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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.”
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