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

      Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018   Page 2 of 10
[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

      Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018   Page 3 of 10
      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.



      Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018   Page 4 of 10
      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.




      Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018   Page 5 of 10
         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

       Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018   Page 6 of 10
                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.

       Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018                          Page 7 of 10
[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

       Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018   Page 8 of 10
       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.

       Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018   Page 9 of 10
       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.




       Court of Appeals of Indiana | Memorandum Decision 18A-MF-629 | September 25, 2018   Page 10 of 10
