Court Opinion

ID: 4127870
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:34:00.137488+00
Date Added: 2024-06-11T12:04:48.741310
License: Public Domain

TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                   OFFICE OF THE ATTORNEY GENERAL

                                             State of California

                                              DANIEL E. LUNGREN

                                                Attorney General

                                 ______________________________________

                      OPINION           :
                                        :          No. 95-110
                   of                   :
                                        :          July 27, 1995
          DANIEL E. LUNGREN             :
            Attorney General            :
                                        :
          CLAYTON P. ROCHE              :
         Deputy Attorney General        :
                                        :
______________________________________________________________________________

           THE HONORABLE JAMES L. MARKMAN, CITY PROSECUTING ATTORNEY,
CITY OF BREA, has requested an opinion on the following question:

                May a city council enter into a development agreement with a land developer if one of
the council members is married to an attorney whose law firm represents the developer concerning
matters unrelated to the proposed development?

                                                    CONCLUSION

                A city council may enter into a development agreement with a land developer if one of
the council members is married to an attorney whose law firm represents the developer concerning
matters unrelated to the proposed development, as long as the council member discloses the interest to
the council, such interest is noted in the council's official records, and the member does not participate
in negotiating or voting upon the agreement.

                                                      ANALYSIS

                  Government Code section 10901 provides:

    1
     All section references are to the Government Code unless otherwise indicated.

                                                            1.                                    95-110

                 "Members of the Legislature, state, county, district, judicial district, and city
        officers or employees shall not be financially interested in any contract made by them
        in their official capacity, or by any body or board of which they are members. . . ."

We are asked to determine whether the prohibition contained in section 1090 would apply to the
execution of a "development agreement" ('' 65864-65869.5) by a city council and a land developer
where one of the council members is married to an attorney whose law firm represents the developer in
matters unrelated to the proposed development. Two legal issues are presented: (1) is a development
agreement a "contract" within the meaning of section 1090, and if so, (2) would the council member
have only a "remote interest" (' 1091) so as to allow execution of the agreement by the council?

                1. Existence of a "Contract"

                The first issue to be resolved is whether a development agreement constitutes a
"contract" for purposes of section 1090. We conclude that it does.

                In 1979 the Legislature enacted sections 65864-65869.5, authorizing cities and counties
to enter into development agreements with land developers. The legislation was intended to address
the situation presented in Avco Community Developers, Inc. v. South Coast Regional Commission
(1976) 17 Cal. 3d 785 and its progeny, such as Raley v. California Tahoe Regional Planning Agency
(1977) 68 Cal. App. 3d 965. These cases applied the general rule that a land developer does not acquire
a "vested right" to complete a proposed project until such time as a final building permit has been
issued and the developer has performed substantial work in reliance upon the permit. Hence, under the
general rule a developer could become involved in detailed planning and other matters and yet find
himself unable to complete the project because of changes in local regulations or approvals. (See City
of West Hollywood v. Beverly Towers, Inc. (1991) 52 Cal. 3d 1184, 1189-1194; Nadel, This Land Is
Your Land . . . Or Is It? Making Sense Of Vested Rights In California (1989) 22 Loyola L.A. L.Rev.
791; Sigg, California's Development Agreement Statute (1985) 15 Sw.U.L.Rev. 695.) The Legislature
authorized the use of development agreements to bring certainty to the planning of projects at an earlier
stage than possible under the general rule.

                 This purpose is expressed by the Legislature in its declarations and findings, set forth as
follows in section 65864:

                 "(a) The lack of certainty in the approval of development projects can result in
        a waste of resources, escalate the cost of housing and other development to the
        consumer, and discourage investment in and commitment to comprehensive planning
        which would make maximum efficient utilization of resources at the least economic
        cost to the public.

                "(b) Assurance to the applicant for a development project that upon approval
        of the project, the applicant may proceed with the project in accordance with existing
        policies, rules and regulations, and subject to conditions of approval, will strengthen the
        public planning process, encourage private participation in comprehensive planning,
        and reduce the economic costs of development.

                                                    2.                                                95-110

                 "(c) The lack of public facilities, including, but not limited to, street, sewerage,
         transportation, drinking water, school and utility facilities, is a serious impediment to
         the development of new housing.              Whenever possible, applicants and local
         governments may include provisions in agreements whereby applicants are reimbursed
         over time for financing public facilities."

With respect to the terms of a development agreement, section 65865.2 provides:

                  "A development agreement shall specify the duration of the agreement, the
         permitted uses of the property, the density or intensity of use, the maximum height and
         size of proposed buildings, and provisions for reservation or dedication of land for
         public purposes. The development agreement may include conditions, terms,
         restrictions, and requirements for subsequent discretionary actions, provided that such
         conditions, terms, restrictions, and requirements for subsequent discretionary actions
         shall not prevent development of the land for the uses and to the density or intensity of
         development set forth in the agreement. The agreement may provide that construction
         shall be commenced within a specified time and that the project or any phase thereof be
         completed within a specified time.

                 "The agreement may also include terms and conditions relating to applicant
         financing of necessary public facilities and subsequent reimbursement over time."

Development agreements may be enforced as specified in section 65865.4:

                 "Unless amended or canceled pursuant to Section 65868, or modified or
         suspended pursuant to Section 65869.5, and except as otherwise provided in
         subdivision (b) of Section 65865.3, a development agreement shall be enforceable by
         any party thereto notwithstanding any change in any applicable general or specific plan,
         zoning, subdivision, or building regulation adopted by the city, county, or city and
         county entering the agreement, which alters or amends the rules, regulations, or policies
         specified in Section 65866."2

               In examining whether a development agreement constitutes a "contract" for purposes of
section 1090, we first note the Legislature's fundamental goals in enacting the statutory prohibition
against the holding of financial interests in government contracts. In 66 Ops.Cal.Atty.Gen. 152,
156-157 (1983), we observed:

                 "Section 1090 of the Government Code codifies the common law prohibition
         and the general policy of this state against public officials having a personal interest in

    2
      Section 65868 authorizes the mutual modification or cancellation of an agreement. Section 65869.5 provides for
possible changes in state or federal law which could affect an agreement. Section 65865.3, subdivision (b) refers to certain
matters when there is an annexation of territory.

                                                            3.                                                     95-110

       contracts they make in their official capacities. (Terry v. Bender (1956) 143
Cal. App. 2d 198, 206; Schaefer v. Berinstein (1956) 140 Cal. App. 2d 278, 289; Stockton
       P. & S. Co. v. Wheeler (1924) 68 Cal. App. 592, 597; cf. Oakland v. California
       Construction Co. (1940) 15 Cal. 2d 573, 576.) Mindful of the ancient adage, that `no
       man can serve two masters' (Matthew 6:24; cf. People v. Darby (1952) 114 Cal. App. 2d
412, 426), `a self-evident truth, as trite and impregnable as the law of gravity' (Stockton
       P. & S. Co. v. Wheeler, supra, at 601), the section was enacted to insure that public
       officials `making' official contracts not be distracted by personal financial gain from
       exercising absolute loyalty and undivided allegiance to the best interest of the entity
       which they serve, and at least with respect to those contracts, it does so by removing or
       limiting the possibility of their being able to bring any direct or indirect personal
       influence to bear on an official decision regarding them. (Stigall v. City of Taft (1962)
       58 Cal. 2d 565, 569; City Council v. McKinley (1978) 80 Cal. App. 3d 204, 212;
       Fraser-Yamor Agency, Inc. v. County of Del Norte (1977) 68 Cal. App. 3d 201, 215.)
       The mechanism of the section is one of prohibiting public officials from being
       personally financially interested as private individuals in any such contract. . . ."

More recently in 76 Ops.Cal.Atty.Gen. 118, 119 (1993) we additionally stated:

               ". . . Section 1090 is concerned with financial interests, other than remote or
       minimal interests, which would prevent officials from exercising absolute loyalty and
       undivided allegiance in furthering the best interests of their public agencies. (See
       Stigall v. City of Taft (1962) 58 Cal. 2d 565, 569.) Moreover, when section 1090 is
       applicable to one member of the governing body of a public entity, the proscription
       cannot be avoided by having the interested member abstain; the entire governing body
       is precluded from entering into the contract. (Thomson v. Call (1985) 38 Cal. 3d 633,
       647-649; Stigall v. City of Taft, supra, 58 Cal.2d at p. 569; City of Imperial Beach v.
       Bailey (1980) 103 Cal. App. 3d 191, 197; 70 Ops.Cal.Atty.Gen. 45, 48 (1987); 69
       Ops.Cal.Atty.Gen. 102, 104 (1986).) A contract which violates section 1090 is void.
       (Thomson v. Call, supra, 38 Cal.3d at p. 646.)" (Fn. omitted.)

                With these principles in mind, we turn to the terms of a development agreement
executed by a city or county and a land developer. A development agreement contains the essential
elements of a contract as defined by the Legislature. "A contract is an agreement to do or not to do a
certain thing." (Civ. Code, ' 1549.) "It is essential to a contract that there should be: 1. Parties
capable of contracting; 2. Their consent; 3. A lawful object; and, 4. A sufficient cause or
consideration." (Civ. Code, ' 1550.) A development agreement contemplates that both the city or
county and the developer will agree to do or not to do certain things. Both parties will mutually
consent to terms and conditions allowable under the law. Both will receive consideration. The
developer will essentially receive the local agency's assurance that he can complete the project. The
local agency in turn will reap the benefit of the development, with all the conditions it might
legitimately require, such as streets, parks, and other public improvements or facilities. (See Civ.
Code, '' 1556, 1565, 1595, 1596, 1605.)

                                                   4.                                                95-110

                  In Thomson v. Call (1985) 38 Cal. 3d 633, a developer sought city approval for a
2500-unit development. The project required a rezoning of the land as well as the usual building
permits. The city indicated that it would approve the development if the developer dedicated land for a
park overlooking the project. One parcel of the land needed for the park was owned by a city council
member. At subsequent council meetings and in anticipation of the possible sale of his property to the
developer, the council member abstained from participation in council actions involving his property.
He did, however, vote on other matters relating to the proposed development such as the rezoning
application. The court concluded that the entire transaction, although accomplished in steps, was a
single, multi-party "contract" for purposes of section 1090 and that it involved the city council member,
at least indirectly. The court concluded:

                  "As part of the transaction at issue, Call [the council member] sold property to
         the city, using IGC [the developer] as a conduit. Whether we regard his interest as
         direct or indirect, it is clearly a pecuniary interest forbidden by section 1090 and by the
         decisions applying conflict-of-interest rules generally. Neither the absence of actual
         fraud nor the possibility of a `good faith' mistake on Call's part can affect the conclusion
         that this contract violates section 1090 and is therefore void [citations]." (Id., at p. 646;
         fns. omitted.)

If a formal development agreement had been executed in Thomson v. Call, could the council member
have sold his property to the developer with impunity? We believe not. A council member may not
"serve two masters" whether the development (1) proceeds in steps or (2) is the product of a single,
formal development agreement.

                   2. Existence of a "Remote Interest"

               Having determined that a development agreement constitutes a contract for purposes of
section 1090, we next consider the type of interest that the council member would have in the proposed
agreement. If the interest may be characterized as a "remote interest" (' 1091), the council could
execute the agreement with the developer if specified conditions were met.3 We conclude that the
council member's interest in the development agreement would be a remote interest.

                   Section 1091 states:

                  "(a) An officer shall not be deemed to be interested in a contract entered into by
         a body or board of which the officer is a member within the meaning of this article if
         the officer has only a remote interest in the contract and if the fact of that interest is
         disclosed to the body of the board of which the officer is a member and noted in its
         official records, and thereafter the body or board authorizes, approves, or ratifies the

    3
     The Legislature has also deemed certain interests in contracts to be "noninterests" (' 1091.5, subd. (a) ["An officer or
employee shall not be deemed to be interested in a contract if his or her interest is any of the following . . . ."].) The
prohibition of section 1090 is inapplicable in the circumstances described in section 1091.5, none of which are germane here.

                                                             5.                                                     95-110

       contract in good faith by a vote of its membership sufficient for the purpose without
       counting the vote or votes of the officer or member with the remote interest.

                "(b) As used in this article, `remote interest' means any of the following:

                ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                "(6) That of an attorney of the contracting party or that of an owner, officer,
        employee, or agent of a firm which renders, or has rendered, service to the contracting
        party in the capacity of stockbroker, insurance agency, insurance broker, real estate
        agent, or real estate broker, if these individuals have not received and will not receive
        remuneration, consideration, or a commission as a result of the contract.

                ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

                 "(c) This section is not applicable to any officer interested in a contract who
        influences or attempts to influence another member of the body or board of which he or
        she is a member to enter into the contract.

                 "(d) The willful failure of an officer to disclose the fact of his or her interest in
        a contract pursuant to this section is punishable as provided in Section 1097. That
        violation does not void the contract unless the contracting party had knowledge of the
        fact of the remote interest of the officer at the time the contract was executed."

Here the council member's spouse is a partner in a law firm which represents the developer in matters
other than the proposed development. The spouse does not personally provide legal services to the
developer, but as a partner, she owns a one percent interest in the firm.

                Initially we note that even though the spouse does not provide legal services to the
developer, such fact is immaterial. As a partner, she would be financially interested in any profits of
the firm as well as its financial success, and hence would be interested in all matters handled by the
firm. She must be considered an attorney of the developer for purposes of section 1090 under basic
rules of agency and partnership law irrespective of which attorneys in the firm actually perform the
legal services. (Cf. Fraser-Yamor Agency, Inc. v. County of Del Norte (1977) 68 Cal. App. 3d 201,
210-211, 214-215; 77 Ops.Cal.Atty.Gen. 112, 116 (1994). )

                 While the council member's spouse would have a financial interest in the development
agreement, would the council member have one as well? Under settled case law and opinions of this
office, a member of a board or commission always is financially interested in his or her spouse's source
of income for purposes of section 1090. This is true even if the husband and wife have an agreement
that their own earnings are to be treated as their separate property, since each spouse is liable for the
necessities of life for the other. (See Reece v. Alcoholic Bev. Etc. Appeals Bd. (1976) 64 Cal. App. 3d
675, 683; Nielsen v. Richards (1925) 75 Cal. App. 680, 685-687; 73 Ops.Cal.Atty. Gen. 191, 194-195
(1990); 69 Ops.Cal.Atty.Gen. 102, 106 (1986).)

                                                                        6.                                         95-110

                  Accordingly the council member here would be financially interested in the
development agreement by virtue of his wife's status as a partner in a law firm handling matters for the
developer, even though the firm does not represent the developer regarding the proposed development.
However, since no fees will be generated for the firm with respect to the development, the spouse's (and
thus council member's) financial interest would meet the statutory definition of being "remote."4 The
firm's attorneys "have not received and will not receive remuneration, consideration, or a commission
as a result of the contract." (' 1091, subd. (b)(6).)5

                   Finally we point out our observation made in 67 Ops.Cal.Atty.Gen. 369 (1984):

                "It is to be noted that section 1091 of the Government Code speaks in terms of
         a board authorizing, approving or ratifying a contract `in good faith by a vote of its
         membership sufficient for the purpose without counting the vote or votes of the officer
         of member with the remote interest.'

                 "This office has characterized the requirements of section 1091 as meaning that
         the member must not only disclose his interest in the proposed contract and refrain
         from attempting to influence other members, but that the member should completely
         abstain from any participation in the matter. (See 65 Ops.Cal.Atty.Gen. 305, 307
         (1982).)

                  "Such complete abstention would also appear to be required to insure
         compliance with the PRA if the remote interest also falls within the purview of the act
         as a financial interest. (See Gov. Code, ' 87100; FPPC Reg. ' 18702.)" (Id., at p.
         377, fn. 8.)6

                We conclude that a city council may enter into a development agreement with a land
developer if one of the council members is married to an attorney whose law firm represents the
developer concerning matters unrelated to the proposed development, as long as the council member
discloses the interest to the council, such interest is noted in the council's official records, and the
council member abstains from voting.

    4
     If the council member himself were the attorney and partner, the interest would clearly meet the statutory definition of
being "remote." It is even more remote where the council member is not the attorney but rather the spouse of the attorney.
Under these circumstances the remote interest exception must reasonably be extended to him in the same manner that the
financial interest is extended to him through his spouse.

    5
       It may be argued that the phrase "have not received and will not receive remuneration, consideration, or a commission as
a result of the contract" does not constitute a limitation upon attorneys of contracting parties, but only upon the remaining
individuals identified in subdivision (b)(6). (See Stats. 1984, ch. 113, ' 1; Stats. 1982, ch. 451, ' 1.) We need not decide
this issue under the facts presented.

    6
      The scope of this opinion is limited to an analysis of the requirements of sections 1090-1097. In particular, we do not
address herein the requirements of the Political Reform Act of 1974 ('' 81000-91015) administered by the Fair Political
Practices Commission.

                                                              7.                                                     95-110

* * * * *

   8.        95-110