The Darthmouth College V. Woodward essay

The Darthmouth College V. Woodward Case of 1819 is one of the cases that are focused on the U.S. Supreme Court’s decision connected with the proper application of the Contract Clause of the U.S. Constitution to private corporations. The Darthmouth College V. Woodward case is a well-known legal case in the U.S. judicial practice because it had an enormous impact on the U.S. business corporation system and the free enterprise system. It has been found that the Supreme Court’s decision was to uphold the sanctity of the college’s original charter which pre-dated the creation of New Hampshire State. The court’s decision highlighted the nature of public and private charters. The Petitioner of this case was the Darthmouth College, and the Respondent was William H. Woodward. Court members included Chief Justice John Marshal, and Associate Justices Bushrod Washington, William Johnson, Henry B. Livingston, Thomas Todd, Gabriel Duvall, and Joseph Story. The U.S. Supreme Court decision was the following: 6 votes for the Dartmouth College, and 1 vote against the Dartmouth College. Legal provision applied to the case: the U.S. Constitution, Article 1, Section 10.

     THE FACTS OF THE CASE

It has been found that in 1769, a charter was granted to the Darthmouth College by King George III of England. This legal document included the basic information about this educational institution, described the purpose and structure of the school and provided land to the college. The Dartmouth College was opened as a private educational institution.

However, in 1816, the New Hampshire legislature set the goal – to change the Dartmouth College, which was a privately funded educational institution, into a state university. The New Hampshire legislature made certain changes in the college’s corporate charter and transferred the control of appointments of the Dartmouth College trustees to the governor. In addition, the governor was given authority to appoint new positions, including the members of the board of trustees. The governor established a state board of visitors who had veto power over the decisions of the Dartmouth College trustees. The trustees of the Dartmouth College were against that decision and declared that the actions of the New Hampshire legislature were unconstitutional. In order to regain authority over the resources of the Dartmouth College, the old trustees of the Dartmouth College filed suit against William H. Woodward, who was on the side of the new appointees.

     SIMILAR CASES COMING BEFORE

     It has been found that the Contract Clause of the U.S. Constitution was the main subject of a number of litigations that occurred in the 19-th century. There were similar cases in the U.S. judicial system, including Fletcher v. Peck case of 1810 and Sturges v. Crowninshield case of 1811. Both cases were focused on the application to the Section 10, Article 1 of the U.S. Constitution, according to which “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility” (U.S. Constitution, Art. I, Sec.10).

Fletcher v. Peck, 10 U.S. 87 (1810) was the first case in the USA, in which the U.S. Supreme Court decision ruled that the state law was anti-constitutional. The decision of the U.S. Supreme Court was used in the development of “a growing number of precedents for the sanctity of legal contracts” (Currie 145).  In addition, the U.S. Supreme Court decision pointed out to the fact that Native Americans had no right to claim their own lands. In Fletcher v. Peck case, the Chief Justice was also John Marshall. In addition, the decision was ruled in a six to one. This fact means that the majority of justices ruled that the state law was anti-constitutional. In the Darthmouth College V. Woodward Case, six justices ruled that the state law was anti-constitutional as well. The Chief Justice John Marshall ruled that the state authorities had no right to cancel the purchase of the land because it would violate the obligations of the contract.

The second similar case is Sturges v. Crowninshield case of 1819, which dealt with the application of bankruptcy laws in New York. The first issue involved violation of the provision in Article I, Section 8 of the U.S. Constitution that gave the U.S. Congress the authority to establish laws on the subject of bankruptcies throughout the USA. As the second issue of this case, the U.S. Supreme Court ruled that the retroactive application of the particular bankruptcy law in New York was violation of the obligation of contracts mentioned in the Article I, Section 10 of the U.S. Constitution. In this case, the state law covered those debts that were contracted before the law was passed. The U.S. Supreme Court rules that the retroactive portion of the law was anti-constitutional. The court’s decision was unanimous because the state law violated the obligation of contracts, it said: “It is the opinion of the Court that the act of the State of New York, which is pleaded by the defendant in this cause, so far as it attempts to discharge this defendant from the debt in the declaration mentioned, is contrary to the Constitution of the United States, and that the plea is no bar to the action” (Sturges v. Crowninshield – 17 U.S. 122, 1819).

     DISCUSSION OF THE ARGUMENTS OF THE CONTENDING PARTIES

The contending parties included the Petitioner (the Trustees of Dartmouth College, represented by Daniel Webster) and the Respondent (Woodward).  The Petitioner’s claim in that case was focused on the fact that it was unconstitutional for the New Hampshire legislature to amend or repeal the charter of such private institution as Darthmouth College.

The Petitioner’s arguments were reasonable and included the following statements: First, the charter for the Darthmouth College was initially granted by King George III as a private institution prior to the American Revolution, which led to the formation of the United States of America. Second, the New Hampshire government did not have the right to amend or repeal corporate contracts and charters, under the U.S. Constitution.

The Respondent’s arguments were focused on the following statements: First, the charter of the Darthmouth College was granted by the king prior to the formation of the United States of America and could be considered as invalid. Second, the state’s opinion concerning the power to amend contracts was supported by the majority of local residents, and therefore the state of New Hampshire had its right to change or revoke the corporate charter of the Darthmouth College and change a private college into public educational institution.

COMPARISON AND CONTRAST OF THE DIFFERENT JUSTICES’ OPINIONS

It has been found that in a five -to – one decision, the U.S. Supreme Court held that the Darthmouth College’s corporate charter could be qualified as a contract between two private parties, and that the state’s legislature could not interfere with it. The fact that the charter had been commissioned by the government could not transform the college into a public educational institution. Chief Justice Marshall wrote the opinion which was endorsed by the majority of justices. According to the opinion of Chief Justice Marshall, the term “contract” referred to transactions involving individual property rights, but not to “the political relations between the government and its citizens” (Trustees of Dartmouth Coll. v. Woodward, 17 U.S. 4 Wheat. 518, 1819).

Moreover, in Dartmouth College v. Woodward case, Chief Justice Marshall mentioned that corporations were state institutions with the purposes “as the government wishes to promote” (Trustees of Dartmouth Coll. v. Woodward, 17 U.S. 4 Wheat. 518, 1819). According to the U.S. Supreme Court, the corporation could be viewed as a “trustee” of those, who contributed to the corporation, an appropriate “duty-based and status-based conception” (Greenwood 93).  In other words, the corporation itself could come as a result of a bestowal of the property rights, with certain obligations to the public and to those who contributed to that entity.

In addition, Chief Justice Marshall articulated a contract metaphor for the corporation, explaining that the understandings between the state and the college “constitute[d] a contract” (Trustees of Dartmouth Coll. v. Woodward, 17 U.S. 4 Wheat. 518, 1819).  In fact, the ultimate holding of Dartmouth College v. Woodward case – that New Hampshire State could not amend the corporate charter of the college on its own behalf — is focused on contractual reasoning. In other words, although the state of New Hampshire was not a royal colony, the contract was still valid, because under the U.S. Constitution, the state has no right to impair contracts (U.S. Constitution, Art.I, Sec.10).

It has been found that after analyzing the main provision of the college’s charter, Chief Justice Marshal concluded that the fund of that educational institution consisted entirely of private donations. He found the appropriate information about the type of corporation. However, Chief Justice “denied the defense assertion that a public object made the corporation an instrument of government” (Stites 80). Chief Justice said: “The parties in this case differ less on general principles, less on the true construction of the Constitution in the abstract than on the application of those principles to this case and on the true construction of the charter of 1769” (Trustees of Dartmouth Coll. v. Woodward, 17 U.S. 4 Wheat. 518, 1819).

Marshall’s declaration about the fact that Dartmouth College was a private corporation was supported by the majority of justices. According to Francis N. Stites, “it was precisely this point that which made the decision important in American constitutional law”(79). Justices Johnson and Levingston concurred for the reason represented by Chief Justice Marshall, Justices Washington and Story, while Justice Duvall dissented without expressing his opinion. Justices Washington and Story agreed with Chief Justice Marshall’s opinion in their long winded concurrence. The major reason was that the college’s charter was legal, and the state had no right to have control over the board.

EVALUATION OF THE SIGNIFICANCE OF THE CASE IN THE BROAD SWEEP OF CONSTITUTIONAL DEVELOPMENT

According to Kent Greenfield, “early in the history of corporate law, both property and contract notions were prominent in theory and doctrine” (93). Richard S. Gruner states that corporations have always been viewed as ‘convenient instrumentalities subject to limitations that serve public policy (2-9). The Dartmouth College v. Woodward case played a significant role in the broad sweep of constitutional development. According to Subhabrata Bobby Banerjee, this case was well-known for “the landmark decision of the U.S. Supreme Court that removed corporations from state control” (8). In fact, this case redefined the role of corporation in American society and its identity. The Chief Justice agreed that “a corporation is an artificial being, invisible, intangible. And existing only in contemplation of law”(Chief Justice John Marshall, Dartmouth Coll. v. Woodward, 17 U.S. 4 Wheat. 518, 1819). By this means, the contemporary corporation was born, defined as a “fictitious legal person, an artificial legal entity” different from its owners and the staff (Banerjee 9).

This case helped to change the nature of corporation. First of all, the U.S. Supreme Court disproved the argument that a corporation was “a creature of the state”, thus putting certain limits on public representation. Secondly, by conferring the use of private rights on corporations, when these rights were held by individuals, the U.S. Supreme Court automatically guaranteed a legal system that could be effectively used to protect those rights. Thus, a corporation, a so-called artificial legal entity, became entitled to legal protection under the 14-th Amendment of the U.S. Constitution” (Banerjee 9). The 14-th Amendment of the U.S. Constitution guarantees all citizens of the USA due legal process and equal protection under the U.S. Constitution.  According to Francis N. Stites, the Dartmouth College v. Woodward case “restricted state power and rendered the corporation serviceable to the needs of a developing national economy” (99). The fact that corporate charters were contracts protected by the U.S. laws gave “legal form to the social and economic axioms of America” (Stites 99).