§ 269]

Statutes and Charters.

361

269. Corporate Charters.

In the famous Dartmouth College Case, Trustees of Dartmouth College v. Woodward, it was held after elaborate discussion pro and con that a charter granted to a corporation by the state was a contract between the state and the corporation which could not be impaired or taken away by subsequent legislation. The significance of this decision, which has been constantly recognized and followed, is that under the doctrine thus announced the state has no power to revoke the privileges granted in a corporate charter nor substantially impair their value. Thus if a charter granted to a corporation provides that the corporate property shall be exempt from taxation, or fixes the rate or method of its taxation, the legislature cannot by subsequent statute make different provisions as to the taxation of such corporate property. But it will not be presumed that the legislature intended in granting a corporate charter to limit its general legislative power, and only in cases in which specific provision has been made in the charter will the corporation be exempted from general legislative control.

Moreover, the privileges granted by a corporate charter are no more sacred than other property and contract rights, and in the exercise of its police power the legislature may make regulations in the interest of the public health and welfare applicable to the business which the corporation is authorized to conduct as fully as to the business of an individual, the general police power being one which the legislature itself cannot impair nor grant away. Therefore, it has been held that statutes prohibiting lotteries (Douglas v. Kentucky and Stone v. Mississippi) or regulating the manufacture and sale of intoxicating liquors (Beer Company v. Massachusetts) are applicable to corporations already created by the state for the purpose of conducting a lottery business or the business of manufacturing and selling liquor.

Moreover, the property of the corporation, including its franchise, which is regarded as a part of its property, may be taken along with other property for public use upon compensation

being made, and therefore it is held that a corporation authorized to conduct a toll bridge or maintain a ferry and given the exclusive privilege of doing so within certain limits may have such right taken away from it for the public benefit in order to construct a free bridge or public ferry, just compensation being made to it for the privilege taken (Central Bridge Corporation v. City of Lowell).

But the exemption of corporate charters from legislative control has been thought to be against public interest, and in many states it is declared by constitutional or statutory provisions that all corporate charters are subject to repeal or modification by the legislature; and in such states charters granted after the enactment of such constitutional or statutory provisions are fully subject to legislative regulation (Pennsylvania College Cases). As to such charters, even conceding that they are contracts, the law authorizing their regulation or repeal, in existence at the time of the granting of the charter, constitutes a part of the contract, and the exercise of the power to revise or repeal is not an impairment of the obligation of the contract, but on the other hand is an exercise of a power expressly or impliedly reserved in the contract.

The doctrine that a corporate charter is a contract applies only to charters granted to private corporations. Public corporations, such as cities, school districts, and institutions created and controlled by the state in the exercise of its power to collect and expend money for public purposes, even though they may be created by charter, are not regarded as having any contract rights, and the charters or privileges granted to them may be taken away or modified or regulated as the legislature may see fit (East Hartford v. Hartford Bridge Co.).

CHAPTER XLVI.

VESTED RIGHTS AND RETROACTIVE LEGISLATION.

270. References.

J. Story, Constitution, §§ 1398, 1399; T. M. Cooley, Constitutional Limitations, ** 358-389; J. I. C. Hare, Constitutional Law, ch. xxxv; H. C. Black, Constitutional Law, §§ 215, 285-289; T. M. Cooley, Constitutional Law (3d ed.), 350-361; Campbell v. Holt (1885, 115 U. S. 620; McClain's Cases, 1044); Louisiana v. Mayor of New Orleans (1883, 109 U. S. 285; McClain's Cases, 1047); Mitchell v. Clark (1884, 110 U. S. 633; McClain's Cases, 1029; Thayer's Cases, 2402); Bronson v. Kinzie (1843, 1 Howard, 311; Thayer's Cases, 1645); McCracken v. Hayward (1844, 2 Howard, 608; 15 Curtis' Decisions, 228; McClain's Cases, 1026; Thayer's Cases, 1651); Mattingly v. District of Columbia (1878, 97 U. S. 687; McClain's Cases, 1043).

271. What Rights are Vested.

The term "vested rights" is not used in the federal constitution (Campbell v. Holt) nor generally in state constitutions; but it is frequently employed to describe those rights incident to property or arising out of contract which are deemed to be beyond impairment by subsequent legislation, under the usual clauses as to due process of law and the impairment of the obligations of contract. For instance, the right of a prospective heir to inherit property is subject to legislative control, so that the share which he shall take or the conditions under which the property shall pass to him may be changed by statute passed before the death of the person from whom he is to inherit; but after the right to inherit has thus become fixed by law, no statute can be passed, general or special, which takes away or restricts the interest which he has thus already acquired by inheritance. Likewise the share which a wife is entitled to have out of her husband's property in the event that she survives him may be diminished or increased at any time

before the husband's death; but after his death her right to dower, as it is called, is fixed, and any attempt by statute to limit it would be unconstitutional as impairing her property rights.

As stated in the preceding chapter, a judgment is not, strictly speaking, a contract, neither is it property. If it represents an interest in property or a right accruing under contract, it may be exempt from impairment by subsequent legislation; but it is not a property right so far as it represents merely a remedy which might or might not be afforded as the legislature in its discretion should determine. Thus if it is provided by statute that cities shall be liable for the value of property destroyed by city officers to prevent the spread of a fire, such a statute is to be considered as granting a privilege only, and not as recognizing a property right; and if the statute should be repealed, no person whose property was subsequently destroyed in this way would be entitled to any compensation. Therefore, a judgment rendered against a state for damages on account of such destruction does not represent a property right, and the legislature in its discretion may take away all remedy for the enforcement of such a judgment (Louisiana v. Mayor of New Orleans).

272. Retrospective Legislation.

The state and federal governments are prohibited from passing ex post facto laws. These prohibitions found in the state and federal constitutions are construed as referring only to statutes relating to the punishment of crime. (See above, § 59.) Retrospective legislation in general is not expressly prohibited, and unless it impairs vested rights of property or of contract it is not unconstitutional. Thus the legislature may by subsequent statute make valid the recording of a deed which by reason of some informality was not legally recorded; and as to any rights arising after the passing of the legalizing act, the defective record which is legalized will be just as effectual as though the recording had been in the first instance regular and lawful; but as

§ 272]

Retrospective Legislation.

365

to any person who has acquired an interest in the property for a good consideration which would be impaired by treating the defective recording as lawful, the legalizing statute can have no effect.

In general the legislature may change or modify the rules of procedure without impairing vested rights. For instance, it may extend the period of limitation within which an action may be brought, and the person against whom it is brought cannot complain; or it may shorten the period, and the person entitled to bring the action cannot complain if a reasonable time has been left to him within which to bring an action for the assertion of his rights (Mitchell v. Clark). The general rule is this, that remedies for the protection of property rights or for enforcing the obligation of a contract may be modified, even as to property already existing or contracts already made, with this exception that the legislature cannot by such changes or modifications of statutory provisions take away all substantial remedy for the protection of property or the enforcement of contract obligations and leave the property owner or party to the contract without any substantial remedy (Bronson v. Kinzie and McCracken v. Hayward).

The right to enact retrospective statutes for the purpose of legalizing acts already done, which are for some technical defect in the method of procedure invalid, is especially recognized with reference to the organization and conduct of municipal corporations (Mattingly v. District of Columbia). Here no private rights are involved, and the legislature may legalize proceedings which are invalid if they might have been valid had they been duly authorized in the first place.

The retrospective legislation, therefore, which is unconstitutional is that which amounts to an ex post facto law or which impairs some vested property or contract right. Legislation is in its nature prospective and not retrospective, and even a socalled retrospective statute is in effect no more than a prospective statute, applicable to conditions which have arisen and are in existence when the statute becomes applicable.