                             ILLINOIS OFFICIAL REPORTS
                                             Appellate Court



                Unifund CCR Partners v. Shah, 2013 IL App (1st) 113658


Appellate Court              UNIFUND CCR PARTNERS, Plaintiff-Appellant, v. MOHAMMAD
Caption                      SHAH, Defendant-Appellee.



 District & No.              First District, Second Division
                             Docket No. 1-11-3658


Filed                        June 18, 2013


Held                         Plaintiff’s complaint to collect an assigned credit card debt owed by
(Note: This syllabus         defendant was properly dismissed on the ground that plaintiff failed to
constitutes no part of the   show that the multiple assignments, especially the assignment to
opinion of the court but     plaintiff and the assignment to plaintiff’s assignor, satisfied the
has been prepared by the     requirements of section 8b of the Collection Agency Act, including
Reporter of Decisions        the requirements that the consideration terms and account information
for the convenience of       be shown, since plaintiff failed to include the necessary information in
the reader.)                 its filing, and in the absence of a record containing the information, the
                             appellate court assumed the trial court acted correctly.


Decision Under               Appeal from the Circuit Court of Cook County, No. 08-M1-162091;
Review                       the Hon. Dennis M. McGuire, Judge, presiding.



Judgment                     Affirmed.


Counsel on                   Joseph P. Kincaid, Catherine Basque Weiler, and Amy Z. Knapp, all
Appeal                       of Swanson Martin & Bell, LLP, of Chicago, for appellant.

                             Daniel A. Edelman, Cathleen M. Combs, James O. Latturner, and
                             Tiffany N. Hardy, all of Edelman Combs Latturner & Goodwin, LLC,
                             of Chicago, for appellee.
                          Stacie E. Barhorst, of Kaplan Papadakis & Gournis, P.C., of Chicago,
                          for amicus curiae Illinois Creditors Bar Association.

                          Joseph S. Messer and Nicole M. Strickler, both of Messer & Stilp,
                          Ltd., of Chicago, for amicus curiae ACA International.

                          Michael L. Starzec, of Wheeling, and Christopher R. DiPlacido, of
                          Deerfield, for amicus curiae National Association of Retail Collection
                          Attorneys.

                          David J. Phillips and Mary E. Phillips, both of Phillips & Phillips,
                          Ltd., of Palos Hills, for amicus curiae NCLC and NACA.

                          Julie Nepevu, of AARP Foundation Litigation, of Washington, D.C.,
                          for amicus curiae AARP.


Panel                     JUSTICE CONNORS delivered the judgment of the court, with
                          opinion.
                          Justices Quinn and Simon concurred in the judgment and opinion.




                                             OPINION

¶1           This appeal is the sequel to Unifund CCR Partners v. Shah, 407 Ill. App. 3d 737 (2010)
        (Shah I) , which answered two certified questions regarding the contents of assignments for
        collection under section 8b of the Collection Agency Act (225 ILCS 425/8b (West 2008)).
        After the parties returned to the circuit court, plaintiff filed an amended complaint, which
        the circuit court then dismissed on defendant’s motion. Plaintiff has appealed from that
        judgment, and we are now confronted with a question of first impression that we touched
        on only in passing in Shah I: do section 8b’s requirements apply to all assignments in the
        chain of title for a debt, or do they apply only to assignments for collection? We decide that
        it is the latter.
¶2           This case comes to us following a motion to dismiss, so we take all well-pleaded facts
        from the complaint as true. See Callaghan v. Village of Clarendon Hills, 401 Ill. App. 3d
        287, 300 (2010). Defendant Mohammad Shah held a credit card issued by Citibank (South
        Dakota) N.A., on which he accumulated a balance of about $16,000 and then defaulted.
        After the default, Citibank transferred defendant’s account to Unifund Portfolio A, LLC,


                                                -2-
     which in turn transferred the account to Cliffs Portfolio Acquisition I, LLC. Cliffs then
     transferred legal title in the account to Palisades Collection, LLC, which in turn transferred
     its interest in the account to Unifund CCR Partners, which is the plaintiff in this case. The
     whole series of transactions was made possible by a number of complicated interlocking
     agreements and is explained in further detail in Shah I, 407 Ill. App. 3d at 738-40. Plaintiff
     then brought the instant suit to collect on the debt.
¶3        In Shah I, we answered two certified questions posed by the circuit court. First, we
     determined that section 2-403 of the Code of Civil Procedure (735 ILCS 5/2-403 (West
     2008)) authorizes an assignee for collection to file suit in its own name in order to collect a
     debt. See id. at 740-42. Second, we were asked to interpret the requirements of section 8b
     of the Collection Agency Act (225 ILCS 425/8b (West 2008)). Section 8b allows legal title
     to a debt to be assigned to a collection agency in order for the agency to collect the debt.
     See 225 ILCS 425/8b (West 2008). We held that
          “a collection agency can establish an assignment of accounts receivable for collection
          purposes through documents attached as exhibits to the plaintiff’s complaint where the
          identification of the accounts transferred, the consideration paid, and the effective date
          of the transfer of particular accounts are in multiple incorporated documents. However,
          such documents must be in the form of contracts of assignment or documents that are
          incorporated by reference into those contracts, rather than in the form of an affidavit.”
          Shah I, 407 Ill. App. 3d at 747.
¶4        Following our decision in Shah I, plaintiff filed a new, verified complaint that alleged
     the chain of title for the debt in detail, and it supported the complaint with a number of
     documents that included the contracts of assignment and related documents for the last two
     transactions in the chain. Plaintiff, however, was either unable or unwilling to disclose the
     consideration for the first two transactions. The circuit court held that this was insufficient
     under section 8b of the Collection Agency Act (225 ILCS 425/8b (West 2008)) and
     dismissed the complaint with prejudice. Plaintiff appealed.
¶5        As we explained in Shah I, debts like the one in this case are a type of intangible
     personal property known as a chose in action, which is not only assignable but is
     traditionally understood as having bifurcated title: legal title and equitable title. See Shah I,
     407 Ill. App. 3d at 741-42. A creditor generally has three options when it comes to
     collecting on a debt. First, the creditor may try to collect the debt itself by bringing an
     action in its own name against the debtor. Alternatively, the creditor may hire a third party,
     known as a collection agent, to pursue the lawsuit against the debtor. In this situation, the
     creditor assigns legal title in the debt to the collection agent but retains equitable title for
     itself. This type of partial assignment is known as an assignment for collection. Finally, the
     creditor may decide to sell off its entire interest in the account to a third party, commonly
     known as a debt buyer. By doing so, the creditor divests itself of both legal and equitable
     title and retains no ownership interest in the debt. See id.; see also generally Sprint
     Communications Co. v. APCC Services, Inc., 554 U.S. 269 (2008) (explaining the history
     of assignments for collection and the legal/equitable title dichotomy).
¶6        In this case, Unifund Portfolio A and Cliffs are both considered debt buyers because
     they received both legal and equitable title. In contrast, Palisades and plaintiff both


                                               -3-
       received only legal title via assignments for collection. As it stands now, Cliffs holds
       equitable title to defendant’s debt while plaintiff holds legal title. Thus, plaintiff has the
       right to sue defendant to collect on the debt, but Cliffs has the right to any proceeds
       recovered by plaintiff from defendant.
¶7          Debt collection is, however, a heavily regulated industry in Illinois, and any party
       attempting to collect a debt must comply with stringent consumer-protection standards. As
       we mentioned in Shah I, section 8b of the Collection Agency Act (225 ILCS 425/8b (West
       2008)) mandates that an assignee for collection establish that it holds legal title to a debt by
       pleading that it received title via a written agreement that identifies “the accounts
       transferred, the consideration paid, and the effective date of the transfer.” Shah I, 407 Ill.
       App. 3d at 747.
¶8          Applying section 8b to this case would be simple if plaintiff were merely the assignee
       for collection of the original creditor, Citibank. But plaintiff is not. What makes this case
       challenging is that ownership of defendant’s debt has changed hands four times as it passed
       from the original creditor to plaintiff, and only two of those transfers were assignments for
       collection. On appeal, plaintiff’s primary contention is that section 8b only obligates it to
       provide the required documentation for the transaction by which it received legal title, that
       is, the last transfer in the chain. Plaintiff argues that it is not required under section 8b to
       produce any of the documentation related to the other three transactions in the chain of title
       in order to establish plaintiff’s own claim to the debt.
¶9          Given the complexity of the chain of title to the debt in this case, it is helpful to
       consider the pleading requirements for each link in the chain piece by piece. First, consider
       a situation where a creditor hires a collection agency to collect on a debt. In that case, the
       creditor assigns legal title for the debt to the agency, and the agency files a lawsuit against
       the debtor in order to collect the debt:



                                               Collection
           Creditor                                                                     Debtor
                                                Agency

       In this situation, there are two statutory pleading requirements. The first is found in section
       2-403(a) of the Code of Civil Procedure (735 ILCS 5/2-403(a) (West 2008)), which grants
       an assignee standing to sue to collect a debt in its own name so long as the assignee’s
       complaint “on oath allege[s] that he or she is the actual bona fide owner thereof, and set[s]
       forth how and when he or she acquired title.” In order to comply with section 2-403(a), the
       collection agency would merely file a verified complaint (or an affidavit attached to the
       complaint) that alleges the required facts.
¶ 10       Because this transaction is an assignment for collection, however, the agency must also
       comply with section 8b of the Collection Agency Act. Under section 8b(e), “[n]o litigation
       shall commence in the name of the licensee as plaintiff unless: (i) there is an assignment of

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       the account that satisfies the requirements of this Section and (ii) the licensee is represented
       by a licensed attorney at law.” 225 ILCS 425/8b(e) (West 2008). Therefore, in addition to
       the allegations regarding how and when the agency acquired title to the debt that are
       required under section 2-403(a) of the Code of Civil Procedure (735 ILCS 5/2-403 (West
       2008)), the agency must also plead that there was a valid assignment for collection by
       including the three factual allegations regarding the assignment pursuant to section 8b of
       the Collection Agency Act (225 ILCS 425/8b (West 2008)) that we identified in Shah I. 1
¶ 11       But what about a situation where the creditor assigns legal title in a debt to one
       collection agency and then that collection agency in turn assigns its interest in the debt to
       another collection agency? There is now an extra entity in the chain of title:



                                         Collection                      Collection
           Creditor                                                                                         Debtor
                                         Agency 1                        Agency 2

       Even so, the second agency does not have standing to pursue the debt under section 2-403
       of the Code of Civil Procedure (735 ILCS 5/2-403 (West 2008)) unless it explains the
       entire chain of title for the debt in its complaint. Section 2-403 requires a plaintiff to detail
       how it came to own its legal interest in the debt that the debtor owes to the creditor, and
       such an explanation would be materially incomplete if the plaintiff did not trace the chain
       of title back to its origin with the creditor. The debtor (and more importantly, the court)
       would have no way of knowing whether the plaintiff actually had legal standing to collect
       on the debt if the plaintiff were permitted to state only that it acquired its interest in the debt
       from another collection agency but was not required to explain how and when that
       collection agency in turn acquired legal title to the debt from the creditor.
¶ 12        The more interesting question is whether a plaintiff in this situation is also required to
       adhere to the requirements of section 8b. It is clear from the plain language of the statute
       that a plaintiff must satisfy section 8b’s requirements for the first assignment for collection
       in the chain of title, that is, the assignment of legal title from the creditor to the first
       collection agency. But section 8b refers only to “the assignment” in the singular rather than
       referring to multiple assignments, the implication being that section 8b applies only to the
       initial assignment for collection in the chain of title. Although the plain language of a
       statute is often the best indication of legislative intent (see Business Service Bureau, Inc. v.
       Webster, 298 Ill. App. 3d 257, 259 (1998)), our overall goal in statutory interpretation is to
       give effect to the intent of the legislature and we “need not accept the literal meaning of a

           1
             Amicus National Association of Retail Collection Attorneys (NARCA) raised an interesting point in its
       brief regarding whether section 8b requires the actual documents manifesting the assignment to be attached
       to the complaint, or whether the section is satisfied if the complaint merely alleges that the written documents
       exist and identifies each of the required elements. We need not resolve that question in this case, however,
       given that plaintiff has not included the requisite factual allegations in the body of its complaint but instead
       merely refers to documents attached as exhibits to the complaint.

                                                       -5-
       statute if it would produce an absurd result” (Shah I, 407 Ill. App. 3d at 743). The entire
       point of section 8b is to ensure that “ ‘the terms of the assignment be open and precise to
       protect the consumer from repetitive litigation and debt collection abuse.’ ” Id. at 744
       (quoting Webster, 298 Ill. App. 3d at 260). If the legislature thought that the stringent
       protections of section 8b were necessary to guard against debt-collection abuse in
       situations where legal title has been assigned only once, then we cannot believe that the
       legislature did not intend for those same requirements to apply in situations where legal
       title has been assigned multiple times to different collection agencies. Even more so than
       for a single assignment, such a situation is ripe for abuse and repetitive litigation against a
       debtor by multiple collection agencies that each claim to hold legal title to the debt. Only
       when the plaintiff complies with section 8b for each of the assignments of legal title in the
       chain can the debtor (and in turn, the court) be certain that the plaintiff currently holds legal
       title to the debt and is therefore the proper plaintiff for the case.
¶ 13        But now consider a different situation. Assume that instead of hiring a collection
       agency to pursue the debt, the original creditor simply sells its entire interest in the debt to
       a debt buyer:



                                                    Debt
           Creditor                                                                     Debtor
                                                    Buyer
       The buyer now holds both legal and equitable title to the debt and the creditor has
       relinquished all ownership claims. If the buyer then files suit against the debtor, what must
       it plead regarding chain of title?
¶ 14        It is clear (and the parties agree) that in this situation the standing requirements of
       section 2-403(a) of the Code of Civil Procedure (735 ILCS 5/2-403(a) (West 2008)) once
       again apply. What is not so clear is whether section 8b of the Collection Agency Act (225
       ILCS 425/8b (West 2008)) does as well. Plaintiff points out that section 8b is titled
       “Assignment for collection,” and refers only to an account that is “assigned to a collection
       agency for collection with title passing to the collection agency to enable collection of the
       account in the agency’s name as assignee for the creditor.” (Emphases added.) 225 ILCS
       425/8b (West 2008). This is a textbook definition of an assignment for collection, which is
       a specific legal concept that refers to the transfer of only legal title for the sole purpose of
       collecting a debt on behalf of the creditor. Importantly, assignment for collection is distinct
       from a sale, which refers to the transfer of both legal and equitable title. See generally
       Sprint, 554 U.S. at 275-80 (historical overview of the evolution of the assignability of
       choses in action). By referring specifically to assignments for collection, the plain
       language of section 8b indicates that the legislature intended to exclude sales of an account




                                                 -6-
       to a debt buyer from the section’s reach. 2 Thus, in order to state a cause of action in this
       situation a debt buyer, unlike an assignee for collection, need only comply with the
       standing requirements of section 2-403(a).
¶ 15       And what about a more complex situation where a creditor sells an account to a debt
       buyer, which then hires a collection agency to pursue the debt?



                                            Debt                       Collection
          Creditor                                                                                       Debtor
                                            Buyer                       Agency

       This is merely a combination of the first two scenarios. As the plaintiff, the collection
       agency must establish its standing under section 2-403(a) by explaining the entire chain of
       title, but it must also plead the additional information required by section 8b regarding the
       transaction between itself and the debt buyer in order to establish that a valid assignment
       for collection occurred.
¶ 16        With this framework in mind, it is now relatively easy to understand what plaintiff is
       required to plead in this case. Although lengthy, the series of transfers in this case is only a
       logical extension of the last scenario:



                             Unifund
         Citibank                                   Cliffs            Palisades            Plaintiff         Defendant
                            Portfolio A



       By referring to each entity in the chain of title by its role in the transactions, the pleading
       requirements for each step in the chain become clear:



                               Debt                Debt              Collection          Collection
         Creditor                                                                                              Debtor
                              Buyer 1             Buyer 2            Agency 1            Agency 2




           2
            Indeed, the legislature recently amended the Collection Agency Act to explicitly exempt assignments to
       debt buyers from section 8b’s requirements. See Pub. Act 97-1070 (eff. Jan. 1, 2013) (amending 225 ILCS
       425/2, 8.5, 8.6 (West 2010)). The amendments did not take effect until January of this year, however, so they
       have no effect on the requirements that were in effect at the time this case was filed.

                                                      -7-
       Under section 2-403, plaintiff must explain the entire chain of title in order to establish its
       standing to sue on the debt. As is mandated by the statute, plaintiff can do this by filing
       either a verified complaint or an affidavit that explains how and when each entity in the
       chain acquired title. Additionally, because plaintiff holds only legal title to the debt,
       plaintiff must demonstrate that the assignments for collection in the chain of title are valid
       by complying with section 8b. In this case, Cliffs holds equitable title to defendant’s debt,
       so plaintiff must provide the section 8b information for both the Cliffs-to-Palisades
       assignment and the Palisades-to-plaintiff assignment. But because section 8b does not
       apply to sales to debt buyers, plaintiff is not required to provide similar information for the
       Citibank-to-Portfolio A transaction or the Portfolio A-to-Cliffs transaction.
¶ 17       With all of that said, we can now examine the actual pleadings in this case. In its fourth
       amended verified complaint, plaintiff alleged that Citibank sold both its legal and equitable
       interests in defendant’s account to Unifund Portfolio A on October 3, 2006, via a bill of
       sale that plaintiff attached to the complaint. Unifund Portfolio A immediately sold its
       interests in the account to Cliffs at 12:01 a.m. that same day. Under a preexisting
       “forward-flow” agreement that had been in effect since May 28, 2003, Cliffs then
       automatically assigned its legal interest in the account to Palisades, which interest was then
       in turn automatically assigned to plaintiff under another forward-flow “master servicing
       agreement” between Palisades and plaintiff that had been in effect as amended since June
       6, 2003. Although the series of transactions was complex, these verified allegations clearly
       establish how and when title to defendant’s debt passed between each entity in the chain,
       and the allegations clearly explain which parties currently have an ownership interest
       (whether legal or equitable) in defendant’s debt. The complaint is therefore sufficient to
       establish plaintiff’s standing under section 2-403.
¶ 18       The next question is whether the complaint’s allegations regarding the last two
       transactions in the chain are sufficient under section 8b. An assignee for collection must
       satisfy three requirements in order to plead a valid assignment for collection. The plaintiff
       must plead that the document manifesting the assignment identifies (1) the accounts
       transferred, (2) the consideration paid, and (3) the effective date of the transfer. See Shah I,
       407 Ill. App. 3d at 747. In this case the third element is easily satisfied. Plaintiff attached to
       the complaint the agreement that controlled the assignment of legal title for defendant’s
       account from Cliffs to Palisades as well as the amended master servicing agreement
       between Palisades to plaintiff. Those agreements both stated that any accounts receivable
       acquired by the assignor would be automatically assigned to the assignee immediately
       upon acquisition by the assignor (thus the term “forward-flow”). The effective date of the
       assignment from Cliffs to Palisades (and also from Palisades to plaintiff) is therefore the
       date that Cliffs acquired the account from Portfolio A: October 6, 2003.
¶ 19       The other two elements are more troublesome. Regarding the accounts transferred, the
       agreement between Citibank and Portfolio A refers to a list of accounts known as the
       “Asset Schedule,” which was purportedly a spreadsheet that contained the identifying
       information for all accounts that are to be transferred to Portfolio A. The Asset Schedule
       was attached as “Exhibit 1” to the Citibank-Portfolio A agreement. But the copy of
       “Exhibit 1” in the record has been completely redacted. In support of its claim that


                                                 -8-
       defendant’s account was one of the accounts transferred, plaintiff has instead attached
       another free-standing exhibit to the complaint that consists of only a single line of
       information on three otherwise blank pages. This appears to be the identifying information
       for defendant’s account, but there is no indication in the document that it was part of the
       Asset Schedule referenced in the Citibank-Portfolio A agreement. Indeed, the only basis
       for the claim that defendant’s account was part of the assets transferred from Citibank to
       Portfolio A is plaintiff’s allegation that it was. The problem is the same with the Portfolio
       A-Cliffs agreement, which also contains an asset schedule that has been completely
       redacted. This means that the documents attached to the complaint that purport to manifest
       the assignments between Citibank, Portfolio A, and Cliffs do not actually contain any
       information regarding the accounts transferred.
¶ 20       Had those been the only transactions in the chain of title, then there would not
       necessarily be a problem because the Citibank-to-Portfolio A and Portfolio A-to-Cliffs
       transactions are not subject to the requirements of section 8b. But recall that the
       forward-flow arrangements between Cliffs, Palisades, and plaintiff automatically
       transferred all assets as soon as they were acquired by the assignors, so the agreements did
       not include lists of specific accounts that were subject to the agreements. Because the
       assignments for collection were arranged in this way, the identifying information for
       accounts transferred can only be found by referring to the asset schedules from the
       Citibank-Portfolio A and Portfolio A-Cliffs agreements. Such incorporation by reference is
       acceptable, as we held in Shah I, 407 Ill. App. 3d at 743-44. Yet the incorporated asset
       schedules in those agreements have been redacted and therefore do not include the relevant
       account information. The only indication in the record that defendant’s account was
       actually part of the accounts transferred is a single line of account information that has been
       stripped of all context and then cut and pasted into a separate exhibit to the complaint.
       Plaintiff claims that that defendant’s account information came from the asset schedules,
       but plaintiff has not included an unredacted version of the documents in the record.
¶ 21       The same is true of the consideration requirement. The agreements between Cliffs,
       Palisades, and plaintiff each incorporate a “Fee Schedule,” which lists the compensation
       that the assignee is entitled to receive. But the fee schedules and accompanying
       consideration information have also been redacted from all copies of the complaint in the
       record on appeal. The apparent reason for the redactions is that plaintiff considered the
       information to be proprietary, so it asked the circuit court to place unredacted copies of
       those documents under seal. 3 But that has proven fatal to our ability to review this case on
       appeal because plaintiff never filed an unredacted copy with this court. The only record
       available to us for review has been stripped of the asset schedules and any information
       regarding the consideration terms for the assignments.
¶ 22       It has long been settled that it is the appellant’s burden to provide an adequate record of
       the proceedings in order for us to fully review the issues on appeal (Altaf v. Hanover

                3
                  Whether that is permissible under section 8b is at least debatable. Defendant contends that placing
       the consideration terms under seal violates section 8b’s requirement that terms of the assignment be “open
       and precise” (Webster, 298 Ill. App. 3d at 260) but that is something that we need not consider here because
       of plaintiff’s failure to provide us with a complete record.

                                                      -9-
       Square Condominium Ass’n No. 1, 188 Ill. App. 3d 533, 539 (1989)), so we must resolve
       any doubts that may arise due to the incompleteness of the record against the appellant
       (Foutch v. O'Bryant, 99 Ill. 2d 389, 392 (1984)). Plaintiff’s failure to include a complete
       and unredacted version of the complaint’s supporting documents in the record on appeal
       prevents us from determining whether the complaint satisfies section 8b’s mandate. The
       parties disagree whether the unredacted versions of the documents properly disclose the
       amounts paid by Palisades and plaintiff for defendant’s account and whether the asset
       schedules actually included defendant’s account, but we cannot resolve the dispute without
       reviewing those documents. If plaintiff was concerned about the confidentiality of
       proprietary information, then it could have asked to file the documents with this court
       under seal as our local rules allow in some circumstances (see Ill. App. Ct., First Dist., R.
       17 (eff. Sept. 1, 2004)). But plaintiff did not do so, which leaves us to resolve this appeal on
       an incomplete record.
¶ 23        Section 8b prohibits plaintiff from stating a claim to defendant’s debt without first
       demonstrating that the written assignments for collection in the chain of title satisfy section
       8b. See 225 ILCS 425/8b(e) (West 2008). Based on the record before us, plaintiff has not
       done so because the information required by section 8b has been removed from the
       documents. While it is entirely possible that the unredacted versions satisfy section 8b, we
       cannot know because they have not been included in the record. Absent a sufficient record
       for us to review, we must presume that the trial court’s rulings on these matters “had a
       sufficient factual basis and *** conform[ed] with the law.” In re Marriage of Gulla, 234
       Ill. 2d 414, 422 (2009). Plaintiff’s failure to include unredacted copies of the documents
       that contain the consideration terms and account information for the assignments prevents
       us from reviewing plaintiff’s claim that the assignments satisfy section 8b, so we must
       assume that the circuit court ruled correctly when it dismissed the complaint.

¶ 24          Affirmed.




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