50 N.Y.2d 430 | NY | 1980
Lead Opinion
OPINION OF THE COURT
One who contracts with a municipality knowing that an employee of the governmental unit has an interest in the contract and that the employee has not disclosed that interest as required by section 803 of the General Municipal Law may not enforce performance of the agreement over the objection of the municipality.
Plaintiffs seek specific performance by the County of Putnam of a contract for the purchase by it from them of a 50-acre area of land to be used for garbage disposal and a solid waste recycling plant. The contract was executed on March 25, 1975 pursuant to approval by the county board of supervi
At the time of the negotiations and contract execution Barbarita held a part-time salaried position with the County of Putnam as County Director of Civil Defense. With the position he also held the titles of "Federal and State Aid Coordinator” and "Engineering Coordinator”. Plaintiffs knew that Barbarita was a county employee. On the day preceding the signing of the contract the broker raised a question with Supervisor Bergin and County Attorney Winnie whether his receipt of a commission as an employee might be embarrassing. When told that it might, Barbarita stated that he could rely on plaintiffs’ recognition of their obligation to him for a broker’s fee and instructed Winnie, who was preparing the contract, that it could be drawn, as it subsequently was, with a recital that "no broker [was] in any way concerned with the transfer of this realty”. In furtherance of the intent to keep secret the fact that a fee would be received by Barbarita, no public disclosure of his role in the transaction was made prior to or at the time of the contract’s execution.
For a variety of reasons, not now pertinent, a closing on the contract had not yet taken place by July 7 and July 8, 1976 when, at a hearing being conducted by the State Investigation Commission, the participation and involvement of Barbarita in the sale came to public light. A week later the county board of supervisors passed resolutions rescinding their prior action with respect to the purchase and declaring the contract void. Plaintiffs then instituted this specific performance action.
In our view section 804 of the General Municipal Law which is a part of article 18 relating to conflicts of interest of municipal officers and employees, is not applicable to the present case. We read the language of that section more narrowly than did the Appellate Division. The section makes null and void any municipal contract "in which there is an interest prohibited by this article”. The only prohibition set forth in the article is that found in section 801, which provides that no municipal officer or employee shall have an interest in a contract with his municipality if he has the power or duty to negotiate or to approve the contract or payments thereunder, to audit bills or claims under the contract, or to appoint an officer or employee with any such authority. As to contracts in which such an interest exists, section 804 of the General Municipal Law works a statutory nullification, thereby providing for municipal taxpayers the protection of a bar to any waiver of the prohibited conflicts of interest through consent of the governing body or authority of the municipality (such as may be effected in the private sector by a principal with respect to an agent who participates in the making of a contract on the principal’s behalf). Because Barbarita, the county civil defense director, lacked any au
It does not follow, however, as plaintiffs contend, that nondisclosure of an interest in a municipal contract by an officer or employee which falls short of the prohibition of section 801 is without significance insofar as enforcement of the agreement by the other party to the contract is concerned. It is true that a sanction against the offending public employee for nondisclosure is provided by section 805 of the General Municipal Law which makes any knowing and willful nondisclosing municipal officer or employee guilty of a misdemeanor, and that the municipality may have other practical and civil remedies against its offending employee. That is not the end of the matter however where, as here, the nonmunicipal party to the contract seeking to compel specific performance was aware of the undisclosed interest of the municipal employee and actively participated in the nondisclosure.
Section 803 of the General Municipal Law is clear and explicit in imposing on a municipal officer or employee an obligation to make written public disclosure to the governing body of the municipality of an interest held or to be held by him in an actual or proposed contract with the municipality, which notice of disclosure must be made a part of the official record of proceedings of the body. The requirement extends to all such employees; it is not limited to those who have a part in the negotiation or approval of the contract.
Plaintiffs were chargeable with notice of the duty of disclosure of his expected broker’s fee which rested on the county’s employee Barbarita. They knew that the duty was being
This result does no more than compel respect for the obligation of loyalty due from an agent to his principal. The agent — here, Barbarita — may not entertain an interest adverse to that of his principal nor may he obtain an advantage for himself from a transaction entered into by his principal, unless with the knowledge and consent of the latter. While these principles are generally stated with respect to one who
Accordingly, the order of the Appellate Division should be affirmed, with costs.
. "§ 804. Contracts void.
"Any contract willfully entered into by or with a municipality in which there is an interest prohibited by this article shall be null, void and wholly unenforceable.”
. "§ 803. Disclosure of interest.
"1. Any municipal officer or employee who has, will have, or later acquires an interest in any actual or proposed contract with the municipality of which he is an officer or employee, shall publicly disclose the nature and extent of such interest in writing to the governing body thereof as soon as he has knowledge of such actual or prospective interest. Such written disclosure shall be made part of and set forth in the official record of the proceedings of such body.”
. We do not consider or intimate any views as to what the result would have been if plaintiffs had had no knowledge of the statutory violation.
. Section 800 of the General Municipal Law (definitions) provides: "3. 'Interest’ means a direct or indirect pecuniary or material benefit accruing to a municipal officer or employee as the result of a contract with the municipality which such officer or employee serves.”
Concurrence Opinion
(concurring). While I join in the ultimate disposition of this appeal, I would affirm for the reasons stated by Mr. Justice James D. Hopkins at the Appellate Division (66 AD2d 80). In my view, Barbarita was under an affirmative duty to disclose his interest in the contract in writing to the Putnam County Board of Supervisors (General Municipal Law, § 803). Until that interest was disclosed, it was indeed an interest prohibited by article 18 of the General Municipal Law, thereby rendering the contract, willfully executed by plaintiffs with knowledge of Barbarita’s undisclosed interest, "null, void and wholly unenforceable” (General Municipal Law, § 804).
Judges Jasen, Gabrielli, Fuchsberg and Meyer concur with Judge Jones; Chief Judge Cooke concurs in result in a concurring memorandum in which Judge Wachtler concurs.
Order affirmed.