Chicot Cty. Drainage Dist. v. Baxter State Bank - 308 U.S. 371, 60 S. Ct. 317 (1940)

Rule:

The actual existence of a statute, prior to such a determination that an act of Congress is unconstitutional, is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects: with respect to particular relations, individual and corporate, and particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination.

Facts:

Petitioner, a county drainage district, defaulted on bonds it had issued, 14 of which were being held by respondents. Pursuant to the Act of May 24 (Act), 1934, 48 Stat. 798, which provided for municipal debt readjustments, petitioner obtained a decree from the district court readjusting petitioner's bond obligations and barring holders of old bonds from recovery unless they presented their bonds to the court for readjustment within one year of the decree. Although respondents had notice of the decree, they did not present their bonds. When the Act was declared unconstitutional, respondents filed suit on the old bonds and received judgment in their favor, which was affirmed on appeal. Certiorari was granted. 

Issue:

Was the judgment in favor of the respondents proper? 

Answer:

No.

Conclusion:

On certiorari, the court held that since the Act was declared unconstitutional after the decree cancelling the bonds was issued, the decree was still valid. The court held that since respondents failed to challenge the statute's validity, which went to the court's jurisdiction in the original action, respondents could not attack it collaterally in the current action. The court reversed the judgment and remanded the case with instructions to dismiss the complaint.