Trustees of Dartmouth College v. Woodward
17 U.S. (4 Wheat.) 518 (1819)
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Rule of Law:
A charter granted by a state to a private corporation is a contract protected by the Contracts Clause of the U.S. Constitution (Article I, Section 10). A state legislature may not unilaterally pass laws that alter the charter's fundamental terms without the corporation's consent, as such laws would impair the obligation of the contract.
Facts:
- In 1754, Reverend Eleazer Wheelock founded a charity school for Native Americans on his private estate, funded by private donations.
- To expand the school, Wheelock solicited further contributions, and in 1769, he applied to King George III of Great Britain for a corporate charter.
- The King granted a charter establishing Dartmouth College in New Hampshire as a private eleemosynary (charitable) corporation.
- The charter established a board of twelve self-perpetuating trustees responsible for governing the college, managing its property, and appointing their own successors.
- In 1816, the New Hampshire legislature passed a series of acts to amend the 1769 charter.
- These acts changed the institution's name to Dartmouth University, increased the number of trustees from twelve to twenty-one, and gave the New Hampshire governor appointment power over the new seats.
- The acts also created a new 25-member Board of Overseers, appointed by the governor, with the power to veto the trustees' actions regarding governance and appointments.
- The original Trustees of Dartmouth College refused to accept the amendments and sued William H. Woodward, the college's secretary who had sided with the new state-created entity, to recover the college's corporate seal, records, and property.
Procedural Posture:
- The Trustees of Dartmouth College sued William H. Woodward in a New Hampshire state court of first instance to recover corporate property.
- The parties agreed to a special verdict, asking the court to rule on the validity of the New Hampshire legislative acts.
- The Superior Court of Judicature of New Hampshire, the state's highest court, ruled in favor of Woodward, upholding the acts.
- The Trustees of Dartmouth College (plaintiffs in error) appealed to the Supreme Court of the United States on a writ of error.
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Issue:
Does a state legislature violate the Contracts Clause of the U.S. Constitution when it amends a private corporation's charter by substantially altering its governance structure without the corporation's consent?
Opinions:
Majority - Marshall, C.J.
Yes. The state laws impair the obligation of the college's charter, which is a constitutionally protected contract. The 1769 charter was a contract between the donors, the trustees, and the Crown, whose rights and obligations were assumed by New Hampshire after the Revolution. This contract was made for valuable consideration—the funds donated and the duties undertaken by the trustees. Dartmouth College is a private eleemosynary institution, not a public civil corporation subject to legislative control; its private funding and purpose of administering a private charity define its character, not its public-serving educational mission. The New Hampshire acts fundamentally altered this contract by transferring the power of governance from the trustees, as designated by the founder, to the state government. This substitution of the will of the state for the will of the donors is a direct impairment of the contract's obligations, violating Article I, Section 10 of the Constitution.
Concurring - Washington, J.
Yes. A charter of incorporation is a contract, and the New Hampshire laws impair it. A critical distinction exists between public corporations (e.g., cities), which are created for public governance and can be modified by the legislature, and private corporations (e.g., colleges), which are founded by private benefactors for private charity. Dartmouth College is a private corporation, and its charter's terms, flowing from the property rights of the founder, are not subject to legislative control. Any law that materially changes the terms of such a contract, such as by altering the number of trustees or the management structure, impairs its obligation.
Concurring - Story, J.
Yes. The charter is a contract that the state legislature has unconstitutionally impaired. A corporation founded by private benefactors is a private corporation, even if its purpose is general charity like education. The charter granted by the Crown was an executed contract, irrevocable and protected. The franchises it bestowed—the right to exist as a corporation, to govern itself, and to manage its property—are vested property rights. The New Hampshire acts create a new corporation in substance, transferring the old corporation's property and franchises to it and subjecting it to a new form of control, all without the original corporation's consent. This is a clear violation of the charter's obligations and the vested rights of the trustees.
Dissenting - Duvall, J.
Justice Duvall dissented without a written opinion.
Analysis:
This landmark decision dramatically expanded the scope of the Contracts Clause, establishing that corporate charters are contracts protected from state legislative impairment. By shielding private corporations from arbitrary state interference, the ruling provided legal certainty that was critical for encouraging economic investment and the growth of private enterprise in the 19th century. The case also firmly established the legal distinction between private corporations, which enjoy significant autonomy, and public corporations, which are subject to greater state control, a foundational principle of modern corporate law.
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