Gelpcke v. City of Dubuque
68 U.S. 175 (1863)

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U.S. Supreme Court

Gelpcke v. City of Dubuque, 68 U.S. 1 Wall. 175 175 (1863)

Gelpcke v. City of Dubuque

68 U.S. (1 Wall.) 175

Syllabus

1. By a series of decisions of the Supreme Court of Iowa prior to that, A.D. 1859, in State of Iowa v. County of Wapello, 13 Ia. 388, the right of the legislature of that state to authorize municipal corporations to subscribe to railroads extending beyond the limits of the city or county and to issue bonds accordingly was settled in favor of the right, and those decisions, meeting with the approbation

Page 68 U. S. 176

of this Court and being in harmony with the adjudications of sixteen states of the Union, will be regarded as a true interpretation of the constitution and laws of the state so far as relate to bonds issued and put upon the market during the time that those decisions were in force. The fact that the said Supreme Court of Iowa now bolds that those decisions were erroneous and ought not to have been made, and that the legislature of the state had no such power as former courts decided that they had, can have no effect upon transactions in the past, however it may affect those in the future.

2. Although it is the practice of this Court to follow the latest settled adjudications of the state courts giving constructions to the laws and constitution of their own states, it will not necessarily follow decisions which may prove but oscillations in the course of such judicial settlement. Nor will it follow any adjudication to such an extent as to make a sacrifice of truth, justice, and law.

3. Municipal bonds with coupons payable to "bearer" having, by universal usage and consent, all the qualities of commercial paper, a party recovering on the coupons will be entitled to the amount of them with interest and exchange at the place where, by their terms, they were made payable.

The Constitution of the State of Iowa, adopted in 1846, contains the following provisions, to-wit:

"ART. 1. § 6. All laws of a general nature shall have a uniform operation."

"ART. 3. § 1. The legislative authority of the state shall be vested in a Senate and House of Representatives, which shall be designated the General Assembly of the State of Iowa,"

&c.

"ART. 7. The General Assembly shall not in any manner create any debt or debts, liability or liabilities, which shall, singly or in the aggregate, with any previous debts or liabilities, exceed the sum of one hundred thousand dollars, except in case of war, to repel invasion, or suppress insurrection."

"ART. 8. § 2. Corporations shall not be created in this state by special laws, except for political or municipal purposes, but the General Assembly shall provide, by general laws, for the organization of all other corporations, except corporations with banking privileges, the creation of which is prohibited. The stockholders shall be subject to such liabilities and restrictions as shall be provided by law. The state shall not directly or indirectly become a stockholder in any corporation."

With these constitutional provisions in existence and force, the legislature passed certain statutes. One -- incorporating

Page 68 U. S. 177

the City of Dubuque, passed February 24, 1847 -- provided, in its 27th section, as follows:

"That whenever, in the opinion of the City Council, it is expedient to borrow money for any particular purpose, the question shall be submitted to the citizens of Dubuque, the nature and object of the loan shall be stated, and a day fixed for the electors of said city to express their wishes; the like notice shall be given as in cases of election, and the loan shall not be made unless two-thirds of all the votes polled at such election shall be given in the affirmative."

By an act passed January 8, 1851, this charter was "so amended as to empower the city councils to levy annually a special tax to pay interest on such loans as are authorized by the 27th section of said act" -- that is to say by the section just quoted. A subsequent act -- one passed 28th January, 1857 -- enacts thus:

"The City of Dubuque is hereby authorized and empowered to aid in the construction of the Dubuque Western, and Dubuque, St. Peter's & St. Paul Railroad Companies, by issuing $250,000 of city bonds to each in pursuance of a vote of the citizens of said city taken in the month of December, A.D. 1856. Said bonds shall be legal and valid, and the city council is authorized and required to levy a special tax to meet the principal and interest of said bonds, in case it shall become necessary from the failure of funds from other sources."

"The proclamation, the vote, bonds issued or to be issued, are hereby declared valid, and the said railroad companies are hereby authorized to expend the moneys arising from the sale of said bonds, without the limits of the City and County of Dubuque, in the construction of either of said roads, and neither the City of Dubuque nor any of the citizens shall ever be allowed to plead that the said bonds are invalid."

With this constitution, as already mentioned, in force, and after the incorporation of the city and the passage of acts of assembly as just mentioned -- and after certain decisions of the Supreme Court of Iowa as to the constitutionality of these acts, the character and value of which decisions make the

Page 68 U. S. 178

principal subject of discussion in this case -- the City of Dubuque issued a large amount of coupon bonds, which were now in the hands of the plaintiffs. The bonds bore date on the 1st of July, 1857, and were payable to Edward Langworthy or bearer on the 1st of January, 1877, at the Metropolitan Bank in the City of New York. The coupons were for the successive half year's interest accruing on the bonds respectively, and were payable at the same place. The bonds recited that they were given "for and in consideration" of stock of the Dubuque Western Railroad Company, one of the roads to which, by the act last mentioned, the city was authorized to subscribe, and that for the due payment of their principal and interest, "the said city is hereby pledged, in accordance with the code of Iowa, and an act of the General assembly of the State of Iowa, of January 28, 1857" -- the act just referred to. The coupons on the bonds not being paid, the plaintiffs sued the City of Dubuque in the District Court of the United States for the District of Iowa, claiming to recover the amount specified in the coupons, with the New York rate of interest from the time of their maturity, and exchange on the City of New York.

The city set up the following grounds of defense:

1. That the bonds were issued by the city to aid in the construction of a railroad extending beyond its limits into the interior of the state.

2. That at the time of issuing the bonds and coupons, the indebtedness of the city exceeded one hundred thousand dollars.

3. That at the time of issuing the bonds and coupons, the indebtedness of the State of Iowa exceeded one hundred thousand dollars.

4. That at the time of issuing the bonds and coupons, the indebtedness of the cities and counties of Iowa exceeded, in the aggregate, one hundred thousand dollars.

The plaintiffs demurred. The demurrer was overruled, and judgment entered for the defendant. On error, the question in this Court was whether the judgment had been rightly given.

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