In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1433

CRAIG E. GEARING,

Plaintiff-Appellee,

v.

CHECK BROKERAGE CORPORATION
and DREW T. ERWIN,

Defendant-Appellants.



Appeal from the United States District Court
for the Central District of Illinois.
No. 99-1214--Joe Billy McDade, Chief Judge.


Argued September 22, 2000--Decided November 21, 2000



 Before POSNER, MANION, and EVANS, Circuit Judges.

 EVANS, Circuit Judge. An old Chinese proverb
holds that to chop a tree down quickly, spend
twice the time sharpening your ax. The Check
Brokerage Corporation did not follow the
proverb’s wisdom. Although it hoped to quickly
win an Illinois suit under a bad check law,
insufficient time was spent studying the nuances
of subrogation law, and thus the corporation
found itself on the receiving end of this suit
alleging violations of the federal Fair Debt
Collection Practices Act (FDCPA). Touch .

 This   saga began on a day in June of 1999 when
Craig   Gearing wrote two small checks--one for
$8.64   and the other for $18.85--at a convenience
store   called Ayerco. The checks bounced.

 A section of the Illinois Criminal Code
provides civil liability for "deceptive
practices," including the issuance of bad checks.
The Illinois law, which imposes significant
penalties on those who write bad checks, holds
that after certain collection efforts come up
dry, the payee of a bad check, or a person
subrogated to the rights of the payee, may sue
for the face value of the check, treble damages
up to $1,500, and attorneys fees and court costs.
720 ILCS 5/17-1a. Check Brokerage, a debt
collection agency, apparently saw the Illinois
law as a business opportunity so it entered into
a contract with Ayerco to collect bad checks
Ayerco received from its customers. But the
contract could not be structured as a traditional
debt collection agreement--pursuant to which
Ayerco would assign the bad checks to Check
Brokerage in return for a percentage of any
recovery--because the rich damages available
under the Illinois act are only recoverable by
the payee of the bad check, or someone subrogated
to the rights of the payee. So Check Brokerage
attempted to structure its contract with Ayerco
in such a way that it would become subrogated to
Ayerco’s rights: it agreed to purchase all bad
checks received by Ayerco for their full face
value. But Check Brokerage was no fool; to
eliminate its risk, the contract said it could
recourse bad checks back to Ayerco, in effect
rescind the sale, after 60 days.

 Gearing’s two checks to Ayerco were returned
with "Closed Account" notations. Pursuant to its
contract, Check Brokerage purchased the two
checks for their face value as written./1 After
performing the collection efforts set out as a
prerequisite to recovery under the Illinois act,
Check Brokerage brought suit against Gearing,
alleging that it was subrogated to Ayerco’s
rights./2 But Gearing didn’t throw in the towel.
He got a lawyer and brought this case against
Check Brokerage (and its attorney Drew Erwin)
pursuant to the FDCPA. The lawsuit alleged that
Check Brokerage’s assertion that it was Ayerco’s
subrogee was a false representation in violation
of 15 U.S.C. sec. 1692e. The district court
agreed and granted Gearing’s motion for summary
judgment. We apply de novo review to Check
Brokerage’s appeal. Silk v. City of Chicago, 194
F.3d 788, 798 (7th Cir. 1999).

 Gearing’s FDCPA claim turns on whether Check
Brokerage was actually subrogated to Ayerco’s
claims against Gearing. "Subrogation is ’[t]he
substitution of one person in the place of
another with reference to a lawful claim . . . so
that he who is substituted succeeds to the rights
of the other in relation to the . . . claim, and
its rights, remedies, or securities.’" Employers
Ins. of Wausau v. James McHugh Constr. Co., 144
F.3d 1097, 1105 (7th Cir. 1998) (quoting Black’s
Law Dictionary 1427 (6th ed. 1990)). Under
Illinois law, a party claiming a right of
subrogation must establish that he paid a claim
or debt for which a third party is primarily
liable and that he seeks to enforce a right
against that third party possessed by the
subrogor. American Nat’l Bank & Trust Co. v.
Weyerhaeuser Co., 692 F.2d 455, 461 (7th Cir.
1982). In addition, the party claiming a right of
subrogation must establish that he is not a
volunteer, but instead is under compulsion to
satisfy the debt. In re Marriage of Milliken, 557
N.E.2d 591, 595 (Ill. App. Ct. 1990); Inland Real
Estate Corp. v. Tower Constr. Co., 528 N.E.2d
421, 428 (Ill. App. Ct. 1988). In cases in which
these elements are satisfied, the Illinois
Supreme Court has instructed that the doctrine of
subrogation should be applied "where it
effectuates a just resolution of the rights of
the parties, irrespective of whether the doctrine
has previously been invoked in the particular
situation." Dworak v. Tempel, 161 N.E.2d 258, 263
(Ill. 1959).

 Translated into the language of this case,
Gearing argues that the recourse provision in the
Check Brokerage-Ayerco contract rendered Check
Brokerage a mere volunteer with respect to its
payment to Ayerco to cover Gearing’s checks.
Generally, a party’s agreement fulfills the
requirement for subrogation purposes that the
would-be subrogee is not acting as a mere
volunteer. But the structure of Check Brokerage’s
agreement with Ayerco does not permit the blind
application of this principle. Although Check
Brokerage purchased Gearing’s bad checks from
Ayerco, it was not required to eat the checks if
its collection efforts were unsuccessful. Indeed,
the recourse provision granted Check Brokerage
the absolute right to cancel its purchase of the
checks after 60 days. This escape hatch shows
that Check Brokerage did not act under any sort
of "compulsion." It was a mere volunteer, and its
claims to the contrary are illusory./3

 Check Brokerage essentially asks us to
eviscerate the compulsion and nonvolunteer
requirement. But it is a stranger to the
transaction that formed the basis of Gearing’s
debt to Ayerco; it had no obligation to come to
Ayerco’s aid, for any "obligation" to Ayerco,
given the escape clause, was really no
"obligation" at all. In a situation like this,
where Check Brokerage is in the business of
purchasing claims, at no risk to itself, so it
can act under the Illinois bad check law, the
taboo on volunteers being disabled from acting as
subrogees makes nothing but good sense. In our
situation, American National Bank & Trust does
not help Check Brokerage, so we hold the company
to be a mere volunteer, not one truly subrogated
to Ayerco’s rights against Gearing.

 Having concluded that Check Brokerage was not
subrogated to Ayerco’s rights, little further
need be said. Check Brokerage’s allegation in its
state court complaint that it was "subrogated" to
Ayerco’s rights gave a false impression as to the
legal status it enjoyed. The representation was,
as the district court found, a false
representation in an attempt to collect the debt,
in violation of 15 U.S.C. sec. 1692e(2) and (10).
Section 1692e applies even when a false
representation was unintentional. Russell v.
Equifax A.R.S., 74 F.3d 30, 33 (2d Cir. 1996). We
therefore affirm the district court’s liability
finding and its damage award, $200 plus costs and
attorneys fees.

AFFIRMED.



/1 The Check Brokerage-Ayerco contract actually
provides that Check Brokerage must pay face value
for checks returned "Insufficient Funds" their
first time through the payor bank, but only 50
percent of face value for checks returned "Closed
Account." Here, Check Brokerage for some reason
paid face value for Gearing’s checks even though
they were returned "Closed Account."

/2 We have not been told how Check Brokerage’s state
court suit against Gearing was resolved.

/3 Check Brokerage makes much of the fact that it
did not exercise its rights under the recourse
provision in this case. This only proves our
point: although Check Brokerage could have
cancelled its purchase of the checks, it
"volunteered" to ratify the sale by declining to
exercise its right of recourse.
