Indep. Ins. Agents of Ohio, Inc. v. Duryee

• Decision Date: 05 May 1994
• Docket Number: No. 93APE09-1251,93APE09-1251
• Citation: 95 Ohio App.3d 7,641 N.E.2d 1117
• Parties: INDEPENDENT INSURANCE AGENTS OF OHIO, INC., Appellant, v. DURYEE, Superintendent, Appellee. *
• Court: Ohio Court of Appeals

Page 7

95 Ohio App.3d 7

641 N.E.2d 1117

INDEPENDENT INSURANCE AGENTS OF OHIO, INC., Appellant, v. DURYEE, Superintendent, Appellee. ^*

No. 93APE09-1251.

Court of Appeals of Ohio, Tenth District, Franklin County.

Decided May 5, 1994.

Emens, Kegler, Brown, Hill & Ritter, William J. Brown and Roger P. Sugarman, Columbus, for appellant.

Lee I. Fisher, Atty. Gen., and Ava W. Serrano, Asst. Atty. Gen., for appellee.

Porter, Wright, Morris & Arthur, Anthony J. Celebrezze, Jr., H. Grant Stephenson, Kathleen M. Trafford and Michael J. Barren, Columbus, for amicus curiae Huntington Ins. Agency, Inc.

WHITESIDE, Presiding Judge

Plaintiff-appellant, Independent Insurance Agents of Ohio, Inc., appeals from a dismissal by the Franklin County Court of Common Pleas of plaintiff's complaint and raises the following three assignments of error:

"I. The trial court erred in dismissing this action in reliance upon the doctrine of res judicata because the cause of action contained in the complaint is dissimilar from the cause of action presented by and decided in Independent Insurance Agents of Ohio, Inc. v. Fabe.

"II. The trial court erred in dismissing this action in reliance upon the doctrine of res judicata because the decision in Independent Insurance Agents of Ohio, Inc. v. Fabe did not adjudicate the merits of IIAO's challenge to the Superintendent's unconstitutional exercise of legislative power.

"III. The trial court erred in dismissing this action because the factual allegations of the complaint, presumed to be true upon consideration of a motion to dismiss for failure to state a claim, entitle IIAO to declaratory and injunctive relief."

In 1992, the Ohio Supreme Court decided Indep. Ins. Agents of Ohio, Inc. v. Fabe (1992), 63 Ohio St.3d 310, 587 N.E.2d 814 ("Independent Ins. Agents I "). The syllabus of that case states as follows:

"1. R.C. 3905.01(B) and 3905.04 do not prohibit the licensing of applicants affiliated with non-insurance financial institutions.

"2. An applicant for a license as an other-than-life insurance agent is not precluded from licensure by R.C. 3905.01(B) and 3905.04 merely because an affiliate of the applicant would be precluded thereunder, unless the applicant is but the alter ego of the precluded affiliate."

Subsequently, Huntington Insurance Agency, Inc. ("Huntington"), which was not a party to the Independent Ins. Agents I case, filed a requisition for corporate agency member license for a fire and casualty insurance license in the state of Ohio with the Superintendent of the Ohio Department of Insurance. Huntington is a wholly owned subsidiary of Huntington Insurance Services, Inc., a bank subsidiary corporation which is wholly owned by the Huntington State Bank, Alexandria, Ohio. The Huntington State Bank is a wholly owned subsidiary of Huntington Bancshares, Inc.

Plaintiff then filed this action in the Franklin County Court of Common Pleas, seeking declaratory and injunctive relief. Plaintiff sought an order declaring that the statute as construed in Independent Ins. Agents I is unconstitutional, since any determination made by the superintendent whether an applicant was the alter ego of a precluded affiliate would constitute an unconstitutional exercise of legislative power by the superintendent. Plaintiff also sought an order preliminarily and permanently enjoining the superintendent from making such a determination on Huntington's application until the General Assembly provides standards to guide the superintendent. Plaintiff contends that there are no standards developed to guide the superintendent in determining alter ego status and that, therefore, the superintendent is exercising legislative power.

Section 1, Article II of the Ohio Constitution vests all legislative power in the General Assembly and Section 26, Article II of the Ohio Constitution has been interpreted to prohibit the delegation of the power except where the General Assembly has provided sufficient, definite standards with which to use the power. ¹ It is true that the General Assembly may not delegate its essential legislative functions, and attempts to do so are unconstitutional. In Belden v. Union Cent. Life Ins. Co. (1944), 143 Ohio St. 329, 28 O.O. 295, 55 N.E.2d 629, paragraph one of the syllabus, the Ohio Supreme Court declared that:

"The legislative power of the state is vested in the General Assembly by Section 1, Article II of the Constitution and that body may not abdicate or transfer to others the essential legislative functions with which it is vested."

Additionally, legislative acts which grant to a board or administrative agency quasi-legislative or quasi-judicial power are proper only if the General Assembly has provided sufficient standards within which the board or agency may make subordinate rules. Belden, paragraph three of the syllabus; Am. Cancer Soc., Inc. v. Dayton (1953), 160 Ohio St. 114, 125, 51 O.O. 32, 37, 114 N.E.2d 219, 225. An exception to the rule requiring "definite rules of guidance in restricting or limiting the exercise of such official action" has been recognized in "cases where the establishment of such criteria would be impossible or impracticable or result in rendering the enforcement of a police regulation nugatory or ineffective." Matz v. Curtis Cartage Co. (1937), 132 Ohio St. 271, 8 O.O. 41, 7 N.E.2d 220, paragraph seven of the syllabus, at 278-279, 8 O.O. at 44-45, 7 N.E.2d at 224-225.

Defendant filed a motion to dismiss, pursuant to Civ.R. 12(B)(6), for failure to state a claim for which relief can be granted, contending that the action was barred by the doctrine of res judicata. The Ohio Supreme Court has held in the syllabus of O'Brien v. Univ. Community Tenants Union, Inc. (1975), 42 Ohio St.2d 242, 71 O.O.2d 223, 327 N.E.2d 753, that:

"In order for a court to dismiss a complaint for failure to state a claim upon which relief can be granted (Civ.R. 12(B)(6)), it must appear beyond doubt from the complaint that the plaintiff can prove no set of facts entitling it to recovery."

The common pleas court determined that plaintiff could prove no set of facts entitling it to recovery and, therefore, dismissed the complaint stating as follows:

"Based on the Ohio Supreme Court's decision in Independent Insurance Agents of Ohio v. Fabe (1992), 63 Ohio St.3d 310 , and based upon this court's determination that the Superintendent's interpretation of words in the English language would not be legislation, the motion to dismiss is SUSTAINED and this matter is dismissed. This decision, therefore, makes moot the motion to intervene on behalf of Huntington." ²

It is from this decision that plaintiff now appeals.

Initially, it must be noted that res judicata is an affirmative defense under Civ.R. 8(C) and, thus, may not ordinarily be the basis of a Civ.R. 12(B)(6) motion. Being an affirmative defense, it necessarily involves information not required to be alleged in the complaint and, therefore, could not be determined by looking only at the complaint, as is required of a Civ.R. 12(B)(6) motion. The defense should have been raised initially by answer (Civ.R. 8[C] ) and then by summary judgment motion. See Nelson v. Pleasant (1991), 73 Ohio App.3d 479, 482, 597 N.E.2d 1137, 1139; Toledo v. Thomas (1989), 60 Ohio App.3d 42, 572 N.E.2d 867; Johnson v. Linder (1984), 14 Ohio App.3d 412, 14 OBR 531, 471 N.E.2d 815. However, since the trial court determined the merits of the defense, we shall address the assignments of error.

The assignments of error are related and will be discussed together. Plaintiff contends that the trial court erred in dismissing this action in reliance upon the doctrine of res judicata. Plaintiff argues that this action presents different issues from those presented by and decided in Independent Ins. Agents I, supra, and that Independent Ins. Agents I also did not determine the constitutionality of the statute.

The parties argue that the basis for the trial court's decision is the doctrine of res judicata. The Ohio Supreme Court has defined res judicata in Norwood v. McDonald (1943), 142 Ohio St. 299, 305, 27 O.O. 240, 242, 52 N.E.2d 67, 71, quoting 30 American Jurisprudence (1940) 908, Judgments, Section 161, as follows:

" 'The doctrine of res judicata is that an existing final judgment rendered upon the merits, without fraud or collusion, by a court of competent jurisdiction, is conclusive of rights, questions and facts in issue, as to the parties and their privies, in all other actions in the same or any other judicial tribunal of concurrent jurisdiction.' "

The court continued:

" 'If, however, the two suits do not involve the same claim, demand, and cause of action, such effect will not be ordinarily given to the prior judgment.' * * * 30 American Jurisprudence, 914, Section 172. To constitute a bar there must be identity not only of subject matter but also of the cause of action. In other words, a judgment in a former action does not bar a subsequent action where the cause of action prosecuted is not the same, even though each action relates to the same subject matter." (Italics sic; boldface added.)

The court later approved and followed this definition in paragraph one of the syllabus of Whitehead v. Gen. Tel. Co. (1969), 20 Ohio St.2d 108, 49 O.O.2d 435, 254 N.E.2d 10.

Some writers discuss res judicata as having two aspects. The first aspect is generally what is known as the concept of res judicata and is sometimes referred to as "claim preclusion" or "claim bar." This concept is the effect of a prior judgment acting as a bar to a second action on the same claim--that is a bar to the entire action in subsequent litigation. The second aspect, frequently referred to as "issue preclusion" or "collateral estoppel," is the effect of a prior judgment precluding relitigation of specific issues in a second action between the same parties or their privies. It precludes issues determined in the first action from being relitigated in...