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.
Decisions of a state court as to whether a state statute is in conformity to the state constitution are very generally followed by the federal courts.1 One well-recognized exception to the general rule that federal courts follow state decisions as to the construction of the state constitution and the consequent validity of state statutes, is found where the statute in question constitutes a contract.2 Thus the validity of a statute under which bonds were issued refunding a prior debt, which provided that coupons should be received for taxes, is a question upon which the United States courts will decide for themselves, and having held such a statute valid,3 before the rendition of a decision of a state court holding such statute void,4 the Supreme Court of the United States will follow its prior decisions on this point and not those of the state court.5 In deciding the constitutionality of statutes authorizing the issuing of bonds for public improvements the federal courts will in cases coming before them for trial follow the decisions of the state courts rendered prior to the issuing of the bonds, ignoring later contrary decisions.6 If no specific adjudication as to the constitutionality of a statute has been made at the time that the contract in question is entered into and the rights of the parties are fixed, the federal courts are not bound to follow a subsequent decision of the state supreme court, rendered after the contract is entered into but before suit is brought thereon, but may exercise their independent judgment.7 An exception to this last rule has been said to arise " when the question is whether a particular statute was passed by the legislature in the manner prescribed by the state constitution so as to become a law of the state,"8 in which case the federal courts are bound to follow the ultimate decision of the state court.9
1 Backus v. Depot Co., 169 U. S. 557; Nobles v. Georgia, 168 U. S. 398; St. Anthony, etc., Co. v. Water Commissioners, 168 U. S. 349; Merchants,' etc., Bank v. Pennsylvania, 167 U S. 461; Forsyth v. Hammond, 166 U. S. 506; Long Island Water Supply Co. v. Brooklyn, 166 U. S. 685; Oakes v. Mase, 165 U. S. 363; Dibble v. Land Co., 163 U. S. 63; Illinois Central Ey. Co. v. Illinois, 163 U. S. 142; Balkam v. W. Iron Co., 154 U. S. 177; Goodnow v. Wells, 67 la. 654; 25 N. W. 864.
2 Stearns v. Minnesota, 179 U. S. 223; Douglas v. Kentucky, 168 U. S. 488; Bacon v. Texas, 163 U. S. 207; Mobile, etc., R. R. v. Tennessee, 153 U. S. 486; Ohio Life Ins. Co. v. De-bolt, 16 How. (U. S.) 416. "This court has always held that the competency of a state, through its legislation, to make an alleged contract, and the meaning and validity of such contract were matters which in discharging its duty under the Federal constitution it must determine for itself; and while the leaning is towards the interpretation placed by the state court, such leaning cannot relieve us from the duty of an independent judgment upon the question of contract or no contract." Stearns v. Minnesota, 179 U. S. 223, 232, 233.
3 McGahey v. Virginia, 135 U. S. 662; Hartman v. Greenhow, 102 U. S. 672.
4 Commonwealth v. McCullough 90 Va. 597; 19 S. E. 114.
5 McCullough v. Virginia, 172 U. S. 102.