Volume 7 - Opinions of Counsel SBEA No. 41
Conflict of interest (town assessor) (purchase at county tax sale) – General Municipal Law, §§ 801, 804; Real Property Tax Law, § 1018:
When a town assessor acquires title to tax delinquent real property located within the town which he serves, it is a conflict of interest and such sale is void ab initio.
We have been asked whether there is a prohibited conflict of interest (General Municipal Law, §801) when, at a county auction of properties acquired by tax deed (Real Property Tax Law, §1018), a town assessor acquires title to real property located within the town which he serves. In the case of Rose v. Eichhorst, 42 N.Y.2d 92, 365 N.E.2d 868, 396 N.Y.S.2d 837 (1977), the Court of Appeals held that there was a conflict of interest when, at a county tax sale, a town board member acquired premises located in the town which he served.
In pertinent part, section 801 of the General Municipal Law provides that a municipal officer or employee may not have an interest “in any contract with the municipality of which he is an officer or employee” if, individually or as a board member, that officer or employee “has the power or duty to...negotiate, prepare, authorize or approve the contract or authorize or approve payment thereunder.” A contract entered into in which there is such a prohibited conflict of interest is declared to be “null, void and unenforceable” (General Municipal Law, §804).
In Rose v. Eichhorst, supra, the Court of Appeals broadly construed the language of section 801, by concluding that a town officer should be considered an officer of the county in which that town is located, in determining whether a contract between the grantor-county and the grantee-town board member involved a prohibited conflict of interest. In so doing, the Court reviewed, at some length, the “interrelationship in the government function” (42 N.Y.2d, at 94) between counties and towns, in general, and, more particularly “in the tax mechanism established by the Legislature” (id., at 94-95).
The Court rejected the petitioner’s contention that, as a town officer, he had no interest in the collection of sums owed to the county – which he asserted was the sole purpose of the tax sale. The Court stated that “while this is descriptive of the end result, it neglects to appreciate the process leading up to the sale” (id., at 96). Further, the Court declared:
To consider solely the procedure by which delinquent taxes are collected is to focus in on only one aspect of a larger and more complex picture. Of course, the county is not the town and the town is not the county, but our legal inquiry must not end there. In the greater scheme of things, the two municipalities have an overlap, if not identity of interest.
...Whether the county is treated as an agent of the town or simply one of two participants in the same collection process, their close affiliation cannot be ignored. (id., at 97).
In conclusion, the Court declared that “the contract of sale, though in form concerning only the county, by implication also involves the town” and that the petitioner “through his membership on the town board, in preparing the town budget and thus initiating the collection of the taxes, must be considered as part of the approval and authorization culminating in the county tax sale” (id., at 97-98).
Thus, the Court’s decision in Rose is based upon two assumptions:
(1) that, generally, a town officer may be considered a county officer, for purposes of Article 18 of the General Municipal Law, because of the overlap or identity of interest of the county and town in the tax collection and enforcement processes; and
(2) that, specifically, the role of a town board member in initiating the collection of taxes via the preparation of the town budget should be considered “as part of the approval and authorization culminating in the county tax sale”.
Applying these premises to the facts at hand, the conclusion seems inescapable that the town assessor, who has a substantially greater role than a town board member in determining the relative tax liability of individual parcels of real property, would be similarly barred by section 801 from acquiring property within his own town, at or after a county tax sale. In contrast to the town board member who assists in the determination of the town-wide tax levy, a town assessor’s determinations of assessed values for each of the parcels to be subject to that tax will have a direct bearing on each property’s share of that aggregate tax burden.
Indeed, the ability of the county and town to raise property taxes is entirely contingent upon the assessor’s completion of each annual assessment roll. And, while the Court of Appeals described the preparation of the town budget as the initiation of the tax collection process, it would be more accurate to describe the assessment of real property as the first step in that process.
We are also asked whether the sale in question is void or voidable. Section 804 of the General Municipal Law provides that a contract in which there is a prohibited conflict of interest “shall be null, void and wholly unenforceable”. The Court of Appeals in the Rose case, however, cited this section as authority for the proposition that “the sale is voidable”.
The word “void” has been interpreted in two distinct manners. First, it has been construed in an unlimited sense, implying an act of no effect. For example, in Mattioli v. Corradino, 24 Misc.2d 157, 199 N.Y.S.2d 905 (County Ct., Montgomery Co., 1960) it was held that:
The word “void” means that an instrument or transaction is nugatory and ineffectual so that nothing can cure it. It means that which has no force and effect, is without legal efficacy, is incapable of being enforced by law. The word “void” is used in statutes in the sense of utterly void so as to be incapable of ratification (United States v. New York and Puerto Rico S.S. Company, 239 U.S. 88, 36 S.Ct. 41, 60 L.Ed. 161). (199 N.Y.S.2d at 908).
Alternatively, it has been considered to mean merely “voidable”, that is, capable of being avoided. (See generally, 56 N.Y. Jur., Statutes §152 (1967)).
Although the Court of Appeals categorized the contract in the Rose case as “voidable”, we believe this term was not used in its technical sense, and that a contract in which there is a prohibited conflict of interest is void ab initio. This conclusion is strengthened by reference to the language of section 804 of the General Municipal Law which follows the word “void”, i.e., “wholly enforceable”. If a contract is wholly unenforceable, we believe it to be without legal effect.
Additionally, it must be noted that section 805 of the General Municipal Law makes it a misdemeanor for any municipal officer or employee to willfully and knowingly violate the conflict of interest provisions of that statute. It seems highly unlikely that the Legislature would characterize the act of entering into a particular contract as a misdemeanor and then permit that contract to be merely “voidable”.
Since a conveyance of land based upon a void contract would constitute no conveyance at all (see, e.g., Mattioli v. Corradino, supra), it is our opinion that there is no contract between the county and the town assessor, and the county should promptly return the deposit paid by the assessor.
August 23, 1979