Court Opinion

ID: 9718387
Source: CourtListenerOpinion
Date Created: 2023-08-26 07:22:23.216606+00
Date Added: 2024-06-11T18:23:58.816058
License: Public Domain

CARTER, Justice
(dissenting).
I dissent.
The opinion of the court finds McHose to be subject to an order of rescission, restitution, or disgorgement under Iowa Code section 502.604(2) based on the court’s belief that he accepted money from persons whom he should have known were engaged in an investment scheme wherein the participating investors would suffer losses. The money paid to him was for amounts owed on unrelated transactions. Irrespective of the burden of proof that is to be applied, this state of facts falls far short of rendering McHose legally liable for the investors’ losses.
Under the rationale that this court applied in State v. Caslavka, 531 N.W.2d 102 (Iowa 1995), the funds of the investors became the property of McHose’s debtors upon receipt and were not impressed by any trust. In accepting payment from monies that included these investors’ contributions, McHose may have been seeking to acquire a preferential creditor’s status. However, because the payments were supported by a past consideration, they are not subject to attack as being fraudulent. See Wilkin Elevator v. Bennett State Bank, 522 N.W.2d 57, 61 (Iowa 1994). This is significant because it would appear that these are the only monies that McHose could be required to disgorge under section 502.604(2).
*385The legal standard for liability for harm resulting to third persons from the tortious conduct of another as a result of so-called aiding and abetting is contained in Restatement (Second) of Torts section 876 (1979). Subparagraph (a) and subparagraph (c) of that section are clearly inapplicable to the situation before the court. The only remaining provision of section 876 on which an aiding and abetting liability could be predicated is subsection (b), which requires the actor to “[know] that the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other so to conduct himself.” MeHose’s activities, vis-a-vis the investment scheme, did not constitute substantial assistance with respect to the parties who were operating the. scheme. There is nothing in the record to suggest that the scheme would not have gone forward in the absence of the acts of MeHose. Moreover, the majority virtually concedes that as the scheme was so designed it was destined to fail under any circumstances. I would affirm the judgment of the district court.