Monday, June 12th, 1939. Sapiro, Hoyland

Judge Edward Kelly presiding:

Superior Court 6.

Comperet, attorney for Beam Bay opens proceedings, by raising objections to the effect that case should be thrown out of court for the following reasons. Only a stock holder can bring such action, but Hoyland has declared that the issuance of all stock including his own is void, therefore he can not be a stock holder. Also, the suit is brought by Hoyland on his own. We have the affidavits of the other stockholders objecting to the action. Judge Kelly denied the motion. Sapiro set forth Hoyland’s demands saying that Hoyland asks that present holders of office as directors be removed. That a new board of directors be appointed and that it be established by court order that the present directors can not at any future time resume office. He asked also for full accounting of all corporate business. Comperet claims that only an officer of the corporation can demand that. Hoyland claims that the stock was issued and/or transferred fraudulently. Sapiro than declared that the status of the Plaintiff is still that of a stockholder, that therefore he is within his rights in bringing suit before the court. Judge Kelly then said that he considered Hoyland a stockholder, because the stock could not be declared void until a court of law so decreed. Comperet’s motion was therefore denied again by Judge Kelly. Comperet tried to prove that the case was not sound because a stockholder could bring an action on behalf of a corporation only when the corporation could do so or when it could be proven that the corporation had suffered harm.*** He cited several cases to this effect and put forth that the Beam Bay Corporation suffered no harm since the exchange or transfer of stock was merely a private transaction. Kelly denied this motion and called a recess.

Case resumed.

Sapiro set forth that 6 claims were based on laws existing before 1931. As the law now stands any stockholder can sue any corporation. He defined the action as a move to remove the officers because all failed to protect the corporation from fraud. Sapiro claimed that Hutchinson withheld from the corporate money collected on the sale of stock and that Hoyland asked the board of directors to protect this, that they refused and he therefore brought the suit himself.

Judge Kelly ordered the case to proceed.

Sapiro then summarized the complaints. (referred to as complaints but regarded as a series of statements).

1) Hoyland holds ten percent of the stock.

2) Corporation was formed in San Diego and all directors reside in that city. (there are five directors at present).

3) Lists former names of corporation, it is now known as Beam Ray.

4) That the number of directors was to be raised to nine.

5) That after arranging that all stock was to be issued to Cullen, Hutchinson, and Olmstead, these three directors then added new directors to the board.

6) That the corporation took over Rife machine and started to manufacture and distribute same.

7) That in the transfer of stock Hutchinson insisted that the money went to the corporation but Plaintiff declares that Hutchinson kept $500.00 of the money.

8) On August 12, 1938, Hutchinson first brought before a meeting of the board the transactions complaining of…(missing transcript)

9) Hutchinson presented to the corporation an illegal suggestion regarding a Dr. Yale.

10) Hoyland gave notice to the corporation that the contracts regarding transfer of stock were all wrong.

11) The affairs of the corporation have become muddled and confused. (missing transcript)

12) Plaintiff has brought action in his own behalf and the interests of the corporation.

13) General accusation against all directors. He asks that they all be removed from office.

Comperet then took the floor and pointed out that Sapiro was in error when he said that Plantiff did not know what was going on in the corporation. That Hoyland attended all meetings, read the minutes, and was familiar with all the activities of all the directors. Sapiro called Edwards to the stand. It was established that Edwards was secretary to the Beam Ray Corporation, is a member of the board of directors, and holds fifty shares of stock. He is also custodian of the records of the company.

Kelly called a noon recess.

Case resumed. Edwards on stand again. Ledgers were introduced and accepted as exhibits. Edwards read the minutes of the meeting of the directors held on June 1st, 1937. Ditto June 25. Sapiro aimed to show by the introduction of these minutes that there was no record of certain activities of the three directors Hutchinson, Cullen and Olmstead. Edwards explains his check for $500.00 made out in Hutchinson’s favor. He was thoroughly sold on what the Rife Machine would do and wanted to buy stock from Hutchinson, but explained that the stock was impounded, but that could give him fifty shares if Edwards would give him five hundred dollars. Edwards agreed and made the check out to Hutchinson under the distinct impression that the money would go to the corporation. He said that he got a receipt from Hutchinson which he later returned to Hutchinson. He does not know were the receipt is now. Judge Kelly asked Edwards if he did not think it queer that Hutchinson would give him his own stock in exchange for money that was to go into the corporation for operating expenses. Edwards said no, he did not think it queer at the time. Sapiro asked when the money Edwards gave to Hutchinson was paid over to the corporation. Comperet objected and was sustained. (for once!!!). Sapiro then handed the ledgers to Edwards and asked him to find a record of when this money was paid to the corporation. Edwards could find no record, but said that these particular records were not the original records. He then produced the old books, and showed that on July 31, Hutchinson turned in a note for $500.00 payable to the corporation. Sapiro asked if this note was not over due. Comperet objected and was sustained. It was brought out here through direct questioning that Hutchinson does not have the receipt he got from Edwards and does not know where it is. Sapiro then questioned Edwards regarding a meeting at which Williams said that the note was non-negotiable. Edwards did not remember. He said that Hutchinson paid back the corporation about seventy-five dollars on one occasion, and fifty dollars which Hutchinson had him apply on the notes about six months back. Nothing has been paid since the note became mature. A notice to the corporation signed by Hoyland dated January 13, 1939, was identified by Edwards in which Hoyland demanded collection on the note by the corporation. Edwards said that the board of directors met and went over the Hoyland demand and immediately took steps to get legal advice but that nothing was done to collect the money from Hutchinson. Edwards said that only one machine had been sold since. That one was sold to Dr. Dishy, a chiropractor. Edwards said that Henderson was discharged from the Court resumed.

Edwards was excused and Reynolds was called to the stand. Reynolds is a director of the Beam Ray Corporation, and has stock in it. He testified that early in May of 1938 he talked to Hutchinson about acquiring stock in the Beam Ray Company, and Hutchinson said that the stock was impounded and could not be sold, but that he could give some of the stock to Reynolds. Record of the transaction was admitted as exhibit 12. Reynolds told of giving check for the stock that was to be released from poundage and of getting a receipt at the time. Later this receipt was taken by Mr. Cullen who gave him a note for $500.00 against Beam Ray Corporation in place of the receipt. This transaction was made under the former name of the corporation, that is: United Polytechnique Institute. Reynolds could not remember when he last attended the meeting of the board of directors of the Beam Ray Corporation. He said that the Beam Ray Corporation was just barely able to keep its head above water. Comperet cross-examined Reynolds and asked Reynolds about a demand made upon Hutchinson for the return of the $500.00 and showed him a document to that effect. Reynolds could not remember who suggested drawing up this document or anything else about it (part of transcript missing).

She said that she understood from Hutchinson that he could give her the stock and that it would later be released and that the $500.00 was in payment for this stock. She told of complaining about not receiving this stock after seven months went by. She said that when she gave the money to Hutchinson he told here that it would be impounded until the corporate commissioner released the stock. She expected Fickerson to hold the money until the transaction could be completed. When she found that the stock was not forthcoming she felt sure that she would get her money back.

Court was adjourned.

Tuesday June 13, 1939. 10 A.M. Miss Ernstein on the stand.

Sapiro showed her a check for $2000.00 made over to Hutchinson and signed by her father, and she identified it. She testified that she was told she would get fifty shares of stock eventually for her $500.00. She said the receipt she got for $2500.00 represented her own and her father’s investment was signed by Henderson and Hutchinson, but she did not remember definitely how many shares were named. Judge Kelly questioned her. And she said that she thought that the receipt said that the money they paid was to be impounded and that they would receive two hundred and fifty shares of stock. Sapiro asked her when she first found out that she made a loan to the corporation. She said that she found out that she could not get the stock until she gave Hutchinson her receipt. She gave it to his and he gave her a note on the corporation. Her father also gave a note. Nothing has been paid to either. Comperet questioned her and she testified that Henderson told her that Beam Ray Corporation could use some money, that she…(missing transcript).

Henderson said that his wife owns 500 shares of stock for which she received a receipt and for which she paid no money. The stock came from Hutchinson but the receipt was signed by Fickerson. Henderson said that he put $900.00 into a former business venture of Hutchinson’s. Henderson said that he saw the receipt given to the Ernsteins and that he might have read it, but that he did not remember what it said. He testified that he knew nothing whatever about the books of the Beam Ray Corporation. He showed a receipt from Hutchinson for $900.00 cash he had given Hutchinson on a former deal. Sapiro asked if Mrs. Henderson had helped to put over the English deal for Beam Ray Corporation Henderson replied with the following story: “His wife had been suffering from a malignant disease. They visited the Rife lab, and she saw the Rife machine and when the English group were here they entertained them at their home. Mrs. Henderson is still take treatments, one a week. Henderson said he left the organization in July because there was too much confusion in the company. He called the courts attention to the fat that he has never wanted any stock nor does he want any part of the English deal. Comperet asked him about the discussions of the corporation; Henderson said these arguments were sometimes between Rife and Hoyland, or Henderson and Hutchinson, or Hutchinson and Couche, Cullen etc….

Henderson said that they rowed about a large number of subjects. Henderson said that Hoyland was technical director for the Beam Ray Corp, that he serviced the machines and was in charge of designing and manufacturing. Comperet asked him where the basic designs came from. And Henderson said that those were Hoyland’s also. Comperet asked Henderson what is the substance of the conversation between Hutchinson and the Ernsteins. Henderson said he remembered it quite clearly. That Hutchinson said the stock was a gift but did not recall his saying that the money was impounded.

Recess. Noon.

Monday, August 14, 1939. Arguments.

Judge Kelly: “I would like counsel to pay attention to the evidence that has been produced, and I would also like to be reminded of the facts of the case.”

(This is a summing up by M.B. of this particular part.) Sapiro brought out he fact that Hutchinson dominated the corporation, that he spoke so frequently about how often he did this and that, it was obviously a Hutchinson promotion from the start. Olmstead’s testimony bore this out and showed also that Olmstead paid no attention to the affairs of the corporation. Sapiro then made an issue of the meetings of June 1st, 1937 when Cullen offered to sell our his course from practically all the stock of the corporation. After having done this they elected their new director. If the meetings were held improperly, as they seem to have been, everything that took place was invalid. He referred to the fact that the markings in the book implied that the order of the pages was fixed deliberately to make it look as if the meetings took place properly.

Sapiro: “They tried to prove that the meetings took place in proper order by putting Olmstead on the stand, and they hope in this way to validate the applications for the issuance of the stock. No word was found of the meeting having been split, but the typewritten changes that occur on the last page.”

Sapiro referred to Olmstead’s testimony pointing out that when Sapiro showed his affidavit saying that he had carefully read the minutes and that they were correct, he then denied that the minutes were correct. He changed his statement under oath because he saw that his stock was invalidated. Fickerson’s testimony disagreed with Olmstead in many respects. Hutchinson then said on the stand that he had examined the minutes and that they were correct.

Sapiro: “No, he said that in his affidavit, but he changed his statement on the stand – just as Olmstead did. At the Fresno meeting the defendants say that they approved all the minutes as they were read at that meeting. They therefore know that the meetings came in a different order than that showing on the minutes. This it would seem should discredit the witnesses.”

Sapiro: “Hutchinson’s very strange manipulations of stock in regard to the Nevada corporation and the A.S.C. courses should be considered, and that Hutchinson had taken most of the stock for himself and had sold it to various people, even though the corporation had abandoned the idea of carrying on the courses. Later, the corporation set about to get control of the Rife Ray machine. Hutchinson fixed himself firmly in contract with Hoyland and Rife and with the British, and used his defunct corporation in the negotiations. Hutchinson then set about to get money. He had been borrowing from people, to use his own phrase, and as the book showed. He got in touch with Edwards, Reynolds and the Ernsteins and sold them some stock using all his tricks as a promoter. (His own testimony proved that all his work was in the capacity of a promoter), and knowing what is in the law he told Viola Ernstein (and I believe she was completely innocent as was her father) that he could not sell her the stock but that he could give it to her. She gave him $500.00 and he gave her a receipt, but when your Honor quizzed him about it he quoted it perfectly, almost word for word. This action of Hutchinson of taking the money before the stock was released from the corporation was criminal. Reynolds gave him a check which says, “received for 500 shares of stock, U.P.I…etc.”. and was signed by Hutchinson. Hutchinson disregarded the law in reference to these three people. It is my contention that this money should be returned to them by Hutchinson. I call your attention to the fact that no mention is ever made at the meetings that followed that Hutchinson got this money from these people. Later at the meeting of August 12 these transactions are referred to as loans. Then Hutchinson asked for receipts saying that they could not receive the stock until they surrendered them. In return for the receipts thus surrendered he gave them notes, they all thought they were buying stocks. Hutchinson’s action was a criminal violation of the Corporate Securities Act, which was designed to protect the innocent victims of such transactions. I think the very slickness of the manner in which he did all these manipulations proved him a criminal, and that he knew what he was doing. Hutchinson held out the money he got from Edwards in May, and in August he gave a note for it. We say that the corporation had not right to issue these notes to these people to protect Hutchinson who had done a crooked piece of work. Edwards knows the law. He knew about the things that Hutchinson was trying to do, and I think he may have been in pari delicto with Hutchinson. Reynolds is naïve. I think he was in good faith. I think that only Edwards may have been a guilty party to the transactions with Hutchinson showing that he collected money here and there in exchange for these gifts of stock. Beth Willman was getting a salary for her services to the corporation, but she gets over seven hundred shares of this stock. The records do not show that Ernstein, Reynolds and Edwards paid for their shares. It says merely that they received the stock for services rendered to the corporation. The money changed hands in every case, long before the stock moved into the corporation. When you asked them why services they had rendered, none could recall any. It is quite obvious that all of this was one complete fraud. That Hutchinson sold stock in these corporations, and received a lot of money, some of which was put into the corporation, but most of which Hutchinson kept. They all failed to tell the truth about the transaction which nullified the application. The Plaintiff did not know that all this was criminal action until I so advised him. We alleged that the books are very irregular, particularly as regards the Nevada corporation, and the A.R.S. assets. The complaint tells that Hoyland served notice on the board of directors, that all of the transactions, stock issuances, etc…were illegal, and that the contracts were improper. Nothing was done. Hoyland told them the British, and the British contracts say nothing about frequencies. We showed in court Hoyland’s records to the British telling of what he had sent to the British, but they were not paying the money they owed. They kept complaining, it was a stall to delay the payments. At the meeting in New York of Hoyland, Hutchinson, and the British, two new agreements were made with no reference to the frequencies, but with all items concerning the financial side of the question. Quite obviously the British were satisfied, since they paid what was in arrears and put up ten thousand dollars more. Soon they were $5000.00 overdue and so they started to yell again and to kick about Hoyland. As a stockholder, Hoyland tried to get the corporation to take steps against the British who were still trying to get out of paying out what they owed. There were certainly cause for them to revise the contracts with the British.”

Noon Recess.

Afternoon session. Sapiro summing up.

Sapiro: “The directors of the corporation did nothing in accordance with the Plaintiff’s demand and hence this action. WE think that this shows that the directors failed to take the proper action to protect the corporation. We therefore ask that the 4,779 shares of corporate stock be declared void and that all activities of the corporation be declared void. Also, the notes to Edwards, Reynolds and Ernsteins. That an examination of all the accounts of the corporation take place. That a receiver be appointed to collect amounts from Hutchinson, that permits be considered to decide which are valid, that the owners of the Rife Ray machine be considered to eliminate Hutchinson as the owner, and that Hoyland and Rife as new owners make a new arrangement with the British, that the Ernsteins become creditors of the corporation also Reynolds and Edwards if the court thinks this is fair, that it be decided who has exclusive rights to the Rife Ray machine.”

Sapiro then cited a number of cases and read law applying to this case. He pointed out that by law Hutchinson was guilty of a felony in acting against the requirements of the corporation. Judge Kelly interrupted to say that he thought the law had been violated flagrantly by Hutchinson. Sapiro then outlined the numerous frauds done by Hutchinson, that where stock has been issued without a proper permit it becomes null and void and that where the parties who took part in the transactions without knowing illegality should be provided for. Judge Kelly wanted to know what kind of relief could be offered them. Sapiro said, that the receive would decide that. Judge Kelly asked if Sapiro held the corporation responsible for Hutchinson’s criminal actions. Sapiro said, “Yes”, decidedly. Sapiro said that he would answer Judge Kelly’s direct questions as to what were the assets of the corporation.

Judge Kelly: “Well what are the assets?”

Sapiro: “Outstanding contracts for machines out on lease, also, rights to collect funds from Hutchinson.”

Judge Kelly: “Would the corporation collect anything from Hutchinson?”

Sapiro: “Yes, certainly.”

Comperet: “Well, Hutchinson has nothing.”

Sapiro: “If it is possible to collect from him it should be done. To continue with the assets, leaving aside the questions of the void contract if we thought that it conveyed rights they (these contracts), your big assets here are Dr. Rife’s name and experience. The receiver would have to make new arrangements with Dr. Rife and I think that Dr. Rife would be glad to do this. I think also that the knowledge of the frequencies should not be divided.”

Judge Kelly: “I wonder if Dr. Rife retained any rights in this contract?”

Sapiro: “I don’t think that he did.”

Afternoon recess (middle recess).

Sapiro, still summing up.

Sapiro: “Dr. Rife, Hoyland, the British and men working at the factory all know the frequencies, and could use them on other instruments. Your Honor asks how I interprete Hoyland’s position. He is a stockholder of the corporation. He was their technical advisor, he is an owner of the machine. He brings this action as a stockholder. Even if he had been at fault there was no misconduct on his part as a stockholder. Hoyland has nothing to do with Hutchinson’s improper stock transactions. I doubt if he could have given any more information to the British that he did give. The board could have certainly made him give it. The fact that the British were completely silent during the New York meetings as regards to frequencies proves that he did what he should do for the British. He might have given more information, I don’t know all that he knows. I think that the value of a going contract with Rife’s name attached to it can be made important. I think the Hutchinson actions are a criminal infraction of the Corporate Securities Act, and that the corporation is definitely guilty along with Hutchinson and that all the things done regarding the application for transfer of the stock are done equally by the corporation. I think the meeting of June 1st is completely void as the actions authorizing this meeting were illegal and therefore void. I don’t believe that all the people who bought this stock are innocent. Edwards know, or should have known better. It is difficult for me to believe that he could have been deceived. Reynolds and the Ernsteins I think are totally without guilt, and were taken in completely by Hutchinson. I think Mr. Henderson and Mrs. Henderson are in a good class, they put some money into the aero schools, but they were interested in the Beam Ray machine, and I think they deserve some consideration, although he said it was just a gamble with him. I think he was persuaded to say this being rather fearful to talk in his defense. I think a wise receiver should adjust all of this though he would find it hard to get hold of any money. He might get an issue of stock that would be legal.”

Judge Kelly: “Has the court the power to declare certain victims as preferred stockholders?”

Sapiro: “Yes, I think too, the stock in regard the owners is void and a new arrangement should be made of the shares held by the owners. I think Mr. Hutchinson should be out entirely, as he did many criminal things, and that he has no place in the organization at all. He has exploited everybody.”

Judge Kelly: “You are expecting a lot of work from the receiver?”

Sapiro: “Yes, because I believe there is a great deal of profit to be got from wise handling of this machine and of Dr. Rife’s name.”

Sapiro finished on this note to the effect that the receiver should be appointed to clear up the mess, and that Hutchinson is the villain of the piece and should be kicked out entirely.

Comperet in his summing up for the corporation drew diagrams on the black board by which he showed the Beam Ray had $5000.00 in stock.

Comperet: “Three were sold for $10.00 each to Olmstead, Hutchinson and Cullen. Then you have a later transfer split up into three large blocks, then you have the last transfer, by which the large blocks were split up among the numerous stockholders. When a man is dangling over an abyss it makes no difference whether you cut the rope above him or below him. Mr. Hoyland says that the transfer to him was void, and capable of ratification, and he therefore cuts the rope and lets himself drop. And to make it a cleaner cut he cuts it again for good measure, thus he says he is not a stockholder. He has one more connection with the corporation because there are three owners of an invention who have a contract with the corporation. Mr. Hoyland says that this contract is void, so he cuts the last connection with the corporation. Upon that basis he assumes to direct the course of the corporation and says that there shall be a receiver appointed, taking it out of the hands of the remaining valid stockholders and that is shall be run according to his ideas. He never paid anything for the stock which is void. He was paid for his technical advice on the basis of commissions.”

Judge Kelly: “Is one who accepts shares through a transfer that was illegal enabled to bring such an action as this?”

Comperet: “He is not.”

This was argued back and forth by Comperet and Sapiro, the decision seemed to be a draw for the time being. Judge Kelly wanted to know what was the status of Hoyland. They could not agree upon this. Comperet pointed out that Hoyland was not fleeced out of anything and that he admits as much, but that if the transactions had been fraudulent only the Ernsteins, Reynolds or Edwards would have the right to sue since they gave their money and got nothing in return.

Judge Kelly: “What would be their form of action against the corp?”

Comperet: “I am not sure.”

Judge Kelly: “They want to get the corporation out of the hands of the swindlers.”

Comperet: “Hoyland is not in the position of the others, and he is not bringing this action on their behalf. His position is adverse to theirs. They have filed affidavits saying they are against his action. The only thing he ever gave to the corporation is the contract he says is void. We have here a particular type of action, a representative suit, but it is important to note who is represented. Hoyland must represent the corporation as he does not represent the other stockholders.”

Comperet then cited cases similar to the Hoyland verses Beam Ray suit.

Judge Kelly: “Isn’t the corporation injured when agents acting for the corporation issue stock with an improper permit?”

Comperet: “It depends upon the circumstance. Where every existing shareholder consents to the issuance of the stock, the corporation is not then considered to be injured. I think it should be kept in mind this adverse position of Hoyland on one side and all the others on another. I said at the first that Hoyland’s desire is to break up the corporation.”

Judge Kelly: “Can one holding void stock proceed against the corporation and ask for a removal of the

Court adjourned until Tuesday.

Tuesday, August 15: Morning session.

Comperet: “We have one fundamental point to consider first. Whether a man who by his own position in the case is not a stockholder, never has been and never could be, is able to maintain this action?”

Judge Kelly: “Why cannot the innocent victims maintain such an action?”

Comperet: “Their remedy would be a different thing. The would then be creditors, if the thing is so old that they can’t be stockholders their only remedy would be a bankruptcy.”

Judge Kelly: “It seems the victims do not want the things finished. It appears they want to kick out the directors who swindled them and name other directors and keep the thing alive.”

Arguments followed along former lines by Comperet and Sapiro. Judge Kelly said that he was determined to settle the point of Hoyland’s right to bring the action. Sapiro maintains that Hoyland was not bringing the action just for himself but for the benefit of the corporation. He merely sets the machines of the court in motion. He opens the door to the court of Equity. It becomes a representative action in the name of the stockholders, who don’t know how to protect themselves, for those who won’t do so, and for the corporation as a unit. Comperet produced legal evidence that a person holding shares of stock that are void is not a stockholder and therefore cannot sue the corporation Judge Kelly declared that the stock that was issued was upon its face valid, though the corporate commissioner had not permitted it, and that the persons who received the stock that was issued without fraud took it in good faith. It seems that we must determine the right of Hoyland to proceed, it being contended by the defendant that the stock issued to him, if void, gives him not right to maintain this action. Under section 310 of the civil code, if that contention is true then the innocent victims of fraudulent transfers of stock and the victims of illegal issue voided because not issued in accordance with the Corporate Securities Act though apparently valid could not avail themselves of the remedial provisions of section 310. It would seem unfair and unjust to deprive such victims of such rights as they might otherwise have under section 310. Because of the very fraud and the illegality of a transaction by which they have been victimized it is not enough to say they have another remedy. The law gives to shareholders certain rights in addition to all other rights and victims should not be deprived. Other rights might not be sufficient to protect them. If they are innocent and some directors or officers of the corporation are dishonest the innocent victims should not by reason thereof be deprived of any part of their rights, whether or not there are other remedies. There is a provision for such an action as is here brought. He then quoted a statute saying that the directors could be removed in case of fraud etc., and could be disbarred permanently. A fraudulent or dishonest director whose fraud or dishonesty has made the stock void should not be protected. Unquestionably the innocent victim of an illegal transfer of stock is a de facto shareholder although it may appear that the stock is void. A statute is remedial, it can’t be denied.

Comperet: “All innocent shareholders have the fullest rights to process under section 310, because a violation of the Corporate Securities administrator by an officer or officers of the corporation unless that very fraud which they attract also excludes them from the remedy. I cannot conceive it to be a principle of Equity that a stockholder within the definition as I have now announced it is under the circumstances which I have indicated. A corporation can act only through its agents, the agents only produce the dynamic consequences of the corporation and it can hardly be conceived that a corporation could be more greatly injured and its very rights to existence impaired to the greatest extent than by the dishonesty of its agents. That therefore an innocent party holding a share of stock valid upon its face, essays to condemn that fraud and proceeds to remove these officers. It would seem to the court that he or they should have the right to the fullest extent. The court will hold at this time that the word shareholder include an innocent transfer of shares of stock valid on their face.”

Recess.

Comperet: “The only persons who are in the positions of innocent victims are those whom the action seeks to remove. The only ones who put a copper cent into the company are Edwards, Reynolds, and the Ernsteins, who are directors. If the stock were for some reason merely voided the remedy would be simple. But if the thing is beyond “of reviving”, what then?”

Judge Kelly: “I am assuming that the Plaintiff is appearing on behalf of the corp?”

Comperet: “I made the statement that Hoyland’s desire to wreck the corporation and I think he has proven this. We start out with a corporation undertaking the business of the manufacturing and distribution of Rife Ray machines. From the beginning Hoyland was in the place of business of the company. He saw all that went on. He says that certain directors stated that the purpose of the corporation was to put over a course of aviation. The statement was simply a matter of personal opinion. We come to this matter of the validity of the stock. We have in the first place the valid issue of three shares. Because the three shares remained with Olmstead, Hutchinson and Cullen. We have the Jun transaction here that’s the point in which the question comes up whether the number of directors was increased and the vacancies left unfilled and then the resolution passed for application to issue additional shares, or whether additional board of directors before the increase voted the increase. I think it should be noted in this that the corporation’s internal difficulties are due to action taken without legal guidance. But at this particular time they had the advice of Mr. Fickerson and he would not permit it to go astray upon a point so easily recognizable as that. The application for a supplemental permit shows that the increase of the board of directors was something yet to be done. It was so simple to do it the right way; nothing could be gained by doing it the other way. It seems reasonable to assume that is was done as Mr. Fickerson says it was. He would not be a party to such misrepresentation.”

Judge Kelly: “He may have been misadvised.”

Comperet: “But this all took place in his office. The meeting was held there. He guided them through action. The increase was made for the sold purpose of getting a quorum for meetings.”

Noon Recess.

Judge Kelly: “Do you consider that this stock was issued validly?”

Comperet: “Yes, there are two things to consider, the transfer and the issue. The issue was entirely valid.”

Judge Kelly: “Do you consider that these three hold the stock as agents of the corporation?”

Comperet: “That was the testimony of Olmstead and we have against it the testimony of Hutchinson.”

Judge Kelly: “Frankly, I prefer the testimony of Mr. Olmstead.”

Comperet: “In many ways, this company faces a $50,000.00 law suit. I can’t see how they can hope to win against the British. The corporation’s agent Hoyland caused this suit to be brought. The British were duped into signing a new contract and they parted with $1500.00. Hoyland says the receivers should negotiate a new contract with the British. The British will have nothing to do with any group in which Hoyland figures.”

Sapiro then called upon Comperet to prove this.

Judge Kelly: “Are these people on the board capable of carrying on the business of the corporation?”

Comperet: “If they are left alone, certainly. Hoyland has decided that he would like to compete with this company by his own activities, and he will ask the British to pay much more for an exclusive license which he claims they do not have.”

Judge Kelly: “Were the receiver an honest man and skilful, do you think that could be accomplished by Hoyland?”

Comperet: “What can a receiver do? We have a company that is just about broke, I have no doubt, that in his closing argument Mr. Sapiro will say he will lend the company the money necessary to carry it on.”

Sapiro objected violently. Judge Kelly laughed and said he thought that was a good suggestion.

Judge Kelly: “Where would this receive get his compensation?”

Comperet: “I wonder! The corporation has had some machines set up. Mr. Sapiro has said that the only assets that the corporation has is the use of Dr. Rife’s name, but Hoyland has said that the design and the frequencies of the machine itself is not that of a Rife Ray machine, and that the machine is in fact different. The company must have these machines junked, must draw up new designs according to Dr. Rife’s ideas, must have Dr. Rife OK these designs, etc. I don’t think Dr. Rife’s ideas would permit Hoyland to do this.”

Sapiro objected volubly.

Comperet: “The board of directors cannot be changed just because the fly in the ointment doesn’t happen to like them. The British situation resulted from Hoyland’s actions and his failure to cooperate with them.”

Judge Kelly: “If the directors are just going to sleep and let Hutchinson or Hoyland run things, how far can they be expected to carry on the business of the company satisfactorily?”

Comperet: “Where have these innocent victims been guilty of fraud?”

Judge Kelly: “I think they should all have prosecuted Hutchinson. Does he owe money to the corp? The suit should be vigorously pressed.”

Comperet: “I agree, but where this money will come from that I don’t know.”

Judge Kelly: “Maybe Mr. Sapiro will put it up. We don’t often get a rich Los Angeles attorney down here. Well, it isn’t enough to have the board of directors honest. They must have ability. Take bank officials. Their responsibilities are tremendous. They have a great deal to consider and so have the directors of this organization. They must act. They must be dynamic. What have they done?”

Comperet: “The Corporation is broke. They are going to have to secure permission from the corporate commissioner to finance themselves by some sale of stock for cash. It will take enough money to carry them through the activities that will put the real Rife Ray machines on the market. We will have to get a new engineer and start all over again.”

Judge Kelly: “Would anyone invest in a corporation about to be sued by the British group?”

Comperet: “Worst of all, would they invest in a corporation that was in receivership? As regards they British suit, we filed a cross complaint naming Hoyland as defendant. If the British can make any case against the corporation we can make a case against Hoyland. I have told the British this, if they succeed in getting a judgment against us we will assign them to our judgment against Hoyland.”

Sapiro: “This is conniving of the weirdest kind I have ever heard about. It’s outrageous.”

Comperet: “Not at all, we say that the debt to the British shall be paid by the one who did the wrong. If they don’t get a judgment against us they won’t get one against Hoyland. If that’s a conspiracy Mr. Sapiro, you can make the most of it. Now, Mr. Hoyland is the only one who felt that he was free to license other corporations. He knew Beam Ray was getting an exclusive license, everyone else testified that they knew it. If there are to be any number of license handed out we might as well close up shop. Mr. Hoyland waited until it suited him to decide that the license was not exclusive. Dr. Rife is not going to be a party to a fraud, and if the machines we sell are not the true Rife machines they are a fraud.”

Judge Kelly: “How long with the directors carry on these plans you have outlined?”

Comperet: “We are ready to go as fast as we can.”

Comperet called upon Mr. Williams who said that as far as he knows 85 percent of the directors have agreed to follow Comperet’s advice. Judge Kelly however, seemed to feel that the 15 percent was s definite consideration.

Judge Kelly: “Do they all now appreciate the fact that a promoter is not a lawyer?”

Comperet: “They have had an expensive lesson.”

Judge Kelly: “Most of these people seem to think that a promoter is a very clever man.”

Recess. Afternoon Recess.

Comperet: “There are one or two other things that rate a reply. I cannot take time to go into detail unless you want to take another day?”

Judge Kelly: “I would like to finish this up today. I want to know what will be the consequences to the innocent investors?”

Comperet: “We have those who put their money into the thing in order to make these machines according to Hoyland’s

Edwards, Reynolds, and the Ernsteins are most entitled to protection. I want to call the court’s attention to the fact that this application for transfer of stock is also signed by Hoyland. He deserves any discredit, if there is any, along with the others. The directors were not guilty of any mismanagement. They put up their money and their work, and in spite of receivership are appointed we are finished. WE can take care of the suit with the British. If the British win from us they will have to try to collect from Hoyland. By refusing to pay him his royalties as one of the owners of the machine, the one who did the damage can only be reached indirectly through the corporation. Our people can’t be harmed through the British suit, since they can’t collect any other way, they will have to talk turkey with us. We have now the evidence of Mr. Olmstead, as a clear guide to us in any steps that may be necessary to recover such stock as should go back there. I think we can secure from the corporate commissioner the return of these shares for which nothing of value was paid.”

Sapiro: “I think the validity of this June meeting should be discussed.”

Judge Kelly: “It seems it was most irregular.”

Sapiro: “I don’t think there was any meeting. And the whole stock arrangement is void.”

Comperet produced papers proving that the application was dated June 1st.

Sapiro: “I think that all of them realized that their affidavits were wrong. They realized the falsity of the June meeting and so they worked up a new story. All their testimony was contrary to their affidavits. The cross-examination proved that.”

Judge Kelly: “I think the whole thing is corrupt and polluted by the actions of Hutchinson. I believe that there are directors who are honest, but who know nothing about the corporation or its running. Can they carry it on without the burden of a receiver?”

Sapiro: “I think they are not the proper persons to develop this machine. They’ve all known for months how things were going. They are decent men who as a group do not act. The corporation needs somebody who will act. This lack of activity might destroy the corporation entirely. They are all paralyzed. Dr. Rife said he know there were changes made in his machine and that they were not changes that would make any difference (were not fundamental changes). Dr. Rife is a genius but he didn’t know how to put the machines in a form that could be used in offices of doctors. These machines are perfectly good, they are just the same as the Couche machine and the one that gave Mrs. Henderson such relief. The receiver should renegotiate contracts that will stand up and won’t be exploiting innocent stockholders. WE need a really good businessman in here. The Ernsteins should be paid off first, then Reynolds, then Edwards. I think we have assets in spite of Mr. Comperet’s sneering remarks about the machines we have. A receiver could collect what money is owed on these machines or he could recoup the machines and resell them. Then make a new contract with the owners of Beam Ray, leaving Hutchinson out. Then make a new contract with the British. If they knew that it would be brought out that we know they are merely stalling for the time when they talk so much about frequencies, they would compromise. The British are very clever at that, they can always have a Munich. Mr. Comperet says everyone is against Hoyland, but they accuse Hutchinson of fraud also. Edwards, Reynolds, and the Ernsteins testified in such a way that they actually took sides with Hoyland. Hoyland doesn’t ask for a judgment for himself, he wants the corporation to carry on properly He hasn’t a ghost of a chance if these people continued to run things. I think the contracts and the stock issued in fraud must be handled somehow by the court.”

Judge Kelly: “Can the corporate commissioner validate the void document?”

Sapiro: “No.”

Judge Kelly: “Can he authorize the issuance of stock to these people in lieu of the void stock they hold?”

Sapiro: “I think they might arrange some method under which through a new application a stock arrangement can be worked out, and a new contract might be worked out. These victims might prefer to be creditors. But for myself I would prefer to be a stockholder. It would rest with them. All of this would be worked out by a receiver, but I don’t believe it could be done by the present directors. The receiver would have to arrange new contracts between the owners and the corporation. The court should declare void all the agreements made, all stock issued, etc. The court should indicate what should be done about Hutchinson. It is some question now as to who is the legal directors, they were not elected by legal stock, but they are the de facto board. The directors should be put in control of the voting power of the corporation. Outstanding contracts should be cancelled by law, ditto the void stock.”

Comperet: “The directors are now in control of the voting power.”

Judge Kelly: “It seems that they were illegally elected. I have expressed my views on Hutchinson heretofore. I don’t quite know whether he did this deliberately or not. He may have believed that he had thought out a plan to escape its effect by taking money from people on a promise of delivering stock. There are always some people who think they can beat the law, or circumvent it. It is hard to conceive that anyone would be so ignorant as to believe that they could get away from the effect of the Corporate Securities Act by so doing. But he may be just that ignorant, in which case he certainly knew the object of the law and what it was invented for. It was apparent that Hutchinson was acting in violation of the law. Since I made some remarks as to my views of Hutchinson it has been reported to me that Mr. Van Mort has stated that Mr. Hutchinson came to him after this action was started and offered him a consideration for withholding certain checks and receipts which Mr. Van Mort later produced in court. If that is true it exposes fully Mr. Hutchinson as having a low impression of the law. I want this matter reported to the D.A.’s office. And it is my wish that the proper procedure should be taken against Hutchinson. We have here an instrument designed by Dr. Rife, who seems to have no idea of the business and not much regard for money or property. He is the type of an inventory who seeks to discover something that will benefit humanity, thoughtless of his own interests. He gave the impression on the witness stand…

(transcript missing pages)

(next day?)

Hoyland resumed the stand after 11 A.M. recess.

Hoyland suggested that he would like to make a diagram of how the coded information he sent the British could be applied. A large paper was tacked up on the blank board and Hoyland drew a diagram.

Comperet: “This coded information consisted more of telling the British what particular disease was cured at a particular point on the dial?”

Hoyland: “no, starting from zero, etc…,(he listed the diseases).”

Comperet: “This is not the only letter from the British addressed to Beam Ray corporation that is in your possession, is it?”

Hoyland: “I don’t know which letters are directed to me or the Beam Ray Corporation.”

Comperet: “Will you just look for and produce any letters, telegrams or cablegrams, that are directed to the Beam Ram by the British?”

Hoyland produces a number of them.

Hoyland: “It says: ‘attention Mr. Hoyland’.”

Comperet: “This letter calls attention to the fact that there is a great discrepancy in the machines and says that they can do nothing with it until they get the other machines out of the customs. They ask for more information which they promise will be kept confidential. Did you send any reply to that letter?”

Hoyland: “Yes.”

Comperet: “Here are a number of cablegrams which you have produced. One dated October 10th and addressed to Beam Ray, quote, ‘Four machines received, two operable, all four require extensive overhaul, this and previous delays make our position extremely difficult, still awaiting information promised, Hoyland letter July 18th’. Did they get this information?”

Hoyland: “I would have to find out what I promised them on that date.”

Comperet: “I will read from a cable dated October 31, ‘Distressed no reply to our recent cable. Can you send representative authorized to act to meet Gonin, New York November 17. Reply’. You have had that ever since it was received, haven’t you?”

Hoyland: “Yes.”

Comperet: “Another one of November 3rd, 1938, addressed to Hutchinson, ‘All convinced you do not get our cables or letters. Could you meet me New York, November 17th with power of attorney to discuss situation? Fear losing funds offered us. Signed Gonin.’ Didn’t you get that cable at the office of the Beam Ray Company?

Hoyland: “I don’t think so. Mr. Hutchinson gave it to me before we went to New York.”

Comperet: “Didn’t you know that the situation was such that the British sent their correspondence in duplicate, one going to Mr. Hutchinson?”

Hoyland: “Yes.”

Comperet: “Did you sow their letters or cables to the board of directors after receiving them?”

Hoyland; “No, I kept them because it was all technical.”

Comperet: “Did you think that the board of directors should not know that the British wanted this information?”

Hoyland: “They all knew it in the office and I knew Hutchinson was receiving copies.”

Judge Kelly: “Did anyone reply to any of these letters?”

Hoyland: “I replied to some of them but I thought the company should replay to others.”

Judge Kelly: “Who was secretary of the company at the time?”

Hoyland: “Mrs. Willman.”

Judge Kelly: “Is she here?”

Comperet: “No, but she can be called. (continuing) Calling your attention to this letter from Mr. Blewett. Did you know that he was making such complaints at the time?”

Hoyland: “I have never seen this letter before.”

Comperet then asked Hoyland to read through the letter.

Court recessed until 2 p.m.

Afternoon Session. Hoyland read the Blewett letter.

Comparet: “You knew such complaints were being made by them over a period of a good many weeks?”

Hoyland: “I had seen the cables, yes.”

Comperet: “Including the one saying they were convinced you were not getting their cables?”

Hoyland: “Yes,”

Comperet: “During this period did not the officers and the directory of the corporation request you to send the information asked for? Didn’t George Edwards or Mr. Hutchinson ask you to do this?”

Hoyland: “I don’t remember that any of them did. I am sure that Mr. Edwards never asked me to.””

Comperet: “When did you send them the list of what the letters on the dial stood for?”

Hoyland: “I think that was in August.”

Comperet: “That was promised them in San Diego?”

Hoyland: “(pointing to diagram) This was.”

Comperet read more of the complaints from the English letters in which they asked repeatedly why they were not sent the numerical frequencies.

Comperet: “What was your reason for withholding these?”

Hoyland: “They were to get them this way. (Pointing to a diagram).”

Comperet: “In a number of letters the British asked for a statement of the costs of the machine. Had you sent them these figures?”

Hoyland: “Yes.”

Comperet: “Did you tell them that trained men could have assembled the parts in one day?”

Hoyland: “Yes I did.”

Comperet: “Do you recall the cost for parts for one machine?”

Hoyland: “I think it was about two hundred and forty-five dollars.”

Comperet: “You charged them five hundred dollars plus a hundred and fifty dollars royalty for clinical machines and six hundred dollars plus one hundred and fifty dollars for lab machines. Now, what did this difference represent?”

Hoyland: “When you are starting, you can’t manufacture machines as cheaply as when you are in production.”

Comperet: “What were the men paid?”

Hoyland: “Five dollars.”

Comperet: “That would mean then that it took one man fifty-five days to put the machine together?”

Hoyland: “I had three men working on them at that time, they knew that we were manufacturing the machines especially for the British in England.”

Comperet: “In reply to these two cables asking for a representative to meet Dr. Gonin in New York. You and Mr. Hutchinson were the authorized agents of the corporation and dealt with the British?”

Hoyland: “Yes.”

Comperet: “When you met Dr. Gonin, didn’t he present you with this letter along with two memorandums explaining the points upon which the amendments were to be made?”

Sapiro objected to the line taken by Comperet and Judge Kelly said he was confused himself as to what Comperet was leading up to. Comperet consulted the allegations in the pleading and quoted from one of the amended complaints.

Comperet: “The Corporation has made certain contracts with British representatives and that said British have cabled threats to the corporation stating their intention to start suit. We propose to show that the directors of the corporation took all the action that they could take.”

Sapiro insisted that the corporation knew all about the complaints by the English, but Judge Kelly felt that perhaps Hutchinson and Hoyland had both conspired to keep the information from the corporation. Comperet put the blame for the failure to give the British the information they desired entirely on Hoyland. Judge Kelly ruled that he might be allowed to so prove if he could. Sapiro started to remove marks on the document. Comperet caught him doing it and a tussle ensued. Judge Kelly told Sapiro very firmly that he was not to make marks on any document, then reprimanded him. Finally, he told both attorneys to sit down and behave themselves. Sapiro then inspected the document. Judge Kelly asked him why he had put the marks on there in the first place. Sapiro evaded the question murmuring that he did so in December. Judge Kelly said that what the court is especially interested in right now is what is the status of the people who hold the stock, and if the stock that they received is void by reason of the ruling of the corporate commissioner, what is the status of the directors?

Judge Kelly: “There is evidence here of rather strange transactions. Mr. Hutchinson said that he could give away stock, but he could not sell it, and people were paying money to him for stock which they expected to receive later. Can this be done legally? Or were these merely gifts from the people? Did Mr. Hutchinson ever intend that the money should get to the corporation? How much of all this was known to the directory of the corporation and what had they done about it? This issue seems more important at the time than the British suit.”

Comperet resumes cross-examination.

Comperet: “At that conference you negotiated these two amendments?”

Hoyland: “Yes.”

Comperet: “And, after Dr. Gonin returned to London he sent this cable dated December 10th?”

Hoyland: “That’s right.”

Comperet: “The cablegram says among other things, ‘sending new agreement’. Now when you were first one this stand you produced a type-written copy of a cablegram, sent by yourself to Dr. Gonin in response to the proposed contract sent by the British. In this cable you say, ‘…letter and proposed agreement received. Your letter misstates fact regarding specification. Also that Beam Ray has basic rights. This is not correct . All basic rights remain with original owners. You have breached contract by failing to send payments.’ Now do you mean to say that Beam Ray holds no exclusive license to the Rife machine?”

Hoyland: “Yes, I mean that.”

Comperet: “You say also in this cable, ‘your proposed first contract comprehends a wrong first party’. Who did you mean would be the right party? Yourself, Rife an Hutchinson?”

Hoyland: “Yes.”

Comperet: “So by your statement you meant that the corporation did not have the authority to give such a license as this proposed contract would give to the British and such authority would have to be obtained from the owners?”

Hoyland: “That’s right.”

Comperet: “After you sent this cable to Dr. Gonin in which you informed him that the corporation did not have the right to make such a contract, did you inform the corporation?”

Hoyland: “I told Edwards. He saw the cable before I sent it.”

Judge Kelly: Was Mr. Edwards the only director you showed the cable?”

Hoyland: “I think so.”

Comperet: “You explained to him the meaning of it as you explained it here so that he would understand it means?”

Hoyland: “Yes, I made it clear to Edwards.”

Comperet: “In reply to the cable Dr. Gonin sent this cable, dated September 30, did he not?”

Hoyland: “Yes.:”

Judge Kelly: “(After reading Gonin cable). When did you reach the conclusion that the corporation did not have the exclusive license?”

Hoyland: “I took my papers to my attorney in Los Angeles.”

Judge Kelly: “You examined the contract with the British didn’t you?”

Hoyland: “I’m not a lawyer, Hutchinson was appointed to take care of our interest.”

Judge Kelly: “Is Hutchinson a lawyer?”

Hoyland: “He always said he was as good as any lawyer.”

Judge Kelly: “We’ll find that out when we get him on the stand. Did you receive any money after you had learned the contract was wrong?”

Hoyland: “No.”

Judge Kelly: “When did you get this information from your attorney?”

Hoyland: “Before I sent this cable.”

Judge Kelly: “Did neither you nor the company have a legal counsel other than Mr. Hutchinson before you consulted your attorney in Los Angeles?”

Hoyland: “The first contract with the British was drawn up in the office of Mr. Fickerson and I was relying on Mr. Hutchinson to set Dr. Rife and myself right.”

Comperet: “Did he come to the company’s office?”

Hoyland: “Yes.”

Comperet: “Then why the change in December?”

Hoyland: “My attorney pointed this out to me at the time.”

Comperet: “When you showed your cable to Edwards did you tell him what you proposed to do if Beam Ray tried to go ahead with the contract?”

Hoyland: “We discussed it, Mr. Edwards, Mr. Sapiro, and myself. There was a directors meeting which Mr. Sapiro attended and a cable was sent to the British.”

Comperet: “I show you a cable addressed to Beam Ray Corporation dated January 5th, 1939. How did it get into your possession?”

Hoyland: “That was delivered to the Beam Ray offices, I took it down to Mr. Edwards and he gave me a copy and I kept the originals.”

Comperet: “Do you think this refers only to technical matters that concern you and not the company?”

Hoyland: “No, the owners and the company were both interested.”

Judge Kelly: “You say you took the cablegram to Edwards and he made a copy and gave you the original. What did you do with it?”

Hoyland: “I put it among my papers. Edwards had a copy of it.”

Recess.

Comperet, quoting from a cable sent to the Beam Ray corporation by the attorneys for the British, to the affect that Beam Ray had broken the original agreement, had ignored requests by British, that the British were willing to return the machines and expected to get their money back.

Comperet: “You say in your complaint that the rights of the corporation have been challenged. Do you mean your own challenge, saying that the corporation does not have an exclusive license and therefore could not deal with the British?”

Hoyland: “Yes, that is what I mean.”

Comperet: “I show you here a copy of a notification you served on the directors of the corporation. You say, ‘wherefore I demand that you release and surrender your agreement with the owners and all rights’. You complain that the directors should have adjusted with the owners this difference about the rights of the corporation. Is that your idea of adjusting the matter?”

Sapiro insisted the entire exhibit be shown to the court and not just the section quoted by Comperet.

Hoyland: “(After reading the entire document). If they couldn’t adjust them this is the answer. We ask for a new contract.”

Comperet: “On your own terms?”

Hoyland: “Yes.”

Comperet: “What was your occupation before you started your work on the Rife machine?”

Hoyland: “Radio business.”

Comperet: “You conducted a little radio shop?”

Hoyland: “Yes.”

Comperet: “When did you first work on the Rife machine?”

Hoyland: “August 1934.”

Comperet: “What was the first work you did?”

Hoyland: “Repairing Dr. Rife’s machine.”

Comperet: “When did you being to devote your whole time to the work on the Rife machine?”

Hoyland: “From August 1934 I was almost continually in touch with Dr. Johnson in Pasadena. Later I was given an order to build a machine. I took the first machine to Pasadena and later to Los Angeles where we ran a clinic, from October 1935 to June 1936. I worked three days a week with Dr. Johnson and then I came to San Diego for three months and was here in September of 1936. We ran a clinic in Pasadena at the Old Folks Home three mornings a week.”

Comperet: “During this period you were working only part time on the Rife machine weren’t you?”

Hoyland: “I was trying to run my business at the same time.”

Comperet: “That made it a struggle didn’t it, to keep going on at that time.”

Hoyland: “The clinic interfered with business and I lost business.”

Comperet: “During this period your income was not very much?”

Hoyland: “It wasn’t as much as when I started.”

Comperet: “Now in May of 1937, did you get down to devoting full time to Rife Ray machines?”

Hoyland: “From then on I did, I quite my business.”

Comperet: “From then on until your contract with Beam Ray was severed you devoted yourself to work on Dr. Rife’s machines?”

Hoyland: “We did other things at the lab.”

Comperet: “Have you received any dividends as a stockholder of Beam Ray?”

Hoyland: “No sir.”

Comperet: “But you received some money and some royalties on machines released in the U.S. and on the British deal?”

Hoyland: “There have been eleven or twelve machines sold.”

Comperet: “From May 1937 to June 19038, how were you supporting yourself?”

Hoyland: “I had money in the bank and lived on my savings account and continued to support myself on that money after I joined Beam Ray.”

Comperet: “While you were technical director for Beam Ray you received additional compensation, one and a half percent of each machine, didn’t you?”

Hoyland: “One half percent, the one percent was to be paid when the machines were all paid for.”

Comperet: “You received about $2900.00 from the British contract and $220.00 royalty on four machines sold to the British, your received some $3500.00 from Beam Ray?”

Hoyland: “Approximately that.”

Comperet: “When you offered to did you show them the money, did you have it in cash?”

Hoyland: “No.”

Comperet: “In January 13, you served a demand upon the board of directors of Beam Ray signed by you and you thereby demand that the directors do certain things, number of which that they taken steps to collect back from certain persons including yourself all moneys paid in connection with the British deal. If you didn’t have the money, why did you want to do this?”

Hoyland: “I had property, real estate, and a house near Arrow Head Lake.”

Comperet: “A mountain cabin?”

Hoyland: “I said a house.”

Comperet: “A cabin is a house.”

Hoyland: “Yes, but a house isn’t always a cabin.”

Comperet: “I understood you to say that the first machine built by Beam Ray was built in the month of May 1938, and the money with which to buy the parts for the machine came from money paid in by Edward and Reynolds.”

Hoyland: “I suppose so. I know we got some money somewhere and bought parts for that machine. The machine was sold to Dr. Hamer.”

Comperet: “When was that machine started?”

Hoyland: “I can’t remember.”

Comperet: “You had met Mr. Hutchinson before you became connected with Beam Ray, hadn’t you?”

Hoyland: “Yes.”

Comperet: “On about the 15th of April, Mr. Cullen, Mr. Henderson and yourself went to the office and about four days after you were again at the U.P.I. office in the Broadway Building?”

Hoyland: “Yes.”

Comperet: “On these occasions there was a discussion to the effect of having Mr. Hutchinson take over the job?”

Hoyland: “Yes.”

Comperet: “And the U.P.I., was the corporation to do that?”

Hoyland: “Yes.”

Comperet: “At the time you had no stock in U.P.I.?”

Hoyland: “There was a promise that Dr. Rife and I would receive thirty percent of the stock.”

Comperet: “You received a written assignment of fifty-five percent of the stock from Dr. Rife, didn’t you?”

Hoyland: “Yes.”

Comperet: “Was this before or after you discussed business with Mr. Hutchinson?”

Hoyland: “I think that it was put in writing after.”

Comperet: “Do you recall a conversation at which yourself and Rife and Mr. Gordon Gray were present which took place at Rife’s laboratory at which you demanded that the interest in the invention be assigned to you?”

Hoyland: “No, that was from the other side.”

Comperet: “At that time did Mr. Gray suggest that you receive twenty percent interest?”

Hoyland: “No sir. Dr. Rife and I had always had the understanding that we share evenly, as I had done all the development work.”

Comperet: “What do you mean by that?”

Hoyland: “I had done all the building and designing of the machines other than the one original machine that he had in his laboratory. I brought that to a state where it could be carried around.”

Comperet: “Did Rife then say that he would give you fifty-five percent?”

Hoyland: “No, he said sixty percent, and that was reduced to fifty-five.”

Comperet: “Did you suggest that reduction?”

Hoyland: “I told him that I would accept fifty-five percent.”

Comperet: “He then put that in writing, didn’t he?”

Hoyland: “Yes.”

Comperet: “If you have that written document, will you produce it please?”

Hoyland did so and the document was identified. (Copy was substituted for original Rife letter for court exhibit).

Sapiro: “In whose handwriting is that written?”

Hoyland: “Dr. Rife’s.”

Sapiro: “When did Mr. Hutchinson receive the assign of an interest of the invention?”

Hoyland: “I think about the time Dr. Rife wrote it.”

Judge Kelly: “What interest was Hutchinson given?”

Hoyland: “One third.”

Judge Kelly: “How could that be?”

Hoyland: “Originally there was just Rife and myself. Fifty-five percent and forty-five percent. That was later divided, thirty to Rife, thirty-three and a third to Hutchinson and thirty-six and two-thirds to me.”

Comperet: “(A copy is substituted for the original of this exhibit). “I show you a document hand written, is that the one by which Hutchinson’s one third is conveyed to him?”

Hoyland: “Yes.”

Comperet: “At that date, April 30th, had you yet reached a definite agreement with regard to licensing Beam Ray to manufacture machines?”

Hoyland: “I don’t remember when we started to make drafts.”

Comperet: “When you did make an agreement you understood that the work would be divided – Dr. Rife to do laboratory work, you to supervise the making of the machines and Hutchinson to do the business end, including sales?”

Hoyland: “Yes.”

Comperet: “At that time there was no money on hand to start the business?”

Hoyland: “There was none. It was Mr. Hutchinson’s business to get the money.”

Comperet: “Did you have Carson, the man who came in to work with you, agree that he would not tell anyone the secrets of the machine?”

Hoyland: “I told him, in confidence, the workings of the machines, and I made him promise not to tell anyone.”

Comperet: “Carson remained as long as you remained technical director?”

Hoyland: “Yes.”

Comperet: “You know that Carson refused to give the corporation any information concerning the making of the machine?”

Hoyland: “Yes.”

Judge Kelly: “Is this machine patented?”

Hoyland: “It is impossible to patent it. You have to be very careful who you give information to.”

Comperet: “You said that Mr. Steiner was attorney for the British?”

Hoyland: “That’s my understanding.”

Comperet: “Wasn’t he also attorney for the corporation or for yourself?”

Hoyland: “No.”

Comperet: “Where was the agreement between the three owners and corporation prepared?”

Hoyland: “Mrs. Willman typed it out.”

Judge Kelly: “Did she construct it also?”

Hoyland: “No, I don’t know who constructed it.”

Comperet: “You yourself made some changes in it?”

Hoyland: “I made some suggestions, but I don’t know whether it was changed after that or not.”

Comperet: “Didn’t you know that most of the final draft was prepared in the office of Sloan and Steiner?”

Hoyland: “No, I was in the shop most of the time, not in the office.”

Comperet: “You read that contract before you signed it?”

Hoyland: “I presume I did. Mr. Hutchinson was supposed to be taking care of all the contracts at the time.”

Comperet: “I show you this contract. Do you see the names Sloan and Steiner on this paper? Does that refresh your memory?”

Hoyland: “No it doesn’t.”

Comperet: “Every bosy and cook and a hand in drawing up that contract?”

Hoyland: “Probably.”

Comperet: “During the time that the negotiations went on between you and Rife and Hutchinson for the taking over of the manufacturing end of this thing by the corporation you were informed, were you not, of how the stock in the corporation was to be divided?”

Hoyland: “I was informed that Dr. Rife and I were to receive thirty percent between us.”

Comperet: “You were informed of other stock arrangements?”

Hoyland: “He wrote it down and then destroyed it.”

Comperet: “You knew who they were and what proportion of stock they were to get?”

Hoyland: “I didn’t know who they were, I merely heard the names.”

Recess.

Friday, June 1939, 10 A.M. Hoyland on the stand. Sapiro explained that he has cases to handle in San Francisco and would have to be absent from July 19 to July 26. Judge Kelly said that he was determined to go thoroughly into the case and to give plenty of time to it. He said he was puzzled as to what was the affect of the issuance of the stock, and he said that the case would have to be continued from noon Friday 15, until the 27th. Comperet withdrew Hoyland and put Olmstead on the stand.

Comperet: “What is your occupation?”

Olmstead: “I practice law.”

Comperet: “Were you one of the original corporators of the Beam Ray?”

Olmstead: “I was.”

Comperet: “Are you still a shareholder in that corporation?”

Olmstead: “I am.”

Comperet: “On June 1st, 1937 were you then a shareholder?”

Olmstead: “I was.”

Comperet: “On June 1st did the stockholders hold a special meeting, and if so where?”

Olmstead: “Yes, at Fickerson’s law office in Los Angeles.”

Comperet: “Were directors meetings also held on that day?”

Olmstead: “Yes.”

Comperet: “Were you present at both meetings and can you tell us what took place?”

Olmstead: “Yes, I was told by Fickerson to be in his office by ten. A meeting of the board directors was called then. The minutes of that meeting I presume had been prepared to advance

Olmstead: “An offer was made from Mr. Cullen to transfer to the corporation a contract which was held by Cullen at the time, in relation to services for a correspondence school in aviation. The corporation accepted the contract from Cullen”

Comperet: “What did he ask in return for this contract?”

Olmstead: “The issuance of four thousand nine hundred and ninety seven shares of stock.”

Comperet: “At this meeting was Mr. Cullen’s offer discussed by the directors, and did they taken any action?

Olmstead: “They passed a resolution accepting it.”

Comperet: “What did they do regarding the matter of making an application to the corporate commissioner for a permit?”

Olmstead: “A resolution was passed authorizing Fickerson to prepare an application for a permit to issue shares to Cullen, Hutchinson, and Olmstead.”

Comperet: “Was any further action taken by the directors prior to the close of the meeting?”

Olmstead: “No.”

Comperet: “On the same day was there a stockholders meeting held?”

Olmstead: “Yes, after the other meeting.”

Comperet: “Who were the holders of all of the issued stock of the corporation that day?”

Olmstead: “Cullen, Hutchinson, and myself.”

Comperet: “At the stockholders meeting what business was taken up?”

Olmstead: “A resolution made to increase the number of the board of directors from three to nine.”

Comperet: “After the shareholders voted on this matter did they make any provisions as to how the six additional places on the board were to be filled?”

Olmstead: “I explained how I could not be in San Diego regularly so they decided to fill at least three of the places in San Diego in order to have a forum without my presence.”

Comperet: “Was there any other business?”

Olmstead: “Three new members were elected to the board.”

Comperet: “Going back to the first directors meeting held on that day, after Cullen’s offer of contract in exchange for stock, was there a copy made of the resolution?”

Olmstead: “Yes, a copy was made by the secretary.”

Comperet: “Do you know if an application was made to the corporate commissioner for a permit?”

Olmstead: “Yes, to Mr. Fickerson.”

Comperet showed him a copy of the application and he identified it.

Comperet: “What was done with the original?”

Olmstead: “I expect it was sent to eh corporate commissioner.”

Sapiro: “Did you prepare that application or sign it?”

Olmstead: “I did not.”

Sapiro: “Weren’t there some exhibits attached to the application?”

Olmstead: “I don’t know.”

Sapiro: “Will you read it and see if it doesn’t refer to some exhibits?”

Olmstead: “Yes.”

Sapiro tried to keep document out of exhibits but Judge Kelly ruled it could be admitted.

Comperet: “Did the corporation issue the 4997 shares of stock in accordance with the permit?”

Olmstead: “Yes, they were issued to Cullen, Hutchinson, and myself.”

Judge Kelly: “How many to each?”

Olmstead: “I received six hundred shares. I don’t know about the other three.”

Comperet showed the court how the issuance of the 5000 shares stood after this meeting.

Comperet: “On August 28, 1938, was there a special meeting of the stockholders of Beam Ray in Fresno and were you present?”

Olmstead: “Yes.”

Comperet: “Were the other two there?”

Olmstead: “Yes.”

Comperet: “Were you three the only stockholders in the corporation?”

Olmstead: “Yes.”

Comperet: “At that meeting were the minutes of previous directors and stockholders meetings read?”

Olmstead: “Yes, we read all of the minutes of the meetings of the corporation from its inception.”

Comperet: “Was any resolution made regarding actions and taken previously?”

Olmstead: “Yes, minutes were all validated, a unanimous vote passed this resolution.”

Comperet then showed Olmstead the minutes of this meeting and Olmstead identified the resolution as one taken at that time.

Comperet: “I show you a document which purports to be an application for permission to transfer stock to various persons including Dr. Rife, Mrs. Henderson, etc. Do you recall this document and did you sign the original?”

Olmstead: “Yes I did.”

Comperet: “I call your attention to page four, which shows the transfers which you propose to make, one from yourself to Mrs. Cullen, another to Edwards. Did you do this?”

Olmstead: “Yes.”

Comperet: “Did you receive any payment for doing so?”

Olmstead: “I did not.”

Olmstead: “That’s right.”

Morning Recess.

Court resumes. Sapiro takes the witness.

Sapiro: “I show you minutes of the meeting of June 1st, 1937. Will you look at the top right hand corner and read the figures that are there and state what it is under the figures?”

Olmstead: “It says 22 in a circle, and under it CRH. Those are Hutchinson’s initials.”

Sapiro: “Is that his hand writing?”

Olmstead: “I couldn’t say.”

Olmstead then read from the top of the pages of 22 to 27, all initialed by Hutchinson.

Sapiro: “Does it say in line five of the first paragraph that that meeting took place at 10 A.M., June 1st, 1937?”

Olmstead: “Yes.”

Sapiro: “Was there a written notice sent out for that meeting?”

Olmstead: “I was called personally by Fickerson.”

Sapiro: “Were all the minutes of the meetings prepared in advance?”

Olmstead: “Yes.”

Sapiro: “Did you advise this?”

Olmstead: “I had nothing to do with it at all.”

Sapiro then produced minutes, referring to the fact that the meeting was called at 11 A.M.

Sapiro: “Is there anything in the minutes that says anything about the meeting adjourning and then reconvening?”

Olmstead: “No.”

Sapiro: “Did you read these minutes? You signed this affidavit that you had read all of the minutes and that they were correct?”

Olmstead: “Yes.”

Sapiro: “You were present at both meetings, that is, the stockholders and the board of directors?”

Olmstead: “Yes.”

Sapiro: “This affidavit was filed after the complaint in this action. Had you read the complaint?”

Olmstead: “I read parts of it, not all.”

Sapiro: “You knew that it referred to meetings of stockholders, etc.?”

Olmstead: “Yes.”

Sapiro: “You knew that this portion f your affidavit was definitely aimed at something that the Plaintiff was trying to prove?”

Olmstead: “Yes.”

Sapiro: “Here the minutes of the meeting on August 28 in Fresno prepared ahead?”

Olmstead: “I presume so.”

Sapiro: “Who was present at that meeting?”

Olmstead: “Hutchinson, Cullen, and myself.”

Sapiro: “And you signed the affidavit you made no exceptions, you were present at all meetings?”

Olmstead: “Yes.”

Sapiro then tried to point out that Olmstead claimed that he read the minutes carefully but that his testimony does not agree with the minutes. Olmstead replied heatedly that he merely said that the minutes reflected the procedure of the meetings.

Sapiro: “Did Hutchinson ever tell you about certain shares of stock that would be given to Mr. Winter?”

Olmstead: “Not that I recall.”

Sapiro: “Did you ever ask why 500 shares were being given to Winters?”

Olmstead: “I don’t recall that I ever asked that.”

Sapiro: “Did you ever try to find out about it?”

Olmstead: “I recall that Mr. Winter was supposed to have given help to Mr. Hutchinson.”

Sapiro: “Was anything said about Mr. Winter having given Mr. Hutchinson money for the stock?”

Olmstead: “No.”

Sapiro: “Did you ask anything at all about the various names on that list of people who were supposed to get stock?”

Olmstead: “No.”

Sapiro: “You took Mr. Hutchinson’s word that the money was merely a loan?”

Olmstead: “Yes.”

Sapiro: “Is it a fact that the list of proposed transfers were sent out in full at this meeting in Fresno?”

Olmstead: “Yes, as I recall it.”

Sapiro: “Did you make any inquiry about these people at all?”

Olmstead: “No.”

Sapiro: “Did you ask when Mr. Hutchinson had received money from Mr. Edwards?”

Olmstead: “No, it was generally understood that these people rendered services. I don’t know what

Olmstead: “No.”

Sapiro: “You were not curious about the distinctions?”

Olmstead: “No.”

Sapiro: “Did Mr. Hutchinson say anything about these people?”

Olmstead: “No, I released some of my shares and In think that some of them went to Winters.”

Sapiro: “Was this at Mr. Hutchinson’s suggestion?”

Olmstead: “Yes.”

Sapiro: “Did you know that most of these people had given Hutchinson money in varying amounts?”

Olmstead: “No.”

Sapiro: “You didn’t even make an investigation? In other words all you did was to sign the minutes that were put before you?”

Olmstead: “No, that is not right.”

Sapiro: “Did you make any changes?”

Olmstead: “No.”

Sapiro: “You knew that Mrs. Willman was not present at this meeting, yet you signed the minutes so saying?”

Olmstead: “Yes, but inadvertently.”

Sapiro: “What inquiries did you make about the financial state of the corporation?”

Olmstead: “I don’t recall that I every raised any.”

Sapiro: “But you are a director, aren’t you?”

Olmstead: “I looked over the statements.”

Sapiro then showed Olmstead an item listed among the assets of the corporation of approximately $51,000.00.

Sapiro: “In the application which you signed following this meeting in Fresno there is a statement to the effect that the Airplane courses were abandoned?”

Olmstead: “They were discontinued, not abandoned.”

Sapiro: “Did you as a director not question the financial statement that set out as an asset that $51,000.00 when you knew that the courses had been discontinued?”

Olmstead: “We still considered it an asset.”

Sapiro: “Did you know that there was another corporation, U.A. Schools in Nevada, set up by Hutchinson and Cullen?”

Olmstead: “No, but that didn’t effect this organization.”

Sapiro: “Did you know anything about it at that meeting?”

Olmstead: “No.”

Sapiro: “Didn’t you as a director inquire what the liabilities were?”

Olmstead: “No.”

Sapiro: “You just signed the minutes as they were given to you?”

Olmstead: “No, I didn’t that’s not right.”

Sapiro: “Yet you don’t know what this liability to UAS was for?”

Olmstead: “No, I know nothing about it at all.”

Sapiro: “Did you do anything about the notes from Hutchinson?”

Olmstead: “We accepted his notice.”

Sapiro: “Do you remember any of the details at all?”

Olmstead: “No.”

Sapiro: “Where did you get information about these notes?”

Olmstead: “From Fickerson and from Hutchinson.”

Sapiro: “You didn’t get any information from Mr. Edwards?”

Olmstead: “I have never met Mr. Edwards except in court.”

Sapiro: “Did you know Mr. Van Wort?”

Olmstead: “Yes.”

Sapiro: “Did he hold an office in the corporation at that time?”

Olmstead: “No.”

Sapiro: “Didn’t you introduce a resolution which included a reference here stated, (showing him the minutes)?”

Olmstead: “Yes.”

Sapiro: “How much of the minutes were read out loud at that meeting?”

Olmstead: “We read all of them.”

Sapiro: “Who did the reading?”

Olmstead: “I did.”

Sapiro: “You and not Mrs. Willman?”

Olmstead: “Not Mrs. Willman.”

Sapiro: “How fast did you read them?”

Olmstead: “I read very fast.”

Sapiro: “Did you read them so that everybody present could hear them?”

Olmstead: “I think so.”

Sapiro then asked Olmstead to read a page of the minutes aloud so that he could time him. Olmstead did, and was checked at two minutes and fifty seconds a page.

Sapiro: Before we go on I want to count the number of pages so that we can compute the time it took to read these minutes. I want to know how much other business besides the reading of the

Sapiro: “Yet it says here that each item was fully discussed.”

Olmstead: “Yes.”

Sapiro: “How much discussion was there on any of these other resolutions?”

Olmstead: “(shouting) I couldn’t tell you!”

Sapiro: “Now Mr. Olmstead, you wouldn’t want me to shout at you, would you?”

Olmstead: “I can take it.”

Sapiro: “Alright, just show me one resolution were there was some discussion.”

Olmstead pointed out and referred to the matter of Hutchinson’s promissory note.

Sapiro: “Well, how much time was devoted to discussion during the meeting?”

Olmstead: “I couldn’t tell you.”

Sapiro: “Would you say one hour in the aggregate?”

Olmstead: “Yes, there was. I would say more than that.”

Sapiro: “You adjourned the meeting at two?”

Olmstead: “I don’t know how long whether it was two, three or four hours.”

Sapiro: “You are therefore changing your testimony?”

The discussion between Sapiro and Olmstead was waxing hot when Judge Kelly interrupted to court to inform them that the case would have to be discontinued until Monday, June 27.

Morning session of June 27th.

A telegram from Olmstead saying that he was delayed but would be in court for the afternoon session, was read. Hoyland took the stand. Comperet interrogating. Comperet showed a paper which had been Hoyland’s possession. It was Henderson’s resignation.

Comperet: “Mr. Hoyland, how did you get this paper?”

Hoyland: “It was put into my hands.”

Comperet: “Do you consider this a technical matter?”

Hoyland: “(No answer).”

Comperet: “Now I call your attention to a letter dated September 5th, 1938, addressed to Beam Ray signed by H.S. Parsons, I quote, ‘I take it that you do not have the actual frequencies used other than the markings on the dial of the oscillator. If you would check your frequencies with a resometer you could have kept them in code and sent them to me in code and this we could have checked the instrument. If you do have the actual frequencies, I should like to have them, or we will have to do much difficult work etc…’ Now, at

that time you knew the actual frequencies for the various diseases which could be treated with this instrument?”

Hoyland: “I did not know all of them as they were only on the dial of the master oscillator.”

Comperet: “Let me see if I understand you, at the time you did not know all the frequencies?”

Hoyland: “I say that I did not know the numerical frequencies, they were all on the dial.”

Comperet: “Who prepared these dials and calibrations?”

Hoyland: “I did.”

Comperet: “Who did you get the information from in order to calibrate these dials?”

Hoyland: “They were taken off the last machine that was built by Dr. Rife. I transferred them from one machine to another.”

Comperet: “You didn’t write them down?”

Hoyland: “No.”

Comperet: “Prior to shipping these frequencies to the British you made some notes on these frequencies?”

Hoyland: “We had two machines here, one was my own personal property and I own most of the material in the other. They were in the shop.”

Comperet: “Therefore, by just going to the dials of the machine in the shop you could have procured the actual frequencies needed by the English. (pointing to Parson’s letter) Did you ever reply to this?”

Hoyland: “Without looking at all the letters I wrote, I couldn’t say.”

Comperet: “I call your attention to another document produced from your custody, being a cablegram from Blewett in London, addressed to Hutchinson. It says, ‘Refer your letter July 18, no letter received, require circuit diagrams and frequencies and parts.’ Message continued to effect that this delay was holding things up and making it very difficult for the English group. How did you get this cablegram?”

Hoyland: “It was turned over to me by the office.”

Comperet: “By whom in the office?”

Hoyland: “By Hutchinson.”

Comperet: “There is a date written on this, who wrote it?”

Hoyland: “I did, it is the date of the cablegram.”

Comperet: “In reply to this did you send them the circuit diagrams and the list of frequencies?”

Hoyland: “I sent them the diagrams.”

Comperet: “When?”

Hoyland: “I would have to look at my letters again.”

Comperet: “Will you do so please.”

Hoyland found a letter and showed it to Comperet.

Comperet: “You have produced here a carbon copy of a letter addressed to Mr. Blewett. Is it a carbon copy of the original written by yourself?”

Hoyland: “I don’t remember if I typed it or if Mr. Lyle did.”

Comperet: “Was it typed at your dictation and was the original letter sent by you to Mr. Blewett?”

Hutchinson being out of town at the time I opened it presuming it to be company business’. (The letter also states)…’regarding frequencies of the machine, you will remember me telling you that the frequencies used are not the same ones on the Rife machine. They were in the upper bands. I am sending you schematics etc. (N.B. – The rest of the letter was read so rapidly that I could not take it down, but it referred to the code and there were vague and secretive references to what I told you etc.).

Comperet: “That letter contained all the information you ever sent to the British and when you state that you sent them certain information concerning the frequencies you were referring to this letter, weren’t you?”

Hoyland: “Yes.”

Comperet: “During this period of the later summer and the fall of 1938, were you devoting your full time to your work as technical advisor to the company?”

Hoyland: “During that period I was supervising the building of the machines. I was taking care of the buying of the parts and helping to sell the machines.”

Comperet: “You were on duty with the company for your whole time?”

Hoyland: “Yes, it was a full time job.”

Comperet: “That work was done here in San Diego, except for a few trips to Los Angeles?”

Hoyland: “Yes, and except for a trip or two to Loma Linda.”

Comperet: “I call your attention to another letter which you produced in court this morning dated October 25, 1938, addressed to Beam Ray signed H.S. Parsons. I will quote you a few bits from this, ‘Referring to my letter to you of last week, I have not been able to do much more in Straightening out various items I covered in that letter. I have been expecting a letter from Hoyland which would help us to use the one lab machine which seems to work, but we need further information before I can get the treatment machine operating. There follows a reference to a short circuit and that the original lab machine was quite useless’, it continues, ‘How many we hope to duplicate these machines unless we have the specifications? It looks as though Mr. Hoyland is the only one to write from Beam Ray and he seems to be away so much it is hard to get answers to letters or cablegrams.’ Did you reply to that letter, Mr. Hoyland?”

Hoyland: “I replied to parts of it.”

Comperet: “How did you get this letter?”

Hoyland: “It was among the letters I got before I went to New York to represent the company in a meeting with Dr. Gonin.”

Comperet: “You never returned them to the company later?”

Hoyland: “I put them away in my file and they remained there.”

Judge Kelly: “Do you know if any other members of the organization saw this letter from Mr. Parsons?”

Hoyland: “Yes, it was given to me by the secretary of the corporation.”

Comperet: “You said you believed you had a copy of your letter in reply to certain portions of this letter of Mr. Parsons, will you produce it?”

Hoyland was not able to find the letter.

Comperet: “Here is another cablegram addressed to Beam Ray which was also in your possession dated January 16, 1939, it states in effect, ‘confirm letters and cables// you broke agreements outright.’ How did this cable come into your possession?”

Hoyland: “It was turned over to me by Mr. Edwards.”

Comperet: “At that time did Mr. Edwards say to you that all the directors wished to sign the pending agreements with the English?”

Hoyland: “It had been talked over between Mr. Edwards, Mr. Sapiro, and myself. We looked over the new amended contract and decided that it should not be signed. MR. Sapiro talked it over with us and suggested it best that it be brought up at the directors meeting, which it was.”

Comperet: “Didn’t you say to Mr. Edwards that you would not permit the signing of this agreement by the company?”

Hoyland: “Yes.”

Comperet: “Until you made this statement to Mr. Edwards he had stated that he was in favor of signing it up to that time.”

Hoyland: “I don’t think that he ever said that he was willing to sign it, there was quite a lot of talk between us regarding that contract.”

Comperet: “Didn’t you state definitely that the contract should be signed?

Hoyland: “No, I pointed out some points that I didn’t thing were right.”

Comperet: “Didn’t he still think it should be signed?”

Hoyland: “No.”

Comperet: “Are you positive?”

Hoyland: “As positive as I can be.”

Comperet: “Your refusal to sign was on advice from Mr. Sapiro?”

Hoyland: “Yes.”

Comperet: “I’ll show you another cable among those produced by yourself, this is dated November 24th, 1938, addresses Hutchinson, Beam Ray signed by Gonin: ‘Without prejudice must not pay checks since payment under original contract is to company not individuals'’ How did this come into your possession?"”

Hoyland: “Mr. Hutchinson gave it to me in his office.”

Comperet: “This opening statement about checks, were these checks referred to given to you at the time the amendment was negotiated in New York?”

Hoyland: “Yes.”

Comperet: “An additional payment was made at the time of the new agreement, and certain of these checks were made payable to yourself and to each of the other owners?”

Hoyland: “One to Mr. Hutchinson, one to myself, and the balance to the company.”

Comperet: “Payment was later stopped on these checks and a new payment was made for the same total amount through the company?”

Hoyland: “Yes.”

Recess until 2 P.M.

Afternoon session June 27th, 1939. Judge Kelly asked to have Olmstead on the stand for cross-examination by Sapiro.

Sapiro: “I show the minutes of the meeting of stockholders of August 28, 1938. When did you sign these?”

Olmstead: “I signed them in the P.M. and left Fresno about 6 P.M..”

Sapiro: “According to these minutes there were two transfers to be made out of your stock, 447 shares to Beth Willman and 53 shares to Charles Winter. What consideration did you receive from Beth Willman?”

Olmstead: “None.”

Sapiro: “Did Mr. Hutchinson speak to you about this transfer?”

Olmstead: “Yes.”

Sapiro: “Was there any consideration from anyone?”

Olmstead: “No.”

Sapiro: “And you did all this at the request of Mr. Hutchinson?”

Olmstead: “Yes.”

Sapiro: You had one hundred and one shares left after the transfer?”

Olmstead: “Yes.”

Sapiro: “Were you present at a meeting of the board of directors May 7, 1938?”

Olmstead: “I am not sure. I would like to refresh my memory. (After checking the minutes) No, I was not present.”

Sapiro: “When did you sign these minutes?”

Olmstead: “I can’t tell you that, I made a waiver and then signed them, I can’t remember where I signed them. Possibly in Los Angeles.”

Sapiro: “Would the color of the ink help you to remember?”

Olmstead: “No, I used brown ink most of the time in my fountain pen.”

Sapiro then pointed out that Olmstead used his brown ink to sign all of the minutes. Comperet then took the witness.

Comperet: “Did you sign the minutes of some of the meetings at the office of Mr. Fickerson in Los Angeles?”

Olmstead: “Yes.”

Judge Kelly: “You had six hundred shares Mr. Olmstead and you transferred 499?”

Olmstead: “I guess so, I have 101 now, I transferred 447 to Beth Willman and the balance to Winters.”

Judge Kelly: “Did you understand that either of these parties would put up some money in return for the stock?”

Olmstead: “Not that I recall. I had confidence in Mr. Hutchinson, I was travelling in the northern part of the state and was not in touch with the organization. I had to depend on Hutchinson and Fickerson, then, realizing that I couldn’t be of any service I resigned.”

Judge Kelly: “Had these people rendered some service to the corporation at the time you made the transfer?”

Olmstead: “That was my understanding.”

Judge Kelly: “Did you have conversation with anyone before this transfer took place?”

Olmstead: “Yes, Mr. Hutchinson told me about what they had been doing.”

Judge Kelly: “When you received your shares, did you understand that you were receiving them for services rendered?”

Olmstead: “Yes.”

Judge Kelly: “Did you know that others had received stock and were then transferring it out to others who were giving services? Was this the plan of the organization?”

Olmstead: “Yes.”

Judge Kelly: “Was there any conversation by the members of the board of directors regarding these transfers at any time?”

Olmstead: “Yes, there were discussions about it.”

Judge Kelly: “Did you examine the permit from the corporate commissioner at that time?”

Olmstead: “I don’t believe I did.”

Judge Kelly: “Was there anything said about Mr. Hutchinson as to the limitations by the corporate commissioner as regards the transfer of stock , was there anything said about the fact that you could not sell the stock but that you could give it away?”

Olmstead: “That was the understanding at the time.”

Judge Kelly: “How did you arrive at that conclusion?”

Olmstead: “I don’t know, I think I just arrived at it.”

Judge Kelly: “When was the last stockholder’s meeting held?”

Olmstead: “I’d have to see the books.”

Judge Kelly: “Well about how long, a year ago or more?”

Olmstead: “I think it was in August last year.”

Judge Kelly: “There has been no meeting since then?”

Olmstead: “Not that I know of.”

Olmstead was excused by Judge Kelly, and Hoyland took the stand. Comperet questions Hoyland.

Comperet: “I notice on these cablegrams saying that if these conditions are agreed upon etc., there is a pencilled note saying terms acceptable.”

Comperet: “When you say ‘we’, who do you mean? Who sent the cable?”

Hoyland: “Mr. Hutchinson and I.”

Comperet: “Have you a copy of it?”

Hoyland: “No.”

Comperet: “When you built the first Rife Ray machine, were you informed by Dr. Rife of the frequency range that the machine was required to cover?”

Hoyland: “He talked to me about that and what his machine covered.”

Comperet: “He informed you about it from high to low?”

Hoyland: “No, he didn’t.”

Comperet: “That first machine that you built under your agreement with the University of Southern California was built by you under Rife’s supervision?”

Hoyland: “That’s the way the contract read.”

Comperet: “Did you violate the contract?”

Hoyland: “I was left to build the machine my own way.”

Comperet: “In June of 1935 was when you made an agreement with the (transcript missing words) medical research to build a Rife Ray machine, you did build it soon after that?”

Hoyland: “Yes.”

Comperet: “You had an agreement with them that all work was to be done under Dr. Rife’s direction?”

Hoyland: “That’s what the contract called for.”

Comperet: “Did you do this work without getting the frequencies from Dr. Rife?”

Hoyland: “I calibrated the machine according to the bacteria.”

Comperet: “What specifically did you do that constituted this recalibration?”

Hoyland: “I used a standard oscillator against his machine to see what frequencies he was using.”

Comperet: “He set his machine and you measured his frequencies?”

Hoyland: “Yes.”

Comperet: “Did you make any memorandum of these particular frequencies?”

Hoyland: “Yes, I gave Dr. Johnson and Dr. Rife a list of them.”

Comperet: “Did you ever furnish a list of any of these frequencies to the Beam Ray corporation or any of its officers?”

Hoyland: “No.”

Comperet: “You refused to do this?”

Hoyland: “Yes, I refused. But Mr. Edwards had a sealed letter containing them for some months.”

Comperet: “You had not shown Mr. Edwards that the frequencies were in the envelope, you sealed the paper without showing them to him?”

Hoyland: He asked me to give them to him sealed and I did so.”

Comperet: “When Edwards was talking to you about signing the redraft of the agreement with the British, I call your attention to the fact that the contract has a place for certain (transcript missing words) to be filled in with frequencies and the design of the machine. When you were discussing this didn’t Mr. Edwards then say that he wanted you to give the corporation the necessary information to send on to the English?”

Hoyland: “No, he did not.”

Comperet: “Are you positive of that?”

Hoyland: “Yes, I am positive.”

Comperet: “This letter in which you say you have the frequencies was sealed by you without being shown to any of the officers of the company?”

Hoyland: “Yes.”

Comperet: “You told Edwards that he was not to open that envelope during your lifetime?”

Hoyland: “That was the understanding, that if anything happened to me he could open it.”

Comperet: “Didn’t you tell Edwards that in the event of your death the envelope should be delivered to your attorney and that he would then give him the frequencies?”

Hoyland: “No, I had two papers.”

Comperet: “Was your attorney Mr. Sapiro at the time?”

Hoyland: “No, not at that time.”

Comperet: “I understood that you say that the frequencies used in the machines put out by the corporation were not set to the same frequencies as Dr. Rife’s machine.”

Hoyland: “That is correct.”

Comperet: “Did you inform the board of directors at Beam Ray that the machine you built was not the same as Dr. Rife’s?”

Hoyland: “I had spoken to them about it.”

Comperet: “Who did you tell about this?”

Hoyland: “Mr. Hutchinson, on our way to New York.”

Comperet: “Who else did you explain it to?”

Hoyland: “To Mr. Edwards.”

Comperet: “When and where?”

Hoyland: “At his house one evening.”

Comperet: “When, what evening?”

Hoyland: “I can’t remember when.”

Comperet: “About that time were you still a member of the board of directors?”

Hoyland: “Yes.”

Comperet: “When did you become a director of Beam Ray Inc.?”

Hoyland: “In September of 1938, I believe.”

Comperet: “You resigned when?”

(missing words)

Comperet: “Then it was during the period between September and November that you told Edwards at his home that the machines you were building were not putting out the same frequencies as Dr. Rife’s machines?”

Hoyland: “Yes.”

Comperet: “How did you explain that?”

Hoyland: “In the summer of 1936 I designed a new machine, or rather I checked it there at the lab, I had designed it in Pasadena, and we tested it out then and the frequencies were not the same as on Dr. Rife’s machine.”

Comperet: “Did you tell him how great the difference was?”

Hoyland: “I explained that there was quite a fundamental difference.”

Comperet: “Who else on the board of directors did you explain this to?”

Hoyland: “Mr. Henderson, in the late summer of 1938.”

Comperet: “Anyone else?”

Hoyland: “I don’t think so.”

Comperet: “When you were first informed that the members of this British group were coming to San Diego to discuss a contract?”

Hoyland: “When Dr. Couche returned from England in the spring of 1938, about a month before the British arrived.”

Comperet: “During the period from that time until the British arrived there was considerable discussion, was there not, regarding the desirability of having a corporation to deal with them?”

Hoyland: “We were looking for man to manage the affairs.”

Comperet: “And that lead to Mr. Hutchinson being procured for that purpose?”

Hoyland: “Yes.”

Comperet: “Wasn’t there also talk about forming a corporation?”

Hoyland: Yes.”

Comperet: “And that manufacturing rights would be given?”

Hoyland: “They were to be given a license to do that.”

Comperet: “You were not selling the invention?”

Hoyland: “No.”

Comperet: “It was decided that the corporation would make the final deal with the British whereby they would receive the license to manufacture, isn’t that so?”

Hoyland: “That went through the company, yes. (then he said)…but that is not correct, the company had to have unanimous consent to he owners.”

Comperet: “Did you read either of the two original contracts with the British, those of June 4th or 5th?”

Hoyland: “No, sir, I did not.”

Comperet: “You were one of the owners at the time, were you not?”

Hoyland: “I was.”

Comperet: “I believe you said that you read the contracts before they were finally executed and you say that these contracts were signed only by the Beam Ray corporation and the British?”

Hoyland: “Yes.”

Comperet: “Wasn’t it the understanding that you had prior to that time that the corporation would be the one that would sign the contract after it had been agreed up on finally?"”

Hoyland: “That they would sing it, yes, but that the owners had to agree to the contract.”

Comperet: “Did you understand that the corporation could not convey to the British any greater rights than the corporation already had?”

Hoyland: “That’s right.”

Comperet: “You said that you realized at the time that the British wanted an exclusive license to manufacture and distribute the machines with certain territorial rights?”

Hoyland: “Yes.”

Comperet: “But you yourself signed no contract with the British in June 1938?”

Hoyland: “No.”

Comperet: “None of the other owners of the Rife Ray machine signed that, did they?”

Hoyland: “No.”

Comperet: “Before the negotiations with the British began, negotiations were under way between the owners and the Beam Ray corporation, regarding what kind of license was to be given to the corporation, weren’t they?”

Hoyland: “Yes.”

Comperet: “Who took part in these discussions?”

Hoyland: “Hutchinson and I and Dr. Rife, sometimes.”

Comperet: “Anyone else?”

Hoyland: “I think Mr. Henderson.”

Comperet: “Didn’t Mrs. Willman, the secretary, type out several agreements?”

Hoyland: I don’t think several.”

Comperet: “How many then?”

Hoyland: I don’t think more that two were made.”

Comperet: “She typed these?”

Hoyland: “I couldn’t say whether she did or didn’t.”

Comperet: “Are you sure there were only two primary drafts before it was signed?”

Hoyland: “I can’t remember any more.”

Comperet: “The final one was written in the office of Steiner and after you read this weren’t certain changes made and weren’t these changes rewritten by Mrs. Willman?”

Hoyland: “I don’t remember.”

Comperet: “There were a number of talks about the terms of the license that was to be given to the corporation?”

Hoyland: “Yes.”

Comperet: “Was it not stated that the license should be an exclusive one?”

Hoyland: “No sir.”

Comperet: “That was not discussed at any of these conferences?”

Hoyland: “That was never discussed at any time.”

Comperet: “You mean that at none of those discussions among you, Rife and Hutchinson was there never any talk of Beam Ray corporation receiving an exclusive license?”

Hoyland: “There never was.”

Comperet: “Was that discussed when Henderson and Mrs. Willman took part?”

Hoyland: “No.”

Comperet: “At the time of the discussions of the terms you knew that Hutchinson was a member of the board of directors of the company and you knew that he had a double position in the talks as one of the three owners and also one of the directors of the company?”

Hoyland: “It seams that I realized it.”

Comperet: “Was anything said among the owners to the effect that the company should be given not and exclusive but that it should be merely one of many companies given a license?”

Hoyland: “Mr. Hutchinson and I discussed this, yes.”

Comperet: “Who else?”

Hoyland: “Just the two of us.”

Judge Kelly: ‘Did you intend that the corporation should advertise the machine widely and did you understand that if other corporations were formed to manufacture these machines they would get the advantage of the advertising of this corporation?”

Hoyland: “I don’t think we ever thought of that.”

Comperet: “Weren’t you leaving it largely up to Mr. Hutchinson to take care of the details of licensing?”

Hoyland: “Yes, he was the manager for the owners.”

Comperet: “Then it was your intention that other companies would be licensed to compete with the Beam Ray company in the manufacturing of this machine?”

Hoyland: “That is correct.”

Comperet: “Did you inform Dr. Rife that you meant to license others?”

Hoyland: “I don’t know.”

Comperet: “You did however, tell Mr. Hutchinson that that was your intention?”

Hoyland: “He brought it up the first time himself. We spoke of it often.”

Comperet: “Were these discussions prior to the final signing of the contract with the Beam Ray corporation?”

Hoyland: “Yes.”

Comperet: “Did you inform any other officers of the corporation that you intended to license others to compete with the Beam Ray?”

Hoyland: “I don’t remember.”

Comperet: “Did you say that you understood fully that the only one signing the agreement with the British granting them a license was the company and you also understand that the British was to receive an exclusive license?”

Hoyland: “Yes.”

Comperet: “Yet you also understand that Beam Ray could not give this license to the British because they didn’t have an exclusive license themselves?”

Hoyland: “They were acting for the owners and given a share in what we got out of the British.”

Comperet: “Will you read the question again please.”

Judge Kelly: “Did you understand that the corporation was acting as an agent?”

Hoyland: “Yes.”

Judge Kelly: “Did Dr. Rife authorize the corporation to act as his agent?”

Hoyland: “He authorized Hutchinson to act for him.”

Judge Kelly: “Did you understand when the British signed that contract that they thought they were getting an exclusive license?”

Hoyland: “Yes, getting it through the owners.”

Comperet: “When you read the agreement between Beam Ray and the British you say that it doesn’t say a word about the corporation making an agreement acting for the owners.”

Hoyland: “No, it doesn’t specify it.”

Comperet: “In November when you signed a letter changing earlier agreements you and Mr. Hutchinson signed as authorized representatives of Beam Ray corporation, you were acting under authority you got from the corp?”

Hoyland: “Yes.”

Comperet: “You understood that you needed that written authorization from the corporation in order to change the contract?”

Hoyland: “We took it out but we never used it.”

Comperet: “If Dr. Gonin had wanted to see that written authorization you would have to have shown it to him?”

Hoyland: “Yes.”

Comperet: “You have that paper from the corporation on you possession now?”

Hoyland: “If I had it, it would be in those letters I gave you today.”

Comperet said it was not among those papers.

Comperet: “You understood anyway that you were acting under that authorization?”

(missing words)

Comperet: “I show you here a copy of the resolution of the board of directors dated November 11, 1938. This was the authorization for Hutchinson and Hoyland to represent the corporation in New York?”

Hoyland identified the document.

Judge Kelly: “Who were the owners at the time this was signed?”

Hoyland: “The same three. Rife, Hutchinson, and myself.”

Judge Kelly: “Did you understand that you were acting as an agent for the corporation and on behalf of yourself?"

Hoyland: “Yes sir.”

Judge Kelly: “Was there ever any authorization of any agent by Dr. Rife?”

Hoyland: “I talked the matter over with Dr. Rife the day before we left for New York and he said anything you and Hutchinson decide will be agreeable to me.”

Judge Kelly: “However there was no written authorization from Rife?”

Hoyland: “No.”

Sapiro: “I think there is one, it hasn’t been introduced yet.”

Judge Kelly insisted that he wanted to see any written authorization from Dr. Rife. Comperet showed a paper signed by Rife giving Hutchinson full authority to act in the owner’s behalf. Judge Kelly declared that this paper did not go so far as to authorize the dealings with the British group. Comperet puts a question.

Comperet: “Mr. Hoyland, you became associated with Beam Ray while it was still U.P.I., around the first part of May 1938?”

Hoyland: “Yes, April or the first part of May.”

Comperet: “You went at frequent intervals to the company’s offices?”

Hoyland: “Yes, I went every day.”

Comperet: “You attended directors meetings before you became a member of the board?”

Hoyland: “Yes.”

Comperet: “They were held around once or twice a month and you attended practically all the meetings until you went to New York?”

Hoyland: “Yes.”

Comperet: “You continued to attend these meetings until sometime in January of this year?”

Hoyland: “I was at one meeting in December to discuss expense accounts for the New York trip.”

Comperet: “You were also at one directors meeting in January?”

Hoyland: “No.”

Comperet: “You read the minute book of the corporation?”

Hoyland: “Not until I became a director.”

Comperet: “Are you sure of this.”

Hoyland: “Yes, I was never allowed to get at it.”

Comperet: “And you desired to see it?”

Hoyland: “It was a very carefully kept out of my way. After I was a director I only read the minutes of the meetings as they took place.”

Comperet: “You read and signed them in a good many instances?”

Hoyland: “I think I signed one.”

Comperet: “Did you read the minutes of meetings held prior to your becoming a member of the board?”

Hoyland: “No sir.”

Comperet: You were present at the directors meeting at which you were elected?”

Hoyland: “After I had been elected, yes.”

Comperet: “After this you made a motion to create a position of sales manager?”

Hoyland: “I know that the position was created, but I am not sure I made the motion.”

Comperet showed him the minutes of that meeting calling his attention to the fact that Cullen called the meeting to order and reference to items including Hoyland making the motion to create the position of sales manager.

Hoyland: “Yes, somebody had to make the motion so I made it.”

Comperet: “When was the first time that you ever saw the minutes to any meeting of the board of directors prior to the meeting at which you were elected?”

Hoyland: “In January of this year.”

Comperet: “”Not before?”

Hoyland: “No sir.”

Comperet: “When you saw the minutes of the meetings which you had attended as a director, were they in the minute book?”

Hoyland: “I am not sure. I think so.”

Comperet: “Why didn’t you look back at some of the minutes of the former meetings?”

Hoyland: “They were just handed to me to sign and I signed them.”

Comperet: “You were in the office of the company many times, didn’t you ask to see these minutes?”

Hoyland: “No.”

Comperet: “You state in your complaint that the rights of the corporation under its contract with the owners have been challenged. By that you mean the company’s claim that it has an exclusive license to manufacture these machines?”

Hoyland: “Yes.”

Comperet: “This refers also to the company having conferred an exclusive license to the British, doesn’t it?”

Hoyland: “That’s right.”

(missing words)

Sapiro objected but Judge Kelly overruled him.

Hoyland: “This was talked over with Dr. Rife in his lab at the end of December. He was in accord with that I was doing at that time, as regards this particular item.”

Comperet said that is all at this time. Sapiro took the witness.

Sapiro: “Do you remember how long a time you and any others worked in making these four machines for the British?”

Hoyland: “We started on the fourth of June and they were shipped in August, we worked about six weeks.”

Sapiro: “Were the clinical machines the same as were made for Dr. Hamer?”

Hoyland: “Yes.”

Sapiro: “Was that the same as the machine used on Mrs. Henderson?”

Hoyland: “No, but the same type.”

Sapiro: “Was it the same as the machine the British saw when they were here?”

Hoyland: “Yes.”

Sapiro: “You said that an expert could wire the machines in one day, what did you mean by that?”

Hoyland: “That referred to if we were doing mass production.”

Sapiro then questioned Hoyland about the actual making of the machines and tried to show that Hoyland made the price of production up and that Hutchinson agreed with this figure. Sapiro showed Hoyland a paper dated July 22, 1938, and he asked him if he had seen the paper before. It was a copy of a letter to Dr. Gonin, signed by Hutchinson. Hoyland recognized it.

Sapiro: “Was Hutchinson then manager for the company?”

Hoyland: “Yes.”

Judge Kelly read the letter over Comperet’s objection and admitted as evidence.

Sapiro: “The figure you gave the British for the cost of the four machines was a fair figure based on actual costs of producing these machines?”

Hoyland: “Yes.”

Sapiro then read the minutes of the meeting of the board resolving that Hoyland should draw up a letter in reply to a letter from the British.

Sapiro: “Did you write such a letter?”

Hoyland: “Yes.”

Sapiro: “I show you a copy of the letter, is this the letter and was the original signed by you?”

Hoyland: “Yes.”

Sapiro then read from the letter to the effect that coded frequencies had been sent to the British.

Sapiro: “Did you present copies of this letter to the members of the board?”

Hoyland: “Yes.”

Sapiro: “Did they all approve of it?”

Hoyland: “They all agreed that it was a good letter.”

Sapiro: “Did anyone complain about the contents of the other letters?”

Hoyland: “No.”

Sapiro: “Did you have a lot of correspondence with the British?”

Hoyland: “I sent quite a lot of letters to them.”

Sapiro called upon Hoyland to identify copies of letters sent by Hoyland to the British. He did so and these were then admitted as evidence. One of these letters referred to an enclosure showing Parsons how to operate a Rife machine, another letter referred to the fact that all the friction had been smoothed out in the company and they were doing a fine business, that Lyle had taken over Hutchinson’s place after his resignation and that everything was going along beautifully. Judge Kelly remarked, ‘They were a little bit optimistic weren’t they’. Another letter referred to a list of schematics and changes in the personal of the company.

Court adjourned until Wednesday, 10 A.M.

Wednesday June 28, 1939. Hoyland on the stand.

Sapiro introduced more letters written by Hoyland to the British. These had to do with equipment and technical matters. One dated August 6th contained a list of parts shipped. And August 27th, letter from Hoyland to Blewett that Referred to changes in frequencies eliminating number five plug. Letter of September 9th, referred to Seventh Day Adventists, letter September 23, general remarks about business. Letter 24, to Parsons, explanation of frequencies. Letter August 29th Hutchinson, Hoyland, and Beth Willman, signed by Dr. Couche. Comperet objected on grounds that the Couche letter was hearsay, and Judge Kelly sustained the objection. Sapiro tried to introduce a letter to Couche from Hutchinson. Comperet objected again on the same grounds and was sustained by Judge Kelly, who declared that he did not consider Dr. Couche a part of the litigation. A letter from Blewett was admitted in which he said that he was delighted to hear that Hoyland was holding a controlling interest, as he was worried when he got letters from people he didn’t know.

Sapiro: “Did you know Mr. Blewett when he was here with the British group?”

Hoyland: “Yes.”

Sapiro: “Was anyone besides you writing to Dr. Blewett?”

Hoyland: “Yes, Hutchinson, Mrs. Willman Dr. Rife.”

Sapiro: “How did you know this?”

(missing words)

Hoyland: “Yes, they did.”

Sapiro: “The original of the document of adjustment of interest to Hutchinson dated April 30, 1938, you said that it was in your hand writing, was that copied by you from something and if so from what?”

Hoyland: “From a typewritten sheet that had been prepared by Mr. Hutchinson.”

Sapiro: “Did you make any change in the document when you copied it?”

Hoyland: “Yes, I changed one line.”

Sapiro: “What was the line?”

Comperet objected and was sustained but Judge Kelly allowed Hoyland to point out the line, that he was trying to show that Hutchinson attempted to dominate the other two owners, (Hoyland and Rife). But Judge Kelly did not consider this line of evidence and would not admit it.

Sapiro: “You met Dr. Gonin in New York about November 17, did you discuss with him at that time all the other matters that he had been inquiring about?”

Hoyland: “I discussed all the questions that he brought up about technical things.”

Sapiro: Was Mr. Hutchinson present at these meetings?”

Hoyland: “Yes.”

Sapiro: “Was Dr. Gonin satisfied with the information and did he say so in the presence of Mr. Hutchinson?”

Hoyland: “Yes.”

Sapiro: “Was the new contract that they sent over to the British a restatement of the old contract or did it differ in one particular from the others?”

Comperet objected and was sustained.

Sapiro: “Did you discuss this agreement with Mr. Edwards?”

Hoyland: “Yes.”

Sapiro: “At that time did either of you speak of any objections to that agreement?”

Hoyland: “Yes, we decided to have one of the payments put off until they could get their machines in working order.”

Sapiro: “Were the British in default at that time, and if so how much?”

Hoyland: “Yes, they were, about five thousand dollars.”

Sapiro then brought out that the British were in default of another payment later and that Edwards and Hoyland discussed the matter.

Sapiro: “Were any conclusions expressed by you or Edwards at that time as to what was to be done?”

Hoyland: “Yes, we both made suggestions.”

Sapiro: “Do you remember any made by Edwards?”

Hoyland: “We decided to send the British a cable saying that a new contract should be drawn up and the payments that had already been made by them should be credited to them on the new contract.”

Sapiro: “Did Mr. Edwards prepare such a cablegram?”

Hoyland: “Yes, he did.”

Sapiro: “Who sent it?”

Hoyland: “He asked me to and I did.”

Judge Kelly: “Did you ever get a financial report on the British group?”

Hoyland: “No sir.”

Judge Kelly: “Did you know of anything being done along that line by the officers or directors of the company?”

Hoyland: “No sir.”

Morning recess was called.

Sapiro: “You testified today that Hutchinson ha said that you and Rife would get about thirty percent of the stock of Beam Ray?”

Hoyland: “Yes, sir.”

Sapiro: “Was this an inducement to you to sign up with Beam Ray.”

Hoyland: “Yes.”

Sapiro: “On references to licenses to other corporations did Mr. Hutchinson mention where these would be given?”

Hoyland: “He said there would be one on the east coast, one in the middle west, and so on.”

Sapiro: “Did he say anything about Beam Ray in connection with these other licenses?”

Hoyland: “No.”

Comperet: “At your talk in New York with Gonin, you say that Gonin raised certain technical questions that he wanted answered relating to the design of the machines and the frequencies?”

Hoyland: “Not in respect to the frequencies as the frequencies but I references to the calibrations on his dials.”

Comperet: “And you say that he was fully satisfied with your answers before he left?”

Hoyland: “Yes.”

Comperet: “Did he say that Blewett and Parsons were also satisfied?”

Hoyland: “He didn’t mention them.”

Comperet: “And this all took place in the presence of Mr. Hutchinson?”

Hoyland: “Yes sir.”

(missing words)

Hoyland: “No, we came to an agreement on the royalty.”

Comperet: “Didn’t he state that you had misrepresented the price of the machines to him based on what the parts actually cost?”

Hoyland: “No, he said that the machines could be built in England for one hundred and twenty five dollars.”

Comperet: “I show you a letter from Mr. Blewett to yourself. You also produced in court Plaintiffs exhibits number 24 to 32 inclusive, many of which were letters signed Beam Ray by various persons, how did it happen that the company correspondence was in your possession?”

Hoyland: “What letters are those, may I see them?”

Comperet secures the letters.

Comperet: “I show you exhibit 25 signed for Beam Ray, also exhibit 30 and 31 signed yours very truly Beam Ray Inc., 33, 34, 37. How does it happen that all these letters have been kept in your possession?”

Hoyland: “These are letters that I sent to Dr. Parsons.”

Comperet: “You stated that some of them were not signed by you.”

Hoyland: “Some are signed by Mr. Lyle, he gave them to me.”

Comperet: “Didn’t you think that the corporation should have these letters?”

Hoyland: “The corporation had the copy of some of them.”

Comperet: “You said that the reason you didn’t send the numerical frequencies was that the understanding was that they were not to get them?”

Hoyland: “That’s right.”

Comperet: “Here is a letter signed by you saying, ‘we have exact frequencies and you can get them on the dial quite easily. If you can’t do this let me know and I will send them to you.’ Here is another letter dated November 10, signed Mr. Blewett and delivered personally by Dr. Gonin in New York, you say that during the conferences in New York…”

Hoyland: “Yes, I remember now having read that in New York,”

Comperet: “I call your attention to the following in this letter, ‘I told you in my last letter how disappointed we all were in the delays in receiving the machines and when they came they needed a complete overhaul, many joints were not soldered, then we could not check them properly. The two laboratory machines do not agree, one must be wrong. Which is wrong? In spite of many letters, etc., you people have refused to send the frequencies. We cannot use the machines. You promised us the frequencies in June but we are still waiting in August.’ What reply did you make to this, Mr. Hoyland?”

Hoyland: “I don’t remember.”

Comperet: “As a matter of fact, didn’t you keep very silent about it?”

Judge Kelly: “What was your position with reference to these demands, did you feel that they were entitled to them through the contract?”

Hoyland: “I have them what they had a right to have. I sent them the code long before this letter was received.”

Comperet: “In this letter here Mr. Blewett complains that they had been assured that six hundred dollars was the net cost for the clinical machines and that he found they were made almost entirely in standard parts and that these parts could be bought for much less in the United States, wasn’t Mr. Gonin still complaining that the correct cost figures had never been given his?”

Hoyland: “I don’t know.”

Comperet then read from the letter in which Blewett said that even in England they could buy the parts and assemble them for only a small part of what the Beam Ray charged them and that they were terribly misinformed.

Comperet: “Wasn’t it discussed at the conference with Gonin in New York?”

Hoyland: “No, he merely said that they could manufacture them for that price.”

Comperet: “(reading from the letter again). Why, in spite of repeated requests, have we not had the figures on the cost of the machines?”

Hoyland: “They were sent to them.”

Comperet: “Was not that discussed in your New York conference?”

Hoyland: “I don’t think it was.”

Comperet then read further quoting the English in the effect that in spite of having spent thousands of dollars they still didn’t get the frequencies and the machines still did not operate properly. Hoyland dodged the issue by going on rambling monologue in which he said that they had discussed royalties and had lowered the figures to about ten dollars a machine as the British guaranteed to do the mass production of them.

Noon recess called.

Afternoon session June 28. Dr. Rife called to the stand.

Comperet interrogating. Witness identified as one of the owners of the Rife Ray invention and one of the shareholders in Beam Ray.

Comperet: “Has the Plaintiff ever informed you that the machines that he designed and built for the Beam Ray were not operating on the same frequencies as your own?”

Rife: “They were supposed to be operating on the same…with harmonics.”

Comperet: “Did he ever tell you that there was a fundamental difference?”

Rife: “He said on one or two occasions that there was a difference in harmonics. At the time the deal was pending for an agreement by which the owners were to license Beam Ray to manufacture and lease Rife Ray machines.

Comperet: “Did you take part in some of these talks as to what the terms of the agreement were to be?”

Comperet: “Who took part in these discussions?”

Rife: “Mr. Hoyland, Mr. Hutchinson, I think Mr. Henderson and possibly one of two others whom I recall.”

Comperet: “Was anything said about other companies being granted licenses later?”

Rife: “I do not recall anything.”

Comperet: “What was your understanding of the license given to Beam Ray? Were many other companies to licensed or was Beam Ray to get an exclusive?”

Rife: “I don’t recall that any other company was to get it except the British.”

Judge Kelly: “Did you understand that the Beam Ray was to get an exclusive license?”

Rife: “That was my understanding.”

Comperet: “You understood that Beam Ray was going to give a sub-license to the British having already a license from the owners?”

Rife: “Yes.”

Comperet: “Was it your understanding that he license given to Beam Ray by the owners was a world wide exclusive license?”

Rife: “I can not recall that there was any actual statement made to that effect but I understood it to be so.”

Comperet: “Was that understanding based on conversations had with others concerning the granting of the license?”

Rife: “Yes it was.”

Sapiro then took the witness.

Sapiro: “Do you recall when you first started negotiations with anybody representing Beam Ray?”

Rife: “I think about April or May of last year.”

Sapiro: “Did you ever give an option to Mr. Cullen?”

Rife: “I did not.”

Sapiro: “I show you a signed copy of an agreement made in New York on November 17th when Hutchinson and Hoyland went east to deal with the British. You will see that it is signed by Hutchinson for Hoyland and Rife. Was this document ever presented to you for your approval since November 17th?”

Rife: “After reading it through carefully, it seems as though I have seen it before. The only time I can recall that I might have seen it is when they came back from New York after the dealings with Dr. Gonin.”

Sapiro: “Do you recall giving written approval to that document?”

Rife: “I do not.”

Sapiro: “You say that the devices that were being built in the early part of 1938, the one that went to Dr. Couche and two that were in the lab were built on new harmonics?”

Rife: “They were built on a different principle, we have a given wave length and it can be produced in different ways, but it should be the same no matter how it is produced.”

Sapiro: “You knew that these three machines were being built with that machine?”

Rife: “Yes.”

Judge Kelly: “What is your profession?”

Rife: “I am a scientist engaged in research work, pathological and bacteriological science.”

Dr. Rife then gave a history of his studies and work.

Judge Kelly: “Have you had any business experience at all?”

Rife: “No.”

Judge Kelly: “What is the difference in frequency and harmonics?”

Rife: “Frequency is an actual wavelength…” (said something about harmonics that I didn’t get, B.R.).”

Judge Kelly: “When you constructed this Beam Ray machine you had a dial representing the frequencies or harmonics?”

Rife: “We had many dials on the original machine.”

Judge Kelly: “Is that the machine Mr. Hoyland got the frequencies from?”

Rife: “Yes, he took them off that old machine.”

(Notes because Marion could not follow in detail)

Some questioning by Judge Kelly concerned with the scientific side of the case. Dr. Rife explained how the machine changed in design from the original to the most recent type. Kelly wanted to know whether Hoyland told Dr. Rife about the changes he was making and Rife said that he did. Kelly then asked about the frequencies and Dr. Rife explained.

Judge Kelly: “Did you examine the machines built by Hoyland for the British?”

Rife: “No.”

Judge Kelly: “You didn’t know if they differed from the earlier machine?”

Rife: “I did not.”

Judge Kelly: “When you perfected this instrument you thought about an organization to manufacture and distribute these machines?”

Rife: “I wanted to get them out to the public, as many as I could.”

Judge Kelly: “How did you happen to get in touch with Mr. Hutchinson?”

Rife: “Mr. Cullen had his over at the laboratory just on a social call.”

Judge Kelly: “Hutchinson was introduced to you by Mr. Cullen then?”

Rife: “Yes.”

Judge Kelly: “Is Mr. Cullen a business man?”

Rife: “Dr. Milbank Johnson brought his to the laboratory as an electrical engineer.”

Judge Kelly: “Did you discuss the production of this instrument with Hutchinson and Hoyland, together I mean?”

Rife: “To some extent.”

Judge Kelly: “You had confidence in them?”

Rife: “Yes.”

Judge Kelly: “You assigned certain of your interests to others?”

Rife: “To Hutchinson and Hoyland for the purpose f carrying on the work.”

Judge Kelly: “Did they outline their plans for distributing the instrument?”

Rife: “Yes, to some extent.”

Judge Kelly: “What was their plan?”

Rife: “To start on a small scale and increase production, and that the British would take it over for England, that is, that British Empire.”

Judge Kelly: “When you assigned your interests to these gentlemen were there any others concerned with the machine?”

Rife: “No.”

Judge Kelly: “You associated yourself with them to save yourself the fatigue of the business end of the work?”

Rife: “Yes.”

Judge Kelly: “Did you ever receive any information from anybody as to the British instruments being defective in manner?”

Rife: “I had one letter from Mr. Blewett saying the instruments were not working and that he did not know if it was because they had been damaged in transit.”

Judge Kelly: “When you got this letter did you discuss this matter with anyone?”

Rife: “Yes, with Mr. Hoyland, and he said that he had checked the machine carefully.”

Judge Kelly: “Did he tell you of any changes made in the machines before he shipped them?”

Rife: “He did not.”

Judge Kelly: “Would these machines be easily injured in shipment?”

Rife: “They might be.”

Judge Kelly: “Did you supervise the packing or shipping of these instruments?”

Rife: “No.”

Judge Kelly: “Who did?”

Rife: “I think Mr. Hoyland did.”

Judge Kelly: “Who advised about making an organization?”

Rife: “I think that was when Hutchinson and Henderson came into the discussions.”

Judge Kelly: “What was said about exclusive rights to the machines?”

Rife: “As I understand it the three owners, Hutchinson, Hoyland and myself gave to this organization the rights to manufacture these machines and I thought that was an exclusive right.”

Judge Kelly: “Was anything ever said about the owners reserving any rights to be given to any other corporation?”

Rife: “I don’t think so.”

Judge Kelly: “What about foreign countries?”

Rife: “I don’t know what arrangements were to be made in that respect.”

Judge Kelly: “Did you understand that this license was to be given by Beam Ray or by the owners?”

Rife: “By Beam Ray.”

Judge Kelly: “You understood that Beam Ray had exclusive rights to give a license and that the owners had reserved nothing except royalties?”

Rife: “Yes.”

Judge Kelly: “I suppose you avoided business discussions as much as possible?”

Rife: “Yes I did.”

Judge Kelly: “A very fortunate man.”

Sapiro takes the witness. Sapiro quoted from a document to he effect that the owners of the Rife machine must approve the price of the machines and the distributions of profits.

Sapiro: “Is that correct Mr. Rife?”

Rife: “Yes, that’s right.”

Sapiro: “Mr. Hoyland had been working for you for some time before you met Mr. Hutchinson?”

Rife: “Yes.”

Sapiro: “Did Henderson and Hutchinson discuss with you the forming of a new corporation?”

Rife: “I understood that there was already a corporation that would be shifted over into the Beam Ray in order to save expenses.”

Sapiro: “Did they say they would give you some stock in this corporation if you made an agreement with them?”

Rife: “I am not sure that they did.”

Sapiro: “Did you receive a certificate saying you were the owner of some stock?”

Rife: “I received a small paper from Mr. Fickerson.”

Sapiro: “Was this in return for giving up certain rights to the Beam Ray machine?”

Rife: “I don’t think so.”

Sapiro: “Why do you think you received it?”

Rife: “It was supposed to be given to me.”

Sapiro: “Given for what?”

Rife: “That I don’t remember. It was merely that I was to receive certain stock. I don’t think I

(missing words)

Rife: “It didn’t enter my mind. I never gave it any thought.”

Judge Kelly interrupts…

Judge Kelly: “I don’t believe there was any thought in the Doctor’s mind as to money or stock. I don’t think he cared what hot got, or whether he got anything, he seems to have been interested only in the production of his machine and of getting them out where they could do some good.”

Sapiro takes the witness.

Sapiro: “Was there any arrangement under which someone was to send you some shares of stock or receipt for some?”

Rife: “No arrangement, only what might have been said.”

Sapiro: “By whom?”

Rife: “By the group, possibly Mr. Hutchinson.”

Sapiro: “Do you recall what was said, anything at all?”

Rife: “I do not.”

Sapiro: “I show you a copy of the application for transfer of shares subject to escrow, do you recall signing that Dr. Rife?”

Rife: “Well, I signed several where I had a line up similar to that.”

Sapiro:” Do you recall this particular one?”

Rife: “(After reading it through very deliberately) The only thing that is at all familiar is this. (Pointing to signatures on document).”

Sapiro: “Do you recall anyone bringing such a document to you to sign?”

Rife: “This I recall was signed in Mr. Hutchinson’s office. I was called in to sign it and I did.”

Dr. Rife was excused from the stand. Edwards was called to the stand.

Wednesday, June 28. Afternoon session.

Comperet: “Did Mr. Hoyland tell you at any time in the fall of last year that the machines he was manufacturing for Beam Ray corporation operated on a principle fundamentally different from Dr. Rife’s machine?”

Edwards: “Mr. Hoyland told me at one time that Dr. Rife thought that he had the frequencies but he didn’t have them.”

Comperet: “Do you recall last December when the corporation received from the solicitors fro the British group a draft for a contract licensing the British to manufacture the machines?”

Edwards: “Yes.”

Comperet: “Did you discuss with Mr. Hoyland the question of whether the contract should be signed and sent back to the British?”

Edwards: “Yes, when I received it I called Hutchinson and Hoyland and told them that it had arrived. They both had access to this paper. I have a copy to Mr. Hutchinson.”

Comperet: “Did the executive committee have in their possession a description of the principles of the Rife Ray machine, or did they know the frequencies at which the machine should be set?”

Edwards: “No.”

Comperet: “You had no way of finding out through Mr. Hoyland?”

Edwards: “Yes, I asked Mr. Hoyland if we shouldn’t sign this and send it back, but Mr. Hoyland would not approve of it because the British owed $5000.00 (five).”

Comperet: “did you try to get Mr. Hoyland to give the frequencies to the British.”

Edwards: “Yes, I did, but he said that they already had them and he wasn’t going to give them to them again. I said if they have them what harm is there in giving them to them again?”

Judge Kelly: “Did you know for a certainty that the British had the frequencies?”

Edwards: “Only that Mr. Hoyland told me so.”

Comperet: “Did you know that there had been considerable correspondence from the British concerning their wish to have the frequencies and that Mr. Hoyland had these letters in this possession?”

Edwards: “Yes.”

Comperet: “Following that discussion with Hoyland, was there a cable sent to the British in regards to the proposed contract which you have there in your hand?”

Edwards: “Yes.”

Comperet: “Who drafted that cable?”

Edwards: “Mr. Sapiro.”

Comperet: “Have you a copy of it?”

Edwards: “Yes, I think I have a proposed draft.” (He produced it).”

Comperet: “You yourself didn’t choose the wording of this?”

Edwards: “It was drafted following the meeting of the board f directors which Mr. Sapiro attended. There was a resolution to the effect that it should be sent in that form.”

Comperet consulted the minutes and found a record of the resolution in the minutes of January 10th, 1939. Comperet showed cablegram from Gonin to Beam Ray to the effect that Hoyland’s cable had been received but that the British would recognize the corporation only in their dealings. He quoted from another cable, January 15th, 1939, ‘You have broken original agreements, refuse to sign the revised agreement, and have ignored Gonin’s cable.’ It went on to say that the machines would be returned and that the British would expect to have their money refunded. Comperet showed a cable sent in answer to this, one which Edwards said he got from Hoyland to the effect that it was the British who had broken the agreement, etc.

Comperet: “From whom did you get this information?”

Edwards: “From Mr. Sapiro.”

(missing words)

Edwards: “Yes.”

Comperet: “What reply did he make?”

Edwards: “We asked several times and he refused. I even asked Mr. Hutchinson if he would give them to us and put them in trust, and I asked MR. Hoyland what we would do in the event of his death.”

Judge Kelly: “Did you or any of the directors try to get the frequencies from Dr. Rife?”

Edwards: “I didn’t think that we could, but since then I have gotten them from Dr. Rife. When I asked Mr. Hutchinson to resign he said that he would resign if Mr. Hoyland would give the corporation the correct frequencies. As soon as I got this Hutchinson, Mrs. Willman and Mr. Cullen resigned.”

Comperet: “What finally happened to that sealed envelope?”

Edwards: “Mr. Hoyland came over to my house with Mr. Kahn and asked me for the two envelopes. I gave them both to Mr. Hoyland and I have never seen them since. One was to his lawyer and was to be delivered in the case of his death. I never saw the contents of either envelope.”

Comperet: “After Hoyland was dismissed as technical advisor was the corporation able to carry on?’

Edwards: “No.”

Comperet: “Who had been working under Hoyland?”

Edwards: “Mr. Carson. I asked Mr. Carson to work for us, I told him that he could get the frequencies from Dr. Rife. He said he wanted to think it over and later he called me up and said he could not go along with us.”

Comperet: “As these machines were built, were they tested by an oscillograph to see if they were correctly adjusted?”

Edwards: “Yes.”

Comperet: “Who paid for the parts that went in to the oscillograph?”

Edwards: “I understand that Mr. Hoyland supplied the parts and the corporation paid for the labor.”

Comperet: “What happened to it after Hoyland left?”

Edwards: “It went with Hoyland.”

Comperet: “And the company could not check up on the machines without it?”

Edwards: “No.”

Comperet: “How long was it before the company could get a new one and train a man to operate it?”

Edwards: “About two months.”

Comperet: “And during that time nothing could be done about the machines?”

Edwards: “That’s right.”

Judge Kelly: “Is this machine patented?”

Edwards: “No.”

Sapiro: “Your Honor, the machines can not be patented because the theory has been known tool long.”

Judge Kelly: “(to Edwards) Can the frequencies be patented?”

Edwards: “No.”

Judge Kelly: “Than anyone could manufacture the machine and make it work?”

Edwards: “Yes, if they knew the frequencies.”

Recess called. Afternoon recess. Edwards resumed the stand. Sapiro cross-examines.

Sapiro: “I show you Plaintiffs exhibit 25. Have you ever seen it before?”

Edwards: “No.”

Sapiro: “Were you present at the meeting of the board of directors October 3rd?”

Edwards: “Yes.”

Sapiro: “You remember a resolution which required Mr. Hoyland to write this letter.”

Edwards: “Yes.”

Sapiro: “Isn’t that the letter that was submitted to the directors in accordance with the resolution?”

Edwards: “I don’t remember reading that letter.”

Sapiro: “Did you ever inquire as to whether or not that letter had been written and sent?”

Edwards: “I don’t remember.”

Sapiro: “Were the minutes of that meeting read at the next meeting?”

Edwards: “Yes.”

Sapiro: “Didn’t you ask if this letter had been written?”

Edwards: “I presumed that Mr. Hoyland would write it. I honestly do not remember reading the letter.”

Sapiro: “Will you read it and see if it refreshes your memory?”

Edwards: “After reading the letter I still do not remember reading it.”

Sapiro: “And you mean that you never inquired about the letter?”

Edwards: “I don’t think I did. At that time Mr. Hoyland and myself were on very friendly terms and I had no reason to question him about it.”

Sapiro: “Will you look in your records and see if there is not a copy of that same letter with certain initials on it, including your own.”

Edwards: “Shall I look now?”

Sapiro: “No, later. Didn’t you turn over to Mr. Hoyland the letter and the cable from the British and ask him to take the matter up?”

Edwards: “Yes.”

Sapiro: “And didn’t you and Mr. Hoyland and I go over the matter in your court room, and weren’t we all in accord that the British were trying to stall for time?”

Edwards: “Most of them were telephone down to me and then Mr. Hoyland picked them up at the telegraph office.”

Sapiro: “Didn’t you make copies?”

Edwards: “Yes, I saw that Mr. Hutchinson got one and I gave one to you.”

Sapiro: “Didn’t we have a free and full discussion of matters regarding the corporation and the British at our meeting, and didn’t you ask me to draw up the cablegram to the British?”

Edwards: “Yes, we agreed on that.”

Sapiro: “Wasn’t there accord on the board to the effect that what we put in the cablegram was correct and should be sent to the British?”

Edwards: “After Mr. Sapiro came down and talked to us about this we felt that we had complied. We had not had any legal advice until then.”

Sapiro: “Didn’t everyone of us feel that the corporation had complied?”

Edwards: “Yes, at the time we did.”

Sapiro: “Didn’t everyone there say that the corporation had complied up to date?”

Edwards: “I don’t recall anyone making objection.”

Sapiro: “Do you remember my asking if anyone present knew of any breach of contract and that no one said anything?”

Edwards: “Yes, but there was the matter of frequencies.”

Sapiro: “That didn’t occur in my presence did it?”

Edwards: “I don’t know.”

Sapiro: “You knew that you could get the frequencies from Dr. Rife, didn’t you?”

Edwards: “Well, I assumed that Dr. Rife had them, but I never asked them for them.

Sapiro: “You knew that he had worked them out for his machine?”

Edwards: I assumed that he had, and found out since that he did.”

Sapiro: “You say that you had two envelops from Mr. Hoyland, one for the lawyer and one for the lawyer and one for the frequencies?”

Edwards: “Yes.”

Sapiro: “Was there a lawyer’s name on one?”

Edwards: “Yes, Mr. Glen.”

Sapiro: “You wouldn’t want to indicate that it was my name?”

Edwards: “No.”

Sapiro: “How did you find out that the oscillograph was owned half by Hoyland and half by the corporation?”

Edwards: “There was a note about it.”

Sapiro: “Did you ever ask Mr. Hoyland about the oscillograph?”

Edwards: “No, I don’t think I did.”

Sapiro: “At the meeting of January 10th of this year, was there a plan presented for trying to get everyone together?”

Edwards: “Yes.”

Sapiro: “Did all of them favor the plan?”

Edwards: “We expressed ourselves in favor of presenting the plan.”

Sapiro: “What is the location of the corporate offices?”

Edwards: “Between Washington and University on Fifth Street.”

Sapiro: “Is that both the factory and the headquarters?”

Edwards: “Yes.”

Sapiro: “Has there been any changes in the offices?”

Edwards: “No.”

Comperet took the witness.

Comperet: “Going back to the meeting of January 10th, from what did you get the idea that the company had complied with the wishes of the British, was it from what Mr. Sapiro told you?”

Edwards: “Yes.”

Comperet: “Who presented the plan to avoid litigation?”

Edwards: “Mr. Sapiro.”

Comperet: “Of what did the plan consist, was it a plan whereby Mr. Hutchinson was told that he would have to give up his interest in the company?”

Edwards: “Yes, I believe he was left out in that plan.”

Comperet: “Was it further suggested that if he did not agree that a number of law suites would be started against him?’

Edwards: “Yes, Mr. Sapiro suggested that.”

Comperet: “And what was said about that?”

Edwards: “The plan was that I should file a suit and the Ernsteins should file one, and Mr. Reynolds should have an investigation of the corporation set up and Mr. Hoyland was going to file a law suit himself.”

Comperet: “And what else?”

Edwards: “I think that was all.”

Comperet: “And by means of all these law suites you were going to avoid litigation>?”

Edwards: “I guess so.”

Comperet: “Wasn’t Mr. Hutchinson expected to give up his interest in the Rife Ray machine?”

Edwards: “Yes, that has been the whole trouble.”

Judge Kelly: “Mr. Comperet, have the English received the frequencies or have they not?”

Comperet: “(answering) They have not.”

Judge Kelly: “Have you gotten the correspondence files with the British group?”

Comperet: “I have not been able to get them.”

Judge Kelly: “I would like to know what there is in the corporation that is worth fighting over, since the machines could not be patented?”

Comperet: “Well the frequencies are still secret.”

Sapiro then said that the machine coming from Dr. Rife would have a very great value because of the Dr.’s reputation and his long record of work.

Judge Kelly: “Assuming that this machine is a great boom to humanity, what actually has the corporation got? I am not talking about the instrument. I want to know what good will exist? It doesn’t look to me as if there is any. You say that the British could build the machines and that you couldn’t stop them?”

Sapiro: “That’s right, we couldn’t stop them.”

Comperet: “I show you Mr. Edwards, a document headed, “Proposal to C.R. Hutchinson, January 11th, 1939. That he surrender all his interest in the corporation and the machine. Is that the plan that was presented at the time?”

Edwards: “Yes.”

Comperet: “Who drew up the plan?”

Edwards: “I think this was drawn up by Mr. Sapiro, in Mr. Gordon Gray’s office.”

Comperet: “I note that the first thing stipulated is that he surrender to the corporation all his rights in the stock in Beam Ray no matter in whose name the stock may stand. Did Mr. Hutchinson agree to be so frozen out of the corporation?”

Edwards: “No.”

Comperet: “So then the plan didn’t prevent litigation?”

Edwards: “No.”

Comperet: “When this plan was discussed did they specify and expect that this would intimidate?”

Edwards: “Yes.”

Comperet: “What was said and by whom?”

Edwards: “As I remember it, Mr. Sapiro said that if Mr. Hutchinson got all of these law suites slapped on him at about the same time that he would just want to run.”

Comperet: “Now going back to your assumption that Dr. Rife knew the frequencies, had Mr. Hoyland ever told you that Dr. Rife knew them?”

Edwards: “No, he told me that Dr. Rife only thought he had them.”

Comperet: “What did you think that meant?”

Edwards: “Well, Mr. Hoyland told me about that time, that Dr. Rife measured the frequencies only by the length of the wire and that he did not take other factors into consideration.”

Comperet: “Were the letters from the British mailed to the shop?”

Edwards: “Yes, after Mr. Hoyland left we had a post office box.”

Comperet: “Why?”

Edwards: “So that the board of directors could get all of the mail.”

Comperet: “Before this, had you found it hard to get the mail?”

Edwards: “Yes, it was taken up to the shop and we wouldn’t know what was going on.”

Sapiro then took the witness.

Sapiro: “I show you Plaintiff’s exhibit 11 and I ask you if there was anything said about litigation that was not sent to all the members later?”

Edwards: “I think there were some things said.”

Sapiro: “Were you certain in saying I suggested that by bringing all these suits I expected litigation?”

Comperet objected and Judge Kelly sustained him.

Sapiro: “Did you say that I said no?”

Edwards: “I didn’t say that. I was referring to the proposal to Hutchinson.”

Sapiro: “Did you and the board think that this was the right thing to do?”

Edwards: “At that time I did.”

Sapiro: “Was it not planned at that meeting that Mr. Gray should see Mr. Hutchinson and offer him a cash settlement in return for his rights?”

Edwards: “Yes, there was supposed to be consideration.”

Sapiro: “Was Mr. Williams present at that meeting?”

Edwards: “Yes.”

Sapiro: “Do you recall that he was favorable to Mr. Hutchinson?”

Edwards: “Yes.”

Sapiro: “Do you remember any statement to the effect of what would happen if the suits were started against Hutchinson?”

Edwards: “No.”

Sapiro: “Was there anything I suggested with which you were in disagreement?”

Edwards: “No, at the time we were perfectly in accord all the way down the line.”

Sapiro: “You state that you based your opinion of the British question on what I said?”

Edwards: “Yes, as soon as I knew the British had the frequencies I felt that the company had compiled with the terms of the contract.”

Sapiro: “In answer to the suit filed against the corporation by the British, has your board of directors taken any action to authorize counsel what to do?”

(missing words)

Comperet objected. There was much bickering and Judge Kelly adjourned until Thursday.

Thursday, June 29, Morning session.

Hutchinson on the stand. Comperet interrogating.

Comperet: “What is your occupation?”

Hutchinson: “For the past six to eight months I have been making an investigation into the conditions of the Beam Ray corporation?”

Comperet: “Were you one of the original incorporators of the company which is now known as Beam Ray?”

Hutchinson: “I was.”

Comperet: “Trace the changes in the name of the corporation?”

Then Hutchinson commenced involved examination which Comperet interrupted.

Comperet: “Can you just trace the development of the company into Beam Ray in your own words.”

Hutchinson: “About October of 1935, Mr. Cullen came to me with a contract for the organization of a correspondence school of aeronautics and asked me to either join his or advise him how he could put over and operate this school. At that time I was associated with Roscoe Turner in connection with an Aero device. I was also associated with Amelia Earhardt. I discussed this with them after many meetings. Mr. Fickerson stated that he was willing to go along as our legal advisor if I would accept the active management. We closed a contract for five western states for sales rights. We formed a California Corporation through Fickerson of Los Angeles. He was our attorney and handled the legal details. The organization consisted of Olmstead, Cullen and myself. That corporation was known as Aero Reserve School Western Division. The necessary permits were taken out and I made a trip east and contacted the then Virginia Corporation Aero Reserve School officers. I secured for Cullen, an additional contract showing and advising the Virginia corporation officials that it was to the best interest of all that the sales organization from the west coast if divided up would be better if the six additional western states were included. They gave such a contract. Before I go any further your Honor, and in order to establish a vital point I am waiving my constitutional rights, , and by offering my evidence without reservation. In order that I may set right for your Honor’s benefit things that have been brought out in this court, I would like to have exhibit Z of the defendants and the minutes of the books of the corporation to refer to certain items that will verify statements that I will make.”

Comperet: “I show you exhibit Z which is an application for a permit to transfer stock and I show the minute book of the corporation.”

Hutchinson: “Under Exhibit Z acting under authority of the meeting of August 21, 1936, in application for the permit on page 4, Par t9, reads as follows…”

He quotes to effect that C.R. Hutchinson paid all fees etc…

Hutchinson: “Referring to the meeting of the board of the Aero Corporation, November 2, 1936, Part 5, ‘The secretary presented the itemized count of Fickerson and Richardson, attorneys for the corporation, covering legal costs of the organization and franchise taxes for 1935 and 1936 as state filing articles: $29.18, State treasurer franchise tax: $25.00, Minutes book: $5.00, sale: $5.50, county clerk: $1.00, commission corporation application: $15.00, State treasury franchise tax 1936: $27.45, title: $258.33, credits November 26 (by check): $120.00, August 19th: $110.65, September 4th (by check), $27.45. Total credits: $250.00 On motion duly made and seconded this account was approved and the secretary was instructed to set this amount to the credit of C.R. Hutchinson, on the books of the corporation to be paid when funds are available. In my statements to follow I will refer to these as they refer particularly to the set up of the Corporate Securities Charter.”

Judge Kelly: “Dr. Rife was not interested in any of this Aero corporation, he designed a machine he assigned certain interests in it to certain people. How was this divided?”

Hutchinson: “One third to me, one third to Hoyland, one third to Dr. Rife.”

Judge Kelly: “And the forming of the corporation followed?”

Hutchinson: “Yes.”

Sapiro: “The corporation was in existence and the name was changed.”

Judge Kelly: “When you incorporated you first had a permit from the corporation commissioner to issue three shares of stock, one each to Cullen, Olmstead and Hutchinson?”

Hutchinson: “Yes.”

Judge Kelly: “Then you procured a permit for the issuance of 4496 shares of stock which brought it to 5000 shares altogether and these were issued to whom and in what proportion?”

Hutchinson: “I prefer to consult the minute book to be accurate.”

Sapiro head the division of stock and Hutchinson confirmed it by the minutes.

Judge Kelly: “Let me see the defense exhibit Z.”

Comperet: “Were you three: Olmstead, Cullen and yourself holders of all stock in the corporation?”

Hutchinson: “We were.”

Comperet: “There were no other stockholders?”

Hutchinson: “No.”

Judge Kelly: “Was there ever any modification to this permit or is this the last permit issued exactly as it now stands?”

Hutchinson: “Yes.”

Judge Kelly: “Where is it?”

Comperet: “Do you refer to the permit to transfer shares to various other persons from you three original stock holders?”

Hutchinson: “Yes.”

Comperet: “I show you an application to transfer shares subject to escrow.”

Judge Kelly: “I am not concerned about the application, what I want to know is what the corporation

(missing words)

Judge Kelly: “Have you a copy or the original permit that was issued in response to this application?”

Comperet produced one. It was a modification of the document asked for.

Judge Kelly: “Now I think we have a record of the permits of the corporation commissioner.”

Comperet: “I show you defendant’s exhibit being an order of commissioner for transfer of shares.”

Hutchinson: “In the original application there is a…(transcript missing lines)

Comperet: “…and you received consideration, did this happen?”

Hutchinson: “No.”

Comperet: “How did the corporation and the Rife Ray invention get together?”

Hutchinson: “About April 1st, 1938, Mr. Cullen came to me and told me about the extensive work being done by Dr. Rife with the machine and wanted us to take it over and put it on the market. I declined. He made an appointment with Dr. Rife, he took me to the laboratory, and we discussed it with Rife. Cullen suggested to him that this machine be put on the market and that I originate a group to put it over. Dr. Rife, at the time, said that if Cullen would benefit by it as a friend of 25 years standing he would be glad to do it. About a week later Mr. Henderson brought Hoyland to the office. Henderson said the machine was very valuable to humanity. He insisted as one of the Aero School group, that it be taken on as part of our activities. I refused. Henderson told of the benefit received from the machine by his wife and I agreed to go to the laboratory again with them, and with the balance of our associates and gave them the benefit of such experience as I had previously had in order that they might put it over. A few days later Henderson and Hoyland advised me that there would be a meeting at Rife’s lab that evening to discuss this plan, or the plan that I might propose or suggest to them. Present at that meeting were Rife, Hoyland, Dr. Couche, Mr. Winter, Mr. Cullen, possibly one or two others and myself. After much talk about the machine itself I was asked how it could be put on the market and also if I would be interested in the organization of a group to do it. I positively stated at that meeting that I was not interested in this promotion.”

Comperet: “I think we are taking too much time for these details. After some of these meetings did you finally decide to work with them?”

Hutchinson: “At that meeting I outlined the ideas of the corporation which we now have, and I suggested that they get an Angel to provide finance for their organization.”

Judge Kelly: “I see. So they went out and started looking for Angels?”

Comperet: “Your Honor no doubt understands the theatrical term Angel?”

Judge Kelly: “Oh yes, I know all about Angels, spiritually and otherwise. Court is now recessed.”

Thursday, June 29. Court resumed.

Judge Kelly: “Gentlemen, it is your understanding that anyone with a knowledge of science could take this finished product, this instrument that Rife designed, and by examination and tests, without any information supply, could ascertain these frequencies? Do you know whether this could be done Mr. Sapiro, you’re pretty wise?”

Sapiro: “I seem to detect a bark in that remark, my interest in this machinery is naturally for Mr. Hoyland. He says that anyone who reads the numbers on that dial and then sees the band and the code letters can tell these specific frequencies.”

Judge Kelly: “But suppose someone should break a band, would there by any way a scientist could figure out these frequencies?”

Sapiro: “I don’t understand.”

Judge Kelly: “Could anyone without the dial and the code discover the frequencies of the machine?”

Hutchinson: “They couldn’t discover what the frequencies of that machine were, the whole secret of the machines was the frequencies.”

Judge Kelly: “Was the great secret the frequencies that would heal a certain disease?”

Comperet: “Yes.”

Hutchinson: “Each disease has its own particular frequency.”

Judge Kelly: “Then what was it that these people wanted to guard so fiercely?”

Sapiro then explained rather vaguely about the bands of frequencies.

Judge Kelly: “Could anyone do it?”

Sapiro: “No, a person who has not the key to these dials and bands could not make the machine work properly.”

Judge Kelly: “:But anyone could duplicate the machine itself?”

Comperet: “Yes.”

Judge Kelly: “The corporation had no exclusive right to make these machines?”

Sapiro: “No.”

Judge Kelly: “The only secrecy then, was regarding the frequencies, since anyone could have copied the machine?”

Comperet: “Anyone copying it would have to experiment until they found the right frequencies.”

Judge Kelly: “Apparently several people have and know these frequencies. Hoyland, Rife, Carson, and how many of the English have it?”

Sapiro: “At least three: Parsons, Gonin, and Blewett.”

Judge Kelly: “It doesn’t look to me as if we are fighting over very much here, but go ahead, get on with it.”

Comperet: “There is nothing over except the Plaintiff asked the receivership to do this, to cancel the old contract with the owners and to negotiate for some new contract with the English.”

Judge Kelly: “You understand that the receiver would have the right to demand and receive the code for the frequencies?”

Comperet: “Would the receiver have a greater right than the company?”

Sapiro: “Yes, they certainly would.”

Judge Kelly: “Then the receiver would have the secret. Well, go on, if you want to litigate it proceed, but I haven’t been sitting here trying to figure out what this is all about, apparently the only secret is what the frequencies are. I want to know if a test can be given the machine that will (missing words)

Sapiro: “Dr. Rife’s name is valuable.”

Judge Kelly: “Well, all you have to do is dig up another fellow named Rife.”

Sapiro: “I think that could be stopped.”

Hutchinson: “I think I can clarify this question.”

Judge Kelly: “I am not at all sure that you can, but go ahead, you have my permission to try.”

Hutchinson: “There are about 40 frequencies discovered by Dr. Rife that have not yet been released to the public, and have not been included in the machine. Even if there are other machines the company would still have a tremendous advantage in that they have research to prove that Dr. Rife is still bringing out new frequencies.”

Judge Kelly: “Do you think the company has a claim on all further discoveries of Dr. Rife along this line?”

Hutchinson: “Let me see that contract. (after reading it) I don’t see that you have any claim on the ingenious Dr. Rife’s future experiments and discoveries.”

Comperet: “At that conference at the lab, you said that you gave those present there some explanation of a plan to market the machine?”

Hutchinson: “Yes, I suggested that Dr. Rife and those he desired to give an interest to have an agreement among themselves and secure a group interested in putting this instrument on the market, and that they form a California Corporation, similar to the corporation that we had used, that is, the U.P.I. and then figure out the proportional parts that each of the group would be entitled to and make an application to the corporation commissioner as we had done. And operate under that plan. And that they secure in their group or through it someone that would secure the money to make it possible to build the necessary machines to operate a small business. I offered to give them the benefit of our organizing experience in getting it in motion and any advice that I could give.”

Judge Kelly: “Did you understand that Dr. Rife bound himself to keep the frequencies secret from anyone?”

Hutchinson: “I understood him well enough to know that when he said he would put this information in the hands of the right people he would do so.”

Judge Kelly: “You knew that he was interested primarily in humanity and the benefit his machines could give to the sick and if he felt that humanity needed it he would give the information to anyone who would help him in his good work?”

Hutchinson: “I guess so.”

Comperet: “Was the decision finally reached to take over U.P.I. corporation to be used as a corporation to release the machines?”

Hutchinson: “Later, when Mr. Gordon Gray, representative of Mr. Rife, this was decided upon.”

Comperet: “What was the final agreement in this regard?”

Hutchinson: “When Rife, Hoyland, Henderson and one or two others came into the office and they asked me to organize, they stated that speed was necessary, because the English group were expecting soon. Within a few weeks. And that quick action was wanted, and that none of them had any experience in organization or any business ability. They asked what was the quickest way we could get the machine on the market and he prepared to deal with the British and get the million dollars that the British were supposed to pay.”

Judge Kelly: “Where did you hear about the million dollars?”

Hutchinson: “From Hoyland and Dr. Couche.”

Judge Kelly: “Did you see any correspondence to this effect?”

Hutchinson: “No, but I saw a letter saying that they had 10,000 pounds to be put into the machine. Dr. Couche had sold them on the value of the machine.”

Comperet: “Well, how did you come to use the U.P.I. corporation?”

Hutchinson: “I suggested that as the contract that we had was for eleven Western States for the school, and as I doubted if we could deliver this course, and I had formed a Nevada Corporation based upon this new contract, and which contract and corporation expected to offer me a contract similar to the contract held from the Aero Reserve School, that for the sake of speed in the organization of the group we drop all ideas of carrying on the school and form among ourselves a group to operate the organization and own and control the same. That was to put this machine on the market and deal with the British and that what we applied to the corporation commissioner to transfer stock owned at one time by Cullen, Olmstead, and myself to these parties. And that this stock be transferred and impounded at that time without consideration, and that we use the present corporation for the new organization, and that we set up a fund to be paid to the group who had paid the expenses of the organization of the U.P.I., not exceeding $1,500, to reimburse such sums or pay such accounts as might be designated at that time. The majority of our U.P.I. directors were either present or were approached and approved. Olmstead had advised Cullen and myself that he was, because of his contracts, going to be forced to withdraw from active part of the work and that he would give and assign when approved by the corporation commissioner any interest that he might have in our organization. It was agreed upon at that time, that due to the speed necessary this would be the move, and Cullen and myself, approved by Olmstead, stated that they would make such an application for transfer of this stock to any of the parties designated, in amounts to which they would agree, and that when that was done we would freely give our stock if and when approved. All agreed that this was the thing to do and we proceeded to prepare for our million dollars.”

Comperet: “What was done about determining the relative interests of the parties as it got under way on its new business?”

Hutchinson: “No agreement had been made at that time with any group other than the division of the interests which Dr. Rife gave to Hoyland and myself. I suggested that Dr. Rife have their percent of whatever the corporation would be and his statement and that of Hoyland to me at the time, was that because of the fact that Dr. Couche had made the contract with the British he was entitled to decide with them. The statement was made that Hoyland, Couche and Rife would receive $5000.00 of the $50,000.00 and that the others would receive proportionally small amounts. Hoyland objected to Couche receiving $5000.00 and suggested that it should be $6000.00 to Rife, $6000.00 to Hoyland and $3000.00 to Couche. The other divisions were made accordingly it finally ended up that Mr. Hoyland asked for and received $7500.00 or 15 percent of the entire stock.”

Sapiro: “Has this witness been talking about money or stock?”

Judge Kelly: “I don’t know, perhaps I am not supposed to know. Are they talking about two different things, that is the witness and the counsel?”

(missing words)

Cullen, and Mr. Lyle, dealing with Hoyland, Henderson and their associates set up and presented amounts in which they wanted this stock delivered. That list was made out as shown and presented to their attorney, Mr. Glenn, who approved it. It was forwarded to Fickerson and the application was filed.”

Recess called until 2 P.M.

Afternoon session. Hutchinson on the stand.

Comperet: “Who is Larry Belger mentioned during this trial, is he a stockholder in the Beam Ray corporation?”

Hutchinson: “I know him and he is not.”

Comperet: “Did you contemplate giving him some stock?”

Hutchinson: “I did.”

Comperet: “What were the dealings?”

Hutchinson: “Belger wanted to hold some stock and I told him that I would give him 20 shares of my stock if I could get permission to do so.”

Comperet: “Did he pay any money to you or the corporation for the stock?”

Hutchinson: “No sir.”

Comperet: “Did he ever get this stock?”

Hutchinson: “No.”

Comperet: “Why not?”

Hutchinson: “Mr. Van Wort agreed to buy that from me if I would agree, subject to the agreement of the corporation commissioner.”

Comperet: “Did Mr. Van Wort ever tell you that he had obtained from Belger whatever the rights Belger might have to the stock?”

Hutchinson: “He did.”

Comperet: “I show you here a letter addressed to yourself, signed Larry E. Belger. Did he send or deliver that letter to you telling you that the stock should be given to Mr. Wort instead of to himself?”

Hutchinson: “Yes, he did.”

Comperet: “Exhibit 00, an order from corporation commissioner consenting to the transfer of stock in escrow from C.R. Hutchinson to certain persons, including 20 shared to Van Wort, were these 20 shares that were to have gone to Belger?”

Hutchinson: “They are.”

Comperet: “I call your attention to the fact that this letter, exhibit pp, says: ‘I want to acknowledge receipt of diamond ring, etc, together with any and all claims Mr. Van Wort might have against me.’ Did either the ring or the money come to you?”

Hutchinson: “No sir.”

Comperet: “Calling your attention once more to the statement made in the application to the corporation commissioner that you had agreed to furnish the corporation a loan with money on which to get started on production. You did furnish some money, did you not?”

Hutchinson: “I did.”

Comperet: “When the corporation changed its business to the manufacturing of the Rife Ray machines, was it your plan then to furnish the company as a loan, money with which to get under way?”

Hutchinson: “Not personally.”

Comperet: “How?”

Hutchinson: “Will you explain what you mean by how?”

Comperet: “With regard to the money that was paid the Ernstein, Reynolds, and Edwards – what was to be done with it?”

Hutchinson: “That money was to be put in as a loan, strictly to be used for the building of machines and to be paid before and salaries or dividends were paid.”

Comperet: “Did you so state to these parties prior to the time they gave you the money?”

Hutchinson: “13,000.00??? of it was turned into the company. $500.00 I kept for my own use with the approval of the company.”

Comperet: “Why did you keep this money?”

Hutchinson: “Because I could not handle this deal with the British or the business for America unless I was financed. It was charged to expenses.”

Comperet: “Were these expenses in connection with the British?”

Hutchinson: “Part of them.”

Comperet: “That’s the same $500.00 for which you gave the corporation a promissory note and your assignment of your royalties?”

Hutchinson: “It is.”

Comperet: “I call your attention to Plaintiff’s exhibits 3 and 4. Pages of the minute book of the corporation dealing with stockholders and board director meeting June 7th, 1937, held in Los Angeles. At the time of these meetings were you a stock holder and a member of the board of directors?”

Hutchinson: “I was.”

Comperet: “Will you examine these minutes, particularly those of the meeting of the board of directors, exhibit 4, now in connection with these have you discovered that there is an inaccuracy in your statements and will you explain it?”

Hutchinson: “The minutes reflect what was done at the two meetings, they are combined into one meeting as shown by the minutes.”

Comperet: “Were you present at all three meetings?’

Hutchinson: “I was. The first was a meeting of the board of directors and offer to Cullen was made, the offer was accepted and a resolution adopted to make an application for a permit to transfer the 4799 shares of stock for Mr. Cullen. Such motion was seconded and passed.”

Comperet: “What did you do at the second meeting of the board of directors?”

Hutchinson: “We elected additional members to the board of directors.”

Comperet: “Besides yourself and Olmstead, who was present a these meetings?”

Hutchinson: “Cullen, Fickerson and Mrs. Willman.”

Comperet: “Who prepared the application for the permit?”

Hutchinson: “Mr. Fickerson.”

Comperet: “Among the shares that were transferred in escrow after the company became Beam Ray were some shares to Mr. Blewett. Did he pay for these shares?”

Hutchinson: “No he did not.”

Comperet: “Did he pay the corporation or Olmstead, or Cullen anything for them?”

Hutchinson: “He did not.”

Comperet: “If the transfer of one hundred shares to Dr. Bertol had been made how many shares would you have had left of the corporation stock?”

Hutchinson: “One.”

Comperet: “This order authorizing transfer of shares in escrow says that you can transfer to Winter 4799, did he buy these from you?”

Hutchinson: “No.”

Comperet: “Did Edith Henderson buy her shares?”

Hutchinson: “She did not.”

Comperet: “Did Beth Willman buy hers?”

Hutchinson: “She did not.”

Comperet: “Where are all these shares?”

Hutchinson: “Mr. Fickerson has records of the fact that these people own stock, but the people mentioned do not have the stock.”

Judge Kelly: “Have any of these shares ever passed out of escrow?”

Hutchinson: “No.”

Comperet: “Did Dr. Bertol pay anything for these shares?”

Hutchinson: “He did not.”

Comperet: “Did Dr. Rife, or Hoyland, or Edwards, or Reynolds buy any?”

Hutchinson: “They did not.”

Judge Kelly: “What did these various people do to deserve the gift of these shares of stock, they all testified that they did nothing?”

Hutchinson: “Mr. Winters allowed us to use his name for credit. He was reported as treasurer.”

Judge Kelly: “Yu gave him a block of stock for that small favor?”

Hutchinson: “It was other things that he could do.”

Judge Kelly: “What did Mr. Henderson do?”

Hutchinson: “He was out boosting the company.”

Judge Kelly: “Mrs. Ernstein put up money, didn’t she?”

Hutchinson: “Yes.”

Judge Kelly: “And others also put up money?:”

Hutchinson: “Yes.”

Judge Kelly: “Did you consider this fair, to issue stock to some people who did not put any money?”

Hutchinson: “At that time we did not think about it.”

Judge Kelly: “Did you have a lawyer then?”

Hutchinson: “Mr. Fickerson handled it, and MR. Glenn represented the other people.”

Judge Kelly: “Did you personally ever have any experience with the Corporate Securities Act?”

Hutchinson: “Some.”

Comperet: “The application to transfer was drawn up in August 1938. Was that the matter that was brought to Mr. Fickerson?”

Hutchinson: “Yes.”

Comperet: “The money paid by Reynolds and the Ernsteins was paid the previous May?”

Hutchinson: “Yes.”

Comperet: “Referring to the transfer to Hutchinson from Rife and Hoyland of one third interest in the Rife Ray machine saying: ‘We appoint you to act as our manager and to act on behalf of all matters.’ Did you ever receive a document supposed to cancel this authority?”

Hutchinson: “Yes.”

Comperet: “I show you a letter dated November 4, 1938, attached to which is an envelope addressed to yourself, bearing the return address of Hoyland, being Post Marked January 10, 1939. Have you ever seen these before?”

Hutchinson: “I have.”

Comperet: “Did you receive that letter?”

Hutchinson: “Yes, I received it in a date or the following day.”

Comperet: “This letter which purports to cancel your authority to act as manager dated November 4th. Did you see that, before you received it in January of this year?”

Hutchinson: “(Didn’t get answer).”

Comperet: “About when did you and Hoyland leave for New York to meet Dr. Gonin?”

Hutchinson: “November 11, 1938.”

Comperet: “That would be a week after this letter was written.”

Hutchinson: “Yes.”

Comperet: “Did Hoyland tell you that he and Dr. Rife had taken steps to cancel your authority to act as their manager?”

Hutchinson: “He did not.”

(missing words)

approved of the amendments. That is signed by Hutchinson and Hoyland. Did you show that letter to Hoyland before you signed it and did you discuss the contents with him?”

Hutchinson: “I did.”

Comperet: “Did it have to do with the reduction of the royalties?”

Hutchinson: “Yes.”

Comperet: “Did you go over that letter with Hoyland and did he read it, and did he make any objection to the terms?”

Hutchinson: “Yes.”

Comperet: “Did he say that you had no authority any longer to act as business manager or did he tell Gonin such a thing?”

Hutchinson: “No he did not.”

Comperet: “After Hoyland joined the company as technical director did you ever ask him to give the company the design of the machines or the frequencies?”

Hutchinson: “Yes, many times, but he always refused.”

Comperet: “At the time of the deal between the owners and the company regarding the license to Beam Ray corporation, did you take part in these negotiations?”

Hutchinson: “I did.”

Comperet: “Was anything said as to whether the license was to be exclusive?”

Hutchinson: “They said that the group were to organize and put over the sale of the machines and that we would have the right to sell where ever we saw fit.”

Comperet: “Mr. Hoyland said that it was expressly discussed that there would be other companies licensed in the United States and Canada, did this take place in your presence?”

Hutchinson: “No.”

Comperet: “Did Dr. Rife or Mr. Hoyland say that he proposed to permit other companies to compete with Beam Ray in the manufacture of the machines?”

Hutchinson: “No.”

Comperet: “Was it your intention that the license was to be an exclusive one and that the owners were not to give license to other companies to compete with Beam Ray?”

Hutchinson: “Yes.”

Comperet: “Was that the understanding of the other owners?”

Hutchinson: “I thought it was.”

Comperet: “Did you know that the language used in the agreement between the owners of the corporation was not sufficient in itself to confer a license?”

Sapiro objected and was sustained.

Comperet: “At the time you signed this was it your understanding that you were conferring an exclusive license to Beam Ray at that time?”

Hutchinson: “It was.”

Comperet: “That was your intention?”

Hutchinson: “Absolutely.”

Comperet: “Did Hoyland at any time during the negotiations state to you that he did not intend to make this an exclusive license?”

Hutchinson: “He did not.”

Comperet: “Did you take part in this deal with the British regarding their license?”

Hutchinson: “I did.”

Comperet: “Did Hoyland sit on these conferences?”

Hutchinson: “He did.”

Comperet: “Was anything said as to whether the license that the British were to receive should be an exclusive one within the territory it covered?”

Hutchinson: “Yes, it was agreed that they should get an exclusive one.”

Comperet: “Was this agreed in Mr. Hoyland’s presence?”

Hutchinson: “It was.”

Comperet: “Did Hoyland object to this anyway?”

Hutchinson: “He did not.”

Comperet: “I call the courts attention to the agreement between the Beam Ray Inc. and the three Englishmen. This instrument fails to say that the license is exclusive.”

Judge Kelly: “Dose it say anywhere in the contract that the license is not exclusive?”

Hutchinson: “No.”

Judge Kelly: “Who drew up the contract?”

Comperet: “It was drawn up in the office of Steiner but everybody and hid dog had a hand in it. That was the trouble.”

Judge Kelly: “I was wondering with whom that first license first originated. Didn’t the license to the corporation precede the deal with the British group?”

Comperet: “A paper dated the first day of June, 1938, sets out the division of interest in the machine, Rife 33, Hoyland 36 and 2/3, Hutchinson 33 and 1/3. That is not signed however, by the corporation, it does not use the word license, it says that the company agrees not to sell the machine but to lease it and that any improvements will belong to the owners.”

Sapiro: “I think the law is fixed on matters of patents, that they are not exclusive unless so stated, or unless it so states it is not.”

Judge Kelly: “We will have to consider the circumstances, I think that they apply an exclusive right on this agreement between the others.”

Comperet: “The term license is not used in that paper, but the agreement between Beam Ray and the owners and between Beam Ray and the British uses the word license.”

Judge Kelly: “You say both of these documents were finally drafted in the officers of Sloan and Steiner.

(missing words)

the last three pages. It was a matter of unskilled labor, I would say. I will call your attention to defendants exhibit E. A contract between Beam Ray and the British, it says: ‘Whereas the Beam Ray Corporation holds an exclusive license, etc…’ (to Hutchinson) Did Mr. Hoyland object to that language and did he read it?”

Hutchinson: “He read it and he did not object.”

Comperet: “When you and Hoyland went to New York and dealt with Gonin, did Hoyland then say that Beam Ray had no authority to grant an exclusive license to the British?”

Hutchinson: “He did not.”

Comperet: “Did he say that Beam Ray did not have an exclusive license?”

Hutchinson: “No.”

Comperet: “At that conference with Gonin, did Gonin then deliver a letter and two memorandums from him complaining that the British had not received what they bargained for?”

Hutchinson: “Yes he did.”

Comperet: “You and Mr. Hoyland took part in these conferences with Gonin?”

Hutchinson: “We did.”

Comperet: “I call your attention to cablegram signed by Dr. Gonin and addressed to yourself, dated October 31, 1938: ‘Distressed no reply to our cables, can you send representative, etc.’, and another saying…etc. Did Gonin refer to these matters that he mentioned there?”

Hutchinson: “Yes, he did.”

Comperet: “Did Mr. Hoyland give him any explanation as to why the company had not gotten these cables, did he say, I have the correspondence?”

Sapiro objected and was sustained. Comperet rephrased the question.

Hutchinson: “He did not.”

Comperet: “I call your attention to a letter addressed to yourself from Blewett. Did Dr. Gonin deliver that letter to you in New York?”

Hutchinson: “He did.”

Comperet: “I call your attention to Hoyland’s testimony, he said he has seen the letter at the (text missing)…this letter complains about the corporation (missing text). Did Hoyland give any explanation in reply to these complaints when he read the letter?”

Hutchinson: “Only about the frequencies, he told them that they had them in code.”

Comperet: “Did he say to whom he had given them in code?”

Hutchinson: “I can’t say.”

Comperet: “Did Hoyland say anything as to giving them any further information about the frequencies?”

Hutchinson: “He stated that he had given them the frequencies in code, and that by using the instructions they had they should be able to figure it out, but Dr. Gonin asked for the frequencies in figures, ,and Hoyland said again no, ‘I gave them to you in code’.”

Judge Kelly: “Did Gonin deny he got them in code?”

Hutchinson: “No, he denied that he could read the code.”

Comperet: “During the time of the trip in November, had it been brought to your attention that the British were complaining?”

Hutchinson: “Yes, many times.”

Comperet: “Did you take this up with Hoyland?”

Hutchinson: “Yes, and he always replied: ‘I give it to them in code’.”

Comperet: “Did you ask him to send them the frequencies?”

Hutchinson: “Yes, many times.”

Comperet: “What did Hoyland replay?”

Hutchinson: “’I gave it to them in code’.”

Sapiro took the witness.

Sapiro: “Will you find the minutes of November 2nd, 1936 regarding the expenses of the corporation, will you show me the list.”

Hutchinson did so.

Sapiro: “You paid this money to Fickerson and Richardson yourself?”

Hutchinson: “I did.”

Sapiro: “This contains an item: minute book – five dollars?”

Hutchinson: “Yes, I see it does.”

Judge Kelly: “Is that the minute book you brought?”

Hutchinson: “Yes.”

Sapiro: “Did you file this, knowing what the issues in this case were?”

Hutchinson: “I thought I did.”

Sapiro showed him the item regarding the minute book of the corporation and showed that the book was an old one used to save expenses.

Sapiro: “Now turn to the minutes of the meeting June 1st, in the upper right hand corner is a number in your handwriting. What does that say?

Hutchinson: “Number 22, that is a series of numbers that I put on the pages to see that there are no changes made in the minutes after I left the organization.”

Sapiro: “What time does it say that that meeting took place.”

Hutchinson: “June 1st at ten o’clock.”

Sapiro then took him through several pages, getting Hutchinson to read the headings, bringing out that the minutes were not accurate, the minutes imply that there was only one meeting but it was actually broken

(missing words)

minutes, did you mean it?”

Hutchinson: “I did.”

Sapiro: “Did you ever get paid $250.00?”

Hutchinson: “Yes, from a new group moving through the corporation.”

Sapiro: “How much did the organization collect in tuition?”

Hutchinson: “I would say perhaps $250.00.”

Sapiro: “Is there a record of that?”

Hutchinson: “I presume so, I n the records of the corporation.”

Sapiro: “I would like to see that.”

Comperet: “I don’t see the materiality of this anyway.”

Sapiro: “Suppose I am just disproving the credibility of the witness.”

Judge Kelly called recess, saying ‘Let’s see what the secretary can do during recess’.

After recess, Sapiro questioning. Hutchinson on the witness stand.

Sapiro: “I show you a book that has been delivered to us from Mr. Edwards. Is this the first book of accounts of the old corporation?”

Hutchinson: “No, it’s my personal ledger.”

Sapiro: “Is it in your handwriting?”

Hutchinson: “No.”

Sapiro: “Can you tell from what book what amounts were paid ad tuition fees into the organization?”

Hutchinson: “This book has no connection with those accounts, it is my personal ledger taken from my personal files without my consent.”

Sapiro: “Don’t blame me, it was given to me by Edwards.”

Comperet tried to have this book kept out of evidence, and Judge Kelly sustains his objection.

Sapiro: “Did you receive $4400.00 in cash from Mr. Winters, May 25, 1937?”

Hutchinson: “If I may have my personal ledger so that I can check up, I will see.”

Comperet wanted to have the ledger returned to Hutch, but Kelly rules otherwise.

Hutchinson: “I received as a personal gift some money but I ordered it set up in my personal ledger. It was a loan from Winter, some $5300.00.”

Judge Kelly: “Were these shares of stock given to Winter in return for that money?”

Hutchinson: “Absolutely not.”

Judge Kelly: “Was that money used in the corporation for anything?”

Hutchinson: “No.”

Sapiro: “Will you look at the top of the next page, does it show a loan to J.W. finch? Did he give you that money for a personal consideration?”

Hutchinson: “He didn’t give me the money.”

Sapiro: “To whom then?”

Hutchinson: “To Mr. Cullen.”

Sapiro: “Was he promised 50 shares of stock for that money?”

Hutchinson: “No.”

Sapiro: “Was the $500.00 returned to Finch six months ago?”

Hutchinson: “It was, in June, by myself.”

Sapiro: “Why did you do this, what were the circumstances?”

Hutchinson:” He produced a note signed by Mr. Cullen and endorsed by me. I have it with me.”

Sapiro: “May I see it?”

Hutchinson: “You may (giving it to him).”

Sapiro: “Your item here states that the loan was made April 7th, 1937, but the note is dated April 3rd, 1938. Was there a personal thing which Finch had done which caused him to give this note?”

Hutchinson: “As I remember it, it was a renewal of the previous note from Mr. Cullen, he asked for an endorsement of the note.”

Sapiro: “Who put up the money to pay him?”

Hutchinson: “It was the $500.00 charged on the books of the corporation as part of the repayment of $1,500.00.”

Sapiro: “Wasn’t it set up as an account of the Aero school?”

Hutchinson: “Yes, I had advanced money for the school.”

Sapiro: “When did you organize U.A.S.?”

Hutchinson: “February of 1938.”

Sapiro: “For what purpose/”

Hutchinson: “The promotion of a correspondence school in aviation, and the protection of myself against other contracts.”

Sapiro: “Did it teach the same courses as the U.P.I. was supposed to teach?”

Hutchinson: “It was supposed to, it hasn’t started yet.”

Sapiro: “Did you receive money from Henderson in connection with the Nevada corporation?”

Hutchinson: “Yes.”

Sapiro: “Is Van Wort’s name on that list?”

Hutchinson: “It is.”

Sapiro: “Did he put money up for the expenses of the corporations?”

Hutchinson: “He paid attorney’s fees and expenses to trips to Reno, about $1014.00, I am doing this from memory.”

Sapiro: “Did he ever get it back?”

Hutchinson: “He hasn’t yet.”

Sapiro: “How many shares of Aero stock did you get for this money?”

Hutchinson: “I am not sure.”

Sapiro: “Of the stockholders mentioned in this list the following were likewise connected to the Nevada corporation. Winter, Henderson, Van Wort, Cullen, and yourself, from the time that corporation was set up to the time Beam Ray took over the corporation was anything done to get these courses going?”

Hutchinson: “I couldn’t say.”

Sapiro: “Could there have been activities of the corporation that you would not have known about?”

Hutchinson: “There most certainly could.”

Sapiro: “How could have this been?”

(This testimony was too fast to get) Hutchinson just alibied that he didn’t know what was being done by the others.

Sapiro: “At that time that (Winter, or Williams) made these loans or gifts, did he indicate any reason for this generosity?”

Hutchinson: “No, I asked him for money.”

Sapiro: “Was it due to his interests in the youth of the country?”

Hutchinson: “Yes.”

Sapiro: “What was that interest?”

Hutchinson: “All I can state is hearsay.”

Sapiro: ”Did he say that these gifts were to enable you to give Aero courses to the youth of San Diego, etc?”

Hutchinson: “Yes.”

Sapiro: “How many students did you have at the time?”

Hutchinson: “At that time we didn’t have any.”

Sapiro: “I will show you the books, will you look in them and see if you can find out how much the corporation received for tuition?”

Judge Kelly: “I want this ledger that Mr. Hutchinson says is his personal property to be left in the hands f the court, but not entered as evidence.”

Hutchinson: “I don’t find any record of any payment of tuition (after looking through books). These books start with the organization of the Rife Ray machine.”

Sapiro: “The book I hold in my hand starts much sooner. Will you look at page 11 of exhibit 38 for identification. Can you tell in what time and in what amount Mr. Bertol made you a loan?”

Hutchinson: “July 26, 1937 for $300.00.”

Sapiro: “Was he on the list of persons who were to receive stock in Beam Ray corporation?”

Hutchinson: “Yes.”

Judge Kelly: “(After looking at the book in question), Calling your attention to page 1, Mr. Hutch, these entries are not in your handwriting, is that right?”

Hutchinson: “That’s right.”

Judge Kelly: “Do you know who wrote the items on page one?”

Hutchinson: “No, I can’t say.”

Judge Kelly: “Were there any items made under your supervision?”

Hutchinson: “It looks to me as if it’s been copies from something else, it looks like copies of my personal ledger.”

Judge Kelly: “Do you know how this book got into the possession of Mr. Edwards?”

Hutchinson: “No.”

Judge Kelly: “Have you ever seen this book before?”

Hutchinson: “No.”

Judge Kelly: “Is that a true copy of your accounts?”

Hutchinson: “I would say it reflects the accounts that I owe.”

Judge Kelly: “You received how much money from Winters?”

Hutchinson: “$5,500.00.”

Judge Kelly: “Did you know Mr. Winter before the first of these loans was made?”

Hutchinson: “Yes.”

Judge Kelly: “How long had you known him prior to that time?”

Hutchinson: “I don’t recall.”

Judge Kelly: “Had you been in any business with him?”

Hutchinson: “No.”

Judge Kelly: “It was more social matter, was it casual or close?”

Hutchinson: It was not social, but it was close.”

Judge Kelly: “In what way were you associated, through clubs or anything like that?”

Hutchinson: “I knew him in a business way.”

Judge Kelly: “Did you know his name well enough to call him by his first name?”

Hutchinson: “Yes.”

Judge Kelly: “Did you give him any security for these loans, or did he ask for any?”

Hutchinson: “No.”

Judge Kelly: “Did you sign anything, any promissory notes?”

(missing words)

Judge Kelly: “How much were you worth when you borrowed this money, what were your assets, give yourself all the best of it?”

Hutchinson: “The liquid assets were nothing, the ownership in rights would run into money, many thousands of dollars, I owned an interest in an item known as ‘Nofog’, it was used by Amelia Earhart in San Francisco, for the purpose of fighting fog, I also had the assurance of an interest in Beam Ray.”

Judge Kelly: “In writing?”

Hutchinson: “No.”

Judge Kelly: “What else did you own?”

Hutchinson: “I had an ownership in a device for lowering Aeroplanes by parachute, I own stock in that.”

Judge Kelly: “How much stock did you own in that?”

Hutchinson: “I think about 7 or 8 thousand dollars worth.”

Judge Kelly: “Did this stock have any market value?”

Hutchinson: “No.”

Judge Kelly: “Did you tell Winters what your assets were?”

Hutchinson: “He knew.”

Judge Kelly: “Do you mean to say your went to this man and borrowed $5,500.00 without a scratch of the pen, or any agreement between you?”

Hutchinson: “Yes, he gave me the money in cash.”

Judge Kelly: “Did you tell him when you could pay it back?”

Hutchinson: “No.”

Judge Kelly: “What did you want the money for?”

Hutchinson: “To get back east and get additional rights in the Aero corporation.”

Judge Kelly: “Did you have him to understand that he would have an interest in what you acquired?”

Hutchinson: “I don’t believe I did.”

Judge Kelly: “Are you sure about that?”

Hutchinson: “I can’t say, it’s so long ago.”

Judge Kelly: “When you say to it that Mr. Winters got shares of stock in the Beam Ray corporation you had in mind that you owed his money didn’t you?”

Hutchinson: “No.”

Judge Kelly: “Were you attempting to pay your debts in any instance, when you made these transfers of stock to Beam Ray?”

Hutchinson: “No, I still owe the money.”

Judge Kelly: “And these people gave it to you, without any security?”

Hutchinson: “That’s right.”

Judge Kelly: “And some people say money is tight.”

Sapiro: “Just what did you mean when you said that you considered this money you go from Edwards as a gift?”

Hutchinson: “Because that was our understanding.”

Sapiro: “Aren’t these pages that I show you written in your own handwriting?”

Hutchinson: “They are.”

Sapiro: “Then of course, you have seen that book before, although you just testified that you hadn’t?”

Hutchinson: “I hadn’t gone that far in it.”

Sapiro: “You received some money from Reynolds on May 7th, 1938, didn’t you?”

Hutchinson: “Yes, I think it was about that date.”

Sapiro: “You accepted this check?”

Hutchinson: “I did, under protest.”

Sapiro: “When did you deposit that check?”

Hutchinson: “I think about the next day.”

Sapiro: “May I show you the deposit slips and let you refresh your memory, they show the depositing of the $500.00 represented by the Reynolds check?”

Comperet objected and was sustained, and Sapiro went about it another way.

Sapiro: “What date did you receive $500.00 represented by the Reynolds check?”

Hutchinson: “About one week after that.”

Sapiro: “Will you look at the book and show when that amount of money was credited to the corporation?”

Hutchinson: “That book doesn’t mean anything to me.”

Sapiro: “I’m showing you the account of Edwards in the book of the Beam Ray corporation.

Hutchinson: “If my memory is correct, the two deposit slips you showed me are the transfers from Edwards account.”

Sapiro: “Look in the bank book for a record of that deposit.”

Hutchinson: “It wasn’t deposited, I used it.”

Sapiro then showed him a book in which Hutch’s name had been written over Edwards.

Hutchinson: “I don’t set up these books, I am not sure that they are accurate.”

Sapiro: “When you took Reynolds’ check, did he get any receipt for it?”

Hutchinson: “No.”

Sapiro: “Did Edwards get a receipt?”

Hutchinson: “No, not that I recall. (ditto Ernstein).”

Sapiro: “Did you put into this book the item of $500.00 which was the money from Reynolds?”

(missing words)

board of directors on May 11, 1938. Will you look at the minutes of that meeting and tell me if there is anything stated in there about your receiving these monies?”

Comperet objected and was sustained. Sapiro continues showing the minutes book.

Sapiro: “Did you report the taking of these checks to the directors at the meeting?”

Hutchinson: “I did not.”

Sapiro: “There was another meeting of the directors on May 25, did you report it at that time?”

Hutchinson: “(After studying minutes). It isn’t in there if I did.”

Sapiro named dates of later meetings of June and July.

Sapiro: “Did you report it then?”

Hutchinson: “No.”

Sapiro: “When did you finally report it?”

Hutchinson: “I think it was the first meeting after the return from the east, sometime in August.”

Sapiro: “You were present at a meeting on July 12, it is so recorded in the minutes, would you believe the minutes?”

Hutchinson: “Certainly I was there.”

Sapiro then showed that Hutchinson was present at all meetings and signed the minutes.

Sapiro: “At the August 12th meeting you received authority to issue some notes for these amounts?”

Hutchinson: “That’s right.”

Sapiro: “Did you present these notes to the various people yourself?”

Hutchinson: “No.”

Sapiro: “Did you at any time ask for a return of the receipt from Edwards in place of the note?”

Hutchinson: “The paper returned from Edwards was not a receipt.”

Sapiro: “What was it?”

Hutchinson: “A letter addressed to Edwards stating that I was the owner of so many shares of stock impounded by Fickerson, and that this stock could not be transferred or sold without the permission of the corporation commissioner.”

Judge Kelly: “Was anything said about money that you got from him?”

Hutchinson: “No.”

Judge Kelly: “Did you purposely leave it out of the letter?”

Hutchinson: “No sir.”

Court adjourned for the day.

Friday June 10. Morning session. Comperet informed the court that he was anxious to finish the suit this day as Judge Kelly would be absent for the month of July. Also that if the fight went on there would be nothing left to fight over. He said that the innocent stockholders had to suffer through the actions of Hoyland and Hutch. He said further that if Hutchinson was guilty of any criminal action as regards stock manipulation that was a matter for the district attorney. Judge Kelly declared that he wanted to know just which of the stockholders were innocent. Sapiro said that he thought he was entitled to complete the case. Judge Kelly said that it certainly would be completed and that Sapiro would be given every opportunity to cross-examine the witness fully. Hutchinson then took the stand. Sapiro started the cross-examination.

Sapiro: “You have just stated that while you have not given a receipt to Reynolds and other people you had given a letter?”

Hutchinson: “That’s right.”

Sapiro: “Was the same letter given to all of them?”

Hutchinson: “Yes.”

Sapiro: “Will you please repeat the contents of that letter?”

Hutchinson: “As near as I can remember, it stated that it was impounded with a representative of the corporation commissioner a certain number of shares of stock in my name and that these would be given as a gift, if and when the permission of the corporation commissioner was secured.”

Sapiro: “Have you go these letters?”

Hutchinson: “No.”

Sapiro: “Do these letters make any mention of the fact that you received money from these people?”

Hutchinson: “Not that I remember.”

Sapiro: “Did it mention the number of shares?”

Hutchinson: “Yes.”

Sapiro: “Was the number computed at the value of the stock?”

Hutchinson: “Yes.”

Sapiro: “Who signed these notes?”

Hutchinson: “I did.”

Sapiro: “Then you did not have any signed by the corporation from the date when they gave you the money in May until August/”

Hutchinson: “Nothing that I recall.”

Judge Kelly: “I understand that these shares were gifts, yet it seems that with regard t the Ernsteins, the number of shares were proportionate to the amount of money they put in, was that accidental?”

Hutchinson: “I would say that it was.”

Sapiro: “Do you have in mind what Mr. Reynolds had on his check where it was endorsed, and said for fifty shares of stock?”

Hutchinson: “I do.”

Sapiro: “Now regarding application number 6, do you recall what that is?”

Hutchinson: “500.”

Sapiro: “And he paid you $5,500.00?”

Hutchinson: “No, $6,250.00. He made me a loan.”

Sapiro: “Well, it went to you personally?”

Hutchinson: “I received it personally.”

Sapiro: “Did you put any of it in the treasury of the corporation?”

Hutchinson: “Only indirectly?”

Sapiro: “have you put it in indirectly?”

Hutchinson: “I was doing work for the organization, traveling around the country trying to arrange for the courses.”

Sapiro: “At the time Winters gave you the money, did the corporation own any courses?”

Hutchinson: “No.”

Sapiro: “No contract was turned over to the corporation until the first of June, 1937, is that correct?”

Hutchinson: “I can’t say until I see the contract.”

Sapiro: “Out of your own memory you can’t say that?”

Hutchinson: “No.”

Sapiro: “Just when did the directors authorize you to keep the $500.00 you held out?”

Hutchinson: “Well it was sometimes prior to accepting the money, sometime prior to May, as individuals.”

Sapiro: ‘I mean the directors of the board, and you know very well what I mean.”

Hutchinson: “Officially at the August meeting, I should say.”

Sapiro: “You said that they said that was to enable you to entertain the British.”

Hutchinson: “Yes.”

Sapiro: “But the British had already 1 left the country over two months ago, when did you leave for your vacation?”

Hutchinson: “Some time before the middle of May.”

Sapiro: “But they left before you didn’t they?”

Hutchinson: “Oh they went visiting around.”

Sapiro: “You knew they were not here where you could entertain them?”

Hutchinson: “That’s right.”

Sapiro: “When did you get your note?”

Hutchinson: “I think that was the note that was approved by the board of directors.”

Sapiro: “Who drew up the application you have before you?”

Hutchinson: “Mr. Fickerson.”

Sapiro: “Under instructions from you?”

Hutchinson: “No, at the request of Mr. Glenn.”

Sapiro: “Did you give him the data?”

Hutchinson: “Part of it.”

Sapiro: “You mentioned Mr. Henderson, who to act as Vice President, so you allotted some stock to his wife for that reason.”

Hutchinson: “No, that was not the reason.”

Sapiro: “You said that you could not get any lessons from the Virginia Aero corporation and you had to drop it?”

Hutchinson: “No, we got them from the other series.”

Sapiro: “You say that you didn’t testify that you didn’t drop these Virginia lessons?”

Hutchinson: “I said that we dropped trying to get the course.”

Sapiro: “You never got any Virginia fees for lessons did you?”

Hutchinson: “We received some signed contracts and some deposits which were either all returned or waived.”

Sapiro: “You spoke of money advanced to you by Mr. Fickerson, weren’t you to be paid from tuition fees when received?”

Hutchinson: “I don’t remember that.”

Sapiro: “According to the little book the Finch lean was made to whom?”

Hutchinson: Mr. Cullen.”

Sapiro: “What was the item as I read it (marked here $437.27 cash C.R.H., initials), a loan made by Finch $500.00, is that correct?”

Hutchinson: Yes, with this explanation, I had endorsed the note and assumed the obligation.”

Sapiro: “Why was the note made to Cullen and not to you?”

Hutchinson: “Because I was in Kansas City waiting for Cullen to join me to go back to Virginia to try and secure the additional territory we wanted and some money was needed for personal expenses, money that he had for the trip, he paid part of the bills.”

Sapiro: “How much did you get of that money?”

Hutchinson: “None.”

Sapiro: “So that where it says that in the book, that’s not correct?”

Hutchinson: “I didn’t set up the item in the books, I did not receive cash. I accepted in its place the responsibility of the obligation.”

Sapiro: “You testified regarding the transaction on the Belger stock. In connection with that I show you a letter addressed to Mr. Van Wort, and I ask you if that is your signature on that letter?”

Hutchinson: “Yes.”

Sapiro: “What interest in stock had you conveyed to Mr. Belger, or rather, you had made an agreement to give certain stock to Belger?”

Hutchinson: “I did.”

(missing words)

Hutchinson: “Yes, we needed money for advertising, etc.”

Sapiro: “Y.A.S. was owned by you personally wasn’t it?”

Hutchinson: “Yes.”

Sapiro: “Did you draw money out of this account for yourself personally?”

Hutchinson: “No, for the organization.”

Morning recess called. Recess.

Friday, June 30, Hutchinson on the stand. Sapiro examining.

Sapiro: “It was about February of 1938 that you had your Aero schools Inc., in Nevada?”

Hutchinson: “That’s right.”

Sapiro: “At that time the U.P.I. was carrying on its book’s assets to the amount of $5100.00?”

Hutchinson: “I can’t say what the amount was at that time.”

Sapiro: “Showing record book which contained pay revealing value of contracts at $4997.00, were these the contracts with the Virginia Aero school?”

Hutchinson: “Yes.”

Sapiro: “When these were Beam Ray’s, did you change your listing of assets?”

Hutchinson: “The contract was never abandoned.”

Sapiro reads from record of application to the corporation commissioner stating that the corporation was no longer enrolling students and that Hutchinson was resigning from the company to tend to other business.

Sapiro: “Doesn’t that indicate that there must have been an abandonment of the Aero School venture?”

Hutchinson: “Not necessarily.”

Sapiro: “You say that Cullen told you about the Rife machine and wanted you to take it over, and you refused. What is the date of the first refusal?”

Hutchinson: “Sometime between the first and the fifteenth.”

Sapiro: “Then you went to the lab a week later and again refused? When would that be?”

Hutchinson: “I would say around the sixth and the seventh.”

Sapiro: “And then you went again with a larger group and refused again, when was that?”

Hutchinson: “That was around the fifteenth or sixteenth.”

Sapiro: “Then you finally yielded between the 16th and the 30th, is that correct?”

Hutchinson: “Somewhere about that time.”

Sapiro: “And then Dr. Rife and Hoyland signed an assignment to you on April 30th, is that correct?”

Hutchinson: “Right.”

Sapiro: “What time did the British get there?”

Hutchinson: “About the 23rd of May.”

Sapiro: “You stated that it was important to operate very fast, because the British were coming and speed was essential, and it was therefore necessary to get together with the corporation. First you suggested a new corporation, and later, because quick action was necessary you made an arrangement under which (missing words) to get some contract done, 30 percent to go to Rife, Couche was to get something, and Hoyland also. You said that there was a discussion ending with Rife getting $6000.00, Hoyland $6000.00 and Couche $3000.00, what did Couche get?”

Hutchinson: “Nothing, he was supposed to get it but he didn’t.”

Sapiro: “Was he supposed to get anything out of the American company?”

Hutchinson: “He was supposed to get something in accordance to the division agreed upon between Rife, Hoyland and himself."

Sapiro: “How did you know that?”

Hutchinson: “Because they told me so themselves.”

Sapiro: “What was your next step in reference to your connection with the company?”

Hutchinson: “Well, we called a series of conferences in which Hoyland and I were acting principals and Mr. Henderson, Cullen, and Mrs. Willman sat in. It finally came to a contract in June of 1938.”

Sapiro: “The owners then came to an agreement with U.P.I.?”

Hutchinson: “Yes, after they had come to an agreement among themselves.”

Sapiro: “You were a part owner since the 15th?”

Hutchinson: “Yes.”

Sapiro: “There had been no disposition of the rights of the owners between April 30th and June 1st?”

Hutchinson: “No, except by mutual understanding.”

Sapiro: “Is this part of the affidavit which was signed by you, February 20th, 1939?”

Hutchinson: “Yes.”

Sapiro: “Does it say that Cullen had been given an option to arrange for the manufacturing and distribution of the machines, and that Cullen on May 2nd gave to the corporation these rights under his contract for the manufacturing and distribution and that said corporation accepted these rights, is that true?”

Hutchinson: “Before I answer I will look at the minutes of that meeting.”

Sapiro: “We are not asking about the minutes, we are asking if the statement in the affidavit is true.”

Hutchinson: “(After reading it) to the best of my belief it is true, with the exception that is should be owner instead of owners.”

Sapiro: “Do you think that one owner could give this option?”

Hutchinson: “At the time that Dr. Rife spoke of this to Mr. Cullen in my presence he was a sole owner.”

Sapiro: “About three days before that Dr. Rife had given you and Hoyland an interest in the machine, hadn’t he?”

Hutchinson: “Yes.”

(missing words)

Hutchinson: “I heard him say it.”

Sapiro: “You wrote out the first form of the assignment that Rife and Hoyland signed later?”

Hutchinson: “I did not.”

Sapiro: “You read it didn’t you?”

Hutchinson: “Yes.”

Sapiro: “You didn’t mention the fact that you had heard Rife give this oral promise to Cullen?”

Hutchinson: “No.”

Sapiro: “You were present at one meeting of the board of directors of the U.P.I., on May 2nd, 1938, and you signed the minutes as present?”

Hutchinson: “Yes.”

Sapiro: “Who was the chairman of that meeting?”

Hutchinson: “I was.”

Sapiro: “I will read a portion of the minutes. ‘The chairman then advised that a proposition had been started by Cullen that he held an option on the Beam Ray machines and wanted to give the corporation the rights to this option in the further payment, for his stock in the corporation. A vote of thanks and acceptance was extended to Cullen.’ You pronounced these minutes correct didn’t you?”

Hutchinson: “Yes.”

Sapiro: “Didn’t Mr. Cullen state at that meeting that he had an option with Hoyland and Rife and Hutchinson?”

Hutchinson: “Yes.”

Sapiro: “Did you correct him and tell him he only had an option with Rife?”

Hutchinson: “No.”

Sapiro: “Did you just casually deceive the directors?”

Hutchinson: “I didn’t deceive them at all.”

Judge Kelly: “Well which is true?”

Hutchinson: “Both your Honor.”

Sapiro: “But at the time you had written the agreement with these men under which you would have the right to deal with the corporation?”

Hutchinson: “Yes.”

Sapiro: “Yet you told the board of directors that Cullen had this right, while all the time you knew that only you had this right, is that correct?”

Hutchinson: “It would seem so.”

Sapiro: “What was the agreement?”

Hutchinson: “What agreement?”

Sapiro: “The one that Cullen was turning over to you?”

Hutchinson: “He agreed to release the statement of Dr. Rife’s that he could have the option.”

Sapiro: “He gave it up then?”

Hutchinson: “He agreed to give it up to the corporation in lieu of the contract we had.”

Sapiro: “The corporation didn’t have a contract with the owners then. (Sapiro then read from the record of the minutes regarding Cullen’s release of the option). Wasn’t this record of the minutes prepared much later than the date stated?”

Hutchinson: “No.”

Sapiro: “You were present at a meeting on May 11, 1938?”

Hutchinson: Yes.”

Sapiro: “Were you the chairman of the meeting?”

Hutchinson: “I was.”

Sapiro then quoted from the minutes to the effect that the secretary said that Hutchinson had negotiated a valuable contract with the owners of the Rife Ray, not the corporation to lease the machines.

Sapiro: “Is that correct?”

Hutchinson: “Yes.”

Sapiro: “What did you do about the Cullen meeting?”

Hutchinson: “Nothing apparently.”

Sapiro: “Well, he gave over his option in return for an additional payment for the issuance of stock, what did you do about that?”

Hutchinson: “My thought was that Cullen had given us this right and I was instructed to get a written contract with the owners."

Sapiro: “Instructed by Cullen?”

Hutchinson: “I don’t remember.”

Sapiro: What did Cullen say were the terms of his option from Rife, Hoyland and Hutchinson?”

Hutchinson: “He didn’t mention the terms.”

Sapiro: “Did you advise the board of directors what the terms of that option were?”

Hutchinson: “Only indefinitely, that he had the right we took over.”

Sapiro: “You didn’t state any terms?”

Hutchinson: “No.”

Sapiro: “Did you know what the value of that right was?”

Hutchinson: “No, I still don’t.”

Noon recess.

Afternoon session. Friday, June 30. Hutchinson on the stand. Sapiro questioning.

Sapiro: “You likewise identified a letter from the British containing complaints, and you testified that these things were gone over with Gonin?”

Hutchinson: “That’s right.”

Sapiro: “After that you executed two contracts with Dr. Gonin, are these papers I show you copies of those contracts?”

Hutchinson: “They are.”

Sapiro: “These were reached after consideration of the complaints?”

Hutchinson: “Yes.”

Sapiro: “Do these contracts mention frequencies?”

Hutchinson: “No sir.”

Sapiro: “Did Dr. Gonin insist upon putting into the agreement anything regarding frequencies?”

Hutchinson: “No sir.”

Sapiro: “Did he pay you seven hundred and odd dollars in payment of the balance due on British lab machines, and in addition did he give you checks totaling $10,000.00, which was over due, and later on was that check cancelled, and did he substitute another check?”

Hutchinson: “Yes.”

Sapiro: “Who prepared the minutes of the meeting of August 28, 1938?”

Hutchinson: “They were prepared in Fickerson’s home in Los Angeles, after a conversation between Cullen, Mr. Willman, myself and Fickerson.

Sapiro: “You signed them?”

Hutchinson: “I did.”

Sapiro: “Contained in those minutes is a resolution by Olmstead in ten parts, some of them are as follows: that the board make a demand upon Rife, Hoyland, and Hutchinson for full and complete information concerning design and frequencies of Rife Ray machine, and that they taken action to ensure the secrecy of the frequencies?”

Hutchinson: “I recall that.”

Sapiro: “Hoyland was not present at that meeting?”

Hutchinson: “No.”

Sapiro: “You were?”

Hutchinson: “Yes.”

Sapiro: “You were present at the next meeting as general manager?”

Hutchinson: “I don’t think I was, I am not sure.”

Sapiro: “What did you do to carry out that resolution, did you ever make a demand upon Rife for the frequencies?”

Hutchinson: “I didn’t.”

Sapiro: “You said that he had them, and forty more that he did not reveal?”

Hutchinson: “He only said he had them.”

Sapiro: “We credit Dr. Rife’s work here, you signed one of these contracts in New York, as agent for the owners?”

Hutchinson: “That’s correct.”

Sapiro: “Did you show the contract to Dr. Rife when you returned?”

Hutchinson: “Yes sir.”

Sapiro: “Did he approve of it?”

Hutchinson: “He didn’t object.”

Judge Kelly: “What did he say when you showed it to him?”

Hutchinson: “He didn’t say anything, he just nodded his head.”

Sapiro: “When did you show it to him?”

Hutchinson: “About the first week in September.”

Sapiro: “Did you ever tell him what you had done about approving what Cullen had done?”

Hutchinson: “No.”

Sapiro: “The agreement said that the two shall have the right to overrule you in the decision, didn’t you tell them of each decision as you made it?”

Hutchinson: “I don’t think I did.”

Sapiro: “I’ll show you minutes of a meeting of December 6th, in which you make a motion to make Hoyland technical advisor. At any time after he was separated from the corporation did you demand the frequencies from Dr. Rife?”

Hutchinson: “I asked him to teach them to someone so that we could correctly care for the machines that were now outstanding.”

Sapiro: “Did he give them to the corporation?”

Hutchinson: “Not to my knowledge.”

Sapiro: “How much did you get from the British contracts as a whole?”

Hutchinson: “About $2960.00 in percent of payments, and royalties of $200.00 on the four machines. Did you get other royalties as one of the owners?”

Hutchinson: “Yes $50.00 a machine.”

Sapiro: “Then how many other loans or other acquisitions were there made, which you received from May 1938 to November?”

Hutchinson: “I wouldn’t be able to answer that without checking up.”

Sapiro: What has been your occupation?”

Hutchinson: “For the past four or five years I have been trying to get this Aero school in operation.”

Sapiro: “As a promoter?”

Hutchinson: “It’s always promotional until it’s in operation.”

Sapiro: “What did you do before this?”

Hutchinson: “I spent my time trying to get under way, waiting for correspondence from the east,

(missing words)

Hutchinson: “Yes.”

Sapiro: “That’s all.”

Comperet took the witness.

Comperet: “I call your attention to the $200.00 receipt given to Mr. Van Wort which is dated January 28, 1937, and the $200.00 check from Mr. Glenn. Do these two represent one in the same transaction?”

Hutchinson: “I think they are different.”

Comperet: “The receipt then was not given for the check or money paid when the check was cashed?”

Hutchinson: “It was not.”

Comperet: “Here is Plaintiff’s exhibit 25, a letter sent from the Beam Ray to the British, October 4, 1938, and which begins with a paragraph, ‘At least certain letters seemed to have been sent to them on certain dates.’ Was the matter of these letters discussed with Gonin in New York?”

Hutchinson: “There were a good many letters or lack of letters discussed, mainly to the effect that we promised to do things and to send information which we didn’t do.”

Comperet: “That’s all.”

Judge Kelly: “You say that these people who put out the money, Ernsteins and others, did not receive a receipt, but a form letter. How many of these letters in all did you issue?”

Hutchinson: “Five.”

Judge Kelly: “Were these letters uniform in content?”

Hutchinson: “Yes, one was copied from the other.”

Judge Kelly: “Was the form suggested by an attorney, or did you consult the lawyer about them at all?”

Hutchinson: “No.”

Judge Kelly: “Will you tell me your best recollection of the form of these several letters?”

Hutchinson: “I am the holder of blank number of shares of U.P.I., a California Corporation. This stock is impounded by order to state corporation commissioner, state of California, with Mr. Fickerson, if and when it is approved by the corporation commissioner, I will order the transfer to you of blank shares of stock as a personal gift from me, etc.”

Judge Kelly: “Now you have left blank the account of stock that you own and the amount to be conveyed, were the blanks filled in in each letter, and you signed the letter, and was each letter delivered to the address of these people following the payments of money to you.”

Hutchinson: “I can’t say.”

Judge Kelly: “You did not deliver any of these letters before you got the money?”

Hutchinson: “I don’t think so.”

Judge Kelly: “Did you give any other documents to each of these parties or any memorandum?”

Hutchinson: “Not at that time, no.”

Judge Kelly: “Later these four letters were surrendered to you?”

Hutchinson: “They were surrendered to the office to the to the stenographer.”

Judge Kelly: “When they were delivered to the office, who received them, and into whose hands did they come?”

Hutchinson: “All I have is hearsay. They were delivered there and put into the files of the office.”

Judge Kelly: “Have you ever looked for them?”

Hutchinson: “Yes, about three weeks after they were delivered.”

Judge Kelly: “Were they delivered there on demand of anyone, I mean, did they come to the office because of a telephone call or letter?”

Hutchinson: “I was away, all I have is hearsay.”

Judge Kelly: “Did you ever hear anyone say that they were not in the files?”

Hutchinson: “No.”

Judge Kelly: “Did the corporation commissioner ask for them when he investigated?”

Hutchinson: “As far as I know he has made no official investigation.”

Judge Kelly: “As far as you know they are still in the files?”

Hutchinson: “Yes.”

Judge Kelly: “Have you been questioned about them by the corporation commissioner?”

Hutchinson: “No sir.”

Judge Kelly: “Have you read the Corporate Securities Act?”

Hutchinson: “No sir.”

Judge Kelly: “Were you advised by any lawyer in this transaction?”

Hutchinson: “No.”

Judge Kelly: “Did you ever make a statement to anyone that while you could not sell them stock you could give it away?”

Hutchinson: “I said that it could be sold, but that I could make an application to the corporation commissioner for a transfer.”

Judge Kelly: “Were you told by anyone that you could take money from people on the representation that they in some event might get some stock, and when you took the money from the Ernsteins and Reynolds, you represented to each of them that when and if that was permitted certain stock would be assigned to them. Were you told by anyone that you could do that?”

Hutchinson: “No.”

Judge Kelly: “You had no legal advice on it, but weren’t you consulting some attorney as you went along with this transaction?”

Hutchinson: “Not in regard to this, I was in a position where speed was necessary, the British were coming. WE had to have money from somebody to build the machines. My personal opinion was that as none of the stock had been divided that each was given something for what he did, and that what had been awarded to me I could turn over to anyone who would assist me or the group in making this stock was assigned to you to be held by you and transferred by you to those who might render service to the corporation?”

(missing words)

Hutchinson: “No.”

Judge Kelly: “You thought you could make use of it as you wished, subject to escrow restrictions?”

Hutchinson: “Yes.”

Judge Kelly: “Why were you impelled to give this stock away to these people?”

Hutchinson: “I felt I would receive my share or more from royalties if the machine was marketed properly and that the others deserved it for what they were doing, and if there had been a success with the English group I would be more than repaid and I wanted to get back to the school.”

Sapiro: “The receipt which was shown to you was actually signed by you on January 28, 1938, was it not?”

Hutchinson: “I can’t say, Mr. Van Wort said he gave me cash.”

Sapiro: “What was the other $200.00 for?”

Hutchinson: “I think that was advance money that he was putting up for attorneys fees for forming the Nevada Corporation.”

Sapiro: “He made it payable to you?”

Hutchinson: “There was no one else to make it payable to.”

Sapiro: “Why did you form a corporation in Nevada?”

Hutchinson: “On advice from our attorney.”

Sapiro: “Didn’t you tell Mr. Van Wort that you were doing it so that you could get the stock issued to certain people in Nevada where you couldn’t get it done in California?”

Hutchinson: “No.”

Judge Kelly: “During all the time that you were issuing these letters to the parties that had given you the money you were general manager of the corporation were you?”

Hutchinson: “Yes sir.”

Hutchinson was excused and Fickerson took the stand. Fickerson was identified as an attorney of law in Los Angeles, had been an attorney for 25 years and was deputy commissioner of corporation for four years.

Comperet: “Did you have anything to do with the working of the draft of the initial Corporation Securities Act?”

Fickerson’s answer was rather involved but it brought out the fact that he had helped in this work.

Comperet: “When the Aero Reserve School Western Division was first incorporated, did you have anything to do with it?”

Fickerson: “I supervised the incorporation of the company and prepared the by-laws.”

Comperet: “I show you the permit for the sale and issuance of three shares of this stock, to Cullen, Olmstead, and Hutchinson, for cash. Did you prepare the application for that permit?”

Fickerson: “I did.”

Comperet: “Do you know if the three shares thus called for were issued?”

Fickerson: “”I can’t say that they were.”

Comperet: “I call your attention to the meetings of stockholders and directors of the A.R.S, held June 1, 1937 in Los Angeles, whose office was it?”

Fickerson: “My own.”

Comperet: “Were such meetings held there, that particular day and were you present?”

Fickerson:” Yes.”

Comperet: “How many meetings were held on that day?”

Fickerson:” Three, the director meeting was held first, then the stockholders meeting was held, and then a second directors meeting.”

Comperet: “What was done at the first directors meeting?”

Fickerson:” Two contracts which had been executed by A.R.S. and Cullen were presented together with an offer from Cullen to transfer or assign these two contracts to the corporation in exchange for all unissued shares of stock, 4997 shares. The offer was made, read, and accepted by a resolution which was accepted. Olmstead and Hutchinson were to get this stock along with Cullen.”

Comperet: “Did that acceptance of contracts and resolutions to ask permission to issue stock take place prior to the shareholders meeting?”

Fickerson: “It was the first thing that was done when the officers of the corporation arrived at my office.”

Comperet: “Now I show you an application for a supplemental permit, who prepared it?”

Fickerson: “I had it prepared before the directors and stockholders arrived at my office.”

Comperet: “When did they sign that application?”

Fickerson: “Within an hour of the time they arrived at my office.”

Comperet: “Was it prior to the share holders meeting at which an increase of the board of directors was made?”

Fickerson: “It was.”

Comperet: “I call your attention to the application and ask you to look it over, is there anything in there which further clears this in your memory?”

Sapiro objected and was denied.

Comperet: “Look at the paragraph beginning on page one, with names and addresses of officers Cullen, Olmstead and Hutchinson, then the paragraph includes, ‘The board of directors is to be increased from three to nine members but before this is done their names will be submitted, etc.’.”

Sapiro objected and was sustained.

Comperet: “Where did you get the information you put in there?”

(missing words)

Comperet: “Did you send in to the corporation commissioner the original of the application for a supplemental permit?”

Fickerson: “I did.”

Comperet: “I show you here a carbon copy of a letter, you signed it?”

Fickerson: “I did.”

Comperet: “The names of six new members of the board are given in this letter with their addresses, after that, what next took place?”

Fickerson: “The stockholders meeting took place.”

Comperet: “And after that what?”

Fickerson: “A directors meeting was held.”

Comperet: “What was done then?”

Fickerson: “Three persons were voted to replace, (didn’t get what was muttered).”

Judge Kelly: “Are you reading from the minutes?”

Fickerson: “Yes, but I recollect it perfectly.”

Judge Kelly: “But what go by the minutes?”

Comperet: “We are trying to show that the minutes are not correct.”

Judge Kelly: “You prepared the minutes before the meeting?”

Fickerson: “Yes, your Honor, I only expected one meeting.”

Comperet: “I call your attention to the following page, you will note the difference in the typewriting on the two pages?”

Fickerson: “These minutes on page 223 were not written in my office or on my typewriter. They were written later, not on that day.”

Comperet: “Going back to the minutes of the stockholders meeting, on the last page, notice the last sentence on that page, ‘No further business coming before the meeting, it was adjourned’.”

Fickerson: “That sentence was not typed in my office.”

Sapiro: “I move for the exclusion of the testimony in the difference of typewriters. You say that Mr. Hutchinson spoke to you and told you what to prepare for these minutes, so that you know would be an increase in the board of directors and that at the same time you knew that there would be a (missing words) to take the stock for the three?”

Fickerson: “Yes, I knew that.”

Sapiro: “You prepared the minutes for a meeting of directors at 11 and for a meeting of stockholders at 10?”

Fickerson: “The information that I had had was that a meeting was to be held for the purpose of having stock gotten from Cullen, and for increasing the number of directors from three to nine not the names of the new directors were not given to me.”

Sapiro:” I asked you if you had prepared these with stockholders at 10 and directors at 11.”

Fickerson: “No.”

Sapiro: “That’s the way it is in the book.”

Fickerson: “If I ever knew anything about corporation, I wouldn’t do it, my dictation to my stenographer was that the directors meeting should be held at ten and that the stockholders at 11. I didn’t know any new members were to be added to the board of directors, except as for Mrs. Willman. I advised them to put a new caption here showing that there were two separate meetings and that the time should be corrected. I never noticed that there was this mistake until I read the complaint. Mr. Comperet asked me to explain it but I could not do so, except that there had been a mistake made by the stenographer.”

Sapiro: “You said that that application was signed after the first directors meeting?”

Fickerson: “Yes.”

Sapiro: “Weren’t you called in to pull them out of this hole because they are in a position that makes it look as if you made a mistake?”

Comperet objected and was sustained.

Sapiro: “Is the issue of stock invalid if this transaction was carried through as it is set forth in the minutes?”

Comperet objected and was sustained.

Judge Kelly: “What is motivating your testimony Mr. Fickerson?”

Fickerson: “To show clearly how this mistake was made.”

Sapiro: “Where were the minutes of the meeting of the stockholders signed?”

Fickerson: “I don’t know, not in my office.”

Sapiro: “If they were not signed in your office then Mr. Olmstead testified wrongly.”

Comperet objected and was sustained. Fickerson excused. Afternoon recess called.

After the recess.

Comperet: “The defendants will rest, as I do not see any point in prolonging this, we could keep going for another week.”

Sapiro: “I would like to put Mr. Van Wort on the stand.”

Judge Kelly: “Go ahead.”

Mr. Van Wort takes the stand.

Sapiro: “Please don’t think I am yelling at the witness. He is quite deaf. Give your name and address. Did you know Hutchinson before August 1937?”

Van Wort: “No sir.”

Sapiro: “I show you a receipt, will you state to the court when you got it from Mr. Hutchinson?”

(missing words)

Van Wort: “No.”

Sapiro: “At the time you got this receipt, had you turned over $200.00 to Hutchinson?”

Van Wort: “I had.”

Comperet takes witness.

Comperet: “The $200.00 that you gave and for which you got a receipt, is that in cash?”

Van Wort: “Yes.”

Comperet: “Then this check is for a different item?”

Van Wort: “Yes.”

Comperet: “You didn’t ask for a receipt for a check?”

Van Wort: “No, the check itself was a receipt.”

Van Wort excused.

Judge Kelly: “Do you think you can finish the argument before five?”

Sapiro: “I don’t think so, it will be an argument of fact as well as law. I couldn’t finish my argument before five.”

Judge Kelly: “This department will be dark for a month and I will be busy for a month. It will be impossible to hear you further until the month of August, so that we will have to continue this meeting until the 7th of August.”

Comperet then asked to have it put off until the 14th of August and this was agreed upon.

Judge Kelly: “I want to hear counsel marshal the evidence and I want to know the effect upon a court of equity upon a corporation acting through its agents and these agents acting in a manner that is equitable. And I want to hear what your views are as to the importance of the assets of the corporation. I want to know what you think this corporation owns. It doesn’t seem to me at the moment that it owns anything. It does seem to have a claim on Dr. Rife. Who owns the forty or more frequencies that Dr. Rife has? What has the corporation other than the license to manufacture these machines? And what is the value of that license, if any? Frankly, the court believes that Mr. Hoyland could have given the British group more of what they asked for and that he showed too great a reluctance to give them this information. On the other hand the court’s inclined to believe that when money was raised by Hutchinson and that when he issued these letters to the people who put the money up, he was issuing securities and selling interests in certain stock in escrow and collecting money for them. What effect did that have on the issues here if he was violating the Corporate Securities Act? The important objective of the act is to protect any money in the possession of the victims, not so much with the issuance of the stock. It seems to the court that the representative of a corporation acting through its general managers has come into a court of equity without clean hands and the Plaintiff has done the same, what should the court do? But primarily the question of the innocent people who put their money up and who stand to lose it comes first. I want these people protected in any event, people have come here before the court, who were without guilt, and who parted with their money, thinking they were to have an interest in an instrument of great value. I don’t know whether it has value or not. It appears to be something that cannot be patented. The assignment was made to the corporation but that means nothing, because the instrument is not subject to patent. Perhaps it was a valuable assignment, in spite of that, I want your views on it. I am not personally impressed by Mr. Hutchinson or Mr. Hoyland, but am impressed with the victims who put up their money and got nothing for it. I will be inclined to protect them in any way that I can. Now, if you can convince me that I am wrong in anything that I have said, my opinions are subject to change.”

Comperet: “I think we understand the issues.”

(missing words)

Hutchinson: “No, he was transferring subject to the conditions under which it had been given to him, any rights that he may have had.”

Sapiro: “I show you this letter. Is that your signature?’

Hutchinson: “Yes.”

Sapiro: “In this letter there is a portion signed by Hutch. I now show you a check payable to you in the amount of $20.00 endorsed by you, signed by Van Wort. Have you seen that before?

Hutchinson: “Yes.”

Sapiro: “(to the court) We are showing the court that Hutchinson did get some money through these transactions. Now, Mr. Hutch, would you look at the application to transfer stock that mentions Mr. Van Wort. How many shares to be transferred by you?”

Hutchinson: “20.”

Sapiro: ”Did Mr. Van Wort lend you any money after that?”

Hutchinson: “I don’t think so.”

Sapiro: “I show you a receipt received Van Wort, $200.00 U.P.I., San Diego, California, January 28, 1937, signed by C.R. Hutchinson, is that your signature?”

Hutchinson: “Yes.”

Sapiro: “Isn’t that date wrong, shouldn’t it be 1938?”

Hutchinson: “It has been changed.”

Sapiro showed a check made out to Hutchinson for $200.00 signed by Van Wort and endorsed by Hutchinson.

Sapiro: “Yesterday morning you said you made a mistake in your affidavit, when did you find this out?”

Hutchinson: “When my attention was called to the minutes of the June 1st meeting.”

Sapiro: “Who did this and when?”

Hutchinson: “I am not sure, but I believe Mr. Comperet did after reading parts of the original complaint.”

Sapiro: “When did this happen?”

Hutchinson: “Sometime after I filed my affidavit.”

Sapiro: “When?”

Hutchinson: “Between the date of filing and the time Mr. Olmstead, Cullen, Fickerson, and myself went to Mr. Comperet’s office to see the minutes in trying to find out what had caused the error.”

Sapiro: “Are you sure that it wasn’t after the testimony of Mr. Olmstead?”

Hutchinson: “Positive.”

Sapiro: “What was your mistake?”

Hutchinson: “When I said that the minutes were absolutely correct, the first error was the mention of the first stockholders meeting on June 1st, together with the statement of the prepared minutes, of the August meeting in Fresno.”

Sapiro: “Was one of the errors that all of the pages were wrong?”

Hutchinson: “What do you mean?”

Sapiro: “Never mind. You stated that Beth Willman was at the meeting of June 1st, was that an error?”

Hutchinson: “She was present of course.”

Sapiro: “Then Olmstead was wrong, he said that she wasn’t there. Look in the book please and see of there is any record of the presence of Mrs. Willman.”

Hutchinson: “(After looking in the book). There is nothing in the minutes.”

Sapiro:” You signed the minutes didn’t you?”

Hutchinson: “Yes.”

Sapiro: “And you never noticed these errors until it became an issue in the courtroom?”

Hutchinson: “I never thought of it.”

Sapiro: “You heard them read in Fresno, and heard that there were vital mistakes in them?”

Hutchinson: “It was the content of the minutes themselves as near as I could remember them, I didn’t go back and figure out any of these meetings, or try to remember how they were held.”

Sapiro: “Wouldn’t you have noticed the presence of Mrs. Willman at the second meeting if she had really been elected at the first?”

Hutchinson: “Not necessarily.”

Sapiro: “As secretary, you were responsible for the minutes?”

Hutchinson: “Yes.”

Sapiro: “Then shouldn’t you have done that, shouldn’t you have seen that they were right?”

Hutchinson: “Not necessarily.”

Sapiro: “Who read the minutes of the Fresno meeting?”

Hutchinson: “Mr. Olmstead.”

Sapiro: “Yet you signed the minutes, saying that Mrs. Willman had read the, didn’t you ever suggest that they correct these minutes?”

Hutchinson: “I didn’t notice the difference.”

Sapiro: “You knew that that meeting of June 1st, was a matter concerning this case when you made your affidavit?”

Hutchinson: “Yes.”

Sapiro: “You spoke of costs that had been advanced in the amount of $1500.00?”

Hutchinson: “Estimated.”

Sapiro: “There is an item in the minutes about $1500.00 owed to the U.A.S. Inc., was that for organization?”

Hutchinson: “That was for an agreement of the group that were going to take it over to assume any obligation to that amount that might be presented…(transcript missing lines).”

Sapiro: “You had already set up Aero school in Nevada?”