author: JUSTICE JOHNSON JUSTICE McMORROW,

text:
    AMERICAN TELEPHONE AND TELEGRAPH COMPANY et al., Plaintiffs-Appellees, v. THE VILLAGE OF ARLINGTON HEIGHTS et al., Defendants-Appellants.
    First District (4th Division)
    No. 1 — 89—1764
    Opinion filed June 28,1991.

      McMORROW, J., dissenting.
    Jack M. Siegel, of Chicago, for appellants.
    Thomas R. Phillips, O. Carey Epps, and Dennis S. Pines, and Gerald A. Ambrose, J. Andrew Schlickman, and John A. Heller, all of Sidley & Austin, all of Chicago, for appellees.
   JUSTICE JOHNSON

delivered the opinion of the court:

Plaintiffs, American Telephone and Telegraph Company, a New York corporation, and AT&T Communications of Hlinois, Inc., an Illinois corporation (hereinafter collectively referred to as AT&T), brought an action in the circuit court of Cook County against defendants, the Villages of Arlington Heights, Palatine, Barrington, Lake Barrington, and the City of Crystal Lake, to compel defendants to allow AT&T to install a fiber optic telecommunications cable under defendants’ streets. Defendants are all Illinois municipal corporations. Plaintiffs initially sought a preliminary injunction, a declaratory judgment, and an order of mandamus.

The trial court entered a preliminary injunction in favor of plaintiffs, allowing them to construct and maintain the fiber optic cable under defendants’ public streets. An interlocutory appeal was taken by defendants from the preliminary injunction. This court affirmed the grant of the preliminary injunction. Later, the Illinois Supreme Court denied defendants’ petition for leave to appeal and the cause returned to the circuit court for trial on the preliminary injunction. The trial court entered an order nunc pro tunc as of June 5, 1989, giving plaintiffs the right to construct their fiber optic telecommunications cable beneath the streets of the defendant municipalities. Defendants appeal from the final judgment order.

The following issues are before this court for review: (1) whether this court’s opinion on the interlocutory appeal was a determination on the merits; and (2) whether a municipality in Illinois may require a franchise agreement as a precondition for the use of public streets by a public utility.

We affirm.

Background

Plaintiffs were engaged in the construction of an 85-mile-long fiber optic cable. Plaintiffs planned to extend the cable from Glenview, Illinois, to Rockford, Illinois. At the time this case was filed, a majority of the cable had already been installed on the side of a railroad roadbed owned by the Chicago and North Western Transportation Company pursuant to an easement granted to AT&T. However, the cable would undercross public streets in the defendant municipalities at points where the railroad roadbed owned by the Chicago and North Western Transportation Company intersected with defendants’ public streets.

AT&T’s first contact with defendants took place in February of 1987. At that time, a representative of AT&T was informed by the Village of Arlington Heights that AT&T would have to obtain a franchise in order to use the public streets of the village for its cable. Plaintiffs were also informed that the Northwest Municipal Conference would negotiate franchise agreements between AT&T and the various municipalities whose public streets would be used by AT&T.

In March of 1987, representatives of AT&T met with representatives of the Northwest Municipal Conference. The representatives of the Northwest Municipal Conference informed AT&T that a franchise, or a similar agreement, must be obtained from each defendant municipality before a public utility such as AT&T would be permitted to use their public streets. Representatives of the Northwest Municipal Conference initially requested that AT&T enter into a franchise agreement with them which was similar to AT&T’s agreement with the City of Chicago. AT&T’s agreement with the City of Chicago provided for the payment of “franchise fees” consisting of 2% of AT&T’s gross revenues derived from long-distance calls originating in Chicago, or a minimum of $5 million per year. AT&T refused to agree to the proposal. AT&T maintained that it declined to agree to this proposal because the franchise fees requested had no relationship to the burden imposed upon defendants by AT&T’s use of their streets, or to public safety within the defendant municipalities.

When AT&T refused to agree to tender a percentage of its gross revenues, defendants suggested that an agreement between Western Union and several Illinois municipalities, which was drafted by the Northwest Municipal Conference, could serve as the model for an agreement between defendants and AT&T. Under the “Western Union model,” AT&T would have been required to pay defendants $2.50 for each foot of cable installed within their municipalities. AT&T also rejected this proposal.

Finally, AT&T offered to pay defendants $1 for each foot of fiber optic cable installed within defendants’ public way, in addition to an administrative fee of $5,000 per year. AT&T and the representatives of the Northwest Municipal Conference failed to reach a compensation agreement.

The Villages of Arlington Heights, Barrington, and Palatine have ordinances which enunciate the criteria for obtaining permission to tunnel under their public streets. The City of Crystal Lake has similar provisions in its city code. These ordinances all require an applicant to provide certain information and meet certain conditions before a permit may be issued. However, none of these ordinances requires a permit applicant to enter into a “franchise agreement” with the municipality in order to obtain a permit.

In 1987, AT&T submitted permit applications to defendants pursuant to the municipalities’ respective ordinances. In May of 1987, AT&T applied to the City of Crystal Lake for a permit to construct a telecommunications cable under its street crossings. In July of 1987, AT&T submitted similar permit applications to the Villages of Arlington Heights, Barrington, and Palatine. These villages and the City of Crystal Lake refused to issue permits to AT&T, because AT&T declined to enter into franchise agreements with them. A permit was initially granted by the Village of Lake Barrington; however, this permit was subsequently revoked prior to the installation of the fiber optic cable.

On August 11, 1987, AT&T mailed 10-day notices to the Villages of Arlington Heights, Barrington, and Palatine in an effort to invoke rights granted to it in section 4 of the Telephone Company Act (hereinafter the Telephone Act) (Ill. Rev. Stat. 1987, ch. 134, par. 20). The 10-day notices stated that AT&T intended to begin constructing its fiber optic cable under various streets of the defendant municipalities. A similar letter was mailed to the City of Crystal Lake on September 11,1987.

AT&T commenced work in the Villages of Arlington Heights and Palatine without having obtained permits, and without having entered into franchise agreements with defendants. Defendants responded by ordering AT&T to stop working. Subsequently, AT&T filed a complaint against defendants.

Plaintiffs sought a preliminary injunction to prevent defendants from interfering with the installation of the fiber optic cable under their public streets. During the injunction hearings, defendants maintained that “[Requiring payment of a fee as a condition for use of *** property by a commercial enterprise is a legitimate means of raising revenue.” Defendants also took the position that AT&T had “no right whatsoever” to undercross their streets, and that they have an “absolute right to exclude” AT&T from any use of public streets except on such terms as they may demand. Plaintiffs also sought a declaratory judgment stating that defendants were not entitled to require them to obtain permits and enter into franchise agreements. The original complaint also contained a prayer for an order of mandamus requiring defendants to allow AT&T to construct its cable system under defendants’ street crossings.

On November 2, 1987, the trial court entered an interlocutory order granting a preliminary injunction in favor of plaintiffs which allowed them to “construct, maintain, lay, alter, bore or locate and use its fiber optic cable along, upon, under, and across any highway, street, road, or alley under the control or claimed control of the defendants.” Subsequently, defendants appealed from the interlocutory order. On appeal, this court affirmed in part and reversed in part the decision of the trial court. American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, appeal denied (1988), 123 Ill. 2d 555.

On May 2, 1989, plaintiffs filed a motion to convert the preliminary injunction to a permanent injunction. The court issued an injunction which permanently enjoined defendants from “interfering with or disrupting the ongoing operation of plaintiffs’ fiber optic telecommunications system.” The court ruled that plaintiffs had the right to com struct their fiber optic telecommunications cable beneath the streets of the defendant municipalities pursuant to the Telegraph Act (Ill. Rev. Stat. 1987, ch. 134, par. 4), and the Public Utilities Act (Ill. Rev. Stat. 1987, ch. 111½, par. 13 — 202). The court also ruled that plaintiffs had a right to operate the cable without interference or disruption by defendants. The order was entered nunc pro tunc as of June 5,1989.

Defendants filed their notice of appeal on June 28, 1989. AT&T moved to dismiss the appeal. Subsequently, defendants moved for a direct appeal to the supreme court pursuant to Rule 302(b) (134 Ill. 2d R. 302(b)). The supreme court denied defendants’ motion on August 16, 1989. This court denied AT&T’s motion to dismiss on September 28, 1989. This appeal is taken from the trial court’s order of June 5, 1989.

Opinion

I

First, defendants contend that this court’s decision on the interlocutory appeal in American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, should be reversed because this court’s opinion was not a full determination on the merits, and, insofar as this court went beyond determining whether there was an abuse of discretion by the trial court, its holdings are mere dicta.

Defendants have correctly noted that “the purpose of a preliminary injunction is to preserve the status quo and not to determine controverted rights or decide the merits of a case.” (U-Haul Co. v. Hindahl (1980), 90 Ill. App. 3d 572, 575.) However, a successful movant for a preliminary injunction must show “a reasonable likelihood of success on the merits.” Preferred Meal Systems, Inc. v. Guse (1990), 199 Ill. App. 3d 710, 718.

Defendants are correct that this court’s opinion on the interlocutory appeal was not a full determination on the merits. (See American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381.) However, insofar as this court went beyond determining whether the trial court abused its discretion, its findings are valid because they are relevant with respect to the question of whether plaintiffs are ultimately likely to prevail on the merits. (See Preferred Meal Systems, Inc., 199 Ill. App. 3d at 718.) Therefore, we find that this court’s decision was proper, and we will not reverse this court’s decision on the interlocutory appeal.

II

Next, defendants maintain that an Illinois municipality may require a franchise agreement as a precondition for the use of public streets by a public utility. Specifically, defendants assert that they may require a franchise agreement because the Telegraph Act provides that a municipality must consent to a telephone utility’s use of the public streets. (Ill. Rev. Stat. 1987, ch. 134, par. 4.) Defendants also argue that a franchise agreement is necessary for a public utility to utilize the public streets of a municipality. Plaintiffs contend that a municipality does not have an absolute right to bar a telephone utility from the use of its public streets.

Section 4 of the Telegraph Act contains the following provisions:

“No such company shall have the right to erect any poles, posts, piers, abutments, wires or other fixtures of their lines along or upon any public ground *** within any incorporated city, town or village, without the consent of the corporate authorities of such city, town or village. The consent herein required must be in writing, and shall be recorded in the recorder’s office of the county. ***
The right of any such company to erect such structures, wires or fixtures within the right of way of any public highway is subject to the provisions of Section 9 — 113 of the ‘Illinois Highway Code’ as the same may from time to time be amended.” Ill. Rev. Stat. 1987, ch. 134, par. 4.

Illinois courts have interpreted section 4 of the Telephone Act. In American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, this court made the following finding:

“[SJection 4 of the Telephone Act clearly shows that defendants’ consent is not mandatory before access to the streets [for the purpose of installing telephone wires] can be obtained. [Citation.] Section 4 of the Telephone Act expressly authorizes the telephone company to install its facilities when it is necessary.” (American Telephone & Telegraph Co., 174 Ill. App. 3d at 385.)

Moreover, this court specifically held that “neither plaintiffs nor defendants have an absolute right over the use of public streets.” (American Telephone & Telegraph Co., 174 Ill. App. 3d at 387.) We also noted that power has been granted to the General Assembly to permit the use of public streets, but that such power must be strictly construed. In addition, we have found that the powers and rights granted to a municipality over the streets of a city are regulatory in character. American Telephone & Telegraph Co., 174 Ill. App. 3d at 387.

In addition, our supreme court has ruled that the municipal power to regulate the use of the streets and the concomitant power “to charge a license fee in connection with the exercise of the regulatory powers” (City of Chicago Heights v. Western Union Telegraph Co. (1950), 406 Ill. 428, 433) must “bear some reasonable relation to the additional burdens imposed upon the municipality by the business or occupation.” City of Chicago Heights, 406 Ill. at 433-34.

One year later, the supreme court ruled that a fee required of a telecommunications utility for the use of a municipality’s streets must bear some relation to the amount of street space used for the wires. (City of Chicago Heights v. Public Service Co. (1951), 408 Ill. 310, 318.) The court held that compensation which bears no relation to the amount of space occupied by telecommunications wires is “wholly lacking in uniformity, and is purely arbitrary and discriminatory in its nature.” City of Chicago Heights, 408 Ill. at 318.

Later that same year, the supreme court ruled that a municipality’s regulatory and police powers over its public streets are subject to a reasonableness limitation. Specifically, the court held that “license fees charged must bear some reasonable relation to the additional burdens and necessary expense involved in the regulation and supervision of the business affected, otherwise the ordinance imposing the license fees will be *** deemed null and void.” City of Chicago Heights Public Service Co. (1951), 408 Ill. 604, 608-09.

The supreme court also mandated that “a municipality cannot, under the guise of an exercise of a police power, impose a license fee for revenue purposes.” City of Chicago Heights v. Western Union Telegraph Co. (1950), 406 Ill. 428, 434.

A

We find that a municipality does not have an absolute right to require a franchise agreement as a precondition for the use of public streets by a telecommunications utility. First, defendants maintain that they have an absolute right to require a franchise agreement as a precondition for the use of their public streets by defendants, because the Telegraph Act requires municipal consent. (Ill. Rev. Stat. 1987, ch. 134, par. 4.) Defendants are correct that the Telegraph Act requires written consent from a municipality before any such company may “erect any poles, posts, piers, abutments, wires or other fixtures of their lines along or upon any public ground *** within any incorporated city, town or village.” (Ill. Rev. Stat. 1987, ch. 134, par. 4.) However, the issue of whether a municipality has absolute, arbitrary power over the use of municipal streets by a telephone utility was decided against defendants by this court in American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381. In American Telephone & Telegraph Co., we found that although power has been granted to the General Assembly to permit the use of municipal streets, this power is to be strictly construed. (American Telephone & Telegraph Co., 174 Ill. App. 3d at 387.) We specifically ruled that “neither plaintiffs nor defendants have an absolute right over the use of public streets.” (American Telephone & Telegraph Co., 174 Ill. App. 3d at 387.) In addition, the Illinois Supreme Court has twice refused to consider defendants’ pleas that this court and the trial court erred in rejecting defendants’ claims to unlimited power over the use of public streets by telecommunications companies. Defendants have failed to distinguish the aforementioned cases upon which we rely.

Furthermore, we find defendants’ reliance upon City of Springfield v. Inter-State Independent Telephone & Telegraph Co. (1917), 279 Ill. 324, People ex rel. Shallberg v. Central Union Telephone Co. (1908), 232 Ill. 260, Illinois Bell Telephone Co. v. Lewis (1983), 117 Ill. App. 3d 72, Lewis v. Illinois Bell Telephone Co. (1981), 98 Ill. App. 3d 1047, and Reith v. General Telephone Co. (1974), 22 Ill. App. 3d 337, unpersuasive and inappropriate. Defendants rely upon People ex rel. Shallberg in support of their position that the Telephone Act does not grant authority to a telephone utility to place its telecommunication wires in a municipal street without the consent of that municipality. (People ex rel. Shallberg, 232 Ill. at 275.) In addition, defendants cite the following finding made by the court in People ex rel. Shallberg in support of their position:

“The [Act] *** expressly provides that nothing contained in it shall interfere with the control vested in cities, incorporated towns and villages in relation to the regulation of the poles, ■wires, cables and other appliances. That control is not limited to prescribing the location and size of the poles, and such matters, but extends to the whole subject.” People ex rel. Shallberg, 232 Ill. at 276.

As we stated above, the Telegraph Act requires consent from a municipality before a telephone utility may “erect any *** wires or other fixtures of their lines along or upon any public ground *** within any incorporated city, town or village.” (Ill. Rev. Stat. 1987, ch. 134, par. 4.) However, under current Illinois common law, a municipality’s control over the use of its streets by a telecommunication utility does not “extendf ] to the whole subject.” (See People ex rel. Shallberg, 232 Ill. at 276.) A municipality’s control over the use of public streets is not absolute. (American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, 387.) Moreover, this court has ruled that a municipality’s “consent is for the purpose of notifying the municipality in advance of intended construction so that it can exercise its regulatory power of time, manner, and location of the construction.” American Telephone & Telegraph Co., 174 Ill. App. 3d at 386.

Defendants also rely upon City of Springfield v. Inter-State Independent Telephone & Telegraph Co. (1917), 279 Ill. 324. In City of Springfield, the court held that a municipality's power to permit the use of its streets by “public service corporations” is “discretionary” (City of Springfield, 279 Ill. at 327), and that a “city council may, in its discretion, grant a license for the occupation of the streets without qualification, or may impose such conditions upon the giving of its consent *** as it deems advisable.” City of Springfield, 279 Ill. at 327.

We noted above that current case law has mandated that a municipality’s right to control the use of its public streets must be “strictly construed.” (Emphasis added.) (American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, 387.) This court has specifically found that a municipality does not have an absolute right over the use of its public streets. See American Telephone & Telegraph Co., 174 Ill. App. 3d at 387.

Defendants’ reliance upon Reith v. General Telephone Co. (1974), 22 Ill. App. 3d 337, is also inappropriate. We have already found that Reith is distinguishable from the instant case. The issue in Reith was whether a company that obtains a license from a municipality to use its streets may evade liability when injuries result from such use. This issue has little, if any, relevance to the case at bar.

Finally, we find that defendants’ reliance upon Lewis v. Illinois Bell Telephone Co. (1981), 98 Ill. App. 3d 1047, and Illinois Bell Telephone Co. v. Lewis (1983), 117 Ill. App. 3d 72, is inappropriate. In Lewis v. Illinois Bell Telephone Co. (1981), 98 Ill. App. 3d 1047, the property in question was private property. (Lewis, 98 Ill. App. 3d at 1048.) Lewis is not relevant to the instant case because the property in question in the instant case is public property committed to public use by the Telegragh Act. (Ill. Rev. Stat. 1987, ch. 134, par. 2.) Moreover, the issue in both of these cases is the extent of a public utility’s eminent domain power. Accordingly, we find that defendants do not have an absolute right to bar plaintiffs from the use of public streets.

B

Defendants also maintain that they have an absolute right to require that plaintiffs enter into a franchise agreement with them as a prerequisite for plaintiffs’ use of their public streets. Defendants argue that a franchise agreement is necessary before a public utility may utilize the public streets of a municipality.

We find that a franchise agreement is not a necessary prerequisite for plaintiffs’ use of defendants’ streets. Defendants do not have an absolute right to require that plaintiffs enter into a franchise agreement as a precondition to the use of their public streets. First, the Telegraph Act has no provision which states that a franchise agreement is a necessary prerequisite for a telephone utility’s use of a municipality’s public streets, or that a telephone utility must pay a municipality franchise fees for use of that municipality’s public streets. The Telegraph Act merely requires the consent of municipal authorities before a telephone utility may place telephone wires upon public property. Ill. Rev. Stat. 1989, ch. 134, par. 4; see also American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, 385.

In addition, the common law clearly states that municipalities may not charge permit or license fees which bear no reasonable relationship to the burdens imposed by the particular proposed use of the public streets. (See City of Chicago Heights v. Public Service Co. (1951), 408 Ill. 604, 608-09; City of Chicago Heights v. Public Service Co. (1951), 408 Ill. 310, 318; City of Chicago Heights v. Western Union Telegraph Co. (1950), 406 Ill. 428, 433-34.) In Illinois, “[t]he terms ‘franchise’ and ‘license’ are sometimes used interchangeably.” (General Electric Cablevision Corp. v. City of Peoria (1972), 8 Ill. App. 3d 948, 951.) The record shows that defendants have attempted to charge the plaintiffs license or franchise fees which bear no reasonable relationship to the burdens which would be imposed by plaintiffs upon defendants. Plaintiffs’ telecommunications cable undercrosses defendants’ streets where property owned by the Chicago and North Western Transportation Company intersects with defendants’ public streets. Defendants attempted to charge plaintiffs millions of dollars in franchise fees. These fees bore no reasonable relationship to the minimal burdens which plaintiffs have imposed upon defendants by running their cable underneath short segments of defendants’ streets.

Moreover, the record indicates that defendants sought to charge plaintiffs exorbitant franchise fees as a “means of raising revenue.” This is clearly impermissible. In Illinois, “a municipality cannot, under the guise of an exercise of a police power, impose a license fee for revenue purposes.” City of Chicago Heights, 406 Ill. at 434.

In addition, we find that defendants’ reliance upon City of Geneseo v. Illinois Northern Utilities Co. (1941), 378 Ill. 506, cert. denied (1942), 316 U.S. 670, 86 L. Ed. 1746, 62 S. Ct. 1046, Village of West City v. Illinois Commercial Telephone Co. (1939), 372 Ill. 493, City of Edwardsville v. Central Union Telephone Co. (1923), 309 Ill. 482, People ex rel. City of Chicago v. Chicago Telephone Co. (1906), 220 Ill. 238, Illinois Broadcasting Co. v. City of Decatur (1968), 96 Ill. App. 2d 454, Coles-Moultrie Electric Cooperative v. Illinois Commerce Comm’n (1985), 131 Ill. App. 3d 946, and General Electric Cablevision Corp. v. City of Peoria (1972), 8 Ill. App. 3d 948, inappropriate. Defendants argue that City of Edwardsville and Village of West City establish that a municipality has the right to require that a telecommunications utility enter into a franchise agreement with it as a prerequisite to using the public streets to house a telecommunications cable. We find that Village of West City mandates that a municipality may enter into a franchise agreement with a public utility. (Village of West City, 372 Ill. at 495-96.) However, Village of West City does not state that a municipality has a right to force a telephone utility to enter into a franchise agreement or that a franchise agreement is a necessary precondition to use of the streets by a telecommunications utility. Similarly, defendants have misinterpreted City of Edwardsville. The issue in City of Edwardsville was whether a statute which imposed a penalty for posts and poles exceeding a certain height was applicable to the Central Union Telephone Company. City of Edwardsville concerns statutory construction (City of Edwardsville, 309 Ill. at 483, 486-88), and it does not address the issue of whether a municipality may compel a telephone utility to enter into a franchise agreement or whether a franchise agreement is a necessary prerequisite for a telecommunications utility’s use of public streets. Therefore, City of Edwardsville and Village of West City are inapplicable to the case at bar.

Similarly, defendants assert that People ex rel. City of Chicago v. Chicago Telephone Co. (1906), 220 Ill. 238, mandates that a telephone company cannot place its wires upon the streets of a municipality without a franchise. Defendants’ interpretation of this case is also erroneous. Chicago Telephone Co. concerned the nature of rates which telephone customers could be charged. Chicago Telephone Co., 220 Ill. at 239, 240-41.

In addition, defendants maintain that Illinois Broadcasting Co. v. City of Decatur (1968), 96 Ill. App. 2d 454, and General Electric Cablevision Corp. v. City of Peoria (1972), 8 Ill. App. 3d 948, mandate that franchise agreements between public utilities and municipalities are authorized by various statutory grants which permit municipalities to regulate the use of their streets. We find that Illinois Broadcasting Co. and General Electric Cablevision Co. are not applicable to the case at bar, because these cases specifically involve the granting of franchises by municipalities to private cable television corporations. Therefore, these cases are not relevant with respect to the legality and scope of franchise agreements between a municipality and a public telecommunications utility.

Finally, defendants contend that City of Geneseo v. Illinois Northern Utilities Co. (1941), 378 Ill. 506, cert. denied (1942), 316 U.S. 670, 86 L. Ed. 1746, 62 S. Ct. 1046, mandates that municipalities have unlimited franchise powers over their streets, and that this court misread City of Geneseo and interpreted it as giving control over municipal streets to the Illinois Commerce Commission. We are not persuaded by defendants’ arguments. In City of Geneseo, the Illinois Supreme Court held that the powers granted to the Illinois Commerce Commission by the Public Utilities Act (Ill. Rev. Stat. 1987, ch. 1112/3, par. 13 — 202) do not deprive municipalities of regulatory authority over the use of streets by public utilities. (City of Geneseo, 378 Ill. at 530.) This court so construed the case and held that “Geneseo is not dispositive of [the case at bar],” in which an entirely different issue is involved. (American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, 385.) The issue in the instant case is whether municipal regulatory authority over placement of telephone company facilities in public streets is absolute or is limited by law.

For these reasons, we find that defendants do not have an absolute right to require a franchise agreement as a prerequisite for the use of their public streets by plaintiffs, and that a franchise agreement is not a necessary precondition for plaintiffs to utilize the public streets of the defendant municipalities.

For the aforementioned reasons, we affirm the decision of the circuit court of Cook County.

Affirmed.

LINN, J., concurs.

JUSTICE McMORROW,

dissenting:

I respectfully dissent. The majority erroneously determines that the municipalities do not possess the lawful authority to prohibit AT&T’s use of public streets pending negotiation of a franchise agreement. The majority’s decision is in direct conflict with Illinois Supreme Court case law precedent and applicable Illinois statutory law. The majority’s ruling is particularly disturbing, because it virtually nullifies both the municipal power to regulate a public utility’s use of public streets and the municipal authority to charge a franchise fee for such use.

I

The instant appeal presents the question of whether the municipalities possess the lawful authority to condition their consent to AT&T’s use of public streets upon the negotiation of a franchise agreement for such use. In my view, Illinois statutes and case law precedent grant to the municipalities the power to prohibit AT&T’s use of public streets pending negotiation of a franchise agreement.

According to the record, AT&T is a public utility that has been issued a certificate of public necessity and convenience, from the Illinois Commerce Commission, to operate AT&T’s telecommunications system in this State. However, the Public Utilities Act explicitly provides that a certificate of public necessity and convenience does not confer a franchise, license, or other power upon the public utility. (Ill. Rev. Stat. 1987, ch. 1112/3, par. 8 — 406.) Consequently, AT&T’s receipt of a certificate of public necessity and convenience does not grant it the automatic right to use public streets for its stated business purpose.

Other statutory provisions set forth limitations upon AT&T’s use of public streets. (Ill. Rev. Stat. 1987, ch. 134, pars. 4, 20 (hereinafter the Telegraph Act and the Telephone Company Act, respectively).) Section 4 of the Telegraph Act provides that AT&T cannot use public streets “without the consent of the corporate authorities” of the municipalities. (Ill. Rev. Stat. 1987, ch. 134, par. 4.) In addition, section 4 of the Telephone Company Act states that AT&T’s use of public streets “shall [not] interfere with the control now vested in” the municipalities. Ill. Rev. Stat. 1987, ch. 134, par. 20.

The “control now vested” in municipalities with respect to use of public streets is set forth in the Illinois Constitution (Ill. Const. 1970, art. VII, §6) and the Illinois Municipal Code (Ill. Rev. Stat. 1987, ch. 24, par. 11 — 80—1 et seq.). One of the municipalities in the case at bar, Arlington Heights, is a home rule unit that is granted the “power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax.” (Ill. Const. 1970, art. VII, §6(a).) These “[p]owers *** of home rule units shall be construed liberally.” (Ill. Const. 1970, art. VII, §6(m); see generally City of Carbondale v. Yehling (1983), 96 Ill. 2d 495, 451 N.E.2d 837; County of Cook v. John Sexton Contractors Co. (1979), 75 Ill. 2d 494, 389 N.E.2d 553.) The remaining defendant-municipalities, which are non-home-rule units, are accorded the power to “regulate the use of the streets and other municipal property.” (Ill. Rev. Stat. 1987, ch. 24, par. 11 — 80—2; see also City of Geneseo v. Illinois Northern Utilities Co. (1941), 378 Ill. 506, 39 N.E.2d 26 (power to regulate includes power to prohibit).) They are also expressly granted the authority to “prevent and remove encroachments or obstructions upon the streets.” (Ill. Rev. Stat. 1987, ch. 24, par. 11 — 80—3.) Based upon these principles, the municipalities in the case at bar are granted the power to regulate, and prohibit, use of public streets by a public utility.

Under Illinois statutory law, all municipalities are specifically granted the power to charge a tax upon the gross receipts of public utility telecommunication companies when those receipts derive from service originating within the municipality. (Ill. Rev. Stat. 1987, ch. 24, par. 8 — 11—2.) The municipal power to charge such a tax is explicitly stated to have no limiting effect upon the municipal authority to charge a franchise fee for a public utility’s use of the municipalities’ public streets:

“The corporate authorities of any municipality may tax any or all of the following occupations or privileges:
1. Persons engaged in the business of transmitting messages by means of electricity, at a rate not to exceed 5% of the gross receipts from such business originating within the corporate limits of the municipality.
* * *
Any of the taxes enumerated in this section may be in addition to the payment of money, or value of products or services furnished to the municipality by the {public utility] as compensation for the use of its streets, alleys, or other public places, or installation and maintenance therein, thereon or thereunder of poles, wires, pipes or other equipment used in the operation of the [public utility’s] business.” (Emphasis added.) Ill. Rev. Stat. 1987, ch. 24, par. 8 — 11—2.

These constitutional and statutory enactments demonstrate that the municipalities possess the power to regulate, and to prohibit, AT&T’s use of public streets. They also establish the municipalities’ authority to charge a reasonable franchise fee for AT&T’s use of public streets.

The municipal power to prohibit a public utility’s use of public streets pending imposition of a franchise fee derives from Illinois Supreme Court precedent. Originally, in Chicago Motor Coach Co. v. City of Chicago (1929), 337 Ill. 200, 169 N.E. 22, the supreme court held invalid a municipal ordinance that required a franchise agreement with the municipality before busses of a public utility would be permitted upon the municipality’s public streets. The supreme court in Chicago Motor Coach concluded that the municipality could not prohibit a public utility’s access to public streets pending the execution of a franchise agreement.

The supreme court’s decision in Chicago Motor Coach was overruled in City of Geneseo v. Illinois Northern Utilities Co. (1941), 378 Ill. 506, 39 N.E.2d 26. In Geneseo, the court explicitly held that the municipal authority “to regulate and control the use of their streets *** inelude[s] the right to grant to or to withhold that use from [public] utilities.” (Geneseo, 378 Ill. at 520.) The court noted that “[t]his power has been sustained since the passage of the Public Utilities act[] [citations]” (Geneseo, 378 Ill. at 520), which does not “tak[e] from the city the ‘right to permit * * * or prohibit the use of any street, alley or public place within a city.’ ” (Geneseo, 378 Ill. at 521.) The court has also held that a municipality possesses the power to charge a reasonable franchise fee for a public utility’s use of public streets within the municipality’s control. (Geneseo, 378 Ill. at 522-23; see also City of Springfield v. Inter-State Independent Telephone & Telegraph Co. (1917), 279 Ill. 324, 116 N.E. 631; People ex rel. Shallberg v. Central Union Telephone Co. (1908), 232 Ill. 260, 83 N.E. 829; see also Coles-Moultrie Electric Cooperative v. Illinois Commerce Comm’n (1985), 131 Ill. App. 3d 946, 476 N.E.2d 1303; Diginet v. Western Union ATS, Inc. (N.D. Ill. 1991),_E Supp._; see generally 12 E. McQuillen, The Law of Municipal Corporations §34.37, at 128 (3d ed. 1986).) The court determined that “the power vested in cities to permit or refuse a license or franchise to a public utility has not been repealed by the provisions of the Public Utilities act, and anything said to the contrary in *** Chicago Motor Coach *** is not adhered to.” Geneseo, 378 Ill. at 530.

Based upon Geneseo, the Illinois Supreme Court has observed that:

“[Chicago Motor Coach] involved the power of the city to prohibit the operation of the company’s busses. It has been regarded as holding *** that the Public Utilities Act had so occupied the field as to repeal the right of a municipality to grant or deny permission to utilities to use its streets ***. (See: City of Geneseo v. Illinois Northern Utilities Co., 378 Ill. 506, 518[, 39 N.E.2d 26].) [This] *** proposition[ ] was expressly overruled in the City of Geneseo case." (City of Peoria v. Peoria Transit Lines (1957), 11 Ill. 2d 520, 522-23,144 N.E.2d 607.)

Thus, under binding Illinois Supreme Court precedent, the municipalities retain the right to grant or deny permission to a public utility, such as AT&T, to use the public streets within the municipalities’ control pending the execution of a franchise agreement.

The majority undertakes a misguided analysis with regard to the municipalities’ right to charge a franchise fee for AT&T’s use of public streets. The majority initially determines that “a municipality does not have an absolute right to require a franchise agreement as a precondition for the use of public streets by a telecommunications utility.” (Emphasis added.) (216 Ill. App. 3d at 481.) Thereafter, the majority finds that a public utility’s receipt of an Illinois Commerce Commission certificate of public convenience and necessity (Ill. Rev. Stat. 1987, ch. 1112/3, par. 8 — 406) completely overrides the municipal power to prohibit a public utility’s use of public streets. (216 Ill. App. 3d at 480.) On this basis, the majority concludes that “a municipality’s ‘consent is [only] for the purpose of notifying the municipality in advance of intended construction so that it can exercise its regulatory power of time, manner, and location of the construction.’ [Citation.]” 216 Ill. App. 3d at 482-83, quoting Arlington Heights, 174 Ill. App. 3d at 386.

To reach its erroneous conclusion, the majority misconstrues the Telegraph Act and the Telephone Company Act. According to the majority, these Acts “ ‘clearly show[ ] that defendants’ consent is not mandatory before access to the streets *** can be obtained. [Citation.] Section 4 of the Telegraph Act expressly authorizes the telephone company to install its facilities when it is necessary.’ ” (216 Ill. App. 3d at 480, quoting Arlington Heights, 174 Ill. App. 3d at 385.) However, contrary to the majority’s interpretation, the Acts do require the municipalities’ prior consent to AT&T’s use of public streets. Moreover, section 4 of the Telegraph Act does not authorize the telephone company to install its facilities “when it is necessary,” without regard to municipal consent to such use. (Ill. Rev. Stat. 1987, ch. 134, par. 4.) In addition, section 4 of the Telephone Company Act, which grants public utilities the authority to exercise eminent domain powers over private property, does not vest in public utilities the unilateral right to use public streets without the prior consent of the municipality. Ill. Rev. Stat. 1987, ch. 134, par. 20.

The majority’s disposition in the instant cause is also founded upon a misinterpretation of the scope of municipal powers. For example, the majority posits that the municipal authority to “permit the use of public streets *** must be strictly construed” and is simply “regulatory in character.” (216 Ill. App. 3d at 480, citing Arlington Heights, 174 Ill. App. 3d at 387.) The majority neglects to recognize that the powers of Arlington Heights, which is a home rule unit, should be broadly construed. (Ill. Const. 1970, art. VII, §6(m); see generally City of Carbondale v. Yehling (1983), 96 Ill. 2d 495, 451 N.E.2d 837; County of Cook v. John Sexton Contractors Co. (1979), 75 Ill. 2d 494, 389 N.E.2d 553.) The majority also ignores that the non-home-rule units’ power to regulate use of their public streets includes the power to prohibit such use. See City of Geneseo v. Illinois Northern Utilities Co. (1941), 378 Ill. 506, 39 N.E.2d 26.

The majority also errs in its application of Illinois Supreme Court precedent. The majority improperly relies upon supreme court decisions pertaining to the power of a municipality to impose a tax upon a public utility’s gross receipts or a municipality’s power to license for revenue. (See 216 Ill. App. 3d at 481, discussing City of Chicago Heights v. Public Service Co. (1951), 408 Ill. 604; City of Chicago Heights v. Public Service Co. (1951), 408 Ill. 310; City of Chicago Heights v. Western Union Telegraph Co. (1950), 406 Ill. 428; see also Village of Lombard v. Illinois Bell Telephone Co. (1950), 405 Ill. 209, 90 N.E .2d 105; see generally Ill. Const. 1970, art. VII, §6(e)(2) (municipality has “only the power that the General Assembly may provide by law *** to license for revenue”).) However, the municipalities in the case at bar argue that the franchise fees were premised upon the municipal power to regulate use of public streets, not on the municipal authority to tax, or to license for revenue. Consequently, the decisions relied upon by the majority are inapplicable to the case at bar, and do not lend support to the majority’s position.

The majority misreads the Illinois Supreme Court’s decision in City of Geneseo v. Illinois Northern Utilities Co. (1941), 378 Ill. 506, 39 N.E .2d 26. According to the majority, the Geneseo court “held that the powers granted to the Illinois Commerce Commission by the Public Utilities Act [citation] do not deprive municipalities of regulatory authority over the use of streets by public utilities. [Citation.]” (Emphasis added.) (216 Ill. App. 3d at 486.) However, the court in Geneseo also held that the Public Utilities Act did not deprive municipalities of prohibitory powers over a public utility’s use of public streets. (Geneseo, 378 Ill. at 520-21.) In addition, the Geneseo court overruled its previous decision in Chicago Motor Coach Co. v. City of Chicago (1929), 337 Ill. 200, 169 N.E. 22, in which the court had held that municipalities do not possess the authority to prohibit a public utility’s use of public streets pending execution of a franchise agreement. (See City of Peoria v. Peoria Transit Lines, Inc. (1957), 11 Ill. 2d 520, 144 N.E.2d 607.) The majority’s analysis fails to take into account the Geneseo holding in light of the Illinois Supreme Court’s decisions in Chicago Motor Coach and City of Peoria. In addition, Geneseo and City of Peoria are directly contrary to the conclusion the majority adopts in this appeal.

The majority’s determination is also unsupported by its earlier decision in American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, 528 N.E.2d 1000 (hereinafter Arlington Heights I), which pertained to the trial court’s allowance of AT&T’s motion for a preliminary injunction. In a patent non sequitur, the majority states that “insofar as this court went beyond determining whether the trial court abused its discretion, its findings are valid because they are relevant with respect to the question of whether plaintiffs are ultimately likely to prevail on the merits.” (216 Ill. App. 3d at 479.) However, it is well established that disposition of an appeal from preliminary injunctive relief is not, and cannot be, a ruling on the underlying merits of the parties’ dispute. (See, e.g., Buzz Barton & Associates, Inc. v. Giannone (1985), 108 Ill. 2d 373, 483 N.E.2d 1271.) I cannot accept the majority’s determination that Arlington Heights I is controlling in the instant appeal.

I also find it significant that AT&T has recognized the municipal power to charge a reasonable franchise fee, and has entered into numerous franchise arrangements with other municipalities pertaining to the passage of AT&T’s fiber optic cable under public streets. The municipalities in the instant cause relied upon the existence of AT&T’s franchise agreements with other municipalities as justification for the municipalities’ position that they would not consent to AT&T’s use of their public streets until negotiation of a franchise agreement between AT&T and the municipalities involved in the instant appeal. Although AT&T initially insisted that it had no legal obligation to pay a franchise fee to the municipalities in the case at bar, AT&T later suggested that it would pay the municipalities $1 per linear foot for its use of their public streets.

The franchise agreements that AT&T has executed with municipalities, other than those involved in the instant cause, require the payment of at least $1.00 per linear foot. The record shows that, in aggregate, these fees amount to millions of dollars per year. It cannot be seriously argued that AT&T would have agreed to pay these franchise fees to other municipalities if the fees were not legally valid. AT&T’s payment of such franchise fees to other municipalities is not gratuitous or in the nature of charitable contributions to those municipalities. AT&T has observed that still other municipalities have not demanded a franchise fee or franchise agreement for the passage of fiber optic cable under the municipalities’ public streets. However, the circumstance that one municipality chose not to charge a franchise fee for a public utility’s use of public streets does not infringe upon the legal right of another municipality to require a reasonable franchise fee if it so chooses.

In light of these considerations, I conclude that the municipalities possess the lawful authority to prohibit AT&T’s use of public streets pending negotiation of a franchise agreement for such use.

II

The majority also erroneously determines that the entry of a permanent injunction was appropriate, because the municipalities “attempted to charge plaintiffs millions of dollars in franchise fees [that bear] no reasonable relationship to the minimal burdens which plaintiffs have imposed upon defendants by running their cable underneath short segments of defendants’ streets.” 216 Ill. App. 3d at 484.

However, the majority addresses the wrong question. The proper inquiry is not whether the proposed franchise fees were excessive, but whether the municipalities were arbitrary and capricious when they refused to consent to AT&T’s use of public streets until negotiation of a franchise agreement. It is well established that a municipality may not exercise its authority in an arbitrary and capricious fashion. See, e.g., Chicago National Bank v. City of Chicago Heights (1958), 14 Ill. 2d 135,150 N.E.2d 827.

In my opinion, the municipalities here were not arbitrary or capricious. The record indicates that the failure to reach an early accord with respect to a franchise fee was precipitated in large part by AT&T’s refusal to pay any franchise fee whatsoever to the municipalities. There is no legal requirement that a municipality consent to a public utility’s use of public streets according to the time frame unilaterally dictated by the public utility’s intended date of operation. Under these circumstances, the municipalities’ failure to consent to AT&T’s use of public streets cannot be fairly characterized as arbitrary and capricious.

Ill

I find the majority’s resolution of the instant appeal ill-advised, because it nullifies both the municipal authority to regulate a public utility’s use of public streets and the municipal power to charge a franchise fee for such use. The majority now permits a public utility to unilaterally extend its power of eminent domain over private property (see Ill. Rev. Stat. 1987, ch. 134, par. 20) to include public property within a municipality’s control. The majority also allows a public utility’s exercise of this expanded eminent domain power without any consent by or payment of any franchise fee whatsoever to the municipality having control of the public property. This disposition is contrary to Illinois statutory law and Illinois Supreme Court precedent, and is not justified by the majority’s previous ruling in Arlington Heights I. I am unable to accept the majority’s sweeping rules in the instant cause.

In addition, the majority’s disposition needlessly entangles the court in inherently municipal affairs. The majority tacitly condones AT&T’s refusal to negotiate any franchise agreement at all. In place of such negotiation, the majority allows AT&T to obtain a judicial determination of whether the various proposed and nonbinding franchise fees suggested by the municipalities were reasonable. As this court recognized in Arlington Heights I, the imposition of a franchise fee for use of public streets is an inherently legislative function of the municipalities, and whether a particular franchise fee arrangement should be imposed is, in the first instance, a matter within the province of the municipalities and their residents. (Arlington Heights, 174 Ill. App. 3d at 388.) This court is certainly not the proper forum to debate the relative merits of the various franchise arrangements offered by the municipalities. I cannot condone the majority’s unjustified intrusion into a dispute that should be resolved by the residents of the municipalities through their elected officials.

In view of the foregoing considerations, I respectfully dissent.


source: Caselaw Access Project

author: JUSTICE JOHNSON

license: Public Domain

text:
    AMERICAN NATIONAL BANK AND TRUST COMPANY, Guardian of the Estate of Kennicki Freeman, a Disabled Minor, et al., Plaintiffs-Appellants, v. JAMES BRANSFIELD, Defendant-Appellee (Columbus-Cuneo-Cabrini Medical Center et al., Defendants; Columbus-Cuneo-Cabrini Medical Center, Defendant and Counterplaintiff-Appellant; Mohammed Hafeez et al., Defendants and Counterdefendants-Appellees).
    First District (4th Division)
    No. 1 — 88—2833
    Opinion filed June 28,1991.
    — Rehearing denied August 14,1991.

      James P. Chapman and Kathleen Hogan Morrison, both of James P. Chapman & Associates, of Chicago, for appellants American National Bank & Trust Company and Sherron Freeman.
    John J. Reidy, Douglass C. Rose, and Charles E. Reiter III, all of Ruff, Weidenaar & Reidy, Ltd., of Chicago, for appellant Columbus-Cuneo-Cabrini Medical Center.

      Wildman, Harrold, Allen & Dixon, of Chicago (Frank R. Petrek, Jr., Ruth E. VanDemark, and Susan J. Flieder, of counsel), for appellee James Bransfield.
    Hinshaw, Culbertson, Moelmann, Hoban & Fuller, of Chicago (Gary A. Grasso, Joshua G. Vincent, and Bruce L. Carmen, of counsel), for other appellees.
   JUSTICE JOHNSON

delivered the opinion of the court.

Columbus-Cuneo-Cabrini Medical Center (the Medical Center), defendant and counterplaintiff, appeals from an order of the circuit court of Cook County dismissing a claim for implied indemnity in favor of Dr. Mohammed Hafeez, Julia Lester, and Anesthesia Associates of Lake Shore, Ltd. (cumulatively referred to as the Anesthesia defendants), defendants and counterdefendants.

The questions presented on appeal are (1) whether the trial court properly dismissed the Medical Center’s counterclaim for implied indemnity against the Anesthesia defendants; and (2) whether the settlement agreement between plaintiffs and the Anesthesia defendants was made in good faith.

We affirm.

Kennicki Freeman is a 21/2-year-old boy who suffered profound brain damage during a routine hernia surgery at the Medical Center. Plaintiffs American National Bank and Trust Company (as guardian for the estate of Kennicki Freeman, a disabled minor) and Sherron Freeman (Freeman’s mother) brought a medical malpractice action against the Medical Center, Dr. James Bransfield, the physician who performed the surgery, and the Anesthesia defendants (Dr. Mohammed Hafeez, the anesthesiologist who administered the anesthesia; Julia Lester, the nurse anesthetist who assisted Dr. Hafeez; and Anesthesia Associates of Lake Shore, Ltd., the exclusive provider of anesthesia services at the Medical Center).

The Medical Center filed a counterclaim against the Anesthesia defendants seeking recovery for principal/agent indemnity and contribution. Subsequently, the Anesthesia defendants entered into a settlement agreement with plaintiffs. In a consolidated action, the trial court dismissed the Medical Center’s claim for contribution and indemnity against the Anesthesia defendants and entered summary judgment in favor of Dr. Bransfield. Plaintiffs’ appeal of the summary judgment decision in favor of Dr. Bransfield was dismissed with prejudice. The Medical Center appeals the dismissal of its claim against the Anesthesia defendants for indemnification.

On January 21, 1984, Freeman was admitted to the Medical Center for general surgery to correct an inguinal hernia. During the course of the operation, Freeman suffered irreversible brain damage as a result of oxygen deprivation. The pleadings advanced several theories to explain how the injury occurred. One theory is that the anesthesia tube, through which oxygen and anesthesia are administered to the patient, was misplaced and caused an interruption in the supply of oxygen to the brain. The lack of oxygen to the boy’s brain caused his heart to stop and efforts to resuscitate his heart were unsuccessful. Another theory is that bradycardia (slackening in the pace of the heart beat) was brought on by a neurological reflex to the surgery. Under this theory, it was a delay in resuscitative measures which caused the hypoxia and resulting brain damage. A third theory focuses on the defective delivery of oxygen from the anesthesia machine.

Plaintiffs originally filed a negligence action against only the Medical Center in its capacity as employer of the Anesthesia defendants. Plaintiffs filed a first amended complaint, adding Dr. Hafeez, Dr. Bransfield, and Anesthesia Associates of Lake Shore, Ltd., as defendants. The Medical Center filed a motion for summary judgment, arguing that an independent contractor relationship existed between the hospital and the Anesthesia defendants; therefore, the Medical Center could not be liable under the doctrine of respondeat superior. The trial court denied the motion.

Five expert witnesses were identified and deposed in the case. Plaintiffs and Dr. Bransfield each presented two witnesses who testified that Dr. Hafeez was negligent in his administration of the anesthesia. Dr. Hafeez presented one expert witness who raised doubts as to Dr. Bransfield’s care and treatment during the operation. There was no expert testimony regarding the Medical Center’s standard of care. In their amended complaint, plaintiffs charged, inter alia, that the Medical Center was negligent in meeting its obligation to ensure quality health care and in hiring unqualified personnel.

On March 11, 1987, the Medical Center filed a counterclaim against the Anesthesia defendants for contribution under “An Act in relation to contribution among joint tortfeasors” (Contribution Act) (Ill. Rev. Stat. 1979, ch. 70, par. 301 et seq.) and for indemnity. The counterclaim asserted that in the event it was found vicariously liable for the act of the Anesthesia defendants, it would be entitled to indemnification or 100% contribution. The Anesthesia defendants requested a dismissal of both counts of the counterclaim, arguing that the indemnity theory of the Medical Center’s counterclaim was invalid, pursuant to section 2(d) of the Contribution Act. The court dismissed the implied indemnity claim and the contribution claim based upon its determination that implied indemnity “should not apply.” The court further stated that the settlement between plaintiffs and the Anesthesia defendants fell within the sense and purview of the contribution statute and, therefore, the indemnification claim should be denied.

On August 10, 1988, the Anesthesia defendants reached a settlement with plaintiffs for $4.3 million. The available insurance coverage for the Anesthesia defendants was $5 million. After an extensive oral argument on the good faith of the settlement was held, the trial court found the settlement to be in good faith and dismissed the Medical Center’s counterclaim with prejudice. The court certified the order for immediate appeal pursuant to Supreme Court Rule 304 (134 Ill. 2d R. 304), and the Medical Center filed a notice of appeal on September 22,1988.

The Medical Center contends that the trial court erred in dismissing its implied indemnity action based upon vicarious liability against the Anesthesia defendants. It further asserts that implied indemnity is a viable action where liability is imposed by policy of law rather than culpability of conduct. (Allison v. Shell Oil Co. (1986), 113 Ill. 2d 26, 35.) The Medical Center argues that since there was no testimony criticizing any of its acts, its potential liability is not based on fault but upon the policy choice that it should be vicariously liable for the actions of another. The Anesthesia defendants maintain that the trial court properly dismissed the Medical Center’s counterclaim because the Contribution Act supersedes common law implied indemnity based upon the vicarious liability of a principal for the acts or omissions of his agent. We agree with the Anesthesia defendants.

Both indemnity and contribution arise out of the same principle of restitution or unjust enrichment. “A person who has been unjustly enriched at the expense of another is required to make restitution to the other.” (Restatement of Restitution §1 (1937).) Unlike contribution, which requires that joint tortfeasors share responsibility for injury to a plaintiff, indemnity shifts the entire burden of judgment to one party. The theory underlying implied indemnity is that liability is placed upon the party whose fault was the primary cause of the injury. (Heinrich v. Peabody International Corp. (1985), 139 Ill. App. 3d 289, 291.) However, “[bjecause of either confusion or deliberate departure from prevailing usage, however, there are decisions in which full reimbursement has been allowed under the name of contribution, or some form of distribution has been allowed under the name of indemnity.” W. Keeton, Prosser & Keeton on Torts §51, at 341 (5th ed. 1984).

At common law, implied indemnity involved a restitutionary device, “a contract implied in law arising from the legal obligation of an indemnitee to satisfy liability caused by actions of his indemnitor.” (Frazer v. A.F. Munsterman, Inc. (1988), 123 Ill. 2d 245, 255; see F. Woodward, Quasi Contracts §259 (1913).) In response to the prevailing no-contribution rule, courts began to expand the judicially created doctrine of implied indemnity. (See Liberty Mutual Insurance Co. v. Williams Machine & Tool Co. (1975), 62 Ill. 2d 77; Heinrich, 139 Ill. App. 3d at 291.) Initially, implied indemnity required a pretort relationship and a qualitative distinction in the culpable conduct of the defendants; however, “the doctrine increasingly focused on qualitative distinctions, also termed primary-secondary liability or active-passive negligence.” Heinrich, 139 Ill. App. 3d at 292.

In Skinner v. Reed-Prentice Division Package Machinery Co. (1977), 70 Ill. 2d 1, the Illinois Supreme Court stated that it saw no valid reason for a rule prohibiting contribution among tortfeasors and declared contribution to be the law in Illinois. The court recognized statements by Dean Prosser in which he stated “ ‘[tjhere is obvious lack of sense and justice in a rule which permits the entire burden of a loss, for which two defendants were equally, unintentionally responsible, to be shouldered onto one alone, according to the accident of a successful levy of execution, the existence of liability insurance, the plaintiff’s whim or spite, or his collusion with the other wrongdoer, while the latter goes scot free.’ ” Skinner, 70 Ill. 2d at 13, quoting Prosser, Torts §50, at 307 (4th ed. 1971).

Section 2 of the Contribution Act (Ill. Rev. Stat. 1979, ch. 70, par. 302) codifies and expands principles first stated in Skinner. Section 2(a) of the Contribution Act provides that where two or more persons are subject to liability in tort arising out of the same injury to person, there is a right of contribution among them. (Ill. Rev. Stat. 1979, ch. 70, par. 302(a).) Section 2(b) of the Contribution Act provides that contribution exists only in favor of a tortfeasor who has paid more than his pro rata share of common liability. The tortfeasor’s total recovery is limited by the amount he pays in excess of his share. Ill. Rev. Stat. 1979, ch. 70, par. 302(b).

In Allison v. Shell Oil Co. (1986), 113 Ill. 2d 26, our supreme court stated that the effect of the Contribution Act was to extinguish causes of actions based upon the active-passive negligence concept of implied indemnity. The court stated:

“Active-passive indemnity, like contributory negligence, perpetuates inequality by its inability to apportion loss and its refusal to grant any relief whatsoever to a party whose conduct is considered ‘active’ regardless of how much or little other tortfeasors are at fault. *** Having adopted comparative negligence and the principles of apportioning rather than affixing liability, *** the need for implied indemnity *** has also evaporated.” (Allison, 113 Ill. 2d at 34.)

The Allison court, quoting Alvis v. Ribar (1981), 85 Ill. 2d 1, 27, stated that “total justice can only be attained where the law ‘apportions damages according to the relative fault of the parties.’ ” Allison, 113 Ill. 2d at 34.

We believe that the effect of the Contribution Act was to supersede implied indemnity actions based upon vicarious liability of a principal for the acts and omissions of his agent. We find no reason why principal-agent relationships should be treated differently under the Contribution Act, which by its terms applies to “persons *** subject to liability in tort arising out of the same injury.” (Ill. Rev. Stat. 1979, ch. 70, par. 302(a); see Heinrich v. Peabody International Corp. (1985), 139 Ill. App. 3d 289, 299.) The recognition of implied indemnity in this case subverts the goal of the Contribution Act in eliminating inequity between joint tortfeasors.

Our decision is supported by the legislative history of the Contribution Act, which suggests that monetary damages should be shared by all responsible parties. (81st Ill. Gen. Assem. Senate Proceedings, May 14, 1979, at 175-76.) Representative Daniels stated that the bill allows for “contribution between responsible parties as to varying degrees of the judgment action or how much they may owe.” (81st Ill. Gen. Assem., House Proceedings, June 14, 1979, at 18 (statement by Representative Daniels) (Senate Bill 308); Henry v. St. John’s Hospital (1989), 180 Ill. App. 3d 558, 566.) If at the close of all the evidence, it is determined that the Medical Center’s conduct played a role in proximately causing Freeman’s injury, there is no reason why that negligent conduct should not be compared with the conduct of the Anesthesia defendants and the responsibility of damages shared.

Furthermore, the existence of implied indemnity and its application to principle-agent relationships resurrects legitimate criticisms in our inability to define a pretort relationship. (See Bua, Third Party Practice in Illinois: Express and Implied Indemnity, 25 De Paul L. Rev. 287, 296-300 (1976).) The court in Heinrich v. Peabody International Corp. (1985), 139 Ill. App. 3d 289, stated:

“If implied indemnity and contribution coexist, we must again engage in the academic exercise of searching for pretort relationships and qualitative distinctions, but now we must also search for the fine line between cases amenable to contribution and those indicating implied indemnity. As a practical matter, too, it would be difficult to instruct juries simultaneously in theories of contribution and implied indemnity.” Heinrich, 139 Ill. App. 3d at 297.

See also Allison v. Shell Oil Co. (1985), 133 Ill. App. 3d 607, 611-12.

Moreover, if the Medical Center had a sufficient pretort relationship to support a traditional implied indemnity action, it could have provided for contractual indemnity to cover vicarious liability. (Heinrich, 139 Ill. App. 3d at 299.) The Contribution Act does not extinguish the right of parties involved in pretort relationships to arrange for contractual indemnity.

In addition, we agree with the Anesthesia defendants that the existence of both contribution and implied indemnity as remedies among joint tortfeasors would destroy the Contribution Act’s purpose of encouraging settlements. (Hanlon v. Airco Industrial Gases (1986), 148 Ill. App. 3d 1039, 1047; Heinrich v. Peabody International Corp. (1985), 139 Ill. App. 3d 289, 298.) The Contribution Act provides that any potentially liable persons who settle with a claimant in good faith are discharged from all liability to any other tortfeasors. (Ill. Rev. Stat. 1979, ch. 70, pars. 302(c), (d).) However, faced with the possibility of settling with the plaintiff only to be brought back into the action by a nonsettling defendant, few defendants will be encouraged to settle before trial. Frazer v. A.F. Munsterman, Inc. (1986), 145 Ill. App. 3d 1092,1096; see Hanlon, 148 Ill. App. 3d at 1047.

The Medical Center contends that it is manifestly unfair for the law to impose a policy choice of vicarious liability and then deprive the party who is “liable” but not at fault from having the opportunity to recover completely against the actual tortfeasor. It further argues that the effect of the Contribution Act is to remove its ability to recover from the agents who settle with the plaintiff. We disagree.

We believe that section 2 of the Contribution Act provides a vicariously liable tortfeasor with a remedy which is similar to implied indemnity. The Act provides in part that “[n]o tortfeasor is liable to make contribution beyond his own pro rata share of the common liability.” (Ill. Rev. Stat. 1979, ch. 70, par. 302(b).) In addition, section 3 provides in part that “[t]he pro rata share of each tortfeasor shall be determined in accordance with his relative culpability.” (Ill. Rev. Stat. 1979, ch. 70, par. 303.) The equitable concept of relative responsibility applies regardless of the basis for a particular party’s liability. See Doyle v. Rhodes (1984), 101 Ill. 2d 1,14.

“The clear meaning of the statutory language is that each party’s share of damages should be determined by the jury, or by the judge if there is no jury, based on the facts of the case. Whether the jury finds a party 1% responsible, 100% responsible, or any figure in between, that party should be bound by the jury’s verdict.” (Heinrich v. Peabody International Corp. (1985), 139 Ill. App. 3d 289, 296.) Under the Contribution Act, there is no need to recover from settling tortfeasors because damages are apportioned based on degree of fault.

Consistent with the holding in Heinrich, we are of the opinion that if a jury finds that the Medical Center’s liability is entirely vicarious, it may find the Medical Center 0% at fault and the Anesthesia defendants 100% at fault. (Heinrich, 139 Ill. App. 3d at 299.) Having settled the claim with the Anesthesia defendants, the plaintiffs may not later seek to enforce the judgment against the Anesthesia defendants.

The Medical Center incorrectly asserts that under the holding in Hackett v. Equipment Specialists, Inc. (1990), 201 Ill. App. 3d 186, it is impossible to apportion 100% liability to one party under the theory of contribution. The court in Hackett held that where a jury finds a tortfeasor 55% at fault, the jury’s apportionment of 100% liability to another tortfeasor was improper. (Hackett, 201 Ill. App. 3d at 200-01.) We believe the proper rule is that one tortfeasor may seek 100% contribution from another party who was actually and solely at fault. Hanlon v. Airco Industrial Gases (1986), 148 Ill. App. 3d 1039,1047.

In Frazer v. A.F. Munsterman, Inc. (1988), 123 Ill. 2d 245, defendant Munsterman filed a third-party action seeking contribution and implied indemnity. The codefendants settled with the plaintiff, while Munsterman was found liable for negligence. The trial court reduced plaintiff’s award by the amount of the prior settlement and dismissed the owner’s indemnity claim. (Frazer, 123 Ill. 2d at 254.) The supreme court affirmed dismissal of the implied indemnity claim because the owner was found negligent. (Frazer, 123 Ill. 2d at 270.) The court recognized that section 2(d) of the Contribution Act discharges a tortfeasor who has settled in “good faith” with the plaintiff from all liability for contribution to other tortfeasors. (Frazer, 123 Ill. 2d at 263.) Thus, the codefendants were not subject to the owner’s contribution claim because they settled with the plaintiff. Although the court refused to consider questions involving vicarious or derivative liability of the one claiming indemnity, the court rejected the appellate court’s broad holding that the Contribution Act eliminated implied indemnity. Frazer, 123 Ill. 2d at 261.

Similarly, in Thatcher v. Commonwealth Edison Co. (1988), 123 Ill. 2d 275, the supreme court precluded a defendant from seeking indemnity from other tortfeasors. The court stated that although defendant had not been found negligent, it had been sued solely under theories requiring a finding of fault and, had it been found liable, would have been barred from indemnity under the holding in Frazer. Thatcher, 123 Ill. 2d at 279.

The Medical Center contends that since the expert witnesses did not criticize any of its actions it is not at fault and it is entitled to implied indemnification based on vicarious liability as a matter of law. Under the holdings in Frazer and Thatcher, we disagree. Just as in Thatcher, the Medical Center is being sued under a theory requiring a finding of fault.

On February 13, 1987, the trial judge denied the Medical Center’s motion for summary judgment. It is well settled that summary judgment is appropriate in a medical malpractice case where there is no genuine issue as to any material fact and the party seeking summary judgment is entitled to judgment as a matter of law. (Reynolds v. Mennonite Hospital (1988), 168 Ill. App. 3d 575, 578.) Based on the trial court’s ruling, the Medical Center’s degree of fault, if any, is a material issue of fact for a jury to determine.

We therefore hold that the trial court did not err in dismissing the implied indemnity action based upon the vicarious actions of the Anesthesia defendants. We further hold that the Contribution Act supersedes common law implied indemnity based upon the vicarious liability of a principal for the acts or omissions of his agents.

The Medical Center’s next issue on appeal is whether the trial court erred in finding that the settlement agreement between plaintiffs and the Anesthesia defendants was made in good faith. The Medical Center’s only contention is that since its liability is derivative of the Anesthesia defendants’ actions, the settlement was not made in good faith.

We find this argument without merit. As we have previously determined, both the Medical Center and the Anesthesia defendants are subject to liability in tort under section 2(a) of the Contribution Act. Therefore, both parties have a right to settle with the plaintiffs and obtain a discharge from further liability under section 2(d) of the Contribution Act. As long as the potential for tort liability exists, a settlement can be reached in good faith. Ballweg v. City of Springfield (1986), 114 Ill. 2d 107, 122.

In the instant case, the trial court was familiar with the facts and based its determination of good faith on the arguments and authorities in a hearing on the Anesthesia defendants’ motion to dismiss the counterclaim. There is no evidence that the court erred in its finding of good faith.

We therefore hold that the trial court did not err in finding that the settlement agreement between plaintiffs and the Anesthesia defendants was made in good faith.

Because we have decided this case on its merits, we need not determine whether the Medical Center’s action is barred by the statute of limitations.

For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed.

Affirmed.

JIGANTI, P.J., and LINN, J., concur.


author: JUSTICE LaPORTA

text:
    ALL SEASONS EXCAVATING COMPANY et al., Plaintiffs and Counter-defendants-Appellees, v. EDWARD J. BLUTHARDT, Indiv. and d/b/a E.J. Bluthardt, et al., Defendants and Counterplaintiffs-Appellants.
    First District (6th Division)
    No. 1 — 90—0261
    Opinion filed July 5,1991.

      Steven Messner, of Wilmette, for appellants.
    Ronald G. Zamarin, of Des Plaines, for appellees.
   JUSTICE LaPORTA

delivered the opinion of the court:

This is an interlocutory appeal brought by defendants as a matter of right under Supreme Court Rule 307(a)(1) (134 Ill. 2d R. 307(a)(1)). The defendants appeal the court’s order of December 20, 1989, which denied defendants’ motion to dissolve injunctions “implicitly created” by orders entered on April 7 and April 18, 1989. The court subsequently denied defendants’ motion to reconsider on January 18, 1990, and that order is also appealed.

In pertinent part, the order of April 7, 1989, ordered that all net proceeds of a certain home equity loan to defendants in the principal sum of $15,000 be held by defendants’ attorney in an escrow account until further order of court, except that $7,111.37 of these funds were to be repaid into the plaintiffs’ company account instanter.

The order of April 18, 1989, required in part that a check in the amount of $7,111.37 be tendered to plaintiffs’ company for repayment of “monies” owed by defendants, and that the balance of proceeds of the loan secured by defendants’ Illinois real property be retained in defendants’ attorney’s client escrow account.

The defendants’ motion to dissolve the “injunctions” created by the orders of April 7 and April 18 alleged that the sum of $7,888.63 has remained in the escrow account since April 18, 1989, and that these orders created an injunction which enjoined defendants from using assets they lawfully attained in taking out a mortgage on their Prospect Heights home. The plaintiffs have claimed that because their complaint alleges fraud with regard to the original home mortgage loan, these assets should remain frozen to protect their interest. Defendants alleged plaintiffs have failed to show irreparable injury if these funds are released to the defendants. On December 20 the court ordered that the injunctions remain in full force and effect.

On appeal defendants raise these issues: (1) whether the injunctive orders of the court issued on April 7 and April 18 created an equitable attachment contrary to Illinois case law; and (2) whether the funds enjoined are subject to the dispute pending between the parties. Plaintiffs identify the issue as whether the court properly continued to restrain defendants’ control of the proceeds of the encumbrance of the property which is the subject of count VI of the complaint.

Initially we consider the procedural history of the litigation. On January 13, 1989, plaintiffs, All Seasons Excavating Co., a corporation, and its alleged sole shareholders, officers and directors, William V. Roppolo and Carl D. Roppolo, filed a six-count complaint against its employee, Edward Bluthardt, and his wife, Donna Bluthardt. The complaint alleged that defendant Edward Bluthardt was an employee of plaintiff corporation charged with the operation of the business at the direction of William and Carl Roppolo and further charged with the operation and maintenance of the equipment owned by plaintiffs.

Count I alleged improper and fraudulent acts by defendants and alleged that even though plaintiffs instructed defendant to cease activities on behalf of the company as of December 31, 1988, and to return equipment, money, keys, and to cease the use of said equipment, ordered him to cease collecting money for company work performed, and to account for all assets and accounts of the company, the defendant nonetheless used equipment and materials for his own benefit, converted funds and failed to account to plaintiffs, and held himself out as authorized to collect All Seasons accounts. Count I prayed for an injunction to stop these alleged improprieties.

Count II sought an accounting of amounts collected and paid by or on behalf of defendant related to All Seasons business activities and assets and sought judgment for amounts due plus interest.

Count III sought damages for fraud and breach of duty and alleged that the defendants had breached a legal and equitable duty of trust owed to the corporation by fraudulent concealment of work performed using company equipment and by conversion of company funds. The complaint prayed for compensatory and punitive damages.

Count IV sought damages for conversion and prayed for both compensatory and punitive damages.

Count V sought damages for breach of defendants’ alleged promise to repay loans and alleged that plaintiffs loaned to defendants from time to time sums totalling $12,006.66, which loan sums were past due and unpaid. The complaint prayed for judgment in this amount plus interest.

Count VI sought injunctive relief and damages for fraudulent inducement and breach of an oral agreement. Plaintiffs alleged that in July 1987, defendants requested William Roppolo to co-sign a $70,000 note pursuant to a mortgage on their home in Prospect Heights. Plaintiffs alleged that as an inducement to Roppolo co-signing the note, defendants falsely represented that the loan was needed only until they sold their Michigan summer home and that the proceeds of the Michigan sale would be used to retire the $70,000 loan co-signed by plaintiff; that defendants failed and refused to sell their Michigan property and failed to keep the “co-signed note” in good standing; that the note is in default and therefore William Roppolo is liable to the lender for the face value of the note. Plaintiffs prayed for a preliminary injunction prohibiting assignment, transfer or encumbrance of defendants’ Prospect Heights property, their Michigan property or any land trust or other trust in which title may be held, and further prayed for establishment of a constructive trust for the Michigan property and an order of sale with payment of proceeds into the constructive trust. The prayer also asked for judgment for compensatory and punitive damages.

Simultaneous with the January 13 filing of the complaint and before the defendants were served with summons, plaintiffs filed an emergency motion for temporary restraining order, without notice to defendants, to require that defendant cease to act for plaintiff company, be prevented from hiding or damaging the company’s equipment and that defendants be prevented from encumbering or assigning their interests in the real estate in Prospect Heights and Michigan. On January 13, the court entered the temporary restraining order granting all requested relief, the TRO to expire in 10 days unless extended for good cause, and set the motion for hearing on January 23.

On January 17, defendants filed a counterclaim in three counts for declaratory relief, for an accounting based on plaintiffs’ alleged fraud, and for injunctive and other relief. Count I, a “partnership declaratory action,” alleged a verbal agreement in September 1986 among Carl Roppolo, William Roppolo and Edward Bluthardt to form a partnership for a land excavation business to be known as All Seasons Excavating; that each partner would have a one-third interest, with Carl and William Roppolo to make initial capital contribution to cover the purchase of equipment, and defendant to contribute his investment share out of his one-third of the company profits; that defendant was to be solely responsible for the actual operation of the business for a salary in addition to his one-third share of profits. Defendant alleged that without his knowledge or consent, and sometime after September 1986, Carl and William Roppolo incorporated the business, assigning to themselves each a 50% share in an attempt to deprive defendant of his interest in the business. He alleged that on December 30, 1988, Carl Roppolo sent defendant a notice of intention to terminate the partnership. Defendant sought a declaration of partnership, an accounting from plaintiffs and payment of a sum of money or property as would be found due as his share of the partnership assets.

Count II sought injunctive relief to restrain plaintiffs from taking any action with regard to the business property, to prevent its sale or transfer without court supervision, and generally to maintain the status quo while this action was pending.

Count III alleged fraud and that the Roppolos represented to defendant that the business was to be operated as a partnership, and instead, without the knowledge of defendant, the business was incorporated with the intent to deprive defendant of his interest in the business and that defendant relied on these false representations to his detriment. Bluthardt prayed for judgment against counterdefendants; that counterdefendants be ordered to assign to defendant a beneficial interest in one-third of the company and its assets; and sought compensatory and punitive damages, attorney fees and costs.

On January 17, without notice to plaintiffs, defendants moved for and were granted a temporary restraining order, restraining plaintiffs from selling, disposing of, or assigning assets and equipment of All Seasons as prayed in the countercomplaint. Hearings on reciprocal motions to dissolve the temporary restraining orders entered on January 13 and January 17 were set for January 23.

Thereafter the temporary restraining orders were continued in full force and effect by a series of timely court orders. On February 8, plaintiffs’ attorney Zamarin was appointed receiver to collect accounts receivable and to pay current and past due debts of the corporation; the temporary restraining orders were continued in full force and effect. The February 8 order also enjoined defendants from contacting any customer or other entity which had done business with the company and enjoined defendant from use of the company equipment.

On March 14, defendants were ordered to return to plaintiffs $8,300 transferred in January 1989 from a company bank account to their own personal bank account. The parties were ordered to begin the accounting and to commence discovery.

On April 5, defendants filed a motion for a 15-day extension for repayment of the $8,300 amount due and ordered repaid by the March 14 court order and noticed the motion for hearing on April 7. Defendants represented that they had applied for and obtained a $15,000 loan and that the money would be available by April 15.

On April 7, plaintiffs filed a motion for rule to show cause for defendants’ failure to return the $8,300 to the corporation as ordered by the court.

On April 7, the court entered two orders. The first order provided: (1) the hearing on plaintiffs’ motion for rule to show cause was continued to April 18; (2) all net proceeds of defendants’ $15,000 loan were ordered to be paid over to defendants’ attorney Messner to be held in the attorney’s escrow account until further order of court, except that of this amount $7,111.37 was ordered to be repaid into the plaintiffs’ company account immediately upon receipt of the funds; (3) defendants were given leave to hire an appraiser at their own expense without prejudice to a right to seek credit for same; and (4) records were to be made available to defendants provided they paid one half of copying costs. The second April 7 order directed the transfer of $1,118.63 from defendants’ account at the First National Bank of Mount Prospect to the corporation’s account. The court ordered that the corporate account identify the receiver as the only authorized signatory on the corporation account.

On April 18, the court ordered that the proceeds of defendants’ loan secured by their Prospect Heights property was to be retained in the escrow account except for the sum of $7,111.37, which sum was ordered to be tendered to the plaintiff corporation for repayment of money owed by defendants. The defendants were ordered to produce listing agreements entered into for their Michigan property and to produce January 1989 bank statements. The case was set for trial in September 1989.

Thereafter a number of motions were filed and orders entered which have no bearing on the subject of this appeal. The trial was continued to a later date.

On October 30, defendants’ motion to dissolve the injunction created by the April 7 and April 18 court orders was filed and set for hearing on November 14. In its October 30 order the court approved the sale of the company’s excavating equipment for $112,000 and ordered the company loan with Midland Federal be repaid from proceeds with the balance of $17,471.41 tendered to the receiver for disbursement in accordance with prior court orders.

The record discloses no order entered on November 14.

On November 27, the court entered an order which took the defendants’ motion to dissolve the injunction of the April 7 and April 18 orders under advisement pending written order to follow; gave defendants leave to file an amendment to their counterclaim instanter; gave defendants leave to file a motion to compel, a motion for continuance, and a motion to release funds instanter; gave plaintiffs leave to file motion for rule to show cause instanter (the record does not contain a copy of such motion); and set hearing on the motions for January 12,1990.

On December 20, the court entered its memorandum opinion which denied defendants’ motion of October 30 to dissolve the injunctions and ordered that the injunctions created by the April 7 and April 18 orders remain in full force and effect.

Defendants’ subsequent motion for reconsideration was denied without further comment on January 18, 1990, and this interlocutory appeal followed.

This appeal concerns $7,888.63 held in defendants’ attorney’s escrow account. This sum is the balance of the loan proceeds from defendants’ $15,000 bank loan obtained to repay $8,300 allegedly wrongfully taken by defendant from the plaintiffs’ corporate account for his own use after he had been advised that the business would be terminated on December 31,1988.

Defendants argue that the court order of December 20 created an injunction which enjoined defendants from using funds they had lawfully obtained from the loan. In their motion to dissolve the injunction, the defendants argued that the plaintiffs have offered no proof to demonstrate that they will suffer immediate and irreparable injury if the funds are released, that such a showing is required for the issuance of an injunction by section 4 — 101 of the Code of Civil Procedure (111. Rev. Stat. 1987, ch. 110, par. 4 — 101) and absent such a showing there is no justifiable reason to continue to freeze these funds and to deprive defendants of their use. The defendants further argued that the funds are needed to pay costs of this litigation and other debts.

The defendants contend on appeal that the court’s purpose in entering and then subsequently in refusing to dissolve the injunctions of April 7 and April 18 was to impose an equitable attachment on the defendants’ loan proceeds and since the injunction here creates an equitable attachment on the funds and the real estate, such a remedy must meet the strict parameters of section 4 — 101 of the Illinois attachment act (Ill. Rev. Stat. 1987, ch. 110, par. 4 — 101). The defendants argue that the requisite statutory factors are not present (Carriage Way Apartments v. Pojman (1988), 172 Ill. App. 3d 827, 838, 527 N.E.2d 89, citing Lewis v. West Side Trust & Savings Bank (1937), 288 Ill. App. 271, 278, 6 N.E.2d 481) and an attachment is not appropriate.

Defendants refer to that part of the court’s December 20 order as error which states:

“It was the intention of this order, that all monies from the $15,000 note be used to repay the Plaintiff for alleged wrong doings by the Defendant. By securing this money in an escrow account, the Court is not pre-judging the issues of this case, but rather protecting the interests of the Plaintiff. From the facts alleged such protection is warranted. If the Court were to release these loan proceeds, any later success by the Plaintiffs could prove to be a hollow victory, in that the defendant would have no funds to pay a judgment. If however, this Court's disposition is in favor of the Defendants’, the loan proceeds will be properly returned.”

Plaintiffs argue that the temporary restraining order of January 13 prohibited the sale or encumbrance of the Prospect Heights property. We note that the court extended the temporary restraining orders from time to time and denied defendants’ motion to dissolve temporary restraining orders in its February 8 order. In the February 8 order, defendants were ordered to return $8,300 wrongfully taken from plaintiffs’ account within 30 days of the order. The April 7 and April 18 orders modified the temporary restraining order to permit defendants to encumber the property to secure a loan allegedly required by defendants to be able to return plaintiffs’ funds wrongfully diverted by defendants.

Plaintiffs contend that the court properly ordered the loan proceeds funds to be escrowed, thus protecting the funds and the res which are the subjects of or relevant to the dispute being litigated. (Carriage Way Apartments v. Pojman, 172 Ill. App. 3d at 838, 527 N.E.2d at 96, citing American Re-Insurance Co. v. MGIC Investment Corp. (1979), 73 Ill. App. 3d 316, 391 N.E.2d 532.) Because the defendants failed to comply with the January 13 order requiring them to return diverted funds, and since defendants’ explanation for noncompliance was an inability to pay unless they secured a loan using the real estate as security to guarantee repayment, the April orders were entered to accomplish both the loan and the protection of the res.

Plaintiffs contend the trial court has discretion and the duty to preserve the fund in controversy where the fund or the property is the subject of the relief requested so that the ultimately successful litigant does not win “a meaningless victory.” Keeshin v. Schultz (1970), 128 Ill. App. 2d 460, 468-69, 262 N.E.2d 753.

The effect of the April 7 and April 18 orders was to restrain defendants’ unlimited control over the property and to subject it to court restrictions during the pendency of the litigation. Plaintiffs argue that defendants now seek to avoid the January 13 order and the April orders as repeated and reaffirmed in the December 20 order, here appealed, by claiming that since funds are now involved the restraints over the control of the property have been transformed into an impermissible equitable attachment on the real estate.

Defendants argue that the funds enjoined are not the subject of the dispute between the parties, since they were the loan proceeds from a second home mortgage loan procured by defendants. In order to be enjoined, the funds must be involved in the controversy and required to be disposed of in the final order of the trial court. (Exchange National Bank v. Harris (1984), 126 Ill. App. 3d 382, 466 N.E.2d 1079, citing Keeshin v. Schultz (1970), 128 Ill. App. 2d 460, 262 N.E.2d 753.) Defendants argue that only the first home mortgage loan was co-signed by plaintiff William Roppolo and is the claim raised in count VI of the complaint. Defendants further argue that the funds from the second home mortgage loan have no bearing on the first mortgage loan controversy and therefore are not subject to the injunction. Defendants contend the loans are distinct and separate and their only common thread is that each is secured by the same real estate. They argue the proceeds of the second mortgage are not the subject matter of the dispute between the parties nor are they subject to the disposition of the court as part of its final order.

Defendants cite American Re-Insurance v. MGIC Investment (73 Ill. App. 3d at 325) for the proposition that in order to restrain funds, the specific funds at issue must be in dispute between the parties and their disposition must and can be dealt with in the court’s final order. They argue that the only criteria met here is that the court enjoined specific funds but that they were not the disputed funds in controversy nor was their disposition appropriate in a final order.

We disagree with defendants’ position and therefore affirm the orders of April 7, April 18 and December 20, 1989, and the order of January 18,1990.

Both parties cite Carriage Way Apartments v. Pojman (1988), 172 Ill. App. 3d 827, 527 N.E.2d 89, in support of their respective positions on appeal. Plaintiffs cite the case for the general proposition that a court may restrain a party’s control over funds or property which are the subject of or relevant to the issues of the dispute being litigated. Defendants cite the same case for its holding that taking away a person’s control over his property by an injunction in anticipation of a judgment which may or may not be later obtained is “abhorrent” to equitable jurisdiction. Carriage Way Apartments v. Pojman, 172 Ill. App. 3d at 838, citing Lewis v. West Side Trust & Savings Bank, 288 Ill. App. 271.

The court in Carriage Way held that the grant of preliminary injunction by the trial court will not be overturned on appeal unless there has been an abuse of discretion. (Carriage Way Apartments v. Pojman, 172 Ill. App. 3d at 835.) While the issuance of the injunction is discretionary with the court, before a preliminary injunction will be granted the party seeking this remedy must establish the need to preserve the status quo and the probability of irreparable harm to his rights or property and must also establish the probability of his success on the merits. (Carriage Way Apartments v. Pojman, 172 Ill. App. 3d at 835.) The court there ordered proceeds of sales of the subject apartment complex properties owned by the partnership deposited into an escrow account pending the ultimate determination of entitlement of the respective parties.

The Carriage Way action sought appointment of an appraiser to determine the value of partnership real estate and assets since the defendant partners had expressed an intention to withdraw from the partnership. While litigation was pending, the partnership business continued and defendants filed an emergency petition for injunctive relief and damages based on conversion and dissipation of funds by plaintiffs. The court ordered deposit of funds into an escrow account. Plaintiffs alleged there, as here, that the injunction entered amounted to a prejudgment attachment and was error.

The court there held that, where the funds which are the subject of the injunction are also the subject matter of the litigation, the issuance of the injunctions is valid, but, where injunction is used for the purpose of taking away control of a person’s property in anticipation of a possible judgment, such action violates equitable principles. Carriage Way v. Pojman, 172 Ill. App. 3d at 838.

Count VI of the complaint alleges that in July 1987, defendants asked William Roppolo to co-sign a $70,000 mortgage loan on their Prospect Heights home and represented to him that they would sell a parcel of Michigan property to pay off the co-signed note. The complaint further alleged that defendants refused to sell the Michigan property as promised, and that the co-signed mortgage debt is in default, and that as a result Roppolo is liable to the lender for approximately $70,000. Clearly a second mortgage secured by the same property further jeopardizes Roppolo’s position.

We conclude that the real property as security for the first mortgage loan is part of the subject matter of this litigation. In order to maintain the status quo as to the security property, the court acted properly in enjoining the defendants’ activity with respect to this realty and any and all loan proceeds the repayment of which is secured by the property.

We find that the injunctions were properly ordered by the court under its statutory authority in the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 11 — 101) to maintain the status quo during pendency of the litigation to prevent immediate and irreparable injury, loss or damage and that the record supports the conclusion of the court that good cause has been shown for issuance of the injunction restricting defendants’ unlimited authority as to the property pending final resolution of the controversy.

For all of the foregoing reasons, the orders of the trial court are affirmed.

Judgment affirmed.

RAKOWSKI, P.J., and McNAMARA, J., concur.