This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
18 Central Land Co. v. Laidley, 159 U. S. 103; Wood v. Brady, 150 U. S. 18; Lehigh Water Co. v. Easton, 121 U. S. 388; Knox v. Exchange Bank, 12 Wall. (U. S.) 379; Law-ler v. Walker, 14 How. (U. S.) 149; Commercial Bank v. Buckingham. 5 How. (U. S.) 317.
19 Graves v. Moore County, - N. C. - ; 47 S. E. 134; Storrie v. Cortes, 90 Tex. 283'; 35 L. R. A. 666; 38 S. W. 154.
20 Graves v. Moore County, - N. C. - ; 47 S. E. 134.
21 Storrie v. Cortes, 90 Tex. 283; 35 L. R. A. 666; 38 S. W. 154.
22 National, etc., Association v. Brahan, 193 U. S. 635; affirming 80
Miss. 407; 57 L. R. A. 793; 31 So. 840; Central Land Co. v. Laidley, 159 U. S. 103; Alferwitz v. Borg-wardt, 126 Cal. 201; 58 Pac. 460.
23 Ray v. Gas Co., 138 Pa. St. 576; 21 Am. St. Rep. 922: 12 L. R. A. 290; 20 Atl. 1065; 21 Atl. 202.
24 Allen v. Allen. 95 Cal. 184; 16 L. R. A. 646; 30 Pac. 213.
25 Central Land Co. v. Laidley, 159 U. S. 103.
26 Lufkin v. Galveston, 58 Tex. 545.
27 Higgins v. Bordages, 88 Tex. 458; 53 Am. St. Rep. 770; 31 S. W. 52. 803.
28 Storrie v. Cortes, 90 Tex. 283; 35 L. R. A. GG6: 38 S. W. 154.
The distinction here made is not recognized in some states and in many text-books. A dictum by Judge Taney, in Ohio Life Ins. Co. v. DeBolt,30 gave rise to the proposition that "where a statute has received a settled exposition, then a contract has been made under it which is good, there is created an 'obligation' which cannot be overturned by decisions overruling the earlier exposition."31 This proposition, erroneous as applied to cases coming to the Supreme Court of the United States from state courts, finds support in the broad language used in some cases in which error proceedings to inferior Federal courts were brought32 and has been adopted by some of the state courts.33 Thus a mortgage was given by a married woman. The decisions of the state courts then rendered held such mortgages to be valid on the ground that her statutory separate estate was converted into her equitable separate estate. This decision was subsequently overruled. It was held that the mortgage, being given before the later decision was rendered, though suit was brought thereon afterwards, must be governed by the early though erroneous construction of the statute.34 So a note given by a public corporation in payment for a bounty for enlistment at a time when the decisions construing the Constitution held such notes to be valid, was held to be valid though such construction was held incorrect when action was brought on such note.35 This limitation upon the powers of state courts is self-imposed, valid where recognized, but not required by the decisions of the Federal courts. It is recognized indivectly even in cases in which it was held that no question of statutory construction existed. Thus the Supreme Court oi California held that a chattel mortgage passed the legal title to the mortgagee.36 In rendering this decision Section 2888 of the Civil Code was entirely overlooked. In a subsequent case it was held that the former decision was not one construing a statute, and that accordingly a contract made in reliance upon the prior decision was not governed thereby, and that it was not impairing the obligation of a contract to overrule the earlier decision.37
29 Center School Township v. State, 150 Ind. 168; 49 N. E. 961.
30 16 How. (U. S.) 416, 432.
31 Bishop on Contracts (enlarged edition), Sec. 569. The author's acceptance of this rule as law is the more remarkable because he demonstrates its unsoundness.
32 Taylor v. Ypsilanti, 105 U. S. 60; Douglass v. Pike County, 101 U. S. 677; Fairfield v. Gallatin County, 100 U. S. 47.
33 Farrior v. Security Co., 92 Ala. 176; 12 L. R. A. 856; 9 So. 532; Willoughby v. Holderness, 62 N. H. 227. See obiter in Lewis v. Sym-mes, 61 O. S. 471; 76 Am. St. Rep. 428; 56 N. E. 194.
34 Farrior v. Security Co., 92 Ala. 176; 12 L. R. A. 856; 9 So. 532.
35 Willoughby v. Holderness, 62 N. H. 227.
It thus appears that a written law is a "law " within the meaning of this clause of the Constitution, while a judicial decision is not. It is, therefore, a necessary question and often a difficult one, to determine whether a judicial decision is based on a written law or not. A recent decision of the Supreme Court of the United States illustrates what it holds to be a decision based on a statute. A Texas statute provided that railroads indebted to the state should pay interest and a certain amount of the principal annually upon so much of the loan as was due on May 1, 1870, and provided to what extent the property of roads which made default in such payments might be held therefor. By statute during the Civil War treasury warrants had been issued to the creditors of the state. The railroads had been obliged to accept these in payment of their accounts, and in turn had paid them over to the state as credits upon the amounts due from them to the state. The Houston and Texas Central Railroad had paid the amount of indebtedness due to the state if credit were given for the state warrants thus paid over. The state insisted that no credit should be given for such warrants and sued to enforce payment of the amount due. The trial court found in favor of the state. The case was then taken to the Court of Civil Appeals, which held that no credit should be given for such warrants; but in other respects modified the judgment of the lower court so as to give exactly the relief prescribed by the state statute first referred to. That part of the decision holding that payment in state warrants should not be credited since they were bills of credit and in aid of rebellion, was reached independent of this statute, and no part of the decision of the Court of Civil Appeals was expressly based thereon. A writ of error was refused by the supreme court of Texas. Error proceedings in the Supreme Court of the United States resulted in a reversal of the judgment of the Texas court of Civil Appeals on the theory that the judgment of the court gave effect to the statute and thus there was a " law " impairing the obligation of contracts.38 Clearly a decision construing a contract, even if erroneous, is not a law impairing the obligation of the contract.39
36 Berson v. Nunan, 63 Cal. \50.
37 Alferwitz v. Borgwardt, 126 Cal. 201; 58 Pac. 460.