# Appendix to Brief of Defendants Appellees Appellants — United States Overseas Airlines, Inc. v. Venezuela (No. 539) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386418_1581%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix to Brief of Defendants Appellees Appellants - **Published:** January 1, 1957 ## Text -—“-Pnited States Court of Appeal - FOR THE SECOND CIRCUIT Civm Action No. 72-376 ‘ Unitep States Overseas AIRLINES, Inc., Raupa W. E. Cox, Jr., R. W. E. Cox, Letitia Cox, co-partners doing business as Ocean Air Tradeways ; ‘and Ratrx Cox, Jr., Letra H. Cox, Resexagt } ‘L. McSweeney, and Anprew L. Cox,-‘a partnership, doing-business under the firm name and ote of Ocean Arr TRADEWAYS, Plaintiff s-A ppellants-Appellees, ‘against — Compania AEREA ViasEs Expresos DE VENEzUELA, §.A., - AgRoviAS VENEZUELA Evropa and JorGE MaRcANo, Defendants-Appellees-Appellants. * 3 as w NN 1 > ‘Excerpts F rom Transcript of Testimony | W itnesses for Plaintiff | PAGE Ralph .Cox, J r: “ 7 Direct SE RUORER ao —— taetiognseseses sicieieliibalaligaiitniibipaaiie 2 RINNE “seciteniaseainusoediinpnigineiditenaiodiabasel MPS eee hs 2 Reeross ea. vinsnnnaneenvsantaauisisiiamntsiansanelink «A Jorge Mareano: ; aa | Ji rect AcdeeSscheeesnanskqneansennneeethequnnkessenanteneesbetegouasehenced 28, 92 Heriry Schindall: ee Ons : " Cross ... ne | Jorge Marcano (Resumed) :* . aie adamant ee CYOSS ceececceossose. . SysinatnielitanannicbanncighutbdnappaasnanZahpreisis . $4. ROI Sicretcsnnnengiccliinins Sccesibpinssnd Miacadeiaulliad 42,43 Alejo. De Cervera: UID ciccchcsscicnrnlansiens a the 5 sallaslinbibai Sata Redipect otc seksi acaieaneuen 46. o ; . NE sAcchsciscunahh uatiinaseicSbodibuaceiechdecltiaa cmssiaaehesecdasta ic cuaaiiiiin thai 108 Daniel .C. Cox, Jr.: ve i. NIE.” sncesnil cehisssceaubssnta Riel Licata da ia a sediaecmeaakculs 52 Alexander Rozawick: ; ae Cer ipuaieiacnsssiicaslioesitesdebapamied ~ 110 & il ai PAGE. - Witnesses for Defendant = - Albert W. Goteh: to ak “s pote Direct sy RES _ eee scan lubindbtheinicinssteunins apse 48 A Redirect. .......... VARA 18 SORA aT WENO E Os | John S. Russell, Jr.: BE © eartecisgnnnacenieas moron tinmapmsasecetiaag = AE RY ccisiensaviiercupnintercunbeinlaiginieian Dipsihasedtinieanniions 60 John Page Marshall: , | 9... j BE bth tea SETS Rarer iieaiiceae: ae SS AEE ecdatescth enc cdlledcnae LOPE La AR 70 IE © Sadia ainscoccconcctase tua asattanccaaiaeaceeamnes " 92 ‘William C. Wold: , NIL ~ Saad eis cheoesliatiaciensiia again iaant aaa len ae RES RON cS REIN ANT Mae CaP Ue tae 83 IR es eee 83, 87, 90 Rebraea: ee 88,90 ‘Louis: Zinman: sae ay \ a, SPE ea aE Ce E a CS cckncahied iMibssceiccntelssathinsoaMcien mecuciath, 100 Deposition from Fremont W. Burger arene Deposition from Lloyd Webb \..0.0.. cece 110 ” . ; j Deposition from Earl W. Clemett .....2............... irda ; Deposition from Ralph Rts EL *ccUdGialcissaseetaac ee: 119 Colloquy seninaaehiaaie adacaiebinlan YL ENE Me be MO a 121 : Translation of Opinion of Dr. Ramon Tenorio ......... 131 _ United States District Court SOUTHERN DISTRICT OF NEW YORK % Civ. No. 72-376 & 3° . oa UNitep Srates oe RSEAS AIRLINES, Ixc., and. Rien Ww. E. ‘Cox, Jr, Ro W. Ki. Cox, Letitia Cox, co-partners doing business. as Ocean Air Tradeways, and Ratpx Cox, JR.,. Levirta H. Cox, Resexan L. McSwerexey and ANDREW L. Cox, a partnership, doing business ‘under the firm _name _and style of Ocean Air’ 'TRApDEWays, Plaintiffs. ‘US. Sel COMPANIA AEREA VIAJES [EXPRESOS DE VENEZUELA, S.A., AEROVIAS VENEZUELA europa and JORGE Marcaxo, : Defendants. er Before: Hon. Epmunp L. Patmrert, District Judge. “New York, June 15, 1956 10.30 o’clock a.m. APPEARANCES: Maurice L..Scnorenwarp, Esq., Attorney for Plaintiffs; Ty oe Mavcaice L. Scnorswanp, Esq., and° ®BerNxarp B. Potak, Esy., of Counsel. Hate Stimson Russet .& NicKERsON, Esqs., Attorneys for Defendants; | Evcene:H. Nickerson, Hsq., of Counsel. a - 2 e * 3 £9] Mr. Schoenwald: } Ralph Cor, Ir. direct—Cross_ I made ah application for the adjournment of this trial — because the person we expec ted would -testify as to dam- .ages, Mr. Herbert Goldberg, ws taken ill with a heart attack and is still ill, and eounsel offered to permit me to introduce a document which would indicate what Mr, Goldberg would have testified to if -he had been here, and this is contained in a Stipulation. _ Testimony ee . ———— ae [13] RALPH COX, IR, called as.a witness on behalf of te plaintiffs, — first ‘dul¥ sworn, testifie mess fol- lows: . .. : ° ' Fie * -@ . {78] The Court: In other words, the purport of ‘it was you macde—your ‘complaint and they told you to go [79]. ahead and ‘Derformt - The Witness: Yes. ae The Court: You told them you couldn’t perforn’ and it ended on a note of disagreement, without: anything being agreed to? S ‘i The Witness: That. is correct. : 2 “ ° Ss So » £82] Cross-eramination by Mr. Nickerson: — Q. Mr. Cox, what office do you hold in United States Overseas Airlines? “A. Vice-president. . Q. Are you still. a member of the cpap of Ocean ~ Air Tradeways? A. Yes. ; 4 (). Were you president: of U. 8. 0. A. in 19511 A. I was. . 3 - - : ee Ralph Coz, ree ° _ Q. When did you become vice- president? ALA couple of years ago. = P 4 Ralph Cox, Jr.—Cross . ‘ Q. What was his title, if amy?. A. He was purchasing agent’ at the time. » ; Q. Did you have_a man -named Ranevet A. Exeuse me. We had Mr. MeCormick also ag a vice- president. I had overlooked John McCormick. ,_ 086] Q. What was his job? A. He was ar: vice- president and he was the Washington representative, Q: Did you have a man named Sanour? -A. We did.” Q. What was he? A. He was a pilot and general busi- ness administrator with us. . ~ Q. Wasn’t he'a lawyer? A. He was a ‘graduate lawyer. : » e ——— | te . * Q. Mr. Cox, you testified on your direct exauijnation that-in May' 1951 you were in Kurope. When asin you BO - to Europe? A. May of 1951. ) : , Q. Yes, what time in May? A Around the middle of May. | s Q. Were you, over there on business of the U SOAT A. I was on business generally, yes. Q. Where did you go in EF tarope? - A. We went to Paris, England, Germany; I think Italy. aah : Q. Where did you go in Italy ?- [87] -A. W here did I go in Italy? Milan and Venice, . Q. While you were in Paris did vou.receive any eor- respondence concerning AVE? A. believe T. did, ‘from Mr. Clemett. a. . | : SO | 7 * ° * | : | >. Q. I show you copy of a letter datedJune 5th and T ask you whether you. received the original of that when ‘you were in* Europe. .A>Yes, this appears to be a copy. of what I received. ca oa Ralph Coz, ‘Jr. —Cross | Q. Do you notice. in that, Mr. Cox, the sentence “Con. tact AVE in Rome, Italy for complete picture on business. from Rome to Venezuela’? A. I notice- that. — -_— | Mr. Nickerson: I offer this in “evidence, your Honor. ; are * 2 ies > [887 (Received? in ‘evidence as Defendant’ s Ex- aa hibit BQ.) Se \ a. Had. you ‘heard: about AVE prior to the date of that letter?— ‘A. Yes., “ Dest “Q. W hom had you heard from? A. From one of “our pilots by the name of Patton. | Q. How long before that letter was it that you: heard |. from hint? A. Oh, T- would say two or three weeks. | = Q. Did you contact. AVE in Rome, Italy for the com-_ plete picture on business from Rome to V enezuela when: ‘you were in Europe? A. I ean’t recall if I-did.- I-don’t think T did. Jones may have sent them a wire. But if_ my recollection. js correct, we never received any reply or it was missent or something. Mr. Nickerson: Do you have a copy of that wire? | eri : [89] Q. Pcie you Defendant’s ‘Exhibit C for identifi- @ition.and ask you if you received that letter. -A. Yes, I think I received this letter. . | : ae idkereck: I offer that in’ \ etdlaanie. (Received in evidence as Defendant’s Exhibit C.) . + s.- s s 4 a ¢ "Ralph Coz; Jr. —Cross s [90]. Q. Defendant’s ‘Exhibit id Mr. Bee: appears . -to set forth certain communications from Clem to Fritz and Fritz to Clem: Can you tell us who Clem was? . A. That was Clemett, Earl° W. Clemett. Q. And ‘can you tell us who. Decesk. was—I am sorry— _ who Fritz Was? . A. Fritz refers to Frentont Burger, our . chief pilot. : i . Q. I show you Défendant’ ’s Exhibit D for identification “and ask you whether that is the communitation which you ; referred to, which Jones ReOF to AV E. A. Yes, this looks ; like a copy of the—- Mr. Nitkerean: 1 will offer that in evidence. A. (Continuing) —tele “gram. We néver receiv ed an an- Sw er to that. \ » Mr..Schoenwald: No objection. ' (Received in evidence as Defendant’s Exhibit D.) ° e*.—-C«‘ * [91] Mr. Nickerson: Is it conceded that ‘Defendant’s Exhibit C is dated June 7, 1951? Mr, Schoenwald: Yes, it is. Q. On Defendant’s Exhibit D, Mr. Cox, Mr. Jones de- | scribes Jimself as general manager. Was that correét? A. TH t eventual? became eorrect. ™ don’t know the date. Q. June 10, 19512 A’. Then he at that time was pee manager. hey proposed, but we said that —. 14° , Ralph Cox, Jr.,—Cross > Q. So right fromthe beginning, Mr. Cox, you told Mr. Marshall, did vou not, USOA wanted control of all traffic | procurement, did you?- A. Or words to that effect. I+) might add that partic ‘ularly all traffic in Rome was entirely— — i . ¢ e@ ; 5 (117d Q. Let me read froin your dépasition, page 88: .“He (referring to Mr. Marshall) said that openly the ~ Venezuelan embassy would probably not embarrass them- Selves too much by showing partiality to AVE.’ Do -vou reeall that? A. That ’s right, he said that. - Q. Do vou recall testifying to that? A. Yes, I do, and that he further stated— , Me.. Nicke ‘rson: T move. to. strike it out. This Witness will not/ remain responsive to my question, - The C ourt: Vos. «ae . ° .e +i. p20] Q). Who Yirafted Defendant's ; Exhibit’ GG? A, jurver drafted this, to my hest recellection. * * - « (1217 Q. Did you make any change in it? A. “After: Burger. draftest a j Q. Yes... A, I don't recall: T might have. Q. You know vou made no changes in it, don"t vou? A, We are looking back five vears. We went over these notes. He made a rough draft and, then—-usualky he made a rongh draft and then a smooth copy. ‘There mat have been some changes but if there were T don't remember. ” Q. Have you refreshed vour recollection for tliis trial: by reading your deposition? ASSome time'ago. T haven't had a chance to do it in the--to do ‘it recently, * Q. T read from page 100, next-to-the-last question: *“Q. Did vou change anything that Mr. Burger had written? ‘‘A. No,-not that I reeall."’ oe -« & > 15 Ralph Cox, Jr..—Cross Do you recall that testimony? A. Yes. Just about what I said now. I don’t recall. = [122] Q. From page 100: MQ. Do you have a prior draft of Defendanigs Exhibit Gt A. I don’t. know of any such thing.”’ - Do you recall that testimony? A. I can’t recall it. What is Gt Q. G is the exhibit I sii showed you, the letter dated July 19th. A. Do I have a prier draft of that? I don’t - recall, R s i Sue — Q. Do you recall that testimony? A. That is in 1951, that testimony, igy’t it, or 19521 ee Q. Do you recall that testimony? A. I don’t recall stating: it’ just that \ way. If it jis in | there, I must have _ said’ it. a s e | 2 e [125] Q. Were there any prior drafts of the letter of July 21st, Defendant’ = Exhibit I, Mr. Cox? [126] A. I can- not recall. Q. I will read from your deposition, page 112: “Q. Did he (referring to Burger) make any prior draft? A. I don’t believe there were any such.’ ome Do you recall that? Does that refresh ypur-récollec- “Mont A. Yes: -. a Q. Do you recall making a referénce.to the draft of— to the letter of July 21,1951, Defendant’s Exhibit I, ‘vour diary? A. I don’t recall. Q. Have you read your diary since you were exaniined on your deposition? A. No. , (). I-will read from the top of page 117, your testimony, as to what is cohtained in your diary for. July 21, 1951, Saturday: i. ‘ Sy don’t recall his being there. He’ may have been. 16 | Ralph Coz, Jr.,—Cross ‘‘Burger and I worked out an answer to Marshall’s telephone call regarding AVE and I-hope it is accepted.” Do you recall that? A. I probably wrote that, yes. Q. Did you have any. discussion with Mr. Marshall [127] about the provision in the contract which recites— it is IG, in the third. sentence—‘‘The president of CAVE shall be reimbursed by Overseas for actual business ex. pense and, subject: to the attainment of an annual average load factor of not less than 50 perat, shall also receive “an annual salary of $15,000 a year.’’ Did you discuss that: load _ factor of not less than 5i) percent with Mr. Marshallt A. I believe so. ee | Q. When you signed the contract on July 25th, Mr. Cox, who was present? @ e ‘ j Q. I he you Defendant’s Exhibit AL tee ‘identifica. tion and ask. you if you received the original of. that. [140] A. Yes, I think we received this too. | ~ Mr. Nickerson : I offer that in evidence. . sa ‘ Q. Do you recall about when you received it? A. It is dated be ae aard, — "o.. -(Resivel in evidence _ as Defendant? s ‘Exhibit AL. ) : (Defendant's. Exhibit AC received in evidence. ) 21 Ralph Coz, Jr.—Cross | C141] Q. I show you Defendant’s Exhibit AB for iden- » _ tification and ask you if you received the original of that . on or bout its date. A, Yes, we received this. Mr. Nickerson: I offer that im evidence. ° °° -e (Received in evidence . as’ Defendant” Ss Exhibit pS oe as 4 ‘Q. ‘Did you give Mr. Burger peranission to pabitiate an inter-line agreement with at Italia? A. In so far as USOA could do so, yes. £145] Q. oo you been a defendant in. quite a lot of lawsuits, Mr. Cox, you or your company? A. In quite a lot of lawsuits? ~ Q. How many? Mr. ihiiesonwah: I would like that mation to _ be clear. Is he talking about the company or Mr. Cox? , Mr, Nickerson: I will hecads it down. “Q. Mr. Cox, first, personally. A. Oh, I have been sued a few times, but I think quite a number. Q. How manyt A. I guess about three or four law- swits I have had. : . S Q. And how about USOA?. Has USOA been a defend- | ant in quite-a number of lawsuits? A. No, I would not say so. . ; ' : ©, : Q. How many? ° _ me e ? ; cca ° e | ee ~The Court: T will allow ee question on [146] the condition that it. be amended to provide that . ‘ Ja. Ge Be Ralph Cox, Jr.,—Cross it ——- the time of” his: connection with the company. | | Q. While you. were with USOA how many lawsuits has it been int} A. There have been, two or three. Q. Are you sure that is all? A. Well, are you talking about going to trial or being sued and various things? Q. Suits brought against you. A. How is that? Q. A’suit that‘is brought against you irrespective of “whether you went to trial. A. I can’t tell you. Every once in a while some employee sues for some claim of some sort or other and it may. go to trial and it may ie not.. , Q. Didn’t Waters sue you ‘for ‘ie salary you didn’t pay him? A. We paid him. We overpaid Mr. Waters. Mr. Waters had quite'a claim there that was’ just fantastic. Q. He sued you? A. He sued us, that’s right. : Q. Didn’t Mr. W arner. sue you? A. Mr. Warner sued us, that’s right. Q. Was that for services that he rendered you? [147] A. And Warner set them up, set himself up as an expert over Burger, and claimed fantastic sums which weren't in the picture. at all. — Q. USOA has had quite a history of violations of the Civil Aeronauties Administration? A. Oh, no, they haven't. No, _— haven’t. \ Mr. Schoenwald Objection. Q. Let me ask you this. Has USOA ever had any vio- lations alleged against it by the Civil Aeronautics Board for failure to maintain its records at its base— Qtr. Schoenwald : Objection. The Court: Why are you going into this? e 23 es. eo Ralph Coz, Jr—Cross _ Mr. Niekerson: Your Honor, * want to show— ~The Court: Relationship between the corpora- tion and the civil regulating agency could not pos- _ sibly affect the issues of this case or the witness’s. . credibility. | ee Mr. Nickerson:. I want to show. the. absolute disregard that this individual has for any legal processes and any regulation, and I have them here, they are as'‘long as your arm, from the Civil Aeronautics authority as to what violations are outstanding against them, and [ think that affects the eredibility and it shows, the absolute disregard these people— 7 a [148] The Court: You see, we would have to_ undertake a trial within a trial in- order to ascer- tain the merits and validity of these various viola- tions. I.could not undertake to do: that. Mr. Nickerson: “Maybe he will concede some of ee them when I read them. (1493 The Court: Yes. Let me suggest this, you make an offer of proof and then I will rule on it. I am afraid I cannot let you go into it but I will permit you. to make an offer of proofs fe Mr. Nickerson: I offer to prove that USOA Has had the following violations—had the following _violations outstanding against it: in December 1951, one, failure. ‘to maintain aircraft ‘and engine records. at the company’s principal maintenance - base; two, operation of.a propeller approximately 315 hours in excess of approved overhaul time; . three, employment of flight navigator who was not -. jn possession of an appropriate navigator and 24 Ralph Coz, Jr.—Cross medieal certificate; four, operation of an aircraft - with unsecured’ license, life raft, ladder,. cargo, oxygen bottle, et cetera, in thie aircraft; five, opera- _tion of an aircraft with 4 two-pilot crew in excess of prescribed flight time limitations; six, operation of an aircraft with a captain in command who flew in: excess of flight’ timne limitation; seven, failure to maintain proper airmen records; eight, failure to maintain coniplete flight manifest record; nine, . failure to require pilot training in accordance. with the company’s operations [150] when his instru- ment and equipment standard checks. had expired; eleven, operation of an.aireraft with loose passen- ger seats, trunks and unsecured equipment in the: - eabin; twelve, operation of an aircraft’ with an inauliibient number of seats and seat belts for’ the: number .of passengers aboard; thirteen, lack of proper pilot check by . qualifies. company check pilot; ‘fourteen, operation of an aircraft’ with a captain who flew in excess of prescribed limitation; fifteen, operation of an aircraft with a crew? who flew in excess: of prescribed flving time. limitations?. sixteen, failure to maintain records for 144 flights; - seventeen, utilizing of five pilots in excess of pre- scribed flying timé limitation ;\ eighteen, operation | of aircraft in trans-Pacifie operations without the required radio transmitter frequency ; nineteen, operation of aircraft in excess .of maximum allow- able gross weight limit; twenty, operation of. air- craft again in excess of: maximum allowable gross weight limits; twenty-one, same, twenty-two, the. same; twenty-three, the operation of aircraft in an unseaworthy condition in that inadequate” sizé ~ ~ es a Cox, Jr.—Cross ' wire, an inadequate circuit breaker and improperly installed generator sy stem were: utiliged aboard an - aircraft. [151] The next number, company unaided its aircraft to meet its operational requirements with: - out. proper organizational coordination to insure adequate maintenance; ‘next, company has failed to provide .for. its employees adequate and proper - engineering and operational data to insure that the - operation of its aircraft will be in accordance with - the operating requirements of the civil air regulations. c Next, flight crews have exhibited a lack of requi- site knowledge to operate aircraft corumunications equipment in international and overseas operations. _ Next,:routine control of mainten nance of communi- | cations eqiipment is inadequate ‘becdtise of absence | -. of a company inspection sv stem | as required by the civil air regulations. Sueee Next, the company has ‘failed to provide. adequate S engineering data and information to its maintenance personnel in order to provide for proper modifica- tion of tlie aircraft and aircraft components: Next, company has .failed to establish the re- quired -organization maintenance training program. T offer to prove that. ° -The Court: Are you “finished? Mr. Nickerson: Yes. rie xe ‘ [152] The Court: I sustain the objection on the ground that it would lead us, far afield and in- volve us in issues’ whieh we are not called on. to °°” deal with in this case. It could not possibly have. “any relevancy here. ° i tule it out. ” @ e . ®. ~G yout - : CG. & . | Bs RS ee oo a Q._. “Ralph Cox, Jr—Cross : Q. As.a matter of fact, Mr. Cox, you are in contempt personally of a judgment right, here in New York, aren't . ts Mr, Schoenwald : Just a maisent. | ' A. That is not— . . e @ -} Mr. Schoenwald: I also object to the examina- tion of the witness in connection with the last .[153] © question. The only possible area of question of:a.. _witness’s' credibility would be his conviction of a crime. Unless the,question encompasses a convic- ‘tion of a crime, I feel‘it is improper. _- ~ = -_ Q. 4s The Court: You say the only way a witness can be impugned is*by provirg he has been convicted of a crime? aa a . ° ie . The Court: You may ask him whether he was in contempt of judgment. s there a judgment outstanding: against you in a Separation action here in New-York? | “A. No. Qe Wasn't there a judgment against you? A. There a was at one time. Q. Didn’t it provide that you should make certain pay- ments? A. They were made. Q. Yes, and you didn’t come into the state, did ‘you? [154] A. I had a child that was in danger of its life and I stayed out of the state with an, infant then on a psy- chi&trist’s s recommendation, ‘and | will do it again if it is the safety‘of my child, and that is the only contempt that was against ine, sir, and it has been removed, z@ e 6 ore a Ralph Coz, J r.—Recross nm [158] Recross-examination by Mr. Nickerson: o Q. Mr. Cox, when you listened in’ on the telephone call that Webb and Colonel Marcano had—do you recall ves! one? A. Yes. Q. Did you tell Colonet ‘ercene 400 were listening? A. Did I tell him? . Q. Yes. [159] é‘. No, I =e him. eS didn't speak to Colonel Mareano. Q. Did Webb tell him that you were sates A. I don’t think so. x 7 me | Q. Did you tefl ‘Colonel Mateano that you. were making a tape recording of that conversation? A. No. — Q. You made other tape: recordings of other conversa- tions you had with people representing the defendant. didn’t you? A. Did I do what? Q. Made other tape recordings of other conversations that you had with people representing the defendant, didn’t you? A. It seems to me I made a recording when Mr. Russell. threatened me on the phone, yes. Q: Did you make any other tape recordings ‘with [160] people representing—conversations with people repre- senting the defendant? A. Not that T.gan. remember. Q..When you made the tape recording, ‘with Mr. Rus- sell, did you tell him you were doing itt. A. No, I djdn’t. Q). Is it your practice to make tape. recordings of tele- . phone conversations? cS a e o A. Occasionally we make: them. 2 & ae i varieus sundry receivables which remain on the books [352] for a long time, is that they are seldom col- _leeted, almost always written off, at least substantially. © . Rt e e e : > * . ‘A 30 > Henry Schindall—Cross Q. Can you tell‘ us specifically: whether any accounts . réceivable’ from Rome in 1950 were in fact not collected? A. No. It is possible that soine were’ collected. Q. Tam just asking you w hat you can: trace. Can you: trace whether any accounts receivable from Paris: were not collected? .A. No, there is no evidence of collection. | Q. Now—excuse me, | ” sorry. A. There is no evi- dence of collection. | | Q. Yes. With respect to- Lisbon, can you tell us whether any. accounts. receivable from Lisbon in 1950—can you trace whether they were not collected? A. No, sir: Q. Can you trace whether any accounts receivable from. _ Caracas, sales of tickets to passengers in 1950, were not’ collected?) A. Tam a little unzertain of the meaning of - the word ‘‘trace’’ as you use it. W ould you care to. * [353] explain it? | . Q. Is there any ree ord that | you have seen that shows specifieally that ace ounts receivable from sales of. tickets to- passengers in Caracas were not collected, other. than— : A. I don’t recail. . | Q. (Coftinuing)—vour assumption from, the genéral assumption from the statement .of estimated | assets .and liabilities? A. Yes. : © Q." Which you have already told us as of June 15, 1951. A. May T-explain this? = | ~ Q. Will you answer my question and then explain it? A. I don’t recall. I say. that beeause I examined a num- ber of these original vouchers, called comprobanes, and I believe that some of them had entries showing writeoffs of accounts receivable. : ; Q.. Do you recall the amount of those? A. No. Q. In round figures? A: No. T recall seeing some- writeoffs of that character. nies _@ @ 2 31 H cary Sehindall—Cross [354] Q. You'doen’t actually know from your examina- tion of the’ books, do you, when thé various accounts ~ receivable. which. were written off became worthless, do ~ you? A. No, sir. Q. I think you testified on your ‘direct examination that the réserve which appears on page 6 of Exhibit 357 of $126,316, reserve for-exchange loss, that that should have -. been put on the books m .1950;° did you testify to that? A: I believe so, yes. ° ‘Q. You don’t know what portion. of that is allocable to 1950 and what portion allocable to 1951, do yout A. Yes, I believe it is all allocable to 1950. Q.. Didn’t they make sales tickets, in 1951 in Spain? Didn't they put ‘on their books pesetas in Spain in 1950? ~ [855] A. My recollection is that this account existed at . $250,000 at the end of 1950 and that it remains about the samé. There, Were nov colleetions, since no funds could have been —. out of —— peselint ex pesctas in 1951? “That is the paint I am asking. A. T don’t know, 7 1950, yeu know that this was an operating airline, do you not, Mr. Schindall?. A. Yes, -sir. Q. And you don’t know whether in 1950 whether they expected or not to be able to get their, Pesetas out of Spain, do yout. ; . [356] (Question read.) A. T am not sure I understand the question., Do you meéean— e Mr. Nickerson: Would you read the question? The. Witness: May I ask— iti Mr. Nickerson: Yes, go ahead, 32 er Jorge Marcano, Resumed—Direct The .W Meets: ae ‘you mean were 5 ete aware during the. year. 1950 of the difficulty of getting funds out,of Spain? Is that what you mean? _ Mr. Nickerson: . No, I am not asking that. Would you read the question again? (Question read. ) A. No, I do not. May I say, in didien that 1 recall seeing correspondence during 1951, I believe, although I _ am not certain of the date, the tenor of which was there were difficulties so— a | Q. In 1951 you saw that? A. I believe it was. in 1951. Q: Dated 1951? A! Farly in 1951. There were several letters. Attempts. were ‘being made, apparently, to get ‘this money but they weren’t available. -Q. In‘ a statement of estimated ‘assets and liabilities, ‘where it shows a. less, would that not [357] ordinarily, put-a*person on notice as to the facts. with respect to the loss? A. It would merely indicate a loss. - Q. Yes, but wouldn’t a prudent person look at the facts at that loss? A. Yes. ~ Q. As an accountant? A. Yes. [359] JORGE M ARC ANO, Resumed. ‘Direct ‘examination continued by Mr. Schoeniv ald: [401] Mr. Schoenwald: I would like to. offer : this letter in. evidence as a communication: from the..attorney. in fact to his agent as of gpugust Ist. a time before the withdrawal or rescission. of the contract or any proceedings were commenced and as a letter showing the state of- knowledge of the defendant, bearing upon his intent, a necessary element in ‘the case of fraud, bearing upon wilful- X a Jorge Marcano—Direct néss and by its very: nature_and—damages, .and. dealing with the credibility of the witness, and, in so far as it relates to the stock, setting forth the knowledge of the defendant dealing with the shares of stock involved in this case. And I direct your Honor’s attention also to the fact ‘that it indicates. the liability of this company CAVE as well as the ‘Colonel to Flying Tigers, one of the liabilities | not mentioned in the prospectus, in the two places [402] which I think are pretty important ates marked out in advance on the: document. Mr. Nickerson: It will take less"time if I do not ‘ * object to these and reserve my motion to strike - _ them. May I do that? ea | ~The Court: All right. _ It. will be marked ‘in - evidence. ‘ae | 6 = [403] Q. Did you send a communication—did you send this letter out? — . | ’ Mr. Nickerson: - We concede that it was, your Honor, 272. for identification. | ea rate Mr. Schoenfald: - 1 would. like to have this . marked in evidence. ; ) ” Mr. Nickerson: May I. reserve my motion to strike? It will take less time. . The Court: Yes, all right. . a (Plaintiff's Exhibit 272 for identification received. in evidence.) : : rae nets [404] Mr. Schoenwald: Po you also want to concede as to the admission of. this document. in evidence (in@eating) ? fae re “Mr, Nickerson; I will let it in ‘subject to my. a. SE gs ec eee Ni 34° — . > . . Jorge Marcano—Cross : motion to strike, your ‘Honor. I am not going to object to any of this because it takes us more time. + ‘ ° e. * “ [429] Cross examination by Mr. Nickerson :. Q. When were you first ‘engaged in anything to’do with — aviation? ‘A. 1928. . . -Q. Will you give -us the various posts you held from that time up until 1950, when you became president ‘of CAVE? Would you run: through them rapidly. A. Yes. I was chief. of different air units,, chief of paratroop squadron, bomber squadron, I was instructor in the Aviation School. : I became Director of the Military School of Aviation. I came out -to-the-States awd spent one year.here through. school, a different outfit, U. S. Air Force, outfit; went back and became Liaison Officer with the Canal Zone and military attache, assistant military’ attache -in~Panama. Went back to Venezuela, ene: Inspectay General of Aviation. After that I was Air Attache to the Venezuelan Em-: bassv in Washington, After that IT‘was Military Attache ° and Chief of Military Missions at the Embassy in Wash- ington ;. chief representative in the Inter- American Defense Board. . ry 420] From there I west’ had four stations in Q. So that your passengers in the tals ope ration. came from the four-stations? A. Frem the\four stations. 40 - Jorge Marcano—Cross c ° / Q. The: Alitalia ran ftom Rome direct, to Caracas? - A. _ Yes, sift. ' Q So that they had/only the one station in Rome from which to take pasengers out, is that right? A. That i is correct. ‘ Q. If ‘I wideretand what you say, you told the Alitalia . people that you had several stations to fill your airplanés up and if they made any: trouble with respect to. your two flights a week you would get your government to || limit the number of passengers they: could take -out of Caracas; is that correct? A. That is what ! talked: to. them, yes. | . ‘e e ° n (453) Q. Prior to the time that you: got over to Rome’ did you have some requests from Burger to appoint & ‘Mr. Mazzolini as legal representative? A. Yes, I did. Q. Was that done by Vou when you got to: Rome? A. Yes, that was done by me when I got to Rome. Q. And was that done—was that- under this L454] document AK for identification? A. Yes. Q. Did. you ‘have any: conversation while you were in. Rome with Mr. Burger with respect to whether-USOA | did or did not want to take passengers from Spain paying: in pesetas? A. Yes, from what I talked to him I under- stood him that they didn't want to take passengers from Spain. Asa matter of fact. they left Mr. Waters in _° Madrid on the way back to set'up a warehouse, bended _ -warehotise, to take cargo from other. places rather than rege . passengers in esos [456]. Q. Do you recall how ‘many passengers | there .. ' were on the trip back on September 9th? A. On Septem- | ber 9th there were 25° — from Rome, a 41 J onge M arcano—Cross ; ‘le Did you have any Seasitigate: ies Spain? A. art there were 12 passengers from: Spain. sit ts Q. Now do.you recall whether you ‘had any’ conversa- 3 tion with, Mr. Burger while you were in Bome with respect to these 12 passengers in Spaint A. To my recollection, | Burger~™ did not want to take passengers in Spain but apparently later bn he decided; if he did not, have enough in Rome, to'‘take passengers in Spain. That is my ‘recol- lection, - Q. In other. words, am L correct’ in stating that be said ‘that if they had empty ‘seats they would take Spanish passengers who were paying. in pesetas; is that ‘correct? [457] A. That is correct: + Q. And did. you so inform the agent in 'Spaint Did you so inform the agent in . Spain? A. That ne | ‘remember. » Q.:1 will show vou a letter dated September 8, 1951, dias ask you if it refreshes your recollection? A. Yes, : that is. the letter, yes. ; ‘. & Q. ‘Does that -refresh your recollection? A. rene ate —_ You did so inform him? Fass Yes, T informed him. [459] Q. Did Mr. Burger, while you were in Rome, Colonel Marcano, express himself as to whether he “was enthusiastic or not enthusiastié as to the. potential of the operation, the AVE operation? A. He was very enthusi- astie about the AVE operation: As a matter of fact, he and all the people that were working with him, I -mean the pilot-and the riavigator, everybody in the office; crew people, they were all very) enthusiastic, talked about the traffic in Rome, traffic in northern Europe, and even pre- pared a memorandum for: going into peetnaes Europe. a ie - 5 Bi 42 7 Jorge M pareene-emnarens Q. Now. during the time that you were over there did you at -Burger’s .direction sign an\ interline agreement with Rlitalia? “A. Yes, I did. Q. Whick provided for the interchange of passengerst : A. Interchange of passengers in Lisbon. — + eo e 74) nadiaes reduination by Mr. ae Q. I show You Defendant’ s Exhibit AR’ tee identifica. tion. Is that ‘the interline agreement with Alitalia that — you signed? A. That is, .\ sa Ne ~ Q. Are you familar ee Mr. Burger’s initials? A. ‘This is Mr. Burger’ s initials; yes. : > Q. And Defendant’ s Exhibit - AS for identification, was that prepared by Mr. Burger and Mr. Van Boheman? A. “This: was ean by: Mr. ‘Burger and Mr. Van Bohe: man, yes. i, Q. Did you ereiiier send a translation in Spanish of' Defendant's Exhibit “AS ‘to the Ministry~of Communica- tions? A. The Ministry of Communications “hn, Caracas, | Yes. roe Ne Fc a bd ° , * [475] Q- You testified that Mr. Seiaeiaca talked with the Alitalia people. A. Yes. ° ~ Q. Did you. ‘and Mr. ‘Burger jointly: ‘talk with the Alitalia people? . A. I talked. with the Alitalia people when we were going to sign, the agreement. - ath .Q. Yes. Now, did Mr. Burger explain to vou. the nature e of the agre ement that ie wanted to make with Alitalia? — A. He did explain it to me, yes. Q. Did’ he explain to you that he thought it was better ' for the company-— A. That was hie— 43 a Ce ae Jorge Marcano—Recross e Q. —to have one trip a week from northern Europe and one trip a week from Rome? A. And joinmg them in Lisbon. . Q. Joining them’ in Lisbon and exchange passengers? [476] .A- And exchange passengers. Q. Alitalia would then go to the southern part of South ‘Americat A. South Ainerica. : Q. And you would take passengers to Venezuela? A. Or the northern part of Europe. It was going to work that-way. | Dake, , Q. As far as South Ameri¢a was concerned you would - ‘take them to Caracas,. Alitalia would take them. to the southern part of South America, is that correct? A: That "is correct. ras Se e : 7 Mr. Nickerson: Iam going to introduce [477] these two documents when Mr. Schoenwald’ has had ‘a chance to see them. e « e | [480] Recross eramination by Mr. Nickerson: XQ. Calesst, you have been a resident of Venezuela for some time, have you? A. Yes; all my life. » Q. And are you familiar with the Publie Works [481] Program of ‘Venezuela? AL Yes, Tam, fe Q. And as a member of the. government you were familiar with that? A. Yes.- | Q. Are ‘you ge nerally familiar’ with’ the immigration into Venezuelat A. Yes, I an. | 24° ‘Alejo Le Cervera—Recross e - 2 ‘ [485] ALEJO Dr CERVERA, called as a witness on behalf of the plaintiff, being first duly sworn, testified as ‘ follows: © [526] Recross examination by Mr. Nickerson: : e e e - 1528) Q. Could CAVE under the contract of Agent 8. | 1950, hire personnel to perform certain functions for it | in running its operation? A. Very difficult to say because mainly the contractor of personnel against the franchise’ has been transferred to United States OA, but at ‘the same time— Q. Go. ahead, finish. ' the same time CAVE has retained. some rights of supervision and the proposition of personnel. I would say the right— Q. Excuse me; I don’t think you understood my ques- ‘tion. I don't me an-to cut you off. If you want to finish, go ahead. But I don’t think you understood it. - Aside from the contract of July 25, 1951, leave. that aside for the anoment, could CAVE under the franchise, the contract with the federal executive dated August. &, 1950, hire personnel to perform any of its opérational functions? Could it, for example, hire someone. to, sell | tickets for it?) A. Well, that is different. I was thinking ! of flying personnel. No.1 don't think so. Q. It could not hire an agent to sell tickets [529] for it? A. It is so particular.a s ainneiae tIfat, really,. the answer cannot be found. here: , . Q. Yes. Well, Tam just asking you. your opinion. Could they hire an agent to sell tickets f ‘or it: could ‘CAVE hire such an agent? A. Honestly I+ can't say, but my guess is **No.’? sia oe Alejo De Cervera—Recross Q. Could they hire someone to establish a maintenaince ise for them? A. Well, you can ga, as well as I can 80, rough the contractor. Q. Could you answer the question to the best of. your bility? Could they hire someone to establish a main- nance base or would they have to do all of their main- ° nance , themselves? Under the franchise, the document ated August Sth. A. Under. the franchise? Q. Yes. A. IT thought we were ‘speaking of the second . ontract. ce Se. oT Q. No. Iam sorry. I am talking only of the franchise ated August 8,. 1950. A. The ‘franchise? Yes. Q. Under w hat we have been referring to as the [530] ranchise, under that document could CAVE le -gally have . ired someone to’sell tiekets for it? A. Yes. ‘Q. And could it have’ hired someone to establish a idintenance base? A. Yes. Q. And do. agg HEN for it? “A: Yes. Q. Could: it-— A. We are under the assumption that "7 he see ond contract is included for the moment. (). Yes. Tam only talking of the contract datett? August . 1950, which we are re ferring to as the franchise. Could | hire personnel— A. Yes. Q. --to perform various functions? A, Yes, sir. (). Could it hire someone to train any of its pe ‘fsonnel't . \. Yes. 7 me (). Could it hire someane to ‘set Up, flying schedules for hem? ) Now, Mr. Gatch, can you give us from your “experience any opinion as to whether there is a develop. mental ante after an operation shuts down for several / months? °° e. . e A. Yes. It happens invariably. I think we have analo: gies jin this country. There have been a number of strikes of some duration on some of the major [549] air carriers, for -example, during which time much of their normal traffic deserted them an went to other carriers‘or didn’t move at all. .And we know from examining the traffic and economic results of those carriers after service was rein- stated that it took them some period of time, perhaps a month or two, before they recovered to their prior posi. tion. -'The traffic had to be recaptured. “And I think that’ is characteristic of any operation of this kind, a public service function, where service is suspended or shut down and the market be redeveloped. Q. Now, Mr. Goteh, on pages 16 and 17 you made a forecast’ as to prospective triffie revenues, Could vou tell us whether in making -vour forecast vou base that in any part on the gtoss operating revenues for 1950, the ner operating income for the year 1950, or the profit of 1950! - _@ = . 49 yo Albert-W. Gotch—Direct eX [550] A. No, we did not base’ our projections on the full calendar year results. Q. What did you base it on? A. We — them on the seven, months to which we have earlier referred. That. is clearly stated on the bottom of page 16: ‘‘factors experi- enced during the seven months “of 1950 have been — throughout.”” Q. In - your experience of schedule operations, Mr. Goteh, could you tell us what the average loads are of a schedule operation over a year’s time in order to make © money? A. Yes. Among aiflines as of today and as of the past few years the so-called break-even load factor, which is in effect a ‘traffic load produéing revenues to offset the precise costs of carrying that traffic, has ranged on the order of 55 ‘to 60 per cent for most éarriers. That _ means that: between noo and 60 per cent of the seats in all’ of the aireraft that they have eee: over the vear have been oceupied. ; | a (). An average of that? “eS An. average. (Contineing) Have been oceupiéd\by paying passengers. Over 60 per cent they begin to make some money: and within’ the range 60°[551] to 70 per cent there is an opportunity to make a fair and rexsonable return on investment. A rule — of thumb figure for an air carrier at Which he ean make a reasonable return on his investment and at which load factor ‘the public gets a good quality of service, in other words, there are usually sufficient seats to-go around, pro- duces a figure of about 66 to 67 per cent. In other words, two out of three seats filled would usually pay the operator a return on his investment and will give the public'a quality” ‘of service that is acceptable. -Q. Now what is .the highest load factor that Q achusitlin operation reaches? A.W ell, on individual flights ‘they. sometimes reach— — 4 s 50 - Albert W. Gotch—Direct Q. No; I mean an ‘fiverage over the year. A. Well, it varies. Some of the carriers have been getting up to’ about 70 per cent on some of their operations. During thewar, as we know, when we had priority. traffic, it went ‘into the high 80 per ccxt. But, of course, public service fell apart, as we all know. And immediately after the war that same condition prevailed; there was a large demand _ and there was an inadequate supply, and as a result the public got quite dissatisfied and abandoned airlines (552) as a matter of fact.to a great extent; traffic fell off, and for several years the entire industry was in finan. cial difficulty as-a-result of that. | - e @ @s s (553) Q. Does any-earrier, Mr. Goth, —— a 100 per. cent load factor? - A. No. 6 ; oe s “ (561) Mr. Nickerson: Your Honor, I was re- | minded by one of my assoc lates that I made a “misstatement to your Honor’ yesterday, which | would . like to correct, when I said that I -did not * think» that” vertain documents would be in issue. I was thinking of the franchise and actually those related to the rights. And I did know that they were going to be in issue. : - The Court: Very well. ak is, . oie 51 Albert, W. Gotch—Redifect . (573) ‘Redirect examination by Mr. Nickerson: Q. Would you take a look at the report, Mr. Gotch, page 3, paragraph numbered 6. If-I may: ‘‘As soon as. AVE can establish schedule dependability, a satisfactory standard of passenger service, and conduct an aggressive promotional campaign, it should attain a -40 per cent- .passenger load factor on eastbound [574] flights and an 82 per cent load factor on westbound flights, on the . basis of two schedules per week with a 00-passenger airplane.’” ; - . Can you tell us from your experience why you con- sidered schedule dependability, a satisfactory standard of passenger service and an aggressive promotional cam- paign necessary to attain those load factors? A. Well, there are essentially two kinds of common carriage in the airline field: one is the so-ealled [575] Scheduled, which is -the normal certificated carver, and the other is non-scheduled, which has been characterized | as irregular carriage. een cA \Schedule carriers must, under their certificates, per- form a schedule operation; they must post their schedules and they must make every endeavor to adhere to them. . They have to fly whether they have traffic or not. + That is not the case with non-scheduled carriers who . do not have to adhere; to fixed schedule; they may. wait until they accumulate essentially a full load, a profitable . load. It could take a day, it might even take a‘ week, depending on cireamstances. So that over the long pull. . they can attain’a fairly high and profitable load factor. Whereas the schedule carriers are unable to do that be- cause they must fly whether theré is traffie or not. And 52 Daniel C- Cox, Jv.—Direct _if they attain a 60 to 70 per cent load factor they snails _ they .are doing quite well. Mr. Nickerson: That is - _ The Court: This was to be a schedule ue operation, was it not? The Witness: Yes, -sir. atk The Court: And what do you mean ‘ the [576] phrase ‘‘schedule dependability’? The Witness: That means that they adhere to. schedules fairly closely. Adherence to schedule is: usually understood to be somewhere on the order of not more than 45 minutes late. %. £582] DANIEL ©. COX, JR. called as, a witness on ~ behalf-of the plaintiff, being first duly sworn, testified as follows: Direct examination by Mr. Schoenwald: ca, . e . (603] Q. You: were just telling us whether or not that plane was. ever taken out of the eompany’s control by Mr. Webh and Mr. Clemett. Mr. iRistananen: Just to protect the interests of my client for the record, your Honor, may I object. to all of this on the ground that Webb, it has been testified, was their employee, that this was long, long after the event and hasn't any neenise rele- _Vancy to the action. >? 53 Deposition from F remont W. Burger The. Court: Yes. Your objection is noted and you will reserve the right to strike, and I will over- rule the objection for the time ae Ss es e sy e [610] Mr. Schoenwald: I read’ from the deposi- ‘tion of Mr. Fremont Burger. ® es @ , ; [615] Mr. Schoenwald: No. 242 is.the exhibit number of the -_ recording. Mr. Nickerson: : I object te it, your Honor. It - is a self-serving statement, report from. one em- ployee of United States OA to the easel [616] The Court: _ Well. a great deal of this ‘is self-serving and Opinion and conjecture, a pre- * diction of the future states of mind and other mat- _ ,ters which would not be testified to even if Mr. eines were here. And FE have grave doubt as to — the value of this’as a matter of ‘proof just from “the —— of its probative value— e eo e , 5 : [617] The Court:. IT am not sure ‘that: I can consider it a communication within the- terms of ‘the shop book ‘rule,-because there are always col- lateral indicia which are necessary, to establish the ‘ procedure or routine by which the communications are made, The postmark, for instance, the filing indications, perforations, and collateral documents” of yarious kinds, all of which fit into a business. _ s¥stem which show that they were sent in the regu- ~ lar course.of the company’s business and that it was the regular course of the company’s business to keep such communications. * . we can find it? ° 54 e. Deposition from Fremont W. Burger. Now this is a very unusual procedure of a man inaking a recording of his own voice and then send- ing a record of that voice to somebody. else. And it could open the shop book. rule for a great deal of mischief I am afraid if a. thing like ‘this could . be considered to be admissible as evidence in the case. Mr. Schoenw aa: Would: your Honor perhaps be of a different view if we presented the covering letter with which it was sent and the envelope, ‘if: The Court: I might, yes..’ - Mr. Schoenwald: As well as some testimony perhaps by the person who opened: the envelopet (618] That might mean recalling the—it night | mean production of a witness who is in California . who. was ‘the one ‘at that ‘time. who opened and | -recéived the mail. I am‘wondering if Mr. Nicker- son— kaa : Mr. Nickerson: 1 won’t put him to any such ' technicality as that. The Court: If you will concede that this record- ing was sent by. letter by one..employee of this company to another .in‘the regular course of their business and that it was the regular course of their - business to keep. a record of this conversation, I _ will admit it within the shop book Tule, reserving, however, the right to consider only those portions which I think would be admissible as a matter of - primary evidence because,. obviously, somebody's, feeling about the state of mind -of somebody else — would not be admissible. le ee aioe 7 D5 iegnttinn from Fremont W. Burger Mr. .Nié Coreen: I am afraid if I did that,. your , Honor, that under the shop book rule, Federal shop book rule, the fact, that it contains hearsay does not. make it inadmissible; it merely- goes to the weight of it. That is my recollection of the statute. The Court: That is so with respect to hearsay. Mr. Nickerson: Yes. "There are conclusions [619] also. a i ~The Court: Tliere are conclusions and there are " statements ‘here which go way beyond the restrie- tions about hearsay. Mr. Nickerson: -I don’t want to put him to any technical burden that someone mailed it. I ‘will concede that it was aniriled ever here. But I don’t Want to concede that it was the regular course of business, because ‘this was: extraordinary. The Court: Would you concede that if he called this. witness .from California the witness would testify, in substance, that it: was sent’ by mail and received by the company as part of its regular. business, that it was part of the company’s regu- lar business .to-keep the communication? Mr. Nickerson: Yes. 7 The Court: And that this communication was kept? | ‘Mr. Nickerson: That it was kept there, but not , —I won't. .agree that it was made in the regular course of business, but I would agree that it was received and kept inthe regular course of business. The Court: And that he would so testify. — _ Mr. Niekerson:: And that he woald so testify. (620 The Court: ‘Well, I think that that would 56 Deposition from Fremont W. Burger be a sufficient foundation now. I will note. your objection to its receipt and give you the right to move ‘to strike out later, and I will have it marked in evidence. ° i ° ° . ~ . . (Plaintiff’s Exhibit 242 for identification received in évidence.) - wack | ° ° °- \ : [626] Mr. Schoenwald: \ @ e e (627] If vour Honor please, we are \ha¥ing a little . difficulty finding some of the material that\we- -would like \to- read into the @xamination, and I think t would serve . the function of this court and the interest of justice if we -eould read some of this material in. when we have had an opportunity to put our hands on it. There are some. sections that -I know exist -and my associate has‘ been — - unable to find them; and I can’t see how justice would be served by insisting that we sit here and delay while jl look for these. sections. Me The Qeurt: Well, could you go ahead with. the case and reserve the right to move until he reads them in, Mr.. Nickerson? Mr: Nickerson: . Yes. . Ee The Court: ‘I don’t know when we are ever going to.get through, but we are always interested [628] that substantial justice is done. . Mr. Nickerson: All right. I will accede to your Honor’s 8 sngzontion, T will call Mr. Russell. Hy] John S.. Russell, Jr. Direct | ~ JOHN S. RU SSELL, IR., called as a witness on behalf ‘of the defendant, having been first daly sworn, eetiiee as follows: ; Direct examination by Mr. Nickerson: . [629] Q. Yes. A. The meeting was to discuss the © means bad making an agreement between USOA and AVE work. wins oe! ° e. Q. Hold Defendant’s Exhibit N before you (handing). A. There was discussion as to the reasons why USOA = had. ceased to fly its aireraft: I directed the attention of . it was, I believ e, Mr. Jones and Mr. Cox to the existence of Defendant’s Exhibit N and stated that [630] this was untess they had-full loads: Mr: Jones’ stated that the agreement was no good; the only way to make it work was to tear it ap a Start all over again.’ I told Mr. Jones and. Mr. Cox that I fought the agree. a ment was good and that we w oe Te to see whether we could work within the framework of the agreement and _ we had no intention of tearing it up and starting all over * agajn. f There was considerable diseussion about the fact that Mr. Cox's airplanes or USOA’s airplanes were not get- ting enough passengers. Mr.— Q.-Did Mr. Burger say anything at "this meeting? - A. Mr. Burger did. Mr. Burger said on many occasions—it was a rather lengthy meeting, ‘it Was. in two sessions— a binding agreement and wanted to know w ~ the UCSOA - . Was not performing. Mr. Cox stated that they were not going to ‘perform . ‘ MY : \ . > .; ane John 8. Russell, Jv.-—Direct. iment but one that was temporary. - There was a lot of other discusston-going to matters that ‘ . sas enthusiastic about the opportunities: of this route. -.- Mr: Cox. said, “¥du- willl. hah to get: that from. Mr. ae» oe said, “lt will go .out.’’ that the jroblen: was not. one’ that was basic to the agree- ae recall asking Mr. Burger Specific. ily what was neces- sary to develop the business. He responded that the problem was lack of promotion. [631] We had quite a bit of diseussion as tow hat was, necessary ta. promote, And he coneluiled—or he state a _ that. about $60,000 of developmeytal expense avas needed, * That was about the substance of: the morning meeting. usually g0 on in meetings, af airline people. Q. Did. Mr: . Burger express hiniself at* that morning: meeting as to whether he was enthusiastic or not enthygi- | astic as to the: potential of ‘the ape ration? A: Mr. Burger. at all-times during that morning and later was extremely | tos20.A. te seecavenad about two o'clock, a ithe, ; a Ay : ‘e e- . 2 1634] I then bonita up” a vecond porenes There was an aircraft scheduled to leave Rome that night. I asked o# Mr. Cox _whether that flight Was) going to go out on- schedule. ° . Jones."” I asked Mr. Jones the same aivestion.” “And: Me Jones And I believe that i is all ot the sub: tan: «of thiat. meeting | , bi -— e ae ; © [695] Qo Will vod brietty describe how vou -happened to call Mv. Cox or he ealled you and what in substane: el | 59 | John S. Russell, dr. Direct “both of you said?: A. 1 had a cal from Mr. . Marshall about— “\ Q. Don’t tell. us what Mr. “Marshall said. A. ‘As a ‘result of that call I first tried to call Mr. Dougherty but . rot reaching him I ‘called Mr. Cox. . Q. This was Sunday, the’ 16th? A. “This was ‘Sunday - morning, the 16th . I asked Mr. Cox—strike that. I told Mr. Cox that I had been informed that the aircraft ‘ that was scheduled ,to-have left Rome for Caracas ‘had _not in fatt left Rome for Caracas but had been pulled off the route and had been taken into Germany that night. ° 1 asked Ar. Cox whether that was true. “He admitted , that it was true. oe I told him that I had heard that he. Sel stranded lf or 15 passengers. ‘And I asked him whether that was true. He made some remarks about the passengers, I believe— no; excuse me. Hé said, “*I told you ve ssterday we neggl t fly until we have enough passengers or full loads."’ I don’t recall what he-Xaid iff that particular point. I then said, ‘* Well, what about our agreement of” C6 36] yesterday ?”’ i , Q. Did he say anything about passengers in' Spain? A. | Yes, he did. — He-said- that: eight of the passengers I _ eheve were from, Spain and that they only paid in pesetas and he didn’ t have any desire to take passengers out of Spain if they paid in pesetas. ‘TL asked' him about the agreement of yesterday and what effect this hadvon the agreement. I think he*then told me that he was not going to speak tome but T sheuld speak to his lawyer. | | ~1f teld -him that I thought this was a very important mate r and ‘hat I was frankly very. shocked. ¢ a) “Cross-cramination by Mr. Schoenwald: _ 60 John 8. Russell, Jr.,—Cross .Q. Did you tell him you tried to get hold of his lawyer? ‘A. Yes, I did: And*that I was going to do everything [ could do to protect my client’s interest if that wassthe way he was going to act. Q. Now. subsequent to that, tines, Mr. Russell, did you | at the request of either Colonel Marcano or Mr. Marsha! - make any a into the market for _DCAs?1 A. Yes, I did. : --Q-And-did you ial to anyone relative. to- (6. 37] pur. chasing any DC 49. A. Yes, I did. [638] Q. Now, will vou first give us the approximate date of this conyersation! A. Well, it was right after the weekend. It would ‘be Monday, the 17th. Q. Will vou-tell us what was said, in substance? A. I telephoned the pre ssident: of U.S. Airlines, ‘a c@gtificated cargo carrier that operated in: the. eastern part of the United States, a man by the name of James Wooten. | told him the background, the purpose of my eall, and that AVE Chad an option to purchase two aircraft and if. . we could exercise the option would he pyrehase the air. craft. He agreed that if we could get title to the aircraft he. would purchase them for (639] $600,000 apiece, Mr. Nickerson: Your witness. Q. Is this Mr. James Wooten the same James Wooten who was declared a bankrupt and who was subsequently umaprrisoned for embezzling trust funds in connection with, the U.S. Airlines? “Al LT have mo information on that. would be Jvery much surprised if he was. 61 John S. Russell, Jr.—Cross — Q: The U.S. Airlines is defunct now, isn’t it? A. I ‘don’t know wheti.er it is defunct. It doesn’t operate. Q. But it is bankrupt, isn’t-it! A. A petition in bank- ruptey was filed, but after Mr. Wooten left the presidency. 'Q. You are familiar with the facts. It was bankrupt:at | that-time, wasn'tit? A. I am familiar with the conta And" it was very much not bankrupt at that. time. Q. Mr. Wooten, as a matter of fact, had sold one of the airplanes that the Colonel operated with just prior to the .. interest of USOA in this company for $220,000 — t het S A. I don’ 't knew. [640] Q. Mr. Wooten was preside nt of Neat East Air. lines, was het A. Yes, he was.’ . . ~~ Q. You knew that Near East sold an airplane to the | " Cokine! for 220,000 about nine months before? A. No, I don't, asa matter of fact. [am perfectly willing to take your statement that. that is so. Q). Did Colonel Mareano tell you or did. Mr Marshall tell you that he had heard a conversation between Mr. Burger and Mr. Webb in which they were planning‘to take the bill of sale out-of the safe of USOA relating to the airplane that was involved in this operation! Mr. Nickerson: Can vou fix the time! ? Q. Well, shortly a or derine ‘the progress of the conference, did it not eome to your attention that -thie Colonel had heard a conversation between Mr. Burger and Mr. Webb With respect Je taking the biH of sale out of the safe? Kither from Mr. Marshall A. | have of course heard it, Mr..Schoenwald, bute. ean't: place it in ah mind whether DT heard it iis part of the preparation of. this ease or whether | actually .did hear it prior to. ~y John S. Russell, Sos lbaaar Septenber 15th meeting. My ealllition is that I did not. : a ; = e hed * [644] Q. Now did ‘vou know whether or not Mr. Wooten had a million dollars in cash free and clear and available to pay for this airplane at the time he spoke about buying - any : : it?) A. Mr. Wooten had té my knowledge. just become president of Us S. Airlines With an entire new group of backers. Because of other professiona}g arrangements. I knew thiat the group of backers were people of very: sub- stantial means and I believe that they had the money. . Mf. Wooten is a regular client-of yours, isn’t net ~A. Mr. Wooten has never been a client of ours. 2 ().: ‘He hasn't been a ‘client of your firm? relaxed to recognize a period for reestablishment of the operation, — during which perhaps only one plane would’ be required and that in any event he could not send a. second ‘airplane down immediately. Accordingly, the contract was written to provide—to | remove the ee * of $3,000 per. week for a period of 60 days. . Q. So ‘that. it would start after 60 days, $3,000? OA That’s correct. -The Court: And there would - nothing. in the meantime? rs . {670]. The Witness: Yes, sir. In the meantime they would pay $1,500 per roundtrip actually flown. ee * S4 : “ (6741. The Court? Before. answering that, will - vith please indicate what the words were that were added as a result of Mr. Cox’s objection. Mr. Nickerson: ‘‘As defined in this agreement.” The Court: .Let Mr. Marshall answer that. ms “John Page Marshall—Direct The W itness > ‘The words ‘‘as defined in one sagreement”” ‘were added, and I agreed with Mr.. " Cox’s question to me as to whether in my opinion ’ a that would mean. that the term of. the contract, -. ‘being for one year, Would be included inthe ‘‘as \.defined in this agreement”? and that accordingly the action — not binding after the term of a . year. Mr. Se henisicala: With respect to what this wit- ness said, ‘‘that would. mean,” I request that it be - stricken. ; # The € ourt: 1. take it that you are referring to. a conversativn which took place with Mr. Cox— [675] The Witness; Yes, sir. The. Court: --immediately before: this: form . of words was adopted, - Tie, Witness: That is right. The Court: I will take it.- = : - [677] Q. In the discussions that you have referred to in vour testimony with the USOA personnel, did they at ‘any. time maké any statement that they would fly only if they got full loads?’ A. Absolutely not. « * : + . - [O78] Qsi Will vou refer, Mr. Marshall, to certain meet- ings Which you have testified to* that took place in the middle of September 1951. [681] Q. Can yon tell us the substance 6f that, meeting, — who was. there and what was said?) 4 ~ ueglected one‘ “thing, if |. may, in the first meeting. At that meeting Mr. Burgdr was present and he had some considerable _ volume of paper, large sheets, and. textual material, and | ~ Chen ~S " to S a omy ‘ - John Page Marshall—Cross NP | ae s 10 he endeavored to preva., upon: Mr. Kox to consider the requirement for [682] conducting ihe schedule operation. ra es feo (e* e ‘ [693] Cross-éxamination-by Mr. Schoenwald / [708] The Court: Mr. Schoenwald; I am afraid that you are taking a-little ‘bit of the attitude of an attorney for an infant suing:a trustee, and vou --are not in that protected ee gi oe You. are . representing a” businessman trying to e- money, who Was dealing at arm/s lengtli with another busi, hessman, who was alsé trying to meke money, and: you have got to understand the. issues of. this case in’ that light: er . Now I do ‘not regard your. argument as having any, validity cause I think that. you relied upon several thimgs, notlonly what was in the so-called 7 Wa prospectus, but upon “the investigations made by sour own ¢i lients: upon what they considered to be the weight to be attached to.various intangibles and, illusive- considerations. The future business, for. _ instance, y Nobody can predict with certainty wnat ‘is going. to C709] happen in ‘the future on anything, let alone transportation of: passengers., And_ the mann@ in which you are attempting. to explore evervthing#that should have been told to your client, leads.me to believe that you are laboring tinder the ‘iiusion that your client was in the nature of -a ward or an. infant, and that people with whom your .*elient was dealing ‘were like trustees or fiduciaries —in fact, you have made the allegation that they had a fiduciary duty which they breaghed. Mr. Schoenwald: “a contract. . a: ‘John bias Marshall—Cross ‘Phe Court: Tyan, enable to understand what that-is so far’ 1 don *t see what the basis for it is ‘inthis case. I sée one reference in a letter toy the term ‘partner,’ which I don’t think is sufficient to. enable you to make that argument.* But up to this “point you are not entitled to take or to claim the righ* to pursue your adversary as. though they had the duty of a trustee .toward a ward.. They are two cei loosely drawn and which had all kinds of safe- guards and provisions which might have been put into it’ which [710] were not,-and there were all kinds of things ‘about this prospectus} in my opin- ion, which indicated that this company was stum- bling and faltering, if not: in a condition of very serious financial difficulty, and in that atmosphere I don’t unde rstand how vou can pursue this. & Mr. Schoenwald:. Your Honor, I-think this.is a question that relates to the remainder of the -testi- inony, ard it is of some importance. The Court: Well, put a question, . T will give: you an opportunity to argue the law and to sum- marize the evidence later. Put a proper question. | I have been trying to help. you and guide you along * . eonstructive lines in giving you the benefit of what I thought were tentative views, and T can deal with it hetter if you will put a*fresh question ‘and we will go on from ther, heeause T think your impor- ° tant task now isto get the testimony and the proof complete. | dealing ‘at arm’s iength, that is. Ww hat they w ere, and they, entered into the contract, a contract w hich| I liave no hesitancy in. saying was . 72 a J ohn set M arshall—Redirect [734] Redirect ‘examination by Mr. Nickerson: Q. Mr. Marshall, you testified with respect to-a afl. ing of yourself, Colonel Marcano; Mr. Burger and Mr. Webb. Can you tell us in substance what was said in that conversation? I believe you testified it was some- time in September, prior to the time you saw Mr. | ‘Cox. A. Yes, sir. It was on the morning of September 14th that I went to the. Lexington Hotel at approximately ten o’clock in the morning and met with Colonel Marcano ‘and Mr. Burger, who were having ‘ breakfast. Colonel Marcano mentioned that there were some very strange things going on and that USOA was endeavoring to take , their airplane out of AVE’s operation, and he* [735] sug: gested that Mr. Webb -was coming there and that we go up to their room arf discuss the matter, and Mr. Webb Aid come and he told me the first complete detail on the ‘thing, which was that Mr. Cox had sent him, me. Webb, to. Caracas—_ . - e ‘Mr. Schoenwald: I think what the wifness is testifying to is not what our man ‘said -but what * Colonel Marcano ‘said our man ‘said. The Witness: No. °. e- Se. : $ [736] Q: Don’t tell us of. ariy conversation you had alone with Colonel, Marcano. ‘Tell us ‘only of the con- versation you held when Burger, Webb and Colonel Mar- cano were present,- A. Yes. | | A ae * Q- Continue your answer, will you.: A. As I say, -Mr. * Webb said that he had been sent to Caracas by Ralph’ _ Cox to take the airplane’ to Bermuda en the next east-_ ‘bound trip; to get the transfer—to transfer the “pas- > tion.’ OS RLS, Cae John Page M arshall- “Redirect sengers if ante to BOAC, but in any event ‘to return the airplane to the United States. He said that upon his arrival.in Caracas that he had been approached by Mr. Burget and Mr: Burger met the : airplane when he came in and that he had disclosed to f \Mr. Burger hjs instructions, that Mr. Burger had pre- vailed upon him not to do so and that Mr. .Burger and ’ himself, Webb, had then made an arrangement with the & . pilot- of the aircraft, whose name was Campas, to ‘not move the aircraft for any purpose except under instruc- tions accompanied by the word ‘‘Burweb’’ a code word— ~ [ am sorry, should not have used it—at that time I didn’t learn. that it Was Burweb, until later, | [737] Mr. Webb then said that he was very tired; that he had been down to Wildwood and that—he Jaid down on. the bed and said that he wanted to talk over the opera- tion. He said, ‘*I think we can:take over this operation.’’ ~ He said, ‘“‘T own half of. that airplane—I mean, I own 25 percent of it and Clemett owns 25 percent.’’ Hg said, “Cox has transferred the airplane to USOA withott ing us any evidence of our ownership. It is. now, accord- ing to. registry, owned by USOA.”’ Then he said, *‘I think that we can get that airplane.”’ t leav- | He said, ‘Al have a friend of mime in Florida who has a: DC-4-andewho is a very close friend, he has offered to. _ make available to me up-to forty thousand so that I will have Lye aircraft and capitaléto undertake AVE’s opera- Well, Colonel Sereane said | no, that we wishin enter- tain segetlletation or not enter into a discussion or con- . sideration of the operation of AV K by anyone else. “Then ‘I mentioned— — The Deposition from Fremont W. Burger — a& - Q.. Any one else other than who? A. Well, he may have said USOA. | I stressed the fact. that of course we _ had an agreement: with USOA and that our whole effort would be to make that work £738] and that we wouldn’t talk to anybody until that was definitely-out of the picture, and I suggested that Mr. Burger return—Mr.:- Burger and Mr. Webb return to Mr. Cox’s office—they told me that they had been in touch with him—and determine what Mr. Cox’s plans were, and that Colonel Marcano and I would remain there until we received word from them. We-did receive word not less than ‘a hour later, and Mr. Cox was ready to talk to us. “Mr. Nickerson’ That is all, your Honor. a : * e e ar 75 's | 4 Deposition from F remont. W. Burger A. I think that his interest was a result of those dieve- -sions, by and large. I don’t think that he was acquainted with the: situation too much before. | “3 / Did he participate in the discussions with Waters cand by: ‘he’ I mean Cox? A. Yes, to some extent. Prin- cipally,, | asked’ Watefs mostly about the AVE’ operation, what transpired before. “*Q. Can you ‘ell us the substance of whe Waters said about it?’ A. He said that in his opinion he thought there was a good potentiality there, that they had never realized it before. He said that they, operationally and business procurementWise and all of those things—4t hadn't been a good operation, and he mentioned a lot of the person- alities that were in the deal; who they were I don’t know, T don’t remember the names. There seemed to be an arrangement between Wodten. and Prescott and Colonel Mareano, and then thére were certain involved situations among them. Those were the points that he brought out principally. ’’. | | Page 7, second ‘question: [783] *Q. Could you tell -us in substance what your diseussion was?” a This refers to discussions between Mr. Cox and Mr. Burger prior to the time they: saw Mr. Marshall. ? | SA. It -w ould be very. general at this point. We didn’t know the people who were inv olved in it. We were merely under the supposition that it would be available. We were definitely interested in*it. We wanted to determine on what basis if any we might get into stich an arrange- ment.’?’ , Page 8, third from the last question: - offige and decide whether we should wish to keep it or 76 an “Deposition from Fremont W. Burger **Q. When you received Plaintiffs’ Exhibit i, that your Honor, I will refer to as Plaintiff’s Exhibit 397; it is thé Gotch & Crawford study—‘‘did: you examine it? A. I didn’t ‘have an opportunity to. We-were in _in the North Atlantic at that time, and Iw **Q. Did ‘you ever-get.a chance ) was turned over to Mr. Cox principally. He was the one that looked it over. ‘ “Q. Did you ever get a chance to examine it?’ A. Only superficially.” V Page 40, the first question, and this refers (784- 5] to a conversation w ith Colonel Mareano in Caracas: “Q. Did he mention’’—he meaning Colonel Marcano— ‘fanything about the Rome office being involved in a dispute with Mr. Wooten? - A. No—that came up, yes, there was a discussion about that. “Q. What was that? . A. Colonel, Marcano saic that after we had time te go to Rome and look at the Rome not;we. should let him know. But whether Jim Wooten was in-the dgal at that time was not discussed, T don’t believe; at least not in my presence it wasn’t. ‘*Q. What did you* and Mr. Cox say to that? A. It was on the basis of let’s look it over. He told us of some of the expenses that he had had in. connection With the Rome office and we indicated that we felt that it was toc much, that we didn’t think ‘we could handle that, but we would: still look at that and advise him. That was one of my assignments.”’ : ay 77 Wiliam . C. Wold—Diredt {786] WILLIAM CC. w OLD, called as a wites on . behalf of-the defendant, being first duly sworn, testified as follows: ©. Direct examination by Mr. Nichawasie: ,.Q. Mr. Wold, will you tell us what business you are in? . I am a partner in an aircraft | sales firm, ceneageet iserelt sales firm. . Q. Will you tell us something of your background in aircraft: sales? A. Well, I worked for Consolidated Vultee fora number af years. I worked for them about ten . “years; the last four was en in transport aircraft sales -work. : Q. What Seene were ‘hank. about?” A. That was up until: April of 1949 when I started this ‘present business" that I am in. Q. Where were you ‘before you were with Consolidated Vultee? [787] A. Well, I was in the U. S. Signal Corps for a year, and before that I graduated from college. ae Q. Where did you go to college?’ A. M.LT. Q. What kind of degree did you get? A. Aeronautical. oo] Q. In your present business, what is*the nature of that business? A. Transport aircraft sales. We are special- ists in that field. ata oA Q. Would you describe yourselves as brokers? A. Yes; we do primarily brokering and occasionally dealing ourselves. Q. And in that connections \ were you familiar as of. September 15, 1951, with the market price of DC-4 air- craft?: A. Yes. That is part of our business. Mr. Nickerson: May it be conceded that Defend. . ant’s Exhibit BB for identificatioh represents the. - 78 William C.- Wold—Direct time on the aircraft, the two aircraft involved, and. . the engines thereof? Mr. Schoenwald: Yes. — Q. Now holding Defendant’ 's Exhibit BB for identifica. tion and assuming that the two DC-4 aircraft [788] re- ____ ferred to therein, DC-4-E’s, were _in_ proper fitness for flight as of that time, can you give us ‘an opinion as to the market price on that date, September 15, 19511 A. Yes. In my opinion aircraft such as that: w ould have had a fair market value of between. 600 and 625 thousand * dollars. im Q. Could you tell as on what you. base your opinion? .. A. Well, I base that on our records of aircraft sales and known sales of comparable transport aireraft.— Q: Did you have sales that you were aware se’ on. or about that date? A. Yes. Sales that we were aware of and also sales that we actually made ourselves. I can give you some examples if you wani. Q. All right. Will you do that?’ A. In October 109%) we sold an aircraft ourselves. The actual— Q. DC-42 A. DC-4, yes. me i ™ * * e % [789]: Q.‘What was the price? A. Well, the actual price of the aircraft sold was $615,000. Now, the aircraft was not comparable to this aircraft, as far as its type of. _ interior.and so forth. Had it been, in my opinion it would ~. have sold for about $660,000. ~ - Q. You are assuming—I should have: put that into the hypothetical question—a passenger interior recently ‘reno- | vated? ‘A. Yes. In other words, every transport aircraft \ \ \ 79 William C. Wold—Direct sale is not of an 1 aircraft that is identical toa previous sale or a future sale. There are variations. between them. . But trying to compare the aircraft actually sold with the type of aircraft that vou have in mind, in my opinion that would have sold for $660,000. That was in October (1951, an aircraft that_wé sold-ourselves. [790] Now in June of 1951, we did not make this ais but we know of this sale isousk our ‘records, of a DC-4 to, Pacific Northern Airlines; actual sales price: of - this ft was $500,000. In our opinion had it been com- ahi to this one’ it would have sold for about $525,000 ° to $530,000 in June 1951. O | - Now in October— nth —_ _Q. Was the owe pall up? ate ‘market ‘ene was rising sharply. Q. Do you know what the reason for that was? A. Well; the. reason, I think’ the “international situation im ‘the world had a lot to, do with it, aus the fact that airline traffie was rising. In October 1951, again, there were two aircraft sold, which were not our sales, and they -were bought by Sea- board & Western Airline. And in my opinion had they deen comparable to this aircraft ‘they would have sold for between 645 and 650 thousand dollars. [791] The Court: How old were. the two planes represented by. Exhibit BB which you would sell in» 1951? - + Mr. Nickerson: I-am not stire, but maybe the witness can tell us from the aircraft total C792] time. Sy. : The Witness: W ell, you can’t tell the age in time. 80 ‘ 7 William C. Wold—Direct Q. You can only tell the extent of its use? A.. You can tell the extent of its use, yes.. And the total extent of th: use of an aircraft and its chronological time has not, has *~ not been over the’ past good many years, has not been the significance in its value in comparison with its time since overhaul and the supply and demand situation in the market, because we have sold DC-4s as high as $750,00 after they had been completely written off on the owner's ‘books, and the original aircraft cost about $300,000. We- _ did that in the case of National Airlines DC-4s. ' .Q. In what year? A. That was in, I a that was in 1952. Q. Was that due largely to the Korean War situation! A. There’ is no question that that had an effect on the market situation. But airline. traffic. has been growing: steadily all during that period, which also had its effect. -Q. What is the Significance of the initial [793] “KE” next to “DC-4’"% A. The “‘E” is a model designation. ft designates a later model according to the-Army.arid/or the Air Force and Douglas dimensions, and it also indi. cates the type fuel. system. For example, DC-4-B was . originally built only with a 2800-gallon’ fuel sy stem. DC-4-E_ model had a 3600-gallon fuel system. Q. When did DC*4-Es. become obsolete, if they were! A. They are a long ways from obsolete today, sir. ‘Ther are selling now for pretty close to $700,000 range? - Q.. You say they are selling\now for $700,000. Toes ‘that ‘ mean new, delivered by the manufacturer? A. No. sir. They are not in manufacture, and, they have not beer in manufacture since—I think the last’ ones were manu factured in °46. We are — entirely about used air. craft. 81 ' | Q. The DC-3 has -not been manufactured for many - years? A. You are absolutely right: and the DOB sells today for more than it sold new. * Q. Would it be your testimony- ‘that © a DC-3 is not obsolete today? A. Not by a long shot. Q. You say it is. not obsolete?. A: I mean that it is _fowheres near obsolete. . a : Q. In other words any airplane which is cominercially exploitable in your opinion is not obsolete? A. That is ‘right. You woutd have ‘to get into £795] a very careful definition of what you mearby ‘‘obsolete.’? If you mean as a-vehicle for carrying passengers and performing airline service and making money, it is nowheres near obsalete. } : -Q. Well, let me put this final question ‘to you: I take it you would not agree that the cessation of manufacture of a model is tantamount to the beginning of its -obso- lescent ‘period? A. T am. afraid, to be absolutely honest >: 82 . ‘i William C. Wold—Direct ; with you, Judge, I would have to have an expanded defini. * tion of what you mean. by ‘‘obsolete. yw 2 | Q. I am suggesting that if an- ‘airplane model is no longer manufactured by its mahufacturer and the manv. facturer ceases, definitely and irrevocably the manufacture of that model, to the extent of pulling out any of the special machinery wid, taking it off its drafting board so. that there is. no longer any equipment or machinery for the purpose of manufacturing, I am suggesting that that, ipso facto, creates-a condition-of obsolescence for that air. plane? A. Well, I will answer that by saying that it does only relatively. \ Q. All right. 6 get the potnt. A. Because actually if the manufacturers £796] have not been producing or did not foresee a traffic growth “which was going to create a ‘supply and. ‘demand situation for tho. aircraft after he stopped manufacturing them, that would bring their- business way up, far above, what he was selling them for. It simply means I[ think that the manufacturer felt that it was obsolete too soon. “Q. Was there a very lively market in 1951, September, October, 1951, for used DC-4s? A. Well, T would hate to. use the word “‘lively?’ because— Q. Active, reasonably active... A. It was a reasonably active market. Ip‘ our,industgy the numbers are pretty. small and the movement of aircraft-is not so frequent that you can refer to it-like yoy do the stock. market activity. But it was increasing, and the pressure of - demand was, definitely beginning to show. % 83 | > William C. Wold—Cross—Redirect [797] Cross examination by Mr..8choenwald: ; . ie: er me. ’ engines, I use a figure of — $20,000 apiece» That would be eighty thousand. There is $130,000. Now there was. radio equipment and no passenger interior, things like ‘that, all of which brought out. the difference which I use in ae my “standardiza- tion— , Q: Do yéu know, sir, whether or wet USOA’s ainavatt at this time wooded overhaul or: not? A. According to the figures that were on your sheet, they did not need an overhaul. One of: thein only had nine hundred-and-some- odd ‘hours since overhaul. They are good for at, least 8000 hours before they need a:-major overhaul. - — *. * e* io * (826] Redirect examination by Mr. Nickerson: Q. 1 show you Defendant's ‘Exhibit CA for identifica-. tion, a document dated August 13, 1951, with respect -to an aireraft and whith shows four Pratt and Whitney engines, Model R2000-7, and ask vou what in your opinion would the value of the aircraft as‘ of September 15, 1951 bet A. I see from this document that the aireraft was equipped with smaller engines, the R2000-7, which reduces my opinion of: its value. - And I would.say ‘between $550,000. and $575,000. | | ° es : . [827] Recross examination by Mr. Schoenwald: [830] Q. So thateone of these aircraft was subject: to overhaul and another near most of its jie, is that right? is ; . : ; 91 ; : William C. Wold—Recréss [831] A. No.. One of these aircraft had only 900-and-¢ some-odd hours, as I recall, since overhaul and the other had 4000. . ' Q. You told us that about 8000 was the maximum ‘timet A..I didn’t say that. I said that aircraft had to be over- hauled or would have to be overhauled a& soon as 8000 hours. — ; : . The Court: I think,vou said ghat after an over- haul it would have at least an expectancy— The Witness: That is the way I put it. The Court: Of 8000 flying hours. The Witness: It could have any expectancy of 10,000 or twelve; it.depends on the operator. The. CAA keeps some people by experience; they keep - running a fur longer time between overhauls. _Q. Part of the expectancy of one of these planes, almost haif of the expectancy of one. of these planes had dis- appeared already ? A. If USOA was operating with CAB—-- approval, 8000 hours overhaul, then about half the *x- pectancy would have been gone. If it had*been on. 10,000- hour overhaul it would have -been 40 per cent. QQ. That would affect your estimate of the [832] value by another twelve. to fifteen thousand? considered as being distributed to stockholders or used for expenses, amount. ing to $55,000. A reserve for foreign exchange arnounting to $126,000. A total of $633,000. | . —, There was also on the books at April 30th an operation reserve which apparently was’ not used, That, operation _reserve arose partly in 1950, to the amount of $32,900 and partly in 1951 in the amount of $16,800. - Deducting that from the other items leaves a net deduce. tion of $584,000 from the $521,000 or leaving a loss shown on this statement of $62,500. Q. With-respect to that operations reserye, what con- clusion did you draw? [967] A. Well, it is good accounting. _ prattice to set up a reserve for estimated repairs and the books show that each month the operating. expense was” charged and the reserve for operations credited. When- ever a bill came in which was applicable to the repairs of these motors, the reserve account was charged. 97 e Louis. Zinman—Direct _At the end of 1950—I have to have that other sheet— at the end of 1950 there was a balance in that reserve of _— . 147,000 bolivars and in January: and February 36,000 / bolivars were charged against- it, leaving a balance of the reserve applicable to 1950 of 110,000 bolivars or $32,950. - In 1951 there was credited to that reserve actount some _ 54,000 bolivars or about $16,000. These accounts were ‘still open on the books at April 30th but did ‘not appear on the June 15th statement and ~ I assume therefore that it was not used and reduced the loss - accordingly. Q. If ‘that money which was in the reserve for 1950. but which was: not expended in 1950 had been added to the profit, what would that figure have been, Mr. Zinman? Do you have that? A. Well, the amount of the 1950 Te- serve Which was apparently not used amounted ‘to $32, 950, and to that [968] extent. the. pons profit for 1950 f could have been increased. Q. By the-extent of $32,000? A. Right. Q. But you say that conservative accounting practice would require that that reserve remain? A. I would say so, Ves. sé | _ Q. For tax purposes, however, would you be permitted to take the reserve? A. I don’t know about V enezuelan taxes. : e Q. No, Amerie, taxes. A..American! taxes, if you: ‘set up a reserve for cohtingencies but don’t use it, they would allow you only the amount that was actually used. Mr. Nickerson: I will consent that that be stricken, your Honor. (peas Q. ‘Did you examine the books, Mr. Zinman, to see what income ¢ came during the whole of 1950 from tickets, mail, 98. Louts Zinman—Direct parcels, excess baggage and charter flights? A. I checked - the amount which appears. in the ledger and I checked the figures that were posted there with the comprobantes. | Q. Comprobantes are the daily. entries, are they? 969) | A. The daily journal sheets. - Q: The* daily journal sheets.. A. Which are entered | into a bound journal and from that. journal are posted | into the general ledger. The items which appear in the | comprobantes checked out with the general ledger, ne | as far as I can determine they w ere—the income was only | from international. operations either for tickets, mail,* excess baggage, parcels or—and; that is eT flights. .The total in that account was 5,743,725 bolivars. -- Q. Can -you translate that inté dollars? A. In dollars it is $1,714,559. The income figure that is shown in the prospectus is $1,717— -Q. Here it is, page 5. A. —$1,717,332. The differences reprenented an account called miscellaneous income of approximately $2,787. ° : ; _ Q. Could you tell us whether that was from the inter- -national opération or not? A. Well, I didn’t. check that “too carefully, but I think it was income from work which was done in Caracas. Now I also noted in that account— that that account was charged with certain expenses which in my opinion should have. been charged to an expense account [970] but not used as a reduction in the gross income. x bia | Q. Will you tell Bs. cabout, that? A. There were ex- penses, Madrid, tickets, expenses for passengers, tjckets, | _ passengers, Venezuela from: Puerto Rico, transportation of mail from Puerto Rico, items of that nature. _ Q. Those were deducted from. gross income? A. Those . were deducted from gross income. They amounted to. 24,000 bofivars or about $7,290. 7 99 "Cente Z inman—Direct Q. In your opinion in proper accounting practice would you have required that that 7000-odd dollars be in gross, income? A. I would think that they would be charged as ‘expense of operation rather than a reductiori in gross income. | Q. The gross income figure wud have been increased by some $7,000? A. That is correct. Mr. Nickerson: That is all. ie ~The Court: I want to ask a question. By the Court: Q. You said that you saiteiined the books up to the position - -of April 30, 1951. A. Yes, sir. [971] Q. And that you based your conclusions in part on information you obtained for the period subsequent. to ‘April 30, 1951? ‘A. Yes, sir. ‘Q. What was that other information that you used? _A. That was a statement f the account of the National City Bank where the income from the airplane was re- ceived and thé expenses that. were—checks— = - “Mr. Nickerson: That-is part— A. That he paid out. ; -Q. I didn’t hear- what the witness said. A. It was a statement of account with the National City Bank where : the proceeds of the sale of “the airplane were deposited and the checks which wére paid out fram that, account. Q. The gross figures purport to. be a statement of the entire business activity of this company subsequent to ~ April 30, 1951? -A. No, just the statement of that account. And the other information that I base my statement on — was explanations given to me by Colonel Jorge Marcano. Louts Zinman—Cross Q. Did you reduce those to writing in accounting [972] form? A. I have a statement of the schedule here show. ing how T arrived at those figures. _ Q. What do the schedules purport to show? A. It pur. ports to show on what basis the loss that is shown on. the statement was arrived at. : | : Q. As I understand it this company had no current books of account after April 30, 19511 A. That is cor- rect, as far as I know. : _ Q.. And’ up to what period did: you purport to recon- struct after April 30th? -A. Up to June 15.. But I made the statement that’ there was-an..unascertainable figure which we considered to/be payments either to stockholders or for expenses which has been unexplained. — Q. In what amount? A. 55,000. Q. That is all you found that was unexplaihablet A, Yes, sir. Mr. Nickerson: I think the Colonel so testified on that, your Honor. | | The Court: Go ahead, Mr. Schoenwald. \ Cross examination, by Mr. Schoenwald: > ° . ” = [981] Q. You understand that the currency was blockéd in Spain, do you not? A. That is correct. : Q. And that this currency was blocked from January 1950 all the way to the end of 1950, isn’t that right? A. I don’t know that. | . Q. You don’t know the — was blocked during the whole year? A. No, I don’t. : . —-Q. Have you looked into the question 6f blocked cur- rency at all in connection with your preparation! A.. No, sir. ‘ ; * 101. Louts Z inman—Cross "Q. Assume with me that the currency was blocked from January 1950 on to the date June 15th, the. date of the’ prospectus, do you know how much was earned by’ this eompany in pesetas in 1950 and which: was accrued by 1950 in pesetas? A. I know how much the sales \ were; a don’t know how much expenses were deducted. © . Q. Do you know what they accrued on: the books of the company for pesetas during 19501 A. I just gre you that answer. ~.Q. Did .you look at the ledger page? [982] A. Yes. : -- Q. Did you look at—_ A. Do you mean accounts re- ceivable? Oh yes, I. know ‘the accounts receivable, what © was onthe’ books. Wak Q. What were the accounts receivable from. Spain at the end of 1950? A. I don’t have the figure at the end. of 1950, but I do have the figure at the end of April 30, 1951; mes What. were the repeivables from Spain at the end of April 30, 1951? A. Well, that I would have to. look at some other paper; I haven’t got that here. Mr: ‘Sclioenwald:. ~ Can you supply him with the other paper? — ; Q ; The Witness: -It is in my envelope. Can I have - ‘that envelope? ; oe ~ Q. May we have ‘the notes upon which you based your ‘s, previous testimony? . Mt. Nickerson: May we have ‘it anni for * identification, your Honor? © The Court: Yes. — (Marked ‘Plaintiff’ 8 Exhibit 397 for Adentifica- tion.) ’ a Louis Zinman—Cross : tS a G Vat eo The Court:. Have you got the information [983] what the Spanish funds were which were blocked as of April 30, 1951? | | | The Witness: Only. from ‘e June 15, 1951 statement. The way I base my ugures, | took tite balance of the agency accoun‘s at April 30th which amounted to some $492,000 and deducted from that the pesetas that were shown on the June 15th . statement of two hundred and whatever they were: The Court: rom that, wht conclusion— . The Witness: “The conclusion—he. didn’t take _ into eonsideration the halagee of funds that. were due from the ofler agencies. -. : bo Oey : Q. You undefstand that a large part of that was earned in 1950, isn’t that right? A, Some part of it was earned in 1990. . o C984] Q. A subetantial ‘sdesd A. I did not check into the amount, but. bere was some part of it that was due prior to se eg. “Now: did You examine whether or not there were more operations in 1950 than in 1951? A. No, sir. Q. Then you don’t know the proportion: of operations * “in 1950 to the proportions in 151, do yaut A. No, I do Rol . ° Q. Do you Know the period. of operation in “19511 A. ‘From JanuarsSto April 30th. Q. And the period ‘6f Gperation during 1950%.. A. Before. Q. At the time, at June 15, it was clear that there. was a need for a reserve for pe setas, isn’t that correct? Av At June 15 there was a reserve. ; : - Q. Taken for pesetas? A. Taken for pesetas. Q. Had this reserve taken in 1951 been noted next te the net operating profit of $58,000 for 1950 a loss would have been shown? [86] A. I don't think a foreign eX. change loss is a proper charge against operating profit. Q. Would the $19,000. figure be affected? A, Yes, Q. Then. the $19,000 figure would have disappeared, wouldn't it?’ A, If you assume that that was a loss at. that date. _:) Q. Is there any doubt in your mind that 19,000 dollars "was earned during 19501 A. Yes, there would be some oe: ‘“@ 4 104 Louis Z inman—Cross doubt in my mind. It depends on whether you are using ~ foreign exchange or whether the fact that it was blocked ‘funds. I don’t know whether the foreign exchange rate - was less or mére than was put on the books. | Q. Did- you notice that in 1950 the ticket rate of this company was increased?’ A. No, sir. Q. You did not. Had you known that the rate that ‘they charged for tickets out of Spain in pesetas was increased - during 1950, would that. suggest to youeknowledge during — 1950 that as.a matter of fact the -pesetas were no longer worth what they were worth before? [987] A. The way I look at it is that-when they sell a ticket they take into income the amount of the sale. If there is a nee or - loss on pesetas it wouldn’t affect the operating profit; would affect the net profit. 'Q. Would the change of the rate of tickets of. the | amount of pesetas that were required for tickets during 1950 show you a change in the value of ¢urreney? Would - that suggest that possibility? “A. -[ would assume so. | Q. I notice on your work sheet that there was $132,710" and $231,053 whieh apparently were considered | uncol- ‘ leetible. A. No, sir. ~ Q. What lebpaeet is that $231 9537 A. The explana- . tion that was given to me is that they didn’t have an_ exact knowledge of how much: was due from these agen- cies. That is the figure you refer to, the $231,000. And_ that wasn’t put on the books because they. were awaiting ‘information from the branch offices as to how mtich was - actually due, so they could record any expenses that were made and whatever balance ‘of money was due. _ Q. Was. anything ever shown to you to suggest [988] that they collected 231, nape A. No, sir. | 105 Louis Z inman—Cross Seecre Q. You don’t knew that the money was collected? A. | don’t know ,that. they were paid or collected or uncollected, | Q. As a matter, of fact was anything digiwn to you to. suggest that there was a dividend? Did you see any evidence, of a dividend? “A. No; only from what I: was toid that they were distributions made to stockholders. Q. Did they tell you the date they made these distribu- tions to stockholders? A..No, sir, I told you that was an assumed amount. | . ~Q. Even the amount‘of the distribution to stockholders. was assumed? A. Yes, the amount that was unaccounted for was assumed to be either distribution to stockholders or ‘payment of expenses. . (). You didn’t know? A. No. | @ (Q. This $132,000> that was written off, wasn't it? A. No, sir. [989] Q. Was ‘thete any indivation to you that that 132,000 was ever collected? A. No, sir,.that was not explained — to me as being written off. There were certain amounts that he considered uncollectible and some amounts which he considéred would be collected... Whether he collected it or not I cannot. say. a Q. Did.you ask himt A. Did I ask? Q Did: vow ask him if he collected it? A. In. some cases he said he colleeted-and some he didn’t. ) Q. Did he tell you how much he collected? A. No, Q. Did vou ask. him haw much he collected? A. No, sir. Q. Can you tell me, of this combined figure represent- ing approximately $370,000, how much of it do you know as a fact, was actually collected 7. A. 1 don’t know if any of it was collected. . e . em 106 © Louis Zinman—Cross i eerie 1990] Q. Is it ~_ accounting’ practice to offset a: large operating loss against | a non- operating loss, show- ing only the net, figure? A. On an income statement? Q. On-anything which purports to dederibe the history or the facts concerning the company. A. K€ you are talk- ing about a profit and loss statement I would say no; if you are talking about a*‘balance sheet it isn’t usual to show any breakdown of profit and loss in-a balance sheet. Q. Let us refer to the text of this pronpestes. A. The prospectus is a balance sheet. . . Q. The prospectus, I am talking about page 2,. para- graph 2. Do you see that? A. Page 2. Q...Paragragh No. 2. [991] A. Yes. Q. In so far as the sentence there deals with operating profit— Mr. Nickerson: Which is thatt No. 21 Mr. Schoenwald: Paragraph No. 2, page 2. e Q.. Directing-your attention to that area, and directing | your attention to page 5 of the prospectus, the top of page 5, with respect to that let mecask you: Is it good ®accounting practice in statements or in the descriptive text, material such as appears therein to offset a large operating loss against a non-operating loss,. showing only the net figure? A. This is not a statement. This is just an analysis showing the conclusions. You are— Q. In setting forth text of that character in a writing— ! The Court: No, he is not competent, to argue -with you with respect to the propriety of the nar- rative statements in this brochure. It is headed “Summary of Findings and Prospects.”’ And that 107 ‘ Louis Z inman—Cross is a matter for argument later in the case as to. what could, reasonably have been understood. . Q. Ts it not a fact that, as a matter of fact, the offset- ting of non-operating profits against. [992] losses. is -a mixleading practice? A. Under what circumstance?" Q. In a statement— A. If you are showing’ the state- _ment of income and profitsand Rss I would say that _ ee there were material items it would be bad practice not to show the items separately. ‘ Q. In . something which describes the net operating profit, is it not misleading to fail to disclose the existence of a larger offsetting profit—non-operating profit? A. - In the stating of net operating incdme ? No; sir, it might be in the stating of net income, not— ; Q. In the statement of non— A. You see non- -operating profit: would have no effect on non-operating income. Non- -operating — would have -no effect on Oper ating income, a Mr. Nickerson: While the | witness is coming down, ma¥ [offer in evidence Defendant’ s Exhibit BX which Mr. Schoenwald has seen, which Mr. Marshall testified was billed to CAVE. I don’t have the C993] bills. I have seare hed for them and | don't have them. : . Mr. Sehoenwald: I am not objecting to its in . troduction in evidence.. Iam _ not. conceding the value of the items or the authenticity or accuracy. | ¢ (Marked Defendant’s Exhibit BX in evidenee.) Alejo De Cervera—Cross . 993] ALEJO Dz CERVERA, recalled. — nS . e e -«@ } 4G [1002] Cross examination by Mr. Nickerson: ° * a a [1003] Q. It is fair to say, sir, that the rationale behind: —do you know what.1 mean by ‘‘rationale’’—behind the provision of the constitution . prohibiting the transfer is that if the person who transfers that contract to another person, loses’ control over ‘that’ person, that. then the ' Government has no one that it can’ get its hands on for the purpose of requiring the performance of that con- _ tract? Is that a fair statement? A. In-my opinion it is - going too. far. . iY ) Q. Why do you say that? A. Because in Section 13 -there is no difference [1004] -between having no control ‘or— , Q. You have already testified that something certain could be done. A. Yes. I want to be fair. Q. And .you made a distinction, as I recall, between major and minor things; am I correct? A. Yes, because I want to be fair. Q. Yes. It is fair to say that the criteria which : you used ‘in determining that is whether the control is maintained by the person whom the Venezuelan Government can get its hands on? Is that fair? “A. No, no. I remember I ° put the example of:the man‘who hires someone to ¢élean . the window directly and the man who goes to a company | to send.the man to clean the window. That is a petty detail. I can go as far as to that— Q: Yes, you could go as far as setting up a tnaintenance base in Italy as I recall. A. Abroad, yes. 7 Q. And selling tickets and so forth. A. But remember, I ain going along with you becanse I want neny not to be fussy or not to be intolerant. — 109 : Alejo.De Cervera—Cross_ : eet Q. I certainly appreciate that. Now you know that in 1950 and 1951 Venezuela .had a de facto military‘ [1005] junta government. A. Yes. | - Q. And you know that the executive branch bel. all _ of the executive and legislative functions. A. Yes. Q. And you know that the executive branch could change - the Constitution by. decree, do you not? - * Yes. _ Mr. “cndenwald: There are many questions. there. * ee ) — -The Court: ‘He said yes to all of them. © 3 Mr. Schoenwald: He kept shaking his head dur- ing the course— _ The’ Court: No. You said ‘*Yes”’ to all of those proposals,.didn*. yout There was a: junta, there - was a.military junta, which had both ‘executive and . legislative. powers? * The Witness: It is difficult to say “that. The Court: And they. worked by decrees. You ° don’t ‘know that to be the fact, then? The Witness: I do not know that_to be the ‘fact. s The ‘Court: Then the answer is no, You go ahead. . me ‘Yon knew ‘that there was no hgiiadive branch at all? €1006] A. If I. go to the Constitution T know there . “a | & The Court: “No. That is theory. Mr. Nickerson is asking you facts: The theory of government in the Constitution is one thing, but he is asking you _ whether in fact there was a legislative’ arm of the ~ Government: functioning through a duly elected 110 Alexander Rozawick—Direct . congress in Venezuela in 1950 and °51 or whether the legislative power was in the hands of the mili- tary junta. _ Mr,. Nickerson: ae he hie not know the facts. | | ee The Witness: Apparently I do not know that fact. - +s e : : [1007] ALEXANDER. ROZAWICK, called as a witness ‘on behalf of the plaintiffs, being first duly sworn, testi- _ fied as follows: ie erase ee . Direct examination by Mr. Schoenwald : 7 a 2.9 sae ee @ ae ; [1008] Q. Can you tell us in 1951 what -the value of ‘the DC-4 with R2000-7 éngines was equipped for passen- gers? A. Between $250,000 and $350,000. e ° ° {1010} Q. Do vou. iid of any sales on or about Sep- ‘tember 1951 or very close to that tune? A. In that specific time. I don’t really know of COIL] auy sales outside of the periods of. time which 1 have stated, - > ht Re | e- * (1015) Mr. Nickerson: Reading from page 3 ‘of Mr. Webb’s mapenitinn, : taken on September 23, “Q Mr. Webb, you were formerly employed by United States Overseas -Airlines?. A. That is correet. Q. During what period were you employed? C1016) A. I was actually on the’ payroll ‘records from ss antal 15, 1951, until I resigned on June 16, 1952. 111 eae Deposition from Lloyd Webb — ‘“Q. Were you an officer of the company at any time? ~ A. Yes,.I was. al re “What office did you hold -or offices did you hold during that period of time? A. Twas vice-president of the company and also Vice-president -of operations and also a director of operations.”’ Page 7: eee “Q. In these phone ealls’’— sl May it be conceded that those are the phone calls which Mr. Cox has testified to between himself . and Mr. Webb while Mr. Cox was in Europe and Mr. Webb was-in London? © Is that conceded? Mr. Schoenwald: ‘All right. Subject. to some correetion if I find anything. ' Mir. Nickerson: (Reading. ) ‘“Q. In these phone calls did Mr. Cox mention that Mr. Wooten: had operated the franchise of ‘AVE and CAVE? A. He didn’t mention it in the telephone conversations, he mentioned that in England when we were talking to ‘each other, ae ENE Os 1 6 | “Q. What did he say about Mr. Wooten’s operating (1017) the franchise? A. 1 think he recommended that” if Wooten had operated it, it was bound to -have been quite a. bit of money made.’ | - sf e e e Page 12, the last. question: ane” “(Q. Did you talk to Mr. Cox after he returned with De- fendant’s: Exhibit 1397?) - a 2 That, your Honor, is now Defendant’s Exhibit N; the contract ‘between USOA and—! think it is N. 112 Deposition from Lloyd Webb ‘The Court: Yes, N. . Mr. Nickerson: N, between USOA. and CAVE — A, Yes, he showed it to me and Mr. Clemett at the ‘same. tithe. > ~ Q. Where were yout A. In Ralph Cox’s office a _. Wildwood, New Jersey. ‘ , ‘“‘Q. Was there any conversation? A. He told us “thas the contract was signed, it [1018] was. completed. **Q. Did you say anything? A. TI just read the eontrae and then I stated that if I were lim T wouldn't have signed it. ~~ **Q. Did he 82) anything to that? A. He just said he -was familiar enough with the aviation business that |) could handle it. I asked him if he had an attorney pres ent when Mr. Nickersoa : “Instead of doing that, then I wil read each, —— two previous questions: aie x ‘: “Q. “Would you give us the- date of this: conversation? A. ‘This was probably two or thyée ‘days prior to its being __ signed. oo. | \ “Q. Prior to July 25, ‘1951? ces A. Yes, probably in the vicinity of July 17th; to the 21st} somewhere around t. that: time... ~ mas *“Q. Could: ‘you tell us_in substance what the discussion . was between you and Cox after you — Plaintiff *s Ex- HH eh Sa hs pe gino ra , . . is 4 ay * +,: *. That. is now 357, - “. AL T hadn't completely digested the whole thing but still: kept arguing -with . Mr. Cox on the point that if it was such a glorious opportunity, why did the man sell his own airplanes. Even, if his airplanes were ‘in ‘bad shape, he could have sold one and with the money fixed "the other one ‘and gotten ‘another. "*Q, Did you talk’ to him on that subject one or several, times? A. T would say probably three times. | *Q. In- each—instance did yow raise the samé point, namely, that you questioned why he got rid-of his: air- planes, if it was a prafitable operatign? A. T would say yes. T also raised the point that for the year he’ showed ‘his operation in 1950, it just happened to be Apts, Sancto or something, a Catholie holiday, sorne rites that. could ne tl \ a) . _® Teh . » ; 7 . * . . 119 Deposition pe Ralph Cox, Jr. -* _ only. take place in Rome: ~ had religions priests going ’ back and forth that wouldn’t be-tray eling any other time._ [1029] ‘*Q. Rid you discuss that with Mr. Cox more than once? -A.: At least onée.’’ Now, your Honor, I am going to read from the deposition of Mr. Cox. > . [1030], Page 63, first question. And may it be con- eeded that this is also in the conversation with Mr. Mar- shall? 11031) Mr. chinieeed: Yes. + . « Mr. Nickerson: (Reading.) “Q. Did you tell him, do you reeall, what the market _ value of the planes you had was?) A. We presumed the market value to be around $500,000 -to $600, OOO at that ~ ‘thihe per plane, because the demand was such that it “pushed the price up there. Asa ‘matter of fact, I believe Marano was -the first who ‘had ever. Spore a C-54 for $500,000, -arather high figure at: the: time. ie Page 405; and this is the lent vour Honor: Mr. Schoenwald: © 405 .of Mr. Coy? . Abe. Nickefson: Yes. May it be conceded that ‘this is in the inceting at which Mr, Russell attended . on September. 15, 19511 “Mr. Polak: My notes show it is the 14th. Mr. Nickerson = 14th.» . at Schoenwald ; The meeting in New. York, in - September. Mr. Nickerson: Yes. > 120 — @ — from Ralph Coz, o, **Q. My question is, did = iil the terms of = contract ?”’ Then there is some colloquy: and again: - **Q. Will Fou "finish your answer and answer my ques-_ tion. [1032] A. I told these people that as far as we were concerned, the contract was déne; we were pulling oui and we had nothing more to do with it. We were hood- winked. They were try ing to steal our airplane, in our - opinion:?? cari [1033] (Defendant’s Exhibit CD received. in © evidence. ) . ; . ’ e¢ - e e [1042] Mr. Nickerson: * Your. Honor, I can’ concede - with respect to these documents which’ we were shown which Mr, Zinman ‘had been ‘studying, either that they relate to national operations or that they appear on the books. In fact, we know they do not appear on the bodks. The Court: Very well. , [1043] Mr. Nickerson: I am sorry. | That was not credited to the operational accounts. , The Court: As T recall, Mr. Schoenwald did not press . his question with respect to these documents after I - sustained_your first objection. All right. 8 - Yo . . . . . : ‘ F: P » 4 * 121 — : [1048] The Court: Now, gentleaien, T think that, in| accordance with the usual practice, the defendant should speak first, but since there are counterclaims here T have _ no objection if you wish to reverse the usual order; but I think Mr. Nickerson should address ‘himself first to his- case, and then T will hear Mr. Schoenwald. Mr. Nickerson : Whichever your Honor prefers, The Court: ‘Then I suggest that you hegin your argu- ment. — ED ate ¢ ° . * 01053] The Court: There was some delay, as I recall it, about the Lisbon rights, wasn't there? Mr. Nickerson: T am talking now about September 14th: We got the Lisbon rights September Sth. TI am talking as of the date of September 14th. But the Lisbon rights were -in complete order, We have a document. which shows that. eal : e °. eo (1055) Rut certainly that would not. entitle him to, rescission of the contract. The Court: Tunderstand that as a proposition of law,. und-F think T ean save you: some! tine by telling vou that - to thé extentethat this ease is based upon the failure of - CAVE. to provide full loads, I do not regard that as a valid. ground for damage: ‘sor for-rescission because there Is nothing in the contract or in the re ‘lationship between the parties which could tPasonably have , justified USOA in contemplating that CAVE held oat a- guarantee of full loads.) All of the evidence indicates pretty clearly that this business*had to be built up, that efforts had to be expended: to build it up, and that they could not expect to be carrying full [10563 loads of passengers right from 122 Colloquy the beginning, and I think that appears’ right out of the papers and testimony of USOA itself. Serie on os [1062] The-Court: Here was a company which was ° as close to being in a position of non-operation and com- plete frustration as it is possible for it to be. It had sold _ its equipment. It no longer’was running schedule flights. It-had lost substantial amounts of money. It had lost a ‘very substantial amount. of money just befons this con- | tract was executed. ¢ + a °- : . . [1063] True, it had a valuable franchise. _ Mr. Nickerson: That is what I am asking for, damages for loss of that, your Honor. ~The Court: Just a minute. We have got to relate as value “of thre-franchise to the ‘surrounding circumstances. Aman who was dying-of thirst in the middle of the Sahara Desert would gladly exchange a ton of coal for Sg quart of water, and a ton of coal in the middle of the. Sahara Desert to a man dying of thirst is of no value at all. ee ' Mr. Nickerson: Correct. | : [1064] Mr. Nickerson: - Let me explain to your Honor first that by the end of this contract, as an absolute mini- mum,. CAVE would have had in its treasury some one - hundred and fifty-six thousand, dollars. - @: | The Court: How do vou arrive at that? Mr. Nickerson: Bécause it gets that in its $3000-a week guarantee, and all of the other expenses are to be’ paid: by USOA. - 123 Colloquy 7 ; The Court: You mean assuming that USOA adhered to the literal terms of this contract right to the end of. the year the Venezuelan company would have collected exactly what? 7 Mr. Nickerson: Exactly to the dollar, your Honor, no ~ less than: $144,000. Be ; : The Court: How do you arrive at that figure? Mr. Nickerson: Théy were guaranteed $3000 a week under paragraph [(f) of the contract. 4 The Court: Didn’t you waive a substantial part of that? Cie | i Mr. Nickerson: No, your Honor, we did not waive it ‘at all. That was on the supposition that a new agreement could be reached thereafter. ‘The Court: No,'I thought part of it was. (1065) Mr. Nickerson: No, I waived the $2,250 which Was the first roundtrip and the trip back from Caracas to Rome. — ere is re The Court: Are vou including in that waiver— Mr. Nickerson: No, I am nét. $144;000 thev- would have rot, irrespective. : . .s . - (10667 Bear in inind tliat the immigration from Furope to Venezuela, bearsin mind that tremendous. publie works » program in Venezuela and the tremendous flow of immigra- ion that has been increasing. every year from Europe . to Venezuela: So I do not think that it is fanciful td assume that-this could have been made if US( MA had lived up t its contract. This was a very valuable thing: this . was one of the last routes in the world to he developed. ‘The Court:.- This business of transporting immigrants is a’ highly competitive one in Which national. interests are frequently very involved, anil theresis no assurance J] + Ateeaates acs — 124 a Colloquy that any specific proportion of this would have gone by aif, or if they had gone by air, whether they would. have gone by your country’s. It is eemthing oat is in the | realm of speculation. Mr. Nickerson: _ The only way you can look te the _ future is to make reasonable assumptions from -what has happened in the past. “LAV started ftying this route. Your, Honor heard Colonel Marcano testify that he «took over this route and he started flying. So it was’ not any losing operation. Of. that we can be sure. ; The Court: Was LAV organized when this (1067) company gave up its franchise? . : Mr. Nickerson: It is not. in the record, your Honor. _Do you want me to tell you? The Court:* No,‘nevér mind. I thought it was. Didn't Colonel Marcano testify that he had had negotiations with SAS and that they came to nothing? - Mr. Nickerson: Yes. You see’at*that time of course there was a terrific equipment squeeze, as your Honor has heard, but had they been able to keep alive for that year and had USOA lived up to its contract, they would have had all that mone v in the till whie h they could have used to keep this-thing alive. ~ T don’t want-to dwell on it. That’ is the only‘ way we ean look into the future, is to make reasonablk inferences from what has happened in the past...And IT ask for $500,000 for the value of the franchise on the basis of the evidence which is in. . : : ~The Court: Do I understand you correctly to say. that if TSOA had complied with what vou deemed to be its obligations under this .contract, that then’ CAVE would have collected by the end ofthe contract period roughly $140,000 in cash? . : : 125 Colloquy. Mr. Nickerson: . $144,000 minimum, absolute [1068] minimum. ; a - The Court: And that by the use of this eash CAVE. would have been enabled to preserve the existence of its fraachise, but that the loss of this cash was the direct cause of the loss. of the franchise and therefore USOA should pay for the franchise as well? | Mr. Nickerson: Well, your Honor,.I would not put it ‘quite that way. -I would say a minimum, they had fo get $144,000 on their $3,000 a week ‘guarantee from USOA over the term of the contract. They could have used that $144,000 net—not a‘nickel’s worth of expense came out of that. All that was paid by USOA. They could have used that $144,000 to finance or otherwise keep alive, whether by renting planes on a dry lease basis, whether by entering into, some -deai perhaps for the purchase of them, whether this.is an etfort to finance it or some other way, but T say it is reasonable to assume that if a com- pany has $144,000 net at the end of a year, that it isn’t just going to give. up the ghost and say, “This is the end.’’ . e e e C1070] Now ‘to answer your question- directly, vour Honor,. I. would only vay they would be reasonable for those damages which they reasonably could foresee at . the time that they entered into the contract, and I ‘submit - ‘to your Honor that USOA certainly reasonably could foresee this eventuality. : The Court: You make that argument notwithstanding the fact that CAVE was already in imminent dawger of losing its franchise before it entered into this contract, oy virtue of the sale of its equipment and its inability to_ maintain flight schedules?- _ are ee 126 - Colloquy “Mr. Nickerson: I think that increases the validity of my argument, because it gave USOA good reason to sup-| pose that if they pulled out of this that the: franchise _would be lost, and, in fact, Mr. Russell’s testimony, your Honor, that at the meeting on September Lith the valu- able thing. to us here is the franchise and if this thing is pulled back here and if vou pull it (1071) out, we are going to lose the franchise— ‘we put the franchise in jeopardy; I don’t recall the exact wording, but there was certainly testimony of that character at that meeting. So that I certainly think they eould reasonably foresee that as a result of their breach -we would lose this very ‘valugble thing, and what value you put on it of course” is a matter.that you can’t tie down as if it were damages for a breach of a bond and mortgaxe, heeause it inevi- tably has td be'a process of forecast based upon reasonable assumption of what has happened in the past. C1077) Mr. Schoenwald: °° ® [1082] Is the re nt that one particular tenant, namely, a party to this action is willing _to pay for the franchise adequate evidence e of its value? The Court: Yes, that is the best-evidenee. It is the value reached at arm’s length after careful negotiation and inquiry, as to both parties, as to what [LOS3] would . best serve their individual interests. ‘Mr. Schoenwald; I think not, your Honor. I think the eases indicate that value has to be based upon experience and upon market value: that one person could be misled inte assuming that a particular thing is of great yalne— The Court: If what yvou.are referring to iS your case . for fraud, I don’t think there is anv basis for it at all. Of course I agree to the naked [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386418_1581%3A3. Public record. Not legal advice.