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Despite dissent, Supreme Court resolves debt collection suit without addressing constitutional issues raised in direct appeal

By Bethany Krajelis | Feb 27, 2015

Saying it was unnecessary to address issues over the constitutionality of the state's Collection Agency Act, the Illinois Supreme Court on Friday returned a case "to square one" by voiding everything that came after the initial 2009 ruling in the matter.

Justice Thomas L. Kilbride, however, disagreed with the majority's approach, saying it gives the plaintiff "a second bite at the apple" and effectively skirts a review of a direct finding that portions of a state law are unconstitutional.

The high court's 6-1 ruling, written by Justice Lloyd A. Karmeier, came in LVNV Funding LLC v. Matthew Trice, a Cook County case presented to the justices after a judge, following a remand from the appellate court, struck down sections 4.5, 14 and 14b of the Collection Agency Act.

Among other aspects, this act, 225 ILCS 425, requires debt collection agencies to register with the state and provides for civil and criminal penalties if they don't.

The judge's finding that parts of the act were unconstitutional stemmed from a lawsuit LVNV Funding LLC brought against Matthew Trice after it bought a credit card company's interest in debt he owed for plumbing work he had charged to his card.

The court entered a monetary judgment in LVNV's favor on Jan. 15, 2009. Trice had represented himself and didn't file an appeal in the case, but later hired a lawyer to file a petition under Section 2-1401 of the Code of Civil Procedure seeking to vacate the judgment, which a summary of the high court ruling lists at $3,303.90.

In his petition, Trice argued that the court's Jan. 15, 2009 judgment was void because LVNV wasn't registered as a collection agency as required by the act when it sued him.

Without holding an evidentiary hearing, the circuit court denied Trice’s section 2-1401 petition, saying that even if LVNV had failed to register with the state, it did not constitute an error that would void the judgment entered against him.

Following Trice's appeal, the First District Appellate Court noted that the act's penalty provisions say a complaint filed by an unregistered agency is a nullity and as such, any judgment entered on such a complaint is void.

The appeals panel explained that if LVNV was not licensed when it sued Trice, the circuit court wouldn't have authority to enter or enforce a judgment on its complaint, any judgment entered would be void and that allowing the Jan. 15, 2009 judgment to stand would be like helping the collection agency commit a crime.

As such, the appellate court reversed the lower court's denial of his Section 2-1401 petition and remanded for an evidentiary hearing to determine whether Trice was right in alleging that LVNV was not licensed at the time it sued him.

LVNV sought leave to appeal that decision, but the Supreme Court denied its petition in November 2011.

On remand, the circuit court found the penalty provisions the appeals panel had pointed to be unconstitutional on due process, equal protection and vagueness grounds. The judge then said that even though LVNV was not licensed when it sued Trice, the 2009 judgment should have been "voidable rather than void."

Because the court deemed certain provisions of the Collection Agency Acts unconstitutional, the appeal went directly to the state Supreme Court for review.

LVNV argued before the high court that the legislature violated the Constitution when made the failure to register as a debt collection agency a criminal act. It also raised two non-constitutional arguments.

Writing for the majority, Karmeier explained in the court's 15-page opinion that those two arguments, "if successful, would be sufficient to sustain the circuit court’s 'original judgment,' which is what the circuit court order before us—in addition to holding three statutory provisions unconstitutional and, in essence, negating the judgment of the appellate court—purported to do."

And that's exactly what happened, at least with one of the plaintiff's arguments.

The justices, with the exception of Kilbride, agreed with LVNV's contention the appellate court was wrong to say the 2009 judgment would be void if the collection agency didn't have a license when it sued Trice.

"As this court has held, whether a judgment is void or voidable presents a question of jurisdiction," Karmeier wrote for the majority. "In holding that the circuit court’s January 15, 2009, judgment would be void if LVNV lacked a debt collection license, the appellate court in this case appeared to rely on the definition of jurisdiction as the 'inherent power' to enter the judgment involved."

He explained that "a lack of 'inherent power' refers to the idea that if a certain statutory requirement or prerequisite—such as obtaining a debt collection license—is not satisfied, then the circuit court loses 'power' or jurisdiction to consider the cause of action at issue."

 "The problem with this reasoning is that the concept of 'inherent power' relied upon by the appellate court was rejected by this court in Steinbrecher v. Steinbrecher," he wrote.

According to the majority's opinion, Steinbrecher, a 2001 ruling, "concluded that the 'inherent power’ requirement applies to courts of limited jurisdiction and administrative agencies' but ... has no place in civil actions in the circuit courts, since these courts are granted general jurisdictional authority by the constitution."

Karmeier notes that Steinbrecher was reaffirmed the following year in Belleville Toyota Inc. v. Toyota Motor Sales U.S.A. Inc., which defined the meaning of subject matter jurisdiction and stressed that only fundamental defects, like a lack of jurisdiction, would render a judgment void.

"Applying the holdings of Steinbrecher and Belleville Toyota to this case, it is clear that the circuit court’s January 15, 2009, judgment is not void," Karmeier wrote for the court. "In this case, the circuit court possessed jurisdiction over both the parties and the subject matter when LVNV filed its debt collection lawsuit."

So while "LVNV’s failure to register as a debt collection agency was error," the justices said it "did not deprive the circuit court of jurisdiction," which means the 2009 judgment was not void and the appeals panel was wrong to reverse the circuit court's initial denial of Trice's Section 2-1401 petition.

Because the high court determined the initial judgment in this case was not void, Karmeier said it was unnecessary to review the constitutional issues as they only came about as a result of the erroneous appellate court analysis.

The ruling vacates the circuit court's findings of unconstitutionality as unnecessary, rejects the appellate court's analysis and remands the case for a confirmation of the monetary judgment in favor of LVNV and against Trice.

"This case has therefore been returned to square one,” Karmeier wrote.

Kilbride, however, dissented with his fellow justices, saying he couldn't agree with their decision to resolve the case without addressing the constitutionality issues raised.

"I do not believe this court should avoid reviewing a direct finding that sections 4.5, 14, and 14b of the Act are unconstitutional," Kilbride wrote in his dissenting opinion that spanned slightly more than two pages.

Saying the validity of those sections was the sole issue on appeal," Kilbride said "the majority, unfortunately, focuses its analysis on LVNV’s alternative argument that collaterally challenges the appellate court’s prior 2011 decision."

"By addressing LVNV’s alternative argument, the majority allows LVNV to bootstrap and challenge the issue in this appeal, effectively giving LVNV 'a second bite at the apple' when it already litigated this issue to a final resolution," Kilbride argued. "I believe this court should not skirt review of the constitutional issue raised in this direct appeal."

If it were up to him and even if the constitutionality of the act's provisions were not at issue, Kilbride said he would have reversed the circuit court's judgment because "it is error to uphold a judgment that was not obtained in compliance with the Act."

"Here, LVNV engaged in debt collection practices without being lawfully licensed in the State of Illinois when it pursued collection against Trice and filed suit," Kilbride wrote in his dissent. "This court should not assist LVNV in the enforcement of a judgment based on a lawsuit that violated the law at the time it was instituted."

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