Court of Appeals of Illinois, First District, Second Division
Appeal from the Circuit Court of Cook County No. 08 M1162091 Honorable Dennis M. McGuire, Judge Presiding.
Justices Quinn and Simon concurred in the judgment and opinion.
¶ 1 This appeal is the sequel to Unifund CCR Partners v. Shah, 407 Ill.App.3d 737 (Shah I) (2011), which answered two certified questions regarding the contents of assignments for collection under section 8b of the Collection Agency Act (225 ILCS 425/8b (West 2008)). After the parties returned to the circuit court, plaintiff filed an amended complaint, which the circuit court then dismissed on defendant's motion. Plaintiff has appealed from that judgment, and we are now confronted with a question of first impression that we touched on only in passing in Shah I: do section 8b's requirements apply to all assignments in the chain of title for a debt, or do they apply only to assignments for collection? We decide that it is the latter.
¶ 2 This case comes to us following a motion to dismiss, so we take all well-pleaded facts from the complaint as true. See Callaghan v. Village of Clarendon Hills, 401 Ill.App.3d 287, 300 (2010). Defendant Mohammad Shah held a credit card issued by Citibank (South Dakota) N.A., on which he accumulated a balance of about $16, 000 and then defaulted. After the default, Citibank transferred defendant's account to Unifund Portfolio A, LLC, which in turn transferred the account to Cliffs Portfolio Acquisition I, LLC. Cliffs then transferred legal title in the account to Palisades Collection, LLC, which in turn transferred its interest in the account to Unifund CCR Partners, which is the plaintiff in this case. The whole series of transactions was made possible by a number of complicated interlocking agreements and is explained in further detail in Shah I, 407 Ill.App.3d at 738-40. Plaintiff then brought the instant suit to collect on the debt.
¶ 3 In Shah I, we answered two certified questions posed by the circuit court. First, we determined that section 2-403 of the Code of Civil Procedure (735 ILCS 5/2-403 (West 2008)) authorizes an assignee for collection to file suit in its own name in order to collect a debt. See id. at 740-42. Second, we were asked to interpret the requirements of section 8b of the Collection Agency Act (225 ILCS 425/8b (West 2008)). Section 8b allows legal title to a debt to be assigned to a collection agency in order for the agency to collect the debt. See 225 ILCS 425/8b (West 2008). We held that
"a collection agency can establish an assignment of accounts receivable for collection purposes through documents attached as exhibits to the plaintiff's complaint where the identification of the accounts transferred, the consideration paid, and the effective date of the transfer of particular accounts are in multiple incorporated documents. However, such documents must be in the form of contracts of assignment or documents that are incorporated by reference into those contracts, rather than in the form of an affidavit." Shah I, 407 Ill.App.3d at 747.
¶ 4 Following our decision in Shah I, plaintiff filed a new, verified complaint that alleged the chain of title for the debt in detail, and it supported the complaint with a number of documents that included the contracts of assignment and related documents for the last two transactions in the chain. Plaintiff, however, was either unable or unwilling to disclose the consideration for the first two transactions. The circuit court held that this was insufficient under section 8b of the Collection Agency Act (225 ILCS 425/8b (West 2008)) and dismissed the complaint with prejudice. Plaintiff appealed.
¶ 5 As we explained in Shah I, debts like the one in this case are a type of intangible personal property known as a chose in action, which is not only assignable but is traditionally understood as having bifurcated title: legal title and equitable title. See Shah I, 407 Ill.App.3d at 741-42. A creditor generally has three options when it comes to collecting on a debt. First, the creditor may try to collect the debt itself by bringing an action in its own name against the debtor. Alternatively, the creditor may hire a third party, known as a collection agent, to pursue the lawsuit against the debtor. In this situation, the creditor assigns legal title in the debt to the collection agent but retains equitable title for itself. This type of partial assignment is known as an assignment for collection. Finally, the creditor may decide to sell off its entire interest in the account to a third party, commonly known as a debt buyer. By doing so, the creditor divests itself of both legal and equitable title and retains no ownership interest in the debt. See id.; see also generally Sprint Communications Co., L.P. v. APCC Services, Inc., 554 U.S. 269 (2008) (explaining the history of assignments for collection and the legal/equitable title dichotomy).
¶ 6 In this case, Unifund Portfolio A and Cliffs are both considered debt buyers because they received both legal and equitable title. In contrast, Palisades and plaintiff both received only legal title via assignments for collection. As it stands now, Cliffs holds equitable title to defendant's debt while plaintiff holds legal title. Thus, plaintiff has the right to sue defendant to collect on the debt, but Cliffs has the right to any proceeds recovered by plaintiff from defendant.
¶ 7 Debt collection is, however, a heavily regulated industry in Illinois, and any party attempting to collect a debt must comply with stringent consumer-protection standards. As we mentioned in Shah I, section 8b of the Collection Agency Act (225 ILCS 425/8b (West 2008)) mandates that an assignee for collection establish that it holds legal title to a debt by pleading that it received title via a written agreement that identifies "the accounts transferred, the consideration paid, and the effective date of the transfer." Shah I, 407 Ill.App.3d at 747.
¶ 8 Applying section 8b to this case would be simple if plaintiff were merely the assignee for collection of the original creditor, Citibank. But plaintiff is not. What makes this case challenging is that ownership of defendant's debt has changed hands four times as it passed from the original creditor to plaintiff, and only two of those transfers were assignments for collection. On appeal, plaintiff's primary contention is that section 8b only obligates it to provide the required documentation for the transaction by which it received legal title, that is, the last transfer in the chain. Plaintiff argues that it is not required under section 8b to produce any of the documentation related to the other three transactions in the chain of title in order to establish plaintiff's own claim to the debt.
¶ 9 Given the complexity of the chain of title to the debt in this case, it is helpful to consider the pleading requirements for each link in the chain piece by piece. First, consider a situation where a creditor hires a collection agency to collect on a debt. In that case, the creditor assigns legal title for the debt to the ...