The Illinois Court of Appeals, First District, recently affirmed a trial court’s rejection of borrowers’ efforts to vacate all orders in the action and to dismiss the case on the grounds that the original plaintiff in the foreclosure action was not registered under the Illinois Collection Agency Act, 225 ILCS 425/1, et seq. (“ICAA”).
In so ruling, the appellate court took judicial notice of written decisions submitted by the bank supported the conclusion that the original plaintiff was a subsidiary of the substituted bank, and was therefore exempt from the ICAA.
A copy of the opinion is available at: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2014/1stDistrict/1132075.pdf.
An affiliate of a bank filed a mortgage foreclosure complaint against the borrowers. The trial court entered a default judgment, judgment for foreclosure and sale, and the trial court subsequently entered an order approving judicial sale of the subject property.
Approximately eight months later, the borrowers filed a motion to vacate pursuant to section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401). The bank’s affiliate filed a motion to dismiss defendant’s motion, which the trial court granted.
The borrowers argued that the trial court erred in granting the motion to dismiss because original plaintiff was not a subsidiary of substituted plaintiff bank, and, therefore, the original plaintiff was not exempt from the ICAA and any judgment entered was void.
The borrowers argued in their motion that the original plaintiff was not a registered debt collector as shown in an attached Illinois Department of Financial and Professional Regulation (“IDFPR”) Inquiry.
The borrowers further argued that servicing mortgages was clearly an activity in the purview of a debt collector and the main business of a mortgage service is a debt collection activity. The borrowers further argued that an unregistered debt collector cannot act as a Plaintiff in a lawsuit based upon LVNV v. Trice and all orders entered are void. The borrowers’ attorney submitted an affidavit which stated that according to the Illinois Secretary of State, the original plaintiff was never registered in Illinois as a “debt collector.”
The bank filed a motion to dismiss the borrowers’ section 2-1401 petition. In its motion, the bank argued that borrowers’ section 2-1401 petition should be dismissed pursuant to section 2-615 of the Code of Civil Procedure because borrowers failed to allege sufficient facts to support their assertion that the complaint was void since the original plaintiff was not a registered debt collector under the ICAA. In response, borrowers argued that the bank’s motion to dismiss must fail because (1) the bank cannot refute that the original plaintiff was an unlicensed debt collector based on its unsupported statement that the original plaintiff was a subsidiary of the bank, and (2) “[b]orrowers are confused as to how a Limited Partnership (LP) can be subsidiary. A Limited Partnership requires more than one (1) partner so it is not a subsidiary.”
In their reply, the bank asserted that borrowers’ response was “ultimately bereft of any argument that their Petition is viable and of merit.” The bank further argued that borrowers’ petition failed to allege sufficient facts to support their allegations. The bank also attached documents setting forth that the original plaintiff was a subsidiary of the bank at the time the complaint was filed. One document was a portion of a list of bank’s direct and indirect subsidiaries as of December 31, 2009, which included the original plaintiff in the list. The second document was a corporate disclosure statement filed in district court case in the Southern District of Indiana stating that the original plaintiff is a wholly-owned subsidiary of the bank.
The trial court granted the bank’s motion to dismiss with prejudice. The original plaintiff filed a motion for an order approving the report of sale and distribution as well as a motion to substitute the bank as named plaintiff because the original plaintiff had merged into the bank. The trial court entered an order approving the report of sale and distribution, confirming the sale and order of possession. The trial court also granted the original plaintiff’s motion to substitute the bank as party plaintiff.
The borrowers then appealed the trial court’s ruling.
On appeal, borrowers argued that the bank is not exempt from the ICAA because the original plaintiff was not a subsidiary of the bank. The bank maintained that borrowers’ claim is meritless because the original plaintiff was exempt from the ICAA.
As you may recall, the supreme court in Sarkissian v. Chicago Board of Education, 201 Il. 2d 95 (2002) held that pursuant to paragraph (f) of section 2-1401, the general rules for filing a section 2-1401 petition do not apply to petitions challenging a judgment on voidness grounds.
“ ‘[A] judgment, order or decree entered by a court which lacks jurisdiction of the parties or of the subject matter, or which lacks the inherent power to make or enter the particular order involved, is void, and may be attacked at any time or in any court, either directly or collaterally.’ ” Sarkissian, 201 Ill. 2d at 103. The appellate court held that Sarkissian applied because the borrowers’ postjudgment motion argued that the original plaintiff was not a licensed debt collector under the ICAA and, thus that all orders entered by the court were void.
The Appellate Court noted that the purpose of the ICAA is to“ ‘protect consumers against debt collection abuse.’ 225 ILCS 425/1a (West 2010). It provides that ‘[n]o collection agency shall operate in this State, *** 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 2010). The [ICAA] defines a ‘collection agency’ or a ‘debt collector’ as ‘any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection.’ 225 ILCS 425/2 (West 2010). ‘Debt collection’ is defined as ‘any act or practice in connection with the collection of consumer debts’ and ‘ “[c]onsumer debt” *** means money, property, or their equivalent, due or owing or alleged to be due or owing from a natural person by reason of a consumer credit transaction.’ Id. Finally, a ‘consumer credit transaction’ is a ‘transaction between a natural person and another person in which property, service, or money is acquired on credit by that natural person from such other person primarily for personal, family, or household purposes.’ Id.” Aurora Loan Services, LLC v. Kmiecik, 2013 IL App (1st) 121700, ¶ 28.
However, section 2.03(1) of the ICAA provides for certain exemptions:
“This Act does not apply to persons whose collection activities are confined to and are directly related to the operation of a business other than that of a collection agency, and specifically does not include the following:
1. Banks, including trust departments, affiliates, and subsidiaries thereof, fiduciaries, and financing and lending institutions (except those who own or operate collection agencies)[.]”
225 ILCS 425/2.03(1).
The Appellate Court recognized that it already held in Kmiecik that bank subsidiaries are exempt from the ICAA. Kmiecik, 2013 IL App (1st) 121700, ¶ 38. The borrowers asserted, without citation to any case law, that the original plaintiff could not be a subsidiary of the bank because under the ICAA, “only subsidiaries are exempt, not a limited partnership that is owned by Banks’ subsidiaries.”
As you may recall, Illinois Supreme Court Rule 41(h)(7) requires an appellant to include in its brief an “[a]rgument, which shall contain the contentions of the appellant and the reasons therefor, with citation of the authorities and the pages of the record relied on.” Ill. S. Ct. R. 341(h)(7) (eff. July 1, 2008). It is well settled that a contention that is supported by some argument but does not cite any authority does not satisfy the requirements of Supreme Court Rule 341(h)(7), and bare contentions that fail to cite any authority do not merit consideration on appeal. Wasleff v. Dever, 194 Ill. App. 3d 147, 155-56 (1990).
Moreover, the appellate court found that contrary to borrowers’ contention, the ICAA does not limit exemptions to first-tier subsidiaries. According to the exhibits provided in the trial court, the original plaintiff was owned by entities that were subsidiaries of the bank. The cardinal rule in construing a statute, to which all others are subordinate, is to ascertain and give effect to the intent of the legislature. Alvarez v. Pappas, 229 Ill. 2d 217, 228 (2008). To determine legislative intent, the appellate court turned to the language of the statute, which is the best indicator of its intent. Alvarez, 229 Ill. 2d at 228. “[A]ll words and phrases must be interpreted in light of other relevant provisions of the statute and must not be construed in isolation.” Brucker v. Mercola, 227 Ill. 2d 502, 514 (2007). “Each word, clause and sentence of the statute, if possible, must be given reasonable meaning and not rendered superfluous.” Brucker, 227 Ill. 2d at 514.
The Appellate Court concluded nothing in section 2.03(1) of the ICAA limits exemptions to first-tier subsidiaries, and it will not read into its language any additional language imposing such a limitation. Moreover, the Appellate Court also noted that the legislature included a limitation to “any first tier subsidiary of a bank” for an exemption in the Illinois Residential Mortgage License Act of 1987 (205 ILCS 635/1-4(d)(1)(ix). “It is a generally accepted canon of construction that the express inclusion of a provision in one part of a statute and its omission in a parallel section is an intentional exclusion from the latter.” People v. Olsson, 2011 IL App (2d) 091351, ¶ 9.
Under well-established precedent and specifically under the holding of Kmiecik, the Appellate Court took judicial notice that other judicial decisions have recognized that the original plaintiff was a subsidiary of the bank. “An appellate court may take judicial notice of readily verifiable facts if doing so ‘will “aid in the efficient disposition of a case,” ’ even if judicial notice was not sought in the trial court.” Kmiecik, 2013 IL App (1st) 121700, ¶ 37. “Specifically, a reviewing court may take judicial notice of a written decision that is part of the record of another court because these decisions are readily verifiable facts that are capable of ‘ “instant and unquestionable demonstration.” ’ ” Id.
Here, the bank submitted documentation from a federal case detailing the original plaintiff’s ownership by two subsidiaries of the bank and the bank’s list of its subsidiaries, which included the original plaintiff. The appellate court further observed that numerous cases from other jurisdictions have recognized that the original plaintiff was a subsidiary of the bank. See Ridenour v. Bank of America, N.A., No. 13-cv-0317-BLW, 2014 WL 2452990, at *1 (D. Idaho May 22, 2014); Pniewski v. U.S. Bank National Ass’n, No. 13 C 3638, 2014 WL 1052813, at *1 (N.D. Ill. Mar. 19, 2014).
The Appellate Court took judicial notice of these written decisions and held that the original plaintiff was a subsidiary of the bank and was exempt from the ICAA. As the Appellate Court previously held in Kmiecik, it need not reach the question of whether a mortgage foreclosure action qualifies as debt collection under the ICAA. Therefore, the appellate court found the trial court properly granted the bank’s motion to dismiss borrowers’ section 2-1401 petition and it need not consider borrowers’ additional arguments that the foreclosure judgment was void under the ICAA.
Accordingly, the Appellate Court affirmed the dismissal of the borrowers’ petition.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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