## I L L I N O I S 

## O F F I C I A L 

## RE P O R T S Appellate Court

Cavalry Portfolio Services v . Rocha , 2012 IL App (1st) 111690

Appellate Court Caption CAVA LRY PO RT F O L I O SE RVI CE S, Pl a in ti f f

- A p p e ll e e , v

. G ERARD O ROCHA, Def

endant- Appellant.

District & N o. First District, F irst Division Docke t No. 1-11-1690

Rule 23 Order

filed Rule 23 Order withdrawn Opinion filed September 17, 2012

October 17, 2012 October 22, 2012

Held (Note : This sy ll abus

con st it ute s no par t of the opi nio n of the cour t but has bee n pre

par ed by the Rep o rt er of D e c i s i o n s f

o r t h e

c o n v e n i e n c e o

f t h e

rea der

. ) In an action to collect an assigned debt wher e the judgme nt enter ed for plaintiff incorre ctly stated that a trial was held, even though defe ndant did
not appea r fo r trial and an ex parte judgme nt was entered, the denial of defe ndant’s petition under section 2-1401 of the Code of Civil Procedur e to vacate the judgme nt w as reve rsed and the cause was rema nded, since defe ndant had a meritorious claim that the assignments of the debt did not comply with section 8b of the Collection Ag ency Act.

Dec ision Under Review Appea l from the Circuit Court of Cook County
, No. 10-M1-165794; the Hon. Rhoda D. Swee ney , J udg e, pre siding

J udg ment Reverse d and re manded.Counsel on

Appea l Robert Habib a nd J ason Knuc key , both of Chicag o, for a ppellant.

S h i n d ler L aw Firm, of Schaumburg (Anthony P. Be rnar di, of counsel)
, for a ppellee.

Panel J USTI CE CUNNI NGHAM delivere d the judgme nt of the court, with opinion. Presiding J ustice Hoffma n and J ustice Kar

nezis conc u rr ed in the judgme nt and opinion.

OP INION

¶ 1 This appea l arises from a judgme nt that was enter ed ag ainst defe ndant-a ppellant Ger ardo Rocha (Rocha) on Fe bruar y 28, 2011, an d als o a May 16, 2011 order that denied Rocha’s petition to vaca

te judgme nt pursuant to section 2-1401 of the I llinois Code of Civil Procedur e (Code) (735 I L CS 5/2-1401 (West 2010) ). On appea l, Rocha arg ues that: ( 1) the trial court

err ed in de nying his sec tion 2-1401 petition to vacate the judgme nt beca use he prese nted a meritorious defe nse; (2) plai n t i ff-appellee Cavalry Portfolio Service s (Cavalr y Portfolio) failed to prove an ac count stated or tha t the parties e ntere d into a contra ct; and (3) the trial
court e rre d in denying his section 2-1401 petition to vacate the judgme nt beca use he a cted with due diligenc e in contesting the orig inal action and filing the section 2-1401 petition. For the following rea sons, we reve rse the judgme nt of the circ uit court of Cook Co unty and

rema nd the matter f

or fur ther proc eeding s.

¶ 2 BA CKGROUND ¶ 3 On J uly 20, 2010, Cavalry Portfolio filed a complaint ag ainst Rocha in the circ uit court of C ook County alleg ing brea ch of contra ct. C avalr y Portfolio claimed that Roc h a opened

a cre dit car d or line of cre dit acc ou nt with Washington Mutual Ba nk and subsequently defa ulted by failing to make pay ments, resulting in a balanc e due to Cavalry Portfolio in the
amount of $12,320.20. The complaint allege d that Cavalry Portfolio was an assignee of Cavalry SPV I
, L L C, and Cavalry SPV I
, L L C, was an assignee of Washington Mutual Ba nk. Attache d to the complaint wer e the following : acc ount statements from Washington Mutual Ba nk stating that owner ship of Rocha’s acc ount had been transfe rre d to C h as e Ba nk; and

acco unt statements from Chase Ba nk. Also attache d to the complaint wer e: letters that assig ned the rights, title, and interest of unspecifie d acc ounts from Chase Ba nk to Riverwalk Holdings, Ltd., from R iverwa lk Holdings, Ltd., to Cavalry SPV I
, L L C, and from Ca v al ry SPV I , L L C, to Cavalry

Portfolio. ¶ 4 On September 2, 2010, Rocha was serve d by substitut e service

. On September 8, 2010, Rocha filed an appea

ranc e through counsel. On November 15, 2010, both pa rties appea

red

-2-and the matter was set for trial on Fe bruar y 28, 2011. Rocha was g iven 28 day s to answe r or otherwise plead. Howeve r, Rocha did not file an answe r to the complaint. On Fe bruar y 28, 2011
, n ei t h er Rocha nor Rocha’s counsel appeare d for trial and an ex parte judgme nt was

en t ere d ag ainst Rocha in the amount of $12,670.20. The trial court order indicate s t h at a judgme nt was entered aga inst Rocha, after trial. On M ay 5, 2011, Rocha filed a section 2- 1401 petition to vaca

te the judgme nt. Rocha’s section 2-1401 petition stated that he beca me

awa re of the judgme nt on May 2, 2011. The petition stated that Roch a had a meritorious defe nse bec ause Cava lry Portfolio did not have standing to proce ed pursua nt to section 8b of the Collection Ag ency Act (Ac t) (225 I L CS 425/8b (West 2008)). The petition also stated that Rocha acte d with due diligenc e in contesting the judgme nt by filing the petition as soon

as he lear ned of the judgme nt. Attached to the petition wa s Rocha’s aff idavit, which stated that he had not incurre d the expenses set forth in the complaint, he was not awa re of who the plaintiff was, and he was never shown any documents transfe rring any of his acc ounts to the plaintiff. ¶ 5 On May 16, 2011, t h e tri al co u rt denied Rocha’s section 2-1401 petition without a hearing. O n J une 14, 2011, Rocha filed a timely

notice of a

ppeal.

¶ 6 ANALYSI S ¶ 7 On M ay 16, 2011, the t rial court enter ed a final order denying Rocha’s s ec t i o n 2-1401 petition to vaca

te the judgme nt enter ed ag ainst him on Februar y 28, 2011. On June 14, 2011, Rocha fi l ed a timely notice of appea l. This court has jurisdiction to consider Rocha’s
arguments on appea l pursuant to I llinois Supreme Court Rule 304(b)( 3) (ef f. Feb. 26, 2010). ¶ 8 We fi rs t ex am i n e Rocha’s argument that the trial court err ed in denying his section 2- 1401 petition to vacate the judgme nt beca use he prese nted a meritorious defe nse. A petitioner i s entitled to relief under section 2-1401 of the C ode when he sets forth specific fac tual alleg ations supporting eac h of the following elements: (1) the ex i s t en ce o f a meritorious defe nse or claim; (2) due diligenc e in prese nting the defe nse or claim to the trial
court in the orig inal action; and (3) due diligenc e in filing t h e section 2-1401 petition for relief

. Fiala v. Schulenbe rg , 256 I ll. App. 3d 922, 929, 628 N.E.2d 660, 665 (1993). ¶ 9 The parties sug g est that we apply the abuse of discre tion standard of r eview to the trial court’s ruling denying Rocha’s section 2-1401 petition. We note that a rec ent supreme court decision, People v. Vincent
, 226 I ll. 2d 1, 14, 871 N.E.2d 17, 26 (2007), held that when a trial
court dismiss es a section 2-1401 petition, or enter s judgme nt on the pleading s of said petition without holding an evidentiar y hearing, the standard of revie w to be applied is de novo

. The Vincent court rec og nized that applying the de novo standard of revie w conflicte d with prior

case law that held that the abuse of discretion standard is to be applied to a trial court’s ruling in those circ umstances

. Id

. Ho we ver, the court found that the application of the abuse of discretion standard was based on an err oneous belief that a section 2-1401 petition invoked the equitable power s of the court. Id

. at 15, 871 N.E.2d at 27. The court rea soned that when the leg islature abolished the common law writs in favor of the section 2-14 0 1 statutory

reme dy
, it beca

me inacc urate to view the relief in strictly equitable terms. Id

. at 16
, 8 7 1 N.E.2d at 27. Be cause relief aff orded by section 2-1401 is no longe r purely discretionar y , it

-3-would be in co rr ec t t o apply the abuse of discretion standard for ever y dispositi on under section 2-1401 of

the Code. Id

. ¶ 10 Howeve r, many , more recen t d ecisions of the appellate court have rec ognized that the Vincent decision dealt with a narr ow issue under section 2-1401(f ) in which a judgme nt was challeng ed for voidness. The Vincent decision did not involve the due diligenc e, meritorious defe nse, and two-year limit ation re qu i re ments that apply to other actions brought under section 2-1401. Rock

ford Financial Systems, Inc. v. Borgetti
, 403 I ll. App. 3d 321, 326-27, 932 N.E.2d 1152, 1158 (2010); see also Blazyk v. Daman Express, Inc.
, 406 I ll. App. 3d 203, 206, 940 N.E.2d 796,798-99 (2010). The Borgetti court found that the alleg ation of voidness in Vincent had nothing to do with equitable principles. Borgetti
, 403 I ll. App. 3d at 327, 932 N.E.2d at 1158. The court found that “equitable principles and the exercise of discretion still apply in section 2-1401 proce eding s not involving judgme nts alleg ed to be void.” Id

. at 328, 932 N.E.2d at 1159. The Borgetti court rea soned that due diligenc e cannot be revie wed under the de novo standard beca use it is a mix ed question of law and fac t and is a fac t-intensive i n quiry suited to balanc ing and not bright lines. Id

. at 324, 932 N.E.2d at 1156. The co u rt held that a ty

pical section 2-1401 analy sis is two-tiere d: (1) the issue of a meritorious defe nse is a quest i o n of l aw and subject t o de novo revie w; and (2) if a meritorious defe nse ex ists, then the issue of due diligenc e is subject to abuse of discretion revie w. Id

. at 327, 932 N.E.2d
at 1159. We agree with the holding and rea soning in Borgetti and Blazyk

. Thus, we apply the de novo standard in revie wing whether Rocha prese nted a meritorious defe nse in his section 2-1401 petition, and apply the abuse of discretion standard in revie wing whether he complied with the due dilige nce r equire ments of sec tion 2-1401. ¶ 11 R o ch a ar gues that Cavalry Portfolio did not have standing to bring suit aga i n s t h i m beca use none of

the ac count assignments in the complaint complied with section 8b of the Act. Section 8b of the Act states, in per tinent part: “§ 8b. Assignme nt for collection. An acc ount may be assigned to a collection ag ency for collection with title passing to the collection ag ency to enable coll ection of the

acc ount in the ag ency ’s name a s assig nee f or the c reditor provided: (a ) The assig nment is manifested by a written agree ment, separ ate from and i n ad d ition to any document intended for the purpose of listi ng a debt with a co l l ec t i o n ag ency . The doc ument manifestingthe assignment shall specific ally state and inc lude: (i) the e ffe ctive date of the a ssignment; and (ii) the conside ration for

the assignment. * * * (e) No l itigation shall commence in the name of the li ce n see as plaintiff unl ess: (i) there is a n assignment of the acc ount that sa tisfies the require ments of this Section and (ii) the licensee is re p rese nted by a licensed attorney at law.” 225 I L CS 425/8b(a), (e) (West 2008). Rocha also points out that “[i] mplicit in the statute is a third require ment that the contra ct of assig nment specific ally state the rele vant identifying information for th e a c count that is being assig ned.” Unifund CCR Partners v. Shah
, 407 I ll. App. 3d 737, 744, 946 N.E.2d 885, 892 (2011).

-4-¶ 12 In i t s co mp laint, Cavalry Portfolio claimed that it was an assignee of Cavalry SPV I
,

L L C, and C avalr

y SPV I
, L L C, was an assignee of Washi n gt o n Mutual Ba nk. Attache d to th e c o mplaint wer e acc ount statements from Washington Mutual Ba nk stating th a

t o wn e r s h ip of Rocha’s acc ount had been transfe rre d to Chase Ba nk. Also attache d to the complaint wer e letters that assigned the rights, tit le, and inter est of unspec ified ac counts from Chase Ba nk
to Riverwalk Holdings, Ltd., from R i v erwalk Holdings, Ltd., to Cavalry SPV I
, L L C, and from C avalr

y SP V I
, L L C, to Cavalry Portfolio. Upon review of the l etters of assignment, it is clea r that eac h assig nment failed to comply with at least one aspec t of the require ments of section 8b of the Act. Many of the assignments leading to the orig inal complaint ag ainst Rocha failed t o specify the consideration and t he account number in question of either the assig nor, assignee or Rocha, and failed to ident i fy R o cha by name. There fore
, all of the letters of assig nment attache d to Cavalry Portfolio’s complaint failed to comply with section 8b of the Ac t. Thus, Rocha’s sec tion 2-1401 petition presented a meritorious defe nse. ¶ 13 In response , Cavalry Portfolio does not attempt to rebut Rocha’s argument that he has a meritorious defe nse to the orig inal complaint. Rather, Cava lry Portfolio argues that Rocha forf eited his arg

ument that he has a meritorious defe nse an d that Cavalry Portfolio lacke d standing to bring suit ag ainst him, beca use he failed to raise it in a timely manner befor e the trial court. Gree r v. Illinois Housing Dev elopment Author i t y , 1 22 I ll. 2d 462, 508, 524 N.E.2d 561, 582 (1988). Cavalry Portfolio also argues that Rocha’s failure to file an answe r

or appea r at trial resulted in Rocha h av i n g ad m i t ted the alleg ations in Cavalry Portfolio’s complaint. In supp ort of its argument, Cavalry Portfolio claims that the instant case is analog ous to Mortgage Electronic Registration Sy stems, Inc. v. Barnes
, 406 I ll. App. 3d 1, 940 N.E.2d 118 (2010)

. ¶ 14 In Barnes
, the defe ndant was serve d with a complaint, but failed to answe r the complaint. Id . at 3, 940 N.E.2d at 121. A defa ult judgment was enter ed aga inst the defendant. Id . The defe ndant then filed an emer g ency motion to stay the fore closure sale. Id

. After the proper ty in question was sold, the defe ndant filed a section 2-1401 petition to vaca te the fore closure judgme nt beca

use t he plainti ff lacked standing and had no int ere st in the proper ty

. Id

. The trial court de nied the def

endant’ s section 2-1401 petition. Id

. The appellate court held t hat the defe ndant failed to timely raise the standing issue befor e the trial court wher e she failed
to answe r the complaint, was defa ulted, participated in the proce eding s by petitioning the
court for a continuation of sale, and subsequently attempted to raise the standing issue afte r the fore closure a

nd sale. Id . at 6-7, 940 N.E.2d at 123. The court also held t hat because a ll well-plea ded alleg ations of a complaint are admitted by a defe ndant held in defau l t , the defe ndant admitted that the plaintiff had standing

. Id

. at 7, 940 N.E.2d at 124. Thus, Cavalry Portfolio argues that pursuant to Barnes
, Rocha forf eited his arg

ument that Cavalry Portfolio lacke d standing beca

use he failed to raise it in a timely manner befor e the trial court. We do not agree

. ¶ 15 We find that the fac ts in the instant case are distinguishable fr o m the fac ts in Barnes

. This is not a case in which Rocha participated in the proce eding s by filing re s p o n s i v e pleading s and then subsequently rai s ed the issue of standing

. Rocha’s first response to Cavalry Portfolio’s complaint was his section 2-1401 petition, which raised the i s s u e of Cavalry Portfolio’s lack of standing

. In his brief befor e this court, Rocha’s counsel explains

-5-that afte r Rocha’s appea ranc e was filed, his office inadver tently miscalende red th e trial court’s order that was en t er ed on November 15, 2010. The court’s order s et t he matter for trial and also g ave Rocha 28 day s to answe r or otherwise plead. Rocha’s counsel claims that beca use his office did not calenda r the c ourt’s orde r, he a

nd Rocha failed to file an a nswer or appe ar f

or trial. This explanation was not included in the sec tion 2-1401 petition before the trial court. Howeve r, the petition did state that Rocha acte d diligently in filing an appea ranc e and contesting the action as soon as counsel was awa re of the judgme nt enter ed
ag ainst Rocha. Also, Rocha’s section 2-1401 petition wa s filed well within two year s after the entry of the trial court’s judgme nt as require d by the Code. See 735 I L CS 5/2-1401 (West 2010). On its fac e, Rocha’s section 2-1401 peti t i o n shows that he prese nted his lack of standing argument to the trial court at the first opportunity of which he was awa re, unlike the defe ndant in Barnes

. ¶ 16 Moreove r, unlike the defe nd an t i n B a rnes , Rocha was not defa ulted. Although Roc ha failed to appea

r at trial, the rec ord on appea l expli citly states: “[j] udg ment for plaintiff afte r trial for $12,670.20 versus Ger ardo Rocha.” Nowher e in the trial court’s order does it state that a default judgmen t wa s en tere d ag ainst Rocha. On the contrary
, the t rial court’s order provides a line item for indicating whether the judgme nt is by defa ult. The court, specific ally
, enter ed its order indicating that there was a trial. There fore
, the rec ord d o es not support Cavalry Portfolio’s asser

tion that the judgme nt ag ainst Rocha was enter ed by defa ult, as that
term is commonly understood. Howeve r, Cavalry Portfolio expli citly states in its brief befor e this court: “

Although Rocha did, in fact, fail to file an answer or otherwise plead, he was not defaulted. Rather

, a judgment after trial was entere d against him .” (Emphasis added.) Cavalry Portfolio’s argument sug g ests that for purposes of the validity of the judgme nt, there

was a trial. On the other hand, for purposes of preve nting Rocha from raising a defe nse, there

was not. Cavalry Portfolio cannot have it both ways. Thus, we hold that Rocha did not forf eit his argument that Cavalry Portfolio lacked standingto bringsuit ag ainst him. ¶ 17 Rocha als o ar gu es that he acted with due dil ige nce in contesting the action. Section 2- 1401 of the Code require s the petitioner to show due diligenc e in prese nting his meritorious defe nse t o the trial court in the original action and due d i lige nce in filing a section 2-1401 petition for relief

. Fiala
, 256 I ll. App. 3 d at 929, 628 N.E.2d at 665. In this case , Rocha’s counsel fir st learne d about the trial c ourt’s judg ment on May 2, 2011, and filed his sec tion 2-1401 petition on May 5, 2011. Thus, it is clea r that Rocha acte d with due diligenc e in filing the sec tion 2-1401 petition. ¶ 18 Cavalry Portfolio argues that Rocha fai l ed t o ac t wi th due diligenc e in prese nting his defen s e t o t h e tri al court because he failed to file an answe r t o the complaint and failed to appea r at trial. Howeve r, as Rocha p o i n t s o u t , a trial court ruling denying section 2-1401 relief can be vaca

ted even in the absenc e of diligenc e wher e the defe ndant has a meritorious defe nse and actively seeks to vacate the judgme nt. Id

. More important than the due diligenc e require m en t is the require ment that substantial justice be achie ved. I llinois courts have
repe atedly

held:
“One of the guiding principles *** of section 2-1401 relief is that the petition invokes the equitable power s of the circ uit court, which should preve nt enfor ceme nt of a defa ult judgme nt when it would be unfair, unjust, or unconsciona ble. [C itations.] *** Be cause

-6-a section 2-1401 petition is addre ssed to equitable power s, courts have not considere d themselves strictly bound by prec edent, and wher e justice and g ood conscie nce may require i t a defa

ult judgme nt may be vacated even though the require ment of due diligenc e has not been satisfied.” Smith v. Airoom, Inc.
, 114 I ll. 2d 209, 225, 499 N.E.2d 1381, 1388 (1986) (citing American Co n s u l ting Association, Inc. v. Spence r , 100 I ll. App. 3d 917, 42 7 N. E .2d 579 (1981), Manny Cab Co. v. McNeil Teaming Co.
, 28 I ll. App. 3d 1014, 329 N.E.2d 376 (1975), and George F. Mueller & Sons, Inc. v. Ostrowski
, 19 I ll. App. 3d 973, 313 N.E.2d 684 (1974))

. The leg al principles of the case s cited above are instructive in the analy sis of the instant case

. L ike the defe ndants in the case s cited, Rocha suffe red an adver se judgme nt w ithout having
appea red at trial, and it would be unjust to enforc e the judgment in light of his me ritorious defe nse. As previously discussed, R ocha has s h o wn t hat none of the assignments attached
to Cavalr y P ortfolio’s complaint complied with section 8b of the Act. This is cer tainly a situation in which justice and g ood conscie nce require this c ourt to r ever se the trial court’s order that denied Rocha’s section 2-1401 petition to vacate the judgme nt. Thus, even if we

wer e to agree with Cavalry Portfolio that Rocha failed to fulfill the due diligenc e require ment of section 2-1401, we would reve rse the trial court’s order based on the m erits of Roc h a’ s defe nse. We hold that the trial court abused its discretion in denying Rocha’s section 2-1401 petition to vacate the judgme nt. ¶ 19 We note that Rocha also argues that he had a meritorious d ef en s e t o t h e t ri al court’s judgme nt beca

use Cavalry Portfolio failed to prove an acc ount stated and failed to prove that the parties enter ed into a contra ct. Howeve r, as Cavalry Portfolio points out, Rocha prese nted these argument s fo r t h e fi rst time on appea l and thus they are forf eited. See Carlson v. Glueck ert Funeral Home, Ltd.
, 407 I ll. App. 3d 257, 261, 943 N.E.2d 237, 2 4 1 (2011). There fore
, these arguments wer e not considere d and have no bearing on the resolution of this

case

. ¶ 20 For the fore g oing rea sons, we reve rse the judgme nt of the circ uit court of Cook County that denied Rocha’s section 2-1401 petition to vacate the judgme nt enter ed ag ainst him. We

rema nd the matter to the tria l court for further proce eding s consistent with this opi nion.

¶ 21 Reverse d and re manded.

-7-