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TRUSTEES OF DARTMOUTH COLLEGE v. WOODWARD (1816)

Chief Justice Marshall handed down an equally tar-reaching decision in the Dartmouth College case. When the War of 1812 was over, local manufacturing that had grown while British imports were prohibited needed all the help they could get. Subsidies, tax breaks, and monopoly charters were lavished on them by state legislatures, but still the youthful American system of private capital and free enterprise was stressed. Investors needed encouragement.

The best thing states could do for eager but struggling entrepreneurs and their potential investors was to grant them corporate charters with liberal terms. But did such grants guarantee long-term freedom from legislative interference? How safe would corporations be from the fickle whims of annually elected state legislatures? And what exactly was a corporate charter? Was it, too, a contract? That question would be answered in the crucial case of Dartmouth College v. Woodward in 1816.

In 1815, a long-simmering squabble between John Wheelock, president of Dartmouth College since 1779, along with his treasurer, William H. Woodward, on one side and most of the faculty and trustees of Dartmouth on the other became public and political. Wheelock was fired by the trustees. But he persuaded the New Hampshire legislature to incorporate a new institution by the name of Dartmouth University. Twenty-one of the twenty-five trustees were to be appointed by the governor, thus turning a private college into a public university.

Over the next three years, the old trustees boycotted the meetings of the new ones; some students enrolled in one institution and some in the other, and they all rioted over possession of the library and other buildings. Wheelock and Woodward hung on to the college records and funds though they were legally officers of the university. Finally, they both died. In the meantime, the trustees of the old college had instituted a suit that went on appeal to the U.S. Supreme Court. The outcome would answer the question whether American constitutional law would foster unfettered private free enterprise or leave room for government restriction and interference at legislative discretion. In short, what was to be the scope of private enterprise in the United States?

Dartmouth College v. Woodward fed into two of the objectives of Chief Justice John Marshall: to restrict the scope of state legislatures in general, and to protect private property rights from legislative encroachment in particular. But first, one sticky point needed some clarification.

The Dartmouth charter was not a grant of the New Hampshire legislature, but, rather, had been given to John Wheelock s father in 1769 by no less than George III. Now, two generations and a revolution later, was that charter still sacrosanct? Marshall made short shrift of that matter —a mere technicality: "It can require no argument to prove, that the circumstances of this case constitute a contract. An application is made . . .The charter is granted, and . . . property is conveyed. Surely in this transaction every ingredient of a complete and legitimate contract is to be found."

Is it, however, a public charter, like that given to towns and cities, which could be altered? Not at all, declared Marshall. Dartmouth College is a "private eleemosynary institution" and "endowed by private individuals." It is a private institution holding a private charter. The charter, then, is a contract, and the state of New Hampshire is barred by the U.S. Constitution from impairing it. The outcome of this case, decided at a propitious moment is American history when business enterprise was burgeoning and corporate charters were just coming into their own, made safe the projections of capitalists and guaranteed to potential stockholders that their investments would be free of legislative interference.

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TITLE: Law and Legal Services at CitiMall.com Online Shopping Mall

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