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Lake v. Village of Lake

June 24, 1998


The opinion of the court was delivered by: Presiding Justice Geiger delivered the opinion of the court:

Appeal from the Circuit Court of McHenry County.

No. 97--MR--282

Honorable James C. Franz, Judge, Presiding.

The defendant, Village of Lake in the Hills (Village), appeals from the December 19, 1997, order of the circuit court of McHenry County preliminarily enjoining it from taking possession of the Lake in the Hills Airport from the plaintiffs, Lake in the Hills Aviation Group, Inc., Gary Meisner, Howard Seedorf, and Gerald Finefield. On appeal, the Village argues that the entry of a preliminary injunction was improper because the plaintiffs failed to present sufficient evidence demonstrating that they were entitled to such relief. We reverse and remand.

The facts relevant to the Disposition of this appeal are as follows. The Village is a municipal corporation which owns the Lake in the Hills Airport (airport). In February 1992, the Village entered into an Airport Operating Agreement (operating agreement) with Lake in the Hills Aviation Group, Inc. (the Av Group). Gary Meisner, Gerald Finefield, and Howard Seedorf each own a one-third share of the Av Group. The term of the operating agreement was from February 12, 1992, through February 11, 2004.

Under the provisions of the operating agreement, the Av Group was designated as the "operator" of the airport and took possession of the airport premises on February 12, 1992. As operator, the Av Group was required to provide certain services at the airport, including aircraft sales, aircraft maintenance, charter services, and flight training facilities. The operating agreement permitted the Av Group to provide these services directly or by subcontract. In addition, the Av Group was obligated to collect all revenues and pay all expenses associated with the operation of the airport. The operating agreement also required the Av Group to pay the Village $6,000 per month plus a percentage of the gross revenue it received from its operation of the airport.

Additionally, the operating agreement required the Av Group to operate the facility as a public airport at all times. The Av Group was also required to comply with all applicable municipal, federal, and state laws and regulations relating to airports. In the event that the Av Group failed to abide by the terms of the operating agreement, the Village had the right to terminate the operating agreement and to re-enter the airport premises.

In 1992, the Av Group subcontracted the aircraft sales, aircraft maintenance, charter, and flight school services to various companies individually owned by Meisner, Finefield, and Seedorf. The aircraft sales service was subcontracted to Meisner Aircraft Sales, which was owned by Meisner. The aircraft maintenance service was subcontracted to Finefield Aviation, which was owned by Finefield. The charter and flight school services were subcontracted to Northern Illinois Flight Center, which was owned by Seedorf. These subcontract agreements provided for a monthly lease payment to the Av Group and were automatically renewable on a yearly basis. Although the Av Group paid the Village a percentage of these lease amounts, the Village did not receive a percentage of the gross revenues of Meisner Aircraft, Finefield Aviation, or Northern Illinois Flight Center.

On May 10, 1996, the Village was notified that the Illinois Department of Transportation (IDOT) had received a formal letter of complaint concerning the operation of the airport. The complaint had been made by Fred Shay, president of Blue Skies Flying Services (Blue Skies). Shay operated a flight school out of the airport. Shay complained that Seedorf had refused to sell him airplane fuel and had assaulted and harassed his employees. Shay also complained that the Av Group would not provide him with an agreement to operate at the airport unless he complied with certain requirements, including an EPA storm water protection permit, $5 million in insurance coverage, and the payment of other monthly fees.

IDOT warned the Village that, under the terms of a $200,000 development grant the Village had received from the state, it was required to control and operate the airport "for the rightful, fair, equal, and uniform use and benefit of the public." IDOT explained that the Village could not deny access to the airport or its facilities to any individual or company desiring to do business at the airport unless there were compelling reasons justifying such a denial. IDOT also suggested that there was a conflict of interest in permitting the primary service providers at the airport to serve in the capacity of operator. IDOT recommended that the Village create a set of operating rules and regulations and develop separate agreements, leases, or contracts for the airport operator and the various subcontractors. Although the Village apparently spoke with IDOT about these problems, it took no formal action to remedy them.

On October 9, 1996, the Village was notified that IDOT had received another complaint about the Av Group. This complaint was made by a teacher at Prospect High School who used the airport to teach his physical science and aeronautics class. Apparently, Seedorf refused to sell the teacher fuel once he began renting planes from Blue Skies. IDOT warned the Village that the airport would not be considered for further state and federal airport funding until these discriminatory practices were remedied. Under IDOT's Proposed Airport Improvement Program, the airport had previously been designated to receive $8.5 million in federal and state funds between 1996 and 1999.

On October 10, 1997, the Village sent the Av Group notice that it was in default on the operating agreement. The notice provided the following specific violations of the covenants contained in the operating agreement:

"1. Failing to pay the Village the applicable percentage of gross revenues received by Messrs. Seedorf, Meisner and Finefield and their business entities as 'subcontractors' of [the Av Group];

2. Arbitrarily and discriminatorily refusing to sell fuel and lease unoccupied hangar space to Blue Skies Flight ...

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