Trustees of Dartmouth College v. Woodward, 4 Wheaton (17 U.S.) 518; 4 L. Ed. 629 (1819)
Facts—In 1769 the English Crown chartered Dartmouth College. Later, in 1816, the state legislature of New Hampshire passed a law completely reorganizing the government of the college and changing the name to Dartmouth University. The old trustees of the college brought an action of trover (used in cases where a party is alleged to be wrongfully using the goods of another) against Woodward, who was secretary and treasurer of the college and had joined in the new university movement. He held the seal, records, and account books. The state decided against the old college trustees.
Question—
(a) Does the Constitution protect a grant from the Crown, which preceded the Constitution, from state impairment?
(b) Does the state act of 1816 impair the original charter, as contended by the old college trustees?
Decision—
(a) Yes;
(b) Yes.
Reasons—C.J. Marshall (5–1).
“This is plainly a contract to which the donors, the trustees, and the crown (to whose rights and obligations New Hampshire succeeds) were the original parties. It is a contract made on a valuable consideration. It is a contract for the security and disposition of property. It is then a contract within the letter of the Constitution, and within its spirit also.”
Corporations are designed to achieve a form of immortality for those who create them, and future donations may well depend on donors’ beliefs that their money will continue to be directed where they want it to go. Dartmouth College was not a state institution but a private eleemosynary (charitable) institution.
The act of 1816 by the New Hampshire legislature gave the college a public and civil status, increased the number of trustees, and, therefore impaired the operations of the college as originally intended by the founders. The founders sought the charter in good faith, thus making a legally binding contract. Under the act of 1816, the charter as originally intended no longer existed. Thus the New Hampshire legislature violated the Constitution of the United States, and the act of 1816 was void.
Note—Dartmouth not only endorsed the sanctity of contracts for the college but also for business and corporate interests. Daniel Webster argued for the college from which he had graduated, by saying “It is, sir, a small college, and yet there are those that love it.”