Horace Harmon Lurton

“ It is not enough for one occupying a confidential relation to another, who is shown to have secretly received a benefit from the opposite party, to say, 'You cannot show any fraud, or you cannot show that you have sustained any loss by my conduct.' Such an agent has the power to conceal his fraud and hide the injury done his principal. It would be a dangerous precedent to lay down as law that unless some affirmative fraud or loss can be shown, the agent may hold on to any secret benefit he may be able to make out of his agency. ”

“ The decree against O. M. Carter was for a much less sum than such difference.
Neither did the agreement of November 6, 1901, between the parties, of which we shall speak later, afford any defense to the judgments against I. S. and L. D. Carter. Those judgments were for securities traced to their possession, which had not been disposed of in good faith, in view of the knowledge they had of the character of Captain Carter's title and the legal right of the United States to pursue his illegal gains into the property in their hands. ”

“ If it be once assumed that the defendant Carter did secretly receive from Greene and Gaynor a proportion of the profits gained by them in the execution of the contracts in question, the right of the United States in equity to a decree against him for the share so received is made out. It is immaterial if that appears whether the complainant was able to show any specific abuse of discretion, or whether it was able to show that it had suffered any actual loss by fraud or otherwise. ”

“ Aside from the elusiveness of a fraud well concocted and unsuspected while going on, there was in the way of the government in this case the fact that, in respect to almost everything which had served to add to the cost of the work and to the profit of the contractors, Carter had confessedly a wide discretion. That he might be controlled in the exercise of this by his superior officers or by the War Department when important changes, modifications, or substitutions were made, is true. ”

“ This protest does not, as we understand it, involve any serious denial of the fact that nearly two millions of dollars were realized as profit upon contracts drawn by, let out, and supervised by Captain Carter, at a net cost to the contractors of less than one million dollars; nor does it involve any serious denial that approximately one third of this abnormal profit was paid over to some third person not publicly known to have had any connection with the contracts or the contractors. ”

“ When contracts and specifications were elastic enough, as seems to have been the case with the Greene and Gaynor contracts, to justify varying interpretations, or full of options as to materials or methods, as was the fact here, nothing short of conduct or action plainly indefensible as an exercise of honest judgment would justify an inference of corruption. ”

“ Nevertheless, the failure of Captain Carter to secure his evidence, in view of their relation, justifies a presumption that it would not have borne out the defense.
The conclusion we must reach is that Robert F. Westcott was but the agent and representative of Oberlin M. Carter in the receipt of a share in the profit made by Greene and Gaynor.
For whatever gains, profits, or gratuities he is shown to have received, he must account.
The contention that any recovery must be limited to property or securities into which such illicit gains have been traced is not sound. ”

“ The United States assigns as error the allowance of a fee of $60,000 to Mr. H. G. Stone for his services in this and the ancillary suits, of which a balance of $42,500 was directed to be paid by the receiver out of the fund in court. Certain other payments to other counsel and for other expenses are also objected to. The ground of objection is that the allowance to Mr. Stone is excessive, and that neither that fee nor any of the other items should have been paid, because the condition upon which the United Stated agreed to the use of the fund had not been complied with. ”

“ The disability to purchase is a consequence of that relation between them which imposes on the one a duty to protect the interest of the other, from the faithful discharge of which duty his own personal interest may withdraw him. ”

“ The original agreement, as well as the provision inserted by the United States, alike provied that they should not be required to turn over that which had been disbursed in good faith. This involved the right to have their disbursements and their claims for services inquired into from their point of view. The Central Kentucky bonds represented, as the court found, reinvestments of funds or income from funds. They claimed that these bonds were rightfully their own property under the agreement with Captain Carter for a salary of $10,000 per year for one of them and $3,600 per year for the other. ”

“ Captain Carter put the bonds which he had referred to back with the others and took them all.' A proposal to give to Westcott a part of the very securities which Westcott was then giving to Carter as a 'pure donation' is incompatible with the latter contention; it accords more with the attitude of one who was receiving back his own from one who had performed a great service as custodian of property which the owner had reason for concealing from publicity. ”

“ It is charged that Carter entered into a corrupt arrangement with the said contractors, by which he undertook to use his power and discretion in the preparation of specifications and contracts, and in advertising and letting the same out in such a way as to enable Gaynor and Greene to become contractors under conditions which would insure them a large profit, and to use his influence, power, and discretion in the supervision and acceptance of the work to their greatest advantage. ”

“ The 'condition' which the United States claims was violated was 'that the said defendants will turn over to the receiver at least substantially all of the assets turned over to I. S.C.arter and L. D. Carter by J. H. Paul and R. E. Westcott and James Bragg, or their proceeds and reinvestments, except such as have been, prior to the receivership, bona fide paid out or pledged by them for attorneys' fees, or as expenses in defense of said Carter, or expended by them legitimately in the handling of said properties,' etc. ”

“ It acts not on the possibility that, in some cases, the sense of that duty may prevail over the motives of self-interest, but it provides against the probability in many cases, and the danger in all cases, that the dictates of self-interest will exercise a predominant influence, and supersede that of duty. ”

“ This is a bill which seeks to compel the defendant Oberlin M. Carter, late a captain in the Army of the United States, to account for illicit gains, gratuities, and profits received by him through collusion with contractors for river and harbor improvements in the Savannah, Georgia, improvement district, and to follow such illicit profits into securities and other property held for him by other defendants to the suit. ”

“ It therefore prohibits a party from purchasing on his own account that which his duty or trust requires him to sell on account of another, and from purchasing on account of another that which he sells on his own account. ”

“ It restrains all agents, public and private; but the value of the prohibition is most felt, and its application is more frequent, in the private relations in which the vendor and purchaser may stand towards each other. ”

“ Within a month he returned, doubtless due to orders, only to find that serious charges, involving his career and his honor, had been preferred, and that his management of the Savannah district improvements was about to undergo a thorough investigation. There is evidence, as we have before stated, strongly tending to show that he had himself collected the interest and dividends upon the shares and bonds mentioned in these receipts up to the time he went abroad,-a fact which points to his having had personal custody of these securities up to that time. ”

“ Westcott, sometimes by oral direction and sometimes by power of attorney. Certain it is that there was a blending of the business affairs of these two men rarely ever seen. Under Carter's powers of attorney he checked upon Westcott's bank account as his own. He had free access to his safe deposit box, where these securities were kept, and collected interest and dividends as they accrued. Certain investments of large amounts were shown to have been made by him which did not appear in Westcott's bank account. This was explained by Carter, who, in substance, said that Mr. ”