The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)


STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5404

December 14, 1978

OFFICERS AND EMPLOYEES:

Fiduciary obligations

MUNICIPALITIES:

Fiduciary obligations of a city councilperson

Where a city councilperson is also an employee of a private corporation seeking tax relief permitted by statute, the councilperson must abstain from voting on the matter if he or she owes a fiduciary obligation to the private employer. Whether the fiduciary obligation to the private employer is present depends upon the position held by the person involved.

Honorable Mary Brown

State Representative

The Capitol

Lansing, Michigan 48909

You have requested my opinion on a matter which may be stated as follows:

May a city councilperson, who is also an employee of a private corporation, take part in the decision of whether or not to grant the company tax relief permitted by statute?

From the onset it should be noted that, since there is no contract between the public entity and a corporation that employs the public official, your inquiry does not involve a conflict of interest as defined by 1968 PA 317, MCLA 15.321 et seq; MSA 4.1700(51) et seq; nor does it involve common law incompatibility inasmuch as the involved public official is not simultaneously holding two public offices. Instead, a review must be made of the common law regarding the fiduicary obligations a public official owes the public entity which he serves.

In People v Township Board of Overyssel, 11 Mich 222, 225 (1863), the scope of a public official's responsibilities was described by the Michigan Supreme Court, which stated:

'. . . All public officials are agents, and their official powers are fiduciary. They are trusted with public functions for the good of the public; to protect, advance and promote its interest, and not their own. And, the greater necessity exists than in private life for removing from them every inducement to abuse the trust reposed in them, . . .'

In voiding the contract which four members of the 28-member board of freeholders had made with the board, the Court in Overyssel stated, at page 225:

'. . . Fidelity in the agent is what is aimed at, and as a means of securing it, the law will not permit the agent to place himself in a situation in which he may be tempted by his own private interest to disregard that of his principal. . . .'

In the situation raised in your inquiry the concern is that the councilperson's loyalties will be divided between the city he serves and the company which employs him. In this regard a distinction must be made between a public official who serves as an officer or director of a private company and an employee without a fiduciary responsibility to the company. This distinction was recognized in OAG, 1967-1968, No. 4555, p 36 (April 12, 1967), which stated, at page 45:

'. . . If, rather than being an officer or director of the financial institution, he were an employee, the determination of whether substantial conflict of interest existed would depend on the nature of his employment and, particularly, whether there would be any direct or indirect benefit of a substantial nature to him resulting from the arrangement.'

Thus if, in addition to the duties owed to the public, the public official's responsibilities to his private employer are such that a dual agency arises, the individual must avoid the dilemma of determining which of the two masters with adverse interests should be given priority by requiring total abstention from making the choice.

Therefore, it is my opinion that when a councilperson owes a fiduciary duty to a private employer, as well as to the public, he or she must abstain from voting on matters which would require choosing between the duties owed both.

Frank J. Kelley

Attorney General