April 21, 1982

Mr. Jack Gunvordahl 
Burke City Attorney 
Post Office Box 352 
Burke, South Dakota 57523

Official Opinion No. 82-22

City Councilman Purchasing Real Estate From City

Dear Mr. Gunvordahl:

You have requested an official opinion from this office in regard to the following facts:

FACTS: 

The City of Burke is planning on selling real estate under the municipal sale of property statutes.  SDCL 9-27-17.

Based on the above factual situation, you have asked the following question:

QUESTION: 

Is it proper for a city councilman to purchase real estate under SDCL 6-1-1 and 6-1-2(4) providing that the municipal sale of real property statutes are complied with?

SDCL 6-1-1 provides: 

It shall be unlawful for any officer of a county, municipality, township or school district, who has been elected or appointed, to be interested, either by himself or agent, in any contract entered into by said county, municipality, township or school district, either for labor or services to be rendered, or for the purchase of commodities, materials, supplies, or equipment of any kind, the expense, price or consideration of which is paid from public funds, or from any assessment levied by said county, municipality, township or school district, or in the purchase of any real or personal property belonging to the county, municipality, township or school  district or which shall be sold for taxes or assessments or by virtue of legal process at the suit of such county, municipality, township or school district.  Such contract shall be null and void from the beginning.

SDCL 3-16-7 provides: 

Every public officer, being authorized to sell or lease any property, or make any contract in his official capacity, who voluntarily becomes interested individually in such sale, lease, or contract, directly or indirectly, is guilty of a Class 2 misdemeanor.

The harsh ramifications of the above two statutory provisions are softened by the exceptions contained in SDCL 6-1-2.  SDCL 6‑1‑2 provides: 

The provisions of § 6-1-1 shall not be applicable when the contract is made pursuant to any one of the conditions set forth in the following subdivisions hereof, without fraud or deceit; but, such contract shall nevertheless be voidable if the provisions of the applicable subdivision were not fully satisfied or present at the time such contract was entered into: 

(1)  Any contract involving one hundred dollars or less regardless of whether other sources of supply or services are available within the county, municipality, township or school district, provided that the consideration thereof is reasonable and just; 

(2)  Any contract involving more than one hundred dollars but less than the amount for which competitive bidding is required, and there is no other  source of supply or services available within the county, municipality, township or school district provided that the consideration therefor is reasonable and just and further provided that the accumulated total of such contracts paid during any given fiscal year shall not exceed five thousand dollars; 

(3)  Any contract with any firm, association, corporation, or cooperative association for which competitive bidding is not required and where other sources or supply and services are available within the county, municipality, township or school district, and the consideration therefor is reasonable and just, unless the majority of the governing body are members or stockholders who collectively have controlling interest, or any one of them is an officer or manager of any such firm, association, corporation, or cooperative association then any such contract shall be null and void; 

(4)  Any contract with any firm, association, corporation, or cooperative association for which competitive bidding is required by law, and where more than one such competitive bid is submitted.

As noted in A.G.R. 63-64, p. 292, SDCL 3-16-7 is not applicable to the exceptions enumerated in the above-quoted statute.

In answering your question, it is my opinion that SDCL 6-1-2(4) does not allow a city councilman to personally purchase real estate even though  competitive bid provisions are followed.  The exemptions under SDCL 6-1-2 must be strictly adhered to and SDCL 6-1-2(4) only allows contracts between the public entity and a firm, association, corporation or cooperative association.  There is no provision allowing the public entity to enter into a personal contract with the local officer.

As I noted in A.G.R. 1979-1, 'This result is harsh to be sure, but it is what the law provides and requires.'

Respectfully submitted,

Mark V. Meierhenry
Attorney General