FIRST DIVISION

										March 15, 2004

No. 1-02-1450

THE VILLAGE OF ORLAND HILLS,		)   	Appeal from the

							)	Circuit Court of

		Plaintiff-Appellee,			)   	Cook County.

							)   							

v.							)  	No. 99 CH 15762 		    	

							)

CITIZENS UTILITIES COMPANY			)

OF ILLINOIS						)

and 							)	

THE VILLAGE OF TINLEY PARK,		)   	Honorable

							)   	Aaron Jaffe,

		Defendants-Appellants.           	)	Judge Presiding.

	JUSTICE GORDON delivered the opinion of the court:

	Plaintiff, the Village of Orland Hills (Orland Hills), brought this action seeking a

declaratory judgment that defendant Citizens Utilities Company of Illinois (Citizens)1 was obligated to provide water service to an undeveloped parcel of land recently annexed into Orland

Hills and that Citizens' water supply contract with defendant, the Village of Tinley Park (Tinley

Park), did not preclude such service.  The parties filed cross-motions for summary judgment.  The

circuit court granted plaintiff's motion for summary judgment and denied defendants' joint

motions for summary judgment.  This appeal followed.  For the reasons that follow, we reverse

the judgment of the circuit court.

BACKGROUND

	The underlying facts of this case are not in dispute.  In 1962, Orland Hills, then known as the Village of Westhaven, enacted an Ordinance 62-0-018 which granted to the predecessor of

Citizens, the Fernway Utility Co., "the franchise, right and privilege of supplying the Village of

Weshaven and all the inhabitants of said Village within the present and future corporate limits of

said Village with water."  The franchise expired by its terms on December 31, 1991.  It is

undisputed that since the expiration of the ordinance, Citizens and Orland Hills have continued to

act consistently with its terms.  In particular, Citizens has continued to provide water service to

the residents of Orland Hills.

	From 1962 to 1982, Citizens serviced the residents of Orland Hills with well water.  In

February of 1982, however, Citizens entered into a water supply contract (hereinafter, Tinley

Park/Citizens Water Supply Contract, or Water Supply Contract) with adjacent municipalities

which had access to Lake Michigan water, namely, the Village of Tinley Park, the City of Oak

Forest and the Village of Oak Lawn (Oak Lawn), in order to provide Lake Michigan water, rather

than well water, to residents of Orland Hills.  As was stated before the circuit judge, "Lake

Michigan water is infinitely preferable to well water."  Pursuant to the terms of that contract,

Citizens agreed to purchase Lake Michigan water from Oak Lawn and Tinley Park agreed to

allow Citizens to receive Lake Michigan water through its water distribution system.  The Water

Supply Contract also contained several restrictions.  First, Citizens could not extend its water

service within Tinley Park, nor could Citizens use the Lake Michigan water purchased under the

Water Supply Contract to service any customers within a restricted area referred to as the "Tinley

Park planning area as shown on the map attached hereto."  Second, the Water Supply Contract prohibited Citizens from connecting its water distribution system, except for emergency purposes,

to any wells, so long as its water distribution system was connected to Tinley Park's water works

distribution system.  

	Citizens is an Illinois public utility regulated by the Illinois Commerce Commission (the

Commission).  The Commission expressly approved the Water Supply Contract after conducting

hearings.  In 1985, upon a regulatory directive by the Commission, the term of the Water Supply

Contract was extended through September 30, 2006.  

	Attached to the Water Supply Contract and setting forth the restricted area in which

Citizens may not provide water service, was a map of the "Tinley Park planning area" as it existed

in 1982.  It encompassed an area of southwest Cook County located south of 171st Street and

bounded on the east by 86th Avenue, on the west by Route 45, and on the south by Interstate 80. 

The "epicenter" of this lawsuit is the so-called "A&M Parcel"2 located within the restricted area described in the Water Supply Contract.  The A&M Parcel consists of 11 1⁄2 acres of unimproved

real estate, located at approximately 171st Street and 94th Avenue. 

	In November of 1999, Orland Hills entered into a land annexation agreement with the

original owner and the original developer of the A&M Parcel, binding these parties and their

successors in interest.3  Under the annexation agreement, Orland Hills was responsible for extending all water service to the parcel.  The annexation agreement also provided: "[a]fter closing developer may petition to disconnect [from Orland Hills] on or before December 30, 2000

and [Orland Hills] will grant such petition."  

	When Orland Hills requested Citizens extend the water service to the A&M Parcel, both

Citizens and Tinley Park objected to the request, asserting that Citizens was prohibited from

supplying the water to the parcel by the restrictions in the Water Supply Contract.  In November

of 1999, Orland Hills filed a complaint for declaratory judgment,4 seeking a declaration that Citizens was obligated to provide water service to the parcel.  Shortly thereafter, the original

owner of the A&M Parcel sold 9 of the 11 1⁄2 acres to the original developer, contemporaneously

with the now owner/developer and Orland Hills amending the annexation agreement with respect

to the right to disconnect the property from Orland Hills. 

	In April of 2000, several more land conveyances took place, resulting in First Bank and

Trust Company of Illinois (First Bank) holding nine acres of the A&M Parcel as a trustee under a

trust agreement, and Glenbrook Development of NML, L.L.C. (Glenbrook) becoming a

successor developer of this portion of the parcel.  In May of 2000, First Bank and Glenbrook

petitioned Orland Hills to disconnect their portion of the A&M Parcel, citing the annexation

agreement and stating that they were exercising their right to disconnect before the December 30,

2000, deadline.  Orland Hills denied this petition.  In December of 2000, First Bank and

Glenbrook filed a lawsuit in the circuit court of Cook County, asking the court to order Orland Hills to grant their petition to disconnect from Orland Hills, so that their portion of the A&M

Parcel could be annexed into Tinley Park, where it could be supplied by Tinley Park with Lake

Michigan water.5  The circuit court dismissed the disconnection suit, finding that First Bank's and Glenbrook's right to disconnect, per the amended annexation agreement, was dependent on the

outcome of the instant case.  It could be exercised if Citizens was found not obligated to supply

water to the A&M Parcel.  This court affirmed the judgment of the circuit court in the

disconnection suit.6 

	Meanwhile, Orland Hills moved for summary judgment in this water supply suit, seeking a

declaration that Citizens was obligated to provide water service to the A&M Parcel and that the

Tinley Park/Citizens Water Supply Contract did not relieve Citizens of this obligation.  Citizens

and Tinley Park filed a joint motion for summary judgment, contending that Citizens was

precluded by the terms of the Water Supply Contract from providing Lake Michigan water to the

A&M Parcel, and that it was similarly precluded from providing well water to the parcel using the

same distribution system as it does to service its customers with Lake Michigan water. 

	The circuit court granted Orland Hills' motion for summary judgment and denied Citizens'

and Tinley Park's joint motions for summary judgment on the grounds that although the franchise

agreement had expired, an implied-in-fact contract for water services existed between Orland Hills and Citizens, and that it would be against public policy for Citizens, a public utility that

continued to operate in Orland Hills long after the expiration of its franchise, to now state that it

no longer has the obligation to provide water service to all of the inhabitants of Orland Hills.  Citizens and Tinley Park now appeal.  It appears that the property, which is zoned commercial,

remains undeveloped. 

ANALYSIS

	The standard of review on appeal from a grant of summary judgment is de novo.  Harrison v. Hardin County Community Unit School District No. 1, 197 Ill. 2d 466, 470-71, 758 N.E.2d 848, 851 (2001).  Summary judgment is appropriate where "the pleadings, depositions, and

admissions on file, together with the affidavits, if any, show that there is no genuine issue as to

any material fact and that the moving party is entitled to a judgment as a matter of law."  735

ILCS 5/2-1005(c) (West 2002); Chavda v. Wolak, 188 Ill. 2d 394, 403, 721 N.E.2d 1137, 1143 (1999).  Defendants argue that the circuit court erred in granting Orland Hills' motion for

summary judgment and denying defendants' joint motions for summary judgment.  The essence of

defendants' arguments is that the franchise ordinance had long expired, whereas the Water Supply

Contract has not expired and it clearly prohibits Citizens from providing Lake Michigan water

purchased under the contract to the A&M Parcel and that this contract should be enforced

according to its terms.  Defendants call this court's attention to the relevant provisions of the

Water Supply Contract.  Paragraph 6 of the Water Supply Contract provides:

	"Citizens agrees that it will not extend its water service within Tinley Park. 

Citizens will not use water purchased under this Agreement within the Tinley Park planning area as shown on the map attached hereto."  (Emphasis added.)

Paragraph 9 of the Water Supply Contract provides, in part:

	"Citizens agrees that immediately upon the connection of its water works

distribution system to the Tinley Park water system as provided for herein, it will

physically disconnect its present well(s) from its water system and will not

thereafter reconnect any well(s) during the term of this contract, or any extension

thereof, unless its water distribution system is physically disconnected from the

Tinley Park water system or is no longer receiving Lake Michigan water from Oak

Lawn through Tinley Park's water system."

Defendants contend that the language of the Water Supply Contract is unambiguous in that it

prohibits Citizens from providing Lake Michigan water purchased under the contract to the A&M

Parcel and, in addition, prohibits Citizens from servicing the parcel with well water while its

distribution network is connected to Tinley Park's water system.  Defendants argue that where the

terms of a contract are clear and unambiguous, as they are here, the contract must be enforced as

written.  Resolution Trust Corp. v. Holtzman, 248 Ill. App. 3d 105, 112, 618 N.E.2d 418, 423 (1993).

	Plaintiff, on the other hand, maintains that although the franchise agreement between it

and Citizens had expired, because Citizens continued to provide service to customers within

Orland Hills, Citizens is bound by the service obligations of a contract implied in fact between

Orland Hills and Citizens to continue service on the same terms as the expired franchise.  See

Sprague v. Biggs, 390 Ill. 537, 552, 62 N.E.2d 420, 427 (1945); B–C Cable Co. v. City & Borough of Juneau, 613 P.2d 616, 619 n.5 (Alaska 1980) (if a franchise between a utility and a municipality expires but the utility continues to provide service, an implied contract arises under

the same terms and conditions as the expired grant); City of Richmond v. Chesapeake & Potomac Telephone Co. of Virginia, 205 Va. 919, 924, 140 S.E.2d 683, 686 (1965) (when the franchise expired, the utility continued to operate under an implied contract cancelable upon reasonable

notice under the same terms and conditions as the franchise ordinance); 12 McQuillin on

Municipal Corporations §34.51 (3d rev. ed. 1995) (if a company continues to operate after its

franchise has expired, it does so under an implied contract, cancelable upon reasonable notice,

under the same terms and conditions as the franchise ordinance).  

	In Sprague our supreme court quoted with approval the following holding of Iowa City v. Iowa City Light & Power Co., 90 F.2d 679, 682 (8th Cir. 1937): 

		" 'It is well settled that a public service utility operating under a city

franchise is not released from its duty to render service at the moment its franchise

runs out.  Where the city inhabitants have become dependent upon the service and

no other arrangements have been made to supply it, the obligation to serve remains

on the utility whose properties still occupy the streets and public places. ***  The

reciprocal duties which result from necessity when the term of the franchise

expires are no less certain because the conditions are of indefinite duration.' " 

Sprague v. Biggs, 390 Ill. at 552, 62 N.E.2d at 427, quoting Iowa City, 90 F.2d at 682.

Thus, it is plaintiff's position that Citizens is contractually obligated to serve the A&M Parcel with water, and furthermore, plaintiff should not be bound by the onerous restrictions in the Tinley

Park/Citizens Water Supply Contract, to which it is a stranger.  Moreover, plaintiff contends that

the existence of an implied contract between plaintiff and Citizens is not even disputed by

Citizens, as Citizens admitted the following in its response in opposition to the Village of Tinley

Park's motion to dismiss complaint for declaratory judgment:

	"Citizens' and Orland Hills' conduct regarding the supply of water is consistent

with the expired Ordinance.  Therefore, it is axiomatic that the terms and

conditions of the Ordinance continue to govern Citizens' relationship with Orland

Hills."

In light of the cited authority, Citizens' continued provision of service to customers in Orland

Hills, and this admission, we agree with plaintiff that the circuit court was correct in its ruling that

an implied-in-fact contract existed between Orland Hills and Citizens.

	Defendants next argue that even if such an implied contract does exist on the same terms

as the expired franchise ordinance, the contract does not impose an affirmative, mandatory obligation on Citizens to provide service to the A&M Parcel because, under Illinois law, the

language contained in a municipality's grant of a franchise conferring on a grantee a "right,

privilege and franchise" is construed as " 'permissive and enabling, not imperative and obligatory.'

"  Village of Upper Alton v. Alton Gas & Electric Co., 165 Ill. App. 333, 335 (1911), quoting State v. Southern Minnesota R.R. Co., 18 Minn. 40, 49 (1871).  Plaintiff, in its brief before this court, fails to respond to this argument.  Moreover, during the arguments before this court,

plaintiff conceded that it could not cite to any Illinois authority interpreting a grant of franchise to impose a mandatory obligation on the grantee.  Plaintiff's concession is fatal to its position that,

under the implied contract, Citizens has a mandatory obligation, rather than a mere permission, to

supply water services to the A&M Parcel.  

	In any event, it would be futile for plaintiff to argue that the terms of the implied contract

bound Citizens with such a mandatory obligation because, as defendants assert, municipal control

over public utilities has been preempted by the statewide regulatory authority of the Commission

under the Public Utilities Act (hereinafter, the Act) (220 ILCS 5/1-101 et seq. (West 2002)), which we will more fully discuss below.  City of Geneseo v. Illinois Northern Utilities Co., 378 Ill. 506, 514, 39 N.E.2d 26, 31 (1941) (wherever the Public Utilities Act has granted a specific

right or power which may conflict with a like right or power enumerated among those of cities

and villages, the former will prevail as a repeal, by implication, of such rights vested in the

municipality); Commonwealth Edison Co. v. City of Warrenville, 288 Ill. App. 3d 373, 379, 680 N.E.2d 465, 470 (1997) ("utility regulation is not a matter pertaining to local government and

affairs.  Rather, the regulation of public utilities is purely a problem of statewide concern");

Kirwin v. Peoples Gas Light & Coke Co., 173 Ill. App. 3d 699, 528 N.E.2d 201 (1988) (the Act preempted municipal powers to regulate public utilities).  Because the Act expressly empowers

the Commission to supervise all public utilities (220 ILCS 5/4-101 (West 2002)) and includes in

the definition of a "public utility" any entity which "owns, controls, operates or manages, within

this State, *** any plant, equipment or property used or to be used for *** the production,

storage, transmission, sale, delivery or furnishing of *** water" (220 ILCS 5/3-105 (West 2003)),

and all parties to this action agree that Citizens is a public utility regulated by the Commission, plaintiff Orland Hills is preempted by the Act from exerting any control over the operations of

Citizens. 

	Moreover, preemption applies not only where a municipality attempts to regulate a public

utility by a municipal ordinance, but also where it attempts to do so through a franchise

agreement or a contract.  City of Geneseo, 378 Ill. 506, 523, 530, 39 N.E.2d 26, 35, 38 (1941) (although the power vested in cities to permit or refuse a license or franchise to a public utility has

not been repealed by the provisions of the Public Utilities Act, the Commission has exclusive

power "over the acts of the utility exercised by reason of the franchise or permit" (emphasis

omitted)).  Due to the preemption of municipal regulatory control over public utilities, a franchise

agreement can no longer be used as a means for a municipality to control the provision of service

by a public utility.  City of Peoria v. Peoria Water Co., 49 Ill. App. 3d 1066, 364 N.E.2d 1003 (1977) (municipality may not seek specific performance of a franchise agreement between it and a

water company because its right in that regard was preempted by the Public Utilities Act).  In City of Peoria, the court explained:

	"It is irrelevant that a municipal franchise ordinance has been accepted and acted

upon by the grantee utility, for such an ordinance cannot 'stand in the way of the

lawful exercise, by the Commerce Commission, of the regulatory police powers

conferred upon it by the General Assembly.'  (City of Chicago v. Illinois Commerce Comm'n ex rel. Chicago and Western Indiana R.R. Co. (1934), 356 Ill. 501, 510, 190 N.E. 896, 900).  Nor can a preexisting contract be considered a limitation on the exercise of the State's police power."  (Emphasis added.)  City of Peoria, 49 Ill. App. 3d 1066, 1068-69, 364 N.E.2d 1003, 1005 (1977).

We further note that the franchise ordinance had expressly recognized this preemptive power of

the Commission, as it provided, in relevant part, in section 13:

	"[T]his ordinance shall constitute a contract between the parties hereto and,

subject to the rights and powers vested in the Illinois Commerce Commission *** shall be the measure of the rights, powers, obligations, privileges and liabilities of

[Orland Hills] and [Citizens]."  (Emphasis added.)

Accordingly, plaintiff's right to enforce its implied contract with Citizens, whatever its terms may

be, is preempted by the exclusive regulatory authority of the Commission.  Nor may plaintiff claim

that its implied contract with Citizens supercedes the Tinley Park/Citizens Water Supply Contract

which was expressly approved by the Commission.

	We next turn our attention to the Tinley Park/Citizens Water Supply Contract.  As a

preliminary matter, we note that this contract is not preempted by the regulatory authority of the

Commission under the Act.  Although it appears that this contract is very similar to the Orland

Hills/Citizens implied contract in a sense that it is a contract between a municipality and a public

utility, in fact it is not.  Rather, it is a contract between two utilities: a municipal utility company

operated by Tinley Park and a public utility, Citizens.  This is so because Tinley Park is not

regarded to be acting in its municipal governmental capacity with respect to the operation of its

water supply business; it is regarded to be acting in a proprietary, business capacity.  Baltis v. Village of Westchester, 3 Ill. 2d 388, 398, 121 N.E.2d 495, 500 (1954) (It is a "well-established principle that a municipal corporation owning and operating a water system and selling water to individuals, although engaged in a public service, does so in its business or proprietary capacity,

not in any governmental capacity, and no distinction is to be drawn between such business whether engaged in by a municipality or by a private corporation" (emphasis added)); Wagner v. City of Rock Island, 146 Ill. 139, 154, 34 N.E. 545, 548 (1893) ("when a municipal corporation undertakes to construct and operate water works, it does so in the exercise of its private and not

of its governmental functions").  In such a capacity, Tinley Park's actions are not subject to

preemption by the Act.

	Tinley Park argues that the Water Supply Contract is unambiguous and bars Citizens from

providing Lake Michigan water purchased under the contract to the A&M Parcel.  In construing

any contract, the court's function is to give effect to the intent of the parties at the time the

agreement was made.  City of Chicago Heights v. Crotty, 287 Ill. App. 3d 883, 885, 679 N.E.2d 412, 413 (1997).  If the terms of a contract are clear and unambiguous, then the intent of the

parties must be ascertained solely from the words used.  Joseph v. Lake Michigan Mortgage Co., 106 Ill. App. 3d 988, 991, 436 N.E.2d 663, 665 (1982); Schoeneweis v. Herrin, 110 Ill. App. 3d 800, 806, 443 N.E.2d 36, 41 (1982).  A contract is ambiguous if its terms are capable of being

understood in more than one sense because either an indefiniteness of expression or a double

meaning is attached to them.  Joseph, 106 Ill. App. 3d at 991, 436 N.E.2d at 665.  Ambiguity is a question of law for the court to decide.  Joseph, 106 Ill. App. 3d at 991, 436 N.E.2d at 665; URS Corp. v. Ash, 101 Ill. App. 3d 229, 233, 427 N.E.2d 1295, 1299 (1981).

	Tinley Park argues that the restrictions in the Water Supply Contract are clear and

unambiguous and should be enforced.  Specifically, Tinley Park directs us to the language of the second sentence of Paragraph 6: "Citizens will not use water purchased under this Agreement

within the Tinley Park planning area as shown on the map attached hereto."  (Emphasis added.)  Tinley Park recites the boundaries of this restricted area, as they are set forth on the attached map

of the Tinley Park planning area as it existed in 1982, and points out that it is uncontested that the

restricted area includes the A&M Parcel.  Tinley Park, consequently, maintains that the restrictive

provision in question contains no ambiguity.

	Plaintiff Orland Hills, on the other hand, focuses on the truncated portion of the above-

quoted sentence: "Citizens will not use water purchased under this Agreement within the Tinley Park planning area." (Emphasis added.)  Plaintiff next informs this court that Tinley Park defines its planning area in its comprehensive plan, which is neither a part of the Water Supply Contract

nor referred to in the contract, as follows:

	"The planning area includes the incorporated area of the Village and the adjacent unincorporated land area around the incorporated area of the Village."  (Emphasis added.)

Plaintiff thus argues that the restriction in paragraph 6 of the Water Supply Contract does not

prohibit Citizens from servicing the A&M Parcel with water because the A&M Parcel is no longer

within the Tinley Park "planning area" because it is no longer the adjacent unincorporated land around the incorporated area of Tinley Park because the parcel has been annexed by Orland Hills.

	We disagree with plaintiff's rules of contract construction.  Plaintiff has not cited to any

legal authority enabling it to truncate the term "Tinley Park planning area as shown on the map

attached hereto," in order to use some other language, from an instrument that was not referred to in the contract, to explain the now-truncated term "Tinley Park planning area."  We are

especially unconvinced by plaintiff's argument, considering the fact that in another part of its brief,

plaintiff states the following: "The terms of the Tinley/Citizens contract are not ambiguous. 

There is no dispute as to the language of that contract."  

	In any event, Tinley Park responds that plaintiff's construction is flawed: in interpreting a

contract, meaning and effect must be given to every term and provision, if possible, since it is

presumed that every clause in the contract was inserted deliberately and for a purpose and that the

language was not employed idly.  Martindell v. Lake Shore National Bank, 15 Ill. 2d 272, 283, 154 N.E.2d 683, 689 (1958); State Farm Mutual Automobile Insurance Co. v. Schmitt, 94 Ill. App. 3d 1062, 1065, 419 N.E.2d 601, 603 (1981).  Tinley Park thus contends that the second

sentence of paragraph 6, read as a whole, is unambiguous in its intent to fix the boundaries of the

restricted area to those shown on the map.  We agree with Tinley Park that the language of

paragraph 6 is clear and unambiguous.  We, therefore, agree that the restrictions in paragraph 6,

being clear and unambiguous, must be enforced as written.  Resolution Trust Corp. v. Holtzman, 248 Ill. App. 3d 105, 112, 618 N.E.2d 418, 423 (1993).  

	Plaintiff next attempts to deny that the Water Supply Contract prohibits Citizens from

servicing the A&M Parcel with Lake Michigan water purchased under the contract.  It directs this

court to the following language in paragraph 3 of the Water Supply Contract:

	"Oak Lawn agrees to furnish and Citizens agrees to take, under and in accordance

with the terms thereof, all the water supply requirements of its water system in

order to supply the residential, commercial, industrial, and corporate water requirements within its certificated service areas in the vicinities of the corporate

limits of the Village of [Orland Hills]."

Plaintiff thus claims that the Tinley Park/Citizens Water Supply Contract "unequivocally states

that Citizens is obligated to service the A&M Parcel."  We disagree.  It is apparent that this

language deals with the quantity of water that Oak Lawn, which is not a party to this action,

"agrees to furnish" and Citizens "agrees to take" in order to supply Citizens' customers in the Orland Hills area.  Clearly, this language does not transform the requirement that Citizens

purchase a certain quantity of water from Oak Lawn into a mandate that Citizens supply some of

this water to the A&M Parcel.

	Plaintiff next argues that the terms of the Tinley Park/Citizens Water Supply Contract, as

interpreted by defendants, prevent Citizens from performing its obligations to Orland Hills under

the preexisting franchise ordinance and are therefore void on the grounds of public policy.  Blue Dolphin Investments, Ltd. v. Kane, 687 P.2d 533, 534 (Colo. App. 1984).  In that case, the court stated, "We will not give effect to a contractual provision which has as its purpose wrongful

preclusion of a third party's exercise of a valid contractual right."  Blue Dolphin Investments, 687 P.2d at 534.  Plaintiff further cites to section 194 of the Restatement (Second) of Contracts

(Restatement), which states:

		"A promise that tortiously interferes with performance of a contract with a

third person or a tortiously induced promise to commit a breach of contract is

unenforceable on grounds of public policy."  Restatement (Second) of Contracts §194 (1979).

	Tinley Park responds that this argument is without merit.  First, Tinley Park contends that

the timeline of events speaks otherwise: the Orland Hills franchise was passed in 1962; Citizens

entered into the Water Supply Contract in 1982; the franchise expired in 1991; and no dispute

arose between the parties until Orland Hills annexed the A&M Parcel in 1999.  Tinley Park

appears to argue that as things stood in 1982, the restrictions in the Water Supply Contract were

not intended to preclude Orland Hills from exercising its valid contractual rights.  Second, Tinley

Park points out that the Commission, in its exclusive regulatory capacity, approved the Water

Supply Contract, including its restrictions, and argues that the Commission's approval of the

Water Supply Contract preempted the franchise to the extent that it interfered with the contract. 

Moreover, Tinley Park argues that these restrictions, in fact, became part of the implied contract

because section 7 of the franchise ordinance provided:

	"[Orland Hills] and [Citizens] hereby agree that this ordinance shall be subject to

all rules and regulations governing service by [Citizens] approved by the Illinois

Commerce Commission *** and that all such rules and regulations which may be

hereafter approved by the Illinois Commerce Commission *** shall be and become

a part of this ordinance to the same extent and with the same effect as if said rules

and regulations were herein set out in full."

Lastly, Tinley Park points out that from 1962 to 1982, Citizens' only source of water was well

water, and that the Water Supply Contract provided an enormous benefit to the residents of

Orland Hills, as they now had access to Lake Michigan water.  Tinley Park therefore argues that

the Water Supply Contract did not have a wrongful purpose and is not unenforceable on grounds of public policy.  We agree with Tinley Park that for all of the above reasons, plaintiff's claim of

tortious interference must fail.

	Plaintiff Orland Hills, in the alternative, argues that Tinley Park is without jurisdiction to

impose extraterritorial control over the A&M Parcel, which is an existing part of Orland Hills,

another municipality: "Since municipalities are creatures of statute, they have no jurisdiction

beyond their corporate boundaries unless that jurisdiction is conferred by legislature. [Citation] 

Thus, extraterritorial jurisdiction of a municipality is strictly controlled by statute."  City of Springfield v. Judith Jones Dietsch Trust, 321 Ill. App. 3d 239, 241-42, 746 N.E.2d 1272, 1273 (2001); see also People ex rel. Aurora National Bank v. City of Batavia, 91 Ill. App. 3d 716, 721, 414 N.E.2d 916, 920 (1980) (city had no independent power to enter into restrictive covenants to

regulate use of land beyond its borders).  More specifically, plaintiff argues that Tinley Park is

exerting impermissible extraterritorial control not only in preventing the delivery of water service

to the A&M Parcel, but also in manipulating the Water Supply Contract in an attempt to cause

the A&M Parcel to disconnect from Orland Hills, so that it could be annexed by Tinley Park. 

	Tinley Park responds that plaintiff's reliance on City of Springfield and Aurora National Bank is misplaced: these cases hold that a city's zoning enactments are limited to its territorial boundaries and are invalid to the extent that they seek to impose zoning regulations and

restrictions on land outside the city limits.  Tinley Park contends that because it does not seek to

impose restrictions on the classification, use or development of the A&M Parcel, plaintiff Orland

Hills' extraterritorial jurisdiction argument is inapplicable.  Thus, plaintiff seems to argue that

Tinley Park's actions should be governed by the provisions of the Illinois Municipal Code (Municipal Code) which address extraterritorial powers of municipalities, while Tinley Park

appears to argue that so long as it is not exercising zoning-type powers, extraterritorial

jurisdiction is not at issue at all. 

	We agree with plaintiff's general contention that a municipality may generally exercise

authority only within its corporate limits.  Dean Milk Co. v. City of Aurora, 404 Ill. 331, 335, 88 N.E.2d 827, 830 (1949) ("It is an inherent limitation upon the powers of a city that they shall

operate only within the corporate boundaries of the municipality"); City of Springfield, 321 Ill. App. 3d at 242.  We would like to clarify, however, that plaintiff's contention that "municipalities are creatures of statute" (City of Springfield, 321 Ill. App. 3d at 242, citing Petterson v. City of Naperville, 9 Ill. 2d 233, 243, 137 N.E.2d 371, 377 (1956)) oversimplifies the present status of municipalities in Illinois.  In 1970, the Illinois Constitution was amended to give municipalities

additional power and authority, as well as to create the so-called "home rule" municipalities.  See

R. Cope, Annexation Agreements—Boundary Agreements: Walking a Fine Line into the Future—A Map of the Dangers to the Unwary Land Use Traveler, 17 N. Ill. U. L. Rev. 377, 386 (1997).  Article VII, section 6 sets out the powers of home rule municipalities:

	"A County which has a chief executive officer elected by the electors of the county

and any municipality which has a population of more than 25,000 are home rule

units. Other municipalities may elect by referendum to become home rule units.

Except as limited by this Section, a home rule unit may exercise any power and

perform any function pertaining to its government and affairs including, but not

limited to, the power to regulate for the protection of the public health, safety, morals and welfare; to license; to tax; and to incur debt."  Ill. Const. 1970, art.

VII, §6(a).

By contrast, non-home-rule municipalities must derive their authority to act from the legislature. 

See People ex rel. Village of Lake Bluff v. City of North Chicago, 224 Ill. App. 3d 866, 871, 586 N.E.2d 802, 805 (1992).  Therefore, home rule municipalities may have broader powers than

non-home-rule municipalities.  However, "an examination of the [Record of Proceedings of the Sixth Illinois Constitutional Convention] shows that the intention was not to confer

extraterritorial sovereign or governmental powers directly on home-rule units.  The intendment

shown is that whatever extraterritorial governmental powers home-rule units may exercise were

to be granted by the legislature."  City of Carbondale v. Van Natta, 61 Ill. 2d 483, 485, 338 N.E.2d 19, 21 (1975).  Accordingly, we agree with plaintiff that a municipality, whether home

rule or non-home-rule, may exercise authority outside its boundaries only when the state

legislature grants it such authority.  City of Carbondale, 61 Ill. 2d at 485, 338 N.E.2d at 21; Petterson, 9 Ill. 2d at 243, 137 N.E.2d at 377.  

	With respect to Orland Hills' jurisdiction over property that is the subject of an annexation

agreement, section 11-15.1-2.1 of the Municipal Code provides that such property "is subject to

the ordinances, control, and jurisdiction of the [annexing] municipality in all respects the same as

property owned by the municipality that lies within its corporate limits."7  65 ILCS 5/11-15.1- 2.1(b) (West 2002).  The record reveals that in a separate proceeding, which was not appealed,

the circuit court found the annexation of the A&M Parcel into Orland Hills to be lawful. 

However, we also note that Tinley Park does have "planning jurisdiction"8 over a contiguous territory of land within 1.5 miles of its corporate limits and not included in any other municipality. 

65 ILCS 5/11-12-5 (West 2002).  Where property is subject to such conflicting claims of

jurisdiction, the annexing municipality's subdivision and zoning jurisdiction overrides another

municipality's statutory grant of planning jurisdiction over its formerly unincorporated planning

area.  City of Springfield, 321 Ill. App. 3d at 242, 46 N.E.2d at 1273.  Therefore, plaintiff is correct that the A&M Parcel, upon its annexation into Orland Hills, stopped being a part of the

Tinley Park "planning area," as it is defined by statute, and that Tinley Park lost any planning

jurisdiction over the parcel.  On the other hand, Tinley Park is also correct in its contention that the zoning or planning jurisdiction argument is inapplicable here because Tinley Park did not

attempt to exercise either type of jurisdiction over the A&M Parcel.

	Plaintiff next appears to argue that Tinley Park is, nevertheless, exercising improper

extraterritorial regulatory jurisdiction because it seeks to enforce a contract that restricts a public

utility's service in a territory that is not only outside Tinley Park's corporate boundaries, but, moreover, is within the corporate limits of another municipality, namely Orland Hills.  We first

note that, in contrast to the exercise of governmental authority outside of its territorial limits, a

municipality may, in its business or proprietary capacity, exercise extraterritorial powers, such as

the power to contract.  62 C.J.S. Municipal Corporations §137 (1999).  As previously discussed, it is well established that where a municipality owns and operates a water system for the purpose

of selling water to customers, it is regarded as acting in a business or proprietary capacity and is

treated as if it were a private utility company.  Baltis, 3 Ill. 2d 388, 397-98, 121 N.E.2d 495, 500 (1954).  The facts of this case fully support treating Tinley Park's water supply business as a

private utility company: during the arguments before this court, Tinley Park had admitted that its

water supply business is profitable and that it was concerned with protecting its business from

competition.  We observe that the restrictions in the Tinley Park/Citizens Water Supply Contract

are consistent with Tinley Park's business concerns.  Accordingly, Tinley Park was not limited by

jurisdictional restrictions imposed on municipalities when, while acting in its business capacity, it

entered into the Water Supply Contract.

	Plaintiff Orland Hills, however, contends that Tinley Park is in fact competing for an

existing portion of another municipality, Orland Hills, and using the contractual restrictions in the Water Supply Contract to cause the disconnection of the A&M Parcel from Orland Hills and

planned annexation into Tinley Park.  However, we cannot focus on the possible underlying motivations of Tinley Park behind its insistence to enforce the restrictions in the Water Supply

Contract.  It suffices to say that Tinley Park is doing no more than enforcing a valid provision of a

contract into which it entered in a private capacity, before the annexation of the A&M Parcel ever occurred, something it had a right to do under general contract law.

	Plaintiff Orland Hills, in the alternative, argues that Citizens' certificate of public

convenience and necessity, granted to it by the Commission, obligates Citizens to provide water

service to the A&M Parcel.  The General Assembly created the Commission, pursuant to the

Public Utilities Act (220 ILCS 5/1-101 et seq. (West 2002)), to supervise and regulate all public utilities (220 ILCS 5/4-101 et seq. (West 2002)) and vested it with plenary powers with respect to the supervision and regulation of public utilities (220 ILCS 5/4-201 et seq. (West 2002); City of Chicago, 349 Ill. at 346-47, 182 N.E. at 439; Illinois Power & Light Corp. v. Commerce Comm'n, 320 Ill. 427, 430-31, 151 N.E. 236, 237 (1926); Fountain Water Dist. v. Illinois Commerce Comm'n, 291 Ill. App. 3d 696, 701, 684 N.E.2d 145, 150 (1997)).  The Act "created a comprehensive scheme for the regulation of public utilities."  Kirwin, 173 Ill. App. 3d at 705, 528 N.E.2d at 203.  The Act contemplates actual supervision of every public utility, so that continuous, adequate, uniform, and satisfactory service shall be rendered to the public.  Commerce Comm'n v. Chicago Rys. Co., 362 Ill. 559, 566-67, 1 N.E.2d 65, 69 (1936); Fountain Water Dist., 291 Ill. App. 3d at 701, 684 N.E.2d at 150.

	All parties agree that Citizens is a public utility regulated by the Commission. 

Furthermore, all parties agree that Citizens may not operate in Illinois unless it holds either a

municipal franchise or a certificate of public convenience and necessity:

		"No public utility not owning any city or village franchise *** and not

possessing a certificate of public convenience and necessity from the Illinois

Commerce Commission *** shall transact any business in this State until it shall have obtained a certificate from the Commission that public convenience and

necessity require the transaction of such business."  220 ILCS 5/8-406(a) (West

2002).

All parties further agree that Orland Hills/Citizens franchise agreement expired in 1991.  Plaintiff

apparently argues that Citizens' certificate of public convenience and necessity obligates it to

service the A&M Parcel, notwithstanding the Commission's approval of the Water Supply

Contract.

	Citizens obtained a certificate of public convenience and necessity for the territory which

encompasses the A&M Parcel in 1960.  Plaintiff Orland Hills contends that once a public utility

obtains such a certificate, it is obligated to continue to provide service to the areas stated in the

certificate unless it receives permission from the Commission allowing it to discontinue service. 

Section 8-508 of the Act provides in relevant part:

	"[N]o public utility shall abandon or discontinue any service *** without first

having secured the approval of the Commission."  220 ILCS 5/8-508 (West 2002).

Plaintiff, therefore, argues that because Citizens never requested or obtained permission from the

Commission to discontinue service to that certificated area, Citizens is obligated to provide water

service to the A&M Parcel.

	First, Citizens responds that it has no plans to abandon or discontinue service to its Orland

Hills customers.  It further contends that the instant case does not involve Citizens discontinuing

water service to the A&M Parcel; rather it involves a vacant and undeveloped property that does

not receive water service from Citizens.  Citizens, therefore, argues that it cannot "abandon" or "discontinue" water service to a parcel which it has never serviced.  Tinley Park similarly points

out that our supreme court had defined the terms "abandon" and "discontinue," as they are used in

section 8-508 of the Act as follows:

	"Abandon means to relinquish or give up with intent of never again reserving or

claiming one's rights or interest. [Citations.]  It is a voluntary act.  [Citations.]  An

involuntary act is not an abandonment.  [Citation.]  Discontinue may be a

voluntary act, but may be brought about against the will of a person.  [Citations.]  

Discontinue means to cease using, to interrupt continuance of."  City of Geneseo, 378 Ill. at 525-26, 39 N.E.2d at 36. 

Tinley Park argues that these definitions presuppose that there existed a service which could be

abandoned or discontinued, and that under these definitions, neither an abandonment nor a

discontinuance of service can take place with respect to the A&M Parcel because Citizens never

provided it with water service.  We agree that this case does not implicate the abandonment and

discontinuance provisions of section 8-508.

	Second, while Citizens agrees that it provides water service to its customers in Orland

Hills based upon its certificates of public convenience and necessity, it disputes the mandatory

nature of its obligations under the certificate and argues that a certificate of public convenience

and necessity is deemed to be a license and merely grants a public utility permission to serve the

area.  Chicago Rys. Co. v. Commerce Comm'n, 336 Ill. 51, 70, 167 N.E. 840, 848 (1929) ("The certificate of public convenience and necessity confers no property right on the utility in whose

favor it is granted.  It is *** but a mere permission to do a specified act within a fixed time"); see Amalgamated Trust & Savings Bank v. Village of Glenview, 98 Ill. App. 3d 254, 260, 423 N.E.2d 1230, 1234 (1981) (same).  Furthermore, Citizens contends that a certificate of public

convenience and necessity is not to be construed as granting a monopoly or an exclusive privilege,

immunity or franchise.  220 ILCS 5/8-406(f) (West 2002).  Plaintiff Orland Hills, on the other

hand, has not cited to any authority in support of its argument that the certificate of public

convenience and necessity obligates Citizens to provide water service to the A&M Parcel.  

	We note, however, that section 8-101 of the Act provides:

		"AEvery public utility shall, upon reasonable notice, furnish to all persons who

may apply therefor and be reasonably entitled thereto, suitable facilities and

service, without discrimination and without delay."  220 ILCS 5/8-101.

However, section 8-504 provides as follows:

		"The Commission is authorized to make rules and regulations concerning

the conditions to be contained in and become a part of contracts for public utility

services, and any and all services concerning the same, or connected therewith." 

220 ILCS 5/8-504 (West 2002).

In light of section 8-504, we agree with Tinley Park's contention that the Commission's express

approval of the Water Supply Contract ratified its provisions, including the restrictions imposed

by Pparagraphs 6 and 9.  With these restrictions ratified by the Commission, it follows that the

A&M Parcel was not reasonably entitled, within the meaning of section 8-101, to services from

Citizens.  Consequently, we agree with defendants that the certificate of public convenience and

necessity does not obligate Citizens to provide service to the A&M Parcel under the circumstances of this case.

	In sum, plaintiff Orland Hills failed to meet its burden of establishing that Citizens has a

mandatory obligation under either the implied contract or the certificate of public convenience

and necessity to service the A&M Parcel.  Moreover, plaintiff's right to enforce the implied

contract has been preempted by the Act.  On the other hand, the Tinley Park/Citizens Water

Supply Contract, which was expressly approved by the Commission in the exercise of its

exclusive regulatory authority, is valid and enforceable, as are the restrictions contained therein. 

Accordingly, we find that Citizens is not obligated to provide water service to the A&M Parcel.

CONCLUSION

	For the reasons set forth above, we reverse the judgment of the circuit court granting

summary judgment to plaintiff Orland Hills and enter judgment for defendants Citizens and Tinley

Park.

	Reversed. 

	O'MALLEY, P.J. and McNULTY, J. concur.