spirituous liquors in New York City, which, by its terms, was to continue in force until fifty days after the third Tuesday in May, 1866, and for which a substantial fee had been paid. In April, 1866, the legislature adopted another statute regulating the sale of liquors in New York City, which provided, among other things, that after the first of May, 1866, no person should retail spirituous liquors in that city unless he had received a license therefor from the Metropolitan Board of Excise erected by the new law. Subsequent to the first of May, 1866, and before his former license would have expired by its terms, the defendant retailed spirituous liquors without having received a license from the new Board. The action was brought to recover the prescribed penalties. It was urged on behalf of the defendant that the statute of April, 1866, so far as it affected him, was inhibited by the national Constitution and was void, as it destroyed an existing contract between him and the state. The court, by an unanimous judgment, sustained the validity of the statute. Mr. Justice Wright, who delivered the opinion, after showing that the legislature has complete authority to regulate the sale of spirituous liquors, proceeds: 1 "It [the statute] in terms revokes licenses granted under the act of 1857, but that is no encroachment upon any right secured to the citizen as inviolable by the fundamental law. These licenses to sell liquors are not contracts between the state and the person licensed, giving the latter vested rights protected on general principles and by the Constitution of the United States against subsequent legislation; nor are they property in any legal and constitutional sense. They have neither the qualities of a contract, but are merely temporary permits to do what otherwise. would be an offence against the general law. They form a portion of the internal police system of a state; and are issued in the exercise of its police powers, and are subject to the direction of the state government, which may modify, revoke, or continue them, as it may deem fit."

These cases sufficiently illustrate and sustain the proposition stated in a preceding paragraph.

17 Tiffany's R. 667.

5. Private Corporations.

§ 560. Without attempting any exhaustive analysis and definition, it is sufficient here to say, for purposes of illustration, that the corporations known to the American law are municipal, established for governmental purposes; or private, established for some purposes of direct private gain or advantage, although the public, as an unorganized, and not as a municipal body, may be indirectly benefited thereby. Cities, villages, and towns are examples of the former class. The latter class includes those formed purely for the transaction of business, as banking, insurance, railway and bridge companies, and the like; those which are exclusively or partially eleemosynary, as colleges, hospitals, asylums; and those which are simply religious, as church societies. All private corporations in the United States are created immediately or mediately by legislative act. Two modes are in common use in which these associations are called into legal existence. A single corporation may be authorized by a special statute which is technically known as its charter; or the legislature may pass a general law permitting any persons complying with its provisions to associate themselves and assume the corporate charThis latter method is of somewhat recent origin, and is rapidly becoming general throughout the United States.

acter.

§ 561. The question to be considered is, are the charters of private corporations-or, in other words, the acts of incorporation, whether special or general contracts between the company and the state, the obligation of which the latter is forbidden to impair? No other matter connected with constitutional interpretation has given rise to so many decisions, state and national, and to such a fundamental difference of opinion and conflict of judgment. I say fundamental, because this conflict has, in fact, grown out of radically different con ceptions of the Constitution as an organic law, and of the states as essentially sovereign or essentially subordinate. Yet I think it may be said, without any doubt as to the correctness of the statement, that, so far as the Supreme Court of the United States can establish a principle and rule of construc

tion, all these disputes have been finally settled, and settled against the claims of state sovereignty.

§ 562. The whole subject divides itself into three heads, which are, in fact, entirely independent of each other, and which ought to be separately considered, even at the risk of some repetition. These divisions are the following:

(1.) Is the charter granted by the legislature, in its general scope and design, so far as it confers franchises upon the corporation for the accomplishment of the general purposes of its creation, a contract between the company and the state, the obligation of which the latter may not impair?

(2.) Assuming that the preceding question be answered in the affirmative, then are the collateral stipulations which may be inserted in the charter, which are not necessary for the accomplishment of the general design of the corporation, but which may be very beneficial thereto, and may render the franchises more valuable, — are they contracts equally binding upon the state? To illustrate: if in chartering a bank the legislature had stipulated that only a certain amount of tax should be levied upon the institution; or, if in chartering a toll-bridge company, a provision had been inserted that no other bridge should be erected within certain distances of the one authorized by the statute, would these limitations be binding upon the state?

(3.) Are there any implied contracts or agreements on the part of the state, growing out of the express language of charters, and of the general objects and designs for which corporations are created?

As before remarked, these divisions are independent of each other. The first question might be answered in the affirmative, and both the others in the negative. A neglect to keep these several propositions separate and distinct has produced, and can only produce, confusion and uncertainty.

563. (1.) The charter of a private corporation, whether a special statute or a general law, is, in its general scope and design, and so far as it confers franchises for the accomplishment of the general objects of the association, a contract, the obligation of which the state may not impair.

This proposition may be considered as settled; as an established principle of our constitutional law. The number of judicial decisions in which it is expressly affirmed, or implicitly assumed, is very great. I shall not attempt to burden the memory or attention of the reader by a reference to all these cases. The judgments of the Supreme Court of the United States, and a few recent opinions of state tribunals, will sufficiently indicate the results which have been reached through a long forensic and judicial controversy.

§ 564. The question first arose in a formal manner in the leading case of Dartmouth College v. Woodward1 (1819). The facts necessary to be stated are few. During the colonial times, the Crown of Great Britain had granted a charter incorporating Dartmouth College, specifying the number of trustees, how they were to be elected and hold their offices, their powers, and the like. The legislature of New Hampshire subsequently passed a statute modifying this charter in many important particulars, and making great changes in the organization of the institution. The case turned upon the validity of this statute. The Supreme Court examined several subordinate points before arriving at the vital one. Thus, they determined that a college is a private and not a public corporation; that the state succeeding to the rights of the British Crown over the subject, was as much bound by the charter as though it had issued from the state legislature. The court then passed upon the nature of a charter. Chief Justice Marshall delivered the opinion, and held that a charter is a contract, the consideration on the part of the corporation being the benefits which they are supposed to confer upon the public at large. He summed up his argument as follows: 2 "This is plainly a contract to which the donors, the trustees, and the crown (to whose rights and obligations New Hampshire succeeds) were the parties. It is a contract made on a valuable consideration, It is a contract for the security and disposition of property. It is a contract, on the security of which real and personal estate has been conveyed to the corporation. It is, then, a contract within the letter of the Con1 4 Wheaton's R. 518.

2 Ibid. 643.

stitution, and within its spirit also." Opinions were also delivered by Mr. Justice Washington and by Mr. Justice Story to the same effect. The court therefore adopted and announced the principle as the ground of their judgment - ratio decidendi that a private charter is a contract between the state and the corporation. The statute of New Hampshire making changes in the organization of Dartmouth College was declared to impair the obligation of the contract, and to be absolutely void. The Dartmouth College case has always been regarded as authoritative, and has been followed by the same high tribunal in all subsequent decisions, and, with some exceptions to be noticed, by the state courts.

§ 565. In The Providence Bank v. Billings1 (1830), the court, by Chief Justice Marshall, say: "It has been settled that a contract entered into between a state and an individual, is as fully protected by the tenth section of the first article of the Constitution, as a contract between two individuals; and it is not denied that a charter incorporating a bank is a contract."

3

Again, the same doctrine was affirmed in the Planters' Bank v. Sharp (1848). In this case it appeared that the bank had been chartered in Mississippi. The act of incorporation contained the following clauses descriptive of the general powers of the institution: The bank shall have power "to possess, receive, retain and enjoy lands, goods,

chattels, and effects of what kind soever, and the same to grant, alien, or dispose of for the good of the bank; also to discount notes and bills of exchange, and to make loans," etc. A statute was subsequently passed forbidding the bank to transfer any note or other evidence of debt. The Supreme Court held the latter statute void, as it impaired the obligation of a contract.

$566. Passing to a few recent decisions of state courts, we shall find the same doctrine affirmed with equal force and directness. In Backus v. Lebanon (1840), the Supreme Court of New Hampshire declared that the charter of a turn

1 4 Peters' R. 514.

3 6 Howard's R. 301.

2 Ibid. 560.

4 11 New Hamp. R. 19.

i