Midland Funding, LLC v. Charfi

2020 IL App (1st) 190002-U

• Court: Appellate Court of Illinois
• Decided: September 30, 2020
• Docket: 1-19-0002
• Status: Unpublished

Opinion

2020 IL App (1st) 190002-U No. 1-19-0002 Order filed September 30, 2020 Fourth Division

NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1). ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________ MIDLAND FUNDING, LLC, ) Appeal from the ) Circuit Court of Plaintiff-Appellee, ) Cook County. ) v. ) No. 17 m1 111381 ) ALI CHARFI, ) Honorable ) Yvonne Coleman, Defendant-Appellant. ) Judge, Presiding.

JUSTICE HALL delivered the judgment of the court. Presiding Justice Gordon and Justice Lampkin concurred in the judgment.

ORDER

¶1 Held: We affirmed the admissibility of plaintiff’s exhibit as a business record and found that plaintiff had standing to sue defendant as a debt purchaser where it established that it was the bona fide owner of the debt and the chain of title for the debt.

¶2 Plaintiff Midland Funding, LLC, a debt buyer, filed suit against defendant Ali Charfi to

collect a delinquent credit card debt. On appeal, defendant contends that: 1) plaintiff did not lay a

foundation for its Exhibit 2 that would qualify for the “business record” exception to the hearsay

rule, and 2) plaintiff’s Exhibit 2 standing alone without explanatory evidence did not prove No. 1-19-0002

plaintiff’s title to defendant’s account and accordingly, its standing to sue him. For the following

reasons, we affirm.

¶3 BACKGROUND

¶4 In 2014, defendant received a line of credit from Synchrony Bank. In July 2016, Synchrony

Bank charged off defendant’s account for his failure to pay an outstanding balance of $5278.91.

On August 24, 2016, Synchrony Bank sold defendant’s account to plaintiff. On August 26, a bill

of sale was issued between Synchrony Bank and plaintiff and evidencing the transaction.

¶5 In May 2017, plaintiff filed a complaint in the circuit court of Cook County to collect

defendant’s outstanding debt. At trial, defendant testified that he opened a credit card with

Synchrony Bank, received statements in the mail, ceased making payments, and owed money on

the account. Additionally, defendant confirmed that plaintiff’s Exhibit 1 consisted of billing

statements from his account.

¶6 Plaintiff called Paula Fruth to testify as a custodian of records. Ms. Fruth worked as a senior

legal consultant for Midland Credit Management, a sister-company of plaintiff, which provided

management services to plaintiff after it purchased debt. Fruth’s testimony was to establish the

foundation for plaintiff’s exhibits as business records that would exempt them from the rule against

hearsay. Defendant repeatedly objected to Fruth’s testimony concerning Exhibit 2. Defendant

argued that Fruth had no personal knowledge that would allow her to testify about the creation of

Exhibit 2 as she was neither an employee of plaintiff nor Synchrony Bank.

¶7 Regarding Exhibit 2, the circuit court made the following findings:

“Defendant moves to strike the testimony offered to explain the meaning of Exhibit

2 on the ground that the document speaks for itself. The Court agrees that any witness

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testimony offered to explain the meaning of Exhibit 2 is inadmissible and, therefore, is

stricken. Defendant further objects to the admissibility of Exhibit 2 on the ground the

witness does not have personal knowledge regarding the transaction. Although the

document is apparently written on Synchrony Bank letterhead and bears the sole signature

of a Synchrony representative, the Bill of Sale is an agreement between [Midland] and

Synchrony Bank. The witness testified that Exhibit 2 is made and kept in the regular course

of [Midland’s] business and that it is the regular practice of [Midland] to maintain these

records. [Midland] laid a proper foundation pursuant to Illinois Supreme Court Rule 236

and therefore, Exhibit 2 is admissible.”

¶8 The circuit court subsequently entered judgment against defendant in the amount of

$5278.91 plus costs on December 7, 2018. This timely appeal followed.

¶9 ANALYSIS

¶ 10 On appeal, defendant contends that: 1) plaintiff did not lay a foundation for its Exhibit 2

that would qualify for the “business record” exception to the hearsay rule, and 2) plaintiff’s Exhibit

2 standing alone without explanatory evidence did not prove plaintiff’s title to defendant’s account

and accordingly, its standing to sue him.

¶ 11 A. Business Exception to Hearsay

¶ 12 Defendant first contends that the circuit court abused its discretion in finding that plaintiff

laid a proper foundation for Exhibit 2 to be admitted into evidence under the business records

exception to the hearsay rule. Defendant argues that plaintiff’s only evidence was documents it

bought from a third party, Synchrony Bank, which were out-of-court statements, and accordingly,

hearsay. Defendant further argues that it was error for Exhibit 2 to be exempted from the hearsay

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rule because Fruth was unable to testify from personal knowledge that the documents were records

of regular activity timely kept in the regular course of business as required under the Illinois

evidentiary rules. He maintains that Fruth’s testimony did not meet those requirements because

she never worked for Synchrony Bank, but only for plaintiff.

¶ 13 The determination of whether business records are admissible is within the sound

discretion of the circuit court, and its decision will not be reversed absent an abuse of discretion.

JPMorgan Chase Bank, N.A. v. East-West Logistics, L.L.C., 2014 IL App (1st) 121111, ¶ 81. An

abuse of discretion occurs only where the court’s ruling is arbitrary, fanciful, or unreasonable, or

where no reasonable person would take the view adopted by the circuit court. Id. A reviewing

court may sustain an evidentiary ruling by the circuit court for any appropriate reason, regardless

of whether the trial court relied on that reason or whether the trial court’s reasoning was correct.

Kimble v. Earle M. Jorgenson Co., 358 Ill. App. 3d 400, 408 (2005).

¶ 14 The theory upon which entries made in the regular course of business are admissible as an

exception to the hearsay rule is that “ ‘since their purpose is to aid in the proper transaction of the

business and they are useless for that purpose unless accurate, the motive for following a routine

of accuracy is great and the motive to falsify nonexistent.’ ” Kimble, 358 Ill. App. 3d at 414,

(quoting M. Graham, Cleary & Graham’s Handbook of Illinois Evidence, §803.10, at 817 (7th

Ed.1999)). Thus, it makes no difference whether the records are those of a party or of a third

person authorized to generate the record on the business’s behalf. Kimble, 358 Ill. App. 3d at 414.

¶ 15 Supreme Court Rule 236 codifies the business record exception to the hearsay rule. It

states, in pertinent part:

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“Any writing or record, whether in the form of any entry in a book or otherwise,

made as a memorandum or record of any act, transaction, occurrence, or event, shall be

admissible as evidence of the act, transaction, occurrence, or event, if made in the regular

course of any business, and if it was the regular course of the business to make such a

memorandum or record at the time of such act, transaction, occurrence, or event or within

a reasonable time thereafter. All other circumstances of the making of the writing or

record, including lack of personal knowledge by the entrant or maker, may be shown to

affect its weight, but shall not affect its admissibility.” Ill. S. Ct. R. 236(a) (eff. Aug. 1,

1992).

¶ 16 Because the accuracy of the record is presumed, Rule 236 requires only that the party

tendering the record satisfy the foundational requirements that (1) the record was made in the

regular course of business and (2) at or near the time of the event or occurrence. Kimble, 358 Ill.

App. 3d at 414. A sufficient foundation for admitting records may be established through

testimony of the custodian of records or another person familiar with the business and its mode of

operation. Id. Moreover, while the lack of personal knowledge by the maker of the record may

affect the weight of the evidence, it does not affect its admissibility. Id. at 415. Once a witness

has established the foundational requirements of a business record, the record itself should be

introduced. Troyan v. Reyes, 367 Ill. App. 3d 729, 733 (2006). Business records should only be

barred from admission if they are irrelevant, prejudicial or for some other legal appropriate reason.

Id.

¶ 17 In this case, Fruth testified that she was a custodian of records for plaintiff, and that she

regularly reviewed accounts purchased by plaintiff to verify the accuracy of those purchased

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accounts. Fruth also testified that she had access to plaintiff’s records, was familiar with the

business and its mode of operation. Additionally, she testified that Exhibit 2 was made in the

ordinary course of plaintiff’s business and at or near the time of the transaction. She further

testified that it was plaintiff’s regular practice to maintain such records.

¶ 18 Defendant’s contention that Fruth’s testimony failed to lay a foundation because Exhibit 2

was a document created by a third party fails because business records are presumed inherently

reliable and it does not matter if a third party created them. See Kimble, 358 Ill. App. 3d at 414.

Additionally, whether Fruth had personal knowledge of the information contained in the record

only affects its weight, not its admissibility. Id. at 415.

¶ 19 Nor do we find persuasive defendant’s argument that Exhibit 2 contained retained third-

party documents and could not be considered business records. International Harvester Credit

Corp. v. Helland, 151 Ill. App. 3d 848 (1986), on which defendant relies, is inapposite.

¶ 20 In that case, corporate officers of a non-party held a special meeting to authorize certain

employees of International Harvester the ability to execute promissory notes. Id. at 854. No

International Harvester employees were present at the meeting. The circuit court barred the

officers’ minutes from evidence. Id. The Helland court affirmed. Id. The third-party minutes of

the non-party were not the business records of International Harvester, even though they had been

retained in its files. Id.

¶ 21 The present case is distinguishable. In this case, Exhibit 2 consisted of documents that

evidenced a contract between two companies, Synchrony Bank, and plaintiff. Indeed, the circuit

court found that “[a]though the document is apparently written on Synchrony Bank letterhead and

bears the sole signature of a Synchrony representative, the Bill of Sale is an agreement between

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[Midland] and Synchrony Bank.” As an agreement between both parties, Exhibit 2 equally belongs

to plaintiff and Synchrony Bank as a record of its transaction.

¶ 22 We find that the circuit court’s conclusion that plaintiff laid a proper foundation pursuant

to Rule 236 with Fruth’s testimony and the admission of Exhibit 2 into evidence was not an abuse

of discretion.

¶ 23 B. Standing to Sue

¶ 24 Defendant next contends that plaintiff’s documents that were admitted into evidence failed

to establish that it had title to defendant’s account and thus, plaintiff lacked standing to bring suit.

He argues that no link can be shown between “whatever it was that plaintiff claims to have

purchased” and his account. This argument is without merit.

¶ 25 Standing is the requirement that a lawsuit cannot commence unless a plaintiff has some

injury in fact to a legally recognized interest. Unifund CCR Partners v. Shah, 407 Ill. App. 3d 737,

740 (2011). The purpose of the doctrine of standing is to ensure that courts are deciding actual

controversies, and not some abstract questions or moot issues. Id. The primary focus of standing

is that a party have a real interest in the action and its outcome. Id. In deciding whether a party

has standing, a court must look at the party to see if he or she will be benefitted by the relief

granted. Id.

¶ 26 A plaintiff need not allege facts establishing standing. Knott v. Woodstock Farm & Fleet,

Inc., 2017 IL App (2d) 160329, ¶ 33. Rather, lack of standing is an affirmative defense, and the

burden of pleading and proving the defense is on the party asserting it. Id.

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¶ 27 Section 2-403 in the Code of Civil Procedure (Code) (735 ILCS 5/1-101 et seq. (West

2018)), which governs who may be plaintiff in the case of assignments and subrogation, provides

that:

“an assignee and owner of a non-negotiable chose in action may sue thereon in his

or her own name. Such a person shall in his or her pleading under oath alleges that he or

she is the actual bona fide owner thereof, and set forth how and when he or she acquired

title.” 735 ILCS 5/2-403 (West 2018).

A “chose in action” is a “proprietary right in personam, such as a debt owed by another person, a

share in a joint-stock company, or a claim for damages in tort.” Unifund CCR Partners, 407 Ill.

App. 3d at 741, (quoting Black’s Law Dictionary 234 (7th ed.1999)). The plaintiff must detail

how it came to own its legal interest in the debt by tracing the chain of title back to its origin with

the creditor. Unifund CCR Partners v. Shah, 2013 IL App (1st) 113658, ¶ 11. In order to state a

cause of action, a debt buyer need only comply with the standing requirements of section 2-403(a).

Id. at ¶ 14.

¶ 28 Whether plaintiff had standing is a question of law and subject to de novo review. In re

County Treasurer, 2013 IL App (3d) 120999, ¶ 16; Powell v. Dean Foods Co., 2012 IL 111714,

¶ 35.

¶ 29 We find that plaintiff conclusively proved its ownership of defendant’s delinquent credit

account with Synchrony Bank in accordance with the requirements of section 2-403. First,

plaintiff showed that it was the bona fide owner of the debt and second, that it purchased the debt

from Synchrony Bank.

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¶ 30 A review of the record reveals that when plaintiff filed its complaint, it attached the

affidavit of Kristi Lanque, a legal specialist employed by plaintiff, to support the allegations

contained in the complaint. Lanque’s affidavit indicated that she had access to pertinent account

records for plaintiff, and that her statements were based on personal knowledge of accounts

maintained on plaintiff’s behalf. Lanque averred that plaintiff was the current owner or, and/or

successor to, the obligation sued upon and was assigned the rights, title, and interest to Synchrony

Bank’s account with defendant, which reflected a balance of $5278.91 as of March 8, 2017. Thus,

plaintiff filed a verified complaint. Additionally, plaintiff also attached a copy of a statement of

defendant’s account with Synchrony Bank reflecting a balance of $5278.91 to the account.

¶ 31 At trial, plaintiff introduced evidence in the form of Exhibits 1 and 2 to further support its

claims of ownership and to establish the chain of title. Exhibit 1 consisted of Symphony Bank

credit card statements with defendant’s name, address and account number. Exhibit 2 consisted

of the Bill of Sale of plaintiff’s purchase of defendant’s debt from Synchrony Bank, also including

defendant’s name, address, and account number, among other things. Plaintiff also presented

Fruth’s testimony, which established that the Exhibit 2 was a business record kept in the normal

course of plaintiff’s business as a debt buyer, and we have already determined that Exhibit 2 was

properly admitted as a business record.

¶ 32 Additional evidence presented at trial consisted of defendant’s own testimony that he had

a credit account with Synchrony Bank and that he stopped paying the amounts due on the account,

and that Exhibit 1 was a statement from his account.

¶ 33 We find that defendant’s conclusory argument fails to support his burden of proving

plaintiff’s lack of standing. To the contrary, the verified complaint, exhibits and testimony at trial

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overwhelmingly establish that plaintiff had standing as a debt purchaser to sue defendant to collect

the delinquent debt.

¶ 34 CONCLUSION

¶ 35 For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed.

¶ 36 Affirmed.

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