hordarius

Phillips Petroleum Company, a Delaware corporation with its principal place of business in Oklahoma, produced or purchased natural gas from leased land in 11 states during the 1970s. It sold most of the gas in interstate commerce at prices regulated by the Federal Power Commission, later the Federal Energy Regulatory Commission. Beginning in the mid-1970s Phillips proposed price increases. It collected higher amounts subject to refund with interest if disapproved. Phillips suspended royalty payments to lessors until final Commission approval. It paid the suspended royalties of $3.7 million in 1976, $4.7 million in 1977, and $2.9 million in 1978 without interest after the increases were approved. In 1979 the Commission began investigating overcharges. In 1983 it issued an opinion ordering refunds. Royalty owners Irl Shutts, a Kansas resident, and Robert and Betty Anderson, Oklahoma residents owning leases in Oklahoma and Texas, filed suit in Kansas state court seeking interest on the suspended royalties. They sought to represent a class of 33,000 royalty owners later reduced to 28,100 members after 3,400 opted out and 1,500 could not be notified. Fewer than 1,000 class members resided in Kansas and only about one-quarter of one percent of the leases were located there. The Kansas trial court certified the class under a state statute modeled on Federal Rule of Civil Procedure 23 on an opt-out basis. It sent first-class mail notice describing the action and the right to opt out. The court applied Kansas law to award interest at Commission rates followed by the Kansas post-judgment rate of 15 percent. After the Kansas Supreme Court affirmed, the United States Supreme Court granted certiorari in 1984.

Frederick Walz, owner of real estate in Richmond County, New York, filed suit in New York state courts seeking an injunction to prevent the New York City Tax Commission from granting property tax exemptions to religious organizations for properties used solely for religious worship. The exemptions were authorized by Article 16, Section 1 of the New York Constitution, which permits exemptions for real or personal property used exclusively for religious, educational, or charitable purposes and owned by nonprofit corporations or associations organized exclusively for such purposes. Walz contended that the exemptions indirectly required him to contribute to religious bodies by increasing the tax burden on non-exempt property. The New York City Tax Commission moved for summary judgment. The trial court granted the motion. The Appellate Division of the New York Supreme Court affirmed, and the New York Court of Appeals also affirmed. The United States Supreme Court noted probable jurisdiction and heard oral argument on November 19, 1969. All fifty states provide tax exemptions for places of worship, most through constitutional provisions. New York has granted such exemptions since before the adoption of the First Amendment, and Congress has provided similar exemptions for church property in the District of Columbia since the early nineteenth century. The exemptions apply to a broad class of nonprofit organizations, including hospitals, libraries, scientific groups, and patriotic societies, not solely to religious organizations.

In 1877, the Tennessee legislature enacted a statute whose chief object was to secure the development of the mineral resources of the State and to facilitate the introduction of foreign capital. The statute permitted corporations chartered under the laws of other states or countries for mining and manufacturing purposes to become incorporated in Tennessee and carry on business there upon specified terms. Section 5 of the statute provided that creditors who were residents of Tennessee would have priority in the distribution of assets of such corporations over simple contract creditors residing in other countries. The Embreeville Freehold Land, Iron and Railway Company, Limited, a corporation organized under the laws of Great Britain and Ireland for mining and manufacturing purposes, registered its charter under the Tennessee statute in 1890. It established a manager’s office in Tennessee, purchased property, and conducted mining and manufacturing business from that office. The company maintained its home office in London, where its managing director resided. On June 20, 1893, C. M. McClung & Company and other Tennessee residents filed an original general creditors’ bill in the Chancery Court of Washington County, Tennessee, against the Embreeville Company and others. The bill alleged the company’s insolvency and default on obligations, charged a fraudulent conveyance, and sought appointment of a receiver and administration of affairs as an insolvent corporation. The court took jurisdiction, appointed a receiver for the company’s Tennessee property, and administered its affairs in the state. Creditors included C. G. Blake and Rogers, Brown & Company, both residents and citizens of Ohio with places of business in Cincinnati, and the Hull Coal & Coke Company, a Virginia corporation. These out-of-state creditors filed intervening petitions asserting claims and challenging the constitutionality of the statute’s priority provisions. There were also holders of debenture bonds totaling $625,000 and trade creditors in Great Britain, all non-residents of Tennessee or the United States. The Chancery Court upheld the statute’s constitutionality and granted Tennessee resident creditors priority over creditors from other states or countries. On appeal, the Chancery Court of Appeals modified parts of the decree. The Supreme Court of Tennessee affirmed the validity of the statute. It ruled that Tennessee resident creditors were entitled to priority of payment out of the company’s assets over all other creditors residing outside the state, whether from other states or Great Britain.

In 1942 the Department of the Army acquired approximately 181 acres northwest of Philadelphia and constructed the Valley Forge General Hospital on the site. The hospital provided medical care to members of the Armed Forces for the next thirty years. In April 1973 the Secretary of Defense proposed closing the installation as part of a plan to reduce the number of military facilities in the United States, after which the General Services Administration declared the property surplus. In August 1976 the Department of Health, Education, and Welfare conveyed a 77-acre tract of the former hospital grounds to petitioner Valley Forge Christian College. The appraised value of the tract at the time of transfer was $577,500, but the Secretary applied a 100 percent public benefit allowance that allowed the college to take title without any cash payment. The deed conveyed the land in fee simple subject to conditions subsequent that required the college to use the property for thirty years solely for the educational purposes described in its application. Valley Forge Christian College is a nonprofit educational institution operating under the supervision of the Assemblies of God. Its stated purpose is to offer systematic collegiate training to men and women for Christian service as ministers or laymen, and its degree programs are designed to train leaders for church-related ministries. Faculty members must have been baptized in the Holy Spirit and be living consistent Christian lives, and all members of the college administration must be affiliated with the Assemblies of God. In September 1976 respondents Americans United for Separation of Church and State, Inc., a nonprofit organization with approximately 90,000 taxpayer members, and four of its employees learned of the conveyance through a news release. Two months later they filed suit in the United States District Court for the District of Columbia, later transferred to the Eastern District of Pennsylvania, seeking a declaration that the conveyance was null and void and an order requiring the college to return the property to the United States. The District Court granted summary judgment and dismissed the complaint, finding that respondents lacked standing as taxpayers and had failed to allege any actual or concrete injury beyond a generalized grievance common to all taxpayers. The Court of Appeals for the Third Circuit reversed by a divided vote. It held that respondents possessed standing as citizens claiming injury in fact to their shared individuated right to a government that shall make no law respecting the establishment of religion. The Supreme Court granted certiorari in 1981.