                                                                            Digitally signed by
                                                                            Reporter of
                                                                            Decisions
                                                                            Reason: I attest to
                            Illinois Official Reports                       the accuracy and
                                                                            integrity of this
                                                                            document
                                   Appellate Court                          Date: 2019.07.02
                                                                            12:52:44 -05'00'




             Midland Funding LLC v. Schellenger, 2019 IL App (5th) 180202



Appellate Court        MIDLAND FUNDING LLC, Plaintiff, v. JEAN SCHELLENGER,
Caption                Defendant (Jean Schellenger, on Behalf of Herself and a Putative
                       Class, Counterclaimant-Appellant; Midland Funding LLC and
                       Midland Credit Management, Inc., Counterdefendants-Appellees).



District & No.         Fifth District
                       Docket No. 5-18-0202



Rule 23 order filed    March 13, 2019
Motion to
publish granted        April 12, 2019
Opinion filed          April 12, 2019



Decision Under         Appeal from the Circuit Court of Clinton County, No. 17-SC-26; the
Review                 Hon. Michael D. McHaney, Judge, presiding.



Judgment               Affirmed.


Counsel on             Daniel A. Edelman, Cathleen M. Combs, James O. Latturner, Francis
Appeal                 R. Greene, and Isabella M. Janusz, of Edelman, Combs, Latturner &
                       Goodwin, LLC, of Chicago, and Dennis Koch, of Highland, for
                       appellant.

                       William P. Hardy, of Hinshaw & Culbertson LLP, of Springfield, and
                       David M. Schultz and Louis J. Manetti Jr., of Hinshaw & Culbertson
                       LLP, of Chicago, for appellees.
     Panel                    JUSTICE MOORE delivered the judgment of the court, with opinion.
                              Presiding Justice Overstreet and Justice Chapman concurred in the
                              judgment and opinion.


                                               OPINION

¶1         The counterclaimant, Jean Schellenger (Jean), on behalf of herself and a putative class,
       appeals the February 22, 2018, order of the circuit court of Clinton County that granted the
       motion of the counterdefendants, Midland Funding LLC and Midland Credit Management,
       Inc., to dismiss Jean’s counterclaim that, inter alia, the counterdefendants’ collection
       complaint was time-barred by the four-year statute of limitations as set forth in section 2-725
       of the Uniform Commercial Code (UCC) (810 ILCS 5/2-725 (West 2016)). For the following
       reasons, we affirm.

¶2                                               FACTS
¶3         On January 27, 2017, Midland Funding LLC filed a small claims complaint against Jean,
       alleging that Jean was the holder of a credit card (usable only for the purchase of goods at
       Home Depot), that Midland Funding LLC was the successor in interest of the credit card
       account from Citibank, N.A., that Jean made purchases against the account but failed to make
       the monthly payments, that there was a balance of $3151.21 due and owing on the account,
       and that Jean was in default on the account. Midland Funding LLC requested judgment
       against Jean in the amount of $3151.21 plus costs. An affidavit appended to the complaint
       stated that the last payment posted to the account was on July 12, 2012. Accordingly, the
       complaint was filed more than four years but less than five years after the default.
¶4         On June 30, 2017, Jean filed a motion for class certification along with a three-count
       class action counterclaim against Midland Funding LLC and Midland Credit Management,
       Inc. (Midland). The counterclaim alleged, inter alia, that because a Home Depot store credit
       card can only be used to purchase goods at a Home Depot store, the action was one to
       enforce a contract for the sale of goods and the applicable statute of limitations is four years
       under section 2-725 of the UCC (id.). The counterclaim further alleged that Midland’s
       collection complaint was time-barred and, accordingly, the filing violated the Fair Debt
       Collection Practices Act (15 U.S.C. § 1692 et seq. (2012)), the Consumer Fraud and
       Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2016)), and the Collection
       Agency Act (225 ILCS 425/1 et seq. (West 2016)). The allegation underlying all counts of
       the counterclaim was that Midland had a practice of suing customers on time-barred store
       credit card debts.
¶5         On September 19, 2017, Midland filed a motion to dismiss Jean’s counterclaim. The
       motion alleged, inter alia, that Midland’s complaint was timely filed because Jean’s credit
       card agreement is governed by the five-year statute of limitations that applies to credit card
       agreements, pursuant to section 13-205 of the Code of Civil Procedure (Code) (735 ILCS
       5/13-205 (West 2016)), rather than the four-year statute of limitations under the UCC that
       governs the sale of goods, as Jean alleged in her counterclaim.
¶6         A hearing was conducted on February 20, 2018, where counsel offered respective
       arguments concerning, inter alia, which statute of limitations applied. The circuit court

                                                  -2-
       entered an order on February 22, 2018, granting Midland’s motion to dismiss, holding that
       the five-year statute of limitations applied, and dismissing Jean’s counterclaim with
       prejudice. Jean filed a timely notice of appeal.

¶7                                              ANALYSIS
¶8          Our issue on appeal is whether the circuit court erred by granting Midland’s motion to
       dismiss Jean’s counterclaim, on the basis of the five-year statute of limitations applying to
       Midland’s underlying complaint, rather than the four-year statute of limitations, as argued by
       Jean in her counterclaim. A circuit court’s rulings on motions to dismiss (see Freeman v.
       Williamson, 383 Ill. App. 3d 933, 936 (2008)) as well as whether a particular statute of
       limitations applies to a cause of action (see Travelers Casualty & Surety Co. v. Bowman, 229
       Ill. 2d 461, 466 (2008)) are reviewed de novo.
¶9          Here, the issue at hand was settled in Illinois by the court in Harris Trust & Savings Bank
       v. McCray, 21 Ill. App. 3d 605 (1974), as cited by Midland. As in the instant case, the issue
       in Harris Trust was “whether a credit card issuer may commence an action based upon the
       holder’s failure to pay for the purchase of goods more than 4 years after the issuer’s cause of
       action accrued.” Id. at 606. The defendant in Harris Trust argued that, when she purchased
       goods with a credit card issued by the plaintiff bank, she entered into a contract for the sale
       of goods. Id. The plaintiff bank argued that the credit card transaction created a
       debtor/creditor relationship and the cause of action could not have arisen from a failure to
       pay for goods because the bank had already paid for the goods. Id. at 607. The bank
       contended, rather, that the cause of action arose when the defendant failed to repay the bank
       for the funds that were advanced by the bank to the merchant on behalf of the defendant. Id.
       Accordingly, the bank argued that the applicable statute of limitations was that relating to
       written contracts, including a promise to pay money. Id.
¶ 10        The court in Harris Trust observed that “[t]he bank credit card system involves a
       tripartite relationship between the issuer bank, the cardholder, and merchants participating in
       the system.” Id. The defendant in Harris Trust argued that money paid directly to merchants
       constitutes a contract for the sale and purchase of goods. Id. at 608. The court disagreed,
       holding that “money advanced to a merchant in payment for merchandise received by the
       defendant constitutes a loan” and “[t]he defendant promised to repay the bank for money it
       paid to the merchant for her benefit.” Id. The court further observed that “[t]he credit card
       allowed [the] defendant to make use of the resources of the issuer bank, and the merchant is
       in the same financial position as if he were receiving cash from the bank at a small discount
       for its service.” Id. Because the court concluded “that the payments made by the [bank] to the
       merchants pursuant to the cardholder agreement constituted a loan of money,” the longer
       statute of limitations governed the cause of action. Id. at 610.
¶ 11        Jean’s argument on appeal is that the four-year statute of limitations applies to litigation
       regarding a default on a Home Depot store card. She relies on a New Jersey case, Midland
       Funding LLC v. Thiel, 144 A.3d 72, 75 (N.J. Super. Ct. App. Div. 2016), which held that
       “claims arising from a retail customer’s use of a store-issued credit card—or one issued by a
       financial institution on a store’s behalf—when the use of which is restricted to making
       purchases from the issuing retailer[,] are subject to the four-year statute of limitations,”
       which governs contracts relating to the sale of goods.


                                                   -3-
¶ 12        The New Jersey case cited by Jean addresses the same issue that is raised in the instant
       case. We acknowledge that comparable court rulings in other jurisdictions, while not binding,
       “ ‘are persuasive authority and entitled to respect.’ ” Kostal v. Pinkus Dermatopathology
       Laboratory, P.C., 357 Ill. App. 3d 381, 395 (2005) (quoting In re Marriage of Raski, 64 Ill.
       App. 3d 629, 633 (1978)). However, “Illinois courts do not look to the law of other states
       when there is relevant Illinois case law available.” In re Estate of Walsh, 2012 IL App (2d)
       110938, ¶ 45; see also Kostal, 357 Ill. App. 3d at 395 (no need to observe case law from
       other states when Illinois case law is directly on point). Applying these principles here, the
       Illinois case cited by Midland is directly on point and settles the issue at hand. Accordingly,
       we look to that case as authority rather than Jean’s case from a foreign jurisdiction that
       addresses the same issue but yields a contrary result.
¶ 13        Besides the New Jersey case, Jean cites an Illinois case—Citizen’s National Bank of
       Decatur v. Farmer, 77 Ill. App. 3d 56 (1979)—in an effort to support her argument that the
       four-year statute of limitations under the UCC applies here. Jean emphasizes that the court in
       Citizen’s held that a buyer’s obligation to pay for the goods purchased is a fundamental part
       of a contract for the sale of the goods. Id. at 58. We note, however, that Citizen’s is
       distinguishable from the instant case.
¶ 14        In Citizen’s, the defendant purchased an automobile from a car dealership, made a cash
       down payment, and signed an installment contract. Id. at 57. Subsequently, the contract was
       assigned from the dealership to the plaintiff bank, and the defendant made payments to the
       bank, pursuant to the installment contract, but later defaulted. Id. The plaintiff bank did not
       commence litigation until more than four years later. Id.
¶ 15        On appeal, the bank argued that the longer statute of limitations applicable to retail
       installment sales contracts applied because the bank was the assignee of the contract. Id. The
       bank’s argument was that the defendant breached an obligation to make payments and did
       not breach a contract for the sale of goods. Id. The bank cited Harris Trust in support of its
       argument, but the court distinguished that case because in Harris Trust, the longer statute of
       limitations applied because the payments by the bank to merchants, per the cardholder
       agreement, “were loans of money by the issuer to the cardholder” and “[t]he contention that
       the merchants merely assigned retail installment contracts to the bank was specifically
       rejected.” Id. at 58. The court in Citizen’s held that the plaintiff bank did not loan money to
       the defendant buyer but purchased the retail installment contract from the dealership. Id.
       Accordingly, the court held that the four-year statute of limitations pursuant to the UCC
       applied and the bank’s cause of action was untimely. Id. at 59.
¶ 16        We find Citizen’s inapplicable here and distinguish it in the same way the Citizen’s court
       did from Harris Trust. In Citizen’s, the bank stepped into the shoes of the seller as the
       assignee of the retail installment agreement between the buyer and seller. Id. at 57. That is
       not the case here, where a tripartite relationship exists between the bank, the cardholder, and
       the merchant and where the payments made by the bank to the merchant pursuant to the
       cardholder agreement constitute a loan, just as in Harris Trust. See Harris Trust, 21 Ill. App.
       3d at 607-08. Accordingly, we find the holding in Citizen’s does not apply to the instant case.
¶ 17        Jean cites an additional Illinois case—Johnson v. Sears Roebuck & Co., 14 Ill. App. 3d
       838, 851 (1973)—in which the court held that a store credit card was not subject to usury
       laws because the sale of goods on credit and allowing payments over time do not constitute a
       loan. However, again, like Citizen’s, the Johnson case did not involve a tripartite system

                                                  -4-
       where the bank paid the merchant for goods that were purchased by a cardholder who agreed
       to repay the bank instead of the merchant, but a bipartite relationship directly between a retail
       seller and a buyer. See id. at 839-41. Accordingly, we find the ruling in Johnson also
       inapplicable here.
¶ 18        Finally, we note that Jean concedes that litigation involving general purpose bank credit
       cards is subject to a five-year statute of limitations pursuant to section 13-205 of the Code
       (735 ILCS 5/13-205 (West 2016)). On that note, she contends that Harris Trust is
       distinguished from the instant case, because in that case, a general purpose credit card was
       used that could be used at multiple retailers as well as used for cash advances and services,
       whereas here, the credit card originated with Home Depot, was issued through Citibank, and
       could only be used to purchase goods at a single retailer—Home Depot—therefore making it
       subject to the UCC as a part of a sale of goods. We disagree. The type of credit card is
       immaterial. The determining factor in Harris Trust was not that the credit card was general
       purpose or usable only at a single establishment but that a tripartite relationship and a loan of
       money were involved. The same principles apply to this case, and we find the distinction
       Jean raises regarding the type of credit card to be of no consequence to established law in
       Illinois.

¶ 19                                      CONCLUSION
¶ 20      For the foregoing reasons, the February 22, 2018, order of the circuit court of Clinton
       County is affirmed.

¶ 21      Affirmed.




                                                   -5-
