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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?”
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