recall by their successors, yet they may redelegate all or any of them except strictly legislative powers to any inferior agents selected by them, to be exercised during the pleasure of the state.1 When the powers of a corporation and the procedure by which it could be brought into existence have been prescribed by the legislature, the mere fact that the legislature in the same act gives such corporation power to dispose of special stock and the holders of such special stock to become a distinct company does not constitute such a delegation of legislative power as to render an organization formed under the special stock clause invalid.2

So police and taxing powers and legislative powers to a limited extent may be conferred upon municipalities, and the power of eminent domain upon all corporations and persons. But an act seeking to confer upon courts power to annul ordinances is invalid because it attempts to confer legislative powers upon the judicial department.3

§ 1027. Questions which may arise in a given case. Thus it is seen that several matters, some of which are of the most far reaching importance and all of which may arise in a given case, lie at the very threshold of the consideration of the principal constitutional provision affecting corporations, namely, that prohibiting the enactment of laws impairing the obligation of contracts. In passing upon the validity of a statute alleged to impair a particular charter a court may have to consider: 1. The sovereign character of one of the parties and how far that character is involved.

2. The authority of the legislature as an agency of

1 See N. O. W. W. Co. v. La. S. R. Co., 125 U. S. 18; 8 S. Ct. 741.

2 Granby M. & S. Co. v. Richards, 95 Mo. 106; 8 S. W. 246.

Shephard v. Wheeling, 30 W. Va. 479; 4 S. E. 635.

that sovereignty under the constitution of the state where the controversy arises.

3. Whether the legislature has exceeded that authority.

4. The nature of the grant with respect to whether it is revocable at will or is binding upon future legislatures.

5. The proper rule of construction; whether it should be strict or liberal.

6. And finally, whether according to the construction given to the charter the act in question impairs the obligation of the compact within the meaning of the federal constitution.

For the proper determination of one or more of these many collateral issues may arise. For instance, it may be necessary to consider the internal policy and peculiar institutions of the state, and the construction given to its constitution and similar laws and contracts by its own courts.

It is plain that no elaborate exposition of these questions should be looked for elsewhere than in a separate treatise. The most important features germane to the subject of this work will be considered and such illustration of the leading principles as is necessary to impart a clear understanding of its application to corporate charters and contracts will be undertaken in the present charter.

§ 1028. Reservations in constitutions and charters.— Owing to the practice which was inaugurated soon after the decision in the Dartmouth College Case1 and became general, of inserting in state constitutions and special acts of incorporation reservations of power to amend, alter and repeal, this constitutional provision has not been invoked against legislation affecting charters as often as otherwise would have happened. But the

14 Wheat. 518.

effect of such reservations is not as far-reaching and important as might be supposed without due reflection. The contract between the state and the corporation with respect to the grant of the franchise of being a corporation is of little significance in comparison with the innumerable collateral agreements depending upon the exercise of the franchise and into which the express and implied terms of the charter become incorporated. No reservation of amendment and alteration, however broad and sweeping, will authorize a disturbance of vested rights or take away or divest corporate funds without compensation or due process of law.1

§ 1029. The contractual relation between a state and a corporation. A grant of corporate franchise by the state to a corporation without reservation or condition is similar in its nature to a grant of property or privilege. It constitutes a contract which cannot be altered or annulled by subsequent legislation because protected by the constitutional prohibition against impairing the obligation of contracts.2

The starting point of all the controversies concerning the peculiar relations sustained by private corporations to the state, under the inhibition of the constitution against laws impairing the obligation of contracts and its applicability to their charters, was the historic case of Dartmouth College v. Woodward.

1 Infra, § 1032.

2 Fletcher v. Peck, 6 Cranch, 88; Dartmouth College v. Woodward, 4 Wheat. 518; Wilmington R. R. Co. v. Reid, 13 Wall. 264; Delaware R. R. Tax., 18 Id. 225; Louisville v. University of Louisville, 15 B. Mo. 642; Pennsylvania R. Co. v. Duncan, 111 Pa. St. 352; 5 A. 742; Hamilton v. Keith, 5 Bush. Ky. 458; Piqua Bank v. Knoop, 16 How. 369; Mowrey v. Indianapolis, etc., R. R. Co., 4 Biss. 78; Harrington v. Tennessee, 95 S. 679; Berthin v. Crescent City Slaughter House, 28 La. An. 210; St. Louis v. Manuf. etc., Bank, 49 Mo. 574; Black v. Del. & Raritan Canal Co., 24 N. J. Eq. 455.

This case established the inviolability of charters and declared them to be compacts between the government granting and the corporation accepting them.

A review of the decisions since the opinions of Chief Justice MARSHALL and his illustrious associates in that case were delivered discloses a tendency on the part of the courts to confine the doctrine there established to the narrowest possible bounds, if indeed the domain of immunity from state interference has not, under various pretexts, been invaded, and much of it subtracted.1

But it must be conceded by all who have taken or will take the trouble to examine the arguments of counsel and the opinions of the justices, that no greater learning has since been brought to bear upon the question; nor has additional light been shed upon the principles underlying the conclusion that a grant of a corporate franchise creates a contract in the sense in which the term is employed in the constitution.

§ 1030. No consideration required to support the grant.— That a grant of a corporate franchise is a contract or operates as a contract does not depend upon the fact that the state has received a valuable consideration in the carrying out of the objects of the grant by the corporation, or that the performance of its objects confers a public benefit, but for the additional, or rather for the independent, reason that a franchise is a species of property which being once granted away, though without consideration, becomes as against the donor beyond recall. A gift completely executed is irrevocable. The property conveyed by it becomes as against the

1 For an excellent review of the inroads upon the doctrine of the Dartmouth College Case since its first enunciation, see the address of Hon. Aldace F. Walker, before the American Bar Association, 1889, published in the number of the Railway and Corporation Law Journal, dated Aug. 31st, 1889.

donor the absolute property of the donee; and no subsequent change of intentionof the do nor can change the rights of the donee.1

1031. The rule applies to charitable and benevolent corporations. The rule that a grant of a corporate franchise creates a contract does not apply exclusively to private business corporations, but also to those that are of an eleemosynary character. When such a corporation is organized the corporators become trustees of a trust fund the beneficiaries of which are the equitable donees.2

§ 1032. Diversion of funds and change of corporate management within the prohibition. It was also decided in the Dartmouth College Case, and the principle has been reaffirmed in a great number of cases, that a state legislature cannot take the control and management of a corporation out of the hands of those appointed by the

1 2 Bl. Com. 441. Justice STORY, speaking to the point raised by counsel in the Dartmouth College Case, that no valuable consideration had passed to the King of England as an equivalent for the grant, said: “A grant of franchises is not in point of principle distinguished from a grant of any other property. If, therefore, this charter were a pure donation, when the grant is complete and accepted by the grantees, is involved a contract that the grantees should hold, and that the grantor should not reassume the grant as much as if it had been founded on the most valuable consideration." See also, H. & T. C. R. Co. v. T. & P. Ry. Co., 70 Tex. 649; 8 S. W. 498; State v. Ill. Cent. R. Co., 33 F. 730. 2 The Dartmouth College Case not only established the main doctrine, but this also, though it was not the first case in which the constitutional inhibition was decided to apply to other than executed contracts. Fletcher v. Peck, 6 Cranch, 87. See also, Farrington v. Tennessee 95 U. S. 683. Justice STORY said: "In respect also to grants and contracts, it would be far too narrow a construction of the constitution to limit the prohibitory clause to such only where the parties take for their own private benefit. A grant to a private trustee for the benefit of a particular cestui que trust or for any special private or public charity cannot be the less a contract because the trustee takes nothing for his benefit. A grant of the next presentation to a church is still a contract, although it limit the grantee to a mere right of nomination or patronage... It is not admitted that a contract with a trustee is in its own nature revocable whether it be for special or general purposes, for public charity or particular beneficence." P. 697.