Caseflicks

Supreme Court of the United States • 1819

Trustees of Dartmouth College v. Woodward

17 U.S. 518

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Takeaway

In short, this case held that a state cannot unilaterally alter a private corporation’s charter when the charter is a protected contract, establishing a foundational rule of corporate charter protection under the Contract Clause.

Background

Dartmouth College was incorporated by a 1769 royal charter. The charter created a twelve-member board of trustees, authorized the trustees to fill vacancies in their own body, and gave them control over the College’s property, officers, curriculum, and internal governance. The College had been established through the efforts of Reverend Eleazer Wheelock and supported by private charitable donations intended to advance education and religion.

In 1816, New Hampshire enacted laws that purported to amend the charter. The laws enlarged the board of trustees to twenty-one, vested appointments of new trustees in state officials, renamed the institution Dartmouth University, and created a state-appointed board of overseers with authority to approve or reject major trustee decisions. A majority of the original trustees rejected the changes. They brought an action of trover against William H. Woodward, who possessed the College’s seal, records, and other corporate property under the new state regime.

A New Hampshire court entered judgment for Woodward on a special verdict, treating the 1816 statutes as valid. The trustees sought review in the Supreme Court, arguing that the statutes violated the federal Constitution’s Contract Clause, which prohibits states from passing laws impairing the obligation of contracts.

Issues

Issue #1

Whether Dartmouth College’s 1769 charter was a contract protected by the Contract Clause of the United States Constitution.

Holding

Yes. The charter was a contract concerning property and valuable legal rights, and it was protected from impairment by New Hampshire legislation.

Reasoning

The Court accepted that the Contract Clause does not freeze every civil or political arrangement against legislative change. It generally protects contracts concerning property or other objects of value that create rights enforceable in court, rather than governmental offices or institutions established as instruments of state administration. The decisive question, therefore, was whether Dartmouth College was a private institution created through a protected contractual grant or a public governmental institution subject to legislative revision.

reasoning

Dartmouth was a private eleemosynary, or charitable, corporation. Its funds came from private donors, not the State; its purpose was to carry out the donors’ charitable aims of religious and educational instruction; and its trustees were not public officers exercising sovereign power. The fact that education benefits the public did not transform privately donated property into public property or make the College a governmental agency.

reasoning

In granting the charter, the Crown created a perpetual legal entity capable of receiving, holding, and applying charitable gifts according to the founders’ plan. The charter was accepted, and property was conveyed to the corporation in reliance on it. That transaction contained the essential features of a contract: the Crown granted corporate rights and capacities, while the founder, trustees, and donors committed property and services to the charitable institution.

reasoning

The trustees could invoke the Contract Clause even though they did not personally own the donated funds for private profit. The corporation represented the donors and held both the legal and equitable interests needed to administer their charitable trust. The donors’ stipulated consideration was the continuing application of their gifts through the governing structure they selected; the trustees were the legal representatives charged with preserving that arrangement.

reasoning

The Revolution did not erase the charter or the obligations attached to it. New Hampshire succeeded to the Crown’s governmental powers and duties, but vested property rights and existing contractual obligations survived the change in sovereignty. Thus, the State inherited the obligation not to disturb the charter in a manner forbidden by the federal Constitution.

Issue #2

Whether New Hampshire’s 1816 statutes impaired the obligation of Dartmouth College’s charter.

Holding

Yes. The statutes substantially altered the charter’s governing structure and transferred control of the College from the trustees chosen under the charter to the State, thereby impairing the charter’s obligation.

Reasoning

The charter fixed the College’s government in a board of twelve trustees with authority to select successors, manage the College’s assets, appoint and remove officers, determine salaries, and direct education. The founders did not merely require that the funds be spent generally on education; they selected a continuing corporate structure intended to secure the use of those funds according to their design.

reasoning

The 1816 statutes changed that structure at its core. They increased the number of trustees, gave state executive officials the power to appoint additional trustees, established a board of overseers appointed largely by the State, and gave that board supervisory and veto authority over important trustee decisions. In practical effect, the statutes substituted the will of New Hampshire for the will of the founders in governing the College.

reasoning

These changes were not minor adjustments to corporate administration. They reorganized the institution into a state-controlled university, deprived the original trustees of their exclusive power to perpetuate the board, and placed the management and application of privately donated funds under governmental control. Even if the legislature believed the changes would improve the College, it could not impose them without the corporation’s assent because the charter reserved no legislative power to make them.

reasoning

The Court therefore held the 1816 acts repugnant to the Contract Clause. It reversed the New Hampshire judgment and directed judgment for the trustees, including recovery of the corporate property and the damages found by the special verdict.

Concurrences

Justice Washington

Reasoning

Justice Washington agreed that the judgment should be reversed, but separately framed the case through the law of contracts and corporate franchises. He first emphasized that the Court’s appellate jurisdiction extended only to the federal Contract Clause question, not to any claim that the statutes violated the New Hampshire Constitution.

reasoning

He treated a charter of incorporation as a grant and therefore as a contract. In his account, the government grants a franchise—perpetual succession, the capacity to hold property, and corporate powers—to the corporators or trustees. The grant carries a corresponding obligation that the government will not reassume or impair the granted franchise.

reasoning

Washington drew a sharp distinction between public corporations, such as towns and cities established for public government, and private charitable corporations founded and endowed by private persons. Legislatures may generally alter public governmental corporations, subject to limits concerning property held for beneficiaries. But Dartmouth was a private charitable corporation, governed by the founder’s plan and protected from legislative alteration without its consent.

reasoning

The New Hampshire laws impaired the charter because they changed the College’s name, trustees, governing bodies, control of property, and institutional purposes. Washington viewed the statutes as effectively abolishing the original corporation and creating a new one, which the State could not do consistently with the Contract Clause.

Justice Story

Reasoning

Justice Story concurred in the result but supplied an extensive common-law account of corporate and charitable institutions. He explained that a corporation is a distinct artificial legal person with perpetual succession, property, and franchises. A college privately founded and endowed for learning and charity is a private eleemosynary corporation even when its work benefits the public at large.

reasoning

Story stressed the common-law doctrine of visitation. A charitable founder ordinarily has a visitatorial power to ensure that the charity follows its purposes, but the founder may assign that authority to trustees. Here, the charter vested the College’s government and visitatorial authority in the trustees. The State could regulate the corporation under general law and courts could remedy fraud or abuse of trust, but the legislature could not simply take over its governance.

reasoning

He also offered several grounds for finding a protected contract. The founder relinquished control of the charity school and its funds, the trustees accepted duties in administering the charity, and each later donor gave property in reliance on the charter’s assurance that the corporation would administer the gift under its stated terms. In any event, an executed grant of a corporate franchise was itself a contract: once accepted, it could not be revoked merely because the grant had charitable purposes.

reasoning

For Story, the statutes made unmistakably essential changes: they enlarged the board, shifted appointment authority to the governor and council, created an overseer board with a veto, and converted the College into a university under a new governing arrangement. Because no power to make such changes had been reserved in the charter, the statutes impaired its contractual obligations.

Dissents

Justice Duvall

Reasoning

Justice Duvall dissented, but the reported decision provides no written opinion or explanation of his reasoning. The record therefore does not identify a specific legal ground for his disagreement with the Court’s conclusion that the New Hampshire laws violated the Contract Clause.