The second president of Dartmouth College was John Wheelock. Wheelock feuded with his board of trustees and was dismissed on August 26, 1815. This led Wheelock to publish a pamphlet called "Sketches of the History of Dartmouth College," in which he put forward his views, which were entirely compatible with political republicans and through which he hoped to be returned to his post.
William Plumer, the republican governor of New Hampshire, encouraged the legislature to enact a law that would essentially deprive Dartmouth of its independence and put it under state control. Specifically, the state was to have veto power over the appointment of trustees and Wheelock was to have his old job back. Arguing for passage of the bill, Plumer wrote, regarding the charter:
As it emanated from royalty, it contained, as was natural it should, principles congenial to monarchy. Among others it established trustees, made seven a quorum, and authorized a majority of those present to remove any of its members which they might consider unfit or incapable, and the survivors to perpetuate the board by themselves electing others to supply vacancies.
This last principle os hostile to the spirit and genius of free government. Sound policy therefore requires that the mode of election should be changed, and that trustees in future should be elected by some other body of men.
The New Hampshire legislation split the legislation, with some of the students and faculty continuing to operate as the "old" college. William Woodward, the secretary and treasurer, resisted requests for the seal and old records, so the original trustees sued. They sued Woodward in state court and lost. They then asked Daniel Webster, one of their alumni, to represent them in the appeal.
The lawsuit eventually reached the Supreme Court, asDartmouth v. Woodward. Webster opined that the contract clause of the Constitution protected private corporate charters. Chief Justice John Marshall's majority opinion in favor of the college closely tracked the arguments in Webster's brief, and the case became a landmark defense of contracts:
A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created. Among the most important are immortality, and, if the expression may be allowed, individuality; properties by which a perpetual succession of many persons are considered as the same, and may act as a single individual. They enable a corporation to manage its own affairs and to hold property without the perplexing intricacies, the hazardous and endless necessity of perpetual conveyances for the purpose of transmitting it from hand to hand. It is chiefly for the purpose of clothing bodies of men, in succession, with these qualities and capacities that corporations were invented and are in use.
This marked a notable precedent in the separation of power between government and nonprofit corporations, but it gave corporations too much immunity. In 1837, Chief Justice Taney wrote an opinion in the Charles River Bridge case , which limited the sanctity of contracts when the public interest was at stake.