Dartmouth College v. Woodward
"Dartmouth College v. Woodward" was a landmark Supreme Court case decided in 1819 that addressed the balance of power between state legislatures and private corporations. The case arose when the New Hampshire legislature sought to alter Dartmouth College's colonial charter, which the college's Federalist trustees opposed. They argued that the changes represented an unconstitutional impairment of their contractual rights. The Supreme Court, led by Chief Justice John Marshall, ruled in a 5-1 decision that the college was a private corporation and that its charter was a contract protected under the Contracts Clause of the Constitution. This ruling established that states could not interfere with private charters, thereby strengthening the legal protections for private property rights and promoting business interests. Additionally, the court acknowledged that while legislatures could include reservation clauses to allow for future modifications, the Dartmouth College decision significantly limited state control over private entities. This ruling had lasting implications for the relationship between state governments and private corporations in the United States.
Dartmouth College v. Woodward
Date: February 2, 1819
Citation: 4 Wheat. (17 U.S.) 518
Issues: Contracts clause; property rights
Significance: By deciding that a state charter of a private institution was protected by the contracts clause of the Constitution, the Supreme Court enhanced protection of corporate property from interference by the states.
Early in the nineteenth century, many Republicans wanted the states to exercise more controls over a new form of economic concentration the corporation. Forces favorable to business usually desired fewer controls. Although privately owned and managed, corporations were created by legislative charters. In 1816 the Republican-dominated legislature of New Hampshire enacted three laws that changed the colonial charter of Dartmouth College and imposed a number of public controls. The Federalist-dominated trustees of the school appealed to the Supreme Court.
By a 5-1 majority, the Court declared the New Hampshire laws void because they were an unconstitutional impairment on the obligations of a contract. Writing for the Court, Chief Justice John Marshall found that the college was a private corporation and that the colonial charter was a contract. The states were required to respect such vested rights of private property. In a concurring opinion, Justice Joseph Story suggested that legislatures might retain some degree of control by writing “reservations” into charters, allowing for their modification in the future.
The Dartmouth College decision promoted the expansion of business interests when they were vulnerable to attack from state legislatures. In effect, the ruling allowed the contract clause to provide most Fifth Amendment protections for private property, which at that time did not apply to the states. The legislatures, however, managed to diminish the impact of Dartmouth College by including reservation clauses, as suggested by Justice Story. Also, in Charles River Bridge v. Warren Bridge in 1837, the Court took a more limited view of contracts.