Illinois Supreme Court reverses appellate court holding that a judgment obtained by a non-licensed collection agent was void ruling that the licensing requirement is not jurisdictional

The Illinois Supreme Court recently reversed an appellate court opinion holding that a complaint filed by an unregistered collection agency is a nullity, and any judgment entered on such a complaint is void. LVNV Funding, LLC v. Trice, 2015 IL 116129 (Feb. 27, 2015) has an interesting procedural history. After the plaintiff obtained judgment against the debtor on an unpaid debt, the debtor filed a petition collaterally attacking the judgment arguing that the complaint and judgment were void as the plaintiff was not licensed under the state Collection Agency Act (Act). The circuit court denied the petition and the debtor appealed. The appellate court reversed, for the reason stated above, but remanded the case to the circuit court for an evidentiary hearing to determine whether the plaintiff was in fact unlicensed at the time suit was filed. The plaintiff, instead, sought review in the Supreme Court which rejected the request. On remand, the circuit court acknowledged the binding effect of the appellate court’s holding, but ruled that the penalty provisions of the Act were unconstitutional on grounds of substantive due process, equal protection, and vagueness and found the judgment valid. This ruling was taken directly to the Supreme Court (because it raised constitutional issues). The Court addressed and rejected several of the plaintiff’s arguments, but agreed that the appellate court erred when it concluded that the plaintiff’s failure to obtain a license rendered the judgment void. The Supreme Court rejected the appellate court’s reasoning that if a debt collection agency lacks the appropriate license, then the circuit court lacks the inherent power or authority to entertain a lawsuit by that agency. 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 jurisdiction to consider the cause of action. But this idea is at odds with the grant of jurisdiction given to the circuit courts under the state constitution, which provides that Circuit Courts shall have original jurisdiction of all justiciable matters. Citing two earlier high court decisions, the majority found that because circuit court’s jurisdiction is granted by the constitution the failure to satisfy a certain statutory requirement or prerequisite cannot deprive the circuit court of its jurisdiction to hear the case. With this understanding, the Court held that the failure to obtain a license which, if it had been raised timely, might have warranted dismissal of the suit, but it did not deprive the court of jurisdiction. The appellate court therefore erred in reversing the circuit court’s initial denial of debtor’s petition. The Supreme Court declined to address the constitutional issues concluding that the circuit court only reached those questions because the appellate court deemed the judgment void. The dissent makes an interesting point, procedurally anyhow. The dissenter said the Supreme Court should not avoid reviewing a direct finding that sections of the Act are unconstitutional because the appeal comes from the circuit court, the court having declared those sections unconstitutional. [I]ts finding of unconstitutionality was necessary because the appellate court already rejected its alternative grounds [and] [t]his court denied [the] petition for leave to appeal from that decision. The constitutional validity of the Act is, thus, the only subject of the appeal. Because the Supreme Court denied the petition for leave to appeal from the appellate court’s prior decision, the plaintiff could not have resurrected this issue collaterally by cross-appeal in this current direct appeal. By doing so the majority gave plaintiff a second bite at the apple an issue it already litigated to a final resolution.

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