The Legislature of Pennsylvania chartered a college "at
Canonsburg," by the name of the Jefferson College, "in Canonsburg,"
giving to it a constitution and declaring that the same should "be
and remain the inviolable constitution of the said college
forever," and should not be "altered or alterable by any ordinance
or law of the said trustees or in any other manner than by an act
of the Legislature" of Pennsylvania. The college, becoming in need
of funds, put into operation a plan of endowment whereby, in virtue
of different specific sums named, different sorts of scholarships
were created -- one,
ex. gr., by which on paying $400, a
subscriber became entitled to a perpetual scholarship, capable of
being sold or bequeathed, and another by which, on payment of
$1,200, he became entitled to a perpetual scholarship entitling a
student to tuition, room rent, and boarding, this sort of
scholarship being capable, by the terms of the subscription, of
being disposed of as other property. But nothing was specified in
this plan as to where this education, under the scholarships, was
to be. On payment of the different subscriptions, certificates were
issued by the college certifying that A. B. had paid $___, which
entitled him "to a scholarship as specified in the plan of
endowment adopted by the trustees of Jefferson College,
Canonsburg," &c. An act of legislature in 1865, by consent of
the trustees of the college at Canonsburg and of the trustees of
another college at Washington, Pennsylvania, seven miles from
Canonsburg, created a new corporation, consolidating the two
corporations, vesting the funds of each in the new one, and in
their separate form making them to cease, but providing that all
the several liabilities of each, including the scholarships, should
be assumed and discharged without diminution or abatement by the
new corporation. Notwithstanding the act of assembly, the
collegiate buildings, &c., of Jefferson College were left at
Canonsburg, and certain parts of the collegiate course were still
pursued there, the residue being pursued at Washington College,
Washington. Subsequently, in 1869, the then existing Constitution
of Pennsylvania (one adopted in 1857, allowing the legislature of
the state "to alter, revoke, or annul any charter of incorporation
thereafter granted, whenever in their opinion it may be injurious
to the citizens, . . . in such
Page 80 U. S. 191
manner, however, that no injustice shall be done to the
corporators") being in force, a supplement to this act of
1865 was passed, "closely uniting" the several departments of the
new college created by the act of 1865 and authorizing the trustees
of it to locate them either at Canonsburg, Washington, or some
other suitable place within the Commonwealth, they giving to
whichever of the two towns named, had the college taken away from
it, or to both if it was taken away from both, an academy, normal
school, or other institution of a grade lower than a college, with
some property of the college for its use.
Held that the
Legislature of Pennsylvania, by its act of 1869, had not passed any
law violating the obligation of a contract.
On the 15th of January, 1802, the Legislature of Pennsylvania
incorporated a college in the western part of Pennsylvania known as
Jefferson College. The title of the act was, "An act for the
establishment of a college at Canonsburg, in the County of
Washington, in the Commonwealth of Pennsylvania."
The preamble set forth that "the establishment of a college
at Canonsburg," &c.,
"for the instruction of youth in the learned languages, in the
arts and sciences, and in useful literature, would tend to diffuse
information and promote the public good."
The statute in its enacting part proceeded:
"SECTION 1. That there be erected and hereby is erected and
established in Canonsburg &c., a college &c.,
under the management, direction, and government of a number of
trustees, not exceeding twenty-one,"
&c.
"SECTION 2. The said trustees and their successors shall
forever hereafter be one body politic and corporate, with
perpetual succession in deed and in law, to all intents
and purposes whatever, by the name, style, and title of 'The
Trustees of Jefferson College,
in Canonsburg, in the
County of Washington.'"
There was given to the trustees the usual corporate powers, with
all other powers &c., usual in other colleges in the United
States.
Section 3d provided for meetings of the trustees, "
at
the
Page 80 U. S. 192
Town of Canonsburg," for making bylaws and ordinances
for the government of the college &c., principal and professors
&c.
Section 5th provided for the succession in the trustees, how
misnomers in gifts or grants by deeds, or in devises or bequests,
should be treated, adding,
"And the Constitution of the said college herein and hereby
declared and established,
shall be and remain the inviolable
Constitution of the said college forever, and the same shall
not be altered or alterable by any ordinance or law of the said
trustees, nor in any other manner than by an act of the legislature
of this Commonwealth."
In pursuance of this act, the Jefferson College was established.
Several buildings for a college were erected. The state made
donations to the institution from time to time, and from these or
other sources a library, as also a chemical and astronomical
apparatus, was brought together.
In the year 1806, the same legislature incorporated another
college, establishing it at the Town of Washington, just seven
miles from Canonsburg, where the former college had been
established. Thus, although in the faculties of both colleges there
have been from time to time professors of eminent ability and
learning, and though from both colleges have come men who have done
honor to the institutions in which they were reared, it yet came to
pass -- with the multiplicity of colleges throughout the state --
that these two, so near to each other, slenderly endowed and in a
part of Pennsylvania until quite late times neither rich nor
populous, never thrived; on the contrary, rather labored with
existence. Accordingly, in 1853, the trustees of Jefferson College
put into operation a plan of endowment whereby on the payment of
$25, the subscriber to the plan became entitled to a single
scholarship; on the payment of $50, to a family scholarship; on the
payment of $100, to tuition for thirty years; on the payment of
$400, to a perpetual scholarship, to be designated by whatever name
the subscriber might select, it being provided that such a
scholarship might be disposed of by sale or devised by will as any
other
Page 80 U. S. 193
property; by the payment of $1,200, to a scholarship in full,
entitling the holder to the tuition, room rent, and boarding of one
student in perpetuity, it being provided that such a scholarship
might be disposed of as any other property. But in this "Plan of
Endowment," as the paper proposing it was called, nothing was said
of education at Canonsburg specifically, though it was declared
that when $60,000 were subscribed, "the trustees of the college
should issue certificates guaranteeing to the subscribers the
privileges above enumerated." Of these various scholarships upwards
of 1,500 were sold. To each of the subscribers to this plan of
endowment a certificate in this form was issued under the seal of
the corporation:
"
Endowment Fund of Jefferson College,
Pennsylvania"
"This certifies that A. B. has paid _____ dollars, which
entitles him to the privileges of a _____ scholarship, as specified
in the Plan of Endowment adopted by the trustees of Jefferson
College, in Canonsburg, in the County of Washington, transferable
only on the books of the college, personally or by attorney, on
presentation of this certificate."
"Witness the seal of said corporation and the signatures of the
president and secretary thereof,
at Canonsburg, the ___
day of _____, A.D. 185."
"[CORPORATE SEAL]"
"WILLIAM JEFFREY, President"
"JAMES McCULLOUGH, Secretary"
But this scheme did not prove an entirely wise one, for though
it procured a certain amount of money for an endowment fund, it
brought upon the college a large body of students to be educated at
rates entirely too low, and the college was deprived of its former
resources of tuition fees -- always very small, but still much
greater than the interest on the sum which now entitled a student,
and even a whole family of students, to be educated without paying
anything. Thus it was with the Jefferson College, at Canonsburg.
The other college, at Washington, adopted apparently some
similar
Page 80 U. S. 194
scheme and flourished no more than the Jefferson. Both colleges
during the rebellion fell into a condition of debility undesirable
for seats of learning. [
Footnote
1]
In this state of things, there having been a proposition to make
a union of the colleges, a convention of the alumni of both was
held at Pittsburg, September 27, 1864, and the members of this
convention having "discussed in a candid and fraternal spirit the
proposed union of the colleges," passed a series of resolutions, of
which this was the first:
"That we see the hand of Providence pointing to the union of the
two ancient colleges, whose sons we are, and fixing the present as
the time for the happy consummation by such evident facts as these:
the great and constantly increasing number of literary institutions
in the land; the urgent need in Western Pennsylvania of an
eminently influential and richly endowed college; the desire for a
union of Jefferson and Washington, so generally entertained, and so
frequently and earnestly expressed; the proximity of the said
colleges, soon to be made more apparently by the completion of a
connecting railway; the very unsatisfactory condition of their
antiquated buildings; the reduced number of students, partly the
result of our national troubles; the inadequacy of the old salaries
to meet the demands of the times and afford the professors a
competent support; the difficulty of obtaining aid for either
institution in its separate existence; the several offers made by
liberal and reliable men to furnish large amounts of funds in case
a union is effected, and depending also upon that event; the
probable donation by our legislature of a valuable grant of lands
given by Congress to the state for the advancement of agricultural
knowledge."
The convention then went on and recommended a plan of
Page 80 U. S. 195
union for the two colleges and the procuring of appropriate
legislation to effect the consolidation.
The matter in its general aspect was assented to by the boards
of trustees of the respective colleges, and in the following year,
March 4th, 1865, an act was passed by the Legislature of
Pennsylvania to carry out a union.
The title of the act was, "An act to unite the colleges of
Jefferson and Washington, in the county of Washington, and to erect
the same into one corporation, under the name of Washington and
Jefferson College."
Its
preamble recites that
"the trustees of those colleges (Jefferson and Washington)
have agreed upon a union thereof, and have besought this
General assembly to
give thereto the sanction and aid of a
legislative enactment."
Section 1 united the two colleges into one corporation by the
name aforesaid.
Section 2 vested all the property and funds of each in the new
corporation,
"and all the several liabilities of said two colleges or
corporations, by either of them suffered or created,
including
the scholarships heretofore granted by and now obligatory upon each
of them, are hereby imposed upon and declared to be assumed by the
corporation hereby created, which shall discharge and perform the
same without diminution or abatement."
Section 3 declared the objects of the corporation and provided
how the trustees were to be selected and continued, and prescribed
their powers and duties.
Section 10 directed that there should be four periods or classes
of study, denominated the freshman, sophomore, junior, and senior
classes.
Section 11 created two additional departments of study, the
scientific and preparatory; the first to qualify students for
business avocations, the second for admission to the first, or to
the freshman class of the college.
Section 12 provided prospectively for an agricultural
department.
Section 13 declared
"that the studies of the senior, junior, and sophomore classes
shall be pursued at or near
Canonsburg, in the County of
Washington, and those of the freshman
Page 80 U. S. 196
class and of the preparatory, scientific, and agricultural
departments at or near Washington, in said county,"
and provided how the income of endowment funds should be
apportioned &c.
Section 14 committed the instruction and government of the three
higher classes named, to the president and professors of those
classes, and the instruction and government of the freshman class
and the departments, to the vice-president and professors, or
instructors of their appropriate studies &c.
Section 18 enacted:
"That from and after the organization of the corporation hereby
created, as herein provided,
the Colleges of Jefferson and
Washington, named in the first section of the act,
shall
be dissolved, except so far as may be found necessary to
enable them to close up their business affairs and to perfect the
transfer of their property and rights to the corporation by this
act created."
When this new act was passed (A.D. 1865), the then existing or
amended Constitution of Pennsylvania, [
Footnote 2] adopted in 1857, was in force. That
constitution provided that:
"The legislature shall have power to
alter, revoke, or annul
any charter of incorporation hereafter conferred by or under any
special or general law, whenever, in their opinion, it may be
injurious to the citizens of the Commonwealth, in such manner,
however, that no injustice shall be done to the
corporators."
Under the act of assembly of 1865, a new state of things as
prescribed by it was set in operation. But the good effects
anticipated from a union on this plan did not come. The new college
did not thrive. And in 1868, another convention of alumni was held
in which various resolutions were passed, among them one
expressing
"the conviction of the convention that a
complete
consolidation of the two departments should be immediately
effected, so as to have them occupy buildings situated in the
same place."
And in consequence of this the board of trustees of the
college,
Page 80 U. S. 197
through a series of committees, took the matter into
consideration, the result of the whole being the recommendation of
further legislation, in the direction pointed out by the convention
of the alumni.
"A supplement" to the Act of March 4, 1865, was then, February
26, 1869, passed. Section 1 enacted
"that as soon as the necessary preliminary arrangements could be
made and suitable buildings provided,
several departments
of Washington and Jefferson College should be closely united, and
located either at Canonsburg, Washington, or some
other
suitable place
within this commonwealth, to be fixed by
the vote of not less than two-thirds of the trustees,"
&c.
Section 5 provided for an "academy, normal school, or other
institution of lower grade than a college," to be given by the
trustees to the unsuccessful one of the two places named, or to
both, if the college is taken "elsewhere," with some real or
personal property of the college for the use of such academy
&c.
Section 6 made it
"lawful for
any incorporated college or institution of
learning, within this commonwealth, to unite with Washington and
Jefferson College, and consolidate their property and funds for
educational purposes, on such terms and conditions as may be agreed
upon."
With the exception that this act obliged the college to be fixed
somewhere in the state of Pennsylvania, it followed the exact
language of a draft which had been prepared by the committee of the
board of trustees of the college, and reported to it as advisable.
This draft had been approved without dissent by the board,
twenty-five members out of thirty-one composing it being present at
the meeting; and a committee had been appointed by it to visit
Harrisburg and procure its enactment.
After the supplement was obtained, it was accepted by the board,
and the whole college fixed at Washington, with more effective
means of education, including an endowment of $50,000, made by
people of that place on condition that the whole college should be
so fixed.
In this state of things, six persons (with whom afterwards
Page 80 U. S. 198
one hundred and eight others asked to become, and were admitted,
co-plaintiffs), holders of the scholarship certificates, issued as
already mentioned by the trustees of Jefferson College, in 1853,
filed a bill in equity, in the Supreme Court of Pennsylvania,
against
the two corporations, wherein they set forth the
incorporation of Jefferson College at Canonsburg, the buildings it
had erected, and the gifts and endowments which it had received and
possessed; that in 1853, the trustees of the college devised and
put in operation the plan of endowment already mentioned, and
evidenced by certificates of scholarship, issued by them, under the
corporate seal &c.; whereby, tuition &c., in said college,
was granted to the holders, they paying into the corporate Treasury
therefor various sums of money, according to the grade or quantity
of the scholarship, specifying it all as already stated on page
80 U. S. 192;
that one thousand five hundred of these certificates were issued,
of which one thousand two hundred were yet outstanding; that the
complainants,
"residents of Canonsburg and its vicinity, relying upon the good
faith of the said trustees, and the perpetuity of said college at
Canonsburg, bought and still held such certificates of
scholarships, believing that thereby they could have their sons or
descendants educated at said college, in Canonsburg, without the
expense and risk of sending them from home;"
that on March 4, 1865, the Legislature of Pennsylvania passed
the act already mentioned as of that date (reciting it), and on the
26th of February, 1869, "a supplement" to the said act of 1865
(reciting the supplement); that the trustees of Jefferson College
in Canonsburg &c., had accepted the said act of 1865, and had
joined in uniting said two colleges, and had removed the freshmen
class and the preparatory and scientific departments from
Canonsburg to Washington, seven miles distant; and that the
trustees of the college called "Washington and Jefferson College,"
formed under the act of 1865, were about to remove the college
library, apparatus, classes, and professors from Canonsburg to
Washington, and to dispose of the college buildings &c., at
Canonsburg, so as to deprive the plaintiffs of the tuition &c.,
agreed to be
Page 80 U. S. 199
there given to them; and that the defendants justified the
proposed action, under the supplement of 1869; that the said
scholarship certificates constituted subsisting contracts between
the complainants and the trustees of Jefferson College, in
Canonsburg &c., entitling them to have the granted tuition
&c., at that place, in the college there; and that if said acts
of 1865 and 1869 were to have effect, they would be irreparably
injured, and the contracts impaired; that said acts of 1865 and
1869 were invalid and unconstitutional, because impairing the
obligations of subsisting contracts; and therefore repugnant to the
10th section of the first article of the Constitution of the United
States, which declares that no state shall pass any law "impairing
the obligation of contracts."
The
prayer of the bill accordingly was:
1. That said acts of 1865 and 1869 be declared null and void, as
repugnant to the said prohibitions, in that they undertook to
change the location of the said college, its classes, buildings,
and property, from Canonsburg to Washington, or elsewhere.
2. For injunction against making such change or removal.
The case came up on bill and answer. There was no dispute about
facts. The question was the validity of the "supplemental" act of
1869; the question, namely, whether the contract of scholarships
between the complainants and others and Jefferson College, did not
interpose a constitutional barrier to any legislative grant of
authority to the trustees of the college to surrender its former
charter and accept a new one, by which the college was eventually
removed from Canonsburg to Washington, in the same county.
At the same time was filed in the same court another bill; one
by "the trustees of
Jefferson College in Canonsburg, in the
County of Washington" (the old corporation of 1802), against
"Washington and Jefferson College" (the corporation of 1865),
setting out their old charter of 1802, gifts and donations to carry
it out, and specially $5,000 given, bequeathed by benevolent
persons to the complainants as a permanent fund, to be kept
separate from other funds, for educating
Page 80 U. S. 200
poor and pious young men; the scholarships &c., all much as
in the preceding case.
There was also filed a third bill by five persons, "members of
the boards of
trustees of Washington and Jefferson." Their
complaint being more especially of the supplement of 1869, and of
its impairing the obligation of the contracts raised by the act of
1865. All three bills originated apparently in one view, and had
apparently one purpose, the different forms of effort being
resorted to, the one in aid of the other; and so that if one form
of proceeding was found open to fatal objection, one or both of the
others might be resorted to with better prospect of success.
The Supreme Court of Pennsylvania, after a full consideration of
the case (Thompson, C.J., delivering its judgment), dismissed all
the bills, holding in effect:
1st. That the legislation complained of did not, in point of
fact, infringe the said contracts.
2d. That even if the contracts were so affected by the
legislation, yet their obligation could not be said to be impaired
in a legal sense, because the acceptance of the legislation by the
trustees of Jefferson College concluded the complainants; and also,
3d, because the acts of assembly in question were passed by the
Legislature of Pennsylvania, in the exercise of a power so to do,
reserved (as to the act of 1865) in the original charter of
Jefferson College and (as to the act of 1869) given by the amended
Constitution of Pennsylvania.
Page 80 U. S. 209
MR. JUSTICE CLIFFORD delivered the opinion of the Court.
Jefferson College was incorporated on the fifteenth of January,
1802, by the name of the Trustees of Jefferson College in
Canonsburg in the County of Washington, for the education of youth
in the learned languages and the arts, sciences, and useful
literature. By the charter, it was declared that the trustees
should be a body politic and corporate, with perpetual succession,
in deed and in law, to all intents and purposes whatsoever, and
that the constitution of the college
"shall not be altered or alterably by any ordinance or law of
the said trustees, nor in any other manner than by an act of the
legislature of the Commonwealth."
Washington College was incorporated on the twenty-eighth
Page 80 U. S. 210
of March, 1806, by the name of The Trustees of Washington
College for the education of youth in the learned and foreign
languages, the useful arts, sciences, and literature, and was
located in the town of Washington, seven miles distant from
Jefferson College, in the same county.
Experience showed in the progress of events that the interests
of both institutions would be promoted in their union, and the
friends of both united in a common effort to effect that object.
Application was accordingly made to the legislature for that
purpose, and on the fourth of March, 1865, the legislature passed
the
"Act to unite the colleges of Jefferson and Washington, in the
County of Washington, and to erect the same into one corporation
under the name of Washington and Jefferson College."
Enough is stated in the preamble of the act to show that the
application was made to promote the best interests of both
institutions, and that the legislative act which is the subject of
complaint was passed at their united request and to sanction the
union which their respective trustees had previously agreed to
establish. Inconveniences resulted from the provisions contained in
the thirteenth section of the act, which impliedly forbid any
change in the sites of the respective colleges, and also provided
that the studies of certain classes of the students should be
pursued at each of the two institutions, and to that end prescribed
certain rules for appropriating to each certain portions of the
income derived from the funds of the institution, and the manner in
which the same should be expended and applied by the trustees. Such
embarrassments increasing, the legislature passed a supplementary
act, providing that the several departments of the two colleges
should be closely united, and that the united institution should be
located as therein prescribed. Measures were also prescribed in the
same act for determining the location of the united institution,
and it appears that those measures, when carried into effect,
resulted in fixing the location at Washington, in the county of the
same name. Certain parties are dissatisfied with the new
arrangement, and
Page 80 U. S. 211
it appears that on the twenty-fourth of August, 1869, three
bills in equity were filed in the state court praying that the
last-named act of the legislature may be declared null and void as
repugnant to the ninth article of the Constitution of the state and
to the tenth section of the first article of the federal
Constitution. Different parties complain in each of the several
cases, but the subject matter of the complaint involves
substantially the same considerations in all the cases. Those
complaining in the first case are the trustees of Jefferson
College. Complainants in the second case are certain members of the
board of trustees of Washington and Jefferson College, who oppose
the provisions of the act of the twenty-sixth of February, 1869,
and deny that the board of trustees, even by a vote of two-thirds
of the members, as therein required, can properly remove the
college or dispose of the college buildings as therein
contemplated. Objections are made by the complainants in the last
case to both the before-mentioned acts of the legislature, and they
claim the right to ask the interposition of the Court upon the
ground that they are owners of certain scholarships in Jefferson
College, as more fully set forth in the bill of complainant, and
they pray that both of the said acts of assembly may be declared
null and void for the same reasons as those set forth in the other
two cases.
I. Examination of these cases will be made in the order they
appear on the calendar, commencing with the case in which the
trustees of Jefferson College are the complainants. They bring
their bill of complaint against the two colleges as united, under
the first act of assembly passed for that purpose. Service was made
and the respondents appeared and pleaded in bar that the
complainants, as such trustees, duly accepted the act of assembly
creating the union of the two institutions, and that having
accepted the same they, as a corporation, became dissolved and
ceased to exist, and have no authority to maintain their bill of
complaint. Apart from the plea in bar, they also filed an answer,
but as the whole issue is presented in the plea in bar, it will not
be necessary to enter into those details. Opposed to that plea
Page 80 U. S. 212
is the replication of the complainants, in which they deny the
allegation that they, as a corporation, became dissolved or that
they ceased to exist as alleged in the plea in bar, and renew their
prayer for relief. Both parties were heard, and the supreme court
of the state entered a decree for the respondents, dismissing the
bill of complaint. Decrees for the respondents were also entered in
the other two cases, and the respective complainants such out writs
of error under the twenty-fifth section of the Judiciary Act, and
removed the respective causes into this Court for
reexamination.
Whether the act of assembly in question in this case is or not
repugnant to the Constitution of the state is conclusively settled
against the complainants by the decision in this very case, and the
question is not one open to reexamination in this Court, as it is
not one of federal cognizance in a case brought here by a writ of
error to a state court. Nothing therefore remains to be examined
but the second question presented in the pleadings, which is
whether the supplementary act of assembly uniting the two
institutions and providing that there should be but one location of
the same for any purpose impairs the obligation of the contract
between the state and the corporation of Jefferson College, as
created by the original charter, or in other words whether it is
repugnant to the tenth section of the first article of the federal
Constitution.
Corporate franchises granted to private corporations, if duly
accepted by the corporators, partake of the nature of legal
estates, as the grant under such circumstances becomes a contract
within the protection of that clause of the Constitution which
ordains that no state shall pass any law impairing the obligation
of contracts. [
Footnote 3]
Charters of private corporations are regarded as executed contracts
between the government and the corporators, and the rule is well
settled that the legislature cannot repeal, impair, or alter such
a
Page 80 U. S. 213
charter against the consent or without the default of the
corporation judicially ascertained and declared. [
Footnote 4] Of course these remarks apply
only to acts of incorporation which do not contain any reservations
or provisions annexing conditions to the charter modifying and
limiting the nature of the contract. Cases often arise where the
legislature, in granting an act of incorporation for a private
purpose, either make the duration of the charter conditional or
reserve to the state the power to alter, modify, or repeal the same
at pleasure. Where such a provision is incorporated in the charter,
it is clear that it qualifies the grant and that the subsequent
exercise of that reserved power cannot be regarded as an act within
the prohibition of the Constitution. Such a power also -- that is
the power to alter, modify, or repeal an act of incorporation -- is
frequently reserved to the state by a general law applicable to all
acts of incorporation or to certain classes of the same, as the
case may be, in which case it is equally clear that the power may
be exercised whenever it appears that the act of incorporation is
one which falls within the reservation and that the charter was
granted subsequent to the passage of the general law, even though
the charter contains no such condition nor any allusion to such a
reservation. [
Footnote 5]
Reservations in such a charter, it is admitted, may be made, and it
is also conceded that where they exist, the exercise of the power
reserved by a subsequent legislature does not impair the obligation
of the contract created by the original act of incorporation.
Subsequent legislation altering or modifying the provisions of such
a charter, where there is no such reservation, is certainly
unauthorized if it is prejudicial to the rights of the corporators
and was passed without their assent, but the converse of the
proposition is also true -- that if the new provisions altering and
modifying the charter were passed with the assent of the
corporation and they were duly accepted
Page 80 U. S. 214
by a corporate vote as amendments to the original charter they
cannot be regarded as impairing the obligation of the contract
created by the original charter. [
Footnote 6] Private charters or such as are granted for
the private benefit of the corporators are held to be contracts
because they are based for their consideration on the liabilities
and duties which the corporators assume by accepting the terms
therein specified, and the grant of the franchise on that account
can no more be resumed by the legislature or its benefits
diminished or impaired without the assent of the corporators than
any other grant of property or legal estate, unless the right to do
so is reserved in the act of incorporation or in some general law
of the state which was in operation at the time the charter was
granted. [
Footnote 7]
Apply those principles to the case under consideration and it is
quite clear that the decision of the state court was correct, as
the fifth section of the charter, by necessary implication,
reserves to the state the power to alter, modify, or amend the
charter without any prescribed limitation. Provision is there made
that the constitution of the college shall not be altered or
alterable by any ordinance or law of the trustees, "nor in any
other manner than by an act of the legislature of the
commonwealth," which is in all respects equivalent to an express
reservation to the state to make any alterations in the charter
which the legislature in its wisdom may deem fit, just, and
expedient to enact, and the donors of the institution are as much
bound by that provision as the trustees. [
Footnote 8]
Page 80 U. S. 215
Suppose, however, the fact were otherwise, still the respondents
much prevail, as it is admitted that the complainants accepted the
act passed to unite the two colleges and to erect the same into one
corporation, which supports to every intent the respondents' plea
in bar and utterly disproves the allegations of the complainants'
replication denying that the complainant corporation was dissolved
before their bill of complaint was filed. Doubts have often been
expressed whether a private corporation can be dissolved by the
surrender of its corporate franchise into the hands of the
government, but the question presented in this case is not of that
character, as the act of the legislature uniting the two colleges
did not contemplate that either college, as an institution of
learning, should cease to exist or that the funds of either should
be devoted to any other use than that described in the original
charters. All that was contemplated by the act in question was that
the two institutions should be united in one corporation, as
requested by the friends and patrons of both, that they might
secure greater patronage and be able to extend their usefulness and
carry out more effectually the great end and aim of their creation.
Authorized as the act of the legislature was by the reservation
contained in the original charter, and sanctioned as the act was by
having been adopted by the corporators, it is clear to a
demonstration that the act uniting the two colleges was a valid
act, and that the two original corporations became merged in the
one corporation created by the amendatory and enabling act passed
for that purpose, and that neither of the original corporations is
competent to sue for any cause of action subsequent in date to
their acceptance of the new act of incorporation. [
Footnote 9]
II. Sufficient has already been remarked to show that the case
of the dissenting trustees of the new corporation, which is the
second case, is governed by the same principles as the preceding
case. They admit that the act of the legislature
Page 80 U. S. 216
uniting the two colleges in one corporation was duly accepted by
the original corporators, and they also admit in effect that it is
a valid law. Express provision was therein made that the two
colleges should be united in one corporation by the name of
Washington and Jefferson College, and that the new corporation
should possess and enjoy all the capacities, powers, privileges,
immunities, and franchises which were possessed and enjoyed by the
original institutions and the trustees thereof, "with such
enlargements and subject to such changes therein as are made by
this act." Accepted as that act was by the trustees of the original
institutions, they not only ratified the reservation contained in
the fifth section of the charter of Jefferson College, but they in
express terms adopted the changes made in the amended charter
uniting the two institutions in one corporation.
Viewed in the light of these suggestions, the present case
stands just as it would if the reservation contained in the
original charter had been in terms incorporated into the new
charter uniting the two institutions into one corporation, which
the complainants in this case admit is a valid act of the
legislature. Such an admission, however, is not necessary to
establish that fact, as the act was passed by the assent of the two
corporations and in pursuance of the reserved power to that effect
contained in the original charter of the corporation to which the
complaining corporators in the preceding case belonged. Grant that
the power existed in the legislature to pass the act uniting the
two institutions and it follows that the supplementary act which
was passed to render the first act practically available is also a
rightful exercise of legislative authority, as it is clear that
substantially the same reservation is contained in the act
providing for the union of the two institutions as that contained
in the original charter by virtue of which the act was passed
uniting the two institutions in one corporation. [
Footnote 10] Tested by these
considerations, the Court here is of the opinion that
Page 80 U. S. 217
the decision of the state court in the second case is also
correct.
III. Plans of various kinds were devised by the trustees of
Jefferson College and put in operation for the endowment of the
institution, and among others was the plan of establishing what was
called the scholarships, whereby a contributor on payment of
twenty-five dollars became entitled to tuition for one person for a
prescribed period, called a right to a single scholarship, or, on
payment of fifty dollars, to a family scholarship, or, on payment
of one hundred dollars, to tuition for thirty years, or, on payment
of four hundred dollars, to a perpetual scholarship, to be
designated by whatever name the contributor might select. Contracts
of the kind were outstanding at the respective times when each of
the two acts of the legislature in question was passed, and the
complainants in the third case are owners of such scholarships, and
they bring their bill of complaint, for themselves and such other
persons owning such scholarships as may desire to unite in the bill
for the relief therein prayed. They pray that both of the
before-mentioned acts of the legislature may be declared null and
void as repugnant both to the state and federal Constitution, but
it will be sufficient to remark, without entering into any further
explanations, that the second question is the only one which can be
reexamined in this Court. What they claim is that the acts of the
legislature in question impair the obligation of their contracts
for scholarship as made with the trustees of Jefferson College
before the two institutions were united in one corporation.
Reference must be made to the charter creating the union as well as
to the original charters in order to ascertain whether there is any
foundation for the allegations of the bill of complaint.
By the first section of the act creating the union it is
provided that the new corporation
"shall possess and enjoy all the capacities, powers, privileges,
immunities and franchises which were conferred upon and held by
said Colleges of Jefferson and Washington and the trustees thereof,
with such enlargements and subject to such changes therein as
are
Page 80 U. S. 218
made by this act."
Section two also provides that all the real and personal
property held and possessed by or in trust for the said colleges,
with all endowment funds, choses in action, stocks, bequests, and
devises and all other rights whatever to them belonging, are
thereby transferred to and vested in the new corporation; and the
further provision is that
"all the several liabilities of said two colleges or
corporations, by either of them suffered or created, including the
scholarships heretofore granted by and obligatory upon each of
them, are hereby imposed upon and declared to be assumed by the
corporation hereby created, which shall discharge and perform the
same without diminution or abatement."
Undoubtedly the corporate franchises of the two institutions
were contracts of the description protected by that clause of the
Constitution which ordains that no state shall pass any law
impairing the obligation of contracts, but the contract involved in
such an act of incorporation is a contract between the state and
the corporation, and as such the terms of the contract may, as a
general rule, be altered, modified, or amended by the assent of the
corporation, even though the charter contains no such reservation
and there was none such existing in any general law of the state at
the time the charter was granted. Persons making contracts with a
private corporation know that the legislature, even without the
assent of the corporation, may amend, alter, or modify their
charters in all cases where the power to do so is reserved in the
charter or in any antecedent general law in operation at the time
the charter was granted, and they also know that such amendments,
alterations, and modifications may as a general rule be made by the
legislature with the assent of the corporation, even in cases where
the charter is unconditional in its terms and there is no general
law of the state containing any such reservation. Such contracts
made between individuals and the corporation do not vary or in any
manner change or modify the relation between the state and the
corporation in respect to the right of the state to alter, modify,
or amend such a charter,
Page 80 U. S. 219
as the power to pass such laws depends upon the assent of the
corporation or upon some reservation made at the time, as evidenced
by some preexisting general law or by an express provision
incorporated into the charter. Cases arise undoubtedly where a
court of equity will enjoin a corporation not to proceed under an
amendment to their charter passed by their assent, as where the
effect would be to enable the corporation to violate their
contracts with third persons, but no such question is here
presented for the decision of this Court, nor can it ever be under
a writ of error to a state court. Questions of that kind are
addressed very largely to the judicial discretion of the court and
create the necessity for inquiry into the facts of the case and for
an examination into all the surrounding circumstances. [
Footnote 11] Beyond doubt, such a
question may be presented in the circuit court in the exercise of
its jurisdiction, concurrent with the state courts, but it is clear
that such a question can never be brought here for reexamination by
a writ of error to a state court, as such a writ only removes into
this Court the questions, or some one of the questions, described
in the twenty-fifth section of the Judiciary Act. [
Footnote 12] Considerations of that kind
must therefore be dismissed, as the only question presented for
decision is whether the acts of the legislature mentioned in the
bill of complaint impair the obligation of the contracts for
scholarship made by the complainants with the trustees of Jefferson
College.
Decided cases are referred to in which it is held that the
trustees of such an institution, where the terms of the charter
amount to a contract and the charter contains no reservation of a
right to alter, modify, or amend it, cannot consent to any change
in the charter made by the legislature which contemplates a
diversion of the funds of the institution to any other purpose than
that described and declared in the original charter. All or nearly
all of such decisions are based on a state of facts where an
attempt was made to take
Page 80 U. S. 220
the control of such an institution from one religious sect or
denomination and to give the control of it to another and a
different sect or denomination in violation of the intent and
purpose of the original donors of the institution. [
Footnote 13] Questions of that kind,
however, are not involved in the present record, nor does the Court
intend to express any opinion in respect to such a controversy.
Charters of the kind may certainly be altered, modified, or amended
in all cases where the power to pass such laws is reserved in the
charter or in some antecedent general law, nor can it be doubted
that the assent of the corporation is sufficient to render such
legislation valid unless it appears that the new legislation will
have the effect to change the control of the institution, or to
divert the fund of the donors to some new use inconsistent with the
intent and purpose for which the endowment was originally made.
[
Footnote 14] Consent of the
corporation, it is conceded, is sufficient to warrant alteration,
modification, and amendments in the charters of moneyed, business,
and commercial corporations, and it is not perceived that the
question presented in this record stands upon any different footing
from such as arise out of legislation of that character, as the
principal objection to the legislation in question is that the
removal of Jefferson College to the newly selected location exposes
the complainants, as owners of the scholarships, to increased
expense and to additional inconvenience. [
Footnote 15] They do not pretend that the effect of
the new legislation will be to lessen the influence and usefulness
of the college, or to divert the funds to a different purpose from
that which was intended by the donors, nor that it will have the
effect to change the character of the institution from the original
purpose and design of its founders. Pretenses of the kind, if set
up, could not be supported, as the whole record shows that the two
acts of assembly were passed at the earnest solicitation of the
patrons of the two institutions as well as at the request of the
respective boards of trustees.
Page 80 U. S. 221
Even suppose that the consent of the corporation is no answer to
the objections of the complainants, still the decree of the state
court must be affirmed, as it is clear that the reservation in the
charter fully warranted the legislature in passing both the acts
which are the subject of complaint. [
Footnote 16] Suggestion may be made that the reservation
even in the original charter is not expressed in direct terms, but
the terms are the same as those employed in the charter which was
the subject of judicial examination in the case of
Commonwealth
v. Bonsall, [
Footnote
17] which was decided more than thirty years ago by the supreme
court of the state. Provision was made in the charter in that case
that the constitution of a certain public school should not be
altered or alterable by any law of the trustees or in any other
manner than by an act of the legislature of this state. When
incorporated, the charter of the school provided that the trustees
should be chosen by such persons as had contributed or should
contribute to the amount of forty shillings for the purposes of the
corporation. Pursuant to the petition of the trustees, the
legislature passed an act which repealed that clause of the charter
and provided that all the citizens residing within the limits of
the township should be entitled to vote at all such elections, and
the supreme court of the state held unanimously that the act of
assembly was a valid act even though it was not accepted by the
corporation. Reference is made to that case to show that the clause
in the charter of Jefferson College, called the reservation,
furnished complete authority to alter, modify, or amend the
charter, and certainly it must be conceded that that case is a
decisive authority to that point. [
Footnote 18]
Controlled by these reasons, the Court is of the opinion that
the act uniting the two colleges in one corporation was a valid act
even as against the complainants in the third case.
Page 80 U. S. 222
They complain also of the supplementary act, but they hardly
contend that the legislature, in passing the act to unite the two
institutions, parted with any power which was reserved in the
original charter of Jefferson College to enact any proper law to
alter, modify, or amend the act providing for that union. Extended
argument upon that topic does not seem to be necessary, as there is
not a word in the act which favors such a construction or which
gives such a theory the slightest support. Proper care was taken by
the legislature to protect the rights of these complainants by
incorporating into the act uniting the two colleges a provision
that the new corporation should discharge and perform those
liabilities without diminution or abatement. Such contracts were
made with the trustees, and not with the state, and it is a mistake
to suppose that the existence of such a contract between the
corporation and an individual would inhibit the legislature from
altering, modifying, or amending the charter of the corporation by
virtue of a right reserved to that effect, or with the assent of
the corporation, if, in view of all the circumstances, the
legislature should see fit to exercise that power.
Decree in each case affirmed.
[
Footnote 1]
The net endowment of the institution in 1865, from all sources,
was about $56,100. The income of this fund, at 6 percent, equal to
$3,366, aided by contingent, matriculation, and diploma fees,
amounting together to about $1,111 per annum, composed the
resources of Jefferson College, the scholarships issued by it
having cut off the revenue from tuition. The annual expenditures of
the institution were in excess of its income, although the cash
salary of the president was only $1,200 and the highest salary paid
to a professor was $800.
[
Footnote 2]
2 Article 1, § 26.
[
Footnote 3]
Dartmouth College v.
Woodward, 4 Wheat. 700.
[
Footnote 4]
Fletcher v.
Peck, 6 Cranch 136;
Terrett
v. Taylor, 9 Cranch 51.
[
Footnote 5]
Dartmouth College v.
Woodward, 4 Wheat. 708;
General Hospital v.
Insurance Co., 4 Gray 227;
Suydam v. Moore, 8 Barb.
358; Angel & Ames on Corporations (9th ed) § 767, p. 787.
[
Footnote 6]
Mumma v. Potomac
Co., 8 Pet. 286;
Dartmouth College v.
Woodward, 4 Wheat. 712;
Slee v. Bloom, 19
Johnson 474;
Riddle v. Locks and Canals, 7 Mass. 185;
McLaren v. Pennington, 1 Paige's Chancery 107;
Lincoln
v. Kennebec Bank, 1 Greenleaf 79;
Navigation Co v.
Coon, 6 Pa.St. 379;
Com. v. Cullen, 13
id.
133;
Sprague v. Railroad, 19
id. 174;
Joy v.
Jackson Co., 11 Mich., 155.
[
Footnote 7]
Cooley on Constitutional Limitations 279;
Binghamton
Bridge Case, 3 Wall. 51;
Piqua Bank
v. Knoop, 16 How. 369;
Vincennes
University v. Indiana, 14 How. 268;
Planters' Bank v.
Sharp, 6 How. 301.
[
Footnote 8]
Railroad v. Dudley, 14 N.Y. 354;
Plank Road v.
Thatcher, 1 Kernan 102.
[
Footnote 9]
Revere v. Copper Co., 15 Pickering 351;
Attorney
General v. Clergy Society, 10 Richardson's Equity 604.
[
Footnote 10]
Bailey v. Hollister, 26 N.Y. 112;
Sherman v.
Smith, 1 Black 587.
[
Footnote 11]
Hascall v. Madison University, 8 Barb. 174.
[
Footnote 12]
Ward v. Society of Attorneys, 1 Collyer C.C. 377.
[
Footnote 13]
State v. Adams, 44 Mo. 570.
[
Footnote 14]
Railroad v. Canal Co., 21 Pa.St. 22.
[
Footnote 15]
Allen v. McKeen, 1 Sumner 299.
[
Footnote 16]
People v. Manhattan Co., 9 Wendell 351;
Roxbury v.
Railroad Co., 6 Cushing 424;
White v. Railroad, 14
Barb. 559.
[
Footnote 17]
3 Wharton 566.
[
Footnote 18]
State v. Miller, 2 Vroom 521;
Story v. Jersey
City, 1 C.E.Green, N.J., 13.
