FORMAL OPINION
DATE: February 7, 1994
SUBJECT: Conflict of Interests; N.C.G.S. § 14-234 Transfer of Real Property
REQUESTED BY: Robert B. Blythe, Huntersville Town Attorney
QUESTION: May a corporation which is the owner of real property enter into a contract with a town for the transfer of an easement interest in the corporation’s property in exchange for an easement interest in real property owned by the town where a town commissioner is a major stockholder of the corporation.
CONCLUSION: No
DISCUSSION:
Commissioner A of the Town of Huntersville is a major stockholder of X Corporation which owns tract of land number 1. The Town owns tract of land number 2. It has been proposed that the Town obtain an easement over portions of tract number 1 in exchange for an easement to X Corporation over portions of tract number 2. N.C.G.S. § 14-234, which is set out below, prohibits persons who hold public office from dealing with their unit of government in matters affecting their own self interests, and while the statute does contain several exceptions, none appears to be applicable. Because Commissioner A is a major stockholder in X Corporation, the exemption for minority stockholders set out in N.C.G.S. § 14-234(c1) is not applicable. Because the contemplated transaction involves an interest in real property, the exemption in regard to goods and services for less populated counties and cities set out in N.C.G.S. § 14-234(d1) is also inapplicable.
N.C.G.S. § 14-234(a) reads, in pertinent part, as follows:
§ 14-234. Director of public trust contracting for his own benefit; participation in
business transaction involving public funds; exemptions.
(a) If any person appointed or elected a commissioner or director to discharge any trust wherein the State or any county, city or town may be in any manner interested shall become an undertaker, or make any contract for his own benefit, under such authority, or be in any manner concerned or interested in making such contract, or in the profits thereof, either privately or openly, singly or jointly with another, he shall be guilty of a misdemeanor . . .
The discussion of the statutory language of N.C.G.S. § 14-234 by the North Carolina Supreme Court in State v. Williams, 153 N.C. 597, 68 S.E. 897 (1910) supports the position that a violation of the statute occurs only when there is at least some pecuniary benefit passing to the official. In the opinion of that case, the Supreme Court stated as follows:
Nor is it necessary to show that defendant directly profited by the contract. In Doll v. State, 45 Ohio St., 445, it is held that: "To become so interested in the contract, it is not necessary that he make profits on the same. But it is sufficient if, while acting as such officer, he sell the property to the city for its use, or is personally interested in the proceeds of the contract of sale, and received the same, or part thereof, or has some pecuniary interest or share in the contract."
153 N.C. at 600. As a major stockholder of X Corporation, Commissioner A would benefit indirectly if X Corporation obtained an easement over tract number 2 and therefore, the statute prohibits the exchange of easements.
Your request for an opinion also asks if the results would be the same if X Corporation merely permitted the Town to use the easement. The statute, through its very broad language says, in essence, that an official, who is a member of a local government governing body should not have any self-dealing with the government body for which he or she is an officer. See David M. Lawrence, Local Government Property Transactions, § 209 (1987). The statutory language prohibiting self-dealing is not expressly limited to situations where there is a financial benefit passing to the official and N.C.G.S. § 14-234(a) could be interpreted literally to probibit even an informal arrangement for the use of the property by the Town. Such an arrangement could be seen to be an implied contract in violation of N.C.G.S. § 14-234 and would very likely create significant legal problems for Commissioner A and the Town in the future. However, an outright donation of an easement over tract number 1 by the X Corporation to the Town without any consideration is probably not prohibited by N.C.G.S. § 14-234. Any acceptance of an express outright donation of an easement in X Corporation’s property by the Town should only be made after full disclosure by Commissioner A and without any participation by him.
Finally, your letter asks if there are other possible courses of action. In David M. Lawrence, Local Government Property Transactions, § 209 (1987) the author suggests that real property owned by a city council member may be acquired by the city by eminent domain because such acquisition is non-consensual and does not involve contracts which are the focus of N.C.G.S. § 14-234(a). As Mr. Lawrence points out, should a decision be made to condemn an interest in tract number 1, Commissioner A should make disclosure of his interest in X Corporation and take no part in any deliberation or action regarding the property.
MICHAEL F. EASLEY Attorney General
Charles J. Murray Special Deputy Attorney General