IN THE COURT OF APPEALS OF IOWA

No. 20-1321

Filed November 23, 2021

S3 DEVELOPMENT, LLC,

Plaintiff-Appellant,

vs.

HGR INVESTMENTS, INC.,

Defendant-Appellee.

________________________________________________________________

Appeal from the Iowa District Court for Polk County, Jeffrey D. Farrell, 

Judge.

The plaintiff appeals district court’s grant of summary judgment in the 

defendant’s favor. AFFIRMED.

Louis R. Hockenberg, Michael Streit and J. Mason Bump (until withdrawal)

of Sullivan Ward, P.C., West Des Moines, for appellant.

Daniel P. Kresowick of Brick Gentry P.C., West Des Moines, for appellee.

Considered by Tabor, P.J., Ahlers, J., and Carr, S.J.*

*Senior judge assigned by order pursuant to Iowa Code section 602.9206 

(2021).
2

AHLERS, Judge.

S3 Development, LLC (S3) appeals the grant of summary judgment in favor 

of HGR Investments, Inc. (HGR). S3 argues a genuine issue of material fact exists 

over whether S3 entered a contract with HGR through HGR’s agent and whether 

HGR ratified the contract. We reject S3’s arguments and affirm. 

I. Background Facts & Proceedings

The facts needed to resolve this appeal are gleaned from the parties’ filings

in support of and in resistance to HGR’s motion for summary judgment. In 

resistance to HGR’s motion, S3 provided an affidavit from one of its 

representatives, Mike Stessman. According to Stessman’s affidavit, he and two 

friends established S3 in early 2017 “for the purpose of acquiring land, constructing 

Starbucks facilities, and leasing the facilities to operators.” In trying to achieve this

goal, they met Todd Raufeisen, who claimed he was the “R” in HGR. Raufeisen 

stated he had contacts with Starbucks and could secure commercial tenants for 

S3’s purposes. In February 2017, Raufeisen and S3 signed a consulting contract

under which S3 would pay Raufeisen for assistance in the planning and 

procurement processes for Starbucks locations. Several of Raufeisen’s emails to 

S3 contained the following signature block:

Todd B Raufeisen

HGR Investments

todd@hgrinv.com

However, Raufeisen sent these emails from a different address with no apparent 

connection to HGR. Raufeisen eventually provided S3 with three documents titled 

“Starbucks Letter of Intent,” which purportedly showed Starbucks’s intention to 

enter into three separate leases with S3 for commercial space.
3

According to Stessman’s affidavit, Raufeisen informed S3 in September 

2017 that he had been criminally charged and would be going to prison.1 Soon 

after this disclosure, Raufeisen introduced S3 to one of his fellow “partners” at 

HGR. After meeting, one of the principals of HGR assured Stessman that he would 

take over Raufeisen’s role and secure leasing agreements with Starbucks or other

commercial tenants if necessary.

At some point, S3 learned Raufeisen falsified the communications 

appearing to come from Starbucks, including the letters of intent. After the 

anticipated leases with Starbucks failed to materialize, S3 filed a petition against 

HGR. S3 alleged Raufeisen was HGR’s agent and HGR committed breach of 

contract and fraudulent misrepresentation through the actions of Raufeisen. S3 

sought damages for fees it paid under the consulting contract and related 

expenses. HGR moved for summary judgment, asserting it could not be held liable 

for the contract because it was not a party to the contract, it was not incorporated 

when the contract was executed, and Raufeisen was not an agent of HGR.2 The 

district court granted HGR’s motion for summary judgment, and S3 now appeals.

 

1 See United States v. Raufeisen, 748 Fed. Appx. 704, 704 (7th Cir. 2019) (“Todd 

Raufeisen ran a Ponzi scheme that defrauded at least 22 investors, many of them 

close friends or family members, of over $1.7 million. He pleaded guilty to wire 

fraud . . . and money laundering . . . . The district court sentenced Raufeisen to an 

above-guideline term of 72 months in prison and three years of supervised 

release.”).

2 HGR answered an interrogatory by stating, “Raufeisen has never been a 

shareholder, director, officer, or employee of HGR, nor has [Raufeisen] ever been 

authorized to act on HGR’s behalf.” HGR later amended its answer to 

acknowledge that “Raufeisen was an independent commission consultant from 

approximately March 2017 until October 2017,” by which Raufeisen “acted as an 

intermediary between real estate owners and prospective purchasers” like HGR. 

Whatever duties Raufeisen performed as “an independent commission 
4

II. Standard of Review

We review a grant of summary judgment for correction of errors at law. 

Peak v. Adams, 799 N.W.2d 535, 542 (Iowa 2011). In determining whether the 

grant was proper,

we ask whether the moving party has demonstrated the absence of 

any genuine issue of material fact and is entitled to judgment as a 

matter of law. The resisting party must set forth specific facts 

showing that a genuine factual issue exists. Summary judgment is 

proper if the only issue is the legal consequences flowing from 

undisputed facts.

Id. (quoting Huber v. Hovey, 501 N.W.2d 53, 55 (Iowa 1993)). A material issue is 

one that may affect the outcome of the suit. Id. We must look at the facts in the 

light most favorable to the nonmoving party, and we will draw all reasonable 

inferences in the nonmoving party’s favor. Id. at 543. A legitimate inference is one 

that “is ‘rational, reasonable, and otherwise permissible under the governing 

substantive law.’” Id. (quoting Phillips v. Covenant Clinic, 625 N.W.2d 714, 717 

(Iowa 2001)). However, it is not a permissible inference if it is only based on 

speculation or conjecture. Id. The district court is not to make credibility 

assessments when considering a motion for summary judgment, as credibility 

determinations are a responsibility for the fact finder. Frontier Leasing Corp. v. 

Links Eng’g, LLC, 781 N.W.2d 772, 776 (Iowa 2010). If reasonable minds may 

differ, a genuine issue of material fact exists. Peak, 799 N.W.2d at 542.

 

consultant,” they were performed after S3 had already entered the consulting 

contract with Raufeisen.
5

III. Analysis

S3’s claim hinges on its ability to establish that Raufeisen was HGR’s agent 

with authority to bind HGR to the consulting contract. Agency can be established 

by actual or apparent authority. Frontier Leasing, 781 N.W.2d at 776. 

Actual authority to act is created when a principal intentionally 

confers authority on the agent either by writing or through other 

conduct which, reasonably interpreted, allows the agent to believe 

that he has the power to act. Actual authority includes both express 

and implied authority. Express authority is derived from specific 

instructions by the principal in setting out duties, while implied 

authority is actual authority circumstantially proved. 

Id. (emphasis omitted) (quoting Hendricks v. Great Plains Supply Co., 609 N.W.2d 

486, 493 (Iowa 2000)). “Apparent authority is authority the principal has knowingly 

permitted or held the agent out as possessing.” Id. Thus, actual authority focuses 

on the principal’s communications to the agent, while apparent authority focuses 

on the principal’s communications to third parties. Id.; Hendricks, 609 N.W.2d at 

493. Under both actual and apparent authority, the alleged principal’s 

communications and actions must lead to the agency relationship. Id. As the party 

asserting an agency relationship, S3 must ultimately prove Raufeisen was an 

agent of HGR by a preponderance of the evidence. See Hendricks, 609 N.W.2d 

at 493. 

S3 argues the record, including Stessman’s affidavit and emails from 

Raufeisen, shows a connection between HGR and Raufeisen that generates a 

genuine issue of material fact whether Raufeisen was HGR’s agent. We disagree. 

HGR’s interrogatory answer asserted Raufeisen never held a position with HGR 

or had authority from HGR that would have permitted Raufeisen to act on HGR’s 

behalf. This assertion was not rebutted by any evidence of anything said or done 
6

by HGR. Not having any evidence of anything HGR did to establish an agency 

relationship, S3 focuses instead on Raufeisen’s statements and conduct. But it is 

the action of the purported principal, not the purported agent, that establishes an 

agency relationship. Frontier Leasing, 781 N.W.2d at 776 (“Apparent authority 

must be determined by what the principal does, rather than by any acts of the 

agent.” (quoting Magnusson Agency v. Pub. Entity Nat’l Co.-Midwest, 560 N.W.2d 

20, 26 (Iowa 1997))). As a result, absent some evidence that HGR bestowed 

agency authority on Raufeisen, it does not matter what Raufeisen said or did in 

terms of creating an agency relationship. In other words, Raufeisen could claim 

he was an agent of HGR in any way he chose, but unless HGR communicated 

such agency authority to Raufeisen or S3, no agency relationship was created. 

See id.

Nothing in the record supports a finding that anything HGR did gave

Raufeisen actual authority to bind the corporation in any way, either as an express 

grant of authority or an implied grant of authority. Furthermore, there is no

evidence anyone associated with HGR held out Raufeisen as its agent. S3 does 

not allege that anyone from HGR claimed an agency relationship. Also, HGR is

not mentioned in the consulting contract. Rather, the contract is printed on 

“Raufeisen Development” letterhead. Raufeisen signed the contract using only his 

name. S3 acknowledges it paid fees under the contract to Raufeisen only, and

there is no evidence HGR received compensation or other consideration from the 

consulting contract. S3 first communicated with someone from HGR after 

Raufeisen disclosed he would be going to prison and long after the consulting 

contract was signed. While HGR then tried to secure a commercial tenant for S3
7

as Raufeisen contracted to do, there is no evidence HGR acted because it believed 

Raufeisen had bound it to the consulting contract. Instead, the evidence suggests 

HGR viewed its relationship with S3 as a new business opportunity. Stessman’s 

affidavit asserts HGR never denied an agency relationship. While failure to 

repudiate an unauthorized action may give rise to an agency relationship, there is 

no evidence HGR knew or should have known Raufeisen purportedly took any 

action on its behalf. See Fort Dodge Creamery Co. v. Com. State Bank, 417 

N.W.2d 245, 247 (Iowa Ct. App. 1987). As the record does not support finding

Raufeisen possessed actual or apparent authority to act on behalf of HGR, HGR 

was not bound to the consulting contract.

Alternatively, S3 asserts HGR ratified the consulting contract with its later 

actions. “A principal may ratify the unauthorized act of an agent.” Life Invs. Ins. 

Co. of Am. v. Est. of Corrado, 838 N.W.2d 640, 644 (Iowa 2013). Our supreme 

court has provided the following elements of ratification: “(1) the existence of a 

principal”; “(2) an act done as agent”; “(3) principal’s knowledge of material facts”;

and “(4) intent of the principal to ratify the agent's act which can be either express 

or implied.” Abodeely v. Cavras, 221 N.W.2d 494, 502 (Iowa 1974) (citing 

Restatement (Second) of Agency §§ 85, 87, 91, 93(1), 94)). Another factor “is the 

acceptance of the benefits of an agent’s unauthorized act.” Id. S3 failed to prove 

these factors. As explained above, the record does not support finding HGR and 

Raufeisen had a principal-agent relationship or even that Raufeisen purported or 

assumed he was HGR’s agent. There is no evidence HGR knew the full extent of 

Raufeisen’s actions. See id. (“To ratify the principal must have full knowledge of 

the facts.”). There is no evidence HGR intended to ratify Raufeisen’s actions. See 
8

id. (“Intent is a necessary element of ratification.”). Nor is there any evidence HGR 

benefited from the consulting contract. See id.; see also Corrado, 838 N.W.2d at 

647 (“A person should not be able to accept the benefits of a contract even if the 

signer’s acts are unauthorized, but deny his or her obligations under the contract 

because the signer’s acts are unauthorized.”). There is thus no evidence HGR 

ratified the consulting contract. 

With no evidence to support finding Raufeisen was HGR’s agent or that 

HGR ratified the consulting contract, there is no genuine issue that HGR was not 

bound to the contract. Thus, S3’s breach-of-contract claim fails. Similarly, S3’s 

fraudulent-misrepresentation claim is based on allegations HGR committed fraud 

“due to its knowledge of Raufeisen’s activities as agent of HGR and based on its 

ratification of the” consulting contract. Again, no evidence supports finding 

Raufeisen was an agent of HGR or that HGR ratified the contract, so the 

fraudulent-misrepresentation claim also fails. The court thus did not err in granting 

summary judgment for HGR on the breach-of-contract and fraudulentmisrepresentation claims.

Finally, S3 argues the grant of summary judgment “was premature due to 

the ongoing development of new evidence in discovery.” The nature of this

claimed error is unclear. S3 moved to continue the summary judgment hearing, 

and the district court denied this motion about four days before the hearing. 

However, the order denying the motion stated that the court “will consider any 

arguments regarding continuing a decision on summary judgment at the . . .

hearing.” Presumably, this statement in the order was an acknowledgment that 

the court would consider postponing a ruling to give S3 more time pursuant to Iowa 
9

Rule of Civil Procedure 1.981(6). Despite the court’s invitation, S3 did not renew 

its motion to continue to the district court, nor did the court rule on S3’s contention 

that ongoing discovery is a basis to deny summary judgment. S3 did not file a 

motion under Iowa Rule of Civil Procedure 1.904(2) asking the court to rule on this 

contention. Further, S3’s reply brief expressly states “S3 does not appeal the 

denial of” its motion to continue. On the issue S3 raises, S3 does not specify what 

discovery it seeks other than “meaningful discovery responses and depositions of 

[HGR’s] officers and shareholders.” Based on these circumstances, any argument 

that summary judgment was premature is not preserved for our review. See Meier 

v. Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental doctrine of 

appellate review that issues must ordinarily be both raised and decided by the 

district court before we will decide them on appeal.”). 

IV. Conclusion

Because there is no evidence in the record to support finding Raufeisen 

was an agent of HGR or that HGR ratified the consulting contract, we find no error 

in granting summary judgment for HGR. Any argument summary judgment was 

premature is not preserved for our review. 

AFFIRMED.