Request By:
Mr. Stuart Poston, Administrator
Murray Calloway County Hospital
and Convalescent Division
803 Poplar Street
Murray, Kentucky 42071
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in answer to your letter of September 23 in which you relate the following facts and question:
"Since 1962, when the corporation was formed to create the Murray-Calloway County Public Hospital Corporation, the attorney-board member, who is nominated by the local bar association, has provided free legal advice and work for the Board. However, as the hospital has grown and as legal entanglements have become more complicated and frequent, it has become more of a burden on this particular board member to carry out these responsibilities. The attorney-board member has requested that the Board look into the possibility of hiring an attorney to perform the more complicated legal services for the hospital because of the time that it is now taking. It is the Board's opinion that this attorney-board member is certainly more cognizant of the hospital's operation and should be able to represent the Board and the hospital better than any other local attorney. It is their opinion, therefore, that the Board pay him on a fee-for-service basis when it's warranted.
"Our attorney, Harold Hurt, has requested an opinion of the Attorney General as to whether his being remunerated for services from the hospital would represent or constitute a conflict of interest holding fiduciary powers as a board member and as legal counsel. If you can give us an opinion on this matter, we would appreciate it very much."
The question presented relates to the possibility of a conflict of interest where a member of the hospital board contracts with the board to render legal services for compensation.
Due to the composition of the Murray-Calloway County Hospital, which is, in effect, a city-county hospital, we find no specific statute governing same under Ch. 216 KRS though such an operation is permitted.
Booth v. Owensboro, 274 Ky. 325, 118 S.W.2d 684 (1938). We do find under KRS 216.240 [requiring the establishment of a hospital commission to operate a city hospital], the provision that no member of the commission shall be interested in any contract for services of any kind to the hospital or to the city. This provision would, if applicable, prohibit such a contract as anticipated by the Murray-Calloway County Hospital Board.
Although KRS 216.240 would not apply to a city-county hospital, there, nevertheless, could exist a common law conflict of interest. For example, referring to McQuillin, Mun. Corps., Vol 3, § 12.136, relating to municipal statutes forbidding city officers from being interested in contracts with the city, it is said that:
". . . These express provisions are merely declaratory of the common-law doctrine, and apply to all public officers, including municipal, . . ."
Citing the case of
Neisius v. Henry, 142 Neb., 29, 2 N.W. (2d) 291, it was held that express contracts are unenforceable on ground of public policy, even in absence of statute or charter provision.
Next referring to McQuillin's Municipal Corporations, Vol. 10, § 29.97, we find the general rule expressed as follows:
". . . it is generally held that whenever a public officer enters into a contract the execution of which may make it possible for his personal interests to become antagonistic to his faithful discharge of a public duty, such contract will be held void as against public police. . . ."
Also, referring to the case of
Commonwealth v. Withers, 266 Ky. 29, 98 S.W.2d 24 (1936), we find the Court of Appeals stating that:
"It is a salutary doctrine that he who is intrusted with the business of others cannot be allowed to make such business an object of profit to himself. This is based upon principles of reason, of morality, and of public policy. These are principles of the common law and of equity which have been supplemented and made more emphatic by the foregoing and other statutory enactments.
Nunemacher v. City of Louisville, 98 Ky. 334, 32 S.W. 1091, 17 Ky. Law Rep. 933. In their application and operation it is impossible to lay down any definite rules defining the nature of the interest of the officer, or indicating the line between that which is proper and that which is unlawful. In general, the disqualifying interest must be pecuniary or proprietary by which he stands to gain or lose something. . . . Furthermore, it is not material that the self-interest is only indirect or very small."
As indicated above, it would appear that there would exist a strong possibility of a common law conflict of interest, however, this can only be answered by the courts.
There is also a possibility that this question would involve legal ethics, which should be referred to the Kentucky Bar Association Committee created for the purpose of determining questions dealing with this subject. We suggest that you contact Mr. Leslie G. Whitmer, 315 West Main Street, Frankfort, Kentucky 40601.