Rule 23 order filed                 2019 IL App (5th) 180202
March 13, 2019.
Motion to publish granted                NO. 5-18-0202
April 12, 2019.
                                             IN THE

                              APPELLATE COURT OF ILLINOIS

                               FIFTH DISTRICT
______________________________________________________________________________

MIDLAND FUNDING LLC,                      )     Appeal from the
                                          )     Circuit Court of
       Plaintiff,                         )     Clinton County.
                                          )
v.                                        )     No. 17-SC-26
                                          )
JEAN SCHELLENGER,                         )
                                          )
       Defendant                          )
                                          )
(Jean Schellenger, on Behalf of Herself   )
and a Putative Class, Counterclaimant-    )
Appellant; Midland Funding LLC and        )     Honorable
Midland Credit Management, Inc.,          )     Michael D. McHaney,
Counterdefendants-Appellees).             )     Judge, presiding.
______________________________________________________________________________

          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.

                                                 1
¶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


                                                    2
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 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


                                                 3
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


                                                 4
issuing retailer[,] are subject to the four-year statute of limitations,” which governs contracts

relating to the sale of goods.

¶ 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,




                                                5
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 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


                                                   6
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 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 14 Ill. App. 3d at 839. 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.




                                                 7
                                     2019 IL App (5th) 180202

                                          NO. 5-18-0202

                                             IN THE

                               APPELLATE COURT OF ILLINOIS

                                        FIFTH DISTRICT


MIDLAND FUNDING LLC,                          )     Appeal from the
                                              )     Circuit Court of
        Plaintiff,                            )     Clinton County.
                                              )
v.                                            )     No. 17-SC-26
                                              )
JEAN SCHELLENGER,                             )
                                              )
        Defendant                             )
                                              )
(Jean Schellenger, on Behalf of Herself       )
and a Putative Class, Counterclaimant-        )
Appellant; Midland Funding LLC and            )     Honorable
Midland Credit Management, Inc.,              )     Michael D. McHaney,
Counterdefendants-Appellees).                 )     Judge, presiding.
_____________________________________________________________________________________

Rule 23 Order Filed:             March 13, 2019
Motion to Publish Granted:       April 12, 2019
Opinion Filed:                   April 12, 2019
_____________________________________________________________________________________

Justices:             Honorable James R. Moore, J.

                    Honorable David K. Overstreet, P.J., and
                    Honorable Melissa A. Chapman, J.,
                    Concur
_____________________________________________________________________________________

Attorneys           Daniel A. Edelman, Cathleen M. Combs, James O. Latturner, Francis R. Greene,
for                 Isabella M. Janusz, Edelman, Combs, Latturner & Goodwin, LLC, 20 S. Clark
Appellant           Street, Suite 1500, Chicago, IL 60603-3403; Dennis L. Koch, 815 Laurel Street,
                    Suite 23, Highland, IL 62249-2106
_____________________________________________________________________________________

Attorneys           William P. Hardy, Hinshaw & Culbertson LLP, 400 South Ninth Street,
for                 Suite 200, Springfield, IL 62701-1908; Louis J. Manetti, Jr., David M. Schultz,
Appellees           Hinshaw & Culbertson LLP, 151 N. Franklin St., Suite 2500, Chicago, IL 60606
_____________________________________________________________________________________
