CEO 97-10 -- March 6, 1997
CONFLICT OF INTEREST
CITY COUNCIL MEMBER SERVING AS PERSONAL REPRESENTATIVE
OF ESTATE WHOSE CHIEF ASSET IS SUBJECT TO LIEN
DUE TO CODE ENFORCEMENT VIOLATIONS
To: (Name withheld at person's request) (Plantation)
A prohibited conflict of interest exists under Section 112.313(7)(a), Florida Statutes, where a city council member is a personal representative to an estate where the estate's primary asset--a shopping center--has a $1.39 million dollar lien against it as a result of code enforcement proceedings initiated by the city before the council member took office. Although the city council may ultimately decide to resolve the matter for less than the amount of the lien, the council member's interests as personal representative are completely incompatible with those of the city's.
Is a prohibited conflict of interest created where a city council member serves as personal representative of an estate where a commercial center owned by the testator's corporation had a lien filed against it due to code enforcement violations?
Under the circumstances presented, your question is answered in the affirmative.
In your letter of inquiry, you advise that you are a City Council member for the City of Plantation. You also are a certified public accountant. In 1989, you relate, you commenced providing accounting and tax services to an individual and his corporation, which owned a small shopping center. Your C.P.A. practice was located at this center; thus, the corporation was also your landlord. In the ensuing years, you and this client became close personal friends. In June 1993, your friend was diagnosed with cancer and, after a three year battle, he died in April 1996. Prior to his death, he requested that you settle his estate and look after the financial well-being of his teenaged son. Subsequently, you were appointed personal representative of his estate and may serve as trustee of the trust that will ultimately be established under the terms of his will.
You further relate that the center has a lengthy history of code enforcement problems that began shortly after your client was first diagnosed with cancer and which culminated in the Code Enforcement Board filing a lien against the property in the amount of approximately $1.39 million dollars. This amount represents 41 separate code violations, each accruing a fine of $100 per day until the violation is cured, and is grossly in excess of the value of the property, you submit. Further, you are convinced that your client's serious, extended illness prevented him from effectively addressing the center's code enforcement problems or in meeting the Code Enforcement Board's various deadlines for challenging its notices and orders. Additionally, you relate that the Code Enforcement Board's proceedings in this matter were concluded before you took office, with the City Attorney now proceeding to foreclose on the lien.
You relate that the commercial center has hired an attorney to represent it both in defense of the foreclosure action and to negotiate any resolution of the matter with the City. Your responsibilities are devoted to making financial decisions on behalf of the estate (and the resulting trust) from information conveyed to you by the center's lawyer. You represent that you will have no contact with City employees on any matter relating to the center and that your contacts with City staff since the owner's death have been of a limited nature.
Finally, you describe the process by which the City may proceed to resolve the matter concerning the center. Businesses undertaking improvements to cure code problems while there are liens against their property need to have the liens resolved as a part of the "curative" process, as banks are reluctant to lend money for improvements where there is a significant Code Enforcement Board lien superior to the bank's interest. Thus, the City has adopted a "work-out" policy to address such matters. First, the property owner agrees to a curative schedule with the City's Building and Zoning Department, which indicates which violations will be fixed at what time, and identifies the exact cure steps. Next, the City considers whether to reduce the lien. Generally, you advise, the City Council recovers its attorneys' fees and costs, together with the cost of time expended by City personnel during the enforcement process. Although an additional amount sometimes is collected in egregious cases, the trend is more "compliance oriented" than "punishment oriented." Further, it is your hope that the City will be sympathetic to the estate because monies paid to the City above its costs will mean fewer assets to support the decedent's son, who was not responsible for the code violations and who could not have cured them. After the City and property owner agree to an amount, the property owner can then budget the improvement (as the owner then knows what the cure costs will be as well as what needs to be paid to the City). A stipulation usually is entered into which requires that the Code Enforcement Board lien be released when the agreed-upon improvements are timely performed and the City is paid. After that agreement is reached, the bank lends the money, the improvements are funded, and compliance usually is achieved.
Procedurally, the City's practice is to decide whether and how to compromise its liens at a one-time, one-night settlement hearing in front of the City Council. After that, performance of the stipulation is an administrative function where work is done under the jurisdiction of the City's Building and Zoning Department. It is anticipated that the center will hire a contractor to perform the work and coordinate inspections with the Building and Zoning Department. You state that you anticipate that, from a timing perspective, the work-out will be negotiated and approved while the estate is being administered and before its assets are distributed to the trust. Thus, you question whether, and to what extent, your service as personal representative to the estate creates a prohibited conflict of interest.
The applicable statute, Section 112.313(7)(a), Florida Statutes, provides:
CONFLICTING EMPLOYMENT OR CONTRACTUAL RELATIONSHIP.--No public officer or employee of an agency shall have or hold any employment or contractual relationship with any business entity or any agency which is subject to the regulation of, or is doing business, with an agency of which he or she is an officer or employee . . .; nor shall an officer or employee of an agency have or hold any employment or contractual relationship that will create a continuing or frequently recurring conflict between his or her private interests and the performance of his or her public duties, or that would impede the full and faithful discharge of his or her public duties. [Section 112.313(7)(a), Florida Statutes (1995).]
Section 112.313(7)(a) prohibits a public officer from having a contractual relationship with a business entity which is regulated by his agency and also prohibits contractual relationships which create continuing or frequently recurring conflicts between private interests and the performance of public duties, or which impede the full and faithful discharge of public duties. Under the rationale of CEO 91-31, in which we concluded that a trustee of a trust had a contractual relationship with the trust, serving as personal representative of the estate would constitute a contractual relationship with the estate. We are of the opinion that this contractual relationship presents a significant conflict between your private interests and your public duties and that it impedes the full and faithful discharge of your duties as a City Council Member by precluding you from voting on matters involving the settlement of the foreclosure action against the shopping center. Thus, the situation, as we view it, constitutes a prohibited conflict of interest under Section 112.313(7)(a).
In numerous opinions we have opined that public officers, such as city council members, who are also attorneys cannot represent clients or be members of law firms representing clients litigating matters against the city without violating the second part of Section 112.313(7)(a) due to their contractual relationships with their clients that are in conflict with the interests of their city. See CEO 88-40, CEO 88-8, CEO 82-7, and CEO 80-12. We view these opinions as analogous to your situation, and as acknowledged by CEO 82-7, regard for your private interests as personal representative to the estate is completely incompatible with proper regard for your public duties as a City Council member in seeing that the City either prevails in its foreclosure action or attains an appropriate settlement in lieu thereof. Therefore, unless and until the matter concerning the shopping center is completely concluded as far as the City is concerned, our opinion is that you cannot serve as personal representative or trustee while also serving on the City Council. We recognize that this is a harsh result, as we did in CEO 91-24, where we opined that the State Comptroller could not retain stocks he had inherited from his mother, where the stocks appertained to various bank holding companies whose subsidiaries were engaged in operations regulated by the Department of Banking and Finance. However, the Code of Ethics contains no exemption which would permit the type of conflict you have described, and we cannot construe one.
Accordingly, a prohibited conflict of interest is created under Section 112.313(7)(a), Florida Statutes, where you, a City Council member, serve as personal representative of an estate where the estate's primary asset has a lien against it that is being foreclosed upon by the City.
ORDERED by the State of Florida Commission on Ethics meeting in public session on March 6, 1997, and RENDERED this 12th day of March, 1997.
Mary Alice Phelan