215 U.S. HOLMES, WHITE and MCKENNA, JJ., dissenting.

that that was all that the state courts did. But as has been pointed out by a recent accomplished and able writer, that fiction had to be abandoned and was abandoned when this court came to decide the municipal bond cases, beginning with Gelpcke v. Dubuque, 1 Wall. 175. Gray, Nature and Sources of the Law, §§ 535-550. In those cases the court followed Chief Justice Taney in Ohio Life Ins. & Trust Co. v. Debolt, 16 How. 416, in recognizing the fact that decisions of state courts of last resort make law for the State. The principle is that a change of judicial decision after a contract has been made on the faith of an earlier one the other way is a change of the law.

The cases of the class to which I refer have not stood on the ground that this court agreed with the first decision, but on the ground that the state decision made the law for the State, and therefore should be given only a prospective operation when contracts had been entered into under the law as earlier declared. Douglass v. Pike County, 101 U. S. 677. Green County v. Conness, 109 U. S. 104. In various instances this court has changed its decision or rendered different decisions on similar facts arising in different States in order to conform to what is recognized as the local law. Fairfield v. Gallatin County, 100 U. S. 47.

Whether Swift v. Tyson can be reconciled with Gelpcke v. Dubuque, I do not care to enquire. I assume both cases to represent settled doctrines, whether reconcilable or not. But the moment you leave those principles which it is desirable to make uniform throughout the United States and which the decisions of this court tend to make uniform, obviously it is most undesirable for the courts of the United States to appear as interjecting an occasional arbitrary exception to a rule that in every other case prevails. I never yet have heard a statement of any reason justifying the power, and I find it hard to imagine one. The rule in Gelpcke v. Dubuque gives no help when the contract or grant in question has not been made on the faith of a previous declaration of

HOLMES, WHITE and MCKENNA, JJ., dissenting.

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law. I know of no authority in this court to say that in general state decisions shall make law only for the future. Judicial decisions have had retrospective operation for near a thousand years. There were enough difficulties in the way, even in cases like Gelpcke v. Dubuque, but in them there was a suggestion or smack of constitutional right. Here there is nothing of that sort. It is said that we must exercise our independent judgment—but as to what? Surely as to the law of the States. Whence does that law issue? Certainly not from us. But it does issue and has been recognized by this court as issuing from the state courts as well as from the state legislatures. When we know what the source of the law has said that it shall be, our authority is at an end. The law of a State does not become something outside of the state court and independent of it by being called the common law. Whatever it is called it is the law as declared by the state judges and nothing else.

If, as I believe, my reasoning is correct, it justifies our stopping when we come to a kind of case that by nature and necessity is peculiarly local, and one as to which the latest intimations and indeed decisions of this court are wholly in accord with what I think to be sound law. I refer to the language of the court speaking through Mr. Justice Miller in Brine v. Hartford Fire Insurance Co., 96 U. S. 627. To administer a different law (p. 635) is "to introduce into the jurisprudence of the State of Illinois the discordant elements of a substantial right which is protected in one set of courts and denied in the other, with no superior to decide which is right." I refer also to the unanimous decision in East Central Eureka Mining Co. v. Central Eureka Mining Co., 204 U. S. 266, 272. It is admitted that we are bound by a settled course of decisions, irrespective of contract, because they make the law. I see no reason why we are less bound by a single one.

MR. JUSTICE WHITE and MR. JUSTICE MCKENNA concur in this dissent.

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Argument for Plaintiffs in Error.

HENLEY v. MYERS, RECEIVER OF CONSOLIDATED BARB WIRE COMPANY.

ERROR TO THE SUPREME COURT OF THE STATE OF KANSAS.

No. 72. Submitted December 10, 1909.-Decided January 3, 1910.

The State creating a corporation may determine how transfers of its stock shall be made and evidenced, and a change in the law imposing no restraint upon the transfer, but only affecting the method of procedure, does not impair the obligation of the charter contract within the meaning of the contract clause of the Federal Constitution; and so held that the corporation law of Kansas of 1899 is not void as to stockholders who purchased stock prior thereto and sold it thereafter, because it required a statement of the transfer of stock to be filed in the office of the Secretary of State in order to relieve the transferor of stockholder's liability, the act not depriving him of any defense that might be made at the time the stock was acquired.

Methods of procedure in actions on contract that do not affect substantial rights of parties are within the control of the State, and the obligation of a stockholder's contract is not impaired within the meaning of the contract clause of the Federal Constitution by substituting for individual actions for statutory liability a suit in equity by the receiver of the insolvent corporation; and so held as to the corporation law of Kansas of 1899 amending prior laws to that effect.

In becoming a stockholder of a corporation one does not acquire as against the State a vested right in any particular mode of procedure for enforcement of liability, but it is assumed that parties make their contracts with reference to the existence of the power in the State to regulate such procedure.

THE facts are stated in the opinion.

Mr. W. W. Nevison, Mr. George J. Barker, Mr. A. C. Mitchell and Mr. S. D. Bishop for plaintiffs in error:

The liability of stockholders for an additional amount

Argument for Plaintiffs in Error.

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equal to the stock owned by them, although statutory, is contractual in its nature, and therefore within the protection of Art. I, 10, of the Federal Constitution. Whitman v. Oxford National Bank, 176 U. S. 559; Woodworth v. Bowles, 61 Kansas, 569. And see also Howell v. Manglesdorf, 33 Kansas, 194, 199; Cooper v. Ives, 62 Kansas, 395, 401; Pine v. Bank, 63 Kansas, 462, 469; Stocker v. Davidson, 74 Kansas, 214, 215; Anglo-American Co. v. Lombard, 132 Fed. Rep. 721, 729.

So much of § 12, ch. 10, Laws of Kansas, 1898, as provides that no transfer of stock in a corporation shall be legal and binding until a statement of the change of ownership thereof, made by the president and secretary of such corporation, is filed with the Secretary of State, is retroactive, impairs the obligation of the contracts of those who owned stock at the time of its enactment, and is therefore unconstitutional and void.

As to the valid effect of a transfer of stock see Van Demark v. Barons, 52 Kansas, 779; Merrill v. Meade, 6 Kans. App. 620; Parkinson v. Sugar Co., 8 Kans. App. 79; Plumb v. Bank, 48 Kansas, 484; Bank v. Wulfekuhler, 19 Kansas, 60, 65; Hentig v. James, 22 Kansas, 326; 10 Cyc. 716; 19 Am. & Eng. Ency. of Law, 881.

It was not within the power of the legislature to alter this right and effect of transfer. Edwards v. Kearzey, 96 U. S. 595; 3 Thompson on Corp. § 2183; Hope Ins. Co. v. Flynn, 38 Missouri, 483; Dartmouth College Case, 4 Wheat. 518; Walker v. Whitehead, 16 Wall. 314; Goodale v. Fennell, 27 Ohio St. 426; Intiso v. Loan Assn., 68 N. J. L. 588.

The portions of §§ 14 and 15 of ch. 10, Laws of Kansas, 1898, which substituted for individual actions against the stockholders of corporations upon their stockholders' liability, a suit in equity by a receiver to be appointed after a judgment against the corporation, are retroactive, impair the obligation of the contracts of not only the creditors, but the stockholders of a corporation, and are therefore unconstitutional

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Argument for Plaintiffs in Error.

and void. United States v. Quincy, 4 Wall. 535, 550; Kendall v. Fader, 99 Ill. App. 104; aff'd, 199 Illinois, 294; 3 Thompson on Corp., § 3035; Evans v. Nellis, 101 Fed. Rep. 920; Pusey & Jones v. Love, 66 Atl. Rep. 1013; Harrison v. Remington Paper Co., 140 Fed. Rep. 385; Myers v. Fruit Co., 139 Fed. Rep. 111; Converse v. Etna Bank, 79 Connecticut, 163; Savings Bank v. Schranck, 97 Wisconsin, 250; Dexler v. Edmonds, 89 Fed. Rep. 467; Western Bank v. New York, 96 Fed. Rep. 70.

The law of Kansas enacted January 11, 1899, repealing § 32, ch. 23, General Statutes of Kansas of 1868, and §§ 44 and 46 of ch. 23, General Statutes of Kansas of 1868, and enacting §§ 14 and 15 of ch. 10, Laws of 1898, is unconstitutional and void as it impairs the obligations of the contracts of both the creditor and stockholder.

Section 15, ch. 10, Laws of 1898, is unconstitutional and void as it impairs the obligation of the contract of the stockholder by making his additional liability an asset of the corporation and diverting the funds so collected to sources which were not contemplated by § 2, Art. XII, of the constitution of the State.

This court will not reverse its own decisions in order to follow the courts of a State in construing the constitution of that State, and it would have to do so in order to affirm this judgment. Rowan v. Runnels, 5 How. 134; Pease v. Peck, 18 How. 595; Roberts v. Bolles, 101 U. S. 119; Mohr v. Manierre, 101 U. S. 417; Butz v. Muscatine, 8 Wall. 575; Shelby County v. Union Bank, 161 U. S. 149; M. & O. R. R. v. Tennessee, 153 U. S. 486. See also Wright v. Nagle, 101 U. S. 791; Gibson v. Lyon, 115 U. S. 439; Furman v. Nichol, 8 Wall. 44; C., B. & Q. R. Co. v. Nebraska, 170 U. S. 57; New Orleans Waterworks v. Sugar Refining Co., 125 U. S. 18; Burgess v. Seligman, 107 U. S. 20; Stanley County v. Coler, 190 U. S. 437; Bourbon County v. Block, 99 U. S. 686; Great Southern Hotel Co. v. Jones, 193 U. S. 544; Carroll County v. Smith, 111 U. S. 556; Anderson v. Santa Ana, 116 U. S. 356;