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Zabriskie v. Hackensack & N.Y.R. Co., 18 N.J. Eq. 178, 1867 WL 4103, 90 Am.Dec. 617, 3 C.E. Green 178

Facts

The Hackensack and New York Railroad Company was incorporated in 1856 with the purpose of constructing a railroad from Hackensack to the Paterson and Hudson River Railroad. In 1861, a supplement to the charter authorized an extension of the railroad to Nanent, New York. However, the extension was not formally approved by a majority of the stockholders, and one stockholder, Robert Rennie, opposed the extension, arguing that it was a different enterprise from the one for which he had subscribed his capital.

The Hackensack and New York Railroad Company was incorporated in 1856, with power to construct a railroad from Hackensack to the Paterson and Hudson River Railroad, with a capital stock of two hundred thousand dollars, and with power to mortgage its road and lands, franchises and appurtenances, to the amount of fifty thousand dollars.

Issue

Can the Hackensack and New York Railroad Company extend its railroad to a new destination without the consent of all shareholders, given that the extension represents a significant change in the corporation's original purpose?

The question here is, can this company, either with or without the consent of a majority in interest, of its stockholders, compel the complainant to embark capital subscribed for the first enterprise, in this new one, entirely different.

Rule

A legislative charter is a contract between the state and the corporators, which the state cannot impair. Corporators cannot change the purpose of their charter without the consent of all partners, and any alteration must not fundamentally change the nature of the corporation's business.

A legislative charter is a contract between the state and the corporators, which the state cannot impair. Corporators, who stand by and suffer the company to construct a new work authorized by law, without interference, will be held to have acquiesced in it, and, by such acquiescence will lose their remedy in equity.

Analysis

The court analyzed the original charter and the subsequent supplement, determining that the proposed extension to Nanent represented a radical change in the corporation's purpose. The original charter specified a direct route to the Paterson railroad, while the extension would take a longer, more circuitous route into New York, thus constituting a different enterprise. The court emphasized that the consent of all shareholders was necessary for such a fundamental change.

The extension authorized by the act of 1861, is a radical change in the object of this corporation; it is an enterprise entirely different from that in the charter.

Conclusion

The court concluded that the extension of the railroad could not proceed without the unanimous consent of all shareholders, and therefore granted the injunction sought by the complainant.

The court held that the extension could not proceed without the consent of all shareholders.

Who won?

Robert Rennie prevailed in the case as the court upheld his argument that the extension of the railroad was a significant change in the corporation's purpose that required the consent of all shareholders.

The complainant is a stockholder in the company; and of nine hundred and thirty shares of capital stock issued, for one hundred dollars each, he owns three hundred and twenty-four.

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