GELPCKE v. DUBUQUE
Iowa's constitution limited the amount of state debt and forbade the state to own stock in private corporations. But Iowa was enamoured with railroading. The legislature authorized municipal governments to issue bearer bonds to aid railroad construction throughout the state. The idea was that permitting municipalities to do what the state government could not do would circumvent the state constitutional limitation. Railroad prosperity did not materialize and the taxpayers were taxed to pay off the bonds which had been used to buy railroad stock. Bondholders filed suit in federal court to recover interest on the bonds.
Is the obligation to pay a debt a contract beyond impairment by any state?
The Court sided with the bondholders, holding that when contracts are made on the basis of trust in past judicial decisions those contracts could not be impaired by any subsequent construction of the law. "We shall never immolate truth, justice, and the law, because a state tribunal has erected the altar and decreed the sacrifice."