In City of Warwick v. Boeng Corp., 472 A.2d 1214 (R.I. 1984), "the State of Rhode Island had been leasing a building located in the city of Warwick and owned by Boeng" for use as a courthouse. Id. at 1216.
The State sought to exercise an option in the lease to purchase the building. Id. Under the applicable statutes, "the legislative body of the municipality in which the land was located i.e., the City of Warwick was required to approve the transfer prior to issuance of revenue bonds" by the State. Id.
The City refused to recommend approval of the sale, because "sale of the property to a state agency would remove it from the city tax rolls." Id. at 1216-17.
The State refused to negotiate payment of the taxes with the city, and so Boeng and the Mayor of Warwick entered into negotiations, the product of which was an agreement by Boeng to pay the city two years' worth of property taxes "'upon the completion of the appropriate municipal legislative action . . . and the sale of the subject real property'" by Boeng to the State. Id. at 1217 (quoting agreement).
The Warwick City Council passed the appropriate legislation, and the sale was completed; however, Boeng then refused to pay the two years' worth of taxes, prompting the city to sue for breach of contract. Id.
The trial court entered judgment for the city, and Boeng appealed. Id.
The Rhode Island Supreme Court rejected Boeng's contention that "a municipality cannot make a valid contract based upon the payment of money in return for an official's promise to recommend passage of legislation, regardless of the official's intention or the effect of the legislation." Id. at 1218.
The court aligned itself with the modern view that, "generally, in situations in which no improper means are contemplated or bargained for, the bargain is not invalidated merely because the compensation to a party is contingent on the enactment of legislation." Id.
The court explained, id.:
The public policy is to ensure that governmental decisions are made in the public interest and not conditioned on the personal interests or gain of a particular government official.
In the present case, the mayor bargained in the public interest to preserve and protect the tax base of the city. He sought compensation from defendant for the loss to the city of a large yearly tax that would have resulted if the agreement had not been reached and the sale to the State approved. There is no allegation or evidence that the mayor or any of the city's agents acted improperly or with anything but the public's interest in mind. A contract that was executed in the public interest without any improper motives on the part of the parties is not against public policy and therefore not void.