State ex rel. Smith v. Bohannan

• Decision Date: 21 December 1966
• Docket Number: No. 8841,8841
• Citation: 101 Ariz. 520,421 P.2d 877
• Parties: STATE of Arizona ex rel. Darrell F. SMITH, The Attorney General, Petitioner, v. Robert C. BOHANNAN, Jr., Respondent.
• Court: Arizona Supreme Court

Page 877

421 P.2d 877

101 Ariz. 520

STATE of Arizona ex rel. Darrell F. SMITH, The Attorney General, Petitioner, v. Robert C. BOHANNAN, Jr., Respondent.

No. 8841.

Supreme Court of Arizona, In Banc.

Dec. 21, 1966.

Rehearing Denied Jan. 17, 1967.

Darrell F. Smith, Atty. Gen., Philip M. Haggerty, Sp. Counsel, for petitioner.

Lewis, Roca, Scoville, Beauchamp & Linton, John P. Frank, and Thomas A. Latta, Phoenix, for respondent.

PER CURIAM.

This is an original proceeding in quo warranto filed in this Court in the name of the State of Arizona out of the relation of Darrell F. Smith, Attorney General, against Robert C. Bohannan, Jr., a member of the State Board of Public Welfare. Jurisdiction was accepted on September 27, 1966, pursuant to Article 6, § 5, subsec. 1, Constitution of Arizona, A.R.S. and after the filing of briefs submitted for decision on November 22, 1966.

By statute, a state official is prohibited from having an interest directly or indirectly in any purchase made by a board of which he is a member.

'A. Members of the legislature or state, county, city, town or precinct officers shall not be interested directly or indirectly in any contract or in any sale or purchase made by them in their official capacity, or by any body or board of which they are a member.' A.R.S. § 38--446.

The facts admitted in this Court establish that from January 1, 1961, to March 12, 1962, respondent was president and a director of the Associated Mortgage and Investment Company, an Arizona corporation, and also a member of the Arizona State Retirement Board; that during this time Arizona Mortgage and Investment Company sold mortgages in an amount in excess of three million dollars to the Arizona State Retirement Board as investments for the state retirement fund. It is, we believe, accepted without dissent that public officers must have no personal interest in transactions with the government which they represent. The rule is most aptly stated in Stockton Plumbing and Supply Co. v. Wheeler, 68 Cal.App. 592, 229 P. 1020:

'The principle upon which public officers are denied the right to make contracts in their official capacity with themselves or to be or become interested in contracts thus made is evolved from the self-evident truth, as trite and impregnable as the law of gravitation, that no person can, at one and the same time, faithfully serve two masters representing diverse or inconsistent interests with respect to the service to be performed.' 68 Cal.App. 592, 601, 229 P. 1020, 1024.

This Court said in Williams v. State, 83 Ariz. 34, 315 P.2d 981:

'In order that he (the public officer) act only for and on behalf of the state's interest, it is imperative that he have no personal interest that might clash or conflict with that of the state. * * * Public policy requires that personal interests not exist as a possible factor influencing a public official in the performance of his duties.'

We also said in removing by quo warranto an attorney general of this state for official misconduct:

'The object of the removal of a public officer for official misconduct is not to punish the officer, but to improve the public service. The public interest demands that public affairs be administered by officers upon whom rests no stigma * * * of any offense involving a violation of their official duties.' State ex rel. De Concini v. Sullivan, 66 Ariz. 348, 359, 188 P.2d 592, 599.

As a member of the State Retirement Board, it was respondent's obligation to invest the funds of the state retirement system, A.R.S. § 38--743, and, in doing so, to pass upon the desirability of investments in order to insure the solvency of the retirement system. As president and a director of Associated Mortgage, it was his duty to further the interest of the corporation and to actively work for its financial betterment.

Respondent, as president and director of Associated Mortgage and Investment Company and as a member of the Arizona State Retirement Board, was obviously representing diverse and inconsistent interests since the interest of one must necessarily be sacrificed to the interest of the other.

By § 38--447, A.R.S., an officer who violates § 38--446 is subject to certain penalties.

'An officer or person prohibited by the laws of this state from making or being interested in contracts, or from becoming a vendor or purchaser at sales, or from purchasing evidences of indebtedness, who violates any provision of such laws, shall be punished by a fine of not more than one thousand dollars or by imprisonment in the state prison for not more than five years, and is forever disqualified from holding any office in this state.' A.R.S. § 38--447.

The Arizona Legislature did not consider the violation of § 38--446 as a trivial or minor infraction. Punishment by imprisonment in the state penitentiary makes the offense a felony.

Respondent urges that § 38--447 has no application because there must be some benefit to him resulting in a profit before a violation of the law exists. We do not pause long in contemplation of this point. It is conduct which May be detrimental to the interests of the state which the statute seeks to prohibit.

But were it otherwise, respondent's personal profit is clearly evident. The records of the State Retirement Board, of which we take judicial notice, 9 Wigmore on Evidence, 3rd Ed., 537, 538, § 2568a; cf. Climate Control, Inc. v. Hill, 86 Ariz. 180, 342 P.2d 854, establish that the written agreements between Associated Mortgage and Investment Company and the Retirement Board provide for payments each year by the board to the mortgage company of one-half of one percent per annum of the outstanding principal balance on the mortgages as a service charge. Associated Mortgage, as a minimum, profits by the agreements to the extent of one-half of one percent on three million dollars, and respondent, as its president and director, profits indirectly as the company prospers and directly in proportion to his stockholdings.

Nor does the fact, if it be a fact, that respondent did not participate by voting as a board member for the purchase of these mortgages detract from the unlawfulness of his conduct. A public body is entitled to have the active service of its officers. See City of Ensley v. J. E. Hollingsworth & Co., 170 Ala. 396, 54 So. 95. If by nonparticipation, respondent could avoid the duties of his office, he would be using this violation of his duties to justify the breach of the others. It has been held that prohibitory statutes are applicable where the public officer had nothing at all to do with the transaction, Capron v. Hitchcock, 98 Cal. 427, 33 P. 431, and where the public officer was not present to vote but had taken part in the preliminary negotiations, Stockton Plumbing and Supply Co. v. Wheeler, supra.

Respondent argues that this Court lacks jurisdiction entirely to determine this matter or, in its sound discretion, ought not to exercise its jurisdiction. It is urged that there is another action pending in the Superior Court of Maricopa County between respondent and the State Retirement Board in which the Retirement Board, as cross claimant, seeks to recover the profits which Associated Mortgage and Investment Company made out of the prohibited contract, and that the action in this Court constitutes a splitting of the State's cause of action against Bohannan prohibited by the Rules of Civil Procedure.

In this, respondent's position is wholly without merit. The original jurisdiction of the Supreme Court is fixed by the Constitution, supra, and in matters of public importance such as this we will take jurisdiction regardless of whether one of the parties has invoked the jurisdiction of an inferior tribunal.

Moreover, the petition here is not a splitting of a cause of action. The parties in the superior court are Bohannan and others against the State Retirement Board. The action here is against Bohannan by the State of Arizona. The State and the State Retirement Board are individual legal entities. Both have the power to sue and be sued, each independent of the other. A.R.S. § 38--743. The State of Arizona is not a party to the suit in the superior court and would not be foreclosed by a judgment there from invoking the criminal penalties prescribed in § 38--447 or the civil disqualification from forever holding public office.

Respondent's principal argument in resisting quo warranto is predicated on the theory that there must be a previous criminal conviction for the offense prohibited by the statute before he is subject to the disqualification set forth in the last clause of § 38--447. He argues that when originally enacted by the Territorial Legislature in 1901 § 38--446 was contained in the civil code and § 38--447 was contained in the penal code; that only thereafter were the two sections brought together in subsequent revisions....