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Cavalry Portfolio Services v. Gerardo Rocha

October 22, 2012

CAVALRY PORTFOLIO SERVICES,
PLAINTIFF-APPELLEE,
v.
GERARDO ROCHA,
DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County. No. 10 M1 165794 Honorable Rhoda D. Sweeney, Judge Presiding.

The opinion of the court was delivered by: Justice Cunningham

JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Presiding Justice Hoffman and Justice Karnezis concurred in the judgment and opinion.

OPINION

¶ 1 This appeal arises from a judgment that was entered against defendant-appellant Gerardo Rocha (Rocha) on February 28, 2011, and also a May 16, 2011 order that denied Rocha's petition to vacate judgment pursuant to section 2-1401 of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West 2010)). On appeal, Rocha argues that: (1) the trial court erred in denying his section 2-1401 petition to vacate the judgment because he presented a meritorious defense; (2) plaintiff-appellee Cavalry Portfolio Services (Cavalry Portfolio) failed to prove an account stated or that the parties entered into a contract; and (3) the trial court erred in denying his section 2-1401 petition to vacate the judgment because he acted with due diligence in contesting the original action and filing the section 2-1401 petition. For the following reasons, we reverse the judgment of the circuit court of Cook County and remand the matter for further proceedings.

¶ 2 BACKGROUND

¶ 3 On July 20, 2010, Cavalry Portfolio filed a complaint against Rocha in the circuit court of Cook County alleging breach of contract. Cavalry Portfolio claimed that Rocha opened a credit card or line of credit account with Washington Mutual Bank and subsequently defaulted by failing to make payments, resulting in a balance due to Cavalry Portfolio in the amount of $12,320.20. The complaint alleged that Cavalry Portfolio was an assignee of Cavalry SPV I, LLC, and Cavalry SPV I, LLC, was an assignee of Washington Mutual Bank. Attached to the complaint were the following: account statements from Washington Mutual Bank stating that ownership of Rocha's account had been transferred to Chase Bank; and account statements from Chase Bank. Also attached to the complaint were: letters that assigned the rights, title, and interest of unspecified accounts from Chase Bank to Riverwalk Holdings, Ltd., from Riverwalk Holdings, Ltd., to Cavalry SPV I, LLC, and from Cavalry SPV I, LLC, to Cavalry Portfolio.

¶ 4 On September 2, 2010, Rocha was served by substitute service. On September 8, 2010, Rocha filed an appearance through counsel. On November 15, 2010, both parties appeared and the matter was set for trial on February 28, 2011. Rocha was given 28 days to answer or otherwise plead. However, Rocha did not file an answer to the complaint. On February 28, 2011, neither Rocha nor Rocha's counsel appeared for trial and an ex parte judgment was entered against Rocha in the amount of $12,670.20. The trial court order indicates that a judgment was entered against Rocha, after trial. On May 5, 2011, Rocha filed a section 2-1401 petition to vacate the judgment. Rocha's section 2-1401 petition stated that he became aware of the judgment on May 2, 2011. The petition stated that Rocha had a meritorious defense because Cavalry Portfolio did not have standing to proceed pursuant to section 8b of the Collection Agency Act (Act) (225 ILCS 425/8b (West 2008)). The petition also stated that Rocha acted with due diligence in contesting the judgment by filing the petition as soon as he learned of the judgment. Attached to the petition was Rocha's affidavit, which stated that he had not incurred the expenses set forth in the complaint, he was not aware of who the plaintiff was, and he was never shown any documents transferring any of his accounts to the plaintiff.

¶ 5 On May 16, 2011, the trial court denied Rocha's section 2-1401 petition without a hearing. On June 14, 2011, Rocha filed a timely notice of appeal.

¶ 6 ANALYSIS

¶ 7 On May 16, 2011, the trial court entered a final order denying Rocha's section 2-1401 petition to vacate the judgment entered against him on February 28, 2011. On June 14, 2011, Rocha filed a timely notice of appeal. This court has jurisdiction to consider Rocha's arguments on appeal pursuant to Illinois Supreme Court Rule 304(b)(3) (eff. Feb. 26, 2010).

¶ 8 We first examine Rocha's argument that the trial court erred in denying his section 2-1401 petition to vacate the judgment because he presented a meritorious defense. A petitioner is entitled to relief under section 2-1401 of the Code when he sets forth specific factual allegations supporting each of the following elements: (1) the existence of a meritorious defense or claim; (2) due diligence in presenting the defense or claim to the trial court in the original action; and (3) due diligence in filing the section 2-1401 petition for relief. Fiala v. Schulenberg, 256 Ill. App. 3d 922, 929, 628 N.E.2d 660, 665 (1993).

¶ 9 The parties suggest that we apply the abuse of discretion standard of review to the trial court's ruling denying Rocha's section 2-1401 petition. We note that a recent supreme court decision, People v. Vincent, 226 Ill. 2d 1, 14, 871 N.E.2d 17, 26 (2007), held that when a trial court dismisses a section 2-1401 petition, or enters judgment on the pleadings of said petition without holding an evidentiary hearing, the standard of review to be applied is de novo. The Vincent court recognized that applying the de novo standard of review conflicted with prior case law that held that the abuse of discretion standard is to be applied to a trial court's ruling in those circumstances. Id. However, the court found that the application of the abuse of discretion standard was based on an erroneous belief that a section 2-1401 petition invoked the equitable powers of the court. Id. at 15, 871 N.E.2d at 27. The court reasoned that when the legislature abolished the common law writs in favor of the section 2-1401 statutory remedy, it became inaccurate to view the relief in strictly equitable terms. Id. at 16, 871 N.E.2d at 27. Because relief afforded by section 2-1401 is no longer purely discretionary, it would be incorrect to apply the abuse of discretion standard for every disposition under section 2-1401 of the Code. Id.

¶ 10 However, many, more recent decisions of the appellate court have recognized that the Vincent decision dealt with a narrow issue under section 2-1401(f) in which a judgment was challenged for voidness. The Vincent decision did not involve the due diligence, meritorious defense, and two-year limitation requirements that apply to other actions brought under section 2-1401. Rockford Financial Systems, Inc. v. Borgetti, 403 Ill. App. 3d 321, 326-27, 932 N.E.2d 1152, 1158 (2010); see also Blazyk v. Daman Express, Inc., 406 Ill. App. 3d 203, 206, 940 N.E.2d 796,798-99 (2010). The Borgetti court found that the allegation of voidness in Vincent had nothing to do with equitable principles. Borgetti, 403 Ill. 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 proceedings not involving judgments alleged to be void." Id. at 328, 932 N.E.2d at 1159.

The Borgetti court reasoned that due diligence cannot be reviewed under the de novo standard because it is a mixed question of law and fact, and is a fact-intensive inquiry suited to balancing and not bright lines. Id. at 324, 932 N.E.2d 1156. The court held that a typical section 2-1401 analysis is two-tiered: (1) the issue of a meritorious defense is a question of law and subject to de novo review; and (2) if a meritorious defense exists, then the issue of due diligence is subject to abuse of discretion review. Id. at 327, 932 N.E.2d at 1159. We agree with the holding and reasoning in Borgetti and Blazyk. Thus, we apply the de novo standard in reviewing whether Rocha presented a ...


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