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LVNV Funding, LLC v. Trice

Supreme Court of Illinois

February 27, 2015


Circuit court judgment vacated. Cause remanded with directions.

Clinton A. Krislov, Michael R. Karnuth and Christopher M. Hack, of Krislov & Associates, Ltd., and Theodore A. Woerthwein and John Miller, of Woerthwein & Miller, all of Chicago, for appellant.

Lisa Madigan, Attorney General, of Springfield (Michael A. Scodro and Carolyn E. Shapiro, Solicitors General, and Clifford W. Berlow, Assistant Attorney General, of Chicago, of counsel), for intervenor appellant.

Hinshaw & Culbertson LLP, of Chicago (Stephen R. Swofford, David M. Schultz and John P. Ryan, of counsel), for appellee.

Chief Justice Garman and Justices Freeman, Thomas, Burke, and Theis concurred in the judgment and opinion. Justice Kilbride dissented, with opinion.


Page 554


[¶1] This appeal comes to us from the circuit court of Cook County, the court having declared sections 4.5, 14, and 14b of the Collection Agency Act (Act) (225 ILCS 425/4.5, 14, 14b

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(West 2008)) unconstitutional. Following remand from an appellate court decision in which that court held--referencing, inter alia, the Act's penalty provisions--that " a complaint filed by an unregistered collection agency is *** a nullity, and any judgment entered on such a complaint is void" (2011 IL App. (1st) 092773, ¶ 19, 952 N.E.2d 1232, 352 Ill.Dec. 6), the circuit court found the aforementioned penalty provisions of the Act unconstitutional on grounds of due process, equal protection and vagueness. The circuit court then concluded, though the debt collector in this case was unlicensed at the time it filed suit to collect a debt, the resulting judgment should have been " voidable rather than void." Because the circuit court invalidated Illinois statutes, appeal lies directly to this court pursuant to Supreme Court Rule 302(a)(1) (Ill. S.Ct. R. 302(a)(1) (eff. Oct. 4, 2011)). We now vacate the circuit court's findings of unconstitutionality as unnecessary, we reject the analysis of the appellate court, and remand this matter for confirmation of the monetary judgment initially rendered by the circuit court.


[¶3] We refer herein to the version of the Collection Agency Act in effect when LVNV Funding, LLC (hereafter LVNV) filed its complaint against Matthew Trice in the circuit court. See 225 ILCS 425/1 et seq. (West 2008).[1] At the outset, the legislature set forth a declaration of public policy that underscores legislators' concern for the public welfare:

" 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. It is further declared to be a matter of public interest and concern that the collection agency profession merit and receive the confidence of the public and that only qualified entities be permitted to practice as a collection agency in the State of Illinois." 225 ILCS 425/1a (West 2008).

The legislature mandates a liberal construction " to carry out these objects and purposes." 225 ILCS 425/1a (West 2008).

[¶4] The Act specifically exempts from its coverage a host of entities, among them, those traditionally associated with financing and lending, and " [l]icensed attorneys at law." 225 ILCS 425/2.03(5) (West 2008). It otherwise defines a " legal entity" as " a collection agency," subject to the provisions of the Act, when, inter alia, that entity: " [r]eceives, by assignment or otherwise, accounts, bills, or other indebtedness *** with the purpose of collecting monies due on such account, bill or other indebtedness" or " [b]uys accounts, bills or other indebtedness and engages in collecting the same." 225 ILCS 425/3(b), (d) (West 2008). Section 2 of the Act broadly defines " '[d]ebt collection'" as " any act or practice in connection with the collection of consumer debts." 225 ILCS 425/2 (West 2008).

[¶5] Section 4 of the Act provides that " [n]o collection agency shall operate in this State, directly or indirectly engage in the business of collecting," or " exercise the

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right to collect *** without registering under this Act." 225 ILCS 425/4 (West 2008). In addition to the prerequisite of licensing, the Act provides that no entity that has obtained an " assignment" of " title" from the original creditor may commence litigation in its own name unless the " assignment is manifested by a written agreement" specifically stating the effective date of the assignment and the consideration paid therefor. 225 ILCS 425/8b(a) (West 2008).

[¶6] More to the point for present purposes, section 14a of the Act authorizes the Department of Financial and Professional Regulation to enjoin the activities of an unlicensed collection agency, stating that " [t]he practice as a collection agency by any entity not holding a valid and current license under this Act is declared to be inimical to the public welfare, to constitute a public nuisance, and to cause irreparable harm to the public welfare." 225 ILCS 425/14a (West 2008). In addition to a civil penalty for unlicensed practice (see 225 ILCS 425/4.5 (West 2008) (" a civil penalty *** in an amount not to exceed $5,000 for each offense" )), the Act provides for criminal penalties as well: " Any entity that practices *** as a collection agency in this State without being licensed for that purpose *** is guilty of a Class A misdemeanor. Any entity that has been previously convicted under any of the provisions of this Act and that subsequently violates any of the provisions of this Act is guilty of a Class 4 felony." 225 ILCS 425/14b (West 2008); see also 225 ILCS 425/14 (West 2008) (" Engaging in the collection of debts without first having obtained a certificate pursuant to this Act *** is a Class A misdemeanor. The penalties provided by this Act shall not be exclusive, but shall be in addition to all other penalties or remedies provided by law." ).


[¶8] Matthew Trice used a credit card to pay for some plumbing work. He apparently did not pay the credit card company the full amount due on the card. The credit card company sold its interest in the unpaid debt to LVNV. Thereafter, LVNV hired an Illinois attorney and filed a debt collection lawsuit against Trice, who proceeded pro se. On January 15, 2009, the circuit court entered judgment in the lawsuit in favor of LVNV.

[¶9] Trice did not file a direct appeal. Instead, sometime later, Trice, who was then represented by an attorney, filed a petition under section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401 (West 2008)), seeking to vacate the circuit court's final judgment. In this petition, Trice alleged that LVNV was a debt collection agency within the meaning of the Act (225 ILCS 425/3(b), (d) (West 2008)), and that the filing of the lawsuit against him was an act of debt collection. In addition, Trice alleged that, before LVNV filed the lawsuit, it had not registered with the State of Illinois as a debt collection agency as required under the Act. According to Trice, this failure was a fundamental error which rendered the circuit court's judgment of January 15, 2009, " void."

[¶10] The circuit court denied Trice's section 2-1401 petition without an evidentiary hearing. The circuit court concluded that, even assuming LVNV had erroneously failed to register as a debt collection agency, the error did not render the judgment entered against Trice void. Trice appealed.

[¶11] The appellate court reversed the circuit court's denial of Trice's section 2-1401 petition. 2011 IL App. (1st) 092773, ¶ 25. The appellate court first observed that a party seeking relief from a final judgment under

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section 2-1401 ordinarily must plead and prove, among other things, that he had a defense or claim that would have precluded entry of judgment in the original action, and " that he acted with 'diligence in both discovering the defense or claim and presenting the petition.'" Id. ¶ 8 (quoting People v. Vincent, 226 Ill.2d 1, 7-8, 871 N.E.2d 17, 312 Ill.Dec. 617 (2007)). However, when a section 2-1401 petitioner alleges that the challenged judgment is void, the allegation " 'substitutes for and negates the need to allege a meritorious defense and due diligence.'" Id. ¶ 11 (quoting Sarkissian v. Chicago Board of Education, 201 Ill.2d 95, 104, 776 N.E.2d 195, 267 Ill.Dec. 58 (2002)). The appellate court noted that, in this case, Trice's section 2-1401 petition contained no allegations regarding his diligence in discovering that LVNV was unlicensed. Instead, Trice's petition alleged only that the circuit court's judgment was void.

[¶12] Quoting from this court's decision in Ford Motor Credit Co. v. Sperry, 214 Ill.2d 371, 379-80, 827 N.E.2d 422, 292 Ill.Dec. 893 (2005), the appellate court offered the following definition of a void judgment:

" '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.'" 2011 IL App. (1st) 092773, ¶ 13.

Thereafter, the appellate court addressed, at some length, the " nullity rule," which this court discussed in Ford Motor, and has applied, in some instances, to " nullify" the filing of a complaint, and " void" the resulting judgment, where a person or entity unauthorized to practice law has filed suit on behalf of a corporation. Id. ¶ ¶ 13-18.

[¶13] In Ford Motor --a case, like this one, involving a petition for relief under section 2-1401 of the Code of Civil Procedure (see Ford Motor, 214 Ill.2d at 378-79)--this court referenced its " inherent power to define and regulate the practice of law in this state" ( Ford Motor, 214 Ill.2d at 382) in the course of a discussion that ended with the reaffirmation that " the nullity--or voidness--rule" " remains valid law" but a finding that " its application to the facts in the instant cause by the appellate court is misplaced." Ford Motor, 214 Ill.2d at 389. That finding was premised, not on untimely action on the part of petitioner, but rather, to a significant degree, on this court's observation that the Supreme Court Rule that was violated (Ill. S.Ct. R. 721 (eff. Mar. 1, 1997)) " was not enacted to safeguard the public welfare" ( Ford ...

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