Disregarding the earlier case of Rowan v. Runnels73 in which, though the point was involved and passed upon, the argument was not elaborated, the first important case in which the doctrine was clearly laid down that the federal courts need not follow the latest decisions of the state courts construing state laws or constitutional provisions when to do so will be to impair the obligation of contracts entered into in reliance upon earlier decisions holding them void, was that of Gelpcke v. Dubuque,74 decided in 1863. This case came up on appeal from a federal district court, and was a suit to recover upon certain bonds issued by the city of Dubuque, Iowa, which bonds had been issued under authority of an act of the state legislature. The constitutionality of this act had been upheld by the highest court of Iowa at the time the bonds were issued, but later decisions of that court had held the act unconstitutional, and, therefore, the bonds invalid. In its refusal to accept this last judgment of the Iowa supreme court, the federal Supreme Court did not base its refusal upon the ground that the construction was unsettled,75 for in its opinion, after quoting from Leffingwell v. Warren76 that it would follow the latest "settled " adjudications, the court say: "Whether the judgment in question can, under the circumstances, be deemed to come within that category, it is not now necessary to determine." The earlier decisions of the Iowa supreme court, the federal Supreme Court say, were reasonable ones, "sustained by reason and authority," and "in harmony with the adjudications of sixteen of the States of the Union." But not upon this ground, also, is the construction of the later decisions repudiated. The refusal to follow them is based explicitly upon the doctrine that, relying upon the earlier decision, contracts had been entered into which would be impaired should the later decisions be followed. "However we may regard the late case in Iowa as affecting the future," say the court, "it can have no effect upon the past. 'The sound and true rule is that if the contract, when made, was valid by the laws of the State as then expounded by all departments of the government, and administered in its courts of justice, the validity and obligation cannot be impaired by any subsequent action of legislation, or decision of the courts altering the construction of the law.' 77 The same principle applies where there is a change of judicial decision as to the constitutional power of the legislature to enact the law."

72 107 U. S. 20; 2 Sup. Ct. Rep. 10; 27 L. ed. 359.

73 5 How. 134; 12 L. ed. 85.

74 1 Wall. 175; 17 L. ed. 520.

75 As to the rule regarding this see Section 595.

76 2 Black. 599; 17 L. ed. 261.

It will be observed that in this case, though the earlier holding of the state supreme court as to the constitutionality of the act authorizing the bond was declared a reasonable one, it is not upon this ground that the later decision as to its unconstitutionality is repudiated. The relative merits of the earlier and the latest holding of the state court, as an abstract proposition, is not passed upon. It is not asserted that, except as to contracts entered into prior thereto, the state law declared void by the latest decision of the state court is to be treated as a nullity.

The doctrine declared in Gelpcke v. Dubuque has been much criticized upon the double ground that it treats a decision of a state court as a "law " impairing the obligation of contracts, and that it implies an assumption upon the part of the federal courts of a right not simply to apply impartially as between citizens of different States the state law as it finds it (this, it is claimed, being the sole reason for which federal jurisdiction in suits between citizens of different States is given), but to determine what that law is.

But however open to technical criticism, the doctrine has since been repeatedly affirmed and may now be considered beyond dispute.78

77 Quoted from Ohio Life Insurance & Trust Co. v. Debolt, 16 How. 416; 14 L. ed. 997.

78 In Township of Pine Grove v. Talcott (19 Wall. 666: 22 L. ed. 227) the court say: "The national Constitution forbids the State to pass laws impairing the obligation of contracts. In cases properly brought before us that end can be accomplished unwarrantably no more by judicial decision than by legislation."

In Douglass v. County of Pike (101 U. S. 677; 25 L. ed. 968) the court say: "The true rule is to give a change of judicial construction in respect to a statute the same effect in its operation on contracts and existing contract rights that would be given to a legislative amendment; that is to say. make it prospective not retrospective."See also Green Co. v. Conness, 109 U. S. 104; 3 Sup. Ct. Rep. 69; 27 L. ed. 872; Los Angeles v. Los Angeles Water Co., 177 U. S. 558; 20 Sup. Ct. Rep. 736; 44 L. ed. 886.