Request By:
Mr. Ben Carter
Councilman
City of Middlesboro
409 South 28th Street
Middlesboro, Kentucky 40965
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in response to your letter of September 4 in which you state that on two occasions the city has contracted with a corporation whose president is a member of the city council. The question is thus raised as to whether or not a conflict of interest exists with respect to said councilman.
Middlesboro is a city of the third class operating under the councilmanic form of government and there is no specific conflict of interest statute applying to third class cities under Ch. 61 KRS as is the case with cities of other classes operating under the councilmanic form of government. Neither do we find any specific reference in Senate Bill 26 presently governing cities of all classes with respect to this subject. There is, however, a common law principle that forbids contracts of this nature where a public officer has a direct or indirect interest in a contract with a city thereby deriving a pecuniary interest. Such contracts are against public policy and void. In this respect we refer you to Byrne & Speed Coal Company v. City of Louisville, 189 Ky. 346, 224 S.W. 883 (1920); and Nunemacher v. City of Louisville, 98 Ky. 334, 32 S.W. 1091 (1895).
Next referring to the case of Commonwealth v. Withers, 266 Ky. 29, 94 S.W.2d 24 (1936), we find the court stating the following legal concept relating to this question:
"It is a salutary doctrine that he who is intrusted with the business of others cannot be allowed to make such business an object of profit to himself. This is based upon principles of reason, of morality, and of public policy. These are principles of the common law and of equity which have been supplemented and made more emphatic by the foregoing and other statutory enactments. Nunemacher v. City of Louisville, 98 Ky. 334, 32 S.W. 1091. 17 Ky.Law Rep. 933. In their application and operating it is impossible to lay down any definite rules defining the nature of the interest of the officer, or indicating the line between that which is proper and that which is unlawful. In general, the disqualifying interest must be pecuniary or proprietary by which he stands to gain or lose something. Falling within the principle are contracts with firms in which the member of the municipal body is a partner or a corporation of which he is an officer, or sometimes only a stockholder or employee. Byrne & Speed Coal Co. v. City of Louisville, 189 Ky. 346, 224 S.W. 883; Douglas v. Pittman, 239 Ky. 548, 39 S.W. (2d) 979. Furthermore, it is not material that the self-interest is only indirect or very small."
Next referring to McQuillin, Mun. Corps., Vol. 10, § 29.97, we quote the following:
". . . it is generally held that whenever a public officer enters into a contract the execution of which may make it possible for his personal interests to become antagonistic to his faithful discharge of a public duty, such contract will be held void as against public policy. It is the existence of such interest which is decisive, and not the actual effect or influence, if any, of the interest; if there is a potential conflict, the contract is invalid. Moreover, the good faith of the parties, and the reasonableness of the consideration involved in the transaction may be wholly immaterial. . . . The interest of an officer, which will render void a contract with a city, is a present, personal, and pecuniary interest. . . ."
Under the circumstances, it would appear that a conflict would exist with respect to the referred to transaction under the common law principle cited above.