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New Welton Homes v. Eckman6/28/2005
A family contracted for a manufactured home. The agreement included a warranty requiring any claims for breach to be brought within one year. Two years after the home was completed, the purchasers experienced foundation damage after substantial rains and sued the seller for breach of contract. They urge that the discovery rule used for determining when a cause of action accrues within the meaning of the statute of limitations be deployed to extend warranty agreements in contracts. We conclude that there is little justification for such judicial alteration of private contracts.
Facts and Procedural History
In December 1998, Lance and Karen Eckman contracted with Don Welton Manufactured Housing, Inc. (now "New Welton") to purchase and place a 1999 Commodore Modular Home. Among other things, the agreement required installation of a foundation on which to place the modular home, and the creation of a perimeter drain to prevent moisture encroachment on and beneath the foundation. New Welton obtained a proposal from Green Concrete to help backfill the foundation and perimeter drain, and grade and seed that area. New Welton completed this project in June 1999.
The area where the Eckmans reside experienced a drought between 1999 and 2001. There were several consecutive days of rainfall in late May and early June 2001. About a month after these rains, the Eckmans noticed settling and cracking inside the modular home. They discovered water standing around the perimeter of it. Further investigation revealed moisture accumulated inside the foundation area and around the structural support system under the home. This discovery occurred about two and a half years after the home's completion.
The Eckmans sued New Welton and Green, claiming a failed perimeter drainage system and seeking a judgment for the resulting damage. New Welton moved for summary judgment, citing the claims provision in the contract between them. The Eckmans and New Welton had signed a contract under which they agreed that in the event either of them breached, claims for the breach must be brought within one year of the breach. The trial court denied the motion for summary judgment, holding that the discovery rule applied to the contractual limitations period.
The Court of Appeals affirmed, holding that a discovery rule could apply to a breach of contract action that included a limitation action provision. New Welton Homes v. Eckman, 786 N.E.2d 1172, 1178 (Ind. Ct. App. 2003) vacated. We granted transfer.
Contractual Limitation v. Discovery Rule
The Eckmans argue that the discovery rule should apply because they were not able to detect the defective perimeter drain until after the damage surfaced from the rainfall of May 2001. To support their position, the Eckmans cite Barnes v. A.H. Robbins Co., 476 N.E.2d 84 (Ind. 1985), which states that "it is inconsistent with our system of jurisprudence to require a claimant to bring his cause of action in a limited period in which, even with due diligence, he could not be aware that a cause of action exists." Id. at 86. As such, the Eckmans believe that the contractual limitation provision began to run after the damage was discovered, not when it occurred. (Appellees' Br. at 9).
The Eckmans also cite Essex Wire Corp. v. M.H. Hilt Co., 263 F.2d 599 (7th Cir. 1959), where the court held that a cause of action accrues at the time that one suffers legal injury and resulting damage that is sustainable and that both elements must come into existence before the limitation period commences to run. Like the Court of Appeals, the Eckmans rely on Habig v. Bruning, 613 N.E.2d 61 (Ind. Ct. App. 1993), to support the extensio
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