## Facts

- Indian Acres Club of Thornburg, Inc. (the club) was a property owners’ association that owned real estate used for a private recreational campground and related common facilities.
- Glover held a long-term lease from the club for a portion of the club’s real estate (the Glover lease).
- The Glover lease included a non-assignment clause restricting assignment of the leasehold interest.
- In 1986, the club’s board of directors adopted resolutions limiting the authority of the club’s corporate officers, including that officers could not bind the club (1) to any contract concerning the lease or exclusive use of the club’s real estate without prior board approval, and (2) to any contract with a term exceeding one year without prior board approval.
- Crowe was a member of the board when those 1986 resolutions were adopted; he voted for them and seconded the motion adopting one of the resolutions.
- In 1988, the club’s president, Ritter, signed an addendum to the Glover lease on the club’s behalf without obtaining board approval.
- The addendum purported to remove the non-assignment clause from the Glover lease.
- After the addendum, Glover attempted to assign the lease to Crowe.
- The club filed an action for declaratory relief against Glover’s estate and Crowe seeking a declaration as to whether the addendum (and the resulting attempted assignment) was valid and enforceable against the club.

## Issues

1. Whether the club’s president had implied authority to execute, without board approval, an addendum removing the lease’s non-assignment clause despite board resolutions restricting officers’ authority over real-estate lease matters and contracts exceeding one year.
2. Whether Crowe could enforce the addendum against the club based on the president’s apparent authority, given Crowe’s participation in and knowledge of the board resolutions limiting officer authority.

## Decision

- The court granted declaratory relief for the club.
- The court held the 1988 addendum was not effective to bind the club because it was executed without the board approval required by the club’s 1986 resolutions.
- The court rejected the argument that the president’s office carried implied authority to make a material change to the long-term lease in the face of express board-imposed limits.
- The court rejected Crowe’s apparent-authority argument, concluding that Crowe’s knowledge of the limits on officer authority defeated any claim of reasonable reliance.
- Because the addendum was ineffective, the lease’s non-assignment clause remained in force, and the attempted assignment to Crowe was not enforceable against the club.

## Legal Principles

- A corporation (including an incorporated property owners’ association) is bound by an officer’s act only when the officer acts within actual authority or when the elements of apparent authority are met.
- Board resolutions that require board approval for specified categories of contracts restrict an officer’s actual authority in those matters.
- Implied authority associated with a corporate office does not permit an officer to take action that conflicts with express limits imposed by the board.
- Apparent authority requires a reasonable belief in the agent’s authority that is traceable to the principal’s manifestations; a party with actual knowledge of restrictions on authority cannot reasonably rely on apparent authority to enforce an unauthorized transaction.
- A material modification to a long-term lease of corporate real estate that falls within categories requiring board approval is not binding when executed by an officer without that approval.

## Conclusion

Indian Acres Club of Thornburg, Inc. v. Estate of Glover holds that where a board has limited officers’ power to bind the corporation in real-estate lease matters and long-term contracts, a president’s unapproved addendum removing a lease non-assignment clause is not binding, and an intended assignee who knew of those limits cannot enforce the addendum by claiming apparent authority.


Indian Acres Club of Thornburg, Inc. v. Estate of Glover, 37 Va. Cir. 478 (1996)