IN THE COURT OF APPEALS OF IOWA

No. 13-1879

Filed February 25, 2015

URBANDALE BEST, LLC,

Plaintiff-Appellant,

vs.

R & R REALTY GROUP, LLC, PARAGON

BEST, LLC, and HIGHLAND POINTE

OFFICE PARK OWNERS’ ASSOCIATION,

Defendants-Appellees.

________________________________________________________________

Appeal from the Iowa District Court for Polk County, Robert J. Blink, 

Judge. 

The non-managing member of an operating agreement to develop 

commercial property appeals the district court’s ruling in favor of the managing 

member. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED. 

Michael A. Dee and Haley R. Van Loon of Brown, Winick, Graves, Gross, 

Baskerville & Schoenebaum, P.L.C., Des Moines, for appellant.

George A. LaMarca and Philip D. De Koster of LeMarca & Landry, P.C.,

Des Moines, for appellees.

Heard by Danilson, C.J., and Doyle and Tabor, JJ.
2

TABOR, J.

This case involves differing interpretations of a 2008 real estate operating 

agreement between the two fifty-fifty members of Paragon Best, a limited liability 

corporation developing agricultural land into the Highland Pointe Office Park in 

Urbandale. Under the Paragon Best operating agreement, R&R Realty Group, 

LLC is the managing member in charge of the day-to-day business operations,

and Urbandale Best, LLC is the non-managing member and investor whose role 

is limited to approving “major decisions.” Urbandale Best is a wholly owned 

subsidiary of Kansas City Life Insurance Company. 

During the development process, R&R executed a series of documents 

setting up the governance of the Highland Pointe Office Park and giving its 

officers a majority vote. R&R then conveyed a deed to the new owners’ 

association for a storm water detention pond on Outlot A. Urbandale Best

believed those unilateral actions constituted “major decisions” under the 

operating agreement, which required its approval. To enforce its belief, 

Urbandale Best sued for breach of contract, seeking declaratory and injunctive 

relief. R&R filed a counterclaim for breach of contract, alleging Urbandale Best 

acted in bad faith and obstructed R&R’s performance. The district court ruled in 

favor of R&R; Urbandale Best appeals.

Our de novo review of the record shows Urbandale Best’s challenge to the 

Outlot A deed is without merit. As to the governance documents, when we look 

at the parties’ course of dealings evidenced by their 2006 email/letter agreement, 

we find both parties intended and acted to implement the prior operating 
3

agreements and the challenged agreement without engaging in a hypertechnical 

interpretation of the “major decision” matrix. Rather, consistent with the general 

practices in commercial real estate, the parties expected R&R to unilaterally 

execute the governance documents and other deeds and easements that are 

“ministerial” or “ancillary” and “necessary to make the bigger deal go forward” in 

the ordinary course of business. But because the district court reached beyond 

the request of R&R, we vacate its sua sponte listing of other actions it found did 

not constitute major decisions. We agree with the district court that Urbandale 

Best failed to prove its entitlement to injunctive relief. But unlike the district court, 

we conclude R&R is not entitled to relief on its counterclaim and vacate the 

award of damages. 

I. Background Facts and Proceedings

After carefully scrutinizing the record, we find it supports the following 

facts. Kansas City Life and R&R entities have a history of working together on 

real estate developments; since 2005 they have entered into seven joint real 

estate ventures, with Kansas City Life investing around $50 million in equity in 

those projects. Generally, the developments start with raw land located in Polk 

County, and the land is developed into office parks and warehouses, as well as 

hotel and retail space. The name for each joint venture starts with the word 

Paragon and is differentiated by the second term, for example, Paragon East, 

LLC or Paragon Best, LLC. On these ventures, different wholly-owned 

subsidiaries of Kansas City Life contracted with either R&R Real Estate

Investors, LLC (“RREI”—2006 operating agreements) or R&R Realty Group, LLC 
4

(“R&R”—2008 operating agreement). The Kansas City Life subsidiary for each 

joint venture used a name starting with the word Urbandale and the name 

identifying the joint venture, i.e., Urbandale East, LLC and Urbandale Best, LLC. 

The Kansas City Life subsidiaries and the R&R entities perform the same 

roles in the development projects, i.e., the West Des Moines-based R&R entity is 

the “managing member” in the ventures’ operating agreements and acts as the 

“boots on the ground” for the real estate developments. The “Urbandale ____” 

subsidiary, for example, plaintiff Urbandale Best, acts as the “non-managing 

member” or “equity participant.” While the parties share fifty/fifty in the economic 

interests of the joint ventures, the R&R entities are the sole “managing 

members.” 

Des Moines attorney William Bartine served as entity counsel for the 

Paragon Best joint venture, as well as for the other Paragon joint ventures. 

January 2006 Operating Agreements—Paragon Office Park. After 

extensive negotiations over the course of several months in 2005 and early 2006 

involving experienced parties and their attorneys, operating agreements for 

Paragon entities other than Paragon Best were signed at the end of January 

2006 between RREI and Kansas City Life subsidiaries for the development of the 

Paragon Office Park. During negotiations in November 2005, Steve Gaer, 

executive vice president and general counsel of R&R, e-mailed Tracy Knapp, 

chief financial officer for Kansas City Life, and attached a draft operating 

agreement. Included in “Article IV Management of Company” was a major 

decision matrix with four major decisions, such as refinancing “any indebtedness 
5

affecting one or more of the Projects” and “expansion or new construction of or 

on one or more of the Projects.” These two provisions remained in the final 

version of the Paragon operating agreements. 

Relevant to those two major decisions, Knapp testified that while the 

parties were negotiating development opportunities, a contract was signed to 

develop the Citigroup building on a portion of the Paragon East Central land. 

Knapp believed the Citi building was completed immediately before the January 

2006 closings on the joint operating agreements. Wells Fargo provided the 

construction financing for the Citi building, and MassMutual Life Insurance 

Company provided the permanent financing. 

Knapp responded to Gaer’s draft in mid-December 2005 with a redlined 

version of the operating agreement. Knapp added the language “unanimous 

approval” to the major-decisions process and included other major decisions. At 

trial, Knapp explained an expanded major-decision matrix was important to 

Kansas City Life because “when you’re involved in raw ground for future 

development, there are often differences.” Knapp testified:

It’s vital for both members to have protection of their interests so 

that . . . joint development can occur as both members would like or 

that it not occur. And it provides incentive for both members to 

come to an agreement and work together . . . . [W]hile you can’t 

identify all situations where decisions would need to be made, this 

clearly tries to lay out the preponderance of those things that might 

occur and have occurred in our experience in joint ventures, the 

decisions that need to be made.

RREI and Kansas City Life agreed to a matrix containing twenty-three 

major decisions. Gaer testified R&R entities are not a party to any other joint 

ventures with an operating agreement including this many major decisions. The 
6

same matrix was included in the currently disputed 2008 Paragon Best operating 

agreement. Knapp explained there were no additional negotiations concerning 

the matrix before R&R and Urbandale Best signed the 2008 operating 

agreement. 

The 2006 and the 2008 operating agreements are fully integrated, 

providing: “This Agreement and the exhibits hereto contain the entire 

understanding and agreement between the Members and supersede any prior 

understandings and agreements between them respecting the subject matter 

hereof.” 

Article IV “Management of Company.” Under section 4.1 of the 

operating agreements, the managing member (RREI or R&R) was to conduct the 

daily business of the company and to “regularly consult” with the Urbandale ____ 

entity, the non-managing member, about matters that would arise “outside the 

ordinary course of business” and “the decisions, if any, which the Managing

Member has made or intends to make with respect to any such matters.” Section 

4.2, performance standards, required the managing member to “use all 

commercially reasonable efforts to efficiently, prudently, and profitably operate 

the Company’s business and the Projects so as to achieve the profit goals of the 

Company and a commercially reasonable return on the Members’ equity.” 

Thus, the Paragon joint ventures are limited liability companies that, unlike 

a partnership, have “designated only one of its members as the managing 

member.” At trial, R&R presented evidence the Paragon joint ventures had 

generated a profitable return on Kansas City Life’s equity, ranging from seven to 
7

sixteen percent. At no point did Kansas City Life seek to remove RREI or R&R 

as the managing member. 

Section 4.4A, major decisions, stated: “Neither the Company, nor any of 

the Members acting alone, nor the Managing Member, shall take any of the 

actions (each a ‘Major Decision’) set out below without first obtaining the 

unanimous approval of all of the Members[.]” Relevant to this dispute, the matrix 

included as major decisions contracts for longer than one year and conveyances 

of an interest in land, specifically: 

(13) Any transaction not in the ordinary course of business 

or affairs of the Company;

. . . .

(21) Entering into a contract, agreement or obligation that is 

for longer than one (1) year, other than leases that do not require 

unanimous approval of all Members . . . ; 

(22) Granting or conveying any interest in property or any 

right to use or occupy any property other than leases that do not 

require unanimous approval of all Members . . . .” 

Bartine testified Kansas City Life never proposed including the owners’ 

association articles of incorporation/bylaws or the declaration of covenants, 

conditions, and restrictions (CC&Rs) in the major decision matrix. Bartine stated 

those documents are created in the ordinary course of business of a commercial 

real estate development and, as such, are used in all of the R&R entities’ 

commercial real estate developments. 

In its request for injunctive relief below, Urbandale Best pointed to two 

actions taken by R&R that allegedly contravened the section 4.4A requirement of 

major decisions being approved by the non-managing member. First, Urbandale 

Best argued R&R’s execution of three governing documents, referred to as the 
8

Highland Pointe documents, constituted a major decision reached without 

approval of the non-managing member. The Highland Pointe documents include 

(1) articles of incorporation of the Highland Pointe Office Park owners’ 

association (filed with the Iowa Secretary of State), (2) bylaws of the owners’ 

association, and (3) CC&Rs for the Highland Pointe Office Park (recorded with 

the Polk County Recorder). The documents assigned two seats to Urbandale 

Best and three seats to R&R on the association’s board of directors and 

architectural review committee. Urbandale Best alleged the structure of the 

owners’ association created obligations that would last for more than one year 

(major decision 4.4A(21)), which should have been approved by both members 

under the Paragon Best operating agreement. It also alleged the majority vote 

for R&R in the owners’ association stripped Urbandale Best of its governing 

authority under the operating agreement. 

Second, Urbandale Best argued R&R’s execution of a warranty deed 

transferring ownership of a land parcel known as Outlot A to the Highland Pointe

Owners’ Association for purposes of a storm water detention pond constituted a 

major decision under subsection 4.4A(22) because it conveyed an interest in 

property to a separate entity. 

Course of Dealing. As the parties were getting ready to proceed in 2006,

a sewer easement issue arose. Bartine understood such an easement would 

require the conveyance of an interest in land. On March 9, 2006, Bartine sent an 

email to Kansas City Life counsel Karen McConnell and Gaer to determine 

whether the Urbandale entities wanted to sign such documents as required under 
9

a literal reading of the major decision matrix (major decision 4.4A(22)). Bartine’s 

email began: “[W]e need to discuss the circumstances under which [RREI] can 

act as the Managing Member of Paragon East Central. That is, when can [RREI] 

sign documents that bind the Paragon ___, LLCs without a signature by the 

corresponding Urbandale ___, LLC.” Bartine testified his email was intended to 

be “a go-forward comment and understanding” and “relationship-wide 

agreement” as shown by the “fill-in-the-blank” language. Thus, although the 

email first raised the sewer easement, Bartine then listed several other examples 

of “ministerial” or “ancillary” documents for the parties to discuss, stating:

[RREI] has always used the rule . . . that it wants its 

partners to sign significant loan documents, purchase agreements, 

deeds, settlement agreements, etc. Most of the time [RREI] will 

talk to their partners before they sign the specific document, or any 

general class of documents. But in this instance, the City of 

Urbandale is asking for a sewer easement over Paragon North’s 

land as a condition to filing the plat . . . . In your opinion, should 

Urbandale North, LLC sign this easement? To my way of thinking, 

this [easement] fits into a category that I call “ministerial” or 

“ancillary” documents that are necessary to make the bigger deal 

go forward, but which don’t really affect the major terms of the deal. 

Another example is a deed to the City for dedication of right-of-way 

in a platting proceeding. That issue does not present itself in the 

Paragon Office Park Plat 1 context, but we will face it as the 

balance of Paragon Office Park is platted. A final example would 

be routine title affidavits, and perhaps closing settlement 

statements like the one that the Borrower will be requested to sign 

in connection with the MassMutual closing.

Bartine explained his email’s purpose was to obtain an understanding 

about the wording in the operating agreements regarding deeds and

conveyances and to determine what deeds and conveyances would not require 

joint signatures under the ordinary-course-of-business concept (major decision 

13). He testified the R&R entity in other developments “always had an 
10

understanding . . . that ministerial-type acts would be in the jurisdiction of the 

managing member.” For example, “in platting proceedings, the city requires 

streets to be dedicated by deed, and that’s just [a] part of the process.” Bartine 

testified his email was “meant to cover future projects,” including Paragon Best. 

The next day, March 10, 2006, William Schalekamp, then senior vice 

president and general counsel of Kansas City Life, and McConnell came to Des 

Moines and met with Gaer and Bartine to discuss the email. Gaer testified: “[W]e 

had a general discussion about how we wanted to make sure we function going 

forward as far as day-to-day operation of these entities,” and “Schalekamp said 

we agree to these guidelines, and he wrote the sentence on the bottom and 

signed it.” 

Schalekamp testified Bartine asked McConnell, “Does everything that 

needs to be signed have to go to Kansas City for signature?” Schalekamp 

explained the context of the question was Kansas City Life’s relationship with 

R&R focusing “on those things that the R & R side of the venture would be doing 

in its capacity as managing member” and “how are we going to operate day-today?” He testified that at the time of this meeting, Kansas City Life had been in a 

similar, profitable real estate development in Arizona for twenty years in which 

the managing member made “day-to-day ministerial decisions” and ran the 

“property on a day-to-day basis” while providing Kansas City Life with “decisionmaking authority on non-day-to-day matters.” On Bartine’s e-mail, Schalekamp 

wrote: “These general guidelines are acceptable to the Urbandale LLCs and 

Kansas City Life.” Schalekamp, at the time he signed, understood Bartine’s 
11

examples were general guidelines and “not meant to be all-inclusive” because 

other matters would fall within those general guidelines and be acceptable to 

Kansas City Life even though not specified in the email. 

On appeal, Urbandale Best points out Schalekamp testified he did not 

have the authority, nor would he have been willing to bind future unknown 

entities, such as 2008 Urbandale Best, and he believed the parties’ March 2006 

agreement concerning “ancillary” documents only bound then-existing Paragon 

entities.1 But on cross-examination Schalekamp admitted (1) he signed on 

behalf of Kansas City Life, (2) at the time he signed, in addition to the alreadyexisting developments, Kansas City Life and R&R were discussing other 

developments in the greater Des Moines area, (3) he did not tell anyone at the 

meeting his signature “only relates to existing joint ventures, not to the ones we 

are contemplating,” (4) he did not include any language limiting his agreement to 

then-existing joint ventures, and (5) he never notified anyone at R&R he “did not 

want the agreement [he] entered into on behalf of Kansas City Life to apply to 

Urbandale Best or any of the other on-going joint ventures between the parties.” 

Bartine testified after Schalekamp signed, “there had been established a 

basis of understanding as to which conveyances and other documents” the R&R 

 

1 Urbandale Best contends the March 2006 email/letter agreement is not relevant to this 

dispute because RREI, the party identified by Bartine in the email, is a different legal 

entity than R&R, the entity joining with Urbandale Best to form Paragon Best. Noting 

Schalekamp’s testimony on cross-examination and the fact he signed the email on 

behalf of Kansas City Life and not on behalf of any specific Urbandale ___ subsidiary, 

we are not persuaded. We also note Gaer’s November 2005 email to Knapp attaching 

the first draft of the 2006 operating agreements was signed by Gaer as executive vice 

president/general counsel of R&R, even though RREI entered into those agreements. 

Finally, Schalekamp testified he was not consulted with regard to the March 2006 letter 

agreement before Urbandale Best filed this lawsuit.
12

entity “alone could execute.” Three days later, March 13, 2006, Bartine, as the 

incorporator, filed the articles of incorporation for the Paragon Office Park 

owners’ association. Article VII, board of directors, provided the owners 

association’s affairs shall be managed by a board of directors and named three 

directors—Daniel P. Rupprecht, Steven K. Gaer, and Mark Rupprecht. The only 

signature on the document belonged to Bartine as incorporator, and neither 

Kansas City Life nor its subsidiaries objected to this filing.2 This owners’ 

association document governed a large amount of land on six sites from 

“proprietors” Paragon West, Paragon North, Paragon West Central, Paragon 

East Central, City I, and Paragon South. 

Gaer explained, generally owners’ association boards focus on 

maintaining the development’s common areas; “the detention ponds of the 

development”; snow removal on the private roads; “the collection of assessments 

that the other third-party owners need to pay as a part of that maintenance; and 

enforcement of the excusive-use provisions of the park.” Gaer explained no 

“other joint venture entity” has ever asked to be represented on the board of 

directors of the owners’ association or to be represented on the architectural 

review committee in R&R’s numerous other joint ventures.3 

 

2 The fact no objection was lodged to this unilateral action undercuts Schalekamp’s 

testimony that at the time he signed Bartine’s email, he did not consider articles and 

bylaws creating an owner’s association “would fall within the ministerial duties” that did 

not require Kansas City Life’s approval. 

3 We find credible Gaer’s testimony the R&R officials met and performed the functions 

required of the Paragon Office Park owners’ association board of directors and the 

CC&R-created architectural review committee. We do not find credible Knapp’s 

testimony these joint ventures did not have a functioning board of directors/architectural 
13

Thereafter, according to Bartine, “on a regular basis” RREI—as the sole 

managing member and pursuant to the 2006 email letter agreement—

“unilaterally” prepared and executed “a variety of contracts, agreements, or 

obligations for longer than one year” but necessary to make the bigger deal move 

forward (major decision 4.4A(21)). In support of his testimony Bartine prepared 

Exhibit E, a listing of transactions in which an R&R entity “acted as a sole 

managing member for a Kansas City Life affiliate project” without objection by 

Kansas City Life or its subsidiary. For example, RREI unilaterally prepared 

numerous easements in 2007 and 2008. In August 2008 RREI, on behalf of 

Paragon North, entered into an agreement with the City of Urbandale. In March 

2009 RREI filed an owners’ consent to plat Paragon Office Park Plat 3. 

Bartine explained other unchallenged actions/documents listed in Exhibit 

E were the same transaction as the now-challenged deed for Outlot A (Paragon 

Best to the Highland Pointe Owners’ Association). Specifically, in February 2010 

RREI unilaterally filed the Paragon Office Park Plat 3 storm water management 

facility maintenance covenant and permanent easement agreement. The next 

month RREI unilaterally filed a warranty deed from Paragon West to the Paragon 

Office Park Owners’ Association. Kansas City Life did not complain about these 

unilateral actions nor assert the actions were major decisions under a literal 

reading of the operating agreement. 

Finally, Bartine testified RREI’s unilateral actions and filings in Exhibit E 

were a common course of business in commercial real estate developments. As 

 

review committee and instead items needing to be accomplished occurred by everyone 

agreeing on everything.
14

such, similar deeds and conveyances “were prepared, filed, and unilaterally 

recorded” by R&R entities on developments with its other joint venture partners. 

Paragon Office Park CC&Rs. Returning to the 2006 timeline, in March 

2006 a new mortgage between Citi I, LLC and MassMutual was filed with the 

Polk County Recorder.4 One dispute herein is the fact Urbandale Best did not 

sign the Highland Pointe CC&Rs before they were recorded, unlike in April 2006 

where both RREI, Kansas City Life, and the Kansas City Life subsidiaries signed 

the original Paragon Office Park CC&Rs.5 The grantors of the Paragon Office 

Park CC&Rs were six limited liability corporations: Paragon West, Paragon 

North, Paragon West Central, Paragon East Central, City I, and Paragon South. 

The Paragon Office Park CC&Rs were recorded on April 24, 2006, about five 

weeks after the MassMutual mortgage was recorded.

At trial, Knapp testified the April 2006 CC&Rs were not required as part of 

the March 2006 MassMutual refinancing. Schalekamp testified that when he 

signed Bartine’s email, he did not consider CC&Rs to be “ministerial duties.” 

Bartine testified “other reasons” explained why the Paragon Office Park 2006 

CC&Rs and the later March 2010 amended CC&Rs were signed by Kansas City 

Life entities. Bartine first noted the last paragraph of his March 2006 email, “a 

borrower will be requested to sign in connections with the MassMutual closing.” 

Bartine then explained: 

 

4 Under the mortgage, notices to the borrower needed to be sent to City I, LLC, c/o R&R, 

Attention: Gaer with copies to Knapp at Kansas City Life and Bartine. 

5 Daniel Rupprecht signed the CC&Rs on behalf of the five Paragon LLCs and RREI. He 

also signed for City I, LLC. William Schalekamp signed on behalf of the Urbandale LLCs 

and Kansas City Life. 
15

My recollection and my records would indicate that at that 

time we had a major expansion going on at the Citi building, and it 

involved amendments to . . . the substantial loan obligations. And 

in any deal that I’ve done with R&R since 1993 . . . when there is 

financing involved, everybody’s going to sign . . . . So if you’re 

going to present a stack of mortgage documents to Kansas City 

Life to sign, another document that is going on at that time is the 

[CC&R’s], why not get them to sign it? It is good practice.

[Second,] at the time of the first amendment to those 

[CC&Rs in 2010,] we did those in conjunction with the Dahl’s 

exchange. And again, when you are talking about a transaction of 

that scope, why not put another document in front of the partner to 

have them sign. I don’t think it was ever a concession that these 

[CC&Rs] were anything other than day-to-day real estate 

development documents. But that is . . . the reason that they were 

signed by Kansas City Life, because it was, frankly, convenient to 

do it. 

Paragon Office Park. In March 2008 Gaer went to Kansas City to meet 

with Schalekamp. Gaer told Schalekamp “our relationship between R&R and 

Kansas City Life has become almost adversarial on these developments.” Gaer 

gave two examples. First, by objecting to leases to smaller tenants, Kansas City 

Life “has basically eliminated 58% of our tenant base.” Second, Kansas City Life 

“did not like governmental entities as tenants. And they’re fantastic tenants.” 

Gaer stressed to Schalekamp “we’ve got to get by these issues, because we 

can’t run our business, and what you’re suggesting we do is economically 

disadvantageous to both of us.” 

Operating Agreement for Paragon Best. On August 27, 2008, 

Urbandale Best and R&R entered into the Paragon Best operating agreement at 

issue. Under the agreement, both members hold an equal ownership interest, 

each making a capital contribution of $2,973,195.81. This venture is much 

smaller than the 2006 Paragon Office Park joint ventures and involves 
16

approximately thirty to forty acres of agricultural property slated for long-term 

development into the Highland Pointe Office Park. The 2008 operating 

agreement was “amended and restated” from the 2006 operating agreements 

originally negotiated by the related,6but differently titled entities in 2006. 

As in the earlier Paragon Office Park developments, R&R undertook 

unilateral actions on the behalf of Paragon Best to advance the development of 

Highland Pointe Office Park. As specifically detailed in Exhibit E, in April 2011 

R&R signed a development agreement between Paragon Best and the City of 

Urbandale (filed November 2011). On July 12, 2011, R&R unilaterally executed 

numerous documents: owner’s consent to plat Highland Pointe Office Park Plat 

1, the easement for sanitary sewer right-of-way, three easements for storm 

sewer and surface water flow, and an easement for access (all filed March 2011). 

On September 28, 2011, R&R executed an easement for ingress/egress (filed 

March 2011). None of these unilateral actions drew an objection from Urbandale 

Best or Kansas City Life on the grounds that these actions were “literally” major 

decisions under sections 4.4A (21), (22) of the operating agreement. 

The unchallenged, unilateral actions of R&R emerged from the following 

chronology of events. The business relationship between Kansas City Life and 

R&R—dating back to 2005—had grown adversarial. The parties clashed over 

the design of the Dice Building in the Paragon South development. The current 

litigation, commenced in spring 2012, is the third lawsuit “with a Kansas City Life-

 

6 The 2008 operating agreement defined “Related Company” as “[a]ny of the following 

limited liability companies, so long as the Members or their Affiliates each hold a 50% 

interest in such limited liability company: Paragon West, LLC; Paragon West Central, 

LLC; Paragon East Central, LLC; Paragon South, LLC; Paragon East, LLC.”
17

related entity and R&R.” Previously, the parties had been litigating how much 

R&R would pay to buy out Kansas City Life subsidiary Urbandale East Central in 

the Paragon East Central joint venture.7 

Rezoning and Highland Pointe Documents. Returning to facts 

specifically related to Paragon Best, Gaer explained the parties had rezoned 

fifteen acres of the overall land to retail. After the rezoning, Kansas City Life and 

R&R “knew that we were going to sell those parcels off, because we really aren’t 

retail developers.” Knowing sales would be forthcoming, Gaer asked Bartine to 

draft the Highland Pointe documents and suggested Bartine base them on the 

235-acre “Paragon Office Park documents since those have been in existence 

since 2006.” On March 19, 2012, Gaer asked Bartine for an update, noting the 

documents needed to be “finalized and recorded as soon as possible since our 

team is now out marketing the retail land for sale. I want to make sure all of 

these documents are in the public record so any potential purchaser is on actual 

notice.” 

 

7 Gaer described the disagreement leading to a buyout. R&R had a parcel of land it 

wanted to develop into a warehouse. R&R shared market and financial budget 

information with Kansas City Life for building a 140,000 square foot warehouse. With 

Kansas City Life’s consent, R&R hired engineers to lay the warehouse out on the site. 

“And out of the blue,” Knapp and Greg Galvin, Kansas City Life vice president for real 

estate, “show up one morning and hand me a development proposal where Kansas City 

Life was going to build two 60,000 square foot warehouses on that parcel.” Further, 

Kansas City Life planned to “use a construction company that was not an R&R 

construction company. They were going to use a leasing company that was not an R&R 

leasing company. And they were going to use a property management company that 

was not an R&R leasing company.” Knapp and Galvin asked me “if R&R would like to 

be a 50% owner in that.” Gaer responded, “what would . . . motivate you to think that 

[R&R wants] to own 50% of two buildings that we don’t build, manage, or lease in the 

middle of our 2 million square feet of construction of our buildings.”
18

Bartine drafted the documents and sent a copy to Kansas City Life vice 

president Galvin and counsel Matthew O’Connor in a May 25, 2012 email,

stating: “I am attaching the ‘association documents’ for Highland Pointe Office 

Park (articles of incorporation; bylaws; declaration of covenants; deed conveying 

storm water detention area to the association).” Bartine noted “significant 

changes” from the Paragon Office Park documents, including: “The documents 

tighten up the approval process for development, and give the Architectural 

Review Committee broader authority by adopting a ‘sole and unfettered 

discretion’ standard for most decision-making.” Bartine believed the “unfettered 

discretion” standard was consistent with section 4.4 of the operating agreement. 

In early June Knapp responded to Mark Rupprecht, stating Urbandale 

Best’s disapproval and belief the “documents include authorities that are Major 

Decisions in the [operating agreement] and the proposed draft documents would 

circumvent KCL’s authorities as 50% owner.” Knapp objected to the “deeding 

any land, such as proposed Outlot A, to any other parties unless R&R and KCL 

have agreed to this Major Decision.”

A few days later, the parties participated in a conference call and 

discussed Knapp’s concerns. Knapp testified Gaer understood his concerns but 

“also expressed that he wanted to make sure that the roles of the members in the 

operating agreement were not changed.” Knapp responded the first draft was 

“completely at odds with the consistency of the operating agreement with regard 

to each member’s rights.” 
19

On August 28, 2012, Knapp and O’Connor held a conference call with 

Bartine. Knapp recalled again stating Urbandale Best’s desire for equal 

representation on the board of the owners’ association and the architectural 

committee should those documents go forward.

The next day Knapp sent an email to Mark Rupprecht and Gaer and 

included an attachment of “redline changes” to the Highland Pointe documents.

8

 

Knapp stated: “Most of the redline edits are reflective of changes to provide for 

equal participation by R&R and KCL, consistent with the phone conversation that 

we had back in June on this topic.”9 Gaer testified Urbandale Best’s desire for 

equal representation on the board of directors and architectural committee was 

“an unusual request.” Also:

Q. Despite it being an unusual request, did you give it 

serious consideration? A. We did . . . . [W]e’ve always wanted 

input from KC Life, but when it came time to make the ordinary 

decisions that we needed to make as the managing member, if we 

didn‘t agree with what their suggestion and advice was, we made 

the decision as the managing member that we thought was in the 

best interest of the real estate investment business pursuant to our 

standard in 4.2 of the operating agreement. 

 

8

 Also on August 29, 2012, O’Connor sent a follow up e-mail to Bartine attaching the 

redlined versions of the Highland Pointe documents. We note the redlined versions did 

not change the signature block that contained only Gaer’s signature on behalf of R&R for 

Paragon Best, i.e., signatures from Kansas City Life or Urbandale Best were not 

required in Urbandale Best’s redlined versions. 

9 The redlined document stated the “Architectural Review Committee” (ARC) shall be 

composed of four individuals, two selected in the sole discretion of Kansas City Life and 

the other two selected in the sole discretion of R&R. “Unless these CCR are amended, 

each member of the ACR must be an officer or employee of KCL or R&R respectively.” 

The document listed the initial members of the committee as Daniel P. Rupprecht and 

Mark A. Rupprecht (R&R) and Tracy W. Knapp and Gregory M. Galvin (KCL). “No 

action of the ARC is considered approved unless approved by unanimous consent of the 

ARC.” The redlined document also added language stating: “No action of the [owners’ 

association] Board is considered approved unless approved by the unanimous consent 

of the Board.”
20

R&R met internally and discussed the redline changes the day after 

receiving Knapp’s email. A copy of the redline changes—bearing notes 

handwritten by Gaer on August 30, 2012—was turned over to Urbandale Best 

during this litigation. Gaer’s notes captured the views of R&R officers on the 

Urbandale Best proposals. There were several “OK” notations, including: “The 

sole Member of the Association is Paragon Best, LLC.” In several cases the 

notes suggested contacting Bartine for his opinion. As to Urbandale Best’s total 

deletion of the section regarding “Powers Regarding Retail Site,” the notes 

stated: “Need this so people buying retail sites are ‘on notice.’” Also, some of the 

“no” notations were followed by, “we are setting out specific provisions of 

§ 504.901” or “follow the language of the statute.” 

The notes included the following comment, “KCL can’t ‘control’ [with an 

arrow to the word ‘unanimous’] the decisions (we are the managing member), 

incorporate what we agree with, delete balance of changes and record (wait to 

‘resolve’ this once we have closed on Paragon East Central, LLC”)10—attributed

to R&R founder Dan Rupprecht. A second note, again referencing the word 

“unanimous” and in the section discussing the developer’s [Paragon Best’s] 

reserved rights and powers “to sell” building sites, stated: “See operating 

agreement, section 4.4A(22). Keep consistent with that.” 

Next to Knapp’s proposal for equal representation on the board of the 

owners’ association, the notes stated: “No” and “operating agreement § 4.4A

 

10 Knapp explained R&R’s plan to “wait to ‘resolve’ this” referenced the ongoing litigation 

and settlement talks concerning the value of R&R’s buyout of the Paragon East Central 

Project, which closed on December 26, 2012—four months after the internal R&R 

meeting. 
21

Major Decisions, not a major decision.” Similarly, next to “Board of Directors, 

Selection, Term of Office,” the notes stated: “No, ‘outside’ the operating 

agreement. R&R needs to have ‘control’ other than for Major Decisions per 

§ 4.4A of operating agreement.” On the page defining the architectural review 

committee, Gaer jotted the following note: “KCL must be minority of bd.” 

At trial, Knapp admitted the handwritten notes do not show any intent on 

the part of R&R to circumvent the operating agreement. Gaer testified Kansas 

City Life had never asked for representation on the board of directors of the 

owners’ association or the architectural committee in the earlier development of 

Paragon Office Park. Bartine testified R&R entities filled the board and 

architectural committee roles in all of R&R’s developments and historically, the 

non-managing members did not play a role in either the board or committee. 

October 2012 Quarterly Meeting and Closing of Sale of Paragon East. 

Representatives from Urbandale Best and R&R met in Des Moines for a regular 

quarterly meeting on October 3, 2012. The agenda listed eight items, including

the marketing efforts for Highland Pointe, Paragon East Central purchase and 

sale agreement, and covenants for Highland Pointe. Galvin recalled a “very brief 

discussion” by Gaer of the need for the articles, by-laws and declarations to 

follow the Iowa not-for-profit association statutes. Anticipating a broader 

discussion of the documents, Galvin brought copies to the meeting but never 

took them out of his briefcase. Galvin left the meeting believing his company’s 

comments were still under review.
22

Knapp recalled Gaer explaining his concern that Urbandale Best’s 

proposed changes would alter the roles of the members in the operating 

agreement and Knapp’s response their version “had nothing to do with altering 

the impact or roles of the members under the operating agreement.” But Gaer, 

according to Knapp, did not share the level of disagreement reflected in the R&R 

meeting notes. Knapp also recalled Gaer stating his concerns about the Iowa 

not-for-profit statute and his plan to ask Bartine for further analysis of the 

interplay between the proposed changes and the statute. 

In contrast, Gaer recalled stating:

[First], some of the changes [you are seeking] change the 

statutory language of the Iowa not-for-profit law. And they said, 

well, [O’Connor] shouldn’t have done that . . . . [W]e understand 

that we can’t change what the Iowa law says.

[Second], as we read some of these changes, you . . . are 

trying to change the roles of KC Life and R&R vis-à-vis the 

operating agreement. And [Knapp] said, well, we shouldn’t be 

doing that. So at that time I suggested [getting Bartine] on the 

phone, he was the agreed-upon entity attorney, and let’s go 

through these so we can finalize them. 

On October 12, 2012, Gaer sent an email to O’Connor to follow up on the 

“discussion we had last Wednesday with [Knapp and Galvin] when they were in 

town.” He wrote, “please let me know a couple of dates and times that you guys 

are available for a conference call with us and Bill Bartine so we can finalize” the 

Paragon Best “owners’ association documents and CC&Rs.” Starting in October 

2012, the monthly reports from R&R to Kansas City Life noted R&R was waiting 

for dates/times from Kansas City Life for a joint conference call with Bartine to 

finalize the Highland Pointe documents. Gaer testified: “At no time did they ever 

get back to us and take us up on our request to have a conversation to finalize” 
23

the Highland Pointe documents. Knapp admitted Urbandale Best did not 

respond to Gaer’s request to provide its conference call availability to finalize the 

Highland Pointe documents. 

On December 26, 2012, R&R’s buyout of Urbandale East Central’s 

interest in the Paragon East Central development closed. 

January 2013 Quarterly Meeting. On January 10, 2013, Kansas City 

Life officers Galvin and Knapp again met with Gaer in Urbandale. Gaer testified 

the parties discussed the sale of the Paragon Best retail land—the locations to 

sell, the size of the parcels to sell, and the selling price. Knapp testified similarly. 

Knapp and Gaer both testified that Gaer reminded Urbandale Best “we need to 

get the CC&Rs and the owners’ associations finalized, because we’re very close 

to signing purchase agreements on two transactions to sell land in Paragon Best” 

to parties in competition to build a hotel. 

Bartine’s Preparation of the Highland Pointe Documents. Gaer and 

Bartine both testified R&R did not seek to circumvent the Paragon Best operating 

agreement. Specifically, Gaer testified to his instructions to Bartine regarding

drafting the Highland Pointe documents:

I’m asking you as the entity counsel to go through all the 

changes requested by Kansas City Life, and what I’m asking you to 

do is make whatever changes you think are in the best interest of 

Paragon Best, LLC, as the entity counsel, with the exception that 

we fundamentally have an agreement with KC Life that any 

changes that change the Iowa not-for-profit laws won’t be made, 

and any changes that change the roles of the parties, vis-à-vis the 

operating agreement, will not be changed.

With those exceptions, I need you to finalize these, and I 

need you to record them so I can get them to the buyers. 

Bartine testified:
24

Q. . . . When you were making changes and resolving the 

discussions and input you had from the two owners of Paragon 

Best to what eventually became [the Highland Pointe documents,] 

your number one goal was to follow the operating agreement and 

not to take specific suggestions from either party; is that correct? 

A. That is not only correct, but that is the specific discussion I had 

with Mr. Gaer. He said, “You make the changes in compliance with 

the operating agreement.” 

Bartine also testified he came to the conclusion in early January 2013 that 

Urbandale Best did not have the right to consent to the three Highland Pointe 

documents because the documents were not major decisions. On January 25, 

2013, R&R signed the first Paragon Best purchase agreement with a hotel 

developer. Bartine recalled “Gaer specifically came to my office saying we need 

to get this stuff done and get it out of here, and you need to get Kansas City Life 

notified of this.” 

On January 28, 2013, R&R unilaterally issued a warranty deed on behalf 

of Paragon Best that conveyed Outlot A to the Highland Pointe owners’ 

association (recorded in February 2013). That same day, R&R signed the 

second Paragon Best purchase agreement with another developer. The 

purchase agreements specifically stated the buyer acknowledges their purchase 

is subject to the Highland Pointe Office Park Association and CC&Rs, referenced 

as an exhibit. Gaer explained the signed agreements “had nothing attached”

because the documents had not yet been finalized. 

On January 29, 2013, Bartine filed the final Highland Pointe homeowner’s 

association articles and bylaws. On January 30, 2013, Bartine recorded the 

Highland Pointe CC&Rs. Bartine testified the timing was a “practice glitch” and “I 
25

wish I had gotten them out sooner . . . . But . . . I got them out as quickly as I 

could.” 

Bartine Letter—Highland Pointe Documents. On February 14, 2013,

Bartine first informed Urbandale Best the Highland Pointe documents had been 

finalized, filed, and recorded. Bartine testified he had other big financing projects 

going on at the time and 

if I was a procrastinator . . . so be it . . . . I don’t want this to be 

about a matter of disrespect for Kansas City Life; that is not what 

this is at all. This is a matter of I made the judgment that this was a 

document that is in the ordinary course of real estate development, 

and I didn’t think I needed to consult with anybody other than . . . 

the managing member on it. 

. . . .

Q. Did R&R tell you not to inform Urbandale Best about your 

opinion on these documents or the form that they were going to be 

filed until after they filed them? A. Quite the contrary. I was 

getting frequent calls, emails from Mr. Gaer saying this needs to get 

out. This needs to get out to Kansas City Life. So . . . on the timely 

issue of this, if there is anybody who has to have broad shoulders, 

it’s me. 

In the February 2013 letter to O’Connor, Bartine specifically stated the 

“Developer’s power to sell lots is subject to section 4.4A” of the operating

agreement. Bartine detailed his efforts “to reconcile” the Highland Pointe 

documents with the 2008 Paragon Best operating agreement, with his “primary 

directive” being to “have the provisions of the association documents line up with 

the general management duties of the Managing Partner” in the 2008 operating 

agreement. 

As I read section 4.4A . . . the Members have stated that the 

Managing Member should have the authority to make all non-major 

decisions because it has expertise in the local commercial real 

estate market. In other words, if the matter does not fall in a Major 

Decision Category, let the Managing Member manage. However, it 
26

is also essential that the KC Life entity should have a voice at the 

table by assigning board seats to KC Life, allowing KC Life input on 

decisions.

So to make the office park regulatory documents consistent 

with the [2008 operating agreement,] we need to look at section 

4.4A, . . . which provides that neither Member acting alone, nor the 

Managing Member, may make specifically enumerated “Major 

Decisions” (sometimes “MD”) without the unanimous written 

approval of all of the Members.

Next, Bartine analyzed section 4.4A to determine “if the proposed actions 

in connection with the current hotel transactions and the finalization and filing of 

the business park regulatory documents” (the Highland Pointe documents),

“might be characterized as ‘Major Decisions’ requiring all members to consent, or 

‘Not-Major Decisions’ that the Managing Member can initiate, structure, and 

close/finalize.” He then discussed the “authority” of the managing member to 

enter into the Highland Pointe documents and concluded nothing in the major 

decision matrix in section 4.4A limits the ability of the Managing Member to 

execute and file organizational documents and to promulgate bylaws, “provided 

the documents are crafted to give the Managing Member the flexibility to make 

decisions. In the case of the subject documents, they provide the non-managing 

member with a seat on the various boards and an ability to be present as the 

matters are discussed.”

11

 

 

11 Bartine described the changes to the final “Articles of Incorporation of Highland Pointe 

Office Park Owners’ Association” as including five board members/directors, three from 

R&R and two “as the KC Life members”—the “theory here is to give KC Life access to 

the information and discussions that lead up to decisions, but to have the majority of 

votes vested in the Managing Member’s representatives”—(amendments require a 

majority vote). He also described the bylaws as the board directors being “appointed by 

R&R and KC Life (and their respective affiliates).” Finally, Bartine described the CC&Rs 

as including a five-member architectural review committee “with three selected by the 

R&R parties and two by KC Life and its affiliate,” with decisions by a majority.
27

Bartine likewise concluded 4.4A(21) and (22) did not limit R&R’s actions 

as to the CC&Rs, noting: “[W]hat is more clearly fitted into the Managing 

Member’s market expertise than the form of restrictions that will allow fair 

management and maintenance of the office park without over-restricting and 

devaluing the property and its uses.” Bartine stated he was “also comforted by 

the fact that the proposed association documents AND the CC&Rs are based on 

the Paragon Office Park model documents, so there is a course of dealing in that 

area.” 

Finally, Bartine stated: “I have spent quite a bit of time considering section 

4.4A of the [operating agreement,] and I believe that these changes to the 

association documents are materially consistent with the powers allocated to the 

Managing Member and those retained by both Members to act on ‘Major 

Decisions.’”

O’Connor and Gaer Letters. On March 15, 2013, O’Connor reacted to 

Bartine’s letter by sending a letter to R&R’s Daniel Rupprecht stating the finalized 

documents were filed “without the consent of KCL” and “wholly ignore” its 

comments as “sent to William Bartine via email on August 29, 2012, and which 

were discussed by the parties at length in a subsequent conference call, in an 

October 3, 2012 meeting, and in a January 10, 2013 meeting.” O’Connor also 

wrote, this “correspondence constitutes KCL’s notice that, by having filed these 

three documents, R&R, acting as the Managing Member, may be in material 

breach” of the operating agreement.12 

 

12 The Paragon Best operating agreement’s “major decision” section provides:
28

On March 20, 2013, Gaer responded to O’Connor’s letter because 

Rupprecht was out of the office. Gaer understood O’Connor was objecting to the 

Highland Pointe documents. Gaer stated he believed Bartine’s February letter 

addressed the concerns O’Connor raised and R&R believed the recording of the 

Highland Pointe documents was in compliance with the operating agreement. 

“We were concerned that any further delay in recording those documents would 

have been detrimental to the owners of Paragon Best, LLC due to the pending 

sales of two (2) retail sites and could have placed R&R in violation of Section 

4.02 of the operating agreement.” 

Gaer noted the owners’ association/CC&Rs were based on the 2006 

documents. Also, R&R had received “KCL’s suggested changes” to the 

documents three months after Bartine sent out a draft “for review and comment.” 

Gaer then noted the documents were an agenda topic at the October 3 meeting 

and during the conversation Knapp and Galvin “agreed that KCL’s changes 

should not vary the Iowa statutory provisions applicable to not-for-profit entities 

nor should the changes alter the parties’ respective responsibilities and duties” in 

the operating agreement. Gaer reminded O’Connor of Gaer’s follow-up email 

“asking for KCL to provide me with a couple of dates and times for a conference 

 

A Member shall be deemed to have Approved any such Major 

Decision in the event that such Member does not Approve or disapprove 

such Major Decision in writing to the Managing Member within thirty (30) 

days . . . after notice of a pending Major Decision is sent to such Member 

by the Managing Member. 

The district court ruled that Urbandale Best did not provide timely notice to R&R under 

this provision because O’Connor’s letter mentioned only Kansas City Life. We disagree 

with the district court on the notice issue, but ultimately hold R&R did not breach the 

operating agreement.
29

call with Bill Bartine to finalize” the Highland Pointe documents. “At no time did 

KCL provide us with any dates or times for a conference call to further discuss” 

with Bartine the Highland Pointe documents. 

Gaer stated at the January 10 meeting, Knapp and Galvin “acknowledged”

that “we needed to finalize and record the Owners’ Association/CC&Rs before 

closing on either of those sale transactions to ensure that those parcels and their 

subsequent owners would be subject to the Owners’ Association/CC&Rs.” Gaer 

concluded: “Because of the pending sales and no timely response back from KC 

Life, we asked [Bartine] to finalize the drafts based on the discussion and 

philosophical agreement reached between R&R and KC Life at our October 3, 

2012 meeting.” 

District Court Proceedings. On April 1, 2013, Urbandale Best filed suit 

alleging R&R breached the operating agreement, asking for a declaration 

vacating the Highland Pointe documents, and seeking temporary and permanent 

injunctions barring R&R from taking action allegedly authorized by those 

documents that otherwise required the unanimous consent of the parties. R&R 

filed an answer and counterclaim, alleging Urbandale Best breached the contract 

by preventing R&R from managing Paragon Best.

The district court held a temporary injunction hearing on June 13, 2013. 

O’Connor, Bartine, and Gaer testified. At issue was whether Paragon Best and 

R&R should be stayed from proceeding pursuant to the Highland Pointe 

documents until the court had made a final determination on whether the 
30

Highland Pointe documents are major decisions.13 Using the Dice Building as an 

example, O’Connor testified to the “irreparable harm” causing it to seek an 

injunction:

Under the previous operating agreements, if one party wants 

to propose a build opportunity and the other party does not agree 

with that build opportunity, the proposing party has the opportunity 

to purchase the other member’s interest. That occurred regarding 

a proposed build opportunity for [the] Dice Building. 

Urbandale interest disagreed with that. So we agreed to the 

buyout . . . . [A Planned Urban Development was in place.] The 

PUD required that any construction on Paragon South to be of 

generally brick material, earth-tone, neutral colors, landscaping to 

provide for a homogenous development.

. . . . 

And so once we agreed to let them buy us out on the 

proposed Dice building, they had control of the PUD. They then 

changed the standards for brick buildings and things like that and 

directed a single-story white building that has black glass 

throughout the middle of it . . . . It is not consistent [with] the master 

plan for the original Paragon properties. 

And the concern for irreparable harm is that if Urbandale is 

not represented equally on the boards . . . that the same situation 

could occur again, where we pass on a building opportunity and 

then smack-dab potentially in the middle of the rest of the land we 

are going to be stuck with a building such as the Dice building, 

which could cause irreparable harm in the sense of development 

opportunities that others pass on because of the existence of this 

building. 

(Emphasis added.) The district court questioned O’Connor to clarify Urbandale 

Best’s position: 

THE COURT: Did [Kansas City Life] participate in any of the 

actions before the city with regard to a change in the design or 

appearance of the [Dice building]. 

O’CONNOR: No.

 

13 Bartine acknowledged if the court later determined the Highland Pointe documents do 

constitute “major decisions,” the documents could be refiled or amended with the 

consent of both parties.
31

THE COURT: So you’re complaining about it now, but you 

did not involve yourself in the actions before the city that might 

have precluded a different appearance? 

O’CONNOR: That is correct. And the reason being, by that 

time we were in the process of liquidating our assets in . . . the 

Paragon developments except for the unimproved land for Paragon 

West and North.

. . . .

THE COURT: You had a remedy to try and prevent the 

construction of a building that you thought was inconsistent with the 

plans then existing for the whole development?

O’CONNOR: Correct. 

THE COURT: You just did not?

O’CONNOR: Yes.

THE COURT: Would the same opportunity be available to 

you in the [Paragon Best] agreement if you did not believe that a 

building constructed pursuant to a buyout was consistent with the 

overall plans of the development?

. . . .

O’CONNOR: That is an option that we could pursue. 

The district court balanced the equities and concluded “Urbandale Best 

has not met its burden to justify issuance of a temporary injunction.” The court 

concluded an “injunction at this time would harm both parties by delaying the 

closing of the first sale of land at Paragon Best.” 

In August 2013, the district court held a three-day bench trial. The parties 

stipulated the temporary-injunction proceedings were a part of the trial record. 

Gaer testified that at the time R&R signed the Paragon Best operating 

agreement, it did so with the understanding that the matters agreed upon in the 

2006 Bartine email/letter agreement were a part of the intent of the parties upon 

signing. Further: 

Q. And at the time R&R signed [the Paragon Best operating 

agreement], did it do so with the understanding that there had been 

since [the Bartine email/letter agreement] actual examples in 

conformance with [it]. A. Yes.
32

Q. . . . [W]as that course of conduct such that it formed part 

of the intent of R&R at the time it signed [the Paragon Best 

operating agreement]? A. Yes.

Q. Without the understanding in [the Bartine email/letter 

agreement], would R&R have signed the Paragon Best, LLC, 

operating agreement . . . ? A. If Kansas City Life wanted as much 

control and authority as they claim to want today, we would have 

never brought them in as a partner.

Q. Why not? A. Because we can’t operate our business. 

This is our hometown. We’ve got six-million square feet of 

commercial real estate, and we need to be able to operate our 

business here and to protect the reputation and the integrity of 

R&R.

Q. Can you envision anything that R&R would do as the 

sole managing member of Paragon Best that would not be also in 

the same interest, good or bad, for Urbandale Best? A. No, 

because we’re 50/50 partners in that land, and R&R has another 

two-million square feet in Urbandale. So the last thing [R&R is] 

going to do is create problems for ourselves in developments in 

[Urbandale, where we are the biggest taxpayer]. 

 

Further, Gaer testified the Highland Pointe documents “fall under the 

rubric of what the managing member’s responsibilities were going to be” and are 

not major decisions based on the “custom and usage of the real estate 

development market” and the parties “past course of conduct.” 

In October 2013 the district court ruled Urbandale Best failed to meet its 

burden to secure a permanent injunction or declaratory relief because R&R did 

not breach the operating agreement. The court based its ruling on “the custom 

and practice in the industry, the course of dealing between the parties, and the 

express purpose of the parties’ letter agreement [from 2006].” Although R&R did 

not request the district court do so, the court also listed eight matters that did not 

constitute major decisions under the operating agreement. On R&R’s 

counterclaim, the court ruled Urbandale Best breached the operating agreement 

“by making R&R’s performance impossible” and determined $23,122.50 was “an 
33

appropriate measure of damages” considering the time expended on the litigation 

by R&R personnel. 

Urbandale Best now appeals.

II. Standards of Review

Urbandale Best’s request for declaratory judgment and injunctive relief 

invoked the district court’s equitable jurisdiction. See Iowa R. Civ. P. 1.1501. 

We review the district court’s ordering denying Urbandale Best’s request for relief 

de novo. See City of Okoboji v. Parks, 830 N.W.2d 300, 304 (Iowa 2013). The 

district court’s findings of fact are not binding, but we give weight to its 

assessment of witness credibility. Id.

Because R&R’s counterclaim for breach of contract was tried in the same 

equity proceeding, we also review it de novo. Rector v. Alcorn, 241 N.W.2d 196, 

199 (Iowa 1976) (“[O]nce equity has obtained jurisdiction of a controversy, it will 

determine all questions material or necessary to accomplish full and complete 

justice between the parties, even though in doing so it may be required to pass 

upon some matters ordinarily cognizable at law.”).

Urbandale Best urges us to apply an additional layer of scrutiny to the 

district court’s decision. It asserts the court’s ruling so closely tracks the 

proposed findings and conclusions submitted by R&R that the independence of 

the court’s reasoning deserves a closer look on appeal. See In re Marriage of 

Siglin, 555 N.W.2d 846, 849 (Iowa Ct. App. 1996) (“[T]he proposed decision 

should be a guide, with selected portions incorporated into the independent 

thoughts of the trial judge.”). R&R responds that “[t]he fact that the district court 
34

requested both parties to submit proposed findings does not negate the fact that 

the district court heard all of the evidence and was the judge of the credibility of 

the witnesses.” 

Our supreme court has recognized “counsels’ submission of proposed 

findings of fact and conclusions of law can be extremely valuable in assisting the 

district court, especially in highly technical or complicated cases.” See 

NevadaCare, Inc. v. Dep’t of Human Servs., 783 N.W.2d 459, 465 (Iowa 2010). 

But the supreme court has discouraged district courts from adopting verbatim the 

proposed findings and conclusions prepared by counsel for one of the parties, 

lest it appear the court has abdicated its responsibility to reach an objective 

determination. Id. at 465–66; see Rubes v. Mega Life & Health Ins. Co., 642 

N.W.2d 263, 266 (Iowa 2002) (“[T]he customary deference accorded trial courts 

cannot fairly be applied when the decision on review reflects the findings of the 

prevailing litigant rather than the court’s own scrutiny of the evidence and 

articulation of controlling legal principles.”). 

In this case, the district court ruling does borrow liberally from R&R’s 

proposed findings of fact and, to a somewhat lesser extent, from its conclusions 

of law. But that drafting issue alone does not signal the district court’s abdication 

of its independent decision making. The transcripts of the injunction hearing and 

the bench trial show the court was keenly interested in the factual background

and legal issues and engaged in its own questioning of witnesses for both parties 

in an effort to clarify the record. While Urbandale Best has raised legitimate 

concerns, we believe the district court decision was the product of independent 
35

judgment. See Siglin, 555 N.W.2d at 849. Finally, “in equity actions such as this 

we review the evidence anew, disconnected, ultimately, from the trial court 

findings.” Id. 

III. Principles of Contract Interpretation and Construction

In contract cases, our supreme court has described interpretation as 

determining the meaning of words in a contract and construction as deciding the 

legal effect of such words. Fausel v. JRJ Enterprises, Inc., 603 N.W.2d 612, 618

(Iowa 1999). The “cardinal rule” of contract interpretation is to decipher the intent 

of the parties at the time they entered into the agreement. See Pillsbury Co. v. 

Wells Dairy, Inc., 752 N.W.2d 430, 436 (Iowa 2008). If we can ascertain the 

principal purpose of the parties, we give it great weight. Id. We can consider 

extrinsic evidence to help us in the process of interpretation. Id. Because 

“meaning can almost never be plain except in a context,” we determine the 

meaning of contract provisions in the light of all relevant evidence, including the 

situation and relations of the parties, their prior course of dealing, and usages of 

the trade. Fausel, 603 N.W.2d at 618 (stating the rule that words “are interpreted 

in the light of all the circumstances is not limited to cases” where ambiguity

exists). We use these rules to determine “what meanings are reasonably 

possible” and also to deduce our choice “among possible meanings.” Pillsbury, 

752 N.W.2d at 436. “‘But after the transaction has been shown in all its length 

and breadth, the words of an integrated agreement remain the most important 

evidence of intention.’” Fausel, 603 N.W.2d at 618 (quoting Restatement 

(Second) of Contracts § 212, cmt. b, at 126 (1981)).
36

IV. Application of Principles to Paragon Best Operating Agreement

R&R and Urbandale Best present competing views of the Paragon Best 

operating agreement and under what circumstances it would require R&R, as the 

managing member, to obtain the agreement of Urbandale Best, the nonmanaging member, under “Article IV Management of Company.” Urbandale Best 

contends R&R unilaterally entered into three contracts (owners’ 

association/CC&Rs/Outlot A deed) that stripped Urbandale Best of its 

management rights under the operating agreement’s major decision matrix. R&R 

responds the March 2006 Bartine email/letter agreement reflected the intent of 

the parties about how the relationship would proceed and now, mid-game, 

Urbandale Best “seeks to change the rules or suggest they never applied.”

A. Deed. Our de novo review of the record shows Urbandale Best’s 

challenge to the Outlot A deed is without merit. We give no credence to Knapp’s 

testimony that at the time of the deed’s execution Kansas City Life might have 

preferred another location for the detention pond. As explained below, we agree 

with the district court’s statement the “suggestion that Urbandale Best would not 

have signed the deed to the detention pond because it would have selected other 

means for storm water detention is patently incredible.” 

Two years before the deed was recorded, in 2010, R&R sent Urbandale 

Best the master grading plan that showed the dimensions and location of the 

storm water facility. The accompanying email told Knapp and Galvin: “We need 

to start the project now in order to get the grading completed.” The email also 

stated the City had agreed to pay for the grading of a street to be completed the 
37

next year and the City was considering R&R’s request for rezoning to retail. 

Thereafter, the City agreed to R&R’s retail proposal, and R&R and Urbandale 

Best shared fifty/fifty in the $1,073,605 grading cost. As graded, ninety percent

of the elevation contours on the site plan are sloped toward the detention pond 

on Outlot A.14 

Gaer testified Paragon Best “could not change this grading plan without 

going back to the City [of Urbandale] and getting their permission to do it. 

There’s no guarantee they would have given us permission to change it.” Gaer 

also stated it likely would cost Paragon Best another million dollars to change the 

grading and put the detention pond on a different site. Gaer explained any 

change to the storm water plan would disrupt the highly favorable agreement 

R&R had negotiated with the City by agreeing to the City’s proposed location and 

funding of Plum Drive. By agreeing, Paragon Best received the City’s permission 

to zone fifteen acres as retail and the retail-zoned property has a higher market 

value per square foot than when it was commercially zoned. 

In July 2011, nine months before the deed, R&R unilaterally filed the 

Highland Pointe Office Park Plat 1 storm water management facility maintenance 

covenant and permanent easement agreement, which required the transfer of the 

storm water detention pond to the owners’ association. Urbandale Best did not 

 

14 Schalekamp testified:

Q. And if . . . a storm water detention pond [was] required by the 

agreed-upon site plan and planned unit development master plan that 

had been agreed upon by the joint venture parties, that is Kansas City 

Life and R&R, then that detention pond would be a necessary element of 

that development, would it not? A. Yes.
38

object to this covenant and easement agreement. Finally, the deed itself is 

identical to an unchallenged deed in an earlier Paragon development.

Urbandale Best now asserts it would consider spending an additional 

million dollars pursuing an “alternative” to a development plan that had long been 

in place and was significantly completed. Its assertion is unbelievable. R&R did 

not breach the operating agreement by executing and recording the deed to 

Outlot A. Rather R&R acted in conformity with its obligations under the operating 

agreement as the managing member. 

B. Owners’ Association/CC&Rs. With the above contract-law principles 

in mind, we turn to the language of the operating agreement that bears on the 

intent of the parties as to the owners’ association/CC&Rs. Section 4.1 of the 

operating agreement requires the managing member, R&R, to “conduct the 

business of the Company on a day-to-day basis” but also to regularly consult the 

non-managing member, Urbandale Best, concerning “matters that may arise 

outside the ordinary course of business.” Section 4.2 sets performance 

standards for the managing member, requiring it to “use all commercially 

reasonable efforts to efficiently, prudently, and profitably” operate the business to

achieve its profit goals and a commercially reasonable return on the members’ 

investments. And section 4.4A lists twenty-three “major decisions” which require 

unanimous written approval of all members, including requiring R&R to seek 
39

approval from Urbandale Best for “any transaction not in the ordinary course of 

business.”

15

 

Urbandale Best contends (1) the text of the fully integrated operating 

agreement “best represents the parties’ intent that Urbandale Best be involved in 

making major decisions, and (2) the Highland Pointe documents are exactly the 

sort of items encompassed by the major decisions” matrix. Urbandale Best 

points to Bartine’s trial testimony that the challenged documents are agreements, 

create obligations, and transfer property—which qualify them as major decisions 

under sections 4.4A(21) and (22) of the operating agreement. 

Urbandale Best is unconvincing in its reliance on a sliver of Bartine’s 

testimony. His additional discussion concerning the parties’ intent when they 

entered into the 2008 operating agreement does not support Urbandale Best’s 

position. It is important to look at the parties’ course of dealings in the context of 

the 2006 e-mail/letter agreement. See Alta Vista Props., LLC v. Mauer Vision 

Ctr., PC, 855 N.W.2d 722, 727 (Iowa 2014) (considering communications 

between the parties as an aid to contract interpretation). When we allow that 

extrinsic evidence to aid in our interpretation of the major decision matrix, we 

conclude both parties intended and acted to implement the prior operating 

agreements16 and the challenged agreement without a hypertechnical reading of 

 

15 The record shows the content of the “major decisions” was vigorously negotiated 

between the parties in 2006 and remained in the revised operating agreement signed in 

2008.

16 Kansas City Life never objected to its lack of representation on the owners’ 

association board/committee at Paragon Office Park, thus further showing the 

board/committee did not make major decisions and the managing member was free to 

operate the board/committee.
40

each major decision category. Rather, consistent with the general practices in 

the commercial real estate field, including Kansas City Life’s own experiences in 

a prior Arizona development, the parties expected R&R to unilaterally execute 

documents and deeds in the ordinary course of business that are “ministerial” or 

“ancillary” and “necessary to make the bigger deal go forward.”

17

 

Bartine testified to the practical need of the managing member to be able 

to manage and explained the challenged documents are “excepted” from the 

matrix because they are “just every day ordinary course of business documents.” 

Specifically: 

Q. And so your testimony . . . has been that if a document 

falls within the ordinary course of business, it’s not a major 

decision, isn’t that right? A. That would be how I see it, yes.

. . . .

Q. . . . [I]f you come to the determination that a document is 

within the ordinary course of business within section 4.4A(13) but 

might also fall within one of the other major decisions in section 

4.4A, it’s not a major decision because it doesn’t apply here? A. It 

can’t produce a ridiculous result . . . . 

Q. [Your actions were taken] because you thought these 

documents were within the ordinary course of business under 

section 13 regardless of whether they might have fallen within one 

of the other [major decision] sections. True or not true. A. That’s 

true. But how important are these documents? Really, where is 

the materiality in these documents? Because I see these as 

documents that a real estate developer would put in place to control 

the development and drive the value up on the properties. . . . And 

R&R is just not going to do documents like this that are going to 

cause problems or decrease the value of the development period.

Q. Even if the operating agreement requires them to do so? 

A. You have to look at the whole operating agreement and you 

have to look at the context of the negotiations and of the 

 

17 The act of notifying Urbandale Best of the recording of the documents does not 

change the document’s status or the parties’ intent upon signing the 2008 operating 

agreement. The other circumstances under which a Kansas City Life entity signed 

CC&Rs were different from the current situation. The prior circumstances involved

financing and a major land swap and neither circumstance is presented herein. 
41

relationship. And in this one you have [the 2006 email/letter 

agreement] floating around out there where we had this 

understanding. I always had this understanding with these folks. 

 

Attorney Bartine brought more than three decades of experience in 

commercial real estate to his position as entity counsel. Like the district court, 

we find credible his opinion that the challenged documents did not constitute 

major decisions. 

Accordingly, we find at the time the parties entered into the 2008 operating 

agreement, as to R&R’s managerial actions, the parties intended to follow both 

their prior course of dealing and the customs in the commercial real estate 

industry. In 2008 they intended for R&R, as the sole managing member, to make 

managerial decisions and to take unilateral actions required in the ordinary 

course of business to “make the bigger deal go forward.” In fact, after signing the 

Paragon Best operating agreement, R&R so acted without complaint by 

Urbandale Best.18 We therefore conclude R&R’s unilateral actions, given the 

parties’ intended latitude for R&R as the managing member, did not constitute a 

breach of the 2008 Paragon Best operating agreement.

19

C. District Court’s Sua Sponte List. At the conclusion of its ruling, the 

court listed eight matters “outside the Major Decisions of Section 4.4 of the 

Paragon Best Operating Agreement, and within the exclusive rights and 

 

18 In 2011, R&R unilaterally prepared and signed numerous easements within Highland 

Pointe, a warranty deed for a road right-of-way, and an owner’s consent to plat. 

Urbandale Best did not claim these actions were major decisions requiring its agreement 

before R&R could act.

19 Because we conclude R&R’s role as managing member encompassed all of the 

actions it took, we find no merit to Urbandale Best’s claim R&R’s actions violated major 

decision “(5) Any act in contravention of the Agreement or the Article of Organization of 

the Company.”
42

responsibilities of R&R as sole Managing Member.” Urbandale Best claims the 

actions are too broad and strip it “of all rights to participate in the 

management/governance of Paragon Best” including “the right to approve or 

disapprove the sale of lots.” R&R responds the district court acted appropriately 

under its inherent equitable powers.

Upon our de novo review, we recognize the district court was attempting 

to list actions regarding plating, easements, and deeds that R&R previously had 

undertaken without challenge during the parties’ prior course of conduct in the 

Paragon developments. In the spirit of judicial restraint, we vacate the court’s 

specific list, which was not requested by R&R. Instead, we expect the parties to 

conduct their future business in accordance with this opinion and in accordance 

with their prior course of conduct in all of the Paragon developments. 

V. Denial of Injunctive Relief

Urbandale Best filed an action alleging R&R had contravened the 

operating agreement, but did not seek damages. Instead the company asked for 

a declaratory judgment and injunctive relief. Injunctive relief is an extraordinary 

remedy—granted with caution and only when required to avoid irreparable

damage. Skow v. Goforth, 618 N.W.2d 275, 277–78 (Iowa 2000). The party 

seeking an injunction, here Urbandale Best, bears the burden to show (1) an 

invasion or threatened invasion of a right, (2) substantial injury or damages will 

result unless an injunction is granted, and (3) no adequate legal remedy is 

available. See id. On appeal, Urbandale Best argues its claim for irreparable 

harm was “the loss of its contractual right to manage the business.” 
43

We reach the same result as the district court on the issue of injunctive 

relief, but for different reasons. In our de novo review of the record, we find no 

evidence that R&R’s action in recording the Highland Pointe documents resulted 

in a material change in the managing structure envisioned by the parties when 

they signed the operating agreement. We are persuaded by testimony from 

attorney Bartine concerning the anticipated impact of the CC&Rs and the owners’ 

association documents on the relative roles of the two members of Paragon Best. 

Bartine testified nothing in the CC&Rs would circumvent the major decision 

criteria in section 4.4A of the operating agreement. He testified regardless of the 

membership in the owners’ association, R&R would be required to follow the 

operating agreement with regard to major decisions. When asked if the owners’ 

association board or the architectural review committee could do anything to 

contravene Paragon Best’s operating agreement, he replied: “I’m having trouble 

thinking through what might be a major decision that would face those people.” 

Bartine further testified if an unexpected scenario occurred where they were 

faced with a major decision, he “would advise them to involve the major decision 

process” under the operating agreement. 

Given this testimony, we conclude Urbandale Best has not met its burden 

to show irreparable harm in the form of losing its contractual right to manage the 

major decisions of the business.

VI. R&R’s Counterclaim

The district court concluded R&R proved by a preponderance of evidence 

that Urbandale Best breached the operating agreement by making R&R’s 
44

performance impossible. The court based its conclusion on “actions by Kansas 

City Life affiliates [which] have thwart[ed] the joint ventures’ success.” The court 

also opined: “A further breach of this obligation is imminent if Urbandale Best 

does not allow the closing of the hotel property to proceed and the development 

plan for Highland Pointe Office Park to go forward.” The court further determined 

Urbandale Best breached its duty of good faith and fair dealing and ordered the 

company “henceforth to act . . . consistent with its contractual obligations in the 

Operating Agreement for an Major Decision as interpreted by the Court.” The 

court calculated damages based on time spent preparing for trial by R&R 

personnel and by Bartine and awarded R&R $23,122.50.

On appeal, Urbandale Best asserts it cannot be held responsible for the 

alleged actions of other affiliates of Kansas City Life, and further points out prior 

disputes between a different Kansas City Life affiliate, RREI, were settled and 

should not be considered as part of R&R’s counterclaim. In addition, Urbandale 

Best contends its filing of this lawsuit “cannot, as a matter of law, serve as a

basis for a claim of breach of the covenant of good faith and fair dealing.”

R&R’s counterclaim boils down to two questions: (1) Did Urbandale 

Best—by attempting to enforce the “major decision” provisions of the operating 

agreement—prevent R&R from completing its obligations? (2) Did Urbandale 

Best breach an implied covenant of good faith and fair dealing by filing this 

lawsuit? We will address each of these questions in turn.

First, R&R contends “it is a term of every contract that one party shall not 

prevent the other party from performing its obligations”—citing Employee 
45

Benefits Plus, Inc. v. Des Moines General Hosp., 535 N.W.2d 149, 155 (Iowa Ct. 

App. 1995). R&R is correct that our courts have recognized an implied term that 

one party will not prevent the other from complying with the contract conditions. 

But R&R obscures the consequence of that action. Employee Benefits Plus

explains: “[I]f one party to a contract prevents the other from performing a 

condition or fails to cooperate to allow the condition to be satisfied, the other 

party is excused from showing compliance with the condition.” Id. (Emphasis 

added). If Urbandale Best’s actions prevented R&R from complying with a term 

of the operating agreement, R&R would be excused from compliance with the 

term, but the fact of an excuse does not provide R&R with its own cause of action 

for breach of contract by Urbandale Best. See id. 

Second, R&R contends Urbandale Best’s decision to seek declaratory and 

injunctive relief constituted a breach of the implied covenant of good faith and fair 

dealing. R&R claims the buy-out rights and other provisions provided in the 

operating agreement are the sole remedies available to Paragon Best members. 

Both R&R and the district court reach into the business history of the two entities 

to support the finding that Urbandale Best was following an obstructionist 

strategy. 

We recognize an implied duty of good faith and fair dealing in all contracts.

Bagelmann v. First Nat’l Bank, 823 N.W.2d 18, 34 (Iowa 2012). “Good faith 

performance or enforcement of a contract emphasizes faithfulness to an agreed 

common purpose and consistency with the justified expectations of the other 

party.” Restatement (Second) of Contracts § 205, cmt. a, at 99. “[B]ad faith may 
46

be overt or may consist of inaction, and fair dealing may require more than 

honesty.” Id. at cmt. d. When agreeing to contract, the parties enter an implied 

covenant not to act in a way that will destroy or injure the rights of the other party 

to receive the fruits of the contract. Am. Tower, L.P. v. Local TV Iowa, L.L.C.,

809 N.W.2d 546, 550 (Iowa Ct. App. 2011). But the implied covenant does not 

“give rise to new substantive terms that do not otherwise exist in the contract.” 

Bagelmann, 823 N.W.2d at 34. Rather, the duty of good faith offers the parties 

“what they would have stipulated for at the time of contracting if they could have 

foreseen all future problems of performance.” Am. Tower, 809 N.W.2d at 550.

We are skeptical that filing a lawsuit to enforce a literal reading of 

provisions of the operating agreement, even if that literal reading is not the 

interpretation ultimately given the contract by the court, could constitute a breach 

of the entity’s duty of good faith and fair dealing. See generally Klein v. Freedom 

Strategic Partners, LLC, 595 F. Supp. 2d 1152, 1162 (D. Nev. 2009) (concluding 

filing a lawsuit to enforce a partnership agreement, misconstruing the agreement, 

and thereby frustrating the other party’s ability to govern was “not a breach of the 

duties of loyalty and care”). 

We disagree with the district court’s conclusion that R&R proved 

Urbandale Best breached the operating agreement by seeking clarification of its 

terms in this lawsuit. Neither do we find support in the record for the court’s 

statement that further breach of its obligation is imminent if Urbandale Best 
47

delays the closing of the hotel property.20 Accordingly, we reverse the district 

court’s ruling on R&R’s counterclaim and vacate the award of damages. 

We remand for entry of an order and judgment in accord with this opinion. 

Costs are taxed one-half to each party.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Doyle, J., concurs; Danilson, C.J., concurs in part and dissents in part.

 

20 At trial, Bartine testified the hotel franchisers asked for a different configuration of the 

lot and that request was under discussion at the time of the trial and no closing was 

imminent on the hotel deal.
48

DANILSON, C.J. (concurring in part and dissenting in part).

I concur in the majority’s decision to reverse the district court’s ruling on 

R&R’s counterclaim and to vacate both the damage award as well as the district 

court’s listing of non-major decisions. I dissent in part as I would reverse the 

district court’s denial of the relief sought by Urbandale Best.

Once the maze of complex and confusing facts is traversed, the question 

is whether R&R made or authorized itself to make major decisions without 

Urbandale Best’s equal participation. Urbandale Best contends it did and 

thereby usurped the power of Urbandale Best to jointly make major decisions. 

Thus, Urbandale Best contends R&R breached the parties’ operating agreement. 

There is no dispute that both parties invested an equal, substantial sum of funds 

into a joint venture and “major decisions” were to be made on a joint basis. 

As the majority noted, the operating agreement provides:

Neither the Company, nor any of the Members acting alone, nor the 

Managing Member, shall take any of the actions (each a ‘Major 

Decision’) set out below without first obtaining the unanimous 

written Approval of all of the Members:

. . . .

(13) Any transaction not in the ordinary course of business or 

affairs of the Company;

. . . .

(21) Entering into a contract, agreement or obligation that is for 

longer than one (1) year, other than leases that do not require 

unanimous approval of all Members . . . ; 

(22) Granting or conveying any interest in property or any right to 

use or occupy any property other than leases that do not require 

unanimous approval of all Members . . . . 

The dispute arose because the articles and bylaws clearly permit the transfer of 

real estate by the owner’s association and such decisions may be made by five 
49

directors, three individuals from R&R and two from Urbandale Best. Clearly the 

operating agreement requires a joint agreement for the transfer of real estate.

Urbandale Best relies upon the terms of the operating agreement to 

interpret the meaning of the term “major decisions” and argues that the articles 

and bylaws are in clear contravention of the parties’ operating agreement. R&R 

relies upon a course of business from prior business relationships, customs of 

the commercial real estate business to interpret the same term, and paragraph 

13 of the operating agreement to support its actions. 

One problem with R&R’s reliance upon a “course of business” from prior 

relationships is that all prior relationships dealt with different entities, although 

formed by some of the same principals. R&R has not provided any authority in 

this scenario for reliance upon the prior course of conduct of different entities.

Moreover, R&R attempts to use past history and customs of the 

commercial real estate business to vary unambiguous terms in the contract. 

Thus, the better view is that R&R is attempting to use the past course of 

business to support the waiver of specific terms in the parties’ operating 

agreement. See Margeson v. Artis, 776 N.W.2d 652, 659 (Iowa 2009) (noting 

parties may waive terms of their agreement). 

Further, even if the past course of conduct between the principals or the 

customs in commercial real estate business may be supportive of Urbandale 

Best’s waiver of their joint decision making authority in subsequent subsidiaries’ 

articles of incorporation and bylaws, here there was no waiver. Our supreme 

court has stated, 
50

Waiver is defined as the voluntary or intentional relinquishment of a 

known right. The essential elements of a waiver are the existence 

of a right, knowledge, actual or constructive, and an intention to 

relinquish such right. Waiver can be express, shown by the 

affirmative acts of a party, or implied, inferred from conduct that 

supports the conclusion waiver was intended. Generally, the issue 

of waiver is one for the jury; when the evidence is undisputed, 

however, the issue is one of law for the court.

Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. v. 

Federated Mut. Ins. Co., 596 N.W.2d 546, 552 (Iowa 1999) (internal citations and 

quotations omitted).

As the majority noted, the relationship between the principal, Kansas City 

Life, and R&R that began in 2005 “had grown adversial,” and at least one of the 

issues between them was R&R’s sole decision to permit a design of a building in 

another development, a design found objectionable to Kansas City Life. As a 

result, the parties had discussions and negotiations regarding the meaning of 

“major decisions” and R&R’s authority as the managing member under the 

instant operating agreement. 

More significantly, when the articles of incorporation and bylaws were 

shared with Urbandale Best before their filing, Knapp responded by sending an 

email to Mark Rupprecht and Gaer with various redline changes intending to 

modify their terms to be consistent with equal participation in major decisions. 

However, Gaer asked attorney Bartine to prepare and file the articles and bylaws 

as initially prepared without the changes sought by Urbandale Best. 

Under these facts, Urbandale Best did not consent to a modification of the 

terms of the operating agreement nor waive their applicability. Even if Kansas 

City Life has previously waived similar rights or authority in other development 
51

entities, it clearly sought and put R&R on notice that it intended to exercise its 

authority during all stages of their relationship with perhaps one exception. I 

would agree R&R’s execution of an easement for Outlet A for a storm water 

detention pool did not constitute a breach as Urbandale Best or its principals 

impliedly consented to R&R’s action by sharing the substantial grading cost of 

the site plan that incorporated the storm water detention pool. 

Any authority afforded to R&R to prepare and file the articles of 

incorporation and bylaws for the owners association because of the course of 

conduct of the parties, customs in the commercial real estate industry, or 

paragraph 13 of the operating agreement did not permit it to revise the terms of 

the parties’ operating agreement as it did here.

I agree with Urbandale Best that the owners’ association’s articles of 

incorporation and bylaws filed by R&R have caused Urbandale Best to lose its 

contractual right to jointly share in the major decisions of the real estate 

development and it is entitled to injunctive relief.