Attorneys for one of the partners in Peregrine Flight International, a former Minden company that went out of business after two of its experimental planes crashed, argued Tuesday that the remaining partner can't be blamed for any misuse of funds.
Lawyers for Charles G. Miller told the Nevada Supreme Court that Douglas District Judge Michael Gibbons went too far in ruling that Miller "had an active duty to go find out and prevent constructive fraud." Gibbons ordered Miller to pay James C. Ray $585,000 damages.
The lawsuit was filed by Ray, who put $1.9 million into developing the PJ-1 and PJ-2 jet aircraft. Lawyer Richard Glen Campbell Jr. told the court that Michael Van Wagenen, chief executive officer of the company, was in charge of how Ray's money was being spent in development and that if the money was being diverted to other projects, it was at Van Wagenen's orders.
He said it was Van Wagenen who transferred funds to another project which Ray had specifically refused to pay for, not Miller.
"Mr. Van Wagenen was the one primarily responsible for this mess," he said.
But Steve Petersen argued for Ray that the half-million dollar damage award should stand because there was "substantial evidence" Miller knew Ray's cash was being diverted to other projects despite the fact Ray was relying on him to make sure "that his money went to construction of his aircraft."
He said Ray didn't stop the practice because he was afraid that would put an end to his aircraft's development.
The company was thrown into turmoil Dec. 30, 1994, when one of two flying prototypes, the PJ-1, crashed, killing Van Wagenen. Backers tried to keep the project going but were dealt a second blow in August 1995 when a crash killed Van Wagenen's replacement, Joseph Michael Henderson of Gardnerville.
Both men died in crashes in Douglas County near the airport in Carson Valley.
The Supreme Court panel of Myron Leavitt, Nancy Becker and Deborah Agosti will rule later on the case.
