Court Opinion

ID: 3147725
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:36:22.178745+00
Date Added: 2024-06-11T11:55:19.781704
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                          Appellate Court

                    LVNV Funding, LLC v. Trice, 2011 IL App (1st) 092773

Appellate Court              LVNV FUNDING, LLC, Plaintiff-Appellee, v. MATTHEW TRICE,
Caption                      Defendant-Appellant.

District & No.               First District, Third Division
                             Docket No. 1–09–2773

Modified opinion filed       June 30, 2011

Held                         On appeal from the entry of judgment for plaintiff collection agency in
(Note: This syllabus         action to collect a credit card debt owed by defendant, the denial of
constitutes no part of the   defendant’s motion under section 2–1401 of the Code of Civil
opinion of the court but     Procedure to vacate the judgment without hearing evidence was
has been prepared by the     reversed and the cause was remanded for further proceedings, since
Reporter of Decisions for    assuming the truth of defendant’s allegation that plaintiff had not
the convenience of the       registered as required by the Illinois Collection Agency Act, defendant
reader.)                     alleged sufficient grounds for vacating the judgment entered in its favor,
                             and if plaintiff disputes the accuracy of defendant's allegation, the trial
                             court should hold an evidentiary hearing before deciding whether to
                             grant the motion to vacate.

Decision Under               Appeal from the Circuit Court of Cook County, No. 08–M1–107717;
Review                       the Hon. Martin Moltz, Judge, presiding.

Judgment                     Reversed and remanded with directions.
Counsel on                  Woerthwein & Miller (Theodore A. Woerthwein and John Miller, of
Appeal                      counsel), and Krislov & Associates, Ltd. (Clinton Krislov, Michael R.
                            Karnuth, and Eve-Lyn J. Rapp, of counsel), both of Chicago, for
                            appellant.

                            Barhorst & Associates, P.C. (Stacie E. Barhorst, of counsel), and
                            Hinshaw & Culbertson, LLP (Stephen R. Swofford and David M.
                            Schultz, of counsel), both of Chicago, for appellee.

Panel                       JUSTICE NEVILLE delivered the opinion of the court, with judgment.
                            Presiding Justice Quinn and Justice Murphy concurred in the opinion
                            and judgment.

                                             OPINION

¶1          When an unregistered collection agency obtains a judgment against a debtor, does the
        lack of a license make the judgment void, or merely voidable? The trial court here said it
        made the judgment merely voidable, so that the debtor’s failure to raise the issue before entry
        of the final judgment left him with no recourse. We disagree. We find that our legislature’s
        criminalization of an unregistered collection agency’s collection of a debt establishes an
        intent to void any judgment entered in favor of an unregistered collection agency.
        Accordingly, we reverse and remand.

¶2                                         BACKGROUND
¶3          Matthew Trice used his Citibank credit card to pay for some plumbing. He did not pay
        Citibank the full amount the plumber charged. Citibank sold its interest in the credit card
        account to a collection agency named LVNV Funding LLC. In January 2008, LVNV sued
        Trice to recover the balance due on the account. On January 15, 2009, after a trial at which
        Trice represented himself, the trial court entered a judgment in favor of LVNV for $3,303.90.
¶4          Trice hired counsel and, on March 3, 2009, Trice’s counsel filed a motion to vacate the
        judgment pursuant to section 2–1401 of the Code of Civil Procedure. 735 ILCS 5/2–1401
        (West 2008). In the motion, Trice alleged that LVNV had not registered with the State as a
        collection agency before it filed the suit against him. According to Trice, LVNV obtained a
        license to act as a collection agency on August 28, 2008, some months after LVNV filed the
        lawsuit against Trice, but some months before the court entered a judgment in favor of
        LVNV. Trice did not include any allegations concerning how he discovered that LVNV had
        not registered, and he included no other allegations related to his diligence. He sought only

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       a finding that LVNV’s failure to register rendered void the judgment entered against him on
       January 15, 2009.
¶5         LVNV invoked section 2–615 of the Code of Civil Procedure (735 ILCS 5/2–615 (West
       2008)) as grounds for its motion to dismiss Trice’s motion to vacate the judgment. LVNV
       argued that the trial court had jurisdiction over the parties and the subject matter, so the
       judgment was not void.
¶6         The trial court denied Trice’s motion to vacate the judgment without hearing evidence
       because Trice should have notified the court before trial that LVNV had not registered as a
       collection agency. Trice now appeals.

¶7                                            ANALYSIS
¶8         Our supreme court clarified the law pertaining to section 2–1401 motions in People v.
       Vincent, 226 Ill. 2d 1 (2007). The party seeking relief from a judgment must plead and prove
       (1) that he had “a defense or claim that would have precluded entry of the judgment in the
       original action” and (2) that he acted with “diligence in both discovering the defense or claim
       and presenting the petition.” Vincent, 226 Ill. 2d at 7-8. The party opposing the section
       2–1401 petition may move to dismiss it as insufficient at law, or the party may dispute the
       factual assertions of the petition. Vincent, 226 Ill. 2d at 8-9. Where the parties dispute a
       material issue of fact, the trial court should hold an evidentiary hearing before ruling on the
       petition. Vincent, 226 Ill. 2d at 9. “[W]hen a court enters either a judgment on the pleadings
       or a dismissal in a section 2–1401 proceeding, that order will be reviewed, on appeal, de
       novo.” Vincent, 226 Ill. 2d at 18.
¶9         Here, LVNV moved to dismiss the section 2–1401 motion as legally insufficient. See 735
       ILCS 5/2–615 (West 2008); Oliveira v. Amoco Oil Co., 201 Ill. 2d 134, 147 (2002). For
       purposes of our review of the judgment, we must accept as true all well-pleaded facts in
       Trice’s motion to vacate the judgment. Oliveira, 201 Ill. 2d at 147. We will affirm the
       dismissal “only where no set of facts can be proved under pleadings which set forth a cause
       of action entitling the plaintiff to relief.” Bank of Northern Illinois v. Nugent, 223 Ill. App.
       3d 1, 9 (1991). However, the petition must set forth sufficient facts to show entitlement to
       the relief sought. Barham v. Knickrehm, 277 Ill. App. 3d 1034, 1037 (1996).
¶ 10       Trice has adequately alleged that before it filed the lawsuit, LVNV had not registered as
       a collection agency, as required by the Illinois Collection Agency Act (Act) (225 ILCS
       425/14, 14b (West 2008)). But Trice did not raise this issue before the trial court entered a
       final judgment against him on LVNV’s complaint. Trice raises the issue only in a section
       2–1401 petition for relief from the judgment. Finally, Trice claims that LVNV’s failure to
       register makes the judgment in its favor void, and not merely voidable.
¶ 11       When the trial court enters a void judgment, a party aggrieved by the judgment may
       attack it in a section 2–1401 motion without showing diligence. “[T]he allegation that the
       judgment or order is void substitutes for and negates the need to allege a meritorious defense
       and due diligence.” Sarkissian v. Chicago Board of Education, 201 Ill. 2d 95, 104 (2002).
¶ 12       The parties cite us no case in which a court decided whether a violation of the Act
       rendered a judgment void. Apparently, we must decide the issue as a matter of first

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       impression–despite the fact that the Act has remained in effect since 1974. See 225 ILCS
       425/1 (West 2008).
¶ 13        Our supreme court defined void judgments in Ford Motor Credit Co. v. Sperry, 214 Ill.
       2d 371, 379-80 (2005), as follows:
                 “A void order or judgment is, generally, one entered by a court without jurisdiction
            of the subject matter or the parties, or by a court that lacks the inherent power to make
            or enter the order involved. [Citations.] A void judgment is from its inception a complete
            nullity and without legal effect.”
       In Ford Motor, the plaintiff recovered a judgment against the defendant in a proceeding in
       which the law firm that represented the plaintiff had failed to register with the court as
       required by Supreme Court Rule 721(c) (Ill. S. Ct. R. 721(c) (eff. Nov. 1, 1984)). All of the
       attorneys who worked for the law firm had proper Illinois licenses. The trial court held that
       because the law firm engaged in the unauthorized practice of law, the judgment was void.
       Our supreme court noted that the appellate court had reached a contrary result under similar
       facts in Joseph P. Storto, P.C. v. Becker, 341 Ill. App. 3d 337 (2003). Our supreme court
       summarized the reasoning of Storto as follows:
                 “The Storto court observed that although Rule 721(c) requires that professional
            service corporations register with this court, the rule also lacks civil or criminal penalties
            for noncompliance. *** Because Rule 721(c) fails to include civil or criminal liability
            for the failure to register, the Storto court held that this indicated that the registration
            requirement was not promulgated for the protection of the public safety. ***
                 Accordingly, the Storto court determined that, because Rule 721(c) was not enacted
            for the protection of the public, the contractual obligations owed to a professional service
            corporation law firm which lacked registration under Rule 721(c) could not be voided
            absent a showing of prejudice resulting from the failure to register.” Ford Motor, 214 Ill.
            2d at 386-87.
       The Ford court adopted the reasoning of Storto. Ford Motor, 214 Ill. 2d at 387.
¶ 14        Trice here asks us to treat LVNV’s collection efforts, while unregistered, as akin to the
       unauthorized practice of law. LVNV argues that its collection efforts have more in common
       with the practice of law by the unregistered law firm in Ford Motor. Courts in Illinois have
       noted the close relationship between a collection agency’s work and the practice of law.
       Illinois courts have expressly disapproved of acts by which a collection agency has crossed
       the line into the practice of law in People v. Securities Discount Corp., 361 Ill. 551 (1935),
       Midland Credit Adjustment Co. v. Donnelley, 219 Ill. App. 271 (1920), and Smith v. Illinois
       Adjustment Finance Co., 326 Ill. App. 654 (1945). Courts in other jurisdictions have also
       found that collection agencies have practiced law without a license. See Iowa Supreme Court
       Comm’n on Unauthorized Practice of Law v. A-1 Associates, Ltd., 623 N.W.2d 803 (Iowa
       2001); Bay County Bar Ass’n v. Finance System, Inc., 76 N.W.2d 23 (Mich. 1956); Martinez
       v. Albuquerque Collection Services, Inc., 867 F. Supp. 1495 (D.N.M. 1994); Hospital Credit
       Exchange v. Shapiro, 59 N.Y.S.2d 812 (1946); Nelson v. Smith, 154 P.2d 634, 638-39 (Utah
       1944); In re Ripley, 191 A. 918 (Vt. 1937); State ex rel. State Bar of Wisconsin v. Bonded
       Collections, Inc., 154 N.W.2d 250 (Wis. 1967).

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¶ 15        The Illinois General Assembly adopted legislation to license and regulate collection
       agencies beginning in 1974. Comment, The Illinois Collection Agency Act, 1975 U. Ill. L.F.
       441, 443. The Act, as amended, provides:
                “The practice as a collection agency by any entity in the State of Illinois is hereby
            declared to affect the public health, safety and welfare and to be subject to regulation and
            control in the public interest.” 225 ILCS 425/1a (West 2008).
                “No collection agency shall operate in this State, directly or indirectly engage in the
            business of collecting, solicit claims for others, *** exercise the right to collect, or
            receive payment for another of any account, bill or other indebtedness, without
            registering under this Act[.]” 225 ILCS 425/4 (West 2008).
       A corporation acts as a collection agency when it “[b]uys accounts, bills or other
       indebtedness [with recourse] and engages in collecting the same.” 225 ILCS 425/3(d) (West
       2008). A party who acts as a collection agency without proper registration commits a Class
       A misdemeanor and must also pay a civil penalty. 225 ILCS 425/4.5, 14, 14b (West 2008).
¶ 16        Assuming the truth of the allegations in Trice’s section 2–1401 motion, that LVNV had
       not registered as a collection agency before it sued Trice, LVNV committed a crime when
       it purchased the debt and sued to collect it. See 225 ILCS 425/3(d), 14 (West 2008). The
       criminal and civil penalties the Act assigns to LVNV’s alleged acts (225 ILCS 425/4.5, 14,
       14b (West 2008)) distinguish this case from Ford Motor.
¶ 17        The criminal penalties codified in the Act applicable to unregistered collection agencies
       also distinguish this case from K. Miller Construction Co. v. McGinnis, 238 Ill. 2d 284
       (2010), a recent supreme court decision. In K. Miller, a home remodeling contractor failed
       to give his customer a written contract for remodeling work that cost more than $1,000, in
       violation of a statute. Our supreme court noted that “a statutory violation does not
       automatically render a contract unenforceable.” Id. at 294. The court found that the
       contractor could sue for breach of contract. The statute in K. Miller, like the rule in Ford
       Motor, assigned no penalty to its violation. Here, on the other hand, the Act expressly forbids
       collection agencies, like LVNV, from exercising the right to collect any bill before the
       agency has registered as a collection agency, and the Act expressly makes the violation a
       crime.
¶ 18        We find this case similar to cases in which a person practices law without a license.
       Courts have authority to impose penalties for contempt on anyone who practices law without
       a license. 705 ILCS 205/1 (West 2008). Courts may similarly penalize anyone who acts as
       a collection agency without registering. See 225 ILCS 425/4.5, 14, 14b (West 2008). A court
       made the following statement about a complaint drafted by an unlicensed attorney:
            “A complaint drafted by a nonattorney on behalf of a corporation constitutes the
            unauthorized practice of law rendering the pleading a nullity and any judgment entered
            on it void. [Citation.] An attorney’s subsequent appearance and adoption of a complaint
            improperly drafted by a nonattorney does not absolve the drafter of the unauthorized
            practice of law.” Edwards v. City of Henry, 385 Ill. App. 3d 1026, 1036 (2008).
       The rule “operates to void the judgment even where the lay agent merely files the complaint
       over his own signature, and all subsequent court appearances are made by a duly licensed

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       attorney.” Housing Authority v. Tonsul, 115 Ill. App. 3d 739, 740 (1983).
¶ 19       We hold that a complaint filed by an unregistered collection agency is similarly a nullity,
       and any judgment entered on such a complaint is void. The subsequent registration of the
       collection agency does not absolve the agency of the crime of debt collection by an
       unregistered collection agency, and it does not validate a judgment entered on the void
       complaint. The trial court lacks authority to enter or enforce a judgment in LVNV’s favor on
       a complaint LVNV filed in violation of the Act, because to do so would abet LVNV in the
       commission of the crime of debt collection by an unregistered collection agency. 225 ILCS
       425/4, 14, 14b (West 2008).
¶ 20       We find that Trice has alleged adequate grounds for vacating the judgment entered in
       favor of LVNV. If LVNV disputes the accuracy of Trice’s factual allegations, the trial court
       should hold an evidentiary hearing on the issue before deciding whether to grant Trice’s
       motion to vacate the judgment.

¶ 21                               PETITION FOR REHEARING
¶ 22       In a petition for rehearing, LVNV makes several new factual allegations and several new
       arguments never presented in the trial court, including constitutional arguments, for denying
       Trice’s section 2–1401 petition. We do not intend to foreclose LVNV from proving those
       facts and raising those arguments at the evidentiary hearing when the trial court, on remand,
       considers Trice’s petition in light of this opinion. Accordingly, we deny the petition for
       rehearing.

¶ 23                                      CONCLUSION
¶ 24       If LVNV had not registered before it filed the complaint against Trice, it committed the
       crime of engaging in debt collection without proper registration. The crime, if proven, makes
       void the judgment LVNV obtained against Trice. Accordingly, we reverse and remand for
       further proceedings in accord with this opinion.
¶ 25       Reversed and remanded with directions.

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