Fertilizing Co. v. Hyde Park
24 L. Ed. 1036, 97 U.S. 659, 1878 U.S. LEXIS 1495 (1878)
Rule of Law:
A corporate charter granted by a state does not create a contract that exempts the corporation from the state's inherent police power to enact regulations for the protection of public health, safety, and comfort, as a state legislature cannot bargain away its police power.
Facts:
- In 1867, the Illinois legislature granted a 50-year charter to the Northwestern Fertilizing Company to establish works in Cook County, south of a specific township line, for the purpose of converting dead animals into fertilizer.
- The company invested $250,000 to establish its works in a then-swampy and sparsely populated area.
- The location where the company built its works later became part of the incorporated village of Hyde Park.
- The company's operations, which included transporting offal from Chicago through Hyde Park to its works, produced an intolerable stench and were determined to be an 'unendurable nuisance' to the residents who later moved into the area.
- In 1869, the Illinois legislature revised the charter of the village of Hyde Park, granting it extensive police powers to define and abate nuisances, but included a proviso preventing the exercise of these powers against the company for two years.
- After the two-year period expired, the village of Hyde Park passed an ordinance prohibiting the transportation of offal through the village and the operation of any offensive business within its limits.
- Village authorities began enforcing the ordinance by arresting and fining the company's employees who were transporting the animal matter.
Procedural Posture:
- The Northwestern Fertilizing Company filed a bill in an Illinois state court of first instance to enjoin the Village of Hyde Park from prosecuting its employees under a municipal ordinance.
- The case was appealed to the Supreme Court of the State of Illinois, the state's highest court.
- The Supreme Court of Illinois dismissed the company's bill, ruling in favor of the Village of Hyde Park.
- The Northwestern Fertilizing Company, as plaintiff in error, sued out a writ of error to the Supreme Court of the United States to review the judgment of the Illinois Supreme Court.
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Issue:
Does a state-granted corporate charter, authorizing a company to conduct business in a specified location for a term of years, constitute a contract that is impaired by a subsequent municipal ordinance, enacted under the state's police power, that declares the company's business a nuisance and prohibits its operation?
Opinions:
Majority - Mr. Justice Swayne
No, a state-granted corporate charter is not a contract that is impaired by a subsequent municipal ordinance exercising the state's police power. The state's police power to protect the public health and safety is an inalienable authority that cannot be contracted away by the legislature. While the company's charter was a sufficient license to operate until revoked, it cannot be regarded as a contract guaranteeing exemption from future police power regulation, especially when the business becomes a serious nuisance due to population growth.
Dissenting - Mr. Justice Strong
Yes, the company's charter constitutes a contract that is unconstitutionally impaired by the ordinance. The state legislature, fully aware of the nature of the business, expressly authorized the company to maintain a local nuisance to solve the greater public nuisance of animal waste in Chicago. This grant, made in exchange for the company's significant investment, is a binding contract, and the state cannot use its police power to destroy the essential rights conferred by that contract without providing compensation.
Concurring - Mr. Justice Miller
No, the ordinance does not impair the contract, but for reasons different from the majority. A state can, in fact, contract away its police power for a valid consideration. However, the charter in this case did not grant the company the right to operate at a specific, unchangeable location within the large designated territory. The village's ordinance is a valid police regulation concerning the precise locality of the works and does not destroy the company's overall contractual right to operate somewhere within the authorized area south of the designated line.
Analysis:
This decision firmly establishes the principle that the state's police power is a fundamental attribute of sovereignty that generally cannot be surrendered or contracted away. It clarifies that corporate charters, while having the characteristics of a contract under the Dartmouth College doctrine, are granted subject to the state's reserved power to protect public health and safety. The ruling significantly limits the ability of corporations to claim vested contract rights as a shield against subsequent, reasonable environmental and public health regulations, setting a precedent that public welfare can override private economic interests established by charter.
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