Dartmouth College v. Woodward (17 U. S. 518, 1819)
The Issue- Under the Constitution, can a state legislature change the charter of a college?
Facts and Background of this case
In 1769 King George III of Great Britain granted a charter to Dartmouth College. This document spelled out the purpose of the school, set up the structure to govern it, and gave land to the college.
In 1816, over thirty years after the conclusion of the American Revolution, the legislature of New Hampshire attempted to alter Dartmouth's charter in order to reinstate the College's deposed president, placing the ability to appoint positions in the hands of the governor, adding new members to the board of trustees, and creating a state board of visitors with veto power over trustee decisions. This effectively converted the school from a private to a public institution. The College's book of records, corporate seal, and other corporate property were removed. The trustees of the College objected and sought to have the actions of the legislature declared unconstitutional.
The trustees retained Dartmouth alumnus Daniel Webster, a New Hampshire native who would later become a U.S. Senator for Massachusetts and Secretary under President Millard Fillmore. Webster argued the college's case against William H. Woodward, the state-approved secretary of the new board of trustees. Webster's speech in support of Dartmouth (which he described as "a small college," adding, "and yet there are those who love it") was so moving that it apparently helped convince Chief Justice John Marshall, also reportedly bringing tears to Webster's eyes.
The Judgment of the case:
The decision, handed down on February 2, 1819, ruled in favor of the College and invalidated the act of the New Hampshire Legislature, which in turn allowed Dartmouth to continue as a private institution and take back its buildings, seal, and charter. The majority opinion of the court was written by John Marshall. The opinion reaffirmed Marshall's belief in the sanctity of a contract.
The Court ruled that the College's corporate charter qualified as a contract between private parties, the King and the trustees, with which the legislature could not interfere. Even though the United States are no longer royal colonies, the contract is still valid because the Constitution says that a state cannot pass laws to impair a contract. The fact that the government had commissioned the charter did not transform the school into a civil institution. Chief Justice Marshall's opinion emphasized that the term "contract" referred to transactions involving individual property rights, not to "the political relations between the government and its citizens.
Significance:
The decision was not without precedent. Earlier the Court had invalidated a state act in Fletcher v. Peck, 10 U.S. 87 (1810), concluding that contracts, no matter how they were procured (in the case of Fletcher v. Peck, a land contract had been illegally obtained), cannot be invalidated by state legislation. Thus, the court, though working in an early era, was treading on Dartmouth. Fletcher was not a popular decision at the time, and a public outcry ensued. Thomas Jefferson's earlier commiseration with New Hampshire Governor William Plummer stated essentially that the earth belongs to the living. Popular opinion influenced some state courts and legislatures to declare that state governments had an absolute right to amend or repeal a corporate charter. The courts, however, have imposed limitations to this.
After the Dartmouth decision, many states wanted more control so they passed laws or constitutional amendments giving themselves the general right to alter or revoke at will, which the courts found to be a valid reservation. The courts have established, however, that the alteration or revocation of private charters or laws authorizing private charters must be reasonable and cannot cause harm to the members (founders, stockholders, and the like).
The traditional view holds that this case is one of the most important Supreme Court rulings, strengthening the Contract Clause and limiting the power of the States to interfere with private charters, including those of commercial enterprises.