A case otherwise within the jurisdiction of the district court
of the United States and reviewable in the circuit court of appeals
is not a case which may come direct to this Court under § 238,
Judicial Code, merely because, in the course of the case, a
question has arisen as to whether a change in decision of the state
court as to the effect
Page 234 U. S. 620
and scope of a state statute amount to an impairment of the
obligation of a contract.
Courts of the United States are courts of independent
jurisdiction, and when a question arises in a United States court
as to the effect of a change of decision which detrimentally
affects contracts, rights, and obligations entered into before such
change, such right and obligations should be determined by the law
as judicially construed at the time the rights accrued.
Federal courts in such a case, while leaning to the view of the
state court in regard to the validity or the interpretation of a
statute, should exercise an independent judgment, and not
necessarily follow state decisions rendered subsequently to the
arising of the contract rights involved.
Where the district court errs in following later decisions of
the state court, rather than those rendered prior to the making of
the contract, the error may be corrected by the circuit court of
appeals or by this Court under writ of certiorari, but not by
direct appeal to this Court.
A change in decision of the state court in reference to the
scope of a state statute
held in this case not to be a law
impairing the obligation of a contract.
The facts, which involve the jurisdiction of this Court of
direct appeals from the district court under § 247, Judicial Code,
are stated in the opinion.
MR. JUSTICE LURTON delivered the opinion of the Court.
The primary question concerns the jurisdiction of this Court to
entertain this as a direct appeal from the district court.
The decree below was rendered under a general creditors' bill,
by which the assets of the Indianapolis, Crawfordsville, &
Western Traction Company, an insolvent
Page 234 U. S. 621
Indiana corporation, had been impounded, its debts ascertained,
and the order of payment determined. Among the creditors proving
their debts were some claiming liens. One was the Marion Trust
Company, trustee under a general mortgage securing an issue of
mortgage bonds. Another creditor was this appellant, the
Moore-Mansfield Construction Company. That company had, under
contract with the traction company, constructed a part of its line
of railway, and for the balance of its debt claimed a lien upon its
property. The decree from which this appeal was taken gave priority
to the mortgage and denied to appellant any lien upon the property
of the traction company, and adjudged that its debt as fixed should
be paid ratably out of the funds applicable to the payment of
general debts.
Counsel for appellant thus states the issue upon this
appeal:
"The precise controversy presented by the record is: (a) has the
construction company a valid, subsisting, enforceable mechanics'
lien under the laws of Indiana upon the railway property of the
traction company? (b) is such lien senior and paramount to the lien
of the trust deed or mortgage given to secure the outstanding
bonds?"
The defense asserted to the mechanics' lien was that there was
no statute giving to a contractor for railway construction a lien
upon the railway property, and, second, if there existed any such
lien, the construction company, for the purpose of giving security
to the holders of the construction bonds, had expressly covenanted
and agreed to waive and forego whatever right or rights it might
have had at the time of the execution of its contract, or which it
might thereafter acquire, to claim a lien against the property of
the railway company under the laws of the State of Indiana.
The court filed no opinion, but the decree recites that
"the construction company is not entitled to enforce a
Page 234 U. S. 622
mechanics' lien against any of the property of said defendant
traction company in the hands of the receiver of this court or
elsewhere, if any, nor against the proceeds thereof, and that no
such lien exists."
Thus, it is not clear whether the lien asserted was denied
because of the waiver referred to, or because the statute of
Indiana of March 6, 1883, being the statute under which the lien
was claimed, did not embrace contractors. Appellant moved the court
to amend the decree so as to make it more specific by stating
whether it had no lien because, under the law of Indiana, a
contractor could acquire no such lien, or because it had waived its
right to any such lien, as contended by the appellee. This motion
was denied. We shall assume for the purpose of this case that the
lien was denied upon the first ground stated, and upon that basis
determine whether the case is one which can come direct to this
Court.
That appellant could have carried this case for review to the
circuit court of appeals is plain. The jurisdiction of the district
court under the original bill was based only upon diversity of
citizenship. Neither did the contention that, in the progress of
the case, there arose a question claimed to involve the
construction or application of the Constitution of the United
States deprive the unsuccessful party of the right to go to the
circuit court of appeals, where all of the questions would be open
to review. But the contention is that the appellant had an election
to carry the case to the circuit court of appeals or bring it
direct to this Court under § 5 of the Act of 1891, 26 Stat. 827, c.
517, now § 247 of the Judicial Code of 1911, as a case "which
involved the construction or application of the Constitution of the
United States." Shortly stated, the contention is, first, that,
under the decisions of the Indiana Supreme Court prior to the
accruing of the rights of this appellant under its contracts,
contractors were included within those who might, by compliance
with
Page 234 U. S. 623
the mechanics lien statute, secure liens, and second that the
subsequent change of decision by which that court held that
contractors were not included in the mechanics' lien law
constituted a law which impaired the obligation of its contract
within the meaning of the contract clause of the Constitution of
the United States. It therefore assigns as error the action of the
court below in not declaring the rights of appellant to be as they
existed under the line of judicial decisions at the time such
rights accrued.
The title of the Indiana act of March 6, 1883 c. 115, under
which appellant claims to have acquired a lien, was "an act
concerning liens of mechanics, laborers, and materialmen." A
provision of the Constitution of Indiana, § 19, Article 4, provides
that "every act shall embrace but one subject and matters properly
connected therewith, which subject shall be expressed in the
title." The contention is that, for many years, contractors had
been regarded as entitled to a lien under this act and prior acts
having a similar title, though it is conceded that the sufficiency
of the title had never been expressly decided. On February 18,
1909, the Indiana Supreme Court, in the case of
Indianapolis
Northern Traction Co. v. Brennan, 174 Ind. 1, held that the
Act of 1883 did not include contractors or subcontractors. The act
was not held to have been unconstitutionally enacted (
Wilkes
County v. Coler, 180 U. S. 506),
nor that contractors and subcontractors might not have been
included among those to whom the privilege of a lien was extended.
The decree was confined to the single point that the title did not
include contractors. It was therefore a mere construction of the
act as not including obligations to contractors as distinguished
from obligations to mechanics, laborers, and materialmen. This is
claimed to have been such a change of decision as to impair the
obligation of the contract under which the appellant had
constructed
Page 234 U. S. 624
the railway of the traction company. Curiously enough, the
Supreme Court of Indiana has, pending this appeal, retracted the
construction it placed upon the Act of 1883, and has held that
contractors are within the intent and meaning of the act.
Moore-Mansfield Constr. Co. v. Indianapolis &c.
Railway, 179 Ind. 536. But a change in the opinion of a court
as to the proper construction or scope of statute law of a state is
not within Article I, § 10, of the Constitution of the United
States, which provides that "no state shall . . . pass any bill of
attainder,
ex post facto law, or law impairing the
obligation of contracts." That provision is a restraint upon the
legislative power of the state, and, as was said by this Court, "it
concerns the making of laws, not their construction by the courts.
It has been so regarded from the beginning."
Ross v.
Oregon, 227 U. S. 150,
227 U. S. 161.
There had been no subsequent legislation which in anywise affected
liens of contractors.
It has been many times decided that a writ of error will not lie
from this Court to a state court under § 709, Revised Statutes, on
the ground that the obligation of a contract has been impaired by a
change in the decision of the court in respect to the meaning and
scope of a statute the validity of which has not been denied.
"In order to come within the provision of the Constitution of
the United States which declares that no state shall pass any law
impairing the obligation of contracts, not only must the obligation
of a contract have been impaired, but it must have been impaired by
some act of the legislative power of the state, and not by a
decision of its judicial department only. The appellate
jurisdiction of this Court, upon writ of error to a state court, on
the ground that the obligation of a contract has been impaired, can
be invoked only when an act of the legislature alleged to be
repugnant to the Constitution of the United States has been decided
by the state court to be valid, and not
Page 234 U. S. 625
when an act admitted to be valid had been misconstrued by the
court."
Central Land Company v. Laidley, 159 U.
S. 103,
159 U. S. 109;
see also Bacon v. Texas, 163 U. S. 207,
163 U. S. 220;
Loeb v. Columbia Township, 179
U. S. 479,
179 U. S. 493;
National Mutual &c. Assn. v. Brahan, 193 U.
S. 635. If, therefore, a mere change of decision by a
state court in respect of the meaning and scope of a state statute,
not claimed to be invalid or repugnant to the Constitution of the
United States, does not constitute an impairment of a contract
within the meaning of the contract clause of the Constitution, it
must follow that a case otherwise within the jurisdiction of a
district court of the United States, and reviewable in the circuit
court of appeals, is not a case which may come direct to this Court
merely because, in the course of the case, a question arises
touching the effect of such a change of decision upon the rights of
the parties.
Courts of the United States are courts of independent
jurisdiction, and when a question arises in a United States court
as to the effect of a change in decision which detrimentally
affects contract rights and obligations entered into before such
change, such rights and obligations should be determined by the law
as judicially determined at the time the rights accrued. In every
such case, the federal courts, while leaning to the view of the
state court as to the validity or interpretation of a law of the
state, will exercise an independent judgment, and will not
necessarily follow state judicial decisions rendered subsequently.
Burgess v. Seligman, 107 U. S. 20,
107 U. S. 33;
Loeb v. Columbia Township, supra.
Under the settled rule, it was the duty of the court below, when
confronted with the question whether appellant had acquired a lien
under the Act of 1883, to determine for itself the meaning and
scope of that act, and to declare the rights of that company under
the law as it had been judicially determined. The decisions to this
effect are
Page 234 U. S. 626
numerous. Some of them are:
Folsom v. Ninety-six,
159 U. S. 611,
159 U. S. 624;
Loeb v. Columbia Township supra; Jones v. Great Southern Hotel
Company, 86 F. 370, affirmed by this Court in
183 U. S. 193
U.S. 532. If the district court erred in following the later
decision of the Indiana court, the error could have been corrected
by the circuit court of appeals, and the judgment of the latter
court might be reviewed by this Court under a writ of certiorari.
The cases of
Folsom v. Township Ninety-six and
Jones
v. Great Southern Hotel Company, supra, reached this Court
through the circuit court of appeals, one by a certified request
for an instruction and the other by certiorari.
The right to bring the case to this Court from the district
court by a direct appeal depended upon the question whether the
decree denying to appellant the lien it claimed under the law of
Indiana "necessarily and directly involved the construction or
application of the Constitution of the United States."
Empire
&c. Mining Co. v. Hanley, 205 U.
S. 225,
205 U. S. 232.
The change of decision in respect of the scope of the Indiana
statutes was not a law of the state impairing the obligation of the
contract, which is the only basis for the claim that the case is
one which involved the construction or application of the
Constitution of the United States. We are therefore precluded from
an examination of the merits of the case,
Cosmopolitan Min. Co.
v. Walsh, 193 U. S. 460;
Knop v. Monongahela &c. Co., 211 U.
S. 485, and the appeal must be dismissed.