ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEES

Mark E. Spitzer Joseph W. Eddingfield 

Marion, Indiana Wabash, Indiana 

In the 

Indiana Supreme Court _________________________________ 

No. 27S02-0309-CV-398 

NEW WELTON HOMES, SUCCESOR IN INTREST TO, 

DON WELTON MANUFACTURED HOUSING, INC., 

 Appellant (Defendant below), 

v. 

LANCE ECKMAN AND KAREN ECKMAN, 

Appellees (Plaintiffs below),

AND 

RICHARD C. GREEN D/B/A GREEN CONCRETE, 

 Appellee (Defendant below). 

 

_________________________________ 

Appeal from the Grant Circuit Court, No. 27C01-0112-CP-876 

The Honorable Thomas R. Hunt, Judge 

_________________________________ 

On Petition to Transfer from the Indiana Court of Appeals, No. 27A02-0208-CV-694 

_________________________________ 

June 28, 2005 

Shepard, Chief Justice.

 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 

2
the breach must be brought within one year of the breach.1

 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 extension of the discovery rule from 

tort to contractual matters. Based on their understanding of Habig, the Eckmans argue that “the 

statute of limitations began to run when [they] ‘knew or in the exercise of due diligence could 

have discovered’” that their property had been damaged as a result of New Welton’s breach. Id. 

at 65; (Appellees’ Br. at 6 – 7). 

 

1

 The one-year period of limitation found in paragraph 15 of the contract states: “I understand and agree that – if 

either of us should breach this contract -- the other of us shall have only one year, after the occurrence of that 

breach, in which to commence an action for a breach of this contract.” (Appellant’s App. at 55.) 

Similar clauses have also been challenged and upheld in federal courts. See e.g. Resolution Trust Corp. v. Krantz, 

757 F.Supp. 915 (N.D. Ill. 1991). 

3
Each of these cases represent disputes in which the courts were called upon to determine 

when a cause of action might “accrue” within the meaning of the applicable statute of limitation. 

New Welton urges that these interpretations of statutory limitation periods are inapplicable. 

Using arguments typically found in the insurance realm, New Welton relies on Summers v. Auto 

Owners Ins. Co., 719 N.E.2d 412, 414 (Ind. Ct. App. 1999), which reinforces the point that a 

contract limitations provision is valid as long as a reasonable time is afforded. 

The Nature of Contract 

A contract expresses the legal relationship between parties manifested by their assent and 

which organized society recognizes as giving remedies to the holder of a right against the bearer 

of a legal obligation. See, 1 Arthur L. Corbin, Corbin on Contracts §§ 1.2-1.3 (Joseph M. Perillo 

ed., rev. ed. 1993). They represent “private, voluntary allocations by which two or more parties 

distribute specific entitlements and obligations.” Johnson v. Scandia Associates, Inc., 717 

N.E.2d 24, 29 (Ind. 1999). Professor Farnsworth discussed voluntary allocation of rights and 

obligations this way: 

[An e]xchange is the mainspring of any economic system that relies as heavily on 

free enterprise as does ours. Such a system allocates resources largely by direct 

bilateral exchanges arranged by bargaining between individuals. In these 

exchanges each gives something to the other and receives in return something 

from the other. 

1 E. Allan Farnsworth, Farnsworth on Contracts § 1.2 (3rd ed. 2004). 

Indiana law generally holds that “contractual limitations shortening the time to 

commence suit are valid, at least so long as a reasonable time is afforded.” Summers, 719 

N.E.2d at 414. While contractual provisions may sometimes be avoided if the claimant can 

prove fraud, duress, misrepresentation, adhesion, or illusory contract, the Eckmans do not 

challenge the contract or the claims provision on any of these grounds. 

4
Our courts have regularly held that unless a contractual provision contravenes a statute or 

public policy, “actions on a policy that are brought after the expiration of the limitation period 

provision will be barred.” Brunner v. Econ. Preferred Ins. Co., 597 N.E.2d 1317, 1318 (Ind. Ct. 

App. 1992). See also, United Techs. Auto. Sys., Inc. v. Affilliated FM Ins. Co., 725 N.E.2d 871 

(Ind. Ct. App. 2000) trans. denied; Burress v. Indiana Farmers Mut. Ins. Group, 626 N.E.2d 501 

(Ind. Ct. App. 1993) trans. denied. The Brunner court adopted the reasoning of what Judge 

Barteau called the “vast majority of courts,” that an insured’s failure to discover a loss within the 

time provided under the contract for bringing a claim is immaterial. Brunner, 597 N.E.2d at 

1318-19. See also United Techs., 725 N.E.2d at 875. 

 

The Eckman’s proposal to apply the discovery rule to contract law is based on tort 

principles. “The basic theory underlying the distinction between contract and tort is that tort 

liability is imposed by law and that contract liability is the product of an agreement of the 

parties.” Greg Allen Constr. Co. v. Estelle, 798 N.E.2d 171, 173 (Ind. 2003). Similar to 

insurance policies, “we must leave to the individual parties the right to make the terms of their 

agreements as they deem fit and proper, and, as long as those terms are clear and unambiguous 

and are not unlawful, we can only enforce them as agreed upon.” C.A. Enter., Inc. v. Employers 

Commercial Union Ins. Co. of America, 176 Ind. App. 551, 554, 376 N.E.2d 534, 536 (Ind. Ct. 

App. 1978). 

The Court of Appeals has observed that allowing the discovery rule to supercede the 

contractual limitations in insurance cases would “burden [parties] with obligations they did not 

anticipate or undertake, and bestow . . . a windfall.” Burress, 626 N.E.2d at 504-05. The Court 

of Appeals has also said, “[w]hen there is no ambiguity in a contractual provision, that 

provision’s plain language controls.” Id. at 505. Here, both parties agreed to the provisions, and 

the contract limitation should be enforced. The action did not commence within the agreed upon 

period and is therefore time-barred. 

5
Conclusion 

We reverse the trial court and remand with directions to grant judgment to New Welton. 

Sullivan and Boehm, JJ., concur. 

Dickson, J., concurs with separate opinion. 

Rucker, J., dissents with separate opinion. 

6
Dickson, Justice, concurring 

 It should be noted that the Court today enforces a contractual provision shortening the 

time in which to bring an action for breach of a contract requiring installation of a perimeter 

drain around a mobile home foundation. This does not involve a contractual provision 

attempting to shorten a statutory limitation period for personal injury actions. The contract at 

issue is not an insurance policy. And there is no claim that it is a contract of adhesion. 

 In fact, the plaintiffs do not dispute the one-year limitation period provided in the 

contract. Rather, it appears that the sole issue is the construction of the contractual provision 

"after the occurrence of that breach" that triggers the one year period. Appellant's App'x. at 55. 

The defendant appeals the trial court's decision to apply a discovery rule rather than to follow the 

contractual language. I concur with the Court's decision today to enforce the plain language of 

the parties' contract. 

 

7
RUCKER, Justice, dissenting. 

Because I believe the discovery rule should apply to this contract in spite of the limitation 

provision, I respectfully dissent. 

The majority opinion relies wholly on insurance policy cases to support its holding. The 

majority cites Summers v. Auto-Owners Ins. Co., 719 N.E.2d 412 (Ind. Ct. App. 1999) to uphold 

the rule that “contractual limitations [in insurance policies] shortening the time to commence suit 

are valid, at least so long as a reasonable time is afforded.” Id. at 414 (quotations omitted). See

Slip op. at 5. The majority also relies on Brunner v. Economy Preferred Ins. Co., 597 N.E.2d 

1317 (Ind. Ct. App. 1992) for the rule that “a provision in an insurance policy that limits the time 

in which a suit may be brought to a period less than that fixed by the statute of limitations is 

binding, unless it contravenes a statute or public policy.” Id. at 1318. See Slip op. at 6. 

This rule apparently goes back as far as 1908, when this Court declared, “the great weight 

of the authorities [holds] that a provision in an insurance policy limiting the time in which suit 

may be brought thereon to a period less than that fixed by statute of limitations is binding, unless 

it contravenes a statute.” Caywood v. Supreme Lodge of Knights & Ladies of Honor, 171 Ind. 

410, 86 N.E. 482, 483 (1908). In Caywood, our Court relied on the reasoning of the United 

States Supreme Court in Riddlesbarger v. Hartford Ins. Co., 74 U.S. 386 (U.S. 1868), which held 

that limitations provisions in insurance policies must be adhered to because “[i]t is clearly for the 

interest of insurance companies that the extent of losses sustained by them should be speedily 

ascertained, and it is equally for the interest of the assured that the loss should be speedily 

adjusted and paid.” Id. at 390. 

As the above cases reveal, there are policy reasons why the limitation provisions in 

insurance policies should be strictly adhered to. “[T]hese limitations protect insurers from policy 

holders who voice no claim until the year has long since expired, promote early notification 

while evidence is available, and provide carriers with a basis for forming business judgments 

concerning claim reserves and premium rates.” Summers, 719 N.E.2d at 414. In this case for 

example the Court of Appeals reasoned, 

8
These insurance cases demonstrate this court’s concern with 

maintaining the balance struck by the parties to the insurance 

contract. Premiums are set by the insurers based upon the kind of 

risk to be covered and the length of time for that coverage. That 

balance might be upset by extending the time period within which 

to bring suit. We also are concerned with preserving the insurer’s 

opportunity to investigate claims. 

New Welton Homes v. Eckman, 786 N.E.2d 1172, 1176 (Ind. Ct. App. 2003). As the Court of 

Appeals noted, “The valid concerns presented in insurance industry cases are not present here.” 

Id. at 1177. I agree. 

 Insurance policy premiums depend directly on the length of time coverage applies and 

the time in which a claim may be brought. The price agreed to by parties in a construction 

contract, however, is little affected by a provision limiting the time in which to bring suit. Thus 

the policy reasons to uphold limitation provisions in insurance policies simply do not make sense 

in the context of this construction contract, where due diligence could not have uncovered the 

latent defect in the foundation. As we noted in Barnes v. A.H. Robins Co., Inc., 476 N.E.2d 84, 

86 (Ind. 1985), “The [discovery] rule is based on the reasoning 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 a cause of action exists.” 

For the aforementioned reasons, I respectfully dissent. 

9