distance he has traveled to get there.

       The court below thought that “[i]n an era of supersonic travel, the time factor is hardly relevant to the question of whether or not . . . meal expenses are related to the taxpayer’s business . . . .” 369 F. 2d 87, 89-90. But that completely misses the point. The benefits of § 162 (a) (2) are limited to business travel “away from home,” and all meal expenses incurred in the course of such travel are deductible, however unrelated they may be to the taxpayer’s income-producing activity. To ask that the definition of “away from home” be responsive to the business necessity of the taxpayer’s meals is to demand the impossible.

       In considering the proposed 1954 Code, Congress heard a taxpayer plea for a change in the rule disallowing deductions for meal expenses on one-day trips. Hearings on General Revision of the Internal Revenue Code before the House Committee on Ways and Means, 83d Cong., 1st Sess., pt. 1, at 216-219 (1953); Hearings on H. R. 8300 before the Senate Committee on Finance, 83d Cong., 2d Sess., pt. 4, at 2396 (1954). No such change resulted.
      In recommending §62(2)(C) of the 1954 Code, permitting employees to deduct certain transportation expenses in computing adjusted gross income, the Senate Finance Committee stated:
      “At present, business transportation expenses can be deducted by an employee in arriving at adjusted gross income only if they are reimbursed by the employer or if they are incurred while he was away from home overnight ....
      “Because these expenses, when incurred, usually are substantial, it appears desirable to treat employees in this respect like self-employed persons. For this reason both the House and your committee’s bill permit employees to deduct business transportation expenses in arriving at adjusted gross income even though the expenses are not incurred in travel away from home or not reimbursed by the employer. . . .” S. Rep. No. 1622, 83d Cong., 2d Sess., 9 (1954) (emphasis added). See also H. R. Rep. No. 1337, 83d Cong., 2d Sess., 9 (1954).
      And in discussing § 120 of the 1954 Code (repealed by 72 Stat. 1607 (1958)), which allowed policemen to exclude from taxable income up to $5 per day in meal allowances, both the House and Senate Reports noted that, under the prevailing rule, police officers could deduct expenses over the $5 limit of § 120 “for meals while away from home overnight.” H. R. Rep. No. 1337, 83d Cong., 2d Sess., A40 (1954) (emphasis added); S. Rep. No. 1622, 83d Cong., 2d Sess., 191 (1954) (emphasis added). Thus Congress was well aware of the Commissioner’s rule when it retained in § 162 (a) (2) the precise terminology it had used in 1921.

       See n. 14, supra.

       See; e. g., the 1963 proposal of the Treasury Department, in Hearings on the President’s 1963 Tax Message before the House Committee on Ways and Means, 88th Cong., 1st Sess., pt. 1, at 98 (1963).


author: Per Curiam.

text:
    UNITED STATES v. PENN-OLIN CHEMICAL CO. et al.
    No. 26.
    Argued December 7, 1967.
    Decided December 11, 1967.

      Edwin M. Zimmerman argued the cause for the United States. With him on the briefs were Solicitor General Griswold, Assistant Attorney General Turner, Ralph S. Spritzer, Daniel M. Friedman and Richard A. Posner.

      Albert R. Connelly and H. Francis DeLone argued the cause for appellees. With them on the brief were William S. Potter, John W. Barnum and Eugene P. Souther.

   Per Curiam.

The judgment of the United States District Court for the District of Delaware is affirmed by an equally divided Court.

Mr. Justice Marshall took no part in the consideration or decision of this case.


author: Per Curiam. Me. Justice Douglas,

text:
    W. E. B. DuBOIS CLUBS OF AMERICA et al. v. CLARK, ATTORNEY GENERAL, et al.
    No. 515.
    Decided December 11, 1967.

      William M. Kimstler, Arthur Kinoy, Melvin L. Wulf, David Rein, Monroe H. Freedman and Floyd McKissick for appellants.

      Acting Solicitor General Spritzer, Assistant Attorney General Yeagley, Kevin T. Maroney, George B. Searls and Lee B. Anderson for appellees.
   Per Curiam.

On March 4, 1966, the Attorney General petitioned the Subversive Activities Control Board for an order, after appropriate hearings, requiring the W. E. B. DuBois Clubs of America to register with the Attorney General as a Communist-front organization. On April 26, 1966, before hearings were held, appellants attempted to bypass the Board by suing in the District Court. Appellants' complaint in the District Court alleged that the Communist-front registration provisions of the Act were unconstitutional. The complaint also alleged that the “very pendency of these administrative proceedings . . . has resulted and will continue to result . . . in immediate and irreparable injury to fundamental constitutional rights . . . .” Appellants asked the District Court for an order declaring the Communist-front registration provisions unconstitutional and also for an order enjoining the Attorney General and the SACB from enforcing them. A three-judge District Court, convened on appellants’ motion, dismissed the complaint because appellants had failed to exhaust their administrative remedies. This appeal followed.

Before there may be proceedings to punish appellants for failure to register with the Attorney General, the SACB must first find that the DuBois Clubs is a Communist-front organization and issue an order to that effect. The Act provides for a full evidentiary hearing which is to be held in public. Appellants may be represented by counsel, offer oral or documentary evidence, submit rebuttal evidence, and conduct cross-examination. The SACB must make a written report and state its finding of fact. If appellants are aggrieved by the Board’s order, they may obtain review in the United States Court of Appeals for the District of Columbia Circuit which may set aside the order if it is not “supported by the preponderance of the evidence.” Upon motion of a party, the Court of Appeals may order the Board to take additional evidence. Of course, if the Board and the Court of Appeals find that the Act does cover appellants, they may challenge its constitutionality either as applied or on its face. Judgments of the Court of Appeals are reviewable by this Court on certiorari.

It is evident that Congress has provided a way for appellants to raise their constitutional claims. But appellants, denying that they are within the coverage of the Act, wish to litigate these claims in an injunctive proceeding in the District Court. The effect would be that important and difficult constitutional issues would be decided devoid of factual context and before it was clear that appellants were covered by the Act. We have previously refused to decide the constitutionality of the very provisions involved here because it was not clear that the Act would be applied to the objecting parties. American Committee for Protection of Foreign Born v. SACB, 380 U. S. 503, Veterans of the Abraham Lincoln Brigade v. SACB, 380 U. S. 513. Similarly, the District Court should not be forced to decide these constitutional questions in a vacuum.

Appellants rely on Dombrowski v. Pfister, 380 U. S. 479 (1965), to support their contention that the usual rule requiring exhaustion of administrative remedies should not apply in this case. In Dombrowski, however, the constitutional issues were presented in a factual context. Upon a record demonstrating a history of harassment of appellants in connection with their exercise of First Amendment rights, the Court ordered a federal district court to issue an injunction against pending criminal prosecutions under state statutes. This Court held the statutes “void on their face,” and it concluded that, in the circumstances of that case, if appellants were required to submit to a criminal prosecution, the injury to First Amendment freedoms which had already taken place would be compounded. Accordingly, the Court allowed appellants to assert their claims in an equitable proceeding.

In this case, the complaint and .the affidavits constitute no more than conclusory allegations that the purpose of the threatened enforcement of the Act was to “harass” appellants and that harassment was the intended result of the Attorney General’s announcement that he had filed a petition with the SACB. Further, appellants are not being forced to assert their claims in a criminal prosecution. As the court below made clear, “Congress has made careful provision that no tangible sanctions can come into play until the facts have been explored in open hearing [before the Board] and the courts have scrutinized what they show, both in their adequacy to support a registration order and in their constitutional impact upon the statute itself.” In the context of this case, we decline to require the court below to permit substitution of an injunctive proceeding for the civil proceeding which Congress has specifically provided.

The motion to affirm is granted and the judgment is affirmed. Affirmed.

Me. Justice Douglas,

with whom Me. Justice Black concurs,

dissenting.

I believe that the provisions of the Act now challenged are void on their face, that there are no factual issues to be resolved which should condition the outcome of the litigation, and that therefore there is no reason for the lower court to abstain from exercising its jurisdiction.

The statute defines “Communist-front organization” as one which is substantially directed, dominated, or controlled by a Communist-action organization and which is primarily operated for the purpose of giving aid and support to a Communist-action organization, a Communist foreign government, or the world Communist movement. 50 U. S. C. § 782 (4). A Communist-front organization, as defined, is not a group engaged in action but in advocacy; or if action is included, so is advocacy, for § 781 (15) in describing the growth of the Communist movement speaks of those who seek “converts far and wide by an extensive system of schooling and indoctrination.”

Legislation curbing or penalizing advocacy even of ideas we despise is, I submit, at war with the First Amendment. Under our Constitution one’s belief or ideology is of no concern to government. One can think as he likes, embrace any philosophy he chooses, and select the politics that best fits his ideals or needs. That is all implicit in the First Amendment rights of assembly, petition, and expression. Those rights merely enforce, protect, or sanction the beliefs or ideology to which one is committed. So does the right of association which we have said over and again to be part and parcel of those First Amendment rights. Basic in this scheme of values is the immunity of beliefs, ideas, and ideology from government inquiry, probing, or surveillance.

Jefferson expressed the American constitutional theory:

“[T]he opinions of men are not the object of civil government, nor under its jurisdiction .... [I] t is time enough for the rightful purposes of civil government for its officers to interfere when principles break out into overt acts against peace and good order . . . .” Jefferson, A Bill For Establishing Religious Freedom, in The Jeffersonian Cyclopedia 976 (1900).

That is my reading of the First Amendment. Those who can be officially pilloried or punished for having a particular philosophic or political creed are effectively deterred from exercising First Amendment rights.

I see no constitutional method whereby the Government can punish or penalize one for “being a Communist” or “supporting Communists” or “promoting communism.” Communism, as an ideology, embraces a broad array of ideas. To some it has appeal because the state owns the main means of production, with the result that all phases of national life are in the public sector, guaranteeing full employment. To some communism means a medical care program that reaches to the lowest levels of society. To others the communal way of life, even in agriculture, means a fuller life for the average person. To some the flowering of the dance, music, painting, sculpture, and even athletics is possible only when those arts and activities move from the private to the public sector. To some there can be no equivalent of the unemployment insurance, old age insurance, and social security that obtain in a socialized state. To others communism is a commitment to the atheistic philosophy and way of life. To still others, adherence to communism means a commitment to use force and violence, if necessary, to achieve that kind of socialist state. And to some of course it means all of the projects I have enumerated plus perhaps others as well.

The word “revolution” has of course acquired a subversive connotation in modern times. But it has roots that are eminently respectable in American history. This country is the product of revolution. Our very being emphasizes that when grievances pile high and there are no political remedies, the exercise of sovereign powers reverts to the people. Teaching and espousing revolution — as distinguished from indulging in overt acts— are therefore obviously within the range of the First Amendment.

Dennis v. United States, 341 U. S. 494, decided in 1951 at the peak of the notorious “witch hunt” in this Nation, is to the contrary. My Brother Black and I, the only remaining members of the Court who sat in that case, dissented. The crime charged and sustained was a conspiracy to teach and advocate the Marxist creed, including the overthrow of the Government by force or violence. Id., at 497. No overt acts designed to overthrow the Government were charged; no attempt to overthrow was charged. The crime was an agreement to teach, advocate, and espouse a creed that was and is noxious to most Americans.

I cannot believe that Dennis has any continuing vitality. It is out of line with Terminiello v. Chicago, 337 U. S. 1, where a fascist was held to be protected by the First Amendment for espousing his creed, which most Americans find as obnoxious as communism.

It is not conceivable that the Court that decided Dombrowski v. Pfister, 380 U. S. 479, would approve Dennis. In Dombrowski a state prosecution for subversion was enjoined. The people prosecuted were fostering civil rights for Negroes in the South. While it would have been possible to win the state case on constitutional grounds, the Court held that the trial itself would result in irreparable injury. We said:

“Because of the sensitive nature of constitutionally protected expression, we have not required that all of those subject to overbroad regulations risk prosecution to test their rights. For free expression — of transcendent value to all society, and not merely to those exercising their rights — might be the loser.” Id., at 486.

A Communist-front organization under the present Act is a group promoting the world Communist movement. See 50 U. S. C. § 782 (4). If it were defined as a group which, for example, collected arms for the violent overthrow of government, the case would be free of First Amendment problems. But here as in Dombrowski the statute is overbroad, bringing within its scope advocacy, espousal, and teaching of a creed or of causes for which the Communist movement stands.

If an organization is classified a Communist front, serious consequences follow: employment of its members is restricted, § 784; application for or use of passports is made illegal, §785; registration is required, §786; use of the mails and of the radio and TV is curtailed, § 789; tax exemptions are denied, § 790. At least some of these provisions are unconstitutional under our decisions as bills of attainder or as a denial of First and Fifth Amendment rights. Yet vindication would come only after long and protracted hearings and appeals. Meanwhile there wouid be a profound “chilling” effect on the exercise of First Amendment rights within the principle of Dombrowski v. Pfister.

The members of the DuBois Clubs may or may not be Communists. But as I said, I see no possibility under our Constitution of penalizing one for holding or expressing that or any other belief. The DuBois Clubs may advocate causes that parallel Communist thought or Communist policies. They appear, for example, to advocate the termination of the hostilities in Vietnam. But so far as advocacy is concerned, I see no constitutional way of putting restraints on them so long as we have the First Amendment.

Harassing them by public hearings and by probing into their beliefs .and attitudes, pillorying them for their minority views by exposing them to the hearings under the Act — these actions will have the same “chilling” effect as the Court held the trial in Dombrowski would have had.

First Amendment values ride on what we do today. If government can investigate ideas, beliefs, and advocacy at the left end of the spectrum, I see no reason why it may not investigate at any other part of the spectrum. Yet as I read the Constitution, one of its essential purposes was to take government off the backs of people and keep it off. There is the line between action on the one hand and ideas, beliefs, and advocacy on the other. The former is a legitimate sphere for legislation. Ideas, beliefs, and advocacy are beyond the reach of committees, agencies, Congress, and the courts.

Mr. Justice Black and I adhere to the views we expressed in the other cases we have had under this Act (see, e. g., Communist Party v. SACB, 367 U. S. 1, 137, 169; Aptheker v. Secretary of State, 378 U. S. 500, 517, 519; American Committee v. SACB, 380 U. S. 503, 506, 511; Brigade Veterans v. SACB, 380 U. S. 513, 514) and would reverse the judgment below.

       The term “Communist-front organization” is defined in § 3 (4) of the Internal Security Act of 1950, 64 Stat. 989, 50 U. S. C. § 782 (4). Communist-front organizations are required to register with the Attorney General. 50 U. S. C. § 786. When a Communist-front organization does not register, the Attorney General may petition the SACB for an order requiring registration. 50 U. S. C. §792.

       On April 27, 1966, appellants also filed with the Board a motion to dismiss the Attorney General’s petition. The Board denied this motion and, subsequently, on August 18, 1966, appellants filed an answer to the Attorney General’s petition. According to the District Court, the DuBois Clubs “(1) denied generally that it was a Communist-front organization within the meaning of the Act, and (2) denied various allegations of fact made by the Attorney General in the petition.”

       Appellants attacked the provisions, 50 U. S. C. §§ 786 (b), (c), and (d), “on their face and as applied” as violations of Art. I, § 9, cl. 3, Art. Ill, and the First, Fifth, Eighth, Ninth, Tenth, Thirteenth, Fourteenth, and Fifteenth Amendments of the Constitution. Although the Communist-front provisions have been upheld by the District of Columbia Circuit, American Committee for Protection of Foreign Born v. SACB, 117 U. S. App. D. C. 393, 401, 331 F. 2d 53, 61 (1963), reversed on other grounds, 380 U. S. 503 (1965); Veterans of the Abraham Lincoln Brigade v. SACB, 117 U. S. App. D. C. 404, 413, 331 F. 2d 64, 73 (1963), reversed on other grounds, 380 U. S. 513 (1965); Weinstock v. SACB, 118 U. S. App. D. C. 1, 331 F. 2d 75 (1963); Jefferson School of Social Science v. SACB, 118 U. S. App. D. C. 2, 331 F. 2d 76 (1963), their constitutionality has not been specifically determined by this Court, American Committee for Protection of Foreign Born v. SACB, 380 U. S. 503 (1965); Veterans of the Abraham Lincoln Brigade v. SACB, 380 U. S. 513 (1965). Cf. Aptheker v. Secretary of State, 378 U. S. 500 (1964).

       However, the District Court did stay further Board proceedings pending this Court’s disposition of the case.

       50 U. S. C. §794 (a).

       See National Council of American-Soviet Friendship v. SACB, 116 U. S. App. D. C. 162, 322 F. 2d 375 (1963).

       See 50 U. S. C. §§792 (d), (g), 793 (a).

       Cf. Rescue Army v. Municipal Court, 331 U. S. 549, 568-585 (1947).

       See, e. g., Myers v. Bethlehem Shipbuilding Corp., 303 U. S. 41, 50-51 (1938); Macauley v. Waterman S. S. Corp., 327 U. S. 540, 543-545 (1946); Aircraft & Diesel Corp. v. Hirsch, 331 U. S. 752, 771-774 (1947); Allen v. Grand Cent. Aircraft Co., 347 U. S. 535, 553 (1954); Boire v. Greyhound Corp., 376 U. S. 473, 481-482 (1964).

       See 50 U. S. C. §§793 (b), 794.

       Hannah. Arendt writes:
      “The word ‘people’ retained for them [the Founding Fathers] the meaning of manyness, of the endless variety of a multitude whose majesty resided in its very plurality. Opposition to public opinion, namely to the potential unanimity of all, was therefore one of the many things upon which the men of the American Revolution were in complete agreement; they knew that the public realm in a republic was constituted by an exchange of opinion between equals, and that this realm would simply disappear the very moment an exchange became superfluous because all equals happened to be of the same opinion.” On Revolution 88-89 (1963).

       “America had become the symbol of a society without poverty long before the modem age in its unique technological development had actually discovered the means to abolish that abject misery of sheer want which had always been held to be eternal. And only after this had happened and had become known to European mankind could the social question and the rebellion of the poor come to play a truly revolutionary role. The ancient cycle of sempiternal recurrences had been based upon an assumedly 'natural’ distinction of rich and poor; the factual existence of American society prior to the outbreak of the Revolution had broken this cycle once and for all.” H. Arendt, On Revolution 15-16 (1963).

       No such question was presented in American Committee for Protection of Foreign Born v. SACB, 380 U. S. 503, and Veterans of the Abraham Lincoln Brigade v. SACB, 380 U. S. 513. Those cases were reviews of the actions of the Board and did not involve the present question, whether it is necessary to exhaust administrative remedies as a prerequisite to challenging the Act as being invalid on its face.

       On the vices of parallelism see United States v. Lattimore, 127 F. Supp. 405 (D. C. D. C.), aff’d by equally divided court, 98 U. S. App. D. C. 77, 232 F. 2d 334 (en banc).


text:
    BURKE, dba RANCH ACRES LIQUORS, et al. v. FORD et al., dba ALL BRANDS SALES CO., et al.
    No. 632.
    Decided December 11, 1967.

      Robert S. Rizley for petitioners.

      Irvine E. Ungermctn for respondents.
   Per Curiam.

Petitioners, Oklahoma liquor retailers, brought this action under § 1 of the Sherman Act, 26 Stat. 209, 15 U. S. C. § 1, to enjoin an alleged state-wide market division by all Oklahoma liquor wholesalers. The trial judge, sitting without a jury, found that there had in fact been a division of markets — both by territories and by brands. The court nevertheless entered judgment for the wholesalers because, among other reasons, it found that the interstate commerce prerequisite of the Sherman Act was not satisfied. The Court of Appeals affirmed upon the sole ground that “the proof was entirely insufficient to show that the activities complained of were in or adversely affected interstate commerce.” 377 F. 2d 901, 903.

There are no liquor distilleries in Oklahoma. Liquor is shipped in from other States to the warehouses of the wholesalers, where it is inventoried and held until purchased by retailers. The District Court and the Court of Appeals found that the liquor “came to rest” in the wholesalers’ warehouses and that interstate commerce ceased at that point. Hence, they concluded that the wholesalers’ division of the Oklahoma market did not take place “in interstate commerce.” But whatever the validity of that conclusion, it does not end the matter. For it is well established that an activity which does not itself occur in interstate commerce comes within the scope of the Sherman Act if it substantially affects interstate commerce. United States v. Employing Plasterers Association, 347 U. S. 186; Mandeville Island Farms, Inc. v. American Crystal Sugar Co., 334 U. S. 219.

Recognizing this, the District Court went on to find that the wholesalers’ market division had no effect on interstate commerce, and the Court of Appeals agreed. The Court of Appeals held that proof of a state-wide wholesalers’ market division in the distribution of goods retailed in substantial volume within the State but produced entirely out of the State was not by itself sufficient proof of an effect on interstate commerce. We disagree. Horizontal territorial divisions almost invariably reduce competition among the participants. Addyston Pipe & Steel Co. v. United States, 175 U. S. 211; United States v. Sealy, Inc., 388 U. S. 350. When competition is reduced, prices increase and unit sales decrease. The wholesalers’ territorial division here almost surely resulted in fewer sales to retailers — hence fewer purchases from out-of-state distillers — than would have occurred had free competition prevailed among the wholesalers. In addition the wholesalers’ division of brands meant fewer wholesale outlets available to any one out-of-state distiller. Thus the state-wide wholesalers’ market division inevitably affected interstate commerce.

The petition for certiorari is granted and the judgment of the Court of Appeals is reversed. The case is remanded to that court for further proceedings consistent with this opinion.

Me. Justice Harlan concurs in the result.

       Between $44 and $45 million in wholesale purchases in 1964.

       The Court of Appeals stressed the fact that unit sales to the wholesalers increased (885,976 cases to 891,176 cases) from 1963 to 1964 while the market division was in effect. But if there had been free competition among the wholesalers — all other things being equal — presumably sales to them would have increased even more.
      The increase in liquor sales noted by the Court of Appeals was 0.6%; during the same period total personal income in Oklahoma increased from $4,880 million to $5,220 million, an increase of 7.0%. Table 1, Survey of Current Business, p. 30, Office of Business Economics, Department of Commerce (August 1967). Adjusting for concurrent price inflation (see Table 8.1, Survey of Current Business, p. 42 (July 1967)), the increase in real personal income was approximately 5.7%.


author: Per Curiam. Mr. Justice Douglas,

text:
    EAGAR et al. v. MAGMA COPPER CO.
    No 659.
    Decided December 11, 1967.

      Acting Solicitor General Spritzer, Acting Assistant Attorney General Eardley, Alan S. Rosenthal and Richard S. Salzman for petitioners.

      Howard A. Twitty for respondent.
   Per Curiam.

The petition for a writ of certiorari is granted and the judgment is reversed. Accardi v. Pennsylvania R. Co., 383 U. S. 225.

Mr. Justice Marshall took no part in the consideration or decision of this case.

Mr. Justice Douglas,

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

dissenting.

Petitioner Eagar began working for Magma Copper Company March 12, 1958, and left to enter military service just shy of one year later, March 6,1959. After being honorably discharged, Eagar promptly resumed his employment with Magma, May 2, 1962. He seeks vacation pay for the work year following March 12, 1958, and for the Memorial Day and Independence Day holidays in 1962, which followed his re-employment.

Under Magma’s collective bargaining agreement with petitioners’ union, paid vacations are provided at the end of a work year if the employee works 75% of the shifts available to him in that year and is employed with Magma on the one-year anniversary date. Employees who get paid holidays must have worked the shift before and the shift after the holiday and have been on Magma’s payroll continuously for three months before the holiday.

Although Eagar had worked 75% of the shifts for the year March 12, 1958, to March 12, 1959, and had worked the shifts before and after Memorial Day and Independence Day in 1962, Magma denied him benefits. Eagar was not, Magma claims, in its employ on March 12, 1959, nor had he been on the payroll three straight months prior to Memorial and Independence days in 1962.

The majority hold that Magma has violated § 9 (c) of the Universal Military Training and Service Act, 62 Stat. 615, as amended, 50 U. S. C. App. § 459, which provides, inter alia, that a returning serviceman such as Eagar who is re-employed “shall be considered as having been on furlough or leave of absence during his period of training and service in the armed forces, shall be so restored without loss of seniority, [and] shall be entitled to participate in insurance or other benefits offered by the employer pursuant to established rules and practices relating to employees on furlough or leave of absence in effect with the employer at the time such person was inducted into such forces . . . .” (Italics added.)

Section 9 (c) speaks both of “seniority” and of “insurance or other benefits.” In dealing with seniority problems under a like statutory provision, we held that the employee is to be treated as if he had kept his position continuously during his stint in the Army. Accardi v. Pennsylvania R. Co., 383 U. S. 225, 228; Fishgold v. Sullivan Corp., 328 U. S. 275, 284-285.

But this case does not concern “seniority.” No employee of Magma, it appears, regardless of how long he has been with the firm, gets paid vacation if he is not on the payroll on his work-year anniversary date. No employee gets a paid holiday unless he has been with Magma for the three preceding months. The length of vacation and the amoimt of vacation and holiday pay Magma gives do turn on seniority. But petitioners do not contest Magma’s assertion that it does figure the length of vacation for returning servicemen as though they had been constantly on the payroll during their tour of duty in the military. In considering the employee’s eligibility for vacation and holiday pay, since seniority is not involved, the courts must apply the “other benefits” clause of § 9 (c). See Borges v. Art Steel Co., 246 F. 2d 735, 738 (C. A. 2d Cir.). As noted, these benefits are accorded as if the employee were on “furlough or leave of absence” while in service. That is precisely what Magma has done.

Accardi admonishes the courts to give the term “seniority” a broad interpretation. 383 U. S., at 229. But Accardi did not involve the “other benefits” clause, which must be applicable in this clear fringe-benefits case if at all. As Judge Learned Hand said, “[0]bviously the considerations which might make it proper that service in the Army should not affect a man’s seniority are utterly different from those which should count in computing vacations.” Dwyer v. Crosby Co., 167 F. 2d 567, 570 (C. A. 2d Cir.). I would affirm the judgment below.

       There are three other employees of respondent Magma Copper in addition to Eagar on whose behalf the Department of Justice has sought review. The Solicitor General and respondent agree that the facts in Eagar’s case are representative of the other petitioners’ cases, and this Court is asked to resolve the legal dispute on the basis of these facts.

       Section 9 (c) also provides:
      “It is declared to be the sense of the Congress that any person who is restored to a position in accordance with . . . this section should be so restored in such manner as to give him such status in his employment as he would have enjoyed if he had continued in such employment continuously from the time of his entering the armed forces until the time of his restoration to such employment.”

       The “sense of Congress” proviso in § 9 (c) does not indicate a different result. The language was added in 1948 when the “seniority” and “other benefits” provisions were re-enacted upon the expiration of § 8 of the Selective Training and Service Act of 1940, 54 Stat. 890. The “sense of Congress” is concerned with employee “status,” see n. 2, supra. But if “status” were meant to include eligibility for fringe benefits, Congress would not have left unchanged the explicit provision that “other benefits” are to be dispensed as if the returning serviceman had been on leave of absence.


text:
    BROTHERHOOD OF LOCOMOTIVE FIREMEN & ENGINEMEN et al. v. BANGOR & AROOSTOOK RAILROAD CO. et al.
    No. 353.
    Decided December 11, 1967.

      Joseph L. Rauh, Jr., John Silard, Harriett R. Taylor, Isaac N. Groner, Harold C. Heiss, Donald W. Bennett, Alex Elson, Willard J. Lassers and Aaron S. Wolff for petitioners.

      Francis M. Shea, Richard T. Conway, James R. Wolfe and Charles I. Hopkins, Jr., for respondents.
   Per Curiam.

The order of December 4, 1967, denying the petition for a writ of certiorari is vacated.

This case is a consequence of a dispute with respect to the scope of an arbitration award governing the manning of trains and engines in freight service. The union took the position that the award had no effect after 12:01 a. m., March 31, 1966. On March 28, the District Court for the District of Columbia issued a temporary restraining order forbidding a strike. On March 31, the union struck against a number of railroads. The District Court entered contempt orders, imposing substantial fines for alleged violation of its restraining order. The Court of Appeals ruled on various legal issues presented to it but remanded to the District Court to consider whether there had in fact been a contempt, and, also, if there was á contempt, whether it was “of such magnitude as to warrant retention, in part or to any extent, of the coercive fine originally provided for in contemplation of an outright refusal to obey.”

Petitioners seek certiorari to review the adverse rulings made by the Court of Appeals. However, because the Court of Appeals remanded the case, it is not yet ripe for review by this Court. The petition for a writ of certiorari is denied. See Hamilton Shoe Co. v. Wolf Brothers, 240 U. S. 251, 257-258 (1916).

Mr. Justice Black would grant the petition and set the case for argument.


text:
    GERMANN v. UNITED STATES.
    No. 384.
    Decided December 11, 1967.

      Louis Bender for petitioner.

      Solicitor General Griswold, Assistant Attorney General Vinson, Ralph S. Spritzer, Beatrice Rosenberg and Paul C. Summitt for the United States.
   Per Curiam.

The petition for certiorari is granted.

The judgment of the United States Court, of Appeals for the Second Circuit is vacated, and the case is remanded to the United States District Court for the Southern District of New York in order to give that court an opportunity to consider the motion to substitute the Konkursamt Basel-Stadt (the Bankruptcy Office of Basel, Switzerland) as party petitioner, and to reconsider that court’s former adjudication of contempt and the accompanying fine in light of the original petitioner’s death.

It is so ordered.


author: Per Curiam. Mr. Justice Harlan and Mr. Justice Stewart

text:
    UNITED NATIONAL LIFE INSURANCE CO. et al. v. CALIFORNIA.
    No. 669.
    Decided December 11, 1967.

      Hugh P. Cox, Henry P. Sailer, Dennis G. Lyons and William W. Vaughn for appellants.

      Thomas C. Lynch, Attorney General of California, and H. Warren Siegel, Deputy Attorney General, for appellee.
   Per Curiam.

The motion to dismiss is granted and the appeal is dismissed for want of a substantial federal question.

Mr. Justice Harlan and Mr. Justice Stewart

are of the opinion that probable jurisdiction should be noted and the case assigned for oral argument.

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


text:
    DEMERS v. LANGTON, TAX ADMINISTRATOR.
    No. 650, Misc.
    Decided December 11, 1967.
   Per Curiam.

The appeal is dismissed for want of jurisdiction. Treating the papers whereon the appeal was taken as a petition for a writ of certiorari, certiorari is denied.


text:
    TOWNSHIP OF SPRINGFIELD v. GREEN et al.
    No. 675.
    Decided December 11, 1967.

      Read Rocap, Jr., for appellant.

      R. Winfield Baile for appellees.
   Per Curiam.

The motion to dismiss is granted and the appeal is dismissed for want of jurisdiction. Treating the papers whereon the appeal was taken as a petition for a writ of certiorari, certiorari is denied.


author: Per Curiam. Mr. Justice Douglas

text:
    DEVORE v. WEST VIRGINIA BOARD OF DENTAL EXAMINERS et al.
    No. 686.
    Decided December 11, 1967.

      William C. Beatty for appellant.

      C. Donald Robertson, Attorney General of West Virginia, and Thomas B. Yost, Assistant Attorney General, for appellees.
   Per Curiam.

The motion to dismiss is granted and the appeal is dismissed for want of a substantial federal question.

Mr. Justice Douglas

is of the opinion that probable jurisdiction should be noted.


author: Mr. Chief Justice Warren,

text:
    TCHEREPNIN et al. v. KNIGHT et al.
    No. 104.
    Argued November 13, 1967.
    Decided December 18, 1967.

      Arnold I. Shure argued the cause for petitioners. With him on the briefs were Anthony Bradley Eben, Solomon Jesmer and Robert A. Sprecher.

      Stuart D. Perlman, Assistant Attorney General of Illinois, argued the cause for respondents Knight et al. With him on the brief were William G. Clark, Attorney General, Richard E. Friedman, First Assistant Attorney General, and John J. O’Toole, Assistant Attorney General. 'Charles J. O’Laughlin argued the cause for respondents City Savings Association et al. With him on the brief was Albert E. Jenner, Jr. Kinsey T. James filed a memorandum for respondent Mensik.

      Philip A. Loomis, Jr., argued the cause for the Securities and Exchange Commission, as amicus curiae, urging reversal. With him on the briefs were Solicitor General Griswold, Ralph S. Spritzer, David Ferber and Richard E. Nathan.

   Opinion of the Court by

Mr. Chief Justice Warren,

announced by Mr. Justice Brennan.

The narrow question for decision in this case is whether a withdrawable capital share in an Illinois savings and loan association is a “security” within the meaning of the Securities Exchange Act of 1934, 48 Stat. 881, 15 U. S. C. § 78a et seq.

The petitioners are a number of individuals holding withdrawable capital shares in City Savings Association of Chicago, a corporation doing business under the Illinois Savings and Loan Act. On July 24, 1964, they filed a class action in the United States District Court for the Northern District of Illinois, alleging that the sales of the shares to them by City Savings were void under § 29 (b) of the Securities Exchange Act of 1934, 15 U. S. C. § 78ec (b), and asking that the sales be rescinded. Named as defendants in the complaint were City Savings, its officers and directors, two state officials who had taken custody of the Association, and three individuals named as liquidators by the Association’s shareholders in voting a voluntary plan of liquidation. The complaint alleged that the withdrawable capital shares purchased by the petitioners were securities within the meaning of §3 (a) (10) of the Securities Exchange Act, that the petitioners had purchased such securities in reliance upon printed solicitations received from City Savings through the mails, and that such solicitations contained false and misleading statements in violation of § 10 (b) of the Securities Exchange Act and of Rule 10b-5 adopted thereunder by the Securities and Exchange Commission. More specifically, the complaint alleged that the mailed solicitations portrayed City Savings as a financially strong institution and its shares as desirable investments. But the solicitations failed to disclose, inter alia, that the Association was controlled by an individual who had been convicted of mail fraud involving savings and loan associations, that the Association had been denied federal insurance of its accounts because of its unsafe financial policies, and that the Association had been forced to restrict withdrawals by holders of previously purchased shares.

The respondents filed motions to dismiss on the ground that the complaint failed to state a cause of action under § 10 (b) because the petitioners’ with-drawable capital shares were not securities within the meaning of the Securities Exchange Act. The District Court denied the motions to dismiss, ruling that the petitioners’ shares fell within the Act’s definition of securities. However, recognizing that the ruling “involves a controlling question of law as to which there is substantial ground for difference of opinion,” the District Court certified its order for an interlocutory appeal to the Court of Appeals for the Seventh Circuit under 28 U. S. C. § 1292 (b). The Court of Appeals, with one judge dissenting, agreed with respondents that the with-drawable capital shares issued by City Savings did not fit the definition of securities in §3 (a) (10) of the Securities Exchange Act. Consequently, it ruled that the District Court was without jurisdiction in the case, and it remanded with instructions to dismiss the complaint. 371 E. 2d 374. Because this case presents an important question concerning the scope of the Securities Exchange Act, we granted certiorari. 387 U. S. 941. We disagree with the construction placed on § 3 (a) (10) by the Court of Appeals, and we reverse its judgment.

Section 3 (a) (10) of the Securities Exchange Act of 1934 provides:

“3. (a) When used in this title, unless the context otherwise requires—
“(10) The term ‘security’ means any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, or in general, any instrument commonly known as a ‘security’; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.”

This case presents the Court with its first opportunity to construe this statutory provision. But we do not start with a blank slate. The Securities Act of 1933 (48 Stat. 74, as amended) contains a definition of security virtually identical to that contained in the 1934 Act. Consequently, we are aided in our task by our prior decisions which have considered the meaning of security under the 1933 Act. In addition, we are guided by the familiar canon of statutory construction that remedial legislation should be construed broadly to effectuate its purposes. The Securities Exchange Act quite clearly falls into the category of remedial legislation. One of its central purposes is to protect investors through the requirement of full disclosure by issuers of securities, and the definition of security in § 3 (a) (10) necessarily determines the classes of investments and investors which will receive the Act’s protections. Finally, we are reminded that, in searching for the meaning and scope of the word “security” in the Act, form should be disregarded for substance and the emphasis should be on economic reality. S. E. C. v. W. J. Howey Co., 328 U. S. 293, 298 (1946).

Because City Savings’ authority to issue withdrawable capital shares is conferred by the Illinois Savings and Loan Act, we look first to the legal character imparted to those shares by that statute. The issuance of with-drawable capital shares is one of two methods by which Illinois savings and loan associations are authorized to raise capital. City Savings’ capital is represented exclusively by withdrawable capital shares. Each holder of a withdrawable capital share becomes a member of the association and is entitled to “the vote of one share for each one hundred dollars of the aggregate withdrawal value of such accounts, and shall have the vote of one share for any fraction of one hundred dollars.” The holders of withdrawable capital shares are not entitled to a fixed rate of return. Rather, they receive dividends declared by an association’s board of directors and based on the association’s profits. The power of a holder of a withdrawable capital share to make voluntary withdrawals is restricted by statute While withdrawable capital shares are declared nonnegotiable and not subject to Article 8 of the Uniform Commercial Code, such shares can be transferred “by written assignment accompanied by delivery of the appropriate certificate or account book.”

While Illinois law gives legal form to the withdrawable capital shares held by the petitioners, federal law must govern whether shares having such legal form constitute securities under the Securities Exchange Act. Even a casual reading of §3 (a) (10) of the 1934 Act reveals that Congress did not intend to adopt a narrow or restrictive concept of security in defining that term. As this Court observed with respect to the definition of security in § 2 (1) of the Securities Act of 1933, “the reach of the Act does not stop with the obvious and commonplace.” S. E. C. v. C. M. Joiner Corp., 320 U. S. 344, 351 (1943). As used in both the 1933 and 1934 Acts, security “embodies a flexible rather than a static principle, one that is capable of adaptation to meet the countless and variable schemes devised by those who seek the use of the money of others on the promise of profits.” S. E. C. v. W. J. Howey Co., supra, at 299. We have little difficulty fitting the withdrawable capital shares held by the petitioners into that expansive concept of security. Of the several types of instruments designated as securities by §3 (a) (10) of the 1934 Act, the petitioners’ shares most closely resemble investment contracts. “The test [for an investment contract] is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others.” Id., at 301. Petitioners are participants in a common enterprise— a money-lending operation dependent for its success upon the skill and efforts of the management of City Savings in making sound loans. Because Illinois law ties the payment of dividends on withdrawable capital shares to an apportionment of profits, the petitioners can expect a return on their investment only if City Savings shows a profit. If City Savings fails to show a profit due to the lack of skill or honesty of its managers, the petitioners will receive no dividends. Similarly, the amount of dividends the petitioners can expect is tied directly to the amount of profits City Savings makes from year to year. Clearly, then, the petitioners’ withdrawable capital shares have the essential attributes of investment contracts as that term is used in § 3 (a) (10) and as it was defined in Howey. But we need not rest our decision on that conclusion alone. “Instruments may be included within any of [the Act’s] definitions, as matter of law, if on their face they answer to the name or description.” S. E. C. v. C. M. Joiner Corp., supra, at 351. The petitioners’ shares fit well within several other descriptive terms contained in §3 (a) (10). For example, the petitioners’ shares can be viewed as “certificate [s] of interest or participation in any profit-sharing agreement.” The shares must be evidenced by a certificate, and Illinois law makes the payment of dividends contingent upon an apportionment of profits. These same factors make the shares “stock” under § 3 (a) (10). Finally, the petitioners’ shares can be considered “transferable share[s]” since “[t]he holder of a withdrawable capital account may transfer his rights therein absolutely or conditionally to any other person eligible to hold the same.”

Our conclusion that a withdrawable capital share is a security within the meaning of § 3 (a) (10) is reinforced by the legislative history of federal securities legislation. When Congress was considering the Securities Act of 1933, representatives of the United States Building and Loan League appeared before House and Senate committees to plead the cause of the League’s members. The League’s spokesmen asked Congress for an exemption from the Act’s registration requirements for building and loan association shares. The spokesmen argued that the cost of complying with the registration, requirements whenever a building and loan association issued a new share would be prohibitive. However, the League’s spokesmen emphatically endorsed the coverage of building and loan associations under the Act’s antifraud provisions. Thus, Morton Bodfish, the League’s Executive Manager, told the House Committee on Interstate and Foreign Commerce:

“When a person saves his money in a building and loan association, he purchases shares and nearly all of our $8,000,000,000 of assets are in the form of shares ....
“The practical difficulties of an association having to register every issue of shares . . . are obvious.
“[W]e approve vigorously and are quite willing to be subject to section 13, which is the fraud section . . . ,
“Now, gentlemen, we want you to leave, the fraud sections there, just as they are, so that [if] any fraud developed in connection with the management of any of our institutions anywhere or under the name of building and loan, this law can be effective and operative.”

Congress responded to the appeals from the building and loan interests by including in §3 (a)(5) of the 1933 Act an exemption from the registration requirements for “[a]ny security issued by a building and loan association, homestead association, savings and loan association, or similar institution . . . .” It seems quite apparent that the building and loan interests would not have sought an exemption from the registration requirements and Congress would not have granted it unless there was general agreement that the Act's definition of security in § 2 (1) brought building and loan shares within the purview of the Act.

The same Congress which passed the Securities Act in 1933 approved the Securities Exchange Act in 1934, and the definition of security contained in the 1934 Act is virtually identical to that in the earlier enactment. The legislative history of the 1934 Act is silent with respect to savings and loan shares, but the Senate Report on the Act asserts that its definition of security was intended to be “substantially the same as [that contained] in the Securities Act of 1933.” S. Rep. No. 792, 73d Cong., 2d Sess., 14 (1934). In addition, when Congress amended the 1934 Act in 1964 to provide for the registration of certain equity securities, it provided an exemption for “any security . . . issued by a savings and loan association . . . .” 15 U. S. C. § 781 (g)(2)(C). Thus, the 1934 Act has a pattern of coverage and exemption of savings and loan shares similar to the pattern in the 1933 Act.

We view the Court of Appeals’ conclusion that the petitioners’ withdrawable capital shares are not securities as a product of misplaced emphasis. After reviewing the definition of security in §3(a) (10), the Court of Appeals stated that “[t]he type of interest now before us, if it is covered by this definition, must be an ‘instrument commonly known as a “security.” ’ ” 371 F. 2d, at 376. Thus, the Court of Appeals read the words an “instrument commonly known as a ‘security’ ” in § 3 (a) (10) as a limitation on the other descriptive terms used in the statutory definition. This, of course, is contrary to our decision in Joiner where we rejected the respondents’ invitation to “constrict the more general terms substantially to the specific terms which they follow.” 320 U. S., at 350. In addition, we cannot agree with the Court of Appeals’ analysis which led it to conclude that a withdrawable capital share is not an “instrument commonly known as a ‘security.’ ” For example, the Court of Appeals stressed that withdrawable capital shares can be issued in unlimited amounts and their holders have no pre-emptive rights. Yet the same is true of shares in mutual funds, and we have little doubt that such shares are securities within the meaning of the Securities Exchange Act. The Court of Appeals also emphasized that the withdrawable capital shares are made nonnegotiable by Illinois law. This simply reflects the fact that such shares are not a usual medium for trading in the markets. The same can be said for the types of interests which we found to be securities in Howey and Joiner. The Court of Appeals noted further that the holders of withdrawable capital shares are not entitled under Illinois law to inspect the general books and records of the association. Inspection of that nature, however, is not a right which universally attaches to corporate shares. In short, the various factors highlighted by the Court of Appeals in concluding that the withdrawable capital shares are not an “instrument commonly known as a ‘security’ ” serve only to distinguish among different types of securities. They do not, standing alone, govern whether a particular instrument is a security under the federal securities laws.

The Court of Appeals thought it highly significant that the term “evidence of indebtedness” appears in the definition of security in the 1933 Act but was omitted from the definition in the 1934 Act. We cannot agree that the omission has any controlling significance in this case. For one thing, we have found other descriptive terms in § 3 (a)(10) which cover the petitioners’ withdrawable capital shares. The Court of Appeals’ emphasis on the omission of “evidence of indebtedness” from §3 (a) (10) flowed from its conclusion that the petitioners’ “relationship with the enterprise is much more that of debtor-creditor than investment.” 371 F. 2d, at 377. That assertion, however, overlooks the fact that, under Illinois law, the holder of a withdrawable capital share does not become a creditor of a savings and loan association even when he files an application for withdrawal. For this reason alone, the omission of the term “evidence of indebtedness” from § 3 (a) (10) provides no basis for concluding that Congress intended to exclude the petitioners’ withdrawable capital shares from the Act’s coverage.

The Court of Appeals sought a policy basis for its decision when it noted that the federal securities laws “were passed in the aftermath of the great economic disaster of 1929. Congress was concerned with speculation in securities which had a fluctuating value and which were traded in securities exchanges or in over-the-counter markets.” 371 F. 2d, at 377. This statement suggests, and the respondents have argued in this Court, that the petitioners’ withdrawable capital shares are not within the purview of the 1934 Act because their value normally does not fluctuate and because they are normally not traded in securities exchanges or over-the-counter. The accuracy of this assertion is open to question.. But, more important, it is irrelevant to the question before us. As was observed in Howey, “it is immaterial whether the enterprise is speculative or non-speculative.” 328 U. S., at 301.

Policy considerations lead us to conclude that these petitioners are entitled to the investor protections afforded by the Securities Exchange Act. We agree fully with the following observations made by Judge Cummings in his dissent below:

“The investors in City Savings were less able to protect themselves than the purchasers of orange groves in Howey. These [petitioners] had to rely completely on City Savings’ management to choose suitable properties on which to make mortgage loans. . . . The members of City Savings were widely scattered. Many of them probably invested in City Savings on the ground that their money would be safer than in stocks. . . . Because savings and loan associations are constantly seeking investors through advertising . . . the SEC’s present tender of its expert services should be especially beneficial to would-be savings and loan investors as a shield against unscrupulous or unqualified promoters.” 371 F. 2d, at 384-385.

The respondents have argued that we should not declare the petitioners’ withdrawable capital shares securities under §3(a)(10) because the petitioners, if they are successful in their suit for rescission, will gain an unfair advantage over other investors in City Savings in the distribution of the limited assets of that Association, which is now in liquidation. This argument, at best, is a non sequitur. This case in its present posture involves no issue of priority of claims against City Savings. This case involves only the threshold question of whether a federal court has jurisdiction over the complaint filed by the petitioners — a question which turns on our construction of the term “security” as defined by § 3 (a) (10) of the Securities Exchange Act of 1934. It is totally irrelevant to that narrow question of statutory construction that these petitioners, if they are successful in their federal suit, might have rights in the limited assets of City Savings superior to those of other investors in that Association.

Reversed.

Mr. Justice Marshall took no part in the consideration and decision of this case.

       Ill. Rev. Stat., c. 32, §§ 701-944.

       The members of the class were identified in the complaint as “more than 5,000 investors [who] have purchased securities [i. e., withdrawable capital shares] of City Savings since July 23, 1959 . . . The total investment of the class members was alleged to amount to “between fifteen and twenty million dollars.”

       The state officials had acted under the authority of Ill. Rev. Stat., c. 32, § 848. The record does not disclose the precise reason for placing City Savings under state custody. However, the complaint filed in the District Court and the petitioners’ brief in this Court suggest that City Savings has been the victim of mismanagement of major proportions.

       The voluntary plan of liquidation was formally approved four days after the petitioners had filed their complaint. However, the three liquidators had been nominated prior to the filing of the complaint, and their election had been a foregone conclusion. Voluntary liquidation is authorized bj' Ill. Rev. Stat., e. 32, Art. 9.

       15 U. S. C. §78e (a) (10).

       15 TJ. S. C. §78j (b).

       17 CFR § 240.10b-5.

       “2. When used in this title, unless the context otherwise requires—
      “(1) The term ‘security’ means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of int'erest or partieipation in any profit-sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a ‘security’. . . .” 48 Stat. 905.

        S. E. C. v. United Benefit Life Ins. Co., 387 U. S. 202 (1967); 8. E. C. v. Variable Annuity Life Ins. Co., 359 U. S. 65 (1959); S. E. C. v. W. J. Howey Co., 328 U. S. 293 (1946); and S. E. C. v. C. M. Joiner Corp., 320 U. S. 344 (1943).

       The Securities Exchange Act was a product of a lengthy and highly publicized investigation by the Senate Committee on Banking and Currency into stock market practices and the reasons for the stock market crash of October 1929. See Loomis, The Securities Exchange Act of 1934 and the Investment Advisers Act of 1940, 28 Geo. Wash. L. Rev. 214, 216-217 (1960).

       “The capital of an association may be represented by with-drawable capital accounts (shares and share accounts) or permanent reserve shares, or both . . . Ill. Rev. Stat., c. 32, § 761 (a). “Permanent reserve shares shall constitute a secondary reserve out .of which losses shall be paid after all other available reserves have been exhausted . . . .” Id., § 763.

         Id., §741 (a)(1).

        Id., §742 (d)(2). Each borrower from a savings and loan association automatically becomes a member of the association, id., §741 (a)(2), but is entitled to only one vote, id., §742 (d)(4).

        Id., §778 (c). The directors are required to apportion an association’s profits at least annually.

        Id., §773.

        Id., §768 (c).

        Id., §768 (b).

       Cf. S. E. C. v. Variable Annuity Life Ins. Co., 359 U. S. 65, 69.

       “[T]he term 'security’ [in the Securities Act of 1933 is defined] in sufficiently broad and general terms so as to include within that definition the many types of instruments that in our commercial world fall within the ordinary concept of a security.” H. It. Rep. No. 85, 73d Cong., 1st Sess., 11 (1933).

       Ill. Rev. Stat., c. 32, § 778.

       The Court of Appeals refused to apply the Howey test in this case. It did not view the petitioners as entering a common enterprise with profits to come solely from the efforts of others because “profit is derived from loans to other members of the savings and loan association.” 371 F. 2d, at 377. That analysis, however, places too much emphasis on the fact that, under Illinois law, anyone who borrows from a savings and loan association automatically becomes a member of the association. Ill. Rev. Stat., c. 32, § 741 (a) (2). It also overlooks the several other classes of investments which Illinois savings and loan associations are authorized to make. Id,., §§ 792-792.10.

         Id., §768 (a).

        Id., § 768 (b).

       Hearings on H. H. 4314 before the House Committee on Interstate and Foreign Commerce, 73d Cong., 1st Sess., 70-75 (1933) (testimony of Morton Bodfish, Executive Manager, United States Building and Loan League); Hearings on S. 875 before the Senate Committee on Banking and Currency, 73d Cong., 1st Sess., 50-54 (1933) (testimony of C. Clinton James, Chairman, Federal Legislative Committee of the United States Building and Loan League).

       Hearings on H. B.. 4314, supra, at 71.

        Id,., at 73.

        Id., at 74.

       15 U. S. C. §77e (a) (5).

       The view expressed by the building and loan association interests in 1933 has not changed over the years. The United States Savings and Loan League, in its Membership Bulletin, made the following comments on the Court’s decision to hear this case:
      “This case is not necessarily as significant and earth shaking in its implications as many savings and loan people assume. In the first place the savings and loan business always has assumed that it was subject to the antifraud provisions of the Securities Acts relating to advertising practices, etc. Regardless of how this case goes it does not mean that savings and loan associations will be any more involved with the SEC than they have been in the past. It does not mean that associations would have to register with the SEC and be subject to all of the rules that apply to typical securities transactions.”
      United States Savings and Loan League, Membership Bulletin, June 28, 1967, p. 15.

       The Court of Appeals rejected the view that we take of the legislative history of federal securities legislation with respect to savings and loan association shares. In effect, the Court of Appeals viewed Congress’ exemption of savings and loan shares from the registration requirements as what Professor Loss calls “supererogation.” 1 Loss, Securities Regulation 497 (2d ed. 1961). The Court of Appeals based its argument on the analogy it drew between ordinary insurance policies, which are also exempted from the 1933 Act’s registration provisions, and savings and loan shares. The analogy, however, is inappropriate. Congress specifically stated that “insurance policies are not to be regarded as securities subject to the provisions of the act,” H. R. Rep. No. 85, 73d Cong., 1st Sess., 15 (1933), and the exemption from registration for insurance policies was clearly supererogation. See S. E. C. v. Variable Annuity Life Ins. Co., 359 U. S. 65, 74, n. 4. The same cannot be said for savings and loan shares, particularly when the spokesmen for those who issue savings and loan shares had told Congress they fully expected to be covered by the 1933 Act’s antifraud provisions.

       In Howey, this Court ruled that interests in orange groves were securities under the 1933 .Act. In Joiner, it held that oil leases were securities under the Act.

       See Baker & Cary, Cases and Materials on Corporations 739-741 (3d ed. 1958).

       Ill. Rev. Stat., c. 32, §773 (f).

       The SEC, in its brief amicus curiae submitted in this case, points out that it granted a temporary exemption from §§ 7, 8, 12, and 13 of the 1934 Act to passbooks of savings and loan associations, which were being traded on the Cleveland Stock Exchange shortly after the Act’s passage. The SEC also points out that it has repeatedly enforced the Act’s registration provisions against brokers and dealers whose business includes the solicitation of funds for deposit in savings and loan associations. Brief for the SEC 22-24.