Oleksy v. Sisters of Mercy of Lansing

• Decision Date: 29 March 1977
• Docket Number: 27655,Docket Nos. 25732
• Citation: 253 N.W.2d 772,74 Mich.App. 374
• Parties: , 1977-2 Trade Cases P 61,673 Stanley P. OLEKSY, M.D., Byrne M. Daly, M.D., Francis B. Berkemeier, Arnold J. Kiessling, M.D., James Murphy, Patricia Gorney, Virginia Udrys, Gerald J. Vogt, for themselves and on behalf of all those who have contributed their money, time and talents for the establishment and maintenance of Mercy Hospital as a Full Service Pro-Life Medical Facility, Plaintiffs-Appellants, v. SISTERS OF MERCY OF LANSING, Michigan, Defendant-Appellee. Bruce A. BARTON, Prosecuting Attorney, Jackson County, Michigan, Plaintiff-Appellant, v. SISTERS OF MERCY OF LANSING, Michigan, a non-profit corporation and W. A. Foote Memorial Hospital, Inc., a Michigan Corporation, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 772

253 N.W.2d 772

74 Mich.App. 374, 1977-2 Trade Cases P 61,673

Stanley P. OLEKSY, M.D., Byrne M. Daly, M.D., Francis B.

Berkemeier, Arnold J. Kiessling, M.D., James Murphy,

Patricia Gorney, Virginia Udrys, Gerald J. Vogt, for

themselves and on behalf of all those who have contributed

their money, time and talents for the establishment and

maintenance of Mercy Hospital as a Full Service Pro-Life

Medical Facility, Plaintiffs-Appellants, v. SISTERS OF MERCY OF LANSING, Michigan, Defendant-Appellee.

Bruce A. BARTON, Prosecuting Attorney, Jackson County, Michigan, Plaintiff-Appellant, v. SISTERS OF MERCY OF LANSING, Michigan, a non-profit

corporation and W. A. Foote Memorial Hospital,

Inc., a Michigan Corporation,

Defendants-Appellees.

Docket Nos. 25732, 27655.

Court of Appeals of Michigan.

March 29, 1977.

Released for Publication June 2, 1977.

Alvin G. Dahlem, Joseph C. Olk, Jackson, for Stanley Oleksy et al.

Colombo & Colombo by Louis J. Colombo, Jr., Birmingham, for Sisters of Mercy.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Bruce A. Barton, Pros. Atty. by Judd R. Spray, Asst. Pros. Atty., for Bruce A. Barton.

Dykema, Gossett, Spencer, Goodnow & Trigg by John H. Schomer, Jackson, for W. A. Foote Memorial Hospital.

Before J. H. GILLIS, P. J., and CAVANAGH and D. E. HOLBROOK, Jr., JJ.

D. E. HOLBROOK, Jr., Judge.

The plaintiffs in both cases being appealed come to this Court from summary judgments in the circuit court of Jackson County. GCR 1963, 117.

In the first case (hereinafter referred to as Oleksy ), a doctor sued on behalf of himself and other contributors to the building funds of Mercy Hospital. The defendants were the Sisters of Mercy, a non-profit corporation, operating the allopathic hospital which is located in the city of Jackson. The plaintiffs sought to enjoin the Sisters of Mercy from the sale of Mercy Hospital to W. A. Foote Memorial Hospital. Their standing was predicated on the "time, talent, financial and material resources" they donated which were used to "build, expand and maintain" the hospital. It was alleged that the sale to Foote Hospital would be detrimental to themselves and the community for two reasons: first, that Foote Hospital "is not operated in a Christian atmosphere under a pro-life philosophy, but rather contrary to the preservation of the life of the unborn" and secondly, that the Sisters of Mercy would take the proceeds from the sale and relocate in some other county leaving the Jackson area with a publicly operated hospital. Bruce Barton, the Jackson County prosecutor, moved to intervene in Oleksy but the motion was denied. ¹

An opinion was rendered in the Oleksy case denying standing to the plaintiffs and a motion for rehearing was similarly dismissed. The prosecutor then initiated his own action to enjoin the sale using GCR 1963, 715.2, an action in quo warranto against the defendants, Sisters of Mercy, for abuse of corporate power and for antitrust violations along with W. A. Foote Memorial Hospital. The circuit court, acting on a motion for summary judgment, held against the prosecutor on all counts.

I

In Oleksy all parties accepted and argued the theory advanced by the plaintiffs; to wit, that the Sisters of Mercy, a non-profit corporation, held the property (the hospital) in trust for the benefit of the people of Jackson who contributed time, talent, money and services. The trial judge concluded that in Michigan the Attorney General has exclusive authority to enforce a charitable trust. While we express no opinion on the merits, ² we affirm the analysis used by the trial judge.

The Charitable Trust Act, M.C.L.A. § 554.351; M.S.A. § 26.1191, recognizes trusts even though beneficiaries and objects of the trusts are indefinite. Since 1965, the Attorney General instead of local prosecuting attorneys must represent the beneficiaries of a trust where they are uncertain or indefinite. ³ A majority of states follow this principle, using the rationale that litigation by private citizens would be vexatious and burdensome. Bogert, Trusts & Trustees (2d Ed.), § 414, p. 340; 62 A.L.R. 881, 124 A.L.R. 1237. See also, King v. Emmons, 283 Mich. 116, 277 N.W. 851 (1938). Accordingly, we find that Michigan public policy also requires that the Attorney General have exclusive authority to enforce charitable trusts. The lower court opinion is affirmed.

In addition, we reject the second argument advanced by plaintiffs that they should have been permitted to add the Attorney General. Permitting a party who lacks standing to initiate a controversy by adding the proper party (in this case the Attorney General) who has refused to intervene, would vitiate the basic adversarial element of litigation:

"There are always two parties to every ordinary lawsuit * * * Each of the two, in their respective roles, constitute essential elements of the litigation in which they engage." 1 Honigman & Hawkins, Michigan Court Rules Annotated (2d ed), p. 538.

The trial court in Oleksy correctly rejected the motion to add the Attorney General.

II

In Barton, the Jackson County prosecutor advanced theories based on the alleged ultra vires acts of Mercy Hospital (a non-profit corporation) ⁴ and violations of state anti-trust laws between both of the Jackson hospitals. The lower court held that the Attorney General is exclusively designated to raise questions relating to abuse of corporate powers under M.C.L.A. § 450.1271; M.S.A. § 21.200(271).

Standing to sue for ultra vires acts comes from various statutory provisions and the court rules. While the parties below referred to the Michigan Business Corporation Act, M.C.L.A. § 450.1271; M.S.A. § 21.200(271), which gives standing to the Attorney General, we would point out that for the purposes of the new corporate law "corporation" is defined as one "for profit". M.C.L.A. § 450.1106; M.S.A. § 21.200(106). Sisters of Mercy is a non-profit corporation. However, we find that the Attorney General has corresponding power to sue a non-profit corporation under M.C.L.A. § 600.3601; M.S.A. § 27A.3601. The action must be brought in quo warranto under GCR 1963, 715. In the instant case the Attorney General has refused to bring a quo warranto action. Writing a letter to the prosecutor, the Attorney General stated that he had reviewed the request and concluded that:

"All such actions may be properly litigated by you as prosecuting attorney, and if such violations do in fact exist, it is your duty to do so. No security is required. See, GCR 1963, 718.3(2)."

The primary issue on appeal involves the proper interpretation of the quo warranto court rule whenever the Attorney General refuses to act. Having read the arguments of the parties and studied the court rules we conclude that the prosecutor is without standing to bring quo warranto for either charge.

In commentary to the statute for quo warranto, M.C.L.A. § 600.4501; M.S.A. § 27A.4501, the authors stated that prior procedural law was omitted in the statute, yet the substantive coverage for such actions was retained. The "procedure" for such quo warranto actions is covered by GCR 1963, 715.

In the statute, the scope of the remedy is substantially the same as prior laws. Included as matters falling within the statute, i.e., what is properly brought as quo warranto, are claims concerning the abuse of corporate power. RJA §§ 4521-4535, GCR 1963, 715.2(1)(c)-(g), People ex rel. Attorney General v. Michigan Sanitarium & Benevolent Ass'n, 151 Mich. 452, 115 N.W. 423 (1908).

While we have established that quo warranto is the proper action for abuse of corporate power we must also decide the proper procedure, i.e., the parties who bring the action.

Turning to the court rule 715.2(1), we find that only the Attorney General has the standing to bring a quo warranto action for abuse of corporate power. This standing is found under 715.2(1)(c)-(g).

Portions of the court rule, to wit, 715.2(2),(3) and (4), permit additional parties to bring quo warranto actions without the Attorney General:

".2 Parties.

"(1) Actions by Attorney General.

"(2) Actions by Prosecutor or Citizen. Other actions for quo warranto shall be brought by the prosecuting attorney of the proper county, without leave of court, or by any citizen of the county by special leave of the court or a judge thereof.

"(3) Application to Attorney General. Any person may apply to the attorney general to have the attorney general bring the actions specified in sub-rule 715.2(1). The attorney general may require the person to give security to indemnify the state against all costs and expenses of the action. The person making the application, and any other person having the proper interest, may be joined as parties plaintiff.

"(4) Refusal of Attorney General to Bring the Action. If, upon proper application and offer of security, the attorney general refuses to bring the action, the person may apply to the appropriate court for leave to bring the action himself. Leave to bring the action may be granted by the court."

But these remaining sections of the rule do not permit the prosecutor to bring quo warranto for situations covered by (1). Under (2), "other actions" that may be brought by the prosecutor are actions other than those enumerated under 715.2(1)(a)-(g) where the Attorney General and the prosecutor had been given concurrent power. Therefore the right to bring the ultra vires action is vested exclusively in the Attorney General under (1) and the prosecutor's case under (2) cannot stand. Next the prosecutor argues that he may opt to bring the action under (3) and (4) of the rule. Those portions clearly apply to citizen actions and not to the...