The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1895-10-31

involuntary trustee of those funds for the pur-
pose from which he diverts them and for the
benefit of the persons to be either enriched or
relieved by their proper application. And
equity will follow the diverted funds through
ali transactions into which those funds and
their proceeds pass, and will hold the ultimate
proceeds of those funds to be trust property in
he same sense in which the diverted funds
would be if still held by the wrongdoer and
Tor the same purposes to which the funds
should have been devoted.
1t is said that the diverted funds were
mingled with other funds properly belonging
to the copartners, and that the ultimate pro-
eeeds, of which now speak, are very largely
the proceeds OF private funds honestly in
vested. But, sirs, the mingltng of the trust
fund with other funds does not in any way
operate to the prejudice of this Government.
1t was not the fault OF this Government that
funds to which it had an equitable right were
mingled with other private funds and used for
private purposes. Equity attaches the trust
character to the ultimate proceeds of the en-
tire investment of which the diverted funds,
or their proceeds, constituted part, and the
whole is subject to the equitable claim of this
Government
The fact that the Central Pacific Railroad
Company, with which the Government con-
tracted, was absolutely controlled by CO.
partnership, which stood behind the corpor-
alton preventing the execution of its promises
and Obligations to the Government the fact
that these directors were the copartners con-
trolling the Central Pacific Railroad Company,
and used it ds a mere dummy to extract land
and bond subsidies from this Government for
their benefit; the fact that these directors con-
fessedly contracted with themselves for
works of construction and repair and for sup
plies for the Central Pacific Railroad Com
pany; these facts alone give rise to the pre-
sumption in equity that the contracts were
fraudulent and put upon the directors and
successors the burden of proving that they
were fair and honest.
Beyond this it appears athrmatively, and with
practical conclusiveness. from evidence avail
able to the Government, that the contracts
were actually fraudulent and that vast sums of
money were diverted through them to the
cOpartnershlp.
Upon these facts the ordinary rules of equity
jurisprudence afford ample means for the pro-
lection of the Government against the conse-
quences OF the wrong by which the payment of
the debt was avoided
The fortunes of the directors, including the
assets of those who are dead, are more than
ample to satisfy all of the demands of the Gov
eminent, and should be resorted to while they
are available These rules OF equity are rid
idly applied and enforced In ordinary cases;
why should we abandon them in this case?
The magnitude of fraud does not in any way
modify the rule of equity applying TO it, and
fail to assert our equitable rights in this case,
save and except that we be deferred by the
magnitude OF the fraud.
"Of course it will be hard to prove that
the Glenn ranch was purchased by money
earned through the Central Pacific Rail-
road, and that will naturally be the basis
of the IMPLICATIONS.
~ have advised the Government all
along to take the Central Pacific road by
paying the first mortgage and all the trlb-
utary property pertaining to it. In the
matter of the Glenn ranch / do not know
what the outcome will be, but it would
seem to be reasonable ground for some
thought"