Dartmouth College v. Woodward

Dartmouth College v. Woodward, 4 Wheat. (17 U.S.) 518 (1819), argued 10–12 Mar. 1818, decided 2 Feb. 1819 by vote of 5 to 1; Marshall for the Court, Washington and Story concurring separately, Duvall in dissent without opinion. In 1816, New Hampshire's newly elected Jeffersonian‐Republican governor, William Plumer, and the Republican‐dominated legislature determined to transform Dartmouth College by ousting what they regarded as a self‐perpetuating Federalist hierarchy among the college's trustees and replacing it with trustees appointed through the political process. They therefore enacted statutes that revised the royal charter of 1769 that created the college, changing the institution to a “University,” altering the procedures of internal control, and imposing external, public restraints on the governance of the school. The college's extant trustees determined to contest the constitutionality of this action.

When the case reached the United States Supreme Court for argument in 1818, the college's lawyers, led by Daniel Webster, directed their arguments to the meaning and impact of the Contract Clause of the Constitution (Article I, section 10), contending that the New Hampshire legislature, in amending the original charter of the college, had passed a law “impairing the Obligation of Contracts.” Webster argued that in effect the state legislature had “take[n] away from one … rights, property, and franchises, and give[n] them to another” (p. 558). He asserted that the Contract Clause should be interposed as a constitutional barrier to state activity of this kind.

Chief Justice John Marshall responded in his characteristically facile manner. Though the Court had previously decided Contract Clause cases, Marshall, for the first time, extended the protection of the Contract Clause to a corporate charter. Since the college insisted that it was entitled to constitutional protection from the legislative acts, Marshall had to analyze the relationship between the Contract Clause and the legal status of the college. He found that the college charter was a contract and that the college under the charter was a private and not a public corporation. This last point was important because the New Hampshire state courts had construed the college to be a public, and not a private entity, and therefore subject to the state's regulatory power. If the college were held to be private, the state could not interfere with its vested rights, particularly its property rights of acquisition, management, or control, because the Contract Clause, according to Marshall, was directed at acts affecting private property. The Contract Clause prevented the state from impairing the obligations of the original contract between the college and the state (as successor to the colonial government under the original royal grant). When a charter or an act of incorporation is found to be a contract between a state and a private party, it is protected from legislative interference. Only Justice Joseph Story's concurring opinion modified the sweep of Marshall's statements, suggesting that legislatures could retain certain prerogatives by including “reservation” clauses in corporate charters that allowed legislatures to alter or amend the charter.

By construing the Contract Clause as a means of protecting corporate charters from state interventions, Marshall derived a significant constitutional limitation on state authority. As a result, various forms of private economic and social activity would enjoy security from state regulatory policy. Marshall thus encouraged, through constitutional sanction, the emergence of the relatively unregulated private, autonomous economic actor as the major participant in a liberal political economy that served the commonwealth by promoting enlightened self‐interest.

See also Private Corporation Charters; Property Rights.

Bibliography

G. Edward White , History of the Supreme Court of the United States, vols. 3–4, The Marshall Court and Cultural Change, 1815–35 (1988).

Alfred S. Konefsky