author: JUSTICE LINN

text:
    THE 2416 CORPORATION, Indiv. and as Representative of the Class of Holders of University of Illinois Auxiliary Facilities System Revenue Bonds, Plaintiff-Appellant, v. BOARD OF TRUSTEES OF THE UNIVERSITY OF ILLINOIS, Defendant-Appellee.
    First District (4th Division)
    No. 1-89-3535
    Opinion filed January 31, 1991.

      DeWolfe, Poynton & Stevens, of Chicago (John D. DeWolfe, Jr., and Richard James Stevens, of counsel), for appellant.
    Chapman & Cutler, of Chicago (James E. Spiotto, James R. Richardson, Ann Acker, Wendy A. Grossman, and Ellen L. Karecki, of counsel), for appellee.
   JUSTICE LINN

delivered the opinion of the court:

Plaintiff, The 2416 Corporation, filed this lawsuit as a class action against the board of trustees of the University of Illinois (Trustees). As a holder of certain municipal revenue bonds issued by the Trustees, plaintiff seeks to compel the Trustees to purchase the bonds from plaintiff’s class, on the same terms as the Trustees purchased similar bonds from the Department of Education (DOE). In essence, plaintiff contends that the Trustees gave an improper preference or priority to DOE, in violation of the obligations embodied in the bond instruments.

The trial court entered summary judgment in favor of the Trustees, rejecting plaintiff’s construction of the terms of the bonds and finding that the university had not violated any contractual obligations. The court ruled that the Trustees’ redemption of certain series of bonds within the optional redemption period, for less than the face value of the bonds, did not constitute a preference or priority and neither harmed nor affected holders of other series of bonds.

On appeal, plaintiff’s main arguments are that (1) the university was not authorized by law to take any action that would cause the defeasance of plaintiff’s bonds and (2) the Trustees’ purchase of the DOE bonds was a prohibited preference or priority granted to one bondholder over plaintiff’s class of bondholders. Plaintiff also challenges the classification of the transaction between the university and DOE as a redemption, asserting that the requirements for a redemption were not satisfied.

We affirm.

Background

The University of Illinois (University) is authorized by State law to borrow money and issue and sell bonds for the purpose of acquiring, constructing, or improving its facilities and to refund or refinance its bonds. (Ill. Rev. Stat. 1987, ch. 144, par. 48.IE) The University of lilinois Revenue Bond Financing Act for Auxiliary Facilities (Bond Act) (Ill. Rev. Stat. 1987, ch. 144, par. 48.1 et seq.) also allows the University to refund and refinance any outstanding bonds by issuing “refunding” bonds that are secured by and payable from the same source as the bonds being refunded. Ill. Rev. Stat. 1987, ch. 144, par. 48.5.

The bonds in issue are revenue bonds, which are payable from a specific source of revenue, rather than bonds of indebtedness. The latter type of bonds are issued by States and governmental units, and are payable from and secured by a pledge of the issuer’s taxing power. Generally, revenue bonds are payable from the income of the projects that are built using the proceeds of the bond issues.

THE 1963 BOND ISSUE

In 1963, pursuant to resolution, the University issued $6.8 million of tax-exempt Congress Circle Union Bonds, Series A (1963 Bonds), pursuant to a resolution. The proceeds of these bonds, together with the proceeds of $4 million in Congress Circle Union Bonds, Series B, were used to construct a union building and parking facilities for the Congress Circle Campus in Chicago. Payment of all bonds issued pursuant to the 1963 resolution was secured by revenues to be derived from (1) the operation of the completed facilities; (2) the operation of any other revenue-producing facilities for which additional bonds might be issued subsequently; and (3) certain student service charges.

The 1963 Bonds were serial bonds, which means that the aggregate principal amount of $6.8 million was divided up in such a way that portions of the principal were scheduled to mature over the course of several years (in this case, from 1969 through 1993). These bonds also carried an obligation on the part of the University to refrain from redeeming the bonds before April 1, 1971, thereby ensuring that the bondholders would receive the (then) high rate of interest for a minimum of almost eight years. This feature is known as “call protection” and is considered to be beneficial to the holder of the bond.

In return for the University’s granting call protection for the fixed period, the bond contract allowed the University to redeem some or all of the 1963 Bonds after that fixed time. This is also a common provision, known as “optional redemption” or “optional call,” which allows the issuer to redeem bonds before they mature. In the pending case, under the 1963 resolution, the University could redeem the 1963 Bonds from surplus monies in the Congress Circle Bond Fund beginning on April 1, 1971. The University could also exercise its optional redemption using general revenues, subject to some limitations, beginning on April 1,1973.

If the University decided to redeem any of the 1963 Bonds prior to maturity, its bond contract required it to pay the holders of the bonds to be redeemed a premium amount, in excess of the face value of the bonds.

THE 1965 BONDS

The University issued $9.5 million of tax-exempt Housing Revenue Bonds of 1965, Series A (1965 Bonds) to construct dormitories and staff housing. The 1965 Bonds were issued pursuant to a resolution that supplemented and amended a 1958 housing revenue bond resolution. For the 1965 Bonds, maturity dates range from 1967 through 2001.

These bonds were secured by revenues to be derived from (1) the operation of the dormitory and staff housing facilities that were completed from the 1965 Bond proceeds and all other bonds issued pursuant to the housing bond resolution; (2) a defined portion of student tuitions; and (3) certain existing revenue-producing buildings of the University, after payment of other indebtedness.

The 1963 Bonds and the 1965 Bonds were payable from and had liens on separate sources of revenues. Plaintiff owns one each of such bonds. Plaintiff’s 1963 Bond, series A, has a $5,000 face value and bears interest at the rate of 3.5%. It matures on October 1, 1991. The 1965 Bond, series A, has a $10,000 face value and bears interest at the rate of 3.7%, maturing on October 1, 2000.

THE REFUNDING BONDS (1978 SERIES A THROUGH M BONDS)

In 1978, for financial reasons, the University decided to combine several of its separate, revenue-producing enterprises into one, unified system. At that time, the 1963 and 1965 Bonds, as well as others, were each payable from different sources of revenue. Pursuant to a 1978 resolution, the University issued almost $64 million in “Auxiliary Facilities System Revenue Bonds Series A through M,” which combined the separate revenue systems.

At the time, the United States Department of Housing and Urban Development owned 12 separate series of bonds issued by the University, with an aggregate face value of $20,074,000. Pursuant to the 1978 resolution, the University issued series A through L bonds to replace HUD’s outstanding bonds from the prior, separate series. The series A through L bonds were issued as “refunding bonds” and bore the same aggregate face value as did the original bonds, which were being exchanged for the 1978 series. As refunding bonds are issued to refinance an outstanding issue, they do not create a new obligation but are considered to be an extension of the obligation of the original bonds. These “exchange refunded” bonds were returned to the University to be can-celled and destroyed.

The series M bonds from the 1978 refinancing were issued and sold to the public, for approximately $44 million. The University used a portion of the proceeds to establish a debt service reserve for the series M bonds and another portion to acquire revenue-producing athletic and recreational facilities. The balance of almost $33 million from the sale of the series M bonds was used to purchase United States Treasury bonds and notes to fund an escrow account from which the University would pay principal and interest obligations on various bonds that were then outstanding, including the 1963 and 1965 Bonds, either during their optional redemption periods or at maturity.

This 1978 “advance refunding” of outstanding bonds prompted rating agencies to upgrade the rating of the bonds to the most risk-free investments on the market. Such upgrading resulted from the deposit of United States government securities to replace the original collateral (housing revenue accounts) that had been pledged to secure payment when the bonds were originally issued. Advance refunding apparently is a normal and accepted practice in the municipal bond industry.

The parties disagree as to whether the 1978 advance refunding caused a defeasance, or discharge, of virtually all of the University’s contractual obligations under the originally issued bonds that were exchanged for the 1978 refunded bonds. No one denies, however, that the University’s obligation to pay timely interest and principal remained inviolate.

Shortly before the pending litigation began, plaintiff purchased one of the advance refunded bonds, series M, in the face amount of $25,000. This bond bears interest at the annual rate of 67/s%. As the trial court noted, plaintiff corporation’s president admitted in his deposition that the purchase of this bond (on the advice of counsel) was an attempt to acquire standing to challenge the validity of the 1984 transaction between the University and DOE.

All of the series A through M bonds are secured by the same collateral and are therefore considered to be in “parity.” Parity bonds share a priority of claim or lien against particular pledge revenues. In the event the pledged revenues become insufficient to pay the entire bond obligations secured thereby, all holders of parity bonds or series of parity bonds would share equally in the shortfall; no one bondholder or series could be given a priority or preference of payment over the others.

All of the bonds issued by the Trustees contain a covenant that governs modification or amendment of the rights and obligations of the University and the bondholders. Under the covenant, the Trustees are prohibited from creating “any preference or priority of any bond or bonds over any other bond or bonds or coupon or coupons over any other coupon or coupons.”

The following provision appears only in the government’s series A through L bonds:

“[T]he Board upon giving at least thirty (30) days notice, shall have the option to prepay, on any interest payment date, the entire unpaid principal amount hereof, or, from time to time, in the inverse order of the aforesaid principal installments, such lesser portion thereof in multiples of Five Thousand Dollars-($5,000) *** with interest thereon to the date of such prepayment.”

Under the contractual provisions of the series A through L bonds, the University had the right to redeem, at its sole option, some, none, or all of the series of A through L bonds any time on or after October 1, 1978. The series M bonds sold to the public, in contrast, could not be redeemed until April 1988.

THE 1984 REDEMPTION OR REPURCHASE OF THE DOE BONDS

Between 1978 and 1984, HUD transferred ownership of each of its series A through L bonds to DOE. In September 1984, the University exercised its optional redemption right for all of the outstanding A through L bonds. The series M bonds were still under call protection at that time. DOE, holder of the bonds that were to be redeemed, waived its contractual right to receive the 1.5% premium that it was entitled to receive under the 1978 resolution. Moreover, as part of a Federal college housing loan discount program, DOE agreed to accept in foil payment and satisfaction 58% of the outstanding principal amount of the series A through L bonds. The calculated present value or purchase price of the bonds as of September 27, 1984, was almost $17 million, a figure that includes the early redemption premium amount. Because DOE agreed to accept $7.3 million less than the full amount to which it was entitled, as a means of conferring a gift upon the University pursuant to the college housing loan discount program, the University was able to retire the A through L bonds by paying just under $9.7 million on an obligation of approximately $17 million.

Concurrent with the 1984 redemption, the University approved issuance of approximately $55 million in bonds (Series 1984 Bonds), and used a portion of the proceeds of that series, together with the United States securities and cash on deposit in the 1978 escrow, to fund a new escrow. The 1984 escrow provides for payment of all of the 1978 advance refunded bonds that were still outstanding (including plaintiff’s 1963 and 1965 Bonds) and the series M bonds, all of which were outstanding at that time. As principal becomes due on those bonds, it is paid from the 1984 escrow. Because of the 1984 escrow, Moody’s Investors Service upgraded its rating of the series M bonds from Al to Aaa, the highest rating that Moody’s assigns. Standard & Poor’s also increased its rating of the series M bonds from AA to AAA, its highest rating.

The trial court expressly found that none of the bond documents were amended or modified in violation of any bondholder’s rights and that the relevant transactions were carried out pursuant to the original terms of each bond issue. The court held that the University’s actions were “well within its contractual and statutory grant of authority.”

It is undisputed that the University has paid all principal and interest due on all bonds pursuant to schedule and that there has been no default in payment. Plaintiff’s position, however, is that the Trustees’ 1984 retirement of the DOE series A through L bonds constituted an unauthorized “sale” rather than a redemption and was a preference or priority accorded to DOE over other members of plaintiff’s class.

Opinion

While we do not profess to grasp all aspects of municipal bond law, we have found that the controversy before us ultimately comes down to simple contract principles. In brief, we are called upon to decide whether the University violated plaintiff’s contract rights under the pertinent bond covenants when the University purchased or redeemed DOE’s series A through L series bonds and failed to give plaintiff’s class the same opportunity to sell its bonds.

I

The heart of this argument centers on a covenant contained in all of the bonds issued by the University, to the effect that the University may not show a “preference or priority” to any bond over any other. By giving the phrase the broadest possible meaning, plaintiff argues that the 1984 transaction between DOE and the University was a prohibited preference because it allowed one bondholder, DOE, to sell its bonds off early (albeit at a substantial discount). As a result, plaintiff concludes, the plaintiff class of bondholders was financially harmed because its class members could not sell their own bonds and free up their money for reinvestment at higher interest rates.

Plaintiff first argues that the “no preference” covenants in its bonds were not defeased (defeated) by the 1978 advance refunding in which the series A through M bonds were issued. All covenants contained in plaintiff’s bonds were, by law, carried over into the refunding bonds. In support, plaintiff cites to a section of the statute that authorizes the Trustees to issue refunding bonds. See Ill. Rev. Stat. 1987, ch. 144, par. 48.5a (“All of the provisions of this Act, including covenants that may be entered into in connection with the issuance of bonds, shall be applicable to the authorization and issuance of any refunding bonds”).

This contention, however, is not in dispute on appeal because the University has conceded that the prohibition against preferences or priorities of payment is a right that cannot be defeased. Simply put, defeasance in this context means that all contractual rights and obligations contained in the original, outstanding bonds are extinguished by the issuance of United States government-secured refunding bonds, except the bondholders’ right to be paid timely interest and principal from the established escrow. (See Morton Arboretum v. Thompson (N.D. Ill. 1985), 605 F. Supp. 486, 490) (bondholders’ fundamental right is to have both principal and interest paid when due) (statutory defeasance under Hlinois State Tollway Authority Act). According to the Dow Jones-Irwin Guide to Municipal Bonds (1987), page 52, refunding municipal bonds nullifies earlier covenants, primarily related to the security of the bonds, because the bonds are deemed to have been paid once they are refunded; they cease to exist on the books of the issuing jurisdiction. This result is logical because the escrow of Federal government-backed obligations is considered premier security for payment of the outstanding bonds. Therefore, the purpose of any other contractual covenants that might have imposed restrictions on the issuer’s ability to deal with the original collateral would become obsolete.

In our opinion, the meaning and scope of defeasance is not an issue material to the disposition of this appeal. Accordingly, we move on to the central issue: Did the trial court err in deciding that the University had not given DOE a preference or priority, as those terms are commonly understood in bond parlance?

Plaintiff apparently argues that any differential treatment, such as that which occurred here, may be a prohibited preference or priority. The University, on the other hand, maintains that the prohibition against preferences and priorities refers solely to the situation in which the revenues pledged to secure multiple series of parity bonds become depleted and there are insufficient funds to service the debt represented by all such bonds. In such a case, the law does not permit some of the affected bondholders to recover in full while others are left with worthless bonds and no recourse to obtain repayment of the shortfall. In case of a shortfall, the available revenues are to be prorated so that all bondholders share equally. See Moody’s Investors Service, Moody’s on Mu nicipals 72 (1987); Maccabees v. City of Ashland (1937), 270 Ky. 86, 109 S.W.2d 29; Moore v. Howard (1933), 227 Ala. 219, 149 So. 249.

Plaintiff maintains that the Trustees gave both a preference and a priority to DOE when they purchased all $16.7 million of the series A through L bonds at a calculated price before the bonds were due. According to plaintiff, this action was a “preference” because it gave DOE an opportunity which no other bondholder had and it was a “priority” because it was a purchase before the Trustees had purchased or had an obligation to pay the other outstanding bonds, such as the ones held by plaintiff.

In support of its position, plaintiff cites several cases in which courts held that payment to one bondholder constituted an improper preference. The University argues that these same cases are entirely consistent with its position and do not provide authority for plaintiff’s theory.

In Rothschild v. Village of Calumet Park (1932), 350 Ill. 330, 183 N.E. 337, the plaintiff owned certain special assessment bonds and sought an accounting after his bonds became past due and unpaid. The municipality argued that it had a duty to use the special assessment revenues it had' collected to retire in full as many bonds as it was able to pay, instead of prorating the collection among bondholders. The court held that the special assessment collections were the only source of payment for the bonds and therefore such collections became a trust fund for payment of the bonds to all holders, “without preference among them.” (350 Ill. at 339, 183 N.E. at 341.) The court noted that if for any reason there is a deficiency in the collections of an installment, equity requires that the loss shall be borne ratably by each bondholder.

Two other cases that plaintiff cites relied on the Rothschild holding and arrived at similar conclusions on the preference issue. In Michael J. Bransfield & Sons, Inc. v. City of Chicago (1950), 342 Ill. App. 206, 96 N.E.2d 386, and Loewenthal Securities Co. v. City of Chicago (1951), 343 Ill. App. 159, 98 N.E.2d 541, the City of Chicago appealed from writs of mandamus directing it to pay monies it had collected on special assessment bond issues to fewer than all holders of the bonds. Both courts rejected the position that bondholders could be paid on a first-come-first-served basis when the collected funds would not be sufficient to pay all bondholders. Citing the principle of Rothschild, the courts held that all holders of past-due special assessment bonds had equal rights in the collateral and were entitled to pro rata distribution therefrom.

The above three cases support the University’s definition of what a “preference” is and under what circumstances it usually arises in the municipal bond field. Furthermore, unlike plaintiff, the University obtained an expert’s affidavit to explain the usage of these terms of art. According to him:

“ ‘Preferences’ or ‘priorities’ refer to situations in which revenues pledged to secure repayment of more than one series of parity bonds are either seriously depleted or exhausted in order to repay some, but not all, such parity bonds, thereby short-changing certain series of bonds. In other words, if there is a shortfall in revenues available to repay all debt service obligations, the prohibition against preferences and priorities requires that all parity bonds share in that shortfall. Absent a shortfall, the terms ‘preference’ and ‘priority’ are meaningless.” (Emphasis added.)

Bankruptcy law also recognizes the concept of allowing creditors and classes of creditors to share pro rata in the distribution of the bankruptcy estate. (See 11 U.S.C. §547(b)(1988); In re George Rodman, Inc. (10th Cir. 1986), 792 F.2d 125, 127.) A debtor’s transfer of assets to some creditors or actual payment to some creditors within a certain period before the filing of a bankruptcy petition is therefore deemed an unlawful preference that is subject to being set aside.

We are far less persuaded by plaintiff’s position, which holds that the law prohibits the Trustees from undertaking any type of action or dealings with one group of bondholders that it does not engage in with others. Plaintiff cites no municipal bond cases to support its position and, instead, apparently takes a “plain meaning” approach to the “preference or priority” terminology used in the bonds.

Plaintiff argues that, since the covenant bars “any preference or priority of any bond or bonds over any other bond or bonds” (emphasis added), no further analysis is needed because it is obvious that “any” means that there is more than one type of preference that is prohibited. For example, plaintiff contends, it would be improper for the Trustees to purchase bonds from friends of the Trustees instead of on the open market. Similarly, it would be improper for the Trustees to redeem some bonds prior to their maturity but not other bonds.

Plaintiff’s position ignores the authority that supports the University’s construction of preference and priority. By focusing on general principles of contract construction to construe the term “any preference,” plaintiff never adequately explains why this court should simply ignore the municipal bond treatises and other authorities that the University relies on for explaining the terms. (E.g., Moody’s Investors Service, Moody’s on Municipals 72 (1987); Moore, 227 Ala. 219, 149 So. 249; Maccabees, 270 Ky. 86, 109 S.W.2d 29.) The University’s expert witness, Professor Robert Boyden Lamb, stated his opinion, as an authority in the municipal bond field, that the preference and priority language only refers to the default situation in which the funds securing parity bonds are insufficient to pay all bondholders. Plaintiff did not obtain an expert witness to counter this construction or to support its own proposed application of the concept. Nor does plaintiff challenge the qualifications of the University’s expert witness. Instead, plaintiff challenges some of the underlying assumptions of Lamb’s opinion and further asserts that the trial court should have disregarded the expert’s opinion on “the ultimate issue before the Court.”

We do not agree that the trial court should have ignored an expert’s opinion on the meaning to be ascribed to terms of art in a specialized area of the law. It is true that the trial court was not bound by the professor’s opinion. It is also true that courts of equity are especially suited to the task of construing contract or statutory language without expert help. Nevertheless, there are many situations in which plain meaning may be tempered by usage in a particular trade.

We conclude that the trial court did not err in resolving the central issue of whether the 1984 DOE transaction constituted a prohibited preference or priority.

II

Plaintiff challenges the validity of the University’s September 27, 1984, transaction with DOE on another basis: Did the trial court err in characterizing the transaction as the University’s “redemption” of the bonds when in fact it was a “private purchase”? Plaintiff argues that the bond documents do not authorize any such purchase. According to plaintiff, the Trustees could only purchase bonds on the open market, and even then, only under the circumstances set out in this provision of the 1958 housing bond resolution:

“Any contract or agreement between the Board of Trustees and any original purchaser of Bonds may provide that any funds remaining in a Construction Fund Account established for the account of any series of Bonds being acquired by such purchaser be applied to (I) the redemption of such Bonds or other Bonds then subject to redemption, (II) the purchase of Bonds on the open market, or (III) the construction of additional facilities by the transfer of such funds to another Construction Fund Account *** 11

Plaintiff asserts that nothing in this resolution allows a “private” repurchase by the Trustees. Furthermore, plaintiff contends that to the extent the transaction was a redemption, the Trustees did not follow the attendant procedures, such as giving notice.

The Trustees respond that the economic effects of a redemption, prepayment, or repurchase of bonds for cancellation are virtually identical. In each case, before the maturity date of the bond, the obligor on the debt (the University) pays a price to the holders of the bonds in exchange for the surrender of the bonds for cancellation. Although plaintiff insists that a purchase is different from a redemption, plaintiff cites no supporting cases or municipal bond treatises that support the application of its theory to these facts.

Presumably, a purchase on the open market means a situation in which the University would pay a bondholder whatever the market value of the bond would be at the time of purchase. In that situation, the bond would not be cancelled, as in a redemption, but would be held by the University as any other investment paper. Plaintiff does not argue that the bonds in question were not cancelled. Instead, it alludes to a scenario in which preferential purchases may be set up for friends of the Trustees. In such a case, it would be improper for a private or secret sale to benefit one bondholder over another. We note that by definition, a secret or private sale would not be a sale on the open market, which anticipates an arm’s length relationship between buyer and seller.

We cannot mold the facts of the pending case to fit the private purchase theory. Indeed, plaintiff does not, or cannot, marshal facts to demonstrate that the University’s purchase or redemption of the DOE bonds was prohibited (expressly or in spirit) by the pertinent statutes or bond resolutions. Instead, plaintiff’s challenge focuses on various technical reasons why the 1984 transaction between DOE and the University does not conform to the meaning of “redemption” as set out in the relevant bond documents or authorizing statute. Specifically, plaintiff contends that the 1984 transaction did not result in the payment of the principal amount of the bonds, because of the discount; DOE did not receive the fixed prematurity premium set out in the redemption provision; the transaction did not fulfill the requirement that payment be made on the “interest payment date” (October 1, 1984); and notice was not published in the newspaper.

While we note that the 1958 bond resolution does set forth such requirements for the redemption of bonds, we are at a loss to understand why DOE’s apparent willingness to waive such formalities (and indeed take less than the full amount to which it was entitled under the bonds) is a matter that is appropriate for plaintiff to challenge. Even assuming that plaintiff has standing to challenge an otherwise valid transaction or redemption between the University and another series bondholder, we do not agree that a violation of the guidelines for redemption gives plaintiff any right or remedy in this context.

With respect to the notice argument, the University points out that because DOE was the owner of 100% of the series A through L Bonds, additional notice to it was redundant and unnecessary. (See Geary v. Dominick’s Finer Foods, Inc. (1989), 129 Ill. 2d 389, 400, 544 N.E.2d 344 (parties are not required to perform futile acts); Prairie Vista, Inc. v. Central Illinois Light Co. (1976), 37 Ill. App. 3d 909, 912, 346 N.E.2d 72, 74.) The holders of different series of bonds, such as the series M bonds, were not entitled to notice of the redemption of the series A through L bonds because the notice provisions are for the benefit of the bondholders in the particular series of bonds in which some or all bonds are being redeemed.

Even if we agreed, moreover, that the University’s failure to comply with the procedures for redeeming the A through L bonds gave plaintiff some remedy, this question remains, What relief would be appropriate?

The remedy that plaintiff seeks is the right to sell its bonds to the University before their maturity date, presumably at the premium amount above face value that is normally required when bonds are repurchased or redeemed by the University. Such relief would elevate plaintiff and the purported class of bondholders to a position far above DOE’s, however. Under the terms of the redemption or repurchase of DOE’s bonds, the University received a substantial discount on the price. Plaintiff has not suggested its willingness to match this discount by accepting 58% of the face value of its bonds.

In conclusion, we emphasize that each bond or series of bonds constitutes separate contracts between the bondholder and the University. These separate contracts contain different terms. For example, the series A through L bonds held by DOE contain an express provision allowing the University to redeem the bonds before their maturity, at the University’s option. In 1984, when it exercised that option, the series M bonds were under call protection; they were expressly nonredeemable before 1988. Moreover, the rates of interest on the series A through L bonds ranged from 23A% to 35/s%, while the Series M bonds carried interest rates from 63A% to 67/s%. In addition, if the University elected to redeem the series M bonds after the period of call protection but before maturity, it was subject to paying a premium ranging from l%to 3%, while the premium for early retirement of the series A through L series bonds was from 1% to 2%.

If we carried plaintiff’s theories to their logical end, we would be endangering virtually all bond covenants that permit. optional redemptions by the issuer and call protection for the bondholder. Such a result would not be well founded in contract law. The redemption of one series of bonds does not impair or even affect the contract rights of the owners of other series of bonds. See Ahlborn v. City of Hammond (1953), 332 Ind. 12, Ill N.E.2d 70.

It is not disputed that under the terms of its bond contracts with DOE the University had the absolute right, at its option, to redeem some, none, or all of the series A through L bonds after October 1, 1978. Plaintiff and other holders of series M bonds, or indeed the 1963 and 1965 Bonds (to the extent they have standing), have not sustained even a remote or speculative injury by the lawful actions of the University in its transaction with DOE. Therefore, plaintiffs attempt to remake the bond contract by forcing the University to redeem the plaintiff class’ bonds before maturity must fail. While class action litigation of the sort contemplated here could result in a lot of fees for a few lawyers, we see little real benefit to anyone else and a real detriment to the ability of the University to govern its finances through issuance and redemption of its revenue bonds.

Our review of the trial court’s extensive findings and conclusions supports the determination that plaintiff failed to establish a cognizable breach of contract. Since we have found no impropriety in the University’s 1978 advance refunding and the 1984 transaction with DOE, we hold that plaintiff’s contractual rights were in no way impaired. Accordingly, we affirm the trial court’s entry of summary judgment in favor of the University.

Affirmed.

JIGANTI, P.J., and McMORROW, J., concur.


source: Caselaw Access Project

author: JUSTICE GORDON

license: Public Domain

text:
    THE PURDY COMPANY OF ILLINOIS et al., Plaintiffs-Appellants, v. TRANSPORTATION INSURANCE COMPANY, INC., Defendant-Appellee.
    First District (5th Division)
    No. 1-88-2306
    Opinion filed February 1, 1991.

      William J. Sneckenbert & Associates, Ltd., of Chicago (William J. Sneckenbert and Jonathan D. Moses, of counsel), for appellants.
    Clausen, Miller, Gorman, Caffrey & Witous, EC., of Chicago (James Ferrini, Randall Marmor, and Richard Winter, of counsel), for appellee.
   JUSTICE GORDON

delivered the opinion of the court;

Plaintiffs, The Purdy Company of Illinois (Purdy), and its wholly owned subsidiary, A.D. Schader Co. (Schader), filed a complaint for declaratory judgment in two counts against the defendant, Transportation Insurance Company, seeking a determination of their rights under the terms of an insurance policy issued by the defendant that insured against losses caused by employee dishonesty. Count I alleged that the defendant had breached the terms of the policy when it refused to indemnify the plaintiffs for the full amount of the losses caused by the defalcations of two of its former employees. Count II sought attorney fees and costs, under section 155 of the Illinois Insurance Code, alleging that the defendant’s refusal to pay the total amount of the plaintiffs’ actual loss was vexatious and unreasonable. (Ill. Rev. Stat. 1985, ch. 73, par. 767.) On its own motion, the trial court transferred this case to the law division, stating that although the plaintiffs filed a complaint for declaratory judgment, the allegation contained in count I was actually one asserting breach of contract and that count II sought damages caused by the alleged breach. Thereafter, the defendant filed a motion for summary judgment, which was granted by the trial court pursuant to section 2 — 1005 of the Illinois Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 1005). Plaintiffs now appeal. We affirm the trial court’s entry of summary judgment on both counts.

The uncontroverted submissions in support of the defendant’s motion for summary judgment disclosed that in October of 1980, the defendant issued to the plaintiffs a comprehensive crime insurance policy. The insuring clause provided:

“1A EMPLOYEE DISHONESTY COMMERCIAL BLANKET COVERAGE
Loss of Money, Securities and other property which the Insured shall sustain, to an amount not exceeding in the aggregate the amount stated in the Table of Limits of Liability applicable to this Insuring Agreement 1A through any fraudulent or dishonest act or acts committed by any of the Employees, acting alone or in collusion with others.”

The limit of liability for coverage under insuring agreement 1A was $250,000. Section 11 of the policy provided:

“RECOVERIES
Section 11. Payment of loss under Insuring Agreement 1A *** shall not reduce the Company’s liability for other losses under [any of the Insuring Agreements] whenever sustained. The Company’s total liability (a) under Insuring Agreement 1A for all loss caused by an employee or in which such employee is concerned or implicated *** is limited to the applicable amount of insurance specified in the Table of Limits of Liability ***.”

In 1984, the plaintiffs submitted an insurance claim to the defendant in excess of $340,000 representing losses caused by the defalcations of two Schader employees, John Duffy, a vice-president, and John Fonesca, general manager, during the period from January 1, 1981, to November 27, 1984. Both men worked in Schader’s office, which is located in Hayward, California.

The record disclosed that each employee rented post office boxes and opened checking accounts under the auspices of nonexistent companies and then submitted fraudulent invoices on behalf of these fictitious companies to plaintiffs for payment of equipment rental, materials and services. Duffy had established various fictitious companies, including one company called Steelco. In total, he diverted approximately $145,000 to these companies for his personal use, of which over $100,000 was diverted to Steelco. Fonesca established a fictitious company called Mass Trans to which he diverted approximately $12,000 for his personal use. Each employee by virtue of his position with Schader was authorized to approve payment of invoices.

The second method by which the two employees diverted plaintiffs’ funds was through the submission of personal expenses for payment by plaintiffs. As conceded by plaintiffs, this scheme was accomplished by the two employees’ mutual approval of each other’s expense reports in contravention of known company policy requiring that all expenses be supported by proper documentation. It was estimated that over $85,000 was diverted for Duffy’s personal expenses, and over $55,000 for Fonesca’s personal expenses. It was further estimated that over $25,000 was diverted for the remodeling of one or both of the two employees’ private residences.

After proofs of these losses were filed with the defendant, it retained Surety Service Corporation (Surety) to further investigate plaintiffs’ claim. In January 1985, after the investigation was completed, the defendant notified the plaintiffs that its maximum liability on the entire claim would be $250,000, an amount which it promptly paid. Defendant, therefore, denied payment for the balance of the plaintiffs’ claim in excess of $250,000 on the ground that Duffy and Fonesca had acted in collusion.

The undisputed record established that of the many Schader checks made payable to Steelco, during 1982, more than 10 checks were co-signed by Duffy and Fonesca jointly. And at least one other Schader check made payable to Steelco was signed by Fonesca only. With respect to Mass Trans, the record does not disclose whether any Schader checks made payable to Mass Trans were co-signed by Fonesca and Duffy jointly. It was established, however, that at least one check dated in 1984 and made payable to Mass Trans was signed by Duffy only.

As previously noted, it was further shown that Fonesca and Duffy co-signed Schader checks in excess of $25,000 made payable to a construction and a lumber company for labor and materials used to remodel one or both of their private residences. One of the invoices issued by the construction company and paid by a Schader check co-signed by both Duffy and Fonesca bore Fonesca’s home address.

Among the submissions in support of defendant’s motion were two letters. One letter was written by plaintiffs’ president, John P. Purdy, to Duffy in which he states that Duffy “admitted” to Purdy and other Purdy executives that Duffy and Fonesca “had conspired to divert finds illegally” through Steelco and Mass Trans. The letter stated further: “In addition, by your own admission, this same situation applied to expense accounts which were for non-business expenses and not supported by receipts or other evidence of being business related.” The second letter was written by plaintiffs’ vice-president, Robin Purdy, to notify the defendant that company funds had been diverted into fictitious companies established by two employees, “acting in collusion,” and that both employees “would knowingly approve each other’s expense accounts,” an action that Robin Purdy stated was admitted by Duffy subsequent to his resignation.

In an interoffice memorandum dated March 30, 1984, Duffy, in response to Purdy’s inquiry of the propriety of a Mass Trans invoice, advised Purdy that Mass Trans was a Canadian company that sold equipment to plaintiffs and required payment on a cash-on-delivery basis. Duffy stated further that he was enclosing with the memo photographs “taken by” him of Mass Trans’ equipment. The photographs were not a part of the record.

According to the undisputed affidavit of the general manager of the San Francisco 49ers Football Club, Inc., five 1983 season tickets were purchased through an account bearing the name John Fonesca. After the club sent an invoice to Fonesca for payment, it received two documents:

1. a Steelco check, dated February 1983, made payable to the club in the amount owed, and signed by Duffy; and
2. Fonesca’s handwritten transmittal note, dated March, 1983, forwarding this check.

Four tickets for the Oakland Athletics’ 1983 baseball season were purchased by a Steelco check signed by Duffy through an account bearing the name John Fonesca, which was like-wise established by an uncontroverted affidavit of the Oakland A’s general manager.

An additional Steelco check dated April 16, 1984, and signed by Duffy was made payable to “John Duffy — John Fonesca PRTN,” marked with the notation “Advance.”

The evidence was also undisputed that in early 1983 Fonesca applied for and opened a post office box for Mass Trans. On the application for the post office box, Fonesca named Duffy as a personal reference.

In response to the defendant’s motion for summary judgment and its supporting submissions, plaintiffs filed a memorandum in opposition to the motion and attached affidavits of plaintiffs’ president and vice-president and additional submissions. In their affidavits, both John and Robin Purdy repudiated their earlier statements that Duffy and Fonesca acted in collusion because, according to them, the ensuing investigation did not reveal any facts which would prove that Duffy and Fonesca acted by agreement. The trial court, after hearing argument and examining the pleadings, motions and supporting submissions, granted the defendant’s motion for summary judgment on both counts I and II.

Opinion

The dispositive issue is whether the trial court properly granted summary judgment for defendant, implicitly finding that Duffy and Fonesca colluded in perpetrating their fraud, thus limiting the defendant’s liability under the terms of the policy to a single, $250,000 payment.

Plaintiffs contend that the trial court erred in granting summary judgment because there is a genuine issue of material fact as to whether Duffy and Fonesca acted in collusion. The plaintiffs argue that the term “collusion,” as used in insuring agreement 1A and defined by Black’s Law Dictionary, means a secret agreement to defraud another. They urge, therefore, that the evidence did not conclusively show that Duffy and Fonesca agreed to defraud the plaintiffs, but rather permitted an inference that the two men engaged in separate, noncollusive activity. They contend that even if the evidence does inferentially show that Duffy and Fonesca were aware of each other’s acts, that inference does not sufficiently establish an agreement to defraud another.

The defendant responds that the trial court’s entry of summary judgment was proper in that the undisputed facts established collusion between the two defalcating employees as a matter of law pursuant to the policy language set forth in insuring agreement 1A and section II. Accordingly, defendant urges that to establish collusion under the policy it is only necessary to show that these employees were concerned or implicated in each other’s conduct which caused the plaintiffs’ losses, which the undisputed evidence conclusively showed. Defendant contends, therefore, that recovery was limited to $250,000 under the policy’s explicit provisions.

An insurance policy should be construed like any other contractual agreement. (Dotson v. Agency Rent-A-Car, Inc. (1981), 101 Ill. App. 3d 804, 428 N.E.2d 1002.) Thus, it must be considered in its entirety, and each part of the policy must be construed to be consistent and in harmony with other parts of the policy. (Zurich Insurance Co. v. Raymark Industries, Inc. (1987), 118 Ill. 2d 23, 514 N.E.2d 150.) Accordingly, we must consider the effect of section 11 as it explicitly refers to agreement 1A. Section 11 provides in pertinent part that the defendant’s total liability under insuring agreement 1A is limited to $250,000 for all losses caused by any employee or all losses in which an employee is concerned or implicated.

Neither party cited, nor do there appear to be, any Illinois decisions construing the language at issue in the subject policy. However, defendant cites as supportive of its position the case State Savings Bank v. Hartford Accident & Indemnity Co.,.decided July 8, 1953, by the Tennessee Court of Appeals, (unreported), where the court construed language of an insurance policy somewhat similar to insuring agreement 1A and section 11 of the policy in the instant case. There two bank employees began stealing independently, but began cooperating with one another after each discovered the defalcations of the other. As a result of their efforts, they stole sums of money greatly in excess of the face amount of the fidelity bond. Like the plaintiffs here, the insured claimed the full amount of the bond for each employee, whereas the insurer contended its liability was limited to a single payment of the face amount of the bond, as each employee was concerned or implicated in the acts of the other. The Tennessee Court of Appeals held that the fidelity insuring clause was subject to modification by the language “concerned or implicated” because a contract must be considered in its entirety and not by its isolated parts. Accordingly, the court found that because their acts of cooperation were not limited merely to the covering up of each other’s shortages, but so enabled both men to continue stealing, each employee was concerned or implicated in the thefts of the other. The insurer’s liability was limited, therefore, to a single payment of the face amount of the bond.

We are in agreement with the reasoning of the Tennessee court. A finding of collusion between Fonesca and Duffy does not require that they jointly initiated a common scheme in concert to defraud their employer. Therefore, even if each man began stealing independently, they became sufficiently implicated- and concerned in each other’s fraud and may be deemed to have acted in collusion with the other when they discovered or became aware of each other’s scheme, and overtly assisted, not merely in each other’s cover-up, but also in each other’s perpetuation of the ongoing fraud. This construction serves to give each of the provisions of the policy its full effect without disparity or distortion.

Plaintiffs contend that summary judgment cannot be sustained because the evidence upon which, it was predicated is circumstantial and permits more than one inference to be drawn. A motion-for summary judgment will be granted if the pleadings, admissions and affidavits on file reveal that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law. (Ill. Rev. Stat. 1989, ch. 110, par. 2 — 1005.) If the facts are undisputed, inferences may be drawn from such facts to determine if the defendant is entitled to judgment as a matter of law. (Fishel v. Givens (1977), 47 Ill. App. 3d 512, 362 N.E.2d 97.) Summary judgment may well be predicated upon circumstantial evidence so long as such evidence does not permit conflicting inferences to be drawn. (Cuthbert v. Stempin (1979), 78 Ill. App. 3d 562, 396 N.E.2d 1197.) However, to preclude summary judgment, such other inferences cannot be unreasonable, speculative or conjectural. (Consolino v. Thompson (1984), 127 Ill. App. 3d 31, 468 N.E.2d 422.) The convergence of the undisputed facts and circumstances established that Duffy and Fonesca were each aware of and assisted in the furtherance of the other’s defalcations. Any contrary inference from the cumulative data and circumstances would be unreasonable and speculative. It would require the complete suppression and repudiation of ordinary experience and awareness. Consolino, 127 Ill. App. 3d at 33, 468 N.E.2d at 424. Cf. Anderson v. Liberty Lobby, Inc. (1986), 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505.

It is undisputed that Duffy created the fictitious company, Steelco, to which plaintiffs’ funds were diverted. Yet the record also establishes that Fonesca was aware that Steelco was a bogus company and was using Steelco’s funds for his personal benefit, while simultaneously assisting Duffy’s fraudulent diversion of plaintiffs’ funds to Steelco. Both Fonesca and Duffy co-signed numerous Schader checks, dated as early as 1981, and made payable to Steelco. At least one other Schader check, dated January 31, 1983, and made payable to Steelco, bore only Fonesca’s signature. One month later, while the Steelco defalcations were still in .progress, Duffy wrote a Steelco check, dated February 27, 1983, to pay for Fonesca’s football tickets, a fact Fonesca knew because it was established that Fonesca remailed the Steelco check and attached it to his handwritten transmittal note to the football club. Less than one month later, Duffy and Fonesca purchased baseball tickets for the 1983 season in a similar manner.

It was also undisputed that one check written on the Steelco account in 1984 and signed by Duffy paid $2,675 to Duffy and Fonesca as joint payees.

The uncontroverted evidence also conclusively linked Duffy to Mass Trans, the fictitious company that plaintiffs contend was wholly engineered by Fonesca. When Fonesca applied for a post office box for Mass Trans, he listed Duffy as a personal reference. In addition, one Schader check, dated March 21, 1984, and made payable to Mass Trans, was signed by Duffy. Nine days after Duffy wrote and signed that check, he wrote the memo to plaintiffs’ president, John Purdy, assuring him that Mass Trans was a legitimate Canadian company and represented that he, himself, took photographs of Mass Trans’ equipment being used on a Schader jobsite.

In addition, the evidence was undisputed that, as early as 1981, the time when the defalcations were first committed, Duffy and Fonesca defalcated plaintiffs’ funds through their submission for payment of nonbusiness expenses, accomplished by the two employees’ mutual approval of the other’s expense reports without documentary substantiation as required by company policy. Plaintiffs’ claim included an aggregate of more than $165,000 in fraudulent expense account items submitted on behalf of these two employees during the policy period. These expenses included a 1981 travel agency invoice for personal air travel for “J. Duffy/J. Fonesca” and the amounts diverted by Schader checks co-signed by both men to pay for the remodeling of one or both of their private residences.

Given the convergence of the foregoing evidence, to draw the inference, posited by plaintiffs, that Duffy and Fonesca were neither aware that the other was fraudulently diverting plaintiffs’ funds nor instrumental in the perpetuation of such defalcations is clearly not reasonable, but rather, pure speculation and conjecture.

Moreover, two of these items of evidence, by themselves, conclusively establish that Duffy and Fonesca collaborated in their efforts to defraud the plaintiffs. Specifically, it was shown that Duffy was inextricably implicated in the Mass Trans scheme, purported to be solely engineered by Fonesca, as it was undisputed that while Duffy was signing checks made payable to Mass Trans, he was simultaneously attesting to the legitimacy of that company and even went so far as to advise Purdy that payment to Mass Trans must be on a cash-on-delivery basis and enclose photographs of Mass Trans’ equipment. Moreover, it was not disputed that Duffy and Fonesca knowingly approved the other’s expense reports to defalcate plaintiffs’ funds for personal expenses. We find, therefore, that the inference that Duffy and Fonesca were aware of and assisted in the furtherance of each other’s fraudulent acts is the only inference a fair-minded person could draw from the foregoing uncontroverted evidence. Accordingly, there is no triable issue and the motion for summary judgment should be affirmed. Peltz v. Chicago Transit Authority (1975), 31 Ill. App. 3d 948, 335 N.E.2d 74.

Plaintiffs filed two affidavits in opposition to defendant’s motion for summary judgment, which they argue raise a genuine issue of material fact as to whether Duffy and Fonesca acted in collusion. The first affidavit was that of Robin Purdy, vice-president of Purdy, the parent company of Schader. In this affidavit, Robin Purdy disclaims his apparent admission in the letter to defendant that Duffy and Fonesca had acted by agreement on the ground that he did not then, nor thereafter, obtain sufficient information upon which to reach that conclusion. The second affidavit was that of John Purdy, president of Purdy, who correspondingly sought to neutralize his admission contained in the letter written to Duffy that Duffy and Fonesca had acted in collusion by characterizing that statement as an accusation, stated only to elicit either an “admission or a denial” from Duffy.

In their affidavits, both Purdys merely purport to explain the prior admissions contained in their respective letters; they neither allege any evidentiary facts in support of their affidavits nor expressly deny the otherwise undisputed specific facts pertaining to the conduct of Duffy and Fonesca in defrauding the plaintiffs. These evidentiary facts were documented by the voluminous submissions in support of the defendant’s motion for summary judgment, which included the affiants’ own letters. Such general denials unsupported by any evidentiary facts are insufficient to raise a triable issue as against uncontroverted evidentiary matter. (See People ex rel. Highsmith v. County of Jefferson (1967), 87 Ill. App. 2d 145, 230 N.E.2d 480.) Therefore, each of the underlying facts upon which the motion for summary judgment was predicated remains undisputed, including the fact conceded by plaintiffs that Duffy knowingly approved his and Fonesca’s expenses without supporting documentation.

The impact of the totality of all of these facts and circumstances establishes as a matter of law without reasonable contrary inferences a knowing collaboration between Fonesca and Duffy to assist each other in defrauding the company, thereby invoking the provision of the policy limiting liability for collusive conduct among more than one employee.

The final question we must consider is whether the trial court abused its discretion in granting summary judgment on count II, which sought attorney fees and costs, pursuant to section 155 of the Insurance Code on the ground that the defendant vexatiously and unreasonably refused to pay the actual loss sustained by plaintiffs. (Ill. Rev. Stat. 1985, ch. 73, par. 767.) The plaintiffs argue that the evidence raises a question of fact as to the good faith of the defendant’s conduct. As we have affirmed the entry of summary judgment as to count I, the issue, as framed by count II, whether the defendant acted in bad faith is rendered moot. Accordingly, we affirm the entry of summary judgment as to count II.

For the foregoing reasons, the entry of summary judgment by the circuit court of Cook County is affirmed on both counts.

Affirmed.

COCCIA and MURRAY, JJ., concur.

      This case has been cited with approval in Federal Savings & Loan Insurance Corp. v. Aetna Insurance Co. (N.D. Ill. 1968), 279 F. Supp. 161, and SEC v. Arkansas Loan & Thrift Corp. (W.D. Ark. 1969), 297 F. Supp. 73.


text:
    PCx CORPORATION, d/b/a PC Distributing, Inc., Plaintiff-Appellant, v. RENE ROSS et al., Defendants-Appellees.
    First District (5th Division)
    No. 1-89-0709
    Opinion filed February 1, 1991.

      Bradley B. Falkof, of Griffin & Fadden, Ltd., of Chicago, for appellant.
    Jeffrey Lawrence, of Schaumburg, and Muscarello, Crisanti & Young, of Elgin, for appellees.
   JUSTICE GORDON

delivered the opinion of the court:

This is an appeal from a trial court order, upon remand, enjoining defendants Rene Ross (hereinafter Ross), a former employee of plaintiff, PCx Corporation, and Tech Data, Inc. (hereinafter Tech Data), plaintiff’s competitor and Ross’ new employer, from doing any business with six of plaintiff's customers with respect to the “line of products” carried by plaintiff as of July 8, 1987, for a period of 24 months. Plaintiff contends that the trial court erred: (1) in limiting injunctive relief to only six of its customers and (2) in denying an award of punitive damages against Tech Data. On cross-appeal, defendants contend that the trial court erred: (1) in granting injunctive relief for any of the six customers and (2) in determining that the term “line of products” referred to generic items of computer hardware as opposed to the products of a specific manufacturer. We affirm the trial court.

The current dispute involves two provisions of an employment agreement entered into by Ross when she went to work as a sales consultant for plaintiff, a regional distributor of computer hardware products, in October of 1986. Those provisions stated, in pertinent part: “[Paragraph] 6. Restrictive Covenant.

a. Upon the termination of Employee’s services under this Agreement for any reason whatsoever, Employee shall not directly or indirectly *** call on, solicit, or otherwise deal with any account or customer of the Employer with respect to any line of products or services represented by Employer at the time of termination. This restriction shall begin upon termination of Employee’s services and continue for a period of twenty-four (24) months thereafter. ***
* * *
7. Disclosure of Information.
a. Employee recognizes and acknowledges that all knowledge and information which [she] may acquire in the course of [her] relationship hereunder relating to the business, developments, activities, or products of the Employer or the business or financial affairs of any individual or firm doing business with the Employer, such as, but not limited to, customer and supplier lists, cost and selling prices for specific customers, customers’ needs and requirements, confidential data regarding marketing sources and product designs, and other information, ideas, discoveries, creations, developments, improvements, designs and processes so acquired are the valuable property of the Employer and shall be held by the Employee in confidence and trust for the sole benefit of the Employer.
b. The Employee agrees not to disclose, divulge or publish, without the prior written consent of the Employer, either during the term of [her] employment or at any time subsequent thereto, knowledge of any confidential information concerning the Employer’s business, developments, products or activities, or the business affairs of any individual or firm doing business with the Employer that may be acquired by the Employee.” (Emphasis added.)

The dispute arose when Ross resigned from her sales consultant position with plaintiff in July of 1987 to take a sales position with Tech Data, one of plaintiff’s competitors, and immediately began contacting many of plaintiff’s customers for Tech Data.

After informal attempts at resolving the dispute failed, plaintiff filed a three-count complaint for injunctive and other relief against Ross and Tech Data claiming a breach of the noncompetition agreement, breach of fiduciary duties and tortious interference with the contract. In support of the request for an injunction, plaintiff alleged that Ross breached the terms of the above-stated provisions of her employment agreement by disclosing to Tech Data and using confidential and proprietary information acquired during her employment with plaintiff and by calling on and soliciting plaintiff’s customers for the purpose of selling the same line of products and services sold by plaintiff. After an initial hearing on plaintiff’s motion for preliminary injunction, the trial court entered an order dismissing the complaint and denying the motion, finding that “[t]he restriction [contained in the restrictive covenant] is too broad in scope and will not be enforced by the Court.”

Thereafter, plaintiff filed an interlocutory appeal of that order pursuant to Supreme Court Rule 307(a)(1) (107 Ill. 2d R. 307(a)(1)) and the matter was assigned to our division of the appellate court. In PCx Corp. v. Ross (1988), 168 Ill. App. 3d 1047, 522 N.E.2d 1333, we reversed the trial court’s order, finding sufficient evidence to support granting a preliminary injunction against Ross and Tech Data. In so doing, we specifically found that plaintiff “presented sufficient evidence of the factors indicative of a near-permanent relationship with its customers and that but for her employment [by plaintiff] Ross would not have had contact with them [so as] to raise a fair question as to the existence of a legitimate right in need of protection.” (PCx Corp. v. Ross (1988), 168 Ill. App. 3d 1047, 1058, 522 N.E.2d 1333, 1340.) We remanded this matter to the trial court for “further proceedings not inconsistent” with our opinion. 168 Ill. App. 3d at 1059, 522 N.E.2d at 1341.

PROCEEDING ON REMAND

Upon remand, the trial court conducted a second full hearing on plaintiff’s motion for preliminary injunction. Much of the evidence presented was the same as at the initial hearing and as summarized in the initial appeal (PCx Corp. v. Ross, 168 Ill. App. 3d at 1052-55, 522 N.E. 2d at 1336-38) and will not be restated except to the extent that it re- . lates to the issues raised.

The undisputed evidence showed that Ross was hired as a “sales consultant” for plaintiff in October of 1986 and was assigned a sales territory which encompassed areas south and west of the City of Chicago. At the time of her hire, she signed the aforementioned employment contract as a condition of her employment and thereafter was given the portion of plaintiff’s customer list which related to her territory. According to the testimony of Robert Curley, plaintiff’s chairman of the board, the list was confidential and had been compiled at great expense since plaintiff’s inception in 1982 and contained valuable customer information necessary for the survival of the company. Curley stated that the customer information list included such information as the names, addresses, contact persons, credit information, and product needs of the individual customers.

Though it was generally conceded that Ross’ sales consultant position with plaintiff was mostly one that involved her only in telephone communications with customers, there was nevertheless a dispute over the nature of her relationship with those customers. Ross testified that she was essentially an “order taker.” Robert Curley and Steven Rosenthal, plaintiff’s sales manager, however, testified that the relationship was much more than just that. According to Curley, because of plaintiff’s sales strategy to service and build existing accounts, plaintiff’s sales consultants were the “linch pin” of that strategy. He stated that consultants were extensively trained by plaintiff and its vendors to provide product capability, availability, compatibility and other technical information to customers. He explained the role of the consultants by stating that they were the “value added” difference between plaintiff and its competitors. Rosenthal corroborated the extensive training given sales consultants and further stated that they were the employees primarily responsible for maintaining plaintiff’s good will with its customers.

The undisputed evidence shows that on July 8, 1987, Ross ended her employment with plaintiff. Though it was plaintiff’s policy to conduct an “exit interview” with an employee prior to his or her final date, it apparently did not conduct such an interview with Ross. Furthermore, at the time of her termination, she was not advised or given a list of specific plaintiff’s customers she could not call on, solicit or otherwise deal with in the 24 months following her termination.

On July 13, 1987, five days after Ross’ termination of her employment with plaintiff, she began working as an outside sales representative for Tech Data, a national distributor of computer hardware products, and was assigned a territory encompassing Chicago and its Northwest suburbs. There is a disparity in the evidence as to when Ross “accepted” the offer of employment with Tech Data, with Ross testifying that she did not accept the offer until her first day of work on July 13 and Steven Raymund, Tech Data’s president, and Mark Bennett, Tech Data’s regional sales manager, seemingly testifying that the offer had been orally accepted before that date. However, this disparity is of no apparent consequence since there was no evidence offered that Ross did anything during any period prior to her last day of work with plaintiff in breach of the employment contract.

It is undisputed that Ross first advised Mark Bennett, Tech Data’s regional sales manager, of the terms of her employment agreement with plaintiff either shortly before or after she began working for Tech Data. Thereafter, Bennett, after consulting with Steven Raymund, Tech Data’s president, advised Ross that he still believed that she could make a contribution to Tech Data. To avoid any conflict with that agreement, however, he advised Ross to (1) concentrate her efforts on only existing Tech Data accounts, as listed on the Tech Data customer list, (2) work only in areas other than those she had worked for plaintiff, and (3) emphasize the sale of products other than those she previously sold for plaintiff. Notwithstanding these guidelines, there was only minimal follow-up by Tech Data personnel to monitor Ross’ compliance with them.

The undisputed evidence shows that almost immediately upon commencing employment with Tech Data, Ross began calling on plaintiff’s current customers, some located in the territory assigned to Ross by the plaintiff when she was in its employ and others located elsewhere in Illinois, and subsequently many of these customers purchased products of the same generic type from Tech Data as Ross previously sold for plaintiff. It further shows that soon after Ross’ employment by Tech Data, plaintiff began receiving a significant increase in “credit inquiries” by Tech Data regarding plaintiff’s customers. These increased credit inquiries which were logged by one of plaintiff’s employees, the records of which were admitted into evidence, indicated that Tech Data was in the initial stages of selling products to these customers. Also, during the first year of Ross’ employment with Tech Data, Tech Data nearly doubled the number of customers on its Illinois customer list who were also on plaintiff’s customer list.

The undisputed evidence also indicates that of the 515 customers in Ross’ Tech Data territory, 158 were also customers of the plaintiff. Nonetheless, documentary evidence presented by defendants, including exhibits which showed the dates when these customers commenced doing business with Tech Data and Tech Data’s resellers profiles which showed when Ross first visited these customers, demonstrated that of these 158, only five, Evcor, HEI, Heath Zenith (Downers Grove), ICOM-Lombard, and Imprint Enterprises, were located in the territory assigned to Ross when she worked for plaintiff and not already also Tech Data’s customer at the time Ross first contacted them. These exhibits showed that Ross first contacted Evcor on November 11, 1987, and Tech Data began doing business with it on February 8, 1988; first contacted HEI on December 4, 1987, and Tech Data began doing business with it on February 2, 1988; first contacted Heath Zenith (Downers Grove) on October 28, 1987, and Tech Data began doing business with it on November 16, 1987; first contacted ICOM-Lombard on November 24, 1987, and Tech Data began doing business with it on November 25, 1987; and first contacted Imprint Enterprises on March 11, 1988, and Tech Data began doing business with it on April 13, 1988. Additionally, these same documents showed that one customer of Tech Data, PC Point, had done merely $93 worth of business with Tech Data before Ross first contacted them, as compared to $37,000 in the previous year with plaintiff.

On the basis of this evidence, the trial court found that but for Ross’ employment with plaintiff, she would not have had contact with six customers, PC Point, Evcor, HEI, Heath Zenith (Downers Grove), ICOM-Lombard and Imprint Enterprises, and that plaintiff had a near-permanent relationship with these customers. It found no evidence, however, that Ross had misapplied, misused or misappropriated trade secrets. It enjoined Ross and Tech Data from doing business with any of those six customers with respect to all lines of products, which it defined in its order as “general categories of products,” carried by plaintiff as of July 8, 1987, for a period of 24 months. It directed Tech Data to supply to plaintiff an accounting of all sales and all gross profits earned from these customers from July 13, 1987, Ross’ first day with Tech Data, to the date of its order and directed Tech Data to pay said gross profits to plaintiff. It further specifically denied plaintiff’s request for punitive damages and all other relief requested.

Opinion

Plaintiff first contends that the trial court erred in limiting the injunction to six customers. Plaintiff argues that the evidence clearly shows that Ross contacted far more than these six customers and Tech Data first began doing business with far more than six of its customers after she commenced employment with Tech Data.

As noted in our earlier decision in this matter:

“Although not every alleged business interest will be deemed legally protectable, or ‘proprietary’ for purposes of enforcing a covenant not to compete (Reinhardt Printing Co. v. Feld (1985), 142 Ill. App. 3d 9, 490 N.E.2d 132; Image Supplies, Inc. v. Hilmert (1979), 71 Ill. App. 3d 710, 390 N.E.2d 68), this court has repeatedly recognized two general situations in which such an interest may exist: (1) where the former employee acquired trade secrets or other confidential information through and in the course of his employment and subsequently attempted to use it for his own benefit (ILG Industries, Inc. v. Scott (1971), 49 Ill. 2d 88, 273 N.E.2d 393); and (2) where, by the nature of the business, the customer relationship is near-permanent and but for his association with the employer, the former employee would not have had contact with the customers (Instrumentalist Co. v. Band, Inc. (1985), 134 Ill. App. 3d 884, 480 N.E.2d 1273; Morrison Metalweld Process Corp. v. Valent (1981), 97 Ill. App. 3d 373, 422 N.E.2d 1034).” (PCx Corp. v. Ross (1988), 168 Ill. App. 3d 1047, 1057, 522 N.E.2d 1333, 1339.)

In that decision, we found that an injunction was appropriate in the present case based on sufficient evidence that plaintiff had a near-permanent relationship with its customers and that but for Ross’ employment with plaintiff, she would not have had contact with them. Upon remand, the trial court heard further evidence and concluded, based on that additional evidence, that the injunction, which we deemed warranted in the first appeal, would extend to six customers of plaintiff. In reviewing that decision, we note that the question of the issuance of a preliminary injunction is addressed to the discretion of the trial court and our role on review of the court’s finding is limited to a determination of whether that finding was against the manifest weight of the evidence. (A.B. Dick Co. v. American Pro-Tech (1987), 159 Ill. App. 3d 786, 791-92, 514 N.E.2d 45, 48.) We find the trial court’s decision to limit the injunction to six customers is supported by the manifest weight of the evidence in this case and therefore will not reverse it. See Reinhardt Printing Co. v. Feld (1986), 142 Ill. App. 3d 9, 490 N.E.2d 1302.

The evidence presented on remand in this case sufficiently demonstrates that of the many customers of plaintiff whom Ross contacted and who thereafter purchased products from Tech Data, only five were located in her old territory and were not already Tech Data’s customers when the contact was made. This fact was demonstrated by the exhibits showing the customers’ respective starting dates with Tech Data and the resellers profiles showing the date of Ross’ visits. Arguably these were the only customers whom Ross would not have contacted “but for” her previous employment with plaintiff. Application of the injunction only to these customers was therefore within the trial court’s discretion. It would have been reasonable for the trial court to conclude that all other customers were contacted by Ross because they were already customers of Tech Data and not because she learned of them as a result of her prior relationship with plaintiff. Furthermore, though it is true that the sixth customer affected by the injunction, PC Point, was Tech Data’s customer prior to Ross’ initial contact, having commenced doing business with Tech Data about two weeks before Ross’ first day at Tech Data, we find that the amount of business was so minimal ($93) when compared to the substantial amount of its business with plaintiff in the year prior to Ross’ termination ($37,000) that it was within the trial court’s range of discretion to conclude that Ross would not have contacted PC Point but for her previous employment.

Plaintiff argues that the injunction should have been extended to all of its customers who were initially sold products by Tech Data after Tech Data employed Ross, regardless of whether the customers were located in her old territory. We find that it was reasonable for the trial court to limit its injunction only to the customers located in Ross’ old territory because there is no evidence in the record that Ross had contact with customers outside her territory, or even had access to plaintiff’s full customer list, during her employment with plaintiff. As noted in McRand, Inc. v. Van Beelen (1985), 138 Ill. App. 3d 1045, 486 N.E.2d 1306, a case involving similar circumstances: “[t]he employee should only be excluded from the territory where he was able to establish a certain relationship with the former employer’s customers.” 138 Ill. App. 3d at 1058, 486 N.E.2d at 1315.

Plaintiff also argues that the trial court’s injunction should have been extended to more than the designated six customers because Ross used confidential information acquired during her employment with plaintiff for her own and Tech Data’s benefit. It argues that though there is no direct evidence that Ross misappropriated plaintiff’s customer list or misused any other confidential information she received while working for plaintiff, circumstantial evidence, particularly the increased number of credit inquiries from Tech Data as well as the fact that substantial numbers of customers of plaintiff began doing business with Tech Data after Ross began working for the company, demonstrates the misuse of the customer list and other confidential information.

Plaintiff concedes that there is no direct evidence that Ross misappropriated plaintiff's customer list or misused any confidential information and there is no evidence linking the increased credit inquiries or increase in customers shared by plaintiff and Tech Data to Ross’ activity. The increase may have occurred simply because of the natural business development of Tech Data in the area and the consequent expansion of the number of customers which both Tech Data and plaintiff served. Moreover, the fact that so many of plaintiff’s customers contacted by Ross were also customers of Tech Data is a significant factor in finding that there has been no improper use of confidential information. (See, e.g., Reinhardt Printing Co. v. Feld (1986), 142 Ill. App. 3d 9, 490 N.E.2d 1302.) Consequently, we cannot conclude that the trial court’s finding that there was no misuse of confidential information is contrary to the manifest weight of the evidence.

Plaintiff next contends that the trial court erred in not awarding punitive damages against Tech Data for Tech Data’s tortious interference with its contractual relationship with Ross. It argues that punitive damages should have been awarded because Tech Data encouraged as well as allowed Ross to continue to contact plaintiff’s customers. We disagree.

An award of punitive damages is appropriate where a defendant’s actions are accompanied by aggravated circumstances such as wantonness, willfulness, malice, fraud, oppression, violence and recklessness. (Zokoych v. Spalding (1976), 36 Ill. App. 3d 654, 344 N.E.2d 805.) A request for punitive damages is a matter addressed to the sound discretion of the trial court, and a decision to deny such damages will not be reversed absent an abuse of that discretion. 8930 South Harlem, Ltd. v. Moore (1978), 61 Ill. App. 3d 293, 377 N.E.2d 1049.

Under the circumstances of the present case, we cannot say that the trial court’s denial of punitive damages constitutes an abuse of discretion. The evidence does not show aggravated circumstances. Moreover, there is evidence to the contrary that Tech Data, through its agent, Mark Bennett, gave Ross certain guidelines to avoid conflict with the terms of her employment agreement with plaintiff. These guidelines would appear to be reasonably directed to avoiding such a conflict. At best, under the evidence presented, Tech Data can be charged only with a failure to carefully monitor Ross’ compliance with the guidelines. Tech Data’s failure to carefully monitor its own guidelines does not rise to the level of aggravated circumstances which have in other instances warranted an award of punitive damages. See, e.g., Zokoych v. Spalding (1976), 36 Ill. App. 3d 654, 344 N.E.2d 805.

Plaintiff cites to Smith-Shrader Co. v. Smith (1985), 136 Ill. App. 3d 571, 483 N.E.2d 283, a case involving a claim of tortious interference with business relations, as support for its argument that Tech Data’s conduct warrants an award of punitive damages. Smith-Shrader, however, involved the aggravated circumstances of a defendant, a 50% owner and officer of the plaintiff corporation, upon his decision to resign from plaintiff but before his actual resignation, directly approaching and soliciting the business of plaintiff’s two largest customers. Under these circumstances, the court found his action to be intentional and without just cause and, as such, a basis for an award of punitive damages. Tech Data’s failure to carefully monitor its own guidelines does not warrant a similar conclusion.

On cross-appeal, defendants contend that the trial court erred in granting relief as to any of the six customers because, in the case of all six, the “near permanent” test was not met and, additionally, in the case of PC Point, the “but for” test was not met. Having affirmed the trial court’s grant of the injunction in connection with the six customers, we have effectively disposed of this contention.

Defendants also contend that the court erred in “construing” the term “line of products,” in the restrictive covenant in Ross’ employment contract with plaintiff, to denote a generic type of product, such as a printer or modem, rather than a specific product of a specific manufacturer, such as the printer or modem sold by Toshiba or Samsung. They argue that had the court interpreted the term to mean the products of a specific manufacturer, the damages awarded plaintiff would have been sharply reduced because much of the products sold by Ross to the six customers was of a manufacturer only carried by Tech Data.

We find sufficient evidence in the record to support the construction given by the trial court to the term “line of products.” The evidence shows that to have been the interpretation given to the term by the parties to the employment contract. Both Robert Curley, plaintiff’s chairman of the board, and Steven Rosenthal, its sales manager, testified that the term referred to the general categories of product sold by plaintiff. Additionally and most significantly, Ross conceded that meaning in the resume which she prepared and submitted to Tech Data as part of her employment application when she referred to the product lines she handled for plaintiff by generic type and not by specific manufacturer’s names.

When a term in an agreement is doubtful or uncertain, the meaning given to the term by the parties will be adopted. (See Wald v. Chicago Shippers Association (1988), 175 Ill. App. 3d 607, 529 N.E.2d 1138.) Though Ross did later testify at trial that she “always” believed the term denoted the products of a specific manufacturer, it was for the trier of fact to resolve this contradiction with the concession contained in her earlier prepared résumé. Moreover, we find merit in plaintiff’s contention that the noncompetition agreement would make little sense if its protections applied only to the sale of given products of specific manufacturers rather than to generic product types. It is common knowledge that competition is largely over general product types rather than manufacturers’ names. This was asserted by the plaintiff in its brief and remains unchallenged by the defendants.

For the foregoing reasons, we affirm the judgment of the trial court.

Affirmed.

LORENZ, P.J., and COCCIA, J., concur.


author: JUSTICE MURRAY

text:
    BOARD OF EDUCATION OF SCHOOL DISTRICT NO. 122, COOK COUNTY, Plaintiff-Appellant, v. ILLINOIS STATE BOARD OF EDUCATION et al., Defendants-Appellees.
    First District (5th Division)
    No. 1-90-3025
    Opinion filed February 1, 1991.

      Scariano, Kula, Ellch & Himes, Chartered, of Chicago Heights (Raymond A. Hauser and Douglas D. Danielson, of counsel), for appellant.
    Neil F. Hartigan, Attorney General, of Springfield (Robert J. Ruiz, Solicitor General, and Tanya Solov, Assistant Attorney General, of Chicago, of counsel), for appellees Illinois State Board of Education and Sheila Reilly.
    Melissa J. Auerbach, of Cornfield & Feldman, of Chicago, for appellee Catherine Pappas.
   JUSTICE MURRAY

delivered the opinion of the court:

The Board of Education of School District No. 122, Cook County, Illinois (School District), appeals from the dismissal of count II of its complaint for declaratory relief in a State Board of Education school teacher dismissal case.

The facts in the case are as follows.

Defendant Catherine Pappas (Pappas) was dismissed from her employment as a tenured teacher by the plaintiff, School District, by resolutions adopted on July 20, 1989, and May 8, 1990. Pursuant to the Illinois School Code, section 24 — 12, Pappas requested hearings before hearing officers of the Illinois State Board of Education (State Board) regarding her dismissal by the School District. (Ill. Rev. Stat. 1987, ch. 122, par. 24 — 12.) The School District and Pappas selected defendant attorney Sheila Reilly from a list of potential hearing officers supplied by the State Board to serve as the hearing officer in the dismissal hearing.

A hearing was scheduled for May 9 and 10, 1990. The hearing was never convened. The School District and Pappas entered extensive settlement negotiations. The School District alleges the parties reached a settlement agreement on May 10, 1990. Hearing officer Reilly requested information concerning the terms of settlement discussions and the ultimate settlement agreement. Pappas denies the existence of any settlement.

On June 13, 1990, hearing officer Reilly denied a request by the School District to stay the teacher dismissal hearing. The School District also requested the defendant State Board to stay the hearing. The State Board has made no ruling on the request.

On June 15, 1990, the School District filed a verified complaint for declaratory judgment in two counts naming the State Board, the hearing officer, Sheila Reilly, and the involved school employee, Pap-pas, as defendants. In count I the School District sought a declaration that: (1) a settlement agreement was reached between Pappas and the School District; (2) the School District is entitled to recover its reasonable costs, including attorney fees and such further relief as the court deems equitable; and (3) the court enter a temporary restraining order and preliminary injunction enjoining all teacher dismissal hearings between the parties until the trial court held a hearing on plaintiff’s complaint.

Count II was an alternative count, praying that in the event the court did not award the relief requested in count I: (1) Reilly, the hearing officer, be found to no longer be a disinterested and impartial hearing officer as required by the State Board’s rules and thus disqualified; (2) the School District be entitled to recover its reasonable costs, including attorney fees; and (3) the court enter a temporary restraining order and preliminary injunction enjoining all teacher dismissal hearings until the court holds a hearing on the merits of the plaintiff’s complaint.

Various motions to dismiss the two counts of the complaint were filed.

On September 25, 1990, the trial court entered an order indicating: (1) plaintiff’s motion to dismiss defendants State Board and Reilly from count I was granted and defendants School District and Reilly’s motion to dismiss count I was withdrawn; (2) defendant Pap-pas’ motion to dismiss count I was denied; and (3) all of the defendants’ motions to dismiss count II were granted.

On October 12, 1990, the School District filed what it labels an interlocutory appeal from the order dismissing count II of the complaint. On appeal the School District seeks a reversal of the order and remandment for further proceedings.

The trial judge dismissed count II of the School District’s complaint based on its conclusion that the plaintiff School District had failed to exhaust its administrative remedies.

On appeal the School District raises a number of points in support of its argument that the trial court’s dismissal of count II be reversed and the cause be remanded for further proceedings. Among the points raised on appeal by the parties is the issue of whether the Administrative Review Act (Ill. Rev. Stat. 1987, ch. 110, par. 3 — 101 et seq.) applies to the qualifications of the hearing officer and, if so, whether the cause falls within the various exceptions to the exhaustion of remedies issue.

On jurisdictional grounds, this court must decline to decide the issues raised in this appeal.

• 1-3 It is the duty of an appellate court first to determine that an appeal properly lies before it before going into the merits of the case. (Clark v. State Police Merit Board (1972), 5 Ill. App. 3d 332, 282 N.E.2d 220.) The order of September 25, 1990, is a nonfinal order and not the type of order that is subject to an interlocutory appeal. As a general proposition, the basis for the right of appellate review in Illinois is in the constitution of the State of Illinois and not in the statutes. (In re Organization of the Fox Valley Community Airport Authority (1974), 23 Ill. App. 3d 168, 318 N.E.2d 496.) Appeals as a matter of constitutional right are only from final judgments of a circuit judge. (111. Const. 1970, art. VI, §6.) Illinois law clearly holds that there can be no appeal from a nonfinal order unless specifically authorized by the supreme court rules. Ill. Const. 1970, art. VI, §6; People ex rel. Scott v. Silverstein (1981), 87 Ill. 2d 167, 171, 429 N.E.2d 483.

An order of a trial court that disposes of less than all claims is not appealable unless it contains a written finding to the effect that “there is no just reason for delaying enforcement or appeal” of the order. (134 ENTERPRISES. 2d R. 304(a).) There are some such orders that are appealable without that special finding. (134 ENTERPRISES. 2d R. 304(b).) None are applicable to this case. The order contained in the plaintiff’s brief is unintelligible. An examination of the original record reveals no such special findings contained in the September 25, 1990, order appealed from in this case. The report of proceedings fails to reveal a request for the special finding or an indication that it was granted without request.

As a basis for appellate jurisdiction, plaintiff relies on Supreme Court Rule 307. (134 Ill. 2d R. 307.) By rule the Illinois Supreme Court has granted appeals from certain interlocutory orders. (134 Ill. 2d R. 307.) Supreme Court Rule 307 provides in relevant part that an appeal may be taken from an interlocutory order “granting, modifying, refusing, dissolving, or refusing to dissolve or modify an injunction.” (134 Ill. 2d R. 307(a)(1).) The instant appeal involving the qualifications of a hearing officer under the School Code is not one of those provided for as a matter of right by that rule. The purpose of Supreme Court Rule 307(a)(1) is to permit, as a matter or right, interlocutory review of the exercise of a court’s equitable power to grant the type of coercive injunctive relief formerly available exclusively in the courts of equity jurisdiction. (JFS v. ABMJ (1983), 120 Ill. App. 3d 261, 458 N.E.2d 76.) The court in determining what constitutes an appealable order under Rule 307(a)(1) looks to the substance of the action not the form. In re a Minor (1989), 127 Ill. 2d 247, 537 N.E.2d 292.

This case involves the pleading of alternative counts. The trial court has neither granted nor denied an injunction in this case. Neither the School District’s initial brief nor its reply brief mentions the denial or granting of an injunction. The only issue argued is the propriety of hearing officer Reilly’s failure to recuse herself or the failure of the trial court to disqualify her. In fact none of the parties have argued anything about any injunctions or temporary restraining orders in this appeal. As a result, we find that pursuant to Supreme Court Rule 307 we do not have jurisdiction to rule on the merits of this appeal.

The wisdom of the supreme court rule precluding appellate review from nonfinal orders is best exemplified by this case. If in fact as plaintiff charges there was a settlement, the issue of the bias or qualifications of the hearing officer is moot. Alternatively, the issue of the qualifications of the hearing officer is one first best addressed by the defendant School Board, which, by statute, is charged with the appointment of a fair and impartial hearing officer. We note, nothing in this record indicates that defendant Reilly fails to meet the impartiality requirements of the School Code. Ill. Rev. Stat. 1989, ch. 122, par. 24-12.

At oral arguments the parties seemed in agreement that the case would be remanded to the trial court for further proceedings as to count I. Further, should at the conclusion of this case in the trial court, the dismissal of count II become an issue on appeal, the briefs filed in this appeal shall stand on that issue with the parties reserving the right to supplement their respective briefs.

Accordingly, we dismiss the appeal for want of jurisdiction and remand the case to the trial court.

Appeal dismissed.

LORENZ, P.J., and McNULTY, J., concur.