City of Hiawatha v. Rural Water Dist. No. 2

NOT DESIGNATED FOR PUBLICATION

No. 113,347

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

CITY OF HIAWATHA, KANSAS,
Appellee,

v.

RURAL WATER DISTRICT NO. 2,
BROWN COUNTY, KANSAS,
Appellant.


MEMORANDUM OPINION

Appeal from Brown District Court; JAMES A. PATTON, judge. Opinion filed December 4, 2015.
Affirmed.

William C. O'Keefe, of O'Keefe Law Office, of Seneca, for appellant.

Arthur E. Palmer, of Goodell Stratton Edmonds & Palmer LLP, of Topeka, for appellee.

Before POWELL, P.J., PIERRON and LEBEN, JJ.

Per Curiam: In 1991, the City of Hiawatha contracted to sell water for 40 years to
Rural Water District No. 2 in Brown County, Kansas; the District would then resell the
water to its own customers. In 2012, the City sued the District for breach of contract for
selling water to people outside the District's geographic boundaries. The district court
held that selling water outside the boundaries violated the contract, so the City was
entitled to terminate it.

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The District has appealed on several grounds. The City contends that the District's
appeal should be dismissed without considering the merits because the District has
complied with the judgment and didn't come up with the money it needed to put that
judgment on hold while the case was on appeal. But the court will only dismiss a party's
appeal if the party has voluntarily complied with the judgment. Because the District's
compliance has not been voluntary and unconditional, we will not dismiss its appeal.

On the merits, however, we do not find that any of the District's arguments
succeed:
 First, the District argues that because the amount of water it sold outside the
boundaries was minimal, it didn't substantially violate the contract. But the
terms of the contract provided that any selling outside the boundaries would
be grounds to terminate the contract. The district court properly determined
that the District's actions entitled the City to cancel the contract.
 Second, the District challenges the court's consideration of a supplemental
agreement. The District initially admitted that the document was part of the
contract in its pleadings but later concluded that it hadn't signed it as no
copy with a District signature was found. But the District never sought to
correct its pleadings, and parties to a lawsuit are bound by their admissions
in the pleadings.
 Third, the District argues that the district court wrongly rejected its
affirmative defenses of waiver, laches, the statute of limitations, and
equitable estoppel. But the district court properly considered the evidence
and arguments presented by the District and did not err in rejecting them.

We therefore affirm the district court's judgment.

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FACTUAL AND PROCEDURAL BACKGROUND

On January 7, 1991, the City and the District contracted for the District to buy
water from the City to resell to its own customers.

The District is organized as a rural water district under K.S.A. 2014 Supp. 82a-612
to 82a-650. To form a rural water district, at least 50% of landowners in the proposed
district must petition the board of county commissioners. K.S.A. 82a-614. The petition
should define the boundaries of the proposed district and state that the land within those
boundaries does not have adequate water, that construction of a water system is necessary
to improve the community, and that those improvements would "promote the public
health, convenience and welfare." K.S.A. 82a-614. The board of county commissioners
then holds a hearing; if it finds that proper notice of the hearing was given and that the
assertions in the petition are true, it establishes the rural water district and defines its
boundaries. K.S.A. 82a-616. Each district's set geographical boundaries may be expanded
by petitioning the board of county commissioners. K.S.A. 82a-622 and 82a-623.
Although no Kansas statute specifically prohibits a rural water district from selling water
outside its boundaries, no statute authorizes it, either, and agencies created by statute
generally have only the authority granted by statute. The United States Court of Appeals
for the Tenth Circuit has concluded that the statutory scheme doesn't permit a district to
sell water to customers outside its boundaries. Rural Water Dist. No. 4 v. City of Eudora,
Kan., 659 F.3d 969, 983 (10th Cir. 2011). The court noted the "clear association between
a water district's geographic boundaries and those laws pertaining to its corporate
governance, facilities, and operations." 659 F.3d at 983.

In October 2012, the City sued the District for breach of contract because the
District had sold water outside its geographic boundaries. In its answer, the District
admitted to serving people outside its boundaries but denied that it had breached the
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contract or that the City was entitled to cancel the contract. The District serves about 25
customers outside its boundaries.

The key documents in this case are the original sales agreement, the First
Supplemental Agreement dated December 2, 1991, and the Second Supplemental
Agreement dated March 4, 1996. Each had somewhat different provisions regarding the
District's ability to sell water outside its boundaries.

Paragraph 8 of the original sales agreement provided that the District would sell
only to customers in identified cities "included in or attached to" the District but that if
the District asked to add others, the City could not "unreasonably" withhold approval:

"The City recognizes the fact that the cities of Morrill, Willis, Powhattan, Robinson and
Everest are included in or attached to the boundaries of the District and the District has a
right to sell water to these cities at a wholesale rate. The District agrees not to sell water
outside District's area to an[]y other District or City without the consent of the City. This
consent will not be unreasonably withheld."

The First Supplemental Agreement amended that paragraph to further identify
specifically where the District could sell water outside its boundaries, and it provided that
the District would not otherwise sell water outside the District without the City's consent:

"The City recognizes the fact that the cities of Morrill, Willis, Powhattan, Robinson, and
Everest are included in or attached to the boundaries of the district and that the district
has the right to sell water at wholesale rates. The cities of Morrill and Willis in Brown
County, Kansas, have refused water from the District and are eliminated from being cities
that the District can henceforth sell water to. The City of Hiawatha does recognize the
right of the District to sell water to Rural Water District No. 1 of Doniphan County,
Kansas, which serves only the City of Leona, Kansas, and this extension out of Brown
County to the City of Leona is only to attach to Rural Water District No. 1, Doniphan
County, Kansas, for the purpose of serving residential use and for no other purposes . . . .
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The City of Hiawatha hereby consents to that sale. The City of Hiawatha further consents
that the rural water district may sell to Powhattan, Robinson, and Everest. The District
agrees not to sell water outside the District's area to any other district or city without the
consent of the City of Hiawatha. In the event that said District does violate this term then
the City of Hiawatha may terminate this contract immediately."

The First Supplemental Agreement no longer provided that the City could not
unreasonably withhold its consent, and the agreement now provided that the City could
immediately terminate the agreement if the District sold water outside its borders without
the City's permission.

The Second Supplemental Agreement amended paragraph 8 again by deleting the
last two sentences of the language above and adding the following subparagraphs:

"(B). The City hereby consents that the District may sell water to the Kickapoo
Tribe in Kansas, which is located outside of the District . . . .

"(C). The District agrees not to sell water outside the District's area to any other
district, city, tribe, or other user of water without the consent of the City of Hiawatha. In
the event that said District does violate this term, then the City of Hiawatha may
terminate the contract immediately."

Thus, the Second Supplemental Agreement, like its predecessor, listed those to whom the
District could sell water outside its borders, provided that the District not sell water
outside its borders "to any other . . . user of water without the consent of the City" and
provided that the City could terminate the contract immediately if the District violated
these provisions.

The parties dispute whether the Second Supplemental Agreement is a valid part of
the contract. The District initially agreed that it was in its answer to the City's petition. In
response to a written question from the City, Chairman of the Board of the District,
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Douglas Spellmeier, also stated that the parties had agreed to the Second Supplemental
Agreement but noted that the District had long served individuals outside its boundaries
and "never gave it any thought that the [City] would hold it against the [District] by
adding those single families to the district so they can have rural water."

Later, the District denied ever having signed or agreed to the Second
Supplemental Agreement. It took this position in its reply to the City's Motion for
Summary Judgment. According to the District, it never signed the agreement because the
Kickapoo tribe withdrew its request for water service. The Second Supplemental
Agreement was not admitted into evidence by either party at trial, and neither referenced
it in the proposed findings of law and fact submitted to the district court.

A bench trial was held on September 15, 2014. The City first called Teresa Olson,
bookkeeper for the District, to testify. Olson testified that the District had been expanded
once in 1994 and that customers had subsequently been added outside the boundaries.
She stated that as far as she knew, the District had never provided the county commission
with updated service-area maps, nor had it ever provided the City with a list of customers
served outside the district. She also testified that the City had never asked or contacted
the District about customers outside the district until it filed the lawsuit. According to
Olson, at least some of the customers outside the district boundaries had been signed up
for service since 1991, but others were added later—as recently as 2013, after the lawsuit
was filed.

The City also called Michael Parrish Nichols, City Administrator for Hiawatha.
Nichols testified that the percentage of the City's water used by the District had increased
from 22% in 1997 to 38% in the first 8 months of 2014. Nichols stated that the City had
not increased the total water produced and that the City's population had decreased by
13% from 1991 to 2013. He further testified that the additional water used by the District
stresses the City's water system and that the water was being sold to the District under the
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contract at a loss. Nichols was not aware that the contract limited the amount of water
that the District could require from the City.

The District then called its manager, Harold Keller, to testify. Keller estimated that
customers outside the district boundaries used approximately 60,000 to 70,000 gallons of
the 6 to 7 million total gallons the District purchased each month. Keller testified that,
like Olson, he had never been asked whether the District was serving customers outside
its boundaries, nor had he ever informed the City of the matter.

The district court issued a 13-page written decision on January 21, 2015. It found
that the District had violated the contract by serving people outside its boundaries and
that the City could cancel the contract. The district court referred to the Second
Supplemental Agreement as part of the contract between the parties. The court also held
that the City had no duty to investigate whether the District was selling outside the
boundaries and that nothing in the record would have made the City aware of the sales.
The court said that the District had violated its duty of good faith because it had not
informed the City that it was serving people outside its boundaries.

The District requested either a new trial or that the district court amend or alter its
judgment. The District objected to the district court's consideration of the Second
Supplemental Agreement, arguing that it had never signed nor agreed to that supplement.
It also argued that the district court had used an incorrect figure of how many people it
served outside the district. The district court denied the motion after a hearing in March
2015.

On February 3, 2015, after the court's decision but before the motion hearing, the
City notified the District that it would be terminating the contract on February 9, 2015.
On February 17, the District requested that the district court stay its decision—or put it on
hold—and set a bond if necessary as part of that process. The district court ruled that the
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District could obtain a stay of its order pending appeal if the District posted a $175,000
bond, which would protect the City against the possibility that the District's appeal did
not succeed. The District did not post a $175,000 bond, and the district court's ruling was
not stayed pending appeal.

We turn next to the issues raised on appeal.

I. The District Did Not Lose Its Right to Appeal by Acquiescing in the District
Court's Judgment.

The City argues that the District has acquiesced, or voluntarily complied, with the
district court's judgment by paying the standard water rate of $3.58 per 1,000 gallons
after the City cancelled the contract. Previously, under the contract, the City had charged
only $1.29 per 1,000 gallons. The District had to pay the higher rate because it did not
file the bond that would have stayed the district court's order pending appeal.

The City argues that the District has waived its appeal by voluntarily complying
with the judgment and that our court has no jurisdiction to consider the appeal. The
District admits that it has not posted a bond to stay the judgment but argues that it did not
have the money to do so. The District contends that it hasn't acquiesced because it filed
posttrial motions and has appealed the district court's decision.

The acquiescence doctrine establishes that a party who voluntarily accepts
the benefits or burdens of a judgment loses the right to appeal it. Alliance
Mortgage Co. v. Pastine, 281 Kan. 1266, 1271, 136 P.3d 457 (2006); Uhlmann v.
Richardson, 48 Kan. App. 2d 1, 13, 287 P.3d 287 (2012), rev. denied 298 Kan.
1208 (2013). But acquiescence should be found only when the party's actions
"'clearly and unmistakably show an inconsistent course of conduct or an
unconditional, voluntary and absolute acquiescence. [Citation omitted.]'"
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Uhlmann, 48 Kan. App. 2d at 17. Whether a party's payment is voluntary depends
on whether the facts in the case suggest that the party intends to waive its legal
rights. Varner v. Gulf Ins. Co., 254 Kan. 492, 497, 866 P.2d 1044 (1994); Younger
v. Mitchell, 245 Kan. 204, 209, 777 P.2d 789 (1989).

Under K.S.A. 2014 Supp. 60-2103(d), if one party wants to prevent another
party from enforcing the judgment while it appeals, it must ask the court to set
what's known as a supersedeas bond. Here, the District requested the court to set a
bond but did not pay—apparently for lack of funds—the $175,000 bond the court
set. Despite the City's suggestions to the contrary, merely failing to post the bond
does not mean the District has acquiesced.

In considering the facts, it does not appear that the District voluntarily
accepted the burdens of the judgment or intended to waive its legal rights. Water
service is essential, not optional. See Dedeke v. Rural Water Dist. No. 5, 229 Kan.
242, 249, 623 P.2d 1324 (1981) (requiring rural water districts to give customers
notice and opportunity to challenge termination of service). Thus, since the
District does not have another source of water, it had no choice but to pay the
higher rate required to continue providing water to its customers. Providing
service to its customers—at the core of its statutory and contractual duties—
should not result in an implied waiver of the right to appeal. See Uhlmann, 48
Kan. App. 2d at 14. To protect its interest in providing water to its customers, the
District had to pay the higher water rate. Meanwhile, the District did all that it was
legally and financially able to do: It filed posttrial motions and requested a stay of
judgment pending appeal. In these circumstances, paying the higher water rate
doesn't clearly and unconditionally establish that it intended to waive its legal
rights. We conclude that the District did not acquiesce in the judgment, and we
proceed to consider the issues the District has raised.

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II. The District Court Properly Determined That the District Breached the
Contract.

The District raises several issues, but we will start with whether it breached the
contract. If not, we need not address other issues.

The District characterizes the issue as whether the City presented sufficient
evidence to show a breach of the contract, but it then discusses the district court's failure
to make certain findings, its refusal to reconsider the matter or grant a new trial, and its
determination that the District materially breached the contract (meaning that it violated
the contract in a significant way). The District essentially argues that the district court
erred in (1) failing to make findings regarding the number of households served, the
amount of water used outside the district, and the amount of water that the District could
get from the City, (2) refusing to reconsider its findings that the District acted in bad faith
and that the City was under no obligation to investigate, (3) denying the motion for a new
trial, and (4) finding that the District materially breached the contract.

To determine whether a party has breached a contract, the court must first consider
what the contract required. We have unlimited review of the interpretation and legal
effect of a written contract, so regardless of how the district court read it, we must
interpret the contract and determine its legal effect independently. Heartland Surgical
Specialty Hospital v. Reed, 48 Kan. App. 2d 237, 242, 287 P.3d 933 (2012) (citing
Shamberg, Johnson & Bergman, Chtd. v. Oliver, 289 Kan. 891, 900-01, 220 P.3d 333
[2009]). In interpreting written contracts, the primary rule is to determine the parties'
intent; if the terms of the contract are clear, a court determines the intent of the parties
from the language of the contract without applying rules of construction. Waste
Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 963, 298 P.3d 250 (2013).
When interpreting contractual provisions, the entire contract should be considered as a
whole rather than isolating any one sentence or provision. Wichita Clinic v. Louis, 39
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Kan. App. 2d 848, 853, 185 P.3d 946, rev. denied 287 Kan. 769 (2008). When the
contract consists of two or more documents, we interpret the documents together to
determine the parties' intent. Hollenbeck v. Household Bank, 250 Kan. 747, 752, 829 P.2d
903 (1992).

The original sales agreement provided that the District "will serve customers of
the District system as [shown] by its plans of the system now on file in [its] office." The
original agreement and First Supplemental Agreement expressly prohibited the District
from selling water outside the District's area to any other district or city without the City's
consent—but it also provided that the City would not unreasonably withhold consent.
The First Supplemental Agreement eliminated that restriction on the City (that it not
unreasonably withhold consent) and restricted the District's ability to sell water even to
some cities within its boundaries. At this point, the District did not have an unrestricted
power to sell water. (The First Supplemental Agreement also changed the terms to allow
the City to cancel the contract immediately if the District didn't comply with these
provisions on reselling water.)

The Second Supplemental Agreement further illustrates the parties' intent that the
District would only serve customers within its boundaries. This agreement expressly
prohibited the District from selling water outside its boundaries "to any other district,
city, tribe, or other user of water" without the City's consent. It also reiterated that if the
District violated the term, then the City could immediately cancel the contract. As
discussed in more detail in the next section of our opinion, the district court could
consider this supplement to be part of the agreement because the District admitted that it
was a valid part of the contract in its pleadings. Taken together, the original sales
agreement, the First Supplemental Agreement, and the Second Supplemental Agreement
show that the parties intended for the District to serve only authorized cities and
customers within its boundaries.

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Having determined that the contract prohibited the District from selling water
outside its boundaries without advance consent, we next consider whether the District's
actions constituted a material breach. A breach of contract occurs when a party fails to
perform "'a duty arising under or imposed by agreement.'" Daggett v. Board of Public
Utilities, 46 Kan. App. 2d 513, 515, 263 P.3d 847 (2011) (quoting Malone v. University
of Kansas Medical Center, 220 Kan. 371, 374, 552 P.2d 885 [1976]), rev. denied 294
Kan. 943 (2012). Even if a party breaches a contract, the other party has a right to cancel
the contract only if it was a material breach. M & W Development, Inc. v. El Paso Water
Co., 6 Kan. App. 2d 735, 737-38, 634 P.2d 166 (1981).

A breach is material when the violation is so substantial that it defeats the parties'
purpose for making the agreement. Federal Land Bank of Wichita v. Krug, 253 Kan. 307,
313, 856 P.2d 111 (1993); State v. Jones, 47 Kan. App. 2d 109, Syl. ¶ 4, 271 P.3d 1277
(2012), rev. denied 297 Kan. 1251 (2013). Put another way, a material breach causes a
party to receive something substantially less or different than he or she bargained for.
First Nat'l Bank of Omaha v. Centennial Park, 48 Kan. App. 2d 714, 725, 303 P.3d 705,
rev. denied 297 Kan. 1244 (2013). Whether a contract has been materially breached is a
question of fact, so on this point we must determine whether substantial evidence
supports the district court's finding of a material breach. Waste Connections, 296 Kan. at
964; M & W Development, 6 Kan. App. 2d at 737 (1981). Substantial evidence is legal
and relevant evidence that a reasonable person could accept as sufficient to support a
conclusion. Gannon v. State, 298 Kan. 1107, 1175, 319 P.3d 1196 (2014).

A party's breach is not material if he or she has substantially performed according
to the terms of the contract. Dexter v. Brake, 46 Kan. App. 2d 1020, 1033-34, 269 P.3d
846 (2012). Under the doctrine of substantial performance, a party's performance may be
considered complete if the essential purpose of the contract is accomplished and the party
"made a good-faith attempt to comply with the terms of the agreement even though he or
she fails to precisely meet the terms of the agreement." 46 Kan. App. 2d 1020, Syl. ¶ 2.
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But substantial performance doesn't apply if the parties, by the terms of their agreement,
make it clear that only complete performance will fulfill the contract. 46 Kan. App. 2d at
1033.

In this case, the main purpose of the contract was for the City to provide water to
the District to resell to its customers within its approved boundaries. By selling to
customers outside its boundaries, the District breached the contract. The District contends
that even if it breached the contract, it was not a material breach that justifies allowing
the City to break its agreement because the amount of water used and the number of
customers served outside its boundaries was a very small portion of its total usage and
customers. But the District can't argue that it substantially complied with the contract's
terms because the terms explicitly warned that selling water outside the boundaries
without the City's consent would be grounds for immediately cancelling the contract.

The District also argues that it provided water only to customers who would
otherwise be without. But "[a] breach is a breach is a breach, even if it occurs with the
best of intentions." Waste Connections, 296 Kan. at 974. The District failed to get the
necessary consent from the City or even inform the City that it was serving customers
outside its boundaries. In finding a material breach, the district court also noted that the
District's use of water had increased and that it had continued to expand its customer base
outside its boundaries. Because the City sold the water to the District at a loss, any
amount of water sold outside the District's boundaries harmed the City. Substantial
evidence supports the district court's determination that the District materially breached
the contract.

The District also argues that the district court should have made findings about the
extent of the breach, such as how many customers were served or how much water they
consumed. But the court determined that the District materially breached the contract by
selling any amount of water outside the district without consent; it wasn't necessary for
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the court to make specific findings. The district court acknowledged the District's
argument that the sales outside the boundaries "are of such little consequence" compared
to its overall consumption but ultimately rejected this reasoning. We agree with the
district court that the contract prohibited any sales outside the District's boundaries
without the City's consent, and any sale so made was a material breach.

The District also asserts that the district court should have reconsidered its finding
that the District acted in bad faith and that the City had no obligation to investigate.
Kansas recognizes the duty of good faith and fair dealing in all contracts, except
employment-at-will contracts. Estate of Draper v. Bank of America, N.A., 288 Kan. 510,
525, 205 P.3d 698 (2009). The duty of good faith and fair dealing requires that parties
"refrain from intentionally doing anything to prevent the other party from carrying out his
or her part of the agreement or from doing anything which will have the effect of
destroying or injuring the right of the other party to receive the fruits of the contract."
First National Bank, 48 Kan. App. 2d 714, Syl. ¶ 17. Whether a party met the good-faith
standard is a question of fact. 48 Kan. App. 2d at 729. We will not disturb the district
court's determination of good faith and fair dealing if it is supported by substantial
evidence. Bank of America, N.A. v. Narula, 46 Kan. App. 2d 142, 170, 261 P.3d 898
(2011).

The district court rejected the District's argument that the City had a duty to
investigate and found that the District acted in bad faith by not disclosing that it was
serving customers outside the boundaries. It noted that because the District was created
by statute, the City could reasonably presume that the District complied with the laws and
served customers only within the geographical area set by the county commissioners.
Nothing in the contract required that the City investigate the District's activities. And no
evidence presented at or before trial showed that the City knew or should have known
about the outside sales.

15

If the City had known facts that put it on notice of the outside sales, then it would
have had a duty to investigate. See Vanier v. Ponsoldt, 251 Kan. 88, 108, 833 P.2d 949
(1992). But the only evidence of the City's knowledge was offered after the trial, and the
district court wasn't required to accept it and reconsider the matter. The District asserts
that it didn't act in bad faith because its actions didn't prevent the City from carrying out
the contract. But the duty of good faith and fair dealing also requires not injuring the
other party's right to benefit from the contract. Because the water was sold below cost,
any unauthorized users harmed the City. Substantial evidence supports the district court's
determination that the District violated its duty of good faith and fair dealing by failing to
disclose the outside sales.

The District also argues that the district court should have granted its motion for a
new trial or to amend or alter its judgment. The decision to grant a motion for a new trial
is a matter of discretion for the district court. State v. Fulton, 292 Kan. 642, 648, 256 P.3d
838 (2011). Under the abuse-of-discretion standard, we do not disturb a discretionary
decision unless no reasonable person would have made the same decision or the decision
was based on an error of law or fact. City of Neodesha v. BP Corporation, 50 Kan. App.
2d 731, 740, 334 P.3d 830 (2014). The decision to grant a motion to alter or amend a
judgment is similarly a matter of discretion subject to the abuse-of-discretion standard.
Miller v. Johnson, 295 Kan. 636, 677, 289 P.3d 1098 (2012).

Under K.S.A. 2014 Supp. 60-259, a court may grant a new trial on several
different grounds. The parties agree that the District's request for a new trial is based on
newly discovered evidence. To gain a new trial on this basis, a party must establish that
(1) the new evidence could not reasonably have been produced at trial and (2) there is a
reasonable probability that the new evidence would produce a different result. See, e.g.,
Sims v. Schrepel, 208 Kan. 527, 530, 492 P.2d 1312 (1972); Crone v. Nuss, 46 Kan. App.
2d 436, 450, 263 P.3d 809 (2011), rev. denied 294 Kan. 943 (2012). If the party fails to
establish these facts, the trial court does not abuse its discretion in refusing to consider
16

the new evidence or grant a new trial. Schraft v. Leis, 236 Kan. 28, 40, 686 P.2d 865
(1984).

Before the trial, the only evidence the District presented to show that the Second
Supplemental Agreement was unsigned was an affidavit, and it offered no proof that the
City was aware that the District was serving people outside its boundaries. But in its
posttrial motions, the District suddenly offered up letters addressing the Kickapoo Tribe's
rejection of the contract to show that the District did not agree to the Second
Supplemental Agreement and a letter from the City's lawyer threatening legal action if
the District served customers outside its boundaries. Both Olson, the District's
bookkeeper, and the District's attorney admitted that those letters were available to them
before the trial. Olson explained that she had had many documents to go through, and the
attorney stated he hadn't thought it was necessary to present them at trial. As the district
court stated, "Accepting th[at] Rural Water had many records, that does not establish that
they could not have with reasonable diligence produced the evidence at trial. They chose
a trial strategy and didn't present those documents . . . ." The district court did not abuse
its discretion in denying the motion for a new trial or to alter or amend its judgment.

III. The District Court Did Not Err in Considering the Second Supplemental Agreement.

The District next argues that the district court should not have considered or relied
on the Second Supplemental Agreement in determining whether the District breached the
contract. The District admits that it initially accepted that the Second Supplemental
Agreement was part of the contract but argues that it later noticed the contract was
unsigned and corrected the mistake in its reply to the City's motion for summary
judgment, so the court should not have considered or relied on the document. The District
also notes that the Second Supplemental Agreement was not admitted into evidence at
trial. The City responds that the district court had the right to rely on the pleadings and
the written answer from the District chairman admitting validity of the supplement
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because the District never attempted to amend its answers or modify the admission
through the pretrial order.

Whether a term of a written contract has been modified by a later agreement is a
question of fact for the trial court. Douglas Landscape & Design, L.L.C. v. Miles, 51 Kan.
App. 2d 779, ___, 355 P.3d 700, 707 (2015) (citing Belger Cartage Serv., Inc. v. Holland
Constr. Co., 224 Kan. 320, 330, 582 P.2d 1111 [1978]). This court should uphold the
district court's decision if it is supported by substantial evidence. See Belger, 224 Kan. at
330-31.

Usually "a party is bound by allegations or admissions of fact in his or her own
pleadings." 28 Am. Jur. 2d, Estoppel and Waiver § 71. Not only are they binding,
"[a]dmissions in a pleading have the effect of withdrawing a fact from issue and
eliminating the necessity of proof relating to the fact so admitted. Furthermore, factual
allegations contained in pleadings on which the cause is tried are irrefutable as long as
they remain in the case . . . ." 32 C.J.S., Evidence § 628. The Kansas Supreme Court has
likewise said: "As a general rule parties to an action are bound by their pleadings and
judicial declarations and are estopped to deny or contradict them where the other parties
to the action relied thereon and changed their position by reason thereof." Arrowhead
Constr. Co. v. Essex Corp., 233 Kan. 241, Syl. ¶ 4, 662 P.2d 1195 (1983), disapproved of
on other grounds by Wichita Sheet Metal Supply, Inc. v. Dahlstrom & Ferrell Const. Co.,
246 Kan. 557, 792 P.2d 1043 (1990).

In denying the District's motion for a new trial or to alter or amend judgment, the
district court addressed the Second Supplemental Agreement:

"Nothing in the evidence shows that the Rural Water District 2 notified the city that it had
not signed the second Supplemental Contract. The silence created the appearance and
belief that the contract was in fact in force and was being acted upon by both parties. The
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Rural Water District believed that it was binding and in [e]ffect until a late search of their
records indicated that it was not signed. By then both the attorney for the defendant and
the president or chairman of the board had both said that this was a binding and effective
agreement.

"Even if the contract was not signed, it was certainly followed and it was one of
the terms that the city of course had to use in its dealings with the Rural Water District.
The violation was the reselling of water outside of the geographical boundaries. . . . The
defendants did not seek to amend the answer to the petition, which admitted the existence
of the second Supplemental Agreement. The defendant did not seek to amend the sworn
answers to interrogatories admitting the validity of the agreement. The defendant did not
seek a motion to conform its pleadings to the evidence adduced at trial."

The district court is correct that the District never attempted to amend its answers
to the petition or the City's written questions; nor did it take any other action to correct
the error in its pleadings. The District did not request at trial that the district court
determine whether the Second Supplemental Agreement was properly part of the
contract, and it did not present any evidence of the matter at trial. Because the District
never amended its pleadings, the district court was permitted to treat the admission made
in the District's answer as a fact and to consider the Second Supplemental Agreement as
part of the contract.

IV. The District Court Did Not Err in Rejecting the District's Affirmative Defenses.

The District's final argument is that the district court incorrectly rejected four
defenses it presented to argue that the City could not cancel the contract even if the
District had violated it: waiver, laches, statute of limitations, and estoppel. Each of those
defenses—called "affirmative" defenses—will be addressed separately below.

19

First, the District asserts the court should have accepted its waiver defense
because the City knew that the District was selling water outside the boundaries and
waived its right to cancel the contract. Waiver occurs when a party intentionally and
voluntarily gives up a known claim or right. Lyons ex rel. Lawing v. Holder, 38 Kan.
App. 2d 131, 138, 163 P.3d 343 (2007). Waiver applies only when a party has taken
some absolute action or inaction inconsistent with the claim or right. Falkner v. Colony
Woods Homes Ass'n, 40 Kan. App. 2d 349, 360, 198 P.3d 152 (2008) (quoting Proctor
Trust Co. v. Neihart, 130 Kan. 698, 705, 288 Pac. 574 [1930]). Both knowledge and
intent are essential elements of a waiver, but intent may be inferred from a party's
conduct, and knowledge may refer to what the party should have known. Sultani v.
Bungard, 35 Kan. App. 2d 495, 498, 131 P.3d 1264 (2006). Because waiver is an
affirmative defense, the District had the burden to show that the City waived its claim.
See Smith v. Oliver Heights, LLC, 49 Kan. App. 2d 384, 392, 311 P.3d 1139 (2013).
Whether or not a party has waived its claim is a question of fact. Foundation Property
Investments v. CTP, 286 Kan. 597, 610, 186 P.3d 766 (2008).

In rejecting the District's defense, the district court found that the District's silence
about the sales prevented the City from learning about them; without that knowledge, the
City could not waive its right to cancel the contract. On appeal, the District asserts that
the City knew about the sales, as indicated by a letter from the City threatening legal
action if the District served people outside its boundaries. But the District first introduced
this letter when it sought a new trial. Nothing presented at trial suggested that the City
knew about the outside sales until immediately before filing suit. Substantial evidence
supports the district court's finding that the City did not knowingly waive its right to
cancel the contract.

The District next argues that the district court shouldn't have denied its laches
defense. We review the district court's denial of the doctrine of laches for abuse of
discretion. State ex rel. Stovall v. Meneley, 271 Kan. 355, 388, 22 P.3d 124 (2001). Under
20

the doctrine of laches, when a party neglects to assert a right or claim for an unreasonable
period of time and the delay prejudices or disadvantages the other party, courts will not
grant relief. Meneley, 271 Kan. at 388-89; Woodberry v. State, 33 Kan. App. 2d 171, 175,
101 P.3d 727 (2004). A delay alone is not sufficient to allow a party to invoke the
doctrine; the delay must disadvantage the other party. State ex rel. SRS v. Cleland, 42
Kan. App. 2d 482, 493, 213 P.3d 1091 (2009) (citing Steele v. Guardianship &
Conservatorship of Crist, 251 Kan. 712, 725, 840 P.2d 1107 [1992]).

In this case, the district court rejected the District's laches defense because it found
that the City promptly sought to cancel the contract once it discovered the outside sales
and found that the District failed to show it was harmed or prejudiced by any delay. The
District argues that it has a viable laches defense because the City had never complained
about the matter and because cancelling the contract would harm the District. But the
District didn't show how the City's delay disadvantaged it—in fact, continuing under the
existing contract for an additional time period only benefitted the District, given the
lower price it was paying for water under that agreement. We do not find that the district
court abused its discretion in rejecting the defense.

The District next argues the district court erred in denying its statute-of-limitations
defense. A statute of limitations requires that a person bring a legal claim against another
person within a certain time period set by statute or else lose the right to sue regarding the
claim. K.S.A. 60-511(1) provides that a cause of action for breach of a written contract
must be filed within 5 years of the breach. We have unlimited review of the interpretation
and application of a statute of limitations and thus owe no deference to the trial court's
interpretation. Schoenholz v. Hinzman, 295 Kan. 786, 791, 289 P.3d 1155 (2012). The 5-
year time limit for breach of contract begins to run when the alleged breach occurs, even
if the party doesn't know the breach occurred. Pizel v. Zuspann, 247 Kan. 54, 74, 795
P.2d 42 (1990).

21

In this case, the district court rejected the statute-of-limitations defense, noting that
the District began serving six individuals outside its boundaries from 2011 to 2012, each
a separate breach within the 5-year statute-of-limitations period. The court also
characterized every sale to a customer outside the district boundaries as "an on-going and
continuous breach." The court ultimately found that the City brought the suit within the
applicable time frame of the breach. Though not entirely clear, the District seems to argue
that if there was a breach, it occurred when the District initially served customers outside
the boundaries and that the City failed to discover the breach within the required time
period. It also disagrees that recently adding six more individuals could constitute a
breach.

The contract between the City and the District is a continuing contract. See Rupe
v. Triton Oil & Gas Corp., 806 F. Supp. 1495, 1497, 1499 (D. Kan. 1992) (concerning
contract to purchase gas for 20 years). A continuing contract is a contract that requires
parties to continue to perform for some specified period of time, usually involving
continuing payments. Bagby v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 174 F. Supp.
2d 1199, 1203 (D. Kan. 2001). A continuing contract may be partially breached, and each
partial breach is a separate legal claim on which the parties can sue. Neuromonitoring
Associates v. Centura Health Corp., 2012 Colo. App. 136, ¶¶ 33-35, 351 P.3d 486, 492
(Colo. App. 2012) (citing 10 Corbin on Contracts § 956 [interim ed. 2007]). Here, the
District breached the contract each time it added a new customer outside its boundaries.
Because at least some of the breaches occurred within 5 years of the City bringing the
lawsuit, the City brought its suit within the required time frame.

Finally, the District asserts that the district court should have accepted its
equitable-estoppel defense. To assert equitable estoppel, a party must first show that
another party—by its actions, words, or silence—caused the party to believe certain facts
existed. Petty v. City of El Dorado, 270 Kan. 847, 853, 19 P.3d 167 (2001). The party
must then show that it reasonably relied on those beliefs and would be harmed if the other
22

party were now allowed to deny the facts. 270 Kan. at 853. Because whether equitable
estoppel applies is a discretionary matter, we review the district court's decision for abuse
of discretion. In re Estate of Pritchard, 37 Kan. App. 2d 260, 279, 154 P.3d 24 (2007).

The District doesn't explain what actions the City took that misled it and should
now prevent the City from cancelling the contract. In its brief, it only quotes from the
holding in Deutsche Bank Nat'l Trust Co. v. Sumner, 44 Kan. App. 2d 851, 245 P.3d
1057 (2010), rev. denied 292 Kan. 964 (2011), and states the court must decide whether
the City's actions prevent the City from taking advantage of its mistakes. The District's
trial brief similarly quoted from the same passage without making an argument or
applying it to the case. In rejecting the defense, the district court assumed that the District
was referring to the City's silence and inaction regarding the outside sales. It held that the
City did nothing because the District did not tell it about the outside sales; therefore, the
District couldn't rely on the City's silence or inaction to mean that the City accepted the
sales. The District has not shown any abuse of discretion in the district court's rejection of
this defense. See Coulter v. Anadarko Petroleum Corp., 296 Kan. 336, 351, 292 P.3d 289
(2013).

We affirm the district court's judgment.