Superior Court County: Snohomish. Superior Court Cause No: 94-2-08613-6. Date filed in Superior Court: June 8, 1995. Superior Court Judge Signing: Richard Thorpe.
Written by: Agid, J., Concurred by: Coleman, J., Becker, J.
AGID, J. -- The code of ethics for municipal officers, RCW ch. 42.23, prohibits them from having a beneficial interest in contracts entered into on the municipality's behalf. We are asked to decide whether a municipal contract that limits the liability of a non-profit organization's board members for discretionary decisions made in their official capacity gives those board members a beneficial interest in the contract. Because the code seeks only to regulate municipal officers' financial interests in contracts, not the type of non-pecuniary interest involved here, we conclude that it does not.
In 1992, the Mountlake Terrace police chief, representatives of the Mountlake Terrace Parks and Recreation Department and a group of community representatives created the Neutral Zone to provide volunteer support services to the city's at-risk youth. The Neutral Zone was housed in a facility provided by the Edmonds School District. In its early stages, it was funded, in part, by appropriations from the city budget. Because of the city's close affiliation with the project, two city council members, Candice Johns and Pat Cordova, were on the Neutral Zone's board of directors.
In 1993, the board of directors incorporated the Neutral Zone as a non-profit organization. The city, the school district and the Neutral Zone then drafted an agreement outlining their roles in the operation. The provision of the agreement at issue here, section 9, limits the liability of Neutral Zone board members for making or failing to make discretionary decisions when the board members are acting in their official capacity, unless the decision or failure constitutes gross negligence.
In 1994, the proposed agreement came before the Mountlake Terrace city council for consideration. At the time, Cordova and Johns were members of the city council and were also serving as unpaid directors of the Neutral Zone. Before the vote, Councilmember Joyce Barry challenged Johns' and Cordova's right to participate, contending their involvement in the Neutral Zone presented a conflict of interest under the code of ethics. Johns and Cordova disagreed and voted to adopt the measure, which passed by a vote of four to three. Barry sought a writ of mandamus and declaratory relief to void the agreement. The trial court granted Johns and Cordova's cross-motion for summary judgment and dismissed Barry's complaint. Barry appeals.
RCW 42.23.030 prohibits a municipal officer from making contracts on the municipality's behalf that give the officer a beneficial interest in the contract:
No municipal officer shall be beneficially interested, directly or indirectly, in any contract which may be made by, through or under the supervision of such officer, in whole or in part, or which may be made for the benefit of his or her office, or accept, directly or indirectly, any compensation, gratuity or reward in connection with such contract from any other person beneficially interested therein.
Contracts made in violation of the statute are void, and any officer violating the provisions of the statute is liable to the municipality for a $300 fine. RCW 42.23.050. Barry contends Johns and Cordova were "beneficially interested" in the contract between Mountlake Terrace and the Neutral Zone within the meaning of RCW ch. 42.23 because it limited their liability for decisions made in their capacity as Neutral Zone board members.
RCW ch. 42.23 does not define beneficial interest. Johns and Cordova submit that the term is limited to financial interests. Barry argues that it should be read broadly to prohibit municipal officers from approving contracts that provide them any benefit, financial or otherwise. Read as a whole, the code of ethics clearly supports Johns and Cordova's interpretation. Although the code does not define a beneficial interest, its list of the types of beneficial interests that are not prohibited by the code is instructive. These exceptions include contracts for utility services, publication of legal notices required by law and employment contracts for school bus drivers and other school district employees. See RCW 42.23.030(1)-(10). Because the exceptions to the general rule prohibiting a municipal officer from having a beneficial interest in certain municipal contracts all involve business transactions or employment matters, we conclude the Legislature intended the term beneficial interest under the general rule to encompass the same thing. We conclude, therefore, that RCW 42.23.030 applies only to municipal contracts involving business transactions, employment matters and other financial interests and cannot be read to apply to the contract here, which conferred no financial benefit on Johns or Cordova.*fn1
Section 9 of the agreement did not confer even a potential financial benefit on Johns and Cordova because state law extends them the same benefit. Section 9 provides:
Pursuant to RCW 4.24.264, the Neutral Zone board members shall not be individually liable for any discretionary decision or failure to make a discretionary decision within his or her official capacity as a board member unless the ...