MEMORANDUM DECISION
FILED
Pursuant to Ind. Appellate Rule 65(D), this Sep 25 2018, 8:47 am
Memorandum Decision shall not be regarded as
precedent or cited before any court except for the CLERK
Indiana Supreme Court
purpose of establishing the defense of res judicata, Court of Appeals
and Tax Court
collateral estoppel, or the law of the case.
ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEE
Shaun T. Olsen Michael V. Knight
Olsen Legal Group Ltd. Barnes & Thornburg LLP
Merrillville, Indiana South Bend, Indiana
Alice J. Springer
Barnes & Thornburg LLP
Elkhart, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Paresh Shah and Shobhana Shah, September 25, 2018
Appellants-Defendants-Counterclaim Court of Appeals Case No.
Plaintiffs, 18A-MF-629
Appeal from the Lake Superior
v. Court
The Honorable John M. Sedia,
Wells Fargo Bank, N.A., Judge
Appellee-Plaintiff-Counterclaim Trial Court Cause No.
Defendant. 45D01-1502-MF-49
Bradford, Judge.
Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018 Page 1 of 10
Case Summary
[1] In 2007, Paresh and Shobhana Shah borrowed $500,000.00 from TCF National
Bank, a loan secured with a mortgage on property they owned. TCF’s rights in
the transaction have since been transferred to Wachovia Mortgage FSB and
then to Wells Fargo Bank, N.A. (TCF, Wachovia, and Wells Fargo will
henceforth collectively be referred to as “the Bank”). In 2009, after some
disputes, the Shahs and the Bank executed a modification agreement (“the
Modification Agreement”), which increased the principal and imposed a new
monthly payment. From the beginning and for two years afterwards, the Bank
issued incorrect billing statements to the Shahs, who never made a single
payment pursuant to the Modification Agreement.
[2] In 2015, the Bank filed a foreclosure action, and the Shahs filed counter-claims
for, inter alia, breach-of-contract. Both sides moved for summary judgment.
The Bank argued that the Shahs’ breach-of-contract claims were time-barred
claims that the Bank had violated the federal Fair Credit Reporting Act (“the
FCRA”), while the Shahs argued that their claims actually arose under state
contract law. In December of 2017, the trial court entered summary judgment
in favor of the Bank and against the Shahs on their counter-claims. The Shahs
argue that the trial court erred in granting the Bank’s summary judgment
motion and denying theirs. Because we disagree, we affirm.
Facts and Procedural History
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[3] The Shahs own property located in Munster (“the Property”). On June 7, 2007,
the Shahs borrowed $500,000.00 pursuant to a promissory note from the Bank,
which loan was secured by a mortgage on the Property. On April 11, 2008, the
Shahs refinanced the loan by borrowing $555,000.00 pursuant to a promissory
note (“the Note”) and executing a mortgage in favor of the Bank (“the
Mortgage”).
[4] A dispute arose over the Note and Mortgage which led the Shahs to file a
complaint in Illinois state court, which was later removed to federal court. The
Shahs’ federal complaint was resolved by, inter alia, execution of the
Modification Agreement dated September 20, 2009. The Modification
Agreement, which was signed by both Shahs on September 23, 2009, modified
the terms of the Note and Mortgage by increasing the principal owed by the
Shahs to $580,000.00, which was to be retired by 344 monthly payments of
$3246.99 to start on October 15, 2009. On September 29, 2009, the Bank wrote
the Shahs asserting that “[a]ll necessary documentation was submitted to the
credit reporting agencies to remove all derogatory information reported on your
credit file.” Appellants’ App. Vol. II p. 228. The Modification Agreement did
not obligate the Bank to take measures to clear the Shahs’ credit record.
[5] For approximately two years, the Bank sent the Shahs incorrect monthly billing
statements, beginning with a statement dated October 3, 2009, indicating that a
minimum payment of $47,371.04 was due, of which $44,855.64 was past due.
The Modification Agreement contained no requirement that the Bank provide
the Shahs with a monthly statement and provided that “[t]his Agreement can
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only be changed, amended, or modified in a writing signed by the Lender and
Borrower.” Appellants’ App. Vol. II p. 65. It is undisputed that the Shahs
never made even a single payment pursuant to the Modification Agreement,
whether in the correct amount or the amount indicated in the incorrect monthly
statements.
[6] The Bank filed a foreclosure complaint on February 27, 2015. On April 28,
2015, the Shahs answered the Bank’s complaint, which answer was later
amended to include counter-claims against the Bank. The Shahs’ counter-
claims against the Bank were that the Modification Agreement was valid and
enforceable but that the Bank failed to apply and adhere to it, the Bank
breached the Modification Agreement, and the Bank’s acts and omissions
relative to applying the Modification Agreement were negligent.
[7] On August 22, 2017, the Bank moved for summary judgment on the Shahs’
counter-claims. The Bank argued, inter alia, that the Shahs’ contention that it
breached the Modification Agreement was really a claim that it had violated
provisions of the FCRA, a claim that was time-barred. On October 9, 2017, the
Shahs responded to the Bank’s summary judgment motion and cross-moved for
summary judgment, acknowledging that they were in default of the
Modification Agreement but specifically denying making a claim pursuant to
the FCRA. On December 1, 2017, the trial court held a hearing on the motions
for summary judgment. The Shahs conceded during the hearing that the Bank
was entitled to judgment as a matter of law on the negligence counter-claim.
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On December 12, 2017, the trial court entered summary judgment in favor of
the Bank and against the Shahs on the Shahs’ remaining counter-claims.
Discussion and Decision
[8] When reviewing the grant or denial of a summary judgment motion, we apply
the same standard as the trial court. Merchs. Nat’l Bank v. Simrell’s Sports Bar &
Grill, Inc., 741 N.E.2d 383, 386 (Ind. Ct. App. 2000). Summary judgment is
appropriate only where the evidence shows there is no genuine issue of material
fact and the moving party is entitled to a judgment as a matter of law. Id.; Ind.
Trial Rule 56(C). All facts and reasonable inferences drawn from those facts
are construed in favor of the nonmoving party. Merchs. Nat’l Bank, 741 N.E.2d
at 386. To prevail on a motion for summary judgment, a party must
demonstrate that the undisputed material facts negate at least one element of
the other party’s claim. Id. Once the moving party has met this burden with a
prima facie showing, the burden shifts to the nonmoving party to establish that
a genuine issue does in fact exist. Id. The party appealing the summary
judgment bears the burden of persuading us that the trial court erred. Id. The
Shahs argue that the trial court erred in (1) not concluding that the Modification
Agreement is valid and enforceable against the parties and (2) concluding that
there is no genuine issue of material fact as to whether the Bank breached the
Modification Agreement.
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I. Whether the Modification Agreement is Enforceable
[9] The Shahs seem to claim that the trial court determined that the Modification
Agreement was not enforceable. We need spend little time on this claim, as the
ruling that the Shahs breached the Modification Agreement is necessarily
premised on a conclusion that the Modification Agreement bound both parties.
Because the trial court has already ruled that the Modification Agreement was
enforceable against the parties, we need not address this claim further.
II. Whether There is a Genuine Issue of
Material Fact as to Whether the Bank
Breached the Modification Agreement
[10] The Shahs acknowledge that they have failed to make even one payment
pursuant to the Modification Agreement. Default on a mortgage loan can be
established by designating “into evidence the demand note and the mortgage[,]”
Creech v. LaPorte Prod. Credit Ass’n, 419 N.E.2d 1008, 1012 (Ind. Ct. App. 1981),
and evidence, beyond a mere conclusory statement, of default. See McEntee v.
Wells Fargo Bank, N.A., 970 N.E.2d 178, 183 (Ind. Ct. App. 2012). That said,
the Shahs argue that the Bank breached the Modification Agreement first. The
Shahs’ argument is based on what it alleges are violations of the FCRA by the
Bank, namely, making false representations about the amount of the Shahs’
debt via the inaccurate billing statements and allegedly providing false
information to credit agencies.
Congress [has] made it clear that the FCRA is designed to
preserve the consumer’s privacy in the information maintained
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by consumer reporting agencies. See 15 U.S.C. § 1681(a)(4).
Specifically, Congress stated: “There is a need to insure that
consumer reporting agencies exercise their grave responsibilities
with fairness, impartiality, and a respect for the consumer’s right
to privacy.” Id.; see also Trans Union Corp. v. FTC, 81 F.3d 228,
234 (D.C. Cir. 1996) (“Along with accuracy of collected
information, a major purpose of the Act is the privacy of a
consumer’s credit-related data.”)[.]
Cole v. U.S. Capital, 389 F.3d 719, 725 (7th Cir. 2004).
[11] The Shahs acknowledge that any claim they could have brought pursuant to the
FCRA is time-barred.1 The Shahs, however, insist that their claims are not
actually FCRA claims but, rather, are state-law claims that the Bank breached
the Modification Agreement by violating provisions of the FCRA, which it
argues was essentially incorporated into the Modification Agreement by
operation of law. The Bank counters by arguing that the Shahs’ breach-of-
contract claims are, in fact, FCRA claims that are preempted by the FCRA and
so are time-barred. We agree with the Bank.
1
It seems clear that the Shahs could have pursued FCRA claims in the Indiana state court if they had timely
filed them. The FCRA provides, in part, as follows:
An action to enforce any liability created under this subchapter may be brought in any
appropriate United States district court, without regard to the amount in controversy, or
in any other court of competent jurisdiction, not later than the earlier of--
(1) 2 years after the date of discovery by the plaintiff of the violation that is the basis
for such liability; or
(2) 5 years after the date on which the violation that is the basis for such liability
occurs.
15 U.S.C. § 1681p.
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[12] Federal preemption of state laws is a well-settled proposition:
Article VI of the Constitution provides that the laws of the
United States “shall be the supreme Law of the Land; … any
Thing in the Constitution or Laws of any state to the Contrary
notwithstanding.” Art. VI, cl. 2. Thus, since our decision in
M’Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 427, 4 L. Ed. 579
(1819), it has been settled that state law that conflicts with federal
law is “without effect.” Maryland v. Louisiana, 451 U.S. 725, 746,
101 S. Ct. 2114, 2128, 68 L. Ed. 2d 576 (1981). Consideration of
issues arising under the Supremacy Clause “start[s] with the
assumption that the historic police powers of the States [are] not
to be superseded by … Federal Act unless that [is] the clear and
manifest purpose of Congress.” Rice v. Santa Fe Elevator Corp.,
331 U.S. 218, 230, 67 S. Ct. 1146, 1152, 91 L. Ed. 1447 (1947).
Accordingly, “‘[t]he purpose of Congress is the ultimate
touchstone’” of pre-emption analysis. Malone v. White Motor
Corp., 435 U.S. 497, 504, 98 S. Ct. 1185, 1189, 55 L. Ed. 2d 443
(1978) (quoting Retail Clerks v. Schermerhorn, 375 U.S. 96, 103, 84
S. Ct. 219, 222, 11 L. Ed.2d 179 (1963)).
Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 516 (1992).
[13] The FCRA’s preemption clause provides that “[n]o requirement or prohibition
may be imposed under the laws of any State” with respect to several
enumerated areas covered by the FCRA. 15 U.S.C. § 1681t(b). While it is true
that not all state-law claims based on credit-reporting malfeasance are barred,
“FCRA explicitly preempts state-law claims alleging violations of the federal
act.” Todd v. Franklin Collection Serv., Inc., 694 F.3d 849, 852 (7th Cir. 2012)
(citing 15 U.S.C. § 1681t(b)(1)(F); Purcell v. Bank of Am., 659 F.3d 622, 623–25
(7th Cir. 2011)). The Shahs contend that the Bank violated its duties to (1) not
make false representations about the character, amount, or legal status of the
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Shahs’ debt pursuant to 15 U.S.C. § 1692(e) and (2) provide accurate
information to others, including credit reporting agencies pursuant to 15 U.S.C.
§ 1681s-2(a). Appellants’ Br. pp. 24–25. These allegations are explicit claims
that the Bank violated the FCRA and so are preempted and cannot form the
basis of a claim under state law. See Todd, 694 F.3d at 852.
[14] The Shahs, citing to Cipollone, nonetheless argue that their claims are not
preempted because they arise from an agreement between them and the Bank
and not from a requirement or prohibition imposed by state law. In Cipollone,
the son of a deceased smoker pursued state-court claims against Liggett, a
cigarette manufacturer, including a breach-of-express-warranty claim. 505 U.S.
at 509–10. Liggett pointed to the preemption provision of the Public Health
Cigarette Smoking Act of 1969, which is similar to the FCRA’s and provided
that “[n]o requirement or prohibition based on smoking and health shall be
imposed under State law with respect to the advertising or promotion of any
cigarettes the packages of which are labeled in conformity with the provisions
of this Act.” Id. at 515 (citation omitted). A plurality of the United States
Supreme Court concluded that breach-of-warranty claims were not barred
because they did not arise from a “requirement or prohibition … imposed under
State law[,]” but, rather, from an alleged express warranty from the
manufacturer to the consumer. Id. at 526–27.
[15] Noting the similarity between the preemption language in Cipollone and the
FCRA’s preemption language, the Shahs argue that their claims are based on
the alleged violation of duties that arose under the Modification Agreement.
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To the extent that the Bank owed those duties to the Shahs, there is no getting
around the fact that those duties originally arose from and were imposed by the
FCRA. The Modification Agreement itself imposes no obligation on the Bank
to either issue accurate billing statements or to issue accurate information about
the Shahs’ credit history. To the extent that the Bank has these obligations,
they arise by operation of the FCRA. The Shahs’ reliance on Cipollone is
unavailing, as is their attempt to recast their claim as a contract claim in order
to circumvent the FCRA’s statute of limitations.
[16] The judgment of the trial court is affirmed.
Bailey, J., and Mathias, J., concur.
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