GELPCKE v. DUBUQUE 1 Wallace 175 (1864)

In his introduction to the 1864 reports of the Supreme Court, John Wallace, the Supreme Court reporter, remarked that in Gelpcke the Court imposed "high moral duties … upon a whole community seeking apparently to violate them." The community was Dubuque, Iowa, which attempted to enhance its property values by issuing municipal bonds, backed by local taxes, to promote railroad development that would put Dubuque on the map. Dubuque acted on authority granted by the Iowa legislature, although the state constitution prevented the legislature from investing in private railroads, as Dubuque did, and from increasing the state's indebtedness as much as the legislature authorized the city to increase its indebtedness. Responding to railroad shenanigans and the objections of taxpayers, Dubuque repudiated its debt, and the Iowa Supreme Court held that the legislature had violated the state constitution when authorizing Dubuque to issue the bonds.

Bondholders, seeking federal relief against default, persuaded the Supreme Court to rule that a contract once valid under state law cannot have its validity or obligation impaired by the subsequent action of a state court. Justice noah h. swayne, speaking for all but Justice samuel f. miller, who dissented, refused to accept the state supreme court's ruling on a matter of state constitutional law. Swayne took the high ground by declaring, "We shall never immolate truth, justice, and the law, because a state tribunal has erected the altar and decreed the sacrifice." However, the ground of decision was not clear, and the Supreme Court construed a state judicial decision as a "law," contrary to conventional usage.

Justice oliver wendell holmes later remarked that the decision in Gelpcke took the Court a good while to explain. In fact, the explanation subsequently provided by the Court was that the state judicial decision had violated the contract clause. However construed, Gelpcke was a means of the Supreme Court's expansion of its jurisdiction, either under the doctrine of swift v. tyson (1842) or under the contract clause, which had previously applied only to statutes, not judicial decisions. And the Court established a basis for curbing municipal repudiation of debts and protecting municipal bondholders.

Leonard W. Levy
(1986)