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Ascension Consortium, Inc. v. Hines

A-2887-07T3 (N.J. Super. App. Div. 2009) (Unpublished)

AGENCIES; CHURCHES — The power of a religious society to give direction in the sale of church property depends on the established rules of the particular society but where a church does not refute the authority of its reverend to sign an agreement for the church and does not provide any evidence that a formal resolution is required to bind the church, and is actually paid money in connection with a sale, the church will be bound by the contract signed by its reverend.

A developer entered into a partnership agreement with a church to build low income housing on vacant property owned by the church. The church’s reverend signed the partnership agreement on behalf of the church. The agreement provided that the church would contribute the vacant land to the partnership and the developer would secure financing for the project, obtain all governmental approvals, and manage the development process. The agreement also stated that the developer would receive forty-nine percent of the proceeds from the sale of the lots. The church, with the assistance of the developer, mortgaged the property to satisfy tax liens. The reverend signed the mortgage documents on behalf of the church even though the church did not formally authorize him to do so.

Despite the parties’ agreement that the vacant lot would be transferred to the partnership, the church never did so. Further, the church failed to satisfy the mortgage and a foreclosure action was brought. To save the property from foreclosure, the church sold the lots and paid the bank. The reverend and the church refused to divide the proceeds of the sale with the developer. The developer sued the church.

The lower court, after a jury trial, found that the church and the reverend breached their agreement with the developer to divide the proceeds and awarded money damages to the developer. The church and reverend appealed.

The Appellate Division affirmed. It rejected the reverend and church’s argument that no contract existed between the parties because there was no board resolution and ruled that the church was bound by the agreement because the reverend had apparent authority to act on behalf the church. The Court held that the power of a religious society to give direction in the sale of church property depends on the established rules of the particular society. The Court noted that the reverend was the president of the church and conducted other business transactions on behalf of the church without the need for a formal board resolution. It also found that the reverend testified that he had signed the agreement “for the church” and the church did not refute this fact or provide any evidence that a formal resolution was required to bind the church. Further, the Court pointed out that the church issued several checks in connection with the development project. The church offered no evidence to show that its board objected to making such payments.

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