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Boylan v. The Radburn Association, Inc.

BER-C-438-06 (N.J. Super. Ch. Div. 2008) (Unpublished)

CORPORATIONS; BOARD OF DIRECTORS — Even though a corporation’s board of directors can be constituted in violation of New Jersey law, it still can have apparent authority to bind the corporation to a contract with an innocent third party.

A community association that oversaw a planned community within a municipality entered into an agreement with a developer for the sale of a parcel of vacant land that was to be developed consistent with the rest of the community. Homeowners who resided within the community sued the association and the developer to prevent the transfer. They argued that the board’s makeup violated state law and alternatively, that the community’s board of trustees acted beyond its authority by not hearing objections from community residents before assigning any rights in the land. On the homeowners’ claims against the association, the Court found that the homeowners did not point to any statutes or constitutional provisions that would override precedent holding that a corporation’s board constituted in violation of state law still had the authority to contract with an innocent third party. It also found that the language in the community’s declaration of restrictions, which the homeowners argued prevented the transfer without hearing objections from residents, specified assignments of property rights but made no mention of grants or transfers of land or real estate. The Court pointed out that while the developer was to take title to the vacant land, the rights and powers held by the association were to remain with the association and were not to be transferred to the developer. Based on its conclusions, the Court granted the association’s request to dismiss the homeowners’ claims on summary judgment.

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