Warren E. Burger: We will hear arguments next in Elwood Barclay against Florida. Mr. Nabrit, I think you can begin whenever you are ready.
James M. Nabrit, III,: Mr. Chief Justice, and may it please the Court, I represent the petitioner, Elwood Barclay, who is here on a writ of certiorari to review a judgment of the Supreme Court of Florida which on direct appeal affirmed his murder conviction and a death sentence. The death sentence was imposed by a judge of the Circuit Court of Duval County who entered written sentencing findings that are the focus of our argument here today. The judge disregarded an advisory jury verdict which recommended that Barclay be given life imprisonment, and the Florida Supreme Court affirmed. Barclay lost by a four-to-two vote, and his rehearing petition was denied by an equally divided court. Petitioner brought the case here on certiorari, and the state filed a brief agreeing that this Court should review the case. Now, let me begin my statement of the case before I describe the proceedings in the court below by briefly recounting five points about the Florida death sentencing statute. It is a statute that has been in this Court before. It was the statute approved in the Proffit case, and it was presented as having five procedural safeguards. First, a requirement that the death sentence be based on specific written findings about aggravating circumstances, which was supposed to serve as a guide for the sentencer's discretion. Second, the statute says that the list of aggravating circumstances is limited to eight factors, which are listed in the statute, and six of those I will just refer to in a moment are involved in this case. Second, the statute provided for an automatic appeal, a review in which the Florida Supreme Court is supposed to keep the sentencing decisions under the statute in line with the statute. Next, the jury had a special role. Although it is called advisory, the jury... the jury's judgment is supposed to prevail under the Florida law unless no reasonable mind could disagree that the death sentence should be imposed, so that it is... and finally, the idea that both the judge and jury will make a judgment both about the sufficiency of the aggravating circumstances to justify a death sentence as well as a weighing of the aggravating and mitigating circumstances. So, in summary, in the Proffit case, the Court said that after a verdict of guilt, there would be what this Court referred to as an informed, focused, guided, and objective inquiry into the question of whether a death sentence should be imposed, and that would be at... that kind of objective inquiry, at both the trial and appellate levels. Now, in Barclay's case, Barclay was found guilty in March of 1975, along with a co-defendant Dougan. He was found guilty of first-degree murder in the death of one Stephen Orlando, and two other co-defendants were convicted by the same jury of second-degree murder. After the conviction, at the penalty trial, the jury recommended a death sentence for the co-defendant Dougan, but life imprisonment for Barclay. And in the penalty hearing, the state argued for only one of the eight statutory aggravating circumstances, that the crime was heinous atrocious, and cruel, yet the state made no effort at that penalty trial to convince the jury that any of the other seven circumstances applied. And the majority of the jury came back with a written finding, a written finding that sufficient aggravating circumstances did not exist to justify a death sentence, and a written finding that sufficient mitigating circumstances do exist which outweigh any aggravating circumstances. The judge discharged the jury and directed a pre-sentence investigation report, and a month later entered his own written findings, and five years later, in 1980, the judge substantially repeated the findings when he reimposed the sentence after it was first vacated on the basis of Gardner against Florida. And the judge found seven aggravating circumstances. Now, let me review some of them. The first one is quoted in our brief at Pages 29 and 30, and in this one... this is at the bottom of Page 29 and the bottom of Page 30. In this one the judge found as an aggravating circumstance that Barclay had some prior arrests, and he had a prior conviction for forgery and for breaking and entering. Now, it is acknowledged by the state that this was an error, and the reason is that what the judge found here was the absence of one of the statutory mitigating circumstances, and it is acknowledged as a matter of state law, it is acknowledged at Page 26, I think, of the state's brief, that under the state's Mikenas case, which the state cites, that it is not correct to make the absence of mitigating circumstances an aggravating circumstance, so that that was a finding that is a non-statutory finding. It is a finding of an aggravating circumstance that is not listed in the statute. There are two more points about that. One is that mere arrests under... and again, I am referring to Florida law really as a predicate for the federal arguments that I'll make later, but I am merely trying to be descriptive. Under the Florida law, the mere arrests don't qualify as convictions, even if there is a relevant crime involved, a violent crime under one of the other subsections, and convictions can't be proved by the presentence investigation report. They have to be proved by the state beyond a reasonable doubt at the penalty trial. Now, turning to the next two aggravating circumstances found by the court, and these appear in our brief at the bottom of Page 33 is one, and the next one is over at Page 36, both of these are equally flawed. The first one has to do with whether or not the defendant was under a sentence of imprisonment at the time of the murder, and it is undisputed that Barclay at the time of the murder, Barclay was not in prison, he was not supposed to be in prison, he was not on parole, he was not on probation, none of that. The judge found that he was not imprisoned at the top of Page 34, but he said the criminal record was an aggravating circumstance. So what the judge did here again was to take a past criminal record and say that it was something like, it resembled the statutory aggravating circumstance. The judge did something similar with the next one, at Page 36. He said that... This provision is whether or not the defendant had been convicted of a felony involving the use or threat of violence to the person, and there was nothing like that in Barclay's record, but the judge said that, well, he had been convicted of breaking and entering, and the judge said, it is not known if that prior felony involved the use or threat of violence, but he said, however, such crime can and often does involve violence. So, again, he found something really not in terms of the statute, but he said, well, it is something like the statute, so that we have three findings by the Court which really aren't in terms of the statute. The judge said, well, I am finding something that resembles the statute. Now, the fourth one is whether or not there is... the murder created a great risk of death to many persons. And this one is discussed in our brief beginning over at Page 40, and the judge found that... the judges words, "Before, during, and after the murder. " the judge said, "there was a great risk of death to many persons. " He based it on... he's got a before and an after, but he doesn't have a during in there. Before, he said, the defendants drove around looking for a victim, and it is undisputed that the victim was killed in a deserted, lonely road, and that there was no one else around, but the judge found that there was a great risk of death to many persons based on the fact that before finding a victim in a lonely, deserted spot, they looked at and decided not to attack people in groups in other parts of the city. It is a line of reasoning that--
William H. Rehnquist: Does that... Do you feel that is a totally unreasonable finding on the part of the judge?
James M. Nabrit, III,: --I do, Your Honor. There is no basis in that line of reasoning for distinguishing any case from among many cases where a--
William H. Rehnquist: Let me suggest my own thought that occurs to me. In the case of a premeditated murder, you could say that, you know, there was malice aforethought, et cetera, but the murderer was presumably looking only for one victim. He wasn't just going randomly. But here one gets the impression from the judge's findings that these people were looking not for one victim, but for almost anybody they came across that met a certain description.
James M. Nabrit, III,: --Well, but a single victim who... and they were looking for one alone. I mean, the purpose of the statute is to protect large groups of people against death.
William H. Rehnquist: Well--
James M. Nabrit, III,: Well, in-- --Well, let me put it in two... let me suggest there are two doctrines. One, it has to involve a lot of people, and two, under the Florida law, it has to be an actual risk of harm or death based on the nature of the murder or the conduct immediately surrounding the murder.
William H. Rehnquist: --You feel that the Florida law wasn't designed to produce a great number of people even though they might have been individually isolated or by themselves?
James M. Nabrit, III,: I argue on both parts. There weren't any great number of people. There was nobody around at the time of the murder. And the decision to... the decision not to attack a large group of people can't be considered as endangering a large group of people.
Sandra Day O'Connor: Mr. Nabrit, the Florida Supreme Court, though, obviously found that as a matter of Florida law it met their statutory aggravating circumstance on that fourth factor.
James M. Nabrit, III,: That's correct, and our argument--
Sandra Day O'Connor: So you are not asking us to say that the Florida law is something else, are you?
James M. Nabrit, III,: --No, my argument is that the... my argument is a federal constitutional one, that there is really no evidence of the offense or the statute is construed in such a way that it is vague and overbroad. It is an argument based on the Godfrey case at bottom, but the... well, let's look at the other half of it the judge relied on. The judge relied on something that happened three days after the murder, which is the mailing of tapes, tape recordings to the news media, and said, this event endangered a half-million people of Jacksonville. The problem with that is the same one. There is nothing in the evidence. The state never tried to prove that there were any circumstances that made this dangerous. This wasn't the state's theory. And so there is no evidence to support a notion that anyone was in fact endangered. Now, there are three other aggravating circumstances, and our argument is set forth in our brief at Pages 48 to 63. I think I will not go through them, because my time is limited, and I will instead turn to the main two legal arguments.
Warren E. Burger: When they came upon the victim, was the victim alone or accompanied by others?
James M. Nabrit, III,: Alone. He was a single hitchhiker, alone.
Warren E. Burger: Suppose there were two people there. Would it be unreasonable or irrational for the judge making the decision to think that two people would have been killed instead of one?
James M. Nabrit, III,: Well, the... well, I mean, there are... I... perhaps not. There are several points. One is that two people even wouldn't be enough to create many people, to equal many people under the Florida law, and it is set forth in our brief. So, our argument really is that this is a surprise overbroad construction of the law based on... as the law has been interpreted in those Florida cases. Now, we have two principal arguments. Our first argument is that the trial court sentencing findings violated Barclay's rights under the Eighth and Fourteenth Amendments, and the argument is, as I said before, based not merely on the notion that state law wasn't followed, but based on the idea that a combination of non-statutory aggravating circumstances and the factually base is so overbroad construction of the Florida statute created the violation. The second argument, which I will make later, is really in the nature of a rebuttal argument. It is our answer to the state's contention that even if we are correct about the first argument, there need not be a reversal, that the error is in some way harmless or it does not... at least it does not call for reversal. The main theme of the Eighth Amendment cases from Furman down to date has been that consistency in the avoidance of arbitrariness is the indispensable element to the constitutionality of capital sentencing. We think that the use of aggravating circumstances not provided in the statute violates the Eighth Amendment because it makes capital sentencing ungrounded and arbitrary, and to establish that, we point to the three main purposes that statutory aggravating circumstances are supposed to serve. The list of statutory circumstances is supposed to enable the legislature to decide what kinds of cases deserve the death penalty, so that there is a legislative judgment represented by the limited list of statutory aggravating circumstances. And if you take an example from our case of the prior criminal record, the first one the judge used, the legislature of Florida didn't decide that if someone had a prior record for a prior arrest and a prior record for forgery, that that was the kind of aggravating circumstance that justified the death sentence. The second purpose, the second function of the statutory aggravating circumstances is to guide the sentencer's exercise of discretion, to channel the discretion. And the third function was to provide a basis for appellate review, so that the appellate court would have a way of looking at the findings and attempting to ensure that similar results would be reached in similar cases, and it is our position that all three of these purposes of statutory aggravating circumstances are defeated if the judge is allowed, as the judge in this case did, to make up the aggravating circumstances as he goes along. A factor that one judge will think aggravating will be evaluated differently by another, and a judge presumably will change his view as time passes, so that the danger of arbitrary decision-making is reintroduced into the process.
John Paul Stevens: Mr. Nabrit, may I ask this one question? Is it your legal position that the same, if there is one permissible aggravating circumstance that has been properly found, or are you taking the position that there are no statutory aggravating circumstances that could properly be found on this record?
James M. Nabrit, III,: We take the latter position, Your Honor, but our argument is that there is a constitutional violation based on the fact that even if only some of them are outside the statute, that that violates the Eighth Amendment, but we do take the latter position. In our brief, Part 1-A of our brief addresses each of the seven aggravating circumstances found by the judge, and attempts to show that they are either outside the statute or that they are flawed under the Godfrey guide.
John Paul Stevens: I take it if the Florida Supreme Court agreed with your view that there were no statutory aggravating circumstances, they also would have set aside the death penalty.
James M. Nabrit, III,: That's correct.
Harry A. Blackmun: Yes. Mr. Nabrit, do you have any thoughts as to how the Florida system compares with Georgia's? I regard Georgia as kind of a threshold state, if I can describe it that way, so far as aggravating circumstances are concerned, and I wondered if you felt Florida was the same or was different.
James M. Nabrit, III,: No, I think it is different. I think there is nothing in the Florida decisions that uses the threshold language or the language in the recent opinion of the Georgia Supreme Court after the remand in the Zandt case. On the question of the Eighth Amendment, in summary, I guess, our position is that the safeguards that aggravating circumstances were supposed to serve under the statute fell through in this case, that the trial court really didn't live up to what was represented in Proffit, to assure that after Barclay's conviction there really would be an informed, focused, guided, and objective inquiry into the question of whether or not he would be sentenced to death, and I think that none of those adjectives really fairly describe the findings on which Barclay was sentenced to death, and we submit that the sentence violates the Eighth Amendment. Now, turning to the second point, which as I said before is a rebuttal argument, what we are doing in Part 2 of our brief is answering the Attorney General's contention that Florida's rule, which is embodied in its Elledge case, and which we will call the Elledge rule, makes it appropriate for the court below to affirm even if there were constitutional errors, even if there was a violation of the Eighth Amendment, or several violations of the Eighth Amendment of the kind that we complain about in our first argument. Let me describe the Elledge rule. The Elledge case provides really, as we see it, two rules for dealing with a case where the trial court has made an error, either an error by considering a non-statutory aggravating circumstance or by misapplying one of the statutory circumstances, but where there are other valid aggravating factors remaining in the case. Now, the Elledge case says that a reversal is required, that that situation calls for a reversal if there are statutory mitigating findings, because the reviewing court can't tell whether the error distorted the weighing process, so that... so, to be clear, under Florida law, it is error to consider a non-statutory aggravating circumstance, and they call it error. They call it error even in those cases where they don't reverse. And the cases where they don't reverse are under the second half of the Elledge rule, and that is that the death sentence will be affirmed if there are no statutory mitigating circumstances, no statutory mitigating circumstances, and that is the... the state law premise of Elledge is in the language which is quoted at the top of Page 87 of our brief. The idea is that so long as there are some statutory aggravating circumstances, there is no danger that non-statutory circumstances have served to overcome the mitigating circumstances in the weighing process, in other words, that there is nothing to balance against whatever aggravating circumstances remain, and therefore it is called... what happens is what the Attorney General refers to in quoting the Ford case as a presumption of death, that... The state quotes the same language we do from Ford saying, there being no mitigating factors present, death is presumed to be the appropriate penalty. Now, our argument is that that rule itself violates the Constitution. It is a rule of appellate review, a procedural rule about when you do and when you don't reverse in the presence of a constitutional error, but that this Elledge rule violates the Constitution. Assuming that Elledge is a presumption, a rule of law, it violates Lockett. It directly violates the holding of the Lockett case, because the Ohio statute in Lockett, remember, was one where if there were statutory aggravating circumstances found, and there was no statutory mitigating circumstance, then the death sentence was mandatory. That was what that statute did, and the Elledge case is identical in the way it ignores the non-statutory mitigating factors, and the Ford case, which I mentioned before, the Ford case in the Florida Supreme Court, makes it plain that that is the way the Elledge rule operates, because it shows that the Elledge rule operates even if there are non-statutory mitigating circumstances in the record. There is a presumption of death, so that the presumption overrides non-statutory mitigating circumstances just like the Ohio statute in the Lockett case did. The second... we really have four objections to the Elledge rule, and the first one I have just mentioned, which is based on Lockett. The second one is that the penalty is automatic without regard to the sufficiency of the aggravating circumstances. It is just a mechanical rule, and that that violates Woodson and Lockett, which require there be a judgment about the appropriateness of the death penalty. The final two points I will touch on quickly, and they are familiar to the Court. Assuming that Elledge is not really strictly a mechanical rule, and does involve some judgment or some guess as to what the trial court would have done in the circumstances, then we have the Stromberg principle, which is the same argument that is before the Court in the example of Stevens, and we also have a general Eighth Amendment argument that that kind of review doesn't meet the special Eighth Amendment requirements of reliability which are required because of the special harshness of the death penalty. I would like to reserve my remaining time.
Harry A. Blackmun: Mr. Nabrit, before you sit down, do you have any special comment about Lewis against the state?
James M. Nabrit, III,: Well, Your Honor, we--
Harry A. Blackmun: The reason I ask this is that your opponent doesn't cite it at all, and you cite it profusely. From his brief it is as though it doesn't exist.
James M. Nabrit, III,: --Well, that's right. If the Lewis case... we make the argument about the Lewis case, Your Honor, in our brief in Part 2-A... Part 2-B, and our argument is that if Lewis is the Florida law, and Lewis was reversed, a case from the same judge, if that is the Florida law, then there is no non-arbitrary application of Elledge that could rule against Barclay. So the key factor in Lewis was the jury recommendation of life, and Lewis says that where the jury recommends life, then that counts as if it was a finding of a mitigating factor. Lewis is ignored in some of the other cases. If Lewis is the law, then Barclay plainly should win.
Harry A. Blackmun: Maybe you will explain why--
Warren E. Burger: Mr. Allbritton.
Wallace E. Allbritton: Mr. Chief Justice, may it please the Court, the state of Florida has never claimed that defendants in her courts receive a perfect trial, but only a fair one, and as of this date, approximately 1:35 p.m., that is all the Constitution requires. I think because of the multiplicity of challenges hurled at cases availing the death penalty, it would seem that the only time a capital defendant receives a fair trial is when he is acquitted. I think the overriding issue before this Court is whether the imposition of the death penalty in the instant case contravenes any of the protections afforded by the petitioner or to him under the Constitution, not only the federal but the state. A good starting place is the standard of review followed by the Florida Supreme Court in its review of death penalty cases. That court assumes, and logically so, that where there are multiple statutory aggravating factors and there are no mitigating factors at all, then the weighing process would have reached the same outcome by the trial judge even had he not considered what is termed an improper aggravating factor. Now, this principle is well illustrated in several cases, and I will mention only two of them. One is Dobbert v. State, where the Florida Supreme Court held that the trial judge improperly found two aggravating factors, but since there were no mitigating factors at all, a reversal of the death sentence was not required. And in Ford v. State, cited on Page 15 of my brief, the same result was reached by the Florida Supreme Court, and what is interesting about both of those cases is that this Court declined to review either one of them on certiorari. I have no hesitancy to urge to this Court that petitioner's death penalty was properly imposed based on proof beyond a reasonable doubt of what I count as five statutory aggravating factors, and no mitigating factors at all. In thinking about this, I want it to be understood that in finding this non-statutory aggravating factor that is now complained of to the Court, the trial judge did not consider any evidence that he would not have otherwise known. Rather, it was necessary for the trial judge to consider petitioner's prior criminal record because unless the existence of this mitigating factor is negated, then there will be a presumption that petitioner had not engaged in any previous course of crime at all. This is again well illustrated in the Florida Supreme Court case of Booker v. State, where that court rejected, now, an argument that the trial judge had considered a non-statutory aggravating factor because on cross examination the defendant was interrogated as to his prior criminal activity. Now, the Florida Supreme Court pointedly stated that those questions were posed to the defendant in order to negate or show the absence of a mitigating circumstance. That is, that the defendant had no significant history of prior criminal actions. Now, this was necessary, as the court pointed out, and I quote the words of the court: "Unless this mitigating factor is negated, there would be a presumption that the defendant had not engaged in any previous criminal activity. " Therefore, I say to you that in finding a non-statutory aggravating factor, the trial judge not only did not review any evidence that he was not entitled to do so. Rather, he was required to review that evidence in order to determine the existence of a... or the non-existence of a mitigating factor.
Sandra Day O'Connor: --Mr. Allbritton, do you plan to address the Lewis case, as Justice Blackmun inquired about, which appeared to hold that if a jury found that the defendant should be sentenced to life, that was treated as a mitigating circumstance then, and required a different action when it was challenged by the defendant?
Wallace E. Allbritton: Only to the extent that I don't believe in the Lewis case that the Florida Supreme Court so held. I don't read the case that way at all, but if we assume that they did so hold, then I say in the instant case it has to be obvious that this mitigating factor, that is, the advisory verdict of the jury, was completely overweighed by the multiple statutory aggravating factors that were found by the trial judge and twice approved by the Florida Supreme Court. Now, I submit to you that unless this Court does a legal about-face and Proffit v. Florida, that that case should control the instant case here. The Proffit opinion at 428 US Page 246 sets forth the aggravating factors found by the trial judge. Now, the second of those reads, and I quote, "The petitioner has a propensity to commit murder. " Now, I find this interesting, because this aggravating factor of propensity to commit murder was not then and never has been a statutorily enumerated aggravating factor under Florida law. I think, frankly, there is no getting around the point that this Court approved the use of a non-statutory aggravating factor when used, now, along with other statutory aggravating factors. The decision in Elledge v. State supports the respondent's argument here, because the Elledge court in construing Proffit read something in there, I believe, that is not there, but rather than to go into that, let's take Elledge the way it stands, and Elledge simply holds that a non-statutory aggravating factor will not vitiate a death penalty where there are other statutorily enumerated factors and there are no mitigating factors. That is the holding in Elledge. I would like to tell you how they came to do that. From the record in Elledge, there was a non-statutory enumerated aggravating factor, and of course there was a statutory aggravating factor, and the trial judge had alluded to something that could have been construed as being a mitigating factor. Well, now, what the Florida Supreme Court wanted to do, and what they did do, was to be sure that a non-statutory aggravating factor would not be used to offset a mitigating factor in the weighing process, but we don't have that problem here, because there were no mitigating factors at all unless you do as my honorable opponent would urge you to do, and that is substitute your judgment and reweigh all of the aggravating factors that were weighed by the trial judge and approved by the Florida Supreme Court. If you do that, then you will depart from the decision in Eddings v. Oklahoma.
John Paul Stevens: But isn't there another possibility, because I thought when you answered Justice O'Connor you said that it is possible to read the Lewis case, I guess it is, as saying that when the jury recommends life sentence rather than death, that that may be viewed as a mitigating circumstance which imposes a burden on being sure that the aggravating outweigh. Now, how do you explain Lewis if you make... if you--
Wallace E. Allbritton: May be. That's true. It may be. But the Florida Supreme Court does not undertake to dictate to the trial judge what he shall regard as mitigating evidence. That is a matter for the sentencing authority to do, not for the Florida Supreme Court.
John Paul Stevens: --Then how do you explain Lewis?
Wallace E. Allbritton: Just the way I did to Justice O'Connor, that I don't believe, and I don't read the case--
John Paul Stevens: You said to her, if I recall, that that may mean that the aggravating outweighed that mitigating circumstance, but then you have just now told us that you can't engage in weighing when there are some non-statutory aggravating circumstances. I'm not sure your arguments are consistent.
Wallace E. Allbritton: --I'm not sure I understand you, and I submit to you, sir, I don't... I'm not sure you understood what I said. You may have. I don't know. But if I said that, I did not mean to say it.
John Paul Stevens: May I ask you again, then?
Wallace E. Allbritton: Sure.
John Paul Stevens: How do you explain Lewis?
Wallace E. Allbritton: Lewis, as I understand it, there is language in it which would indicate that a jury advisory can be viewed if the trial judge so desires as a mitigating factor. However, the verdict of the jury... it isn't really a verdict, it's an advisory. It isn't binding on the trial judge at all, and if he so desires in view of the... in view of the other evidence, you can read Lewis as saying that he can use that as a mitigating factor, but I don't think the Florida Supreme Court has required him to do that. I don't read the case that way.
John Paul Stevens: It's entirely a matter within the discretion of the trial judge whether or not to view it as a mitigating factor under your submission?
Wallace E. Allbritton: That's correct, because he is the sentencing authority under Florida law. He is the one that does the weighing under Florida law. The Florida Supreme Court simply on review looks at the evidence and determines if it is competent to support the aggravating factors that the trial judge has found. They do that. In fact, the duty is well stated in Songer v. State, which this Court referred to in Proffit v. Florida, and I quote: "Where the death penalty has been imposed, this Court has a separate responsibility to determine independently whether the imposition of the ultimate penalty is warranted. " And that is what they do. They don't reweigh in the sense, if you please, to determine if the death penalty is or should be initially imposed, but what they do on review is to determine if it has been lawfully imposed, if there is competent evidence cited by the trial judge in support of his findings. I think, too, that the Florida Supreme Court standard of review in death penalty cases can be reviewed actually for what it is, and that is the application of the harmless error rule. Now, there is nothing new in this, because more than 30 years ago in North v. State, decided in 1952, the Florida Supreme Court expressly held that the harmless error rule was applicable in capital cases. And not only that, in the two Ferguson cases, which I cite in my brief, the application of the harmless error rule is clear. For example, in Ferguson, 417 Southern 2nd 631, the Court held that, and I quote, "Any error that occurred in the consideration of the inapplicable aggravating circumstances was harmless. " And again, in Ferguson 417 639, the Court held that any error that occurred in the consideration of the two inapplicable aggravating factors was harmless, based on the weighing process that the judge followed. And interestingly, in the recent case of Ford v. Strickland, Eleventh Circuit Court of Appeals en banc opinion filed January 7th, 1983, Chief Judge Godbold, in a dissenting opinion in part and specially concurring in part, stated that he interpreted the Florida Supreme Court to apply a harmless error rule in refusing to order resentencing, and that the Florida Supreme Court's actions so interpreted passed constitutional muster. This Court, several Justices, I think, have opted for the application of the harmless error rule. In Zant v. Stevens, Justice Powell, in a dissenting opinion, stated he would leave it open to the Georgia Supreme Court to decide whether it had authority to find that the instruction complained of was harmless error. In Drake v. Zant, Justice White dissents, dissenting to a denial of cert, stated that as a matter of general constitutional policy, he thought it essential that appellate courts be able to employ a harmless error rule. In fact, this Court has employed the harmless error rule in several cases, Schnevel v. State, Meritan v. Wainwright, Harrington v. California, and in the well-known Chapman case. Now, then, looking at Petitioner's brief, the tenor of it is, of course, that the trial judge committed egregious error in failing to find any mitigating factor at all. Well, really, this is understandable when viewed from where he sits. However, this claim has been made and rejected by the Florida Supreme Court in many cases. They are cited in my brief, Lucas v. State, Sireci v. State, Mikenas v. State. And in that case... it's a good case on point. It says... The court there... Let me phrase this properly... rejected the argument that certain testimony should have been treated as mitigating factor. There was psychiatric testimony at trial, and it was argued that the trial judge erred in refusing to regard that as mitigating. Well, the Florida Supreme Court pointed out that the testimony was apparently permitted by the trial judge in an abundance of fairness to the defendant, but that the court was not required to give it weight as a mitigating circumstance. Now, that is... they leave the weighing, initial weighing to the trial judge. This premise, I think, is supported... I don't think; it is... well supported by this Court's decision in Eddings v. Oklahoma. There, this Court reviewed the Oklahoma death penalty statute which permitted a defendant to present evidence as to any mitigating factor that he so desired, and then stated that Lockett v. Ohio requires the sentencer to listen, but as to the weight to be given to the mitigating evidence, I quote the words of the court: "We do not weigh the evidence for them. " And in this connection, it must be pointed out that Lockett held that while the sentencing authority must not be precluded from reviewing anything offered as mitigating, it did not undertake to dictate the weight that the various factors are to be given by the trial court, and that actually Lockett v. Ohio does not claim, does not hold, and does not indicate that this Court would substitute this judgment for that of state courts in capital cases at all.
Sandra Day O'Connor: Mr. Allbritton, would you characterize the Florida scheme as a threshold scheme like that of Georgia, or a balancing scheme? It wasn't clear to me from your brief.
Wallace E. Allbritton: It's both. Your Honor, the significance of the aggravating factor at the threshold of the process is to determine if the death penalty may be imposed, if it can be imposed. If there is one or more, then the judge knows that it can be imposed, but thereafter, then there is a weighing process, weighing the aggravating against the mitigating. That is where the weighing comes in for him to find out or make up his mind if he should impose the death penalty.
Sandra Day O'Connor: Under the Florida scheme, if the trial judge found no mitigating circumstances, and found one or more aggravating circumstances, is the trial judge required to impose the death penalty?
Wallace E. Allbritton: Oh, no. No, he isn't.
Sandra Day O'Connor: So he just balances all the facts--
Wallace E. Allbritton: Yes.
Sandra Day O'Connor: --in your scheme.
Wallace E. Allbritton: No, absolutely, he is not. There is no requirement that he impose it at all. He might find five aggravating factors, and no mitigating factors.
Byron R. White: But if he finds some aggravating factors, he may impose the death penalty, even though some of his aggravating factors may be set aside on appeal?
Wallace E. Allbritton: As long as there are no mitigating.
Byron R. White: Right.
Wallace E. Allbritton: But under the Elledge case, the Supreme Court will not permit, Justice White, a non-statutory aggravating factor to offset any mitigating factor in the weighing process. That's the point.
Byron R. White: Well, assuming no mitigating factors at all, in Florida, I take it your submission is that the judge may consider in deciding whether to impose the death penalty statutory as well as non-statutory mitigating circumstances.
Wallace E. Allbritton: No, sir. That was an error. Well, it would be an error. Now, you see, Justice White, at the time of petitioner's trial--
Byron R. White: Yes.
Wallace E. Allbritton: --in February and March, 1975, non-statutory aggravating factors had not been withdrawn from use by the Florida Supreme Court. That was not done until two years afterward, when that court decided Furley v. State.
Byron R. White: That may be. Nevertheless, the law of Florida at the time of this sentence was that the judge could use non-statutory circumstances.
Wallace E. Allbritton: Yes, it was. That was the law. Absolutely.
Byron R. White: So we should judge this case as though it still was the law. Is that it?
Wallace E. Allbritton: You can if you want to, but if you apply the law as it is now, you are still going to come to the same conclusion.
Byron R. White: Because of harmless error, or what?
Wallace E. Allbritton: Harmless error. Absolutely.
Byron R. White: Well, that isn't the... is that the basis for the judgment below?
Wallace E. Allbritton: It's been referred to as the harmless error, yes. And I don't see any other reason to call it anything but that. They use words to the effect that where there are multiple aggravating and no mitigating--
Byron R. White: What is the purpose of withdrawing the use of non-statutory aggravating circumstances as--
Wallace E. Allbritton: --I don't know.
Byron R. White: --as factors then? Would it always be harmless error?
Wallace E. Allbritton: Not under all cases, no. There is one case... I'm sorry, the states, now--
Byron R. White: Well, how do you know this one is one of them?
Wallace E. Allbritton: --I beg your pardon?
Byron R. White: How would you know that this one is one of them, if you applied the current Florida law?
Wallace E. Allbritton: Because there was no mitigating factors to be offset--
Byron R. White: Well, I understand that.
Wallace E. Allbritton: --by the non-statutory aggravating factor. That is why.
Sandra Day O'Connor: Unless Lewis required that the jury recommendation be considered as a mitigating factor.
Wallace E. Allbritton: Let's assume you do that, that it requires that. If the aggravating, non-statutory aggravating factor offsets that, you still have five statutory enumerated aggravating factors proven beyond a reasonable doubt, and that hasn't been... well, it has, too. He argues that it is, and he wants you to substitute your judgment for that of the state trial judge.
Thurgood Marshall: Mr. Allbritton?
Wallace E. Allbritton: Sir?
Thurgood Marshall: Didn't Proffit say that the judge had to use "informed, focused, guided, and objective inquiry? "
Wallace E. Allbritton: That's what he does. Yes, sir.
Thurgood Marshall: Isn't that what he said?
Wallace E. Allbritton: Yes, sir.
Thurgood Marshall: Now, where can you get harmless error under that rule?
Wallace E. Allbritton: Well, because harmless error is used in everything. If you are going to take out the harmless error--
Thurgood Marshall: If you are going to be objective, how can you make a harmless error?
Wallace E. Allbritton: --Justice Marshall, if you take out harmless error, you are requiring the trial to be perfect, and none of them are. There isn't anything in the realm of human affairs that is without some error somewhere. We can't give a man a perfect trial. He can't get one anywhere else. Nowhere. But we can come as close to it as humanly possible.
Thurgood Marshall: And if you don't make it, it's harmless?
Wallace E. Allbritton: It's... Yes, sir, it certainly is. It is harmless. I want to... my time is about up. I had other things to say, but they will go by the board.
Warren E. Burger: --You have about three minutes left.
Wallace E. Allbritton: Yes, sir. I am aware of the holdings in Stromberg v. California, Yates v. United States, Street v. New York, and the other cases. Those were First Amendment cases involving a general verdict of guilt. However, I agree with Justice White when he stated in dissenting opinion in Drake v. Zant that the imposition of the death sentence despite a failure to sustain all of the aggravating factors found by the jury does not conflict with either Stromberg v. California or Street v. New York.
Byron R. White: You are rowing upstream. That was just a dissent.
Wallace E. Allbritton: I know it. 0 [Generallaughter.] I've got a good paddle, though. Judge, I want to conclude on this point. It seems to me, and I know this is policy, or politics, or whatever, but it seems to me, and it seems to us down there in that little state of Florida, that at some point it must be acknowledged that the seemingly never-ending procedural path of capital cases does more to undermine the criminal justice system and society's confidence in it than it does to protect the rights of those who have killed fellow human beings. Hopefully, and I say this hopefully, that we can re-echo the statement found in Stein v. New York to apply to the state of Florida, that the people down there in that state are entitled to some measure of due process just as much as a murdering defendant is entitled to it. Thank you.
Warren E. Burger: Do you have anything further, Mr. Nabrit?
James M. Nabrit, III,: Yes, Mr. Chief Justice. May it please the Court, in the few moments I have left, I would like to talk about how I see the harmless error concept coming into this case, and also say something about the Lewis case. I think a factual point to be made about how Lewis fits in here is that there were facts upon which the jury might reasonably have found that there were both statutory and non-statutory mitigating circumstances for Barclay. The argument of counsel was based on the record that he was a follower, he was not the leader of the group of people who were convicted of the murder. His family status, that he had a wife and five children, that he had a job, that he was a young man, only 23 years old. And a major factor that was emphasized to the jury was the disparity of sentencing, the disparity of punishment between Barclay and the other two people who got second-degree murder but who the jury knew had committed two murders, that were sentenced to terms of imprisonment. The jury also might very well have based its finding on either of four of the statutory mitigating factors, the age, the fact that the state did not prove the prior record. They might have found lesser participation, and they may have found domination by Dougan. Now, it seems to me that the state's distinction of Lewis is not correct. Lewis is an application of the Elledge rule. It is an appellate level rule and not a trial level rule. The Lewis case was sent back for resentencing, the same judge, and the same counsel representing the state. Mr. Allbritton argued it, and Judge Olaff decided Lewis, and he made the same kinds of errors he did here, and the Court of Appeals reversed Lewis because three of these same kinds of aggravating circumstances were reversed. And the ground for a remand in Lewis was merely that there was a jury, the remaining aggravating circumstance had to be weighed against a jury's life recommendation. Now, turning to the harmless error point, this is not really a harmless error case in the ordinary sense, in the Chapman sense. There is no submission by the state... there is no inquiry by the state into the question of prejudice. Certainly the court below didn't rely on harmless error. They didn't acknowledge that there was any error at all. So whether you call it the Elledge rule or harmless error, it is really the same thing. It is harmless error principles attempted to be used in justification for a presumption, a legal rule, the Elledge rule, and our four objections to the Elledge rule, I think, pertain whether you call it harmless error or not. The counsel did not in argument and in his brief disagree with our characterization of Elledge as ignoring, Elledge and Ford, ignoring non-statutory mitigating circumstances, and the only exception to that is Lewis, is the Lewis case. Lewis is the law, as I said before. There is no non-arbitrary application of the law that would convict Barclay. But even examining this case under... if we ever got to trying to apply the Chapman v. California doctrine to this case, considering the special care and reliability required in capital sentencing, the fact that the death sentence was by no means foreordained in this case. There is no way that you could say beyond a reasonable doubt that the error, the multiple constitutional errors, we submit, that were the basis of the sentence of Elwood Barclay could be harmless. My time has expired. Thank you.
Warren E. Burger: Thank you, gentlemen. The case is submitted.


William H. Rehnquist: We will hear arguments next in No. 86-251, Rockford Life Insurance Company against Illinois Department of Revenue, et al.-- Mr. Griswold, you may proceed when you are ready.
Erwin N. Griswold: May it please the Court, this case is here on appeal from the Supreme Court of Illinois. The question, summarily stated, is whether certificates of the Government National Mortgage Association, popularly known as Ginnie Mae and I shall refer to it as Ginnie Mae in the argument, guaranteed as to interest and principal by the full faith and credit of the United States, pursuant to an Act of Congress, are subject to an ad valorem property tax of the State of Illinois. I will seek to show that the bonds are exempt from taxation. First, under general constitutional principles, including the Supremacy Clause, since the unqualified Government guarantee which they contain is the key and essential element in carrying out an important policy deliberately adopted by the Government of the United States under the Commerce Clause and in providing for the general welfare. And, second, pursuant to the express terms of Section 742 of Title 31 of the United States Code, in which the Congress has long provided, since the Civil War, that, and I quote: "All stocks, bonds and other obligations of the United States shall be exempt from State taxation. " Rockford Life Insurance Company bought the bonds involved here in 1977 at a time when Illinois did not impose its property tax on Ginnie Mae bonds. However, on December 31, 1978, the Illinois Department of Local Government changed its rule and imposed the tax for 1978. That led to administrative and Court proceedings, as a result of which the tax was sustained by the Supreme Court of Illinois. Rockford then brought the case here and this Court noted probable jurisdiction on November 10th. In considering both the constitutional and the statutory questions, it is important to have a clear picture of the history of the Government National Mortgage Association and the role which it plays in the housing policy of the United States. The origins go back more than 50 years, to 1934. Some of us remember and others have learned that real estate markets then were moribund. Housing starts had dropped from 937,000 units in 1925 to 93,000 in 1933. Foreclosures were at epidemic levels, as this Court's decision in Home Building and Loan Association against Blaisdell clearly records. Before that time, many efforts had been made by insurance companies and others to insure mortgage debt but the experience was disastrous. It was in this situation that President Roosevelt established a Commission to explore housing finance and out of its report came the First National Housing Act, enacted in 1934. One of the proposals embodied in that Act was the grant of authority for the creation of Federally chartered, privately owned national mortgage associations with power to buy and sell mortgages and issue bonds against them to the general public. Several national policy objectives were expressed. One, to provide new sources of mortgage funds. Two, to provide liquidity for mortgage lenders. That is, marketability and I suggest that is a very key element here. Three, to lower the cost of mortgage funds by increasing the supply of funds. And four... and this is another important one... to move mortgage funds from localities where funds were available to areas where credit was in shorter supply. Despite the authorization and the hopes that lay behind it, the program under the 1934 Act was a complete failure. No private mortgage association was ever established under the program and in 1948, fourteen years later, the program was repealed. In 1938 the Federal National Mortgage Association, sometimes called Fannie Mae, was chartered. One of its purposes was to create a secondary market for mortgages, thereby channeling Federal credit to the housing industry but Fannie Mae did not issue mortgage backed securities. In 1954 it was reorganized under a new charter as a mixed ownership Government corporation. It's secondary market function was to be financed by bonds, by funds borrowed in the private market and these obligations were not secured by the United States. It was a number of years later, in 1968, thirty-four years after the beginning of only meagerly successful efforts in this area, that Fannie Mae was divided into two corporations. One of these, Ginnie Mae, Government National Mortgage Association, was established as a wholly-owned Government corporation. The other corporation retained the Fannie Mae name and Government ownership in it was terminated on September 30, 1968. By the terms of the statute, Ginnie Mae is, and I quote Section 1717(a)(2)(A) of Title 12 of the U.S. Code: "Ginnie Mae is in the Department of Housing and Urban Development. " "It has no Board of Directors and its powers are, by statute, exercised by the Secretary of Housing and Urban Development. " "It has a President who is nominated by the President and confirmed by the Senate. " "Its other officers are appointed by the Secretary of Housing and Urban Development. " Thus Ginnie Mae is unquestionably an instrumentality of the United States and its obligations are clearly, in the normal sense, obligations of the United States.
William H. Rehnquist: Mr. Griswold, who is the obligor on these bonds?
Erwin N. Griswold: The only obligor on these bonds is the United States.
William H. Rehnquist: There isn't any intermediary between the holder or the payee of the bond and the United States?
Erwin N. Griswold: There is an understructure but the only obligation is the United States. The Joint Appendix at Pages 56 to the end, has in bold type the text of the bond. I have lodged with the clerk one of the exhibits which shows what they look like. Actually, the original is a little more impressive. It's got a green background and a brown border and this is the Seal of the United States in the center of it. But the language is on Page 58. It's also on the bond or the certificate, a copy of which has been given to you.
William H. Rehnquist: Well, there it says at the beginning on Page 56, "The Issuer, Named Below". Now, is that the United States?
Erwin N. Griswold: No. That is the entrepreneur who assembles the package and takes the lot to the Government National Mortgage Association.
William H. Rehnquist: Well, here it says, "The Issuer, Named Below, Promises to Pay to the Order of. " That is certainly some form of a promise of payment.
Erwin N. Griswold: But, Mr. Chief Justice, let me just point a little further in it. Page 58 of the Joint Appendix, the upper righthand corner of the certificate: "Except as hereafter undertaken, this certificate does not constitute a liability of nor evidence any recourse against the issuer. " and then the things which are hereafter undertaken is that the issuer promises that these are true and valid bonds and properly handled but no promise to pay and then, at the bottom of Page 58 appears the Guaranty.
John Paul Stevens: Mr. Griswold, may I interrupt Mr. Griswold. The Joint Appendix at 56 reads this way: "The Issuer, Named Below, Promises to Pay to the Order of Rockford Life Insurance Company. " and the issuer named below is the Kissell Company. Doesn't that make the Kissell Company--
Erwin N. Griswold: That's what it says, Mr. Justice, but also it says on Page 58: "Except as hereafter undertaken, this certificate does not constitute a liability of nor evidence any recourse against the issuer. " and it is perfectly clear, I submit, that the holder of this certificate could not sue the issuer and get a judgment.
Byron R. White: --And nobody contends in this case that is the case; do they?
Erwin N. Griswold: Nobody contends that that is the case.
Byron R. White: Including the Government?
Erwin N. Griswold: Yes, I think the Government agrees in its amicus brief. The issuer is an agent. He remains an agent for Ginnie Mae. He collects a service fee. He makes what he gets on the original sale of the bonds but he carries no liability to the holder of this instrument, despite what it says in the first, because that's taken back.
John Paul Stevens: Mr. Griswold, who does make the payments? Who does pay to the Rockford Life Insurance Company the money that's--
Erwin N. Griswold: That all depends upon what actually happens along the way. In normal course, I suppose it's the mortgagor who pays. He pays in wherever he is supposed to pay, which has been arranged by the issuer to accumulate the funds and the issuer then makes the payment, if he has the funds and is able and hasn't gone bankrupt and various other things, to the holder of the certificate.
Antonin Scalia: --Well, wouldn't the issuer's stockholders object to that and sue the issuer, if the issuer doesn't have any obligation to make those payments? I mean, you're telling us that the issuer has no obligations.
Erwin N. Griswold: No, on the contrary. The issuer has obligations, as stated here, to collect the amounts and to account for them and to remit them as they are collected but he has no obligation to the holder of the certificate. His obligation is to Ginnie Mae.
Antonin Scalia: But he's paying the money to the holder of the certificate.
Erwin N. Griswold: That's because that's the nature of the arrangement.
Antonin Scalia: It's because somewhere there must be a promise to do it, because otherwise he would be sued to death by his stockholders.
Erwin N. Griswold: His promise is effectively to Ginnie Mae as the underlying guarantee to help Ginnie Mae to be in the position to carry out its unqualified guarantee of the payment of interest and principal. I think we cannot overlook that language which is printed on Page 58, which is clear and straight. The only obligation, suable obligation on this bond is that undertaken by Ginnie Mae, pledging the full faith and credit of the United States.
Antonin Scalia: Is there another... you're saying that the holder of the bond is a third-party beneficiary of an agreement between the issuer and Ginnie Mae?
Erwin N. Griswold: Of that he is, but he is the direct promisee of the unqualified pledge of the full faith and credit of the United States made pursuant to an Act of Congress by the Government National Mortgage Association and that is the heart of the case and it is because of that unqualified guarantee that these things have worked. Contrary to the prior experience, where mortgage financing was not very successful, Ginnie Mae bonds are now approaching a 120 billion dollars. Not million but billion. As Senator Dirksen used to say, "After a while it adds up to quite a lot of money. "
John Paul Stevens: Mr. Griswold, can I interrupt you again? Toward the bottom of Page 57, there's a sentence: "The Issuer shall remit to the holder all such monthly payments required under this certificate by the fifteenth, 15th, day of each calendar month. " Does not that mean that pursuant to this instrument, the Kissell Company has a duty to pay over to the Rockford Life Insurance Company the monthly payments?
Erwin N. Griswold: That language says that and that calls upon the issuer to perform under an obligation to Ginnie Mae but the only obligation on this certificate, as clearly stated at the top of Page 58, is by Ginnie Mae and it does not constitute a liability of nor evidence any recourse against the issuer.
John Paul Stevens: Is it your view that it the Kissell Company just kept the monthly payments and took them to South America with them and just turn them over, they would not be liable to Rockford Life Insurance Company?
Erwin N. Griswold: It is my view that there is nothing that the holder could do except to sue Ginnie Mae and, incidentally, it would clearly have a good case in the now United States Claims Court because of a contractual obligation of the United States to the holder of the certificate.
Byron R. White: But Ginnie Mae can do some things to it; can't it?
Erwin N. Griswold: Ginnie Mae could do things; yes. Ginnie Mae can remove the issuer. It can require the transfer, not only of the custody of the mortgages but their title. It can deal with them. It can do all kinds of things but the only obligation to the holder, is that of Ginnie Mae. Now, Ginnie Mae is unquestionably an instrumentality of the United States. Its obligations are clearly, in the normal sense, obligations of the United States. The Congressional reports leading up to this suggested the creation of a mortgage-backed securities program and the desirability of Federal Government guarantee of such securities. Congress adopted such a program, including for the first time the Federal guarantee. The program has been a great success and it is quite clear that making the Federal Government's credit available through the guarantee has been the key to that success.
Harry A. Blackmun: Mr. Griswold, one thing strikes me rather peculiarly on the instrument you've given us, and that's in the Joint Appendix, the Kissell Company is named but there isn't anyone who purports to sign on behalf of the Kissell Company, in contrast to immediately below, Ginnie Mae's Secretary and President both attest. Is there any significance in that?
Erwin N. Griswold: Well, that is a point made in our brief, that the only signer of this is Ginnie Mae. The only obligation expressed on it with a signature is Ginnie Mae and the terms of the document are that the only liability which is carried by the instrument is that of Ginnie Mae.
Antonin Scalia: You wouldn't need a signature to have liability on it. I mean, you can type your name and be rendered liable. There's nothing in the law that requires you to have a signature. It looks nicer. But you could type in the Kissell Company and that's enough to make you liable.
Erwin N. Griswold: But I think it is irrelevant in view of that language, "Except as hereinafter undertaken". It could hardly be clearer and was intended. There's an aspect of the 1968 reorganization which seems of special significance. Two corporations were established by that Act. One of these, Fannie Mae, is privately owned and Congress expressly provided, twice in the Federal Housing Act, now found in Section 17/19 of Title 12: "The corporation #"-- That is Fannie Mae. "# shall insert appropriate language in all of its obligations issued under this sub-section, clearly indicating that such obligations, together with the interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or of any Agency or Instrumentality thereof, other than the corporation. " And the contrast with the powers granted to Ginnie Mae, just two sections later, is very great. I may add that Ginnie Mae issues are quoted daily in the Wall Street Journal. This is the current column... it's not all Ginnie Mae... Ginnie Mae is down here under the heading Government Agency Issues. Ginnie Mae futures are quoted in the New York Times daily. Baron's, which is a widely-used financial sheet under the heading Bonds, Government, has two places where Ginnie Maes are quoted. One of futures. Mortgage securities dealers make primary and secondary cash markets in these securities, providing for both immediate and future transfer. There are futures markets in Ginnie Maes and on major exchanges, and exchange-based Ginnie Mae options have been authorized by the Securities and Exchange Commission. Any broker can get current quotations on Ginnie Mae bonds by ticker.
John Paul Stevens: Mr. Griswold, can I ask you another question? Some of these underlying mortgages, as I understand the record here, are also guaranteed by the Federal Housing Authority or the Veterans Administration.
Erwin N. Griswold: All of these mortgages have to be guaranteed by the Veterans Administration, the Federal Housing Authority and one or two other--
John Paul Stevens: Do those guarantees precede the liability of Ginnie Mae?
Erwin N. Griswold: --They precede it and that is the explanation of why, as appears in the briefs, for the two State briefs, that Ginnie Mae has only paid a nominal sum under its guarantee. The underlying guarantee has Ginnie Mae protected by the fact that it--
John Paul Stevens: If they were already guaranteed by one or two other Government agencies, would there have been obligations by the United States within the meaning of the statute, even if they didn't have the Ginnie Mae guarantee?
Erwin N. Griswold: --Very likely not. And this is one reason why I have been stressing this marketability quoted, treated like bonds. The Veterans Administration undertaking is mortgage-by-mortgage. You're still responsible if you have the mortgage, if they don't pay, you've got to go out and find them and it there has to be foreclosure, you have to do it. The Federal Housing Administration is an insurance program and there are a number of limitations, including the fact that the interest isn't insured. The thing that has made these things marketable and which has attracted large sums of money into it, is this unqualified promise of the United States, pursuant to an Act of Congress, pledging the full faith and credit of the United States.
Antonin Scalia: Mr. Griswold, this has troubled me from the outset in this case. Do you have any notion as to what the phrase, "Except as hereinafter undertaken" means in that magic paragraph?
Erwin N. Griswold: Yes, I think I do.
Antonin Scalia: I keep reading it and reading it and I can't find anything that's hereinafter undertaken. It says, "Except as hereinafter undertaken".
Erwin N. Griswold: It is certified that this certificate is legal and regular in all respects. If Kissell has forged them in some way or has not complied with the law, they would still be liable and,-- "It is duly and validly issued, pursuant to Title 3 of the National Housing Act and that no rule, regulation or other like issuance and no contract or other agreement of either the Government National Mortgage Association or the issuer, or both, adversely affects the rights. " That is really a guarantee of regularity.
Antonin Scalia: That much is a commitment of the Kissell Company and nothing else. I see.
Erwin N. Griswold: Now, there is a good deal of talk in the other side's briefs about the case of Smith and Davis. That is dealt with extensively in our brief and in our reply brief and I think I will leave it to that now. The introduction of the full faith and credit of the United States in the Ginnie Mae certificate opened the floodgates. Thereafter, the financing of home mortgages was like traffic on a four-lane highway, with the money flowing freely to a total now approaching, as I've said, 120 billion dollars. Prior to that, without the guarantee, mortgages were not effectively marketable. In those pre-Ginnie Mae days it was like a winding country road with speed blocks and the money only trickled, and this serves, as I have said, to distinguish the Ginnie Mae certificates from Veterans Administration guarantees or from FHA insurance. Congress has spoken in broad and unqualified terms in Section 742. Within both the ordinary and the technical meaning of the language, the certificates clearly state an obligation involving the full faith and credit of the United States. There is no reason to give that language an artificial construction. Whether the language is too broad is essentially a political question. The statute can be changed by Congress where the many competing factors can be appropriately considered and I would call attention to the State's brief, Page 33/34 where they say essentially that. The statutory language seems unusually clear and applicable and it should not be rewritten by this Court. The judgment below should be reversed.
William H. Rehnquist: Thank you, Mr. Griswold. We'll hear now from you Ms. Rosen.
Patricia Rosen: Mr. Chief Justice and may it please the Court. I would like to first talk for a moment, if I might, about the Ginnie Mae certificates themselves and who is obligated on the face of the certificates. As the Court pointed out, the certificate itself states that the issuer, who is named on the face of the certificate, undertakes to promise to pay to Rockford Life Insurance Company payments of both principal and interest on the certificate. In addition, I would like to point out that as the Appellate Court noted in its opinion, the certificates involved in this case are what is generically known as modified pass-through certificates. That is, the issuer undertakes to pay both principal and interest, not only as a straight pass-through, that is, as those payments are received by the mortgagor... paid in by the mortgagor, but whether or not those payments are received. Specifically, I would like to invite the Court's attention to page 57, in the center of the second paragraph. The line I'm referring to reads: "However, the issuer shall pay to holder, whether or not collected by the issuer, and shall remit as set forth below, monthly payment on both principal and interest. "
Sandra Day O'Connor: Ms. Rosen, do you agree, however, that the liability of the issuer is without recourse?
Patricia Rosen: Yes, Your Honor, I agree that the holder of the certificate has no recourse against the issuer. However, counsel for the taxpayer here tries to make that the determinative factor in the case and we strongly disagree with such excessive reliance on simple enforceability by the holder of the certificate. There are other agreements, as pointed out by both the Appellate Court and the Supreme Court, in rejecting this argument of the taxpayer. The issuer has promised, not only on the face of the certificate but also in the guarantee agreement which is signed with Ginnie Mae and, as pointed out by the Court in the opening argument, Ginnie Mae is the one who enforces this obligation of this issuer. It is not the holder of the certificate but it is Ginnie Mae. But certainly the issuer, in this case the Kissell Company, is liable on these certificates and that liability is enforced.
William H. Rehnquist: But not liable to the holder?
Patricia Rosen: That's correct.
William H. Rehnquist: But liable to Ginnie Mae?
Patricia Rosen: That's correct. As to the nature of the constitutional and statutory immunity which is being discussed in this case,--
William H. Rehnquist: Well, I thought the reason it might be important that there was an obligor to respond to any complaints on the part of the holder, other than a Government corporation, was part of the language in Smith against Davis, where it says that one of the characteristics of the obligation of the United States is a binding promise by the United States to pay specified sums and specified dates.
Patricia Rosen: --But I believe what the Court was referring to in Smith versus Davis is that the promise should not be, as it is in this case, only activated in the event of the default on the basis of the primary obligor, but it should be a binding promise from the beginning. In other words, a bond, a stock, something where the United States is obligated to--
William H. Rehnquist: The primary obligor is the--
Patricia Rosen: --Yes. And here, the United States is not the primary obligor.
William H. Rehnquist: --Who is?
Patricia Rosen: The Kissell Company, in this instance that we are discussing. The primary obligor--
Byron R. White: What obligations does it have?
Patricia Rosen: --It's obligated to make payments of principal and interest, in this case, whether or not it receives those payments.
Byron R. White: So you just disagree with Mr. Griswold about its obligations?
Patricia Rosen: Yes, we do as the Appellate and the Supreme Court disagree with Mr. Griswold that the Kissell Company is not the primary obligor in the certificates.
Antonin Scalia: If I understand it, you say it is the obligor but can't be sued to enforce its obligations?
Patricia Rosen: It can only be sued by Ginnie Mae to enforce its obligations. It cannot be sued by the holder of the certificate. It's not that the obligation is unenforceable. The obligation, number one, is there. It's printed on the face of the certificate. It is in the guarantee agreement, so it is obligated.
Byron R. White: If it doesn't collect from the people who signed the mortgages.
Patricia Rosen: Ginnie Mae does sue.
Byron R. White: I know, but Ginnie Mae can't sue this company.
Patricia Rosen: Kissell Company. Yes, they can.
Byron R. White: Suppose all the mortgagees default... all the mortgagors default? The mortgagors just default. They don't pay.
Patricia Rosen: Yes, Your Honor.
Byron R. White: Now, is the Kissell Company independently liable to Ginnie Mae--
Patricia Rosen: Yes, Your Honor, under the language--
Byron R. White: --for the amount that is not paid to it?
Patricia Rosen: --Yes, Your Honor. Under the language which I just read to you, which I quoted to you, that's the difference between a straight pass-through certificate and a modified pass-through. Under a straight pass-through the mortgagor is the primary obligor. Under a modified pass-through, which is what we have here, the Kissell Company itself undertook--
Byron R. White: If we disagree with you on that, what if we agree with Mr. Griswold, then do you lose the case?
Patricia Rosen: --Let me understand what you're disagreeing with me on.
Byron R. White: The extent of the obligation of the Kissell Company.
Patricia Rosen: If you agree that Ginnie Mae is the one who has the primary obligation here... is that what you are--
Byron R. White: If we agree with Mr. Griswold that this company, the issuer, has no obligation except to Ginnie Mae. It has no obligation to the holder of the certificate, does it?
Patricia Rosen: --It is obligated under the terms of the certificate to pay the amounts to the holder. That obligation cannot be enforced by the holder. It can only be enforced by Ginnie Mae.
Byron R. White: So it has no obligation to the holder?
Patricia Rosen: Yes.
William H. Rehnquist: That's almost... it sounds like a little bit of gobbledy-gook because on Page 57 it says,-- "However the issuer shall pay to the holder, whether or not collected by the issuer, and shall remit as set forth below, monthly payments.... " et cetera. Now, I would think that would help you in your case it that meant what it says but you are saying, in effect, it doesn't mean what it says.
Patricia Rosen: I'm saying it does mean what it... I don't understand why... it means what it says but that obligation cannot be enforced by the person holding the certificate.
William H. Rehnquist: But it says you shall pay to the holder but it can't be enforced by the holder.
Patricia Rosen: Yes. The holder has no recourse against the person issuing the certificate.
Sandra Day O'Connor: It's an obligation to the holder, without recourse?
Patricia Rosen: Yes.
Sandra Day O'Connor: That's what it is.
Patricia Rosen: That's correct.
Sandra Day O'Connor: It's an obligation without recourse. But what does it mean, "whether or not collected by the issuer? " That sounds the very opposite of a non-recourse obligation.
Patricia Rosen: Because that's the nature of the modified pass-through program, is that the issuer must pay whether or not he collects from the mortgagor.
William H. Rehnquist: But he must pay to the holder; is that what you're saying?
Patricia Rosen: Yes.
William H. Rehnquist: But the holder can't enforce it?
Patricia Rosen: But it's enforceable by Ginnie Mae, not the holder. Essentially, the language which is relied upon by the taxpayer in this case, is simply the language of the Federal guarantee itself and that is, that in the event of a default... and only in the event of a default... the liability of the United States, under the terms of its guarantee, is triggered and in the event of a default... and when I say default, I'm referring to the default of the issuer or the primary obligor on the certificate. In the event of a default, then the holder of the certificate turns to Ginnie Mae.
John Paul Stevens: May I ask you another question about the intervening layers here?
Patricia Rosen: Yes, Your Honor.
John Paul Stevens: Supposing somebody defaults on a mortgage. It is guaranteed by the Veterans Administration.
Patricia Rosen: Yes, Your Honor.
John Paul Stevens: And eventually the Veterans Administration makes good on the mortgage and so forth, what happens in the interim? Now, the issuer here must continue to make the monthly payments and it eventually reimburses itself from the Veterans Administration; is that right?
Patricia Rosen: Yes.
John Paul Stevens: So that in a normal default situation, Ginnie Mae doesn't have to become involved at all?
Patricia Rosen: That's correct. Under the circumstances which, hopefully, I have just described to you, the question involved in this case concerns the ability of the States, in particular Illinois here, to impose a tax on these mortgage-backed securities which are guaranteed by Ginnie Mae. More broadly, it involves a question of the doctrine of intergovernmental tax immunity, which unquestionably provides that both the State Governments themselves, and the Federal Government, the property of those Governments, their instrumentalities and their obligations must be free from taxation by the other Government. The purpose of this doctrine is to allow both Governments, both at the State and Federal level, to coexist without undue interference by the other Government, through the exercise of its taxing power. It is important, when deciding any question under this doctrine, however, to recognize that the power to raise revenue by taxation is, itself, essential to the operation of any sovereign Government, because it is the only way through which that Government is able to raise the funds necessary to its operation and, therefore, this Court has always been unwilling to broadly interpret either the constitutional or the statutory immunity from taxation.
Harry A. Blackmun: Of course, Illinois has not always taxed these; have they?
Patricia Rosen: No. That's correct, Your Honor.
Harry A. Blackmun: All right.
Patricia Rosen: I believe because, under an earlier interpretation by the Department of Local Government Affairs, they didn't think they were able to impose the tax. There was a question raised at the Appellate Court and Supreme Court level of estoppel, relying on a previous interpretation of the Department, which was later changed. It is unquestionably true that any securities which are issued directly to raise money for the operation of a Government cannot be taxed. And examples of those securities would be stocks, bonds, certificates of indebtedness, Treasury bills and the like. However, we submit that this immunity should not be extended to cover obligations which are issued by private institutions merely because they are Federally guaranteed and the investor has no recourse against the private issuer, in the event the issuer defaults. The taxpayer in this case wants the Court to focus upon this investment transaction from the perspective of the private investor in a default situation and we submit that this is an inappropriate focus for the Court, for several reasons. First of all, it gives a distorted view of the program and does not take into consideration the primary focus of the Court should be on the degree of interference caused with the operation of the Federal Government and the operation of the program itself. As pointed out by amicus on National Governors Association and the like in their brief, 38 States and the District of Columbia, impose not property taxes but income taxes, which would also be barred under the interpretation which is being advanced by the taxpayer in this case, since neither the obligations themselves, nor the income from those obligations could be subject to State taxation, if you adopt the view proposed by the private taxpayer here.
Sandra Day O'Connor: How many states impose a tax like Illinois?
Patricia Rosen: Very few impose a property tax. In fact, Illinois no longer imposes the tax which is at issue in this case. Only four states were listed as imposing a property tax on Ginnie Mae bonds but 38 and the District of Columbia tax the income from the bonds.
Harry A. Blackmun: Was there a replacement tax of some kind? Why did they repeal this?
Patricia Rosen: Yes, there were a number of replacement taxes issued. Under the Illinois constitution, all taxation of intangible personal property was repealed and the State legislature was required to enact replacement taxes, to cover the income which would be lost by abolishing those taxes.
Harry A. Blackmun: What kind of taxes?
Patricia Rosen: I believe it was a wide variety and I can't specifically name a particular... they were state-wide taxes, called replacement taxes but the tax itself was not abolished having anything to do with the issues which are presented by this Court. It was abolished along with all other property taxes on intangibles. And as I pointed out previously, focusing on the recourse by a private investor in the event of a default, is inappropriate because it gives a distorted view of the Ginnie Mae program. Default, as pointed out by the statistics which are reproduced in several of the briefs, are quite rare and, therefore, it has not been shown that the State taxation imposes any real impediment to the success of the Federal program or interferes in any significant way with the operation of the program. As of fiscal 1984, as the briefs point out, the cumulative total of the securities issued by Ginnie Mae was in excess of 215 billion dollars. Contingent liability as of that year was 175 1/2 billion dollars a actual liability amounted to $98,532. To require the States to refrain from taxing a program in excess of 215 billion dollars on the basis of liability somewhat less than $100,000, is not a sensible construction of constitutional or statutory tax immunity. Furthermore, the task which the taxpayer proposes in this case completely ignores the real consideration whenever this Court seeks to determine whether securities should be exempted from State taxation. The focus here should be exclusively on the degree of interference with the Federal Government's program and such interference has not been shown here. In this case, the immunity which the taxpayer seeks, would primarily serve to shield private investments from State taxation. So that immunity is not mandated either by the Constitution or by the Statute. Unlike stocks, bonds or Treasury bills, Ginnie Mae certificates are issued by private banking institutions, not the Government and those private institutions are primarily liable on these certificates. The Government's liability is contingent and unliquidated. The issuance if Ginnie Maes does not increase the public debt, nor does it secure funds for the operation of the Federal Government and these were essentially the tasks which this Court stressed in the Smith case. In Smith the Court looked to several factors, but the factors which essentially we would ask the Court to consider here are, first of all, there is no credit instrument or instrument which is utilized by the Federal Government in order to raise revenue. This is the most important factor because, essentially, what this Court is doing when it says the State cannot impose a tax on these obligations, it is excluding an entire area from the ability of the States to impose taxes. Where the area relates to the ability of the Federal Government to raise revenue, certainly the function involved is an essential one to the operation of--
Byron R. White: What will be the economic result of permitting taxation? It will probably require the interest rate to be raised on the instruments or what?
Patricia Rosen: --Well, these instruments, as I pointed out, at least the income on the instruments is already taxed and, so, I don't--
Byron R. White: So this would be an additional tax?
Patricia Rosen: --No. To date neither the Department of Housing and Urban Development, nor Ginnie Mae itself, nor any branch of the Federal Government, has ever... nor any case has ever found that these instruments were Federally tax exempt, so they are taxed in most states.
Byron R. White: What will be the economic effect of the tax, if any?
Patricia Rosen: I don't know that there would be a direct economic impact.
Byron R. White: Who pays this tax?
Patricia Rosen: Well, in this case, Rockford Life. We pay the tax.
Byron R. White: Do you think if it knows it is going to have to pay the tax, that it would be as eager to buy these certificates in the future or not? At that interest rate.
Patricia Rosen: That is the argument which is advanced by the taxpayer in attempting to argue that there is an interference with the Federal program.
Byron R. White: If it would force the interest rate to rise, it will certainly increase the potential liability of Ginnie Mae.
Patricia Rosen: Well, Your Honor, I would point out first of all, that there has... since tax is imposed, at least on the income on these certificates in most States, there hasn't been shown to be any serious adverse impact on the operation of the program. Ginnie Mae started issuing these certificates in 1970. By approximately 1980 the cumulative total issued was something like 82 billion and by 1984 it was 215 billion.
Byron R. White: And you say that Ginnie Mae isn't complaining?
Patricia Rosen: Ginnie Mae has not complained and certainly under those statistics, should not complain. This program has been phenomenally successful without any declaration that these securities are tax exempt.
Sandra Day O'Connor: Well Ms. Rosen, I understood the Solicitor General's position to be that they are subject to tax and that the interest rates and costs of these certificates have already taken that into effect. Am I wrong?
Patricia Rosen: No, Your Honor, that is correct and that is the point I'm attempting to make, is that these are taxed and there has been no adverse impact on the program to date and, therefore, I don't see that there would be any additional impact if you sustain this tax, Your Honor.
Lewis F. Powell, Jr.: May I ask this question? These instruments are guaranteed to the extent of the full faith and credit of the United States.
Patricia Rosen: That's correct.
Lewis F. Powell, Jr.: Has the United States Government ever had to pay anything on any of them?
Patricia Rosen: Yes, Your Honor, they have. As I pointed out a little bit earlier when I went through the statistics for 1984, it's about one thousandth of one percent per year and that statistic has held valid. I checked six years and, basically, it's been less than one thousandth of one per cent of the total outstanding liability each year that I checked.
Sandra Day O'Connor: The issuers are required to furnish bonds to guarantee, fidelity bonds and bonds to guarantee the payments that they undertake to make?
Patricia Rosen: Yes, Your Honor, that is correct. That is part of the initial agreements which are entered into. When a mortgage lending institution wants to become an issuer of Ginnie Maes, they assemble a pool of mortgages generally in excess of a million dollars and then they apply to become an issuer and, in doing that, their financial situation is scrutinized and also they must supply fidelity bonds to guarantee performance. Essentially, what the taxpayer seeks to do in this case is to expand the doctrine of Federal tax immunity to cover a Federally guaranteed, private investment transaction. Such immunity should not be conferred in the absence of a decision that it is necessary to the success of the Federal program and we submit that decision is one which should be made by Congress-- Here Congress has never indicated either in the statute creating Ginnie Mae, that these bonds... that it intended to, in the language itself nor in the legislative history, is there any indication that it intended, when it authorized Ginnie Mae to guarantee these obligations, that it intended to confer immunity from State taxation and this Court has many, many times indicated that the question of whether the constitutional and statutory immunity should be expanded is one which is best left to Congress, because it is a question which is essentially legislative in nature. Congress here has not indicated that immunity from State taxation is necessary to the success of this program. The program has been phenomenally successful without immunity from State taxation and we would ask this Court to agree with the decisions of the Illinois Appellate and Supreme Courts and to hold that Ginnie Mae securities are not obligations of the Federal Government and they are not entitled to either statutory or constitutional immunity. Thank you.
William H. Rehnquist: Thank you, Ms. Rosen. Mr Griswold, you have two minutes remaining.
Erwin N. Griswold: Ms. Rosen's final argument simply ignores Section 742, which is the whole basis of our claim for exemption.
Byron R. White: If you win, would State income taxes on the interest earned be immune?
Erwin N. Griswold: That question isn't here.
Byron R. White: Well, I'm asking.
Erwin N. Griswold: I have thought about it and I can see arguments on both sides of it.
Byron R. White: Under the section you rely on, doesn't it say interest?
Erwin N. Griswold: It says "income" but the question is whether the income is actually paid by the United States or is paid by the mortgagees through the issuer to the holder. That is a real problem. It is not here and--
Byron R. White: In any event, States have been taxing the income?
Erwin N. Griswold: --In any event, States have been taxing the income. On the other hand, States generally did not impose property taxes. There are only four states which now impose property taxes. They came to it lately, particularly after there was an Illinois decision sustaining it and now Illinois has abandoned the property tax. It is perfectly clear that the key to the success of this program is the Government guarantee. Using patent language, "that was a stroke of genius. " It changed things from one level to a wholly higher level. As one of the witnesses in this record, Joint Appendix on Page 54, said: "But rather than taxpayer money for it, the Ginnie Mae was one of the real beautiful devices that has come along to attract private capital but you use the Government's credit in order to make it credit worthy. " And this is a situation where the Government has wisely and successfully used its credit but it is the Government's credit which is being used through an instrumentality of the United States and that should make it not subject to State property taxes.
William H. Rehnquist: Thank you, Mr. Griswold. The case is submitted.
Speaker: The Honorable Court is now adjourned until tomorrow at 10:00.