Dartmouth College v. Woodward

Not Just a Contract case: Dartmouth College v. Woodward’s Law-of-the-Land Legacy

Editors’ Note: Jane Manners continues HistPhil’s forum marking the bicentennial of the Dartmouth College case.

Dartmouth College v Woodward is, as every first-year law student knows, a contract case. Its canonical holding distinguished public corporations from private ones and established that where private corporations are concerned, a legislative charter is a contract, protected from legislative interference by the Constitution’s contract clause. But Dartmouth College has another legacy, which I’ll call its law-of-the-land legacy: the idea that laws ought to be “general and impartial,” and that laws that bestow unique benefits or burdens to particular persons or segments of society are ipso facto illegitimate. Despite the textbooks’ contract clause focus, Dartmouth College’s law-of-the-land legacy has shaped the legislature’s power to advance the public good and its relationship to philanthropy as much as, if not more than, its charter-as-contract holding.

The notion that generality is a central feature of legitimate legislation today seems self-evident. “The idea that laws should treat everyone the same,” as Naomi Lamoreaux and John Wallis recently put it, “that they should be general and impersonal, not special and individual” is “a central concept of equality.” To us, a law titled “AN ACT to exempt from taxation for a limited time the Flint Glass Factory at Keene, and certain workmen employed therein from military duty”—an act passed by the New Hampshire legislature on June 26, 1816, a day before it amended Dartmouth College’s charter—doesn’t pass the smell test. Why should Keene’s flint glass factory be singled out for special treatment? We assume the explanation for such a targeted piece of legislation must have something to do with corruption: probably the factory owner had some personal connection to a state legislator, or had promised the bill’s sponsor some sort of kickback.

But to the New Hampshire legislature, there would have been nothing corrupt or out of the ordinary about such a private law. As the law’s text explains, the factory’s two owners had petitioned the legislature for the bill on the grounds that they had, “at considerable expense and risque, erected…a building and other works for the manufacture of that useful article,” and now hoped for “aid and encouragement” in their undertaking. For a legislature charged with advancing the public good but lacking a strong tax base, giving “aid and encouragement” to private citizens willing to take on publicly-beneficial projects was a primary way of fulfilling its responsibilities. It’s hard to imagine a material more important to a rapidly growing state than glass – glass for windows, for eyeglasses, for bottles, for tableware. Of course, New Hampshire’s lawmakers wanted to encourage its manufacture, and they did so with the tools at their disposal.

Is “AN ACT to exempt from taxation for a limited time the Flint Glass Factory at Keene, and certain workmen employed therein from military duty” an illegitimate law? And if we answer yes, what do we lose? The legacy of Dartmouth College is, in part, a story of how we got from the world of flint glass factory tax exemptions to a world in which according such special benefits to a particular group is automatically suspect. Mostly, this is a good thing: the temptation to corruption and special dealing inherent in such legislation is obvious, as is the danger such legislative vetting would pose to politically unpopular voices and activities. And of course legislatures today have many more tools at their disposal, including ample tax revenue, to achieve their desired ends. And yet, by taking such targeted laws off the table, we take away a powerful aspect of legislative discretion. In 1816 New Hampshire, the legislature might not have had a tax base, but it did have the power to closely scrutinize the public purpose of private activity, bestowing corporate charters and other benefits on enterprises it deemed publicly beneficial. Dartmouth College is part of the reason legislatures no longer have that power. By embracing the idea that laws should be general rather than targeted, the opinion helped usher in the world we know today, in which democratically-elected legislatures wield remarkably little control over non-profit activity nominally carried out in the public interest.

***

In his argument before the Supreme Court, the Dartmouth trustees’ lawyer Daniel Webster didn’t spend much time on the dry contract-as-charter question that was the formal basis for federal jurisdiction. Instead, he dwelled on the jurisdictionally-irrelevant New Hampshire constitution, whose 15tharticle admonished that “no person shall be deprived of his property, immunities or privileges, put out of the protection of the law, or deprived of his life, liberty, or estate, but by judgment or his peers, or the law of the land.” The pieces of legislation amending Dartmouth’s charter, Webster contended, did not qualify as “the law of the land.” Webster explained the phrase, which had originated in the Magna Carta, by quoting Blackstone: ‘And first, it (i.e. law) is a rule: not a transient sudden order from a superior, to, or concerning, a particular person; but something permanent, uniform, and universal.” Laws that targeted one or a handful of individuals, rather than the general public, were illegitimate. In his own words, Webster elaborated:

By the law of the land is most clearly intended the general law; a law, which hears before it condemns; which proceeds upon inquiry, and renders judgment only after trial. The meaning is, that every citizen shall hold his life, liberty, property, and immunities under the protection of the general rules which govern society.

To Webster, the heart of the case lay in the fact that the legislature had illegitimately singled out Dartmouth College for punitive treatment. Its act amending the charter had been partisan vindictiveness, a legislative sentence rather than a law.

From this frequently quoted excerpt, scholars often trace a through-line, passing through Jacksonian populism and the mid-19thcentury spread of statewide prohibitions on special legislation before culminating in the widely-accepted modern understanding that generality is a central feature of law’s legitimacy. The idea that laws must apply equally to all members of society rather than solely to a specific individual or set of individuals, these scholars argue, got picked up by lawyers and judges in other states, who often quoted Webster in striking down statutes they deemed too targeted and too partial. Simultaneously, the idea inspired Jacksonian populists, who — angered by the impression that legislatures regularly handed out statutory favors to a privileged few — railed against what they termed “special legislation.” Under America’s emerging republican theory, corporate charters were small grants of sovereignty, issued (in theory) only to groups that sought to fulfill a public purpose. To advance the public good, legislators were supposed to closely scrutinize the putative public benefit — a newly-laid road, a freshly-dug canal, a college for educating Indian youths — that might justify the grant of sovereignty being sought. But to their Jacksonian critics, the public purpose of these corporations was often hard to detect. What was apparent, from the Jacksonians’ perspective, was the favoritism involved in their chartering; the tight social connections between legislators and corporators, or the fact that most charter recipients seemed to be vigorous supporters of the party then in power. Why should these well-connected elites be allowed to enjoy the benefits of incorporation, while the many could not?

Over time, these arguments led to the passage both of general incorporation laws — laws that enabled any group of people to incorporate, so long as they met certain basic criteria — and constitutional prohibitions on special legislation. As Jon Levy has recently written, by the second half of the nineteenth century these developments had shifted the focus away from a corporation’s “public purpose,” once an essential prerequisite to a charter, and towards its “private motive,” as states began to differentiate between for-profit and not-for-profit corporations for tax purposes. Where Dartmouth College’s contract holding prevented legislatures from tinkering with corporations on the back end, once their charters had been granted, its law-of-the-land legacy ultimately stopped them from doing so on the front end – the chartering end – as well. What had once been a legislative inquiry into a would-be corporation’s public purpose was transformed into an administrative inquiry into the commercial intent of its founders. Where once a charter had been a legislative tool to advance the public good, it had become, by the end of the nineteenth century, a corporator’s shield against future legislative intermeddling. The result is both a vibrant, sprawling nonprofit sector that purports to serve the public good and a diminished legislative capacity to ensure that it does so.

-Jane Manners

Jane Manners studies US legal history, with a focus on legislation and local government law, and is currently an associate in law at Columbia Law School. She received her PhD in history from Princeton in 2018 and her JD and BA from Harvard. Her work has been supported by the American Council on Learned Societies, the American Society for Legal History, and the American Historical Association. Before law school, Jane worked as a grant maker at the Open Society Institute.

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