CEO 86-42 -- June 19, 1986

CONFLICT OF INTEREST

HOSPITAL DISTRICT TRUSTEE AS REAL ESTATE BROKER IN TRANSACTIONS INVOLVING DISTRICT OR NONPROFIT CORPORATION LEASING HOSPITAL FROM DISTRICT

To: Mr. John W. Gootee, Trustee, Marion County Hospital District, Ocala

SUMMARY:

A prohibited conflict of interest would be created were the real estate firm of a hospital district trustee to receive a commission as a result of a real estate sale involving the hospital district as buyer or seller. A prohibited conflict of interest would be created were the real estate firm of a hospital district trustee to receive a commission in a real estate transaction for acting as a broker for the nonprofit corporation which is leasing the district's hospital. However, no prohibited conflict of interest would be created were the real estate firm to receive a commission from a transaction involving the nonprofit corporation for acting as a broker for the other party to the transaction.

QUESTION 1:

Would a prohibited conflict of interest be created were your real estate firm to receive a commission as a result of a real estate sale involving the hospital district which you serve as a trustee?

This question is answered in the affirmative.

In your letter of inquiry you advise that you serve as a member of the Board of Trustees of the Marion County Hospital District and as a Director of the nonprofit corporation to which the District has leased its hospital. You also advise that you are a licensed real estate broker and that your wife is a licensed real estate salesperson who works under your broker's license.

You question whether you may earn a brokerage commission, through your own services or those of your wife, where the Hospital District was involved as a buyer or seller and either was or was not the party responsible for paying the brokerage commission.

The Code of Ethics for Public Officers and Employees provides in relevant part:

DOING BUSINESS WITH ONE'S AGENCY. -- No employee of an agency acting in his official capacity as a purchasing agent, or public officer acting in his official capacity, shall either directly or indirectly purchase, rent, or lease any realty, goods, or services for his own agency from any business entity of which he or his spouse or child is an officer, partner, director, or proprietor or in which such officer or employee or his spouse or child, or any combination of them, has a material interest. Nor shall a public officer or employee, acting in a private capacity, rent, lease, or sell any realty, goods, or services to his own agency, if he is a state officer or employee, or to any political subdivision or any agency thereof, if he is serving as an officer or employee of that political subdivision. The foregoing shall not apply to district offices maintained by legislators when such offices are located in the legislator's place of business. This subsection shall not affect or be construed to prohibit contracts entered into prior to:

(a) October 1, 1975.

(b) Qualification for elective office.

(d) Beginning public employment.

[Section 112.313(3), Florida Statutes (1985).]

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 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 private interests and the performance of his public duties or that would impede the full and faithful discharge of his public duties. [Section 112.313(7)(a), Florida Statutes (1985).]

In our view, the question of whether a conflict of interest exists does not turn on which party to the transaction is responsible for paying the brokerage commission. Section 112.313(3) prohibits you, as a Trustee of the Hospital District, from acting in an official capacity to purchase any services for the District from a business entity of which you are the proprietor, and prohibits you from acting in a private capacity to sell any services to the District. Therefore, if your real estate firm contracts to act as broker for the District, regardless of whether the District is the seller or the purchaser in the transaction, Section 112.313(3) would be violated. Although the parties by contract may provide that the buyer pays the brokerage commission, as we noted in CEO 82-50, a real estate broker still maintains a fiduciary relationship with his employer regardless of whether compensation will be received.

Section 112.313(7)(a) prohibits you from having a contractual relationship with a business entity which is doing business with the Hospital District. Therefore, this provision would prohibit you from acting as a broker for a party which will be selling to or purchasing from the District. See also CEO 77-64 and CEO 77-110, in which we advised that a public officer should not act as a real estate salesman in the sale of property to the political subdivision which he serves.

Accordingly, we find that a prohibited conflict of interest would be created were your real estate firm to receive a commission as a result of a real estate sale involving the Hospital District which you serve as a Trustee.

QUESTION 2:

Would a prohibited conflict of interest be created were your real estate firm to receive a commission in a real estate transaction for acting as a broker for the nonprofit corporation which is leasing the District's hospital?

This question also is answered in the affirmative.

You question whether you may earn a brokerage commission through your services or those of your wife, where the nonprofit corporation which has leased the District's hospital is involved as either buyer or seller, whether or not the corporation is responsible for payment of the brokerage commission.

If your real estate firm undertakes to act as broker for the nonprofit corporation which has leased the District's hospital, you would have a contractual relationship with a business entity (the nonprofit corporation) which is doing business with the District. This would be true regardless of whether the nonprofit corporation is the buyer or the seller, and regardless of whether the nonprofit corporation is responsible for paying the brokerage commission. See CEO 82-50. Accordingly, we find that a prohibited conflict of interest would be created under Section 112.313(7)(a), Florida Statutes, were your real estate firm to receive a commission in a real estate transaction for acting as a broker for the nonprofit corporation which has leased the District's hospital.

QUESTION 3:

Would a prohibited conflict of interest be created were your real estate firm to receive a commission in a real estate transaction involving the nonprofit corporation which has leased the District's hospital for acting as a broker for the other party to the transaction?

This question is answered in the negative.

Section 112.313(7)(a), Florida Statutes, quoted above in our response to your first question, prohibits you from having a contractual relationship with a business entity which is doing business with the Hospital District. However, you would not have a contractual relationship with the nonprofit corporation if your firm undertakes to act as broker for the other party, whether buyer or seller, to a transaction with the nonprofit corporation. See CEO 85-61 and CEO 81-75. In addition, we note from the terms of the lease between the District and the corporation that the District is not required to approve proposed purchases of real property by the corporation.

Accordingly, we find that no prohibited conflict of interest would be created were your real estate firm to receive a commission in a real estate transaction involving the nonprofit corporation which has leased the District's hospital for acting as a broker for the other party to the transaction.

The Code of Ethics for Public Officers and Employees does not apply to directors of nonprofit corporations when acting in that capacity. See CEO 84-17. Therefore, we suggest that you check the bylaws of the nonprofit corporation and the law regarding directors of nonprofit corporations to see whether there would be any limitations on your actions in real estate transactions involving the nonprofit corporation of which you are a director. In addition, although Section 112.313(12), Florida Statutes, contains a number of exemptions to the prohibitions of Sections 112.313(3) and (7), Florida Statutes, we have not addressed those provisions as your letter does not provide information which would indicate that any of the exemptions could be applicable.