The United States and the States Under the Constitution

was rendered in 1819, and the facts in which were that, in 1769, the royal governor of the province of New Hampshire, acting in the name of the king, granted to Dr. Wheelock and eleven other persons a charter, whereby they were incorporated under the title of "The Trustees of Dartmouth College," with perpetual succession, and with "the whole power of governing the college, of appointing and removing tutors, of fixing their salaries, of directing the course of study to be pursued by the students, and of filling vacancies created in their own body. After the charter had been granted to, and accepted by, the corporation, "property both real and personal, which had been contributed for the benefit of the college, was conveyed to and vested in the corporate body." Acts of the legislature of the state of New Hampshire, passed on 27th June, and 18th December, 1816, increased "the number of trustees to twenty-one," gave "the appointment of the additional number to the executive of the state," and created "a board of overseers, to consist of twenty-five persons, of whom twenty-one are also appointed by the executive of New Hampshire," with "power to inspect and control the most important acts of the trustees." Prior to the enactment of these statutes, one Woodward was the secretary and treasurer of the corporation, and, as such, he had in his possession the charter, corporate seal, records, and certain chattels belonging to the corporation; in 1816 the trustees removed him from office; in 1817 he was appointed secretary and treasurer of the new board of trustees, which was organized under the statutes of 1816, and, as he refused to surrender to the original corporation the property which was in his hands, that corporation brought an action of trover in a court of the state of New Hampshire against him, in which the facts as stated having been found by a

special verdict, judgment was entered in favour of the defendant by the state court of last resort, and the cause was removed by writ of error to the Supreme Court of the United States, which reversed the judgment of the state court, the ground of decision being that the college as incorporated was a private eleemosynary corporation; that its charter, in terms, and by force of the donations of funds made on the faith of it, constituted a contract between the colonial government and the corporation as the representative of the donors of those funds; that it was an implied, but essential, condition of that contract that that charter should not be so modified, without the consent of the corporation, as to substitute governmental control for the will of the donors; that, by the revolution, the duties, as well as the powers, of government devolved on the people of New Hampshire, and the obligations imposed by the charter were the same under the state government as they had formerly been under the colonial government; and that the effect of the statutes of 1816 was to substitute the will of the state for the will of the donors, and, to that extent, to impair the obligation of the contract between the state and the corporation, as made by the charter. Marshall, C. J., in his judgment,60 after accepting the suggestion, that "taken in its broad, unlimited sense, the clause would be an unprofitable and vexatious interference with the internal concerns of a state, would unnecessarily and unwisely embarrass its legislation, and render immutable those civil institutions, which were established for purposes of internal government, and which, to subserve those purposes, ought to vary with varying circumstances;" and "that as the framers of the Constitution could never have intended to insert in that instrument a provision so unnecessary, so mischievous,

60 4 Wheat. pp. 628, 629.

and so repugnant to its general spirit, the term 'contract' must be understood in a more limited sense," expressly conceded, that "the framers of the Constitution did not intend to restrain the states in the regulation of their civil institutions, adopted for internal government, and that the instrument they have given us is not to be so construed," and that "the provision of the Constitution never has been understood to embrace other contracts, than those which respect property, or some object of value, and confer rights which may be asserted in a court of justice," put his judgment on the ground that the charter of the college constituted a contract as hereinbefore stated. Applying to the Dartmouth College Case, the test so clearly stated by Marshall, C. J., in Ogden v. Saunders, that "the positive authority of a decision is co-extensive with the facts on which it is made," it is obvious that the case is an authority for the proposition, that the grant by a state of a charter of incorporation for private purposes unconnected with the administration of government constitutes a contract between the state and the corporation, whose obligation is not to be permitted to be impaired by a material modification of the terms of the charter, either expressed or implied, and that, in every such charter it is an implied condition of the contract, that the state shall not by subsequent legislation change either the purpose of the corporation, or its system of administration.

Implied corporate exemption from taxation.

71. The later cases have narrowed the doctrine of the Dartmouth College case with regard to the implied contracts created by charters, and thereby made obligatory on the states granting them. In Providence Bank v.

61 12 Wheat. 333.

Billings,62 it was decided, in 1830, that the grant of corporate privileges does not carry with it any implied exemption of either the corporate franchise, or property, from state taxation, and this principle has been re-asserted in the later cases of M. G. Co. v. Shelby County,& N. M. R. v. Maguire, Bailey v. Maguire, and Tucker v. Ferguson.66 Following in the same line, it has been held that the imposition in a charter of a specific form or rate of taxation is not to be construed in the absence of an express contract of exemption from other taxation to constitute an implied exemption from such other taxation; 67 and that the grant to a corporation of the right to sell its franchises does not entitle the vendee to exemptions from taxation granted to the vendor.68

Implied grants of peculiar privileges.

72. On the same principle, it has been held that legislative grants of special or exclusive privileges are, in the interests of the public, to be strictly construed, and do not vest in the grantee any powers other than those expressly granted.69 Thus, the charter of a corporation by a state

34 Pet. 514.

63 109 U. S. 398.

20 Wall. 46.

22 Wall. 215.

66 22 Wall. 527.

67 License Tax Cases, 5 Wall. 462; Delaware R. Tax, 18 id. 206; Erie Ry. v. Pennsylvania, 21 id. 492; Home Ins. Co. v. Augusta, 93 U. S. 116; S. C. S. Ry. v. Sioux City, 138 id. 98; N. O. C. & L. R. v. New Orleans, 143 id. 192; W. & W. R. v. Alsbrook, 146 id. 279; Shelby Co. v. Union & Planters' Bank, 161 id. 149; New Orleans v. Citizens' Bank, 167 id. 371.

People v. Cook, 148 U. S. 397; Picard v. East T., V. & G. R., 130 id. 637; K. & W. R. v. Missouri, 152 id. 301; N. C. Ry. v. Maryland, 187 id. 258. See also Shields v. Ohio, 95 id. 319; St. L. & S. F. Ry. v. Gill, 156 id. 649; N. & W. R. v. Pendleton, ibid. 667; P. F. & M. I. Co. v. Tennessee, 161 id. 174; Memphis City Bank v. Tennessee, ibid. 186; P. I. Co. v. Tennessee, ibid. 193; C. & L. T. R. Co. v. Sandford, 164 id. 578; G. R. & I. Ry. v. Osborn, 193 id. 17.

"Rice v. R. Co., 1 Bl. 358; Charles River Bridge v. Warren Bridge,

does not constitute a contract by the state, either with the corporation or with the creditors thereof, that the corporation shall not subsequently be dissolved after due legal proceedings founded upon a forfeiture of the corporate franchises either for misuser or for non-user.70 So, also, the creation of a corporation with the power to erect a toll bridge, or to operate a ferry, does not impliedly bind the state not to license the establishment of a competing bridge or ferry, either toll or free." The grant to

a contractor of the sole privilege of supplying a municipality with water from a designated source is not impaired by the grant to another party of the privilege of supplying it with water from another source; 72 and a municipality which has granted to a company the right to erect and operate an electric lighting plant does not impair the obligation of the contract by erecting a plant for itself.73 Nor does the grant to a quasi-public corporation of the right to sell its franchises by implication extend to the vendee any exemption from rate regulation which was possessed by its vendor; 74 nor may a vendee

11 Pet. 544; Mills v. St. Clair County, 8 How. 581; Perrine v. C. & D. C. Co., 9 id. 172; R. & P. R. v. L. R., 13 id. 81; O. L. I. & T. Co. v. Debolt, 16 id. 416; Jefferson Branch Bank v. Skelly, 1 Bl. 436; The Binghamton Bridge, 3 Wall. 51, 75; G. R. & B. Co. v. Smith, 128 U. S. 174; Stein v. B. W. S. Co., 141 id. 67; H. G. L. Co. v. Hamilton City, 146 id. 258; M. & St. L. Ry. v. Gardner, 177 id. 332; L. & N. R. v. Kentucky, 183 id. 503; Joplin v. S. M. L. Co., 191 id. 150; Stanislaus County v. S. J. & K. R. C. & I. Co., 192 id. 201; Shaw v. Covington, 194 id. 593. See also Owensboro v. O. W. S. Co., 191 id. 358.

70 Mumma v. The Potomac Co., 8 Pet. 281, 286; C. L. I. Co. v. Needles, 113 U. S. 574, 584.

"Fanning v. Gregoire, 16 How. 524; Turnpike Co. v. State, 3 Wall. 210; Wright v. Nagle, 101 U. S. 791; W. & B. Bridge Co. v. W. B. Co., 138 id. 287; Williams v. Wingo, 177 id. 601.

72 Stein v. B. W. S. Co., 141 U. S. 67. 73 Joplin v. S. M. L. Co., 191 U. S. 150. port, 193 id. 561.

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