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Ohio Hospital Assn. v. Community Mut. Ins. Co.

Supreme Court of Ohio
Jul 8, 1987
31 Ohio St. 3d 215 (Ohio 1987)


looking to the principal issues involved to determine whether the action challenged the corporate existence of the defendants, a challenge that could only be made in a quo warranto action

Summary of this case from Mosque v. Salim


No. 86-1242

Decided July 8, 1987.

Quo warranto — Exclusive remedy to test validity of corporate franchise — Rights of parties determinable in declaratory judgment action.

O.Jur 3d Declaratory Judgments § 13.

O.Jur 2d Quo Warranto §§ 5, 16, 23.

Although the exclusive remedy by which the validity of a corporate franchise can be tested is by an action in quo warranto, the trial court has jurisdiction to determine rights among the parties in an action for declaratory judgment.

APPEAL from the Court of Appeals for Franklin County.

In 1983, Hospital Care Corporation ("Blue Cross"), a hospital service association offering a hospital service plan under the Blue Cross logo, and Ohio Medical Indemnity Mutual Corporation ("Blue Shield"), a domestic mutual insurance company marketing medical insurance coverage under the Blue Shield logo, notified the Superintendent of the Ohio Department of Insurance ("superintendent") of their intent to consolidate their operations to be licensed to operate as a domestic mutual insurance company. The superintendent determined that Blue Cross and Blue Shield had to obtain his written consent before they could effect a consolidation. Blue Cross, Blue Shield and the superintendent entered into a written stipulation which would ultimately regulate, in part, the affairs of the consolidated company.

After conducting a hearing on the proposed consolidation, the superintendent approved the consolidation. A certificate of consolidation was approved by the Attorney General and filed with the Secretary of State. The new company, Community Mutual Insurance Company ("CMIC"), is licensed as a mutual insurance company.

Plaintiffs-appellees, the Ohio Hospital Association ("OHA"), a trade association representing over two hundred Ohio hospitals, OHA member hospitals Providence Hospital, Salem Community Hospital and Deaconess Hospital, and subscribers Laura Hunt and Claudine Healey (referred to collectively as "appellees") filed a declaratory judgment action against Blue Cross, Blue Shield, CMIC, and the superintendent. Appellees asked for a judgment declaring that the superintendent was without authority or jurisdiction to consent to the consolidation and to enter into the stipulation; that the consolidation and stipulation constitute as unlawful attempt to allow a hospital service association to escape regulation under R.C. Chapter 1739 and Ohio Adm. Code 3901-1-28; and that appellees' rights under their respective hospital and subscriber contracts with Blue Cross and its successor (CMIC) were not affected.

Blue Cross, Blue Shield and CMIC moved to dismiss the action on several grounds including that the court lacked jurisdiction because the action was properly one in quo warranto, that appellees lacked standing to bring the action for declaratory judgment, and that appellees failed to pursue an administrative appeal. The trial court granted the motion to dismiss without stating a reason or the grounds relied upon.

The court of appeals reversed, holding that quo warranto was not the proper remedy, or if proper, was not the exclusive remedy, and therefore the trial court had jurisdiction to render a declaratory judgment. The court of appeals also held that all the appellees had standing to bring the action; and, that the appellees were not parties to the administrative hearing of the superintendent and thus were not required to pursue an administrative appeal from the superintendent's orders.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Bricker Eckler, James J. Hughes and Diane M. Signoracci, for appellees.

Vorys, Sater, Seymour Pease, Michael J. Canter, Philip W. Stichter and Shawn M. Flahive, for appellants.

The main issue presented is whether the trial court, which has no jurisdiction in quo warranto, has any jurisdiction to determine the rights among the parties in an action for declaratory judgment. We hold that insofar as the relief requested falls short of requiring ouster of the corporate franchise or power, the trial court has such jurisdiction. Ancillary issues relate to the appellees' standing to sue and whether they were parties to the administrative proceedings. We hold that appellees have standing and that they were not required to pursue an administrative appeal. We turn first to these ancillary issues.


Appellees assigned nine errors in the court of appeals. The court of appeals overruled six of these as being premature because the trial court had not yet rendered a declaratory judgment on these issues. The court of appeals properly assumed that the trial court had dismissed the cause based on procedural issues.

Although the granting of a motion to dismiss under Civ. R. 12(B) does not require findings of fact and conclusions of law, "a concise statement by the * * * [trial] court of the grounds for its decision is desirable." Huckeby v. Frozen Food Express (C.A. 5, 1977), 555 F.2d 542, 545, at fn. 4.

Appellants argue that appellees had a statutory right under R.C. 119.12 to appeal the superintendent's decision and that appellees should be precluded from bringing an action for declaratory judgment. R.C. 119.12 reads in part:

"Any party adversely affected by any order of an agency * * * may appeal from the order of the agency to the court of common pleas * * *."

"Party" is defined in R.C. 119.01(G) as "the person whose interests are the subject of an adjudication by an agency."

To support their claim that appellees were parties to the administrative proceedings before the superintendent, appellants rely on Schomaeker v. First Natl. Bank (1981), 66 Ohio St.2d 304, 20 O.O. 3d 285, 421 N.E.2d 530. This reliance is misplaced. Schomaeker was a zoning case. This court held that Schomaeker, who participated in the administrative hearings, was a party entitled to appeal under R.C. Chapter 2506 and, therefore, was not entitled to a declaratory judgment. In the present case the appellees were neither named parties to the administrative proceedings nor did they participate therein.


Contrary to appellants' contention, appellees have alleged such a personal stake in the outcome as to assure the requisite concrete adverseness necessary for standing. Baker v. Carr (1962), 369 U.S. 186, 204. Appellees Hunt and Healey bring this action as subscribers of Blue Cross whose group subscriber contracts were materially affected by the consolidation and stipulation. Appellees Providence, Salem, and Deaconess Hospitals allege the consolidation and stipulation materially alter their contracts as member hospitals with Blue Cross. OHA, a trade association, has standing to sue on behalf of its members if "(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Hunt v. Washington State Apple Advertising Comm. (1977), 432 U.S. 333, 343.

As the court of appeals found when applying this test, OHA does have standing to sue on behalf of its members. First, OHA's members, including Providence, Salem, and Deaconess, have standing to sue. Second, protection of its members' contractual relationship with Blue Cross and its successor (CMIC) is certainly germane to OHA's purpose. Third, the requested declaratory relief does not require the participation of OHA's members. Warth v. Seldin (1975), 422 U.S. 490, 515.


"A writ of quo warranto is in the nature of a writ of right for the king, against him who claims or usurps any office, franchise, or liberty, to inquire by what authority he supports his claim, in order to determine the right. It lies also in case of non-user or long neglect of a franchise, or misuser or abuse of it; being a writ commanding the defendant to shew by what warrant he exercises such a franchise, having never had any grant of it, or having forfeited it by neglect or abuse." 3 Blackstone, Commentaries on the Laws of England (Tucker Ed. 1803) 262.

An action in quo warranto must be brought in the Supreme Court or the courts of appeals (Sections 2 and 3, Article IV, Ohio Constitution; R.C. 2733.03) and "remains, as at common law, a right of the state, and, except where title to a public office is involved, the use of quo warranto remains in the state or its officers." State, ex rel. Cain, v. Kay (1974), 38 Ohio St.2d 15, 17, 67 O.O. 2d 33, 34, 309 N.E.2d 860, 862; R.C. 2733.04.

The remedy afforded by quo warranto is a judgment of ouster, and a judgment of ouster can be pronounced in no other proceeding. R.C. 2733.20; Gas-Light Co. v. Zanesville (1889), 47 Ohio St. 35, 47, 23 N.E. 60, 61. Nor will a collateral attack questioning whether a corporation exists be permitted. State, ex rel. Mick, v. Burke (1929), 120 Ohio St. 410, 416, 166 N.E. 354, 356.

While quo warranto is the exclusive proceeding by which to question the existence of a corporation, quo warranto, as well as other actions, may also question whether a corporation is exceeding its charter or is purporting to exercise powers not possessed. In the latter circumstances there is an overlap of jurisdiction although the judgments may take different forms. Cf. State, ex rel. Bricker, v. Buhl Optical Co. (1936), 131 Ohio St. 217, 5 O.O. 562, 2 N.E.2d 601; State, ex rel. Crabbe, v. Thistle Down Jockey Club (1926), 114 Ohio St. 582, 151 N.E. 709.

This court said in Gas-Light Co., supra, at 47, 23 N.E. at 61:

"As to the first proposition, the argument in support of it seems to assume, that no power or franchise claimed by a corporation can be questioned, except in a proceeding in quo warranto. This is certainly erroneous. Zanesville v. Gas Light Co., supra. That a judgment of ouster cannot be pronounced in any other proceeding is true; but a judgment of ouster in a proceeding in quo warranto, commenced on behalf of the state, is one thing, and a judgment in an action between a company and a private person brought to assert some proprietary claim or alleged obligation of the one to the other, is a very different thing, although the latter judgment may rest upon a conclusion drawn by the court that, as a matter of law, some power or franchise claimed by the company is not possessed by it."

Appellants rely on State, ex rel. Phelps, v. Gearheart (1922), 104 Ohio St. 422, 135 N.E. 606. In Gearheart the relator as an individual brought an action in mandamus on behalf of the state to require the Superintendent of Insurance to revoke all licenses issued by his department to insurance companies which wrote medical malpractice insurance. Relator claimed such insurance contracts were void and therefore the licenses were invalid. This court held that mandamus was neither an appropriate nor adequate remedy; and the insurance companies were exercising a state franchise the validity of which could be challenged only by quo warranto. Gearheart stands only for the proposition that the exclusive remedy by which the validity of the franchise can be tested is by an action in quo warranto. While this is true, the trial court still has jurisdiction to determine the rights and obligations among the parties.

Therefore the court of common pleas can entertain this declaratory judgment action so long as it does not question the corporate existence of appellants.

The judgment of the court of appeals is hereby affirmed.

Judgment affirmed.


STEPHENSON, J., of the Fourth Appellate District, sitting for WRIGHT, J.

QUILLIN, J., of the Ninth Appellate District, sitting for H. BROWN, J.

Summaries of

Ohio Hospital Assn. v. Community Mut. Ins. Co.

Supreme Court of Ohio
Jul 8, 1987
31 Ohio St. 3d 215 (Ohio 1987)

looking to the principal issues involved to determine whether the action challenged the corporate existence of the defendants, a challenge that could only be made in a quo warranto action

Summary of this case from Mosque v. Salim
Case details for

Ohio Hospital Assn. v. Community Mut. Ins. Co.

Case Details


Court:Supreme Court of Ohio

Date published: Jul 8, 1987


31 Ohio St. 3d 215 (Ohio 1987)
509 N.E.2d 1263

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