8231671430_e83d55aa51_z(1)In the closing days of February, the Illinois Supreme Court handed down its decision in LVNV Funding, Inc. v. Trice, a direct appeal from the Cook County Circuit Court. LVNV is noteworthy because it clears away ambiguous language in certain cases describing a lack of statutory prerequisites to an action as depriving the court of jurisdiction, thereby clarifying the issue of when a judgment is void versus voidable. In the process, the Court made the Circuit Court’s determination that parts of the Collection Agency Act were unconstitutional unnecessary, and accordingly vacated them. Our report on the oral argument in LVNV is here.

The Act mandates that no “collection agency” may operate in the state without registering pursuant to the Act. (225 ILCS 425/4) Section 14a of the Act permits the Department of Financial and Professional Regulation to enjoin the activities of an unlicensed collection agency. (225 ILCS 425/14a.)

LVNV began when the defendant allegedly paid for plumbing work with a credit card. When the defendant allegedly failed to pay the full amount due, the credit card company sold the debt to the plaintiff. The plaintiff sued the defendant to collect, and got a judgment. Sometime later, now represented by an attorney, the defendant appeared and filed a petition to vacate the judgment under Section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401). The defendant’s argument was simple: the plaintiff was a debt collection agency, suing him was a debt collection activity, and the defendant wasn’t registered, making the judgment – at least in the defendant’s view – void. The Circuit Court disagreed and denied the motion to vacate, but the Appellate Court reversed. The Appellate Court held that if the plaintiff was unlicensed at the time it filed the suit, the resulting judgment would be void. The Court remanded the matter back to the trial court for a hearing on whether the plaintiff was unlicensed when the suit was filed, but made it clear that the defendant was free to challenge the constitutionality of the Act on remand too.

And that’s exactly what the defendant did. The Circuit Court agreed, striking down the statute on grounds of due process, equal protection and vagueness.

The Supreme Court rejected the trial court’s constitutional holding not on its own merits, but by reaching back to the Appellate Court’s holding. The original judgment entered by the Circuit Court wasn’t void, the Court held, so the Section 2-1401 petition should never have been granted in the first place. Void or voidable was ultimately a question of jurisdiction, the Court explained. But it had been settled in Illinois since at least 1964 that with the exception of administrative actions, the Circuit Courts’ jurisdiction doesn’t come from statutes – it comes entirely from the constitution. Therefore, the failure to satisfy a statutory prerequisite never deprives the court of jurisdiction.

Since the failure of the plaintiff to register as a collection agency was merely a failure to satisfy a statutory prerequisite, the resulting judgment was voidable at most, not void. Therefore, although the defendant might have prevailed in a direct appeal, his Section 2-1401 petition should have been denied. And it followed from that, pursuant to the doctrine of constitutional avoidance, that the Circuit Court should never have decided the constitutional issues.

Justice Thomas Kilbride dissented. Justice Kilbride pointed out that the case was before the Court pursuant to Supreme Court Rule 302(a) solely because the trial court had invalidated a law on constitutional grounds – that was the only issue before the Court. Since the Court had previously denied a petition for leave to appeal from the Appellate Court’s holding regarding voidness, Justice Kilbride would have proceeded to the constitutional issues. After all, if the statute was constitutional, he wrote, the Court was assisting the plaintiff in enforcing a judgment based on a lawsuit that violated the law at the time it was instituted.

Image courtesy of Flickr by Stock Monkeys.com (no changes).