18

18 MR. BEZEK: Thank you, Your Honor. We call
19 Mr. Gaggero.
20
21 STEPHEN MICHAEL GAGGERO,
22 THE PLAINTIFF, CALLED AS A WITNESS ON HIS OWN BEHALF, WAS
23 SWORN AND TESTIFIED AS FOLLOWS:
24 THE CLERK: Please raise your right hand.
25 Do you solemnly state that the testimony you are
26 about to give in the cause now pending before this court
27 shall be the truth, the whole truth, and nothing but the
28 truth, so help you God?

92
1 THE WITNESS: I do.
2 THE CLERK: Please be seated.
3 THE WITNESS: Thank you.
4 THE CLERK: Please state and spell your full name for
5 the record.
6 THE WITNESS: My name is Stephen Michael Gaggero.
7 THE CLERK: Can you spell it, please.
8 THE WITNESS: G-A-G-G-E-R-O. First name is spelled
9 S-T-E-P-H-E-N. Middle name, M-I-C-H-A-E-L.
10 THE COURT: You may proceed.
11 MR. BEZEK: Thank you, Your Honor.
12
13 DIRECT EXAMINATION
14 BY MR. BEZEK:
15 Q Mr. Gaggero, would you tell us where you currently
16 reside, please.
17 A I reside on a ranch in Ventura County on Canada
18 Larga Road.
19 Q And how large is that ranch?
20 A It's 1,500 acres. And in my trust we have -- in
21 another trust of mine, I have an adjoining 2,000 acres.
22 Q So the total is about 3,500 acres?
23 A That's correct.
24 Q How long have you lived there?
25 A It became my primary residence in 1999.
26 Q All right. And are there any activities of any

27 kind that are performed on that ranch, business-type
28 activities, any farming activities, any equestrian

93
1 activities, anything like that?
2 A We have an equestrian center. We run cattle. We
3 grow --
4 THE COURT: I don't know who "we" is.
5 THE WITNESS: Oh, pardon me. Myself and Colleen --
6 THE COURT: Don't know who "Colleen" is either.
7 THE WITNESS: My significant other. And we -- she
8 manages the equestrian center. I lease the ranch out to a
9 cattle operation. I lease the grazing rights. I grow oat
10 hay and harvest it, walnuts, and I raise horses there, and
11 various other things.
12 Q BY MR. BEZEK: Now, where were you born?
13 A I was born in Altadena, California. Pasadena
14 area.
15 Q And have you essentially lived in California all
16 your life?
18 Q What's your educational background?
19 A I went to high school and completed the --
20 THE COURT: Who's the new person sitting at counsel
21 table?
22 MR. BEZEK: Oh, I'm sorry, Your Honor.
23 THE COURT: I didn't get an introduction.
24 MR. BEZEK: You did not. My fault. This is Colleen
25 Connors, Your Honor.
26 THE COURT: Is she a party?

27 MR. BEZEK: She's my paralegal.
28 THE COURT: Okay. Is this the same Colleen that the

94
1 witness just referred to, or a different Colleen?
2 MR. BEZEK: A different Colleen.
3 THE COURT: All right.
4 MR. BEZEK: The witness referred to a Colleen O'Brien.
5 This is Colleen Connors.
6 THE COURT: Okay.
7 Q BY MR. BEZEK: Mr. Gaggero, you were telling us
8 about your educational background.
9 A I went halfway through the 10th grade. That's in
10 school.
11 Q All right. Now, after leaving high school, did
12 you eventually get into business related to real estate,
13 like general contracting?
14 A Yes.
15 Q Can you give us your business background, please.
16 A I became a licensed general contractor in 1976.
17 Prior to that, I worked my way up to that by being a
18 handyman and a painter and a carpenter and then ultimately
19 took my test and became a general contractor, built for
20 others until 1985, sold the company.
21 And up to 1985, I was building things for myself
22 with surplus profits. And in 1985, I started building only
23 for myself and developing my own projects and stopped
24 building for the general public, although from time to time
25 I did the odd favor or odd job.
26 Q Now, when you started building for yourself, can

27 you give the court a kind of overview of the type of
28 projects that you began to specialize in, if any, where

95
1 those projects might have been located, and the size of
2 those projects?
3 A They varied in real estate type but were
4 predominantly custom single-family homes, some in the
5 valley, most of them on the west side. But by and large --
6 I should say some, in the early stages, in the valley,
7 but -- and a few on the west side, but almost all of them,
8 the important ones, were along the coast from Malibu on
9 down.
10 And I also bought apartment buildings and
11 remodeled them, bought small shopping centers and remodeled
12 them, small commercial centers and remodeled them, and kept
13 them in my portfolio, or sometimes I would sell them and
14 then roll the money into other investments.
15 Q How long did you do that type of investment
16 activity for your own account, before creating an estate
17 plan?
18 A I started -- I think my first purchase was in
19 1976. I think. And I continued buying things and
20 developing them for my own portfolio until 1997, at which
21 time I started developing an estate plan. And from 1997 on
22 through and to, I think, 1999, maybe the early part of
23 1999, I started moving my asset portfolio into an estate
24 plan.
25 Q Now, when you were doing this estate planning, did
26 you do that on your own, or did you hire a professional to

27 assist you?
28 A Initially, in 1997, I used some attorneys that I

96
1 had, just regular general counsel-type attorneys. And then
2 in, I think, the middle or latter part of 1997 I was
3 introduced to Mr. Praske, and I hired him to be the
4 architect of the estate plan.
5 Q How is it that you came to be acquainted with or
6 introduced to Mr. Praske?
7 A An attorney named Laura Slocumb had an opportunity
8 to work with him in the past, and she introduced me to him.
9 Q And what prompted your desire at that point in
10 life to seek professional advice in an attempt to create an
11 estate plan?
12 A My estate was -- had grown rather large, and I had
13 just weathered the early 1990's and mid-'90s, which was a
14 pretty rough time for anybody in real estate. And I
15 decided that it would be a prudent idea to get a lawyer to
16 look at my portfolio and develop an estate plan so that my
17 estate would survive me and be for the benefit of my
18 children and not be something that was exposed.
19 Q Now, after you met with Mr. Praske, did you make a
20 decision on whether or not to proceed with an estate plan
21 at that time?
22 A I had actually made the decision before that. I
23 think the triggering event was, I sold my home in March of
24 1997, and I owned the property next door to my home as
25 well.
26 Q Where was that home located?

27 A It was in Malibu on Encinal Beach.
28 Q What was the combined selling price of both

97
1 parcels?
2 A $14-1/2 million.
3 Q And once that house was sold, along with other
4 assets in your estate, is that when you made the decision
5 to establish --
6 THE COURT: There's no testimony -- you're sort of
7 testifying at this point. You said "once the house was
8 sold, along with other assets." I don't know that he
9 testified to that. So let's let him put the evidence in,
10 since he's the one that's under oath.
11 Q BY MR. BEZEK: When you sold the house on
12 Malibu -- in Malibu, did you have other assets in your
13 personal portfolio at that time?
14 A Yes.
15 Q Can you give us a list, as best you can recall, of
16 the assets that you had at that time, in addition to the
17 Malibu house which you had just sold?
18 A I owned a parking lot in Venice beach, on the
19 beach. I owned a small shopping center on the beach in
20 Venice beach. I owned an apartment building on the beach
21 in Venice beach. I owned a mixed-use retail and
22 residential building on the beach in Venice beach. I owned
23 a house on Broad Beach, in Malibu.
24 I owned -- well, at that time -- are we talking
25 about that specific time, because I had been putting some
26 of these assets into limited liability companies and

27 limited partnerships, as I indicated, starting in the early
28 part of 1997, so --

98
1 THE COURT: Let's get a specific question with a
2 specific time frame so we're clear on what you're asking
3 him.
4 Q BY MR. BEZEK: In addition to the personal assets
5 that you just identified for us in your personal portfolio,
6 did you also have assets that were in other limited
7 liability companies or partnerships prior to the time that
8 you established your estate planning trust?
9 A Yes, I did.
10 Q Okay. Can you tell us now -- first of all, have
11 you given us, as best you can recall, what the personal
12 assets were, such as Broad Beach and the Malibu properties
13 and the other things you identified? Have you pretty much
14 identified, as best you can recall, that population of
15 assets?
16 A Well, I had 2,000 acres --
17 THE COURT: Is that a "yes" or "no"?
18 THE WITNESS: No.
19 THE COURT: Okay.
20 Q BY MR. BEZEK: Okay. Would you complete that
21 list, please.
22 THE COURT: Okay.
23 THE WITNESS: I had 2,000 acres in Ojai and Ventura.
24 And in a corporation that I was the sole shareholder of, I
25 had other assets.
26 Q BY MR. BEZEK: All right. Now, at the time that

27 you met with Mr. Praske, did there come a time when you
28 retained him to prepare for you an estate plan?

99
1 A Yes.
2 Q Approximately when was that?
3 A It was late 1997 and early 1998, I believe, when
4 Mr. Praske started implementing the estate plan. It's not,
5 you know, one thing that you just pull a trigger and it's
6 done. It takes a long time to put it all together.
7 Q At the time that Mr. Praske began to design your
8 estate plan, what was the approximate gross value of the
9 assets that were being put into the estate?
10 MR. ROSEN: Objection. Lack of foundation.
11 THE COURT: Sustained. And I don't know who owns them.
12 He's talking about things his corporation owns. I'm just
13 not clear. The way this testimony is going in, it's not
14 very precise. So let's -- sustained.
15 Q BY MR. BEZEK: Let's focus on the personal assets
16 that you identified for us that were in existence at the
17 time you started talking with Mr. Praske.
18 Are you focusing with me on that?
19 A Yes.
20 THE COURT: Are you talking about assets that he owns
21 as an individual? Why don't you ask it that way.
22 MR. BEZEK: Okay.
23 Q These assets that you identified earlier, were
24 these assets that you owned in your individual name?
25 THE COURT: I have no idea what assets he's referring
26 to, because some of them he was talking about a

27 corporation. So we're not being precise here.
28 And I still don't know what -- you're trying to

100
1 get him to say he owned, at what period of time, as an
2 individual, as opposed to his parents, some trust.
3 You know, that's what we're going for here, I
4 think.
5 MR. BEZEK: All right.
6 Q First of all, let's identify with precision, if we
7 can, those assets that you owned in your own name at the
8 time that you were meeting with Mr. Praske.
9 A The problem I'm having is I don't remember which
10 of the Venice beach properties I had transferred into a
11 limited liability company just before I met Mr. Praske.
12 Q Let me ask the question this way. Whether it was
13 owned in your own name or whether it was owned in the name
14 of a partnership or a corporation -- let's start, first of
15 all, with assets in the name of a corporation. Were any of
16 those corporations owned in whole or in part by somebody
17 other than you that held title to those assets?
18 A No.
19 Q With regards to the limited liability companies,
20 were there some assets that were in limited liability
21 companies at that time?
22 A Yes.
23 Q Were you the managing member of those limited
24 liability companies?
25 A Yes.
26 Q And did you own the stock in those --

27 A Wait. I'm not sure I was the managing member.
28 I'm not sure.

101
1 Q Okay. Did you own the stock in those limited
2 liability companies?
3 THE COURT: You mean 100 percent of the stock, or any,
4 1 percent, or what -- how much stock are we talking about
5 here?
6 MR. BEZEK: I wanted to find out first, Your Honor, if
7 he owned, and then we'd talk about how much. Is that okay?
8 THE COURT: You're asking the questions.
9 MR. BEZEK: Okay.
10 Q Did you own the stock in the limited liability
11 companies, any stock?
12 A I owned all the membership interests.
13 Q Okay. In each of the limited liability companies
14 that held a real estate asset?
16 Q Is there any other category of ownership vehicle,
17 corporation, limited liability company, partnership, that
18 we haven't covered yet that held your assets at that time?
19 A No. There were no trusts at that time. And every
20 asset, up to the time I met Joe Praske, was owned
21 100 percent by me, either by virtue of the membership
22 interest, the shares, or the direct title to the property.
23 Q Now, focusing just on that grouping of assets,
24 what was the approximate value of those assets?
25 MR. ROSEN: Objection. Lack of foundation, calls for
26 expert testimony.

27 THE COURT: He can testify as to the value of his own
28 property, right, if he owns it? Isn't that in the Evidence

102
1 Code?
2 MR. ROSEN: For example, I mean, in real estate, are we
3 just going to get -- necessarily it's going to call for his
4 opinion on what he's --
5 THE COURT: Let's look at the Evidence Code section and
6 see what it says. Anybody know the number we're talking
7 about?
8 MR. BEZEK: I don't know the Evidence Code, Your Honor,
9 but I think the Court's right, that --
10 THE COURT: Well, let's look at it and see what it
11 says, because it might apply to property he holds in his
12 own name and it might not apply to the corporate property
13 or the LLC property. Let's get that Evidence Code section.
14 I assume you're relying on that to get around this
15 objection?
16 MR. BEZEK: Yes, Your Honor.
17 THE COURT: Any other response to that objection?
18 MR. BEZEK: The case law establishes that an individual
19 has the right and is competent to testify to the value of
20 property that that individual owns.
21 THE COURT: Okay. What about the property in the
22 corporations and the partnerships? That's the other issue.
23 MR. BEZEK: As long as the testifying witness has
24 established that he is, in this case, the sole owner,
25 although I don't think --
26 THE COURT: Got a case that says that? You don't know

27 what the Evidence Code section is. Do you have a case that
28 says that?

103
1 MR. BEZEK: I do not, Your Honor.
2 THE COURT: Okay. Let's find the Evidence Code
3 section.
4 MR. ROSEN: Looks like it's in the 820 --
5 THE COURT: I think everybody should bring their
6 Evidence Code with them for this trial, because I am going
7 to be asking you what Evidence Code sections you're relying
8 on. I think we're going to get into some evidentiary
9 issues, as I read this trial brief.
10 What section, counsel?
11 MR. ROSEN: It's in the realm of 814 to 824, are the
12 ones dealing with evidence of --
13 THE COURT: You made the objection. Let's see if we
14 can find this.
15 MR. ROSEN: Right.
16 THE COURT: The value -- okay. 813.
17 MR. ROSEN: I'm looking at 813, exactly, yeah.
18 THE COURT: (Reading):
19 The owner or the spouse of the owner.
20 An officer, regular employee, or partner
21 designated by a corporation, partnership,
22 or unincorporated association that is
23 the owner of the property if the designee
24 is knowledgeable.
25 Sustained on foundation as to everything except
26 what he owns personally. You're going to have to lay that

27 foundation.
28 Please bring your Evidence Code to this trial.

104
1 MR. BEZEK: Yes, Your Honor, I will do that.
2 Q Mr. Gaggero, as to the property in the limited
3 liability companies and the corporations -- I want to focus
4 just on that --
5 THE COURT: The ones that he's saying he owns, the LLCs
6 or the corporations?
7 MR. BEZEK: The ones that he says he owns, that's
8 right.
9 THE COURT: Right, okay.
10 Q BY MR. BEZEK: -- how do you know what property
11 was owned by those entities at that time? The time being
12 when you were meeting with Mr. Praske to set up the estate
13 plan.
14 A Because I transferred them from my name into the
15 LLCs that -- well, first with the LLC properties -- I think
16 it's two properties in Venice -- I transferred them into
17 these entities and my attorney set up the entity.
18 Q And when you made those transfers into the
19 entities, do you recall approximately when that transfer or
20 those transfers occurred?
21 A Yes.
22 Q When was that?
23 A In early 1997.
24 Q At the time that you transferred them --
25 A Early-to-mid 1997.
26 Q At the time that you were about to transfer them,

27 but before you actually transferred them, you were still
28 the owner at that time, were you not?

105
1 A Yes, I was.
2 Q At that time, what was the value of those
3 properties?
4 THE COURT: You haven't established the other part of
5 that, 813(a)(3), knowledgeable as to the value of the
6 property. And we need a valuation date. Is the valuation
7 date the date of the transfer that you're asking him what
8 the value was?
10 THE COURT: I'm just asking you. If it's not the date
11 of value, if it's after the corporation owned it, then
12 what's his basis for knowing what the properties are worth?
13 That's what the foundation requires under the
14 Evidence Code. So I don't know what date you're going for
15 here.
16 MR. BEZEK: Well, he doesn't have a precise date of
17 transfer because he doesn't recall. He remembers it was in
18 late '97.
19 THE COURT: The question is -- what are you asking him?
20 Are you asking him for the valuation as of the date of
21 transfer?
22 MR. BEZEK: I'm asking him just before he transferred.
23 Q The question was, before you transferred it, the
24 day before you transferred it -- let's put a date that way.
25 The day before you actually transferred it, while it was
26 still in your name, what was the value of that property at

27 that time?
28 A I believe the two properties that are at issue

106
1 here are 523 Ocean Front Walk and 601 Ocean Front Walk.
2 Those are the addresses. That would be the parking lot and
3 the mixed-use retail and residential property. And my
4 opinion of value in 1997 of those properties is between 6
5 and $7 million of those two properties.
6 Q Now, with regards to the balance of your personal
7 portfolio that was in your personal name before it was
8 transferred to any other entity, do you have an opinion of
9 the combined value of those assets?
10 A Between 35 and $40 million.
11 Q When you met with Mr. Praske, did those combined
12 valued properties then become part of the estate plan for
13 which you used Mr. Praske's help to set up?
14 A Yes.
15 Q Now, when you gave us this value a moment ago of
16 35 to $40 million as to those assets, was that gross value
17 or was that net worth, that is, equity?
18 MR. ROSEN: Objection. Vague and ambiguous.
19 THE COURT: How is that ambiguous?
20 MR. ROSEN: Gross value or net worth. Gross of --
21 THE COURT: Sustained. Gross.
22 MR. ROSEN: Gross of what?
23 THE COURT: Technically, those are incorrect terms.
24 Thank you.
25 Why don't you rephrase.
26 Q BY MR. BEZEK: When you gave us that number, that

27 value, 35 to $40 million, was that the gross fair market
28 value of those properties?

107
1 A Yes, that's an approximate gross fair market value
2 of those properties.
3 Q Did some of those properties have debt against it?
4 A Yes.
5 Q Can you tell us what the approximate equity was in
6 those properties at the time they were transferred into the
7 estate plan that ultimately was designed and implemented
8 through Mr. Praske?
9 THE COURT: Are you talking about the properties he
10 said were worth 35 to 40 million?
11 MR. BEZEK: Yes.
12 THE COURT: What was his personal equity in those
13 properties before he transferred them?
14 MR. BEZEK: Correct.
15 THE COURT: That's your question. Okay.
17 THE WITNESS: And the 35 to 40 is not including the two
18 that were in the limited liability companies or the limited
19 partnerships, whatever they were; is that correct?
20 Q BY MR. BEZEK: Right. We're going to cover those
21 in just a minute.
22 A Okay. Between 15 and $20 million was the -- oh,
23 I'm sorry. The debt. You wanted to know the debt.
24 THE COURT: No. He asked for what your personal equity
25 was --
26 THE WITNESS: Oh, okay.

27 THE COURT: -- in those properties the day before you
28 transferred them.

108
1 THE WITNESS: Okay. Between 15 -- between 15 and $20
2 million.
3 Q BY MR. BEZEK: All right. Now, I want to focus on
4 the two properties that were involved with the limited
5 liability companies that we talked about a moment ago.
6 THE COURT: The two properties in --
7 THE WITNESS: Wait. I have to go back on that because
8 I'm a little confused here. I'm sorry. This is all -- the
9 day before I transferred them?
10 MR. BEZEK: Yes.
11 THE COURT: Into the trust that this attorney set up,
12 what was your personal equity in those properties, the
13 properties that you're saying you personally owned as
14 opposed to what was in a trust or a corporate ownership?
15 THE WITNESS: The problem is, the portfolio properties
16 took over a year to get transferred.
17 THE COURT: We just need a number.
18 THE WITNESS: Okay.
19 THE COURT: Roughly.
20 THE WITNESS: 25 to $30 million was the net equity in
21 the properties that ultimately got transferred into the
22 estate planning, not including the two that we talked about
23 in Venice beach.
24 THE COURT: That's not what he asked you. He wanted to
25 know what your personal equity was in those properties
26 before you transferred them, the ones that you say you

27 owned personally.
28 THE WITNESS: Okay. Can I write them down so I can

109
1 track this? Is that all right?
2 THE COURT: Absolutely.
3 Do you want to give him a pencil and paper?
4 THE WITNESS: I have one. I just want to -- because
5 I'm having a hard time getting all this together.
6 THE COURT: We're losing some time because the
7 questions aren't super precise, so you might want to focus
8 in a little on what you're asking him.
9 THE WITNESS: Okay. I think I got everything I need.
10 Q BY MR. BEZEK: All right. After having done your
11 analysis now, can you answer the following question: What
12 was your personal net worth in the properties that you
13 personally owned the day before they were transferred to
14 the trust?
15 Let me back up, because I think I understand what
16 your confusion is.
17 THE COURT: I thought the question was, what was his
18 personal equity in the properties.
19 MR. BEZEK: I think there's another confusion, another
20 concern.
21 Q How long did it take for these properties
22 ultimately to be transferred into the finalized estate
23 plan?
24 A Over a year.
25 Q Okay. Is it possible for you to focus on each
26 individual property that you owned personally and focus on

27 the date when the transfer occurred and then calculate the
28 value of each asset the day before that transfer occurred

110
1 over that year period of time? Can you do that?
2 A I can, but I'm going to bore the heck out of
3 everybody here while I calculate that.
4 THE COURT: Well, we've just waited for five minutes
5 for him to do something with a pencil and paper. So why
6 don't you just ask him the question that you had on the
7 floor when we took the five minutes so he could do his
8 calculations.
9 What was your personal equity in the properties
10 you owned yourself as opposed to the corporation or the LLC
11 before you transferred them? Roughly.
12 THE WITNESS: And I can use the period -- that year
13 period, what they were worth during that year?
14 THE COURT: Just before they were transferred, roughly.
15 THE WITNESS: Roughly, my -- there was $11 million in
16 net value of the assets that I held personally --
17 THE COURT: That doesn't answer the question. We're
18 trying to find out what was your personal equity in those
19 properties before you transferred them, the ones that you
20 said you owned personally. What was your equity?
21 THE WITNESS: 11 million.
22 THE COURT: Okay.
23 Q BY MR. BEZEK: Now let's focus on the other two
24 assets that you identified before that were not personally
25 owned by you. What assets were those?
26 THE COURT: We've got them, 523 and 621 Ocean Front,

27 Venice.
28 Is that what you said?

111
1 THE WITNESS: 601, yes.
2 THE COURT: Okay, 601.
3 THE WITNESS: I didn't break those two out separately.
4 What I did was took the liberty of including the ones that
5 were in the corporation and a limited liability company and
6 another limited partnership.
7 THE COURT: In the 11 million?
8 THE WITNESS: No, no. I think what you're trying to
9 determine is how much was in the entities and how much was
10 in my personal name.
11 So instead of focusing only on the two in Venice,
12 we talked about the corporations, and I went ahead and took
13 everything I can think of, and I took the entities and did
14 the gross and net on all the properties in the various
15 entities.
16 THE COURT: Well, he gets to ask the questions. It's
17 like dancing. He leads and you follow. So he asks the
18 question; you have to answer it.
19 THE WITNESS: Okay.
20 Q BY MR. BEZEK: For each of these limited liability
21 companies that held title to those properties, were you
22 the -- did you manage or provide management services for
23 those entities?
24 A Yes.
25 Q What did those management services include in
26 relation to managing the asset?

27 A All of the tasks that go along with property
28 management as well as all of the aspects of the asset

112
1 management, such as refinancing, dealing with tax issues,
2 insurance issues, making decisions to buy, sell, buy or
3 sell the asset, to improve the asset, overseeing any
4 improvements to the asset, financing, designing some
5 ultimate disposition of the asset.
6 Q While you managed those assets for the limited
7 liability companies, did you maintain knowledge of the
8 value of those assets?
9 A Yes.
10 Q Okay. Now, with regards to those limited
11 liability company assets, can you tell us what the value of
12 those assets -- of the assets that were transferred in
13 there were when they were transferred to the trust?
14 THE COURT: You're talking about the LLC companies he
15 said he owned, correct?
16 MR. BEZEK: Yes, Your Honor.
17 THE COURT: Those are the two companies in Venice,
18 right -- two properties in Venice?
19 THE WITNESS: Yes. If you want to talk about just the
20 Venice properties, I'll add that up real quick, and that
21 will be --
22 THE COURT: We're just talking about the LLCs that you
23 owned, the two Venice properties. Was there anything else?
24 THE WITNESS: There was another property in the Ventura
25 area.
26 THE COURT: My error. Just all the properties you

27 owned.
28 THE WITNESS: The LLCs?

113
1 THE COURT: Yeah.
2 THE WITNESS: Okay. The net equity in the properties,
3 in the three LLC's, was approximately $11-1/2 million.
4 Q BY MR. BEZEK: Now, that's in addition to the
5 $11 million that we talked about earlier for your personal
6 assets?
7 A That's correct.
8 Q Now, in any of that analysis that you've just
9 given us, did any of that involve the value of the
10 2,000-acre and 1,500-acre ranch up in Ojai, Ventura?
11 A Yes, it included the 2,000 acre one because that
12 was an LLC. It did not include the one that was in the
13 corporation, and it did not include the partnership that
14 was in Montecito.
15 Q Okay. I want to focus on those two corporate
16 transfers or assets. Are you with me?
17 A Yes.
18 Q Okay.
19 THE COURT: You just referred to a partnership in
20 Montecito as a corporate asset. I'm now confused.
21 MR. BEZEK: No. It was my mistake, Your Honor, in the
22 question.
23 THE COURT: Okay.
24 Q BY MR. BEZEK: Let's focus, first of all, on the
25 1,500-acre parcel that was not included in the valuation so
26 far.

27 A Okay.
28 Q Was that in a -- what kind of entity held that

114
1 property?
2 A A corporation.
3 Q Were you the manager for that corporation? Did
4 you provide management services for that corporation?
5 A Yes.
6 Q Were those management services similar to the ones
7 you just described to us for the other properties?
8 A Yes.
9 Q In that capacity, was it your obligation and your
10 duty to maintian knowledge of the value of that asset?
11 A Yes.
12 Q What was the value of that asset --
13 THE COURT: Were you the sole shareholder in the
14 corporation?
15 THE WITNESS: Yes.
16 THE COURT: I'm sorry.
17 Q BY MR. BEZEK: What was the value of that asset
18 when it was transferred into the trust, the net value? I'm
19 talking about after debt.
20 A 5.3 million.
21 Q Now, you also mentioned an asset in Montecito that
22 was owned by a partnership?
23 A Yes.
24 Q And were you the manager -- did you provide
25 management services for that partnership similar to what
26 you've already identified for us?

27 A Yes.
28 Q Montecito is located in Santa Barbara?

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1 A Yes.
2 Q What type of an asset was that?
3 A It was an estate.
4 Q Do you recall how large the real estate parcel was
5 on which this estate was located?
6 A I think it was 11 acres.
7 Q Okay.
8 THE COURT: Was the 11 acres in Montecito a
9 single-family residence?
10 THE WITNESS: Yes, ma'am -- yes, Your Honor.
11 THE COURT: And did you have a partnership interest in
12 the partnership and, if so, could you describe it briefly?
13 THE WITNESS: I had a partnership with a bank, and they
14 had 15 percent -- they were entitled to their regular
15 interest and then 15 percent of the net equity when we sold
16 it.
17 THE COURT: A partnership as opposed to a mortgage?
18 THE WITNESS: It was a participating mortgage.
19 THE COURT: Okay.
20 Q BY MR. BEZEK: What was the net equity in the
21 Montecito property at the time it was transferred into the
22 estate plan?
23 MR. ROSEN: Objection. Vague. Is he talking about
24 Mr. Gaggero's net equity or the total?
25 THE COURT: Sustained.
26 Q BY MR. BEZEK: What was the net equity of the

27 partnership in that entity at the time it was transferred
28 into the estate planning?

116
1 A I can't answer it like that, because it didn't
2 actually get transferred into the estate plan. It -- I'm
3 not sure if it got -- I'm not sure if it got transferred
4 into the estate plan or not, actually. I just don't know
5 if it did. It was sold, and I don't know if it -- if one
6 of the ownership entities was part of the estate plan when
7 it was sold or not. I don't recall.
8 Q All right. Between the properties that we have
9 identified so far, if my math is correct, we're at about
10 26, $27 million in net equity, two 11's and a 5?
12 Q Now, when these assets funded the estate planning
13 that had been created by Mr. Praske, did Mr. Praske perform
14 any other services other than being the legal
15 representative that designed the estate plan for you? Did
16 he continue on in any capacity?
17 A Yes.
18 Q What capacity?
19 A He managed the estate plan after he -- as I
20 indicated, it took about a year or more to get it into
21 place, and then he managed it and maintained it after that.
22 And he was the trustee of the two trusts. I think one
23 might be a foundation and one is a trust.
24 Q Now, once the estate plan was established and
25 Mr. Praske began to provide services, as you've just
26 identified, did you continue to provide services to the

27 trust in terms of locating property, for example, that the
28 trusts, or one of them, might want to buy?

117
1 A Yes. I was the asset manager and, in that
2 capacity, I made the determinations as to the highest and
3 best use of all the assets, the disposition of the assets,
4 or whether we should retain them. And I looked to build
5 the portfolio by looking for opportunities to either hold
6 and grant, hold and keep in the family, or develop for
7 resale.
8 Q And did you perform those services for the estate
9 from the time that the estate was complete in its formation
10 to the present date?
11 A Yes.
12 Q Now, in July, August of 1998, did you have any
13 conversations with Mr. Praske about the 938 property that
14 you had located?
15 A Yes.
16 Q And I'm not trying to lock you in on the date,
17 because I'm not sure when you had the first conversations,
18 but do you have a recollection of when you first brought to
19 Mr. Praske's attention the fact that you had found 938 as a
20 potential investment for the estate?
21 A It would have been between the end of May and
22 probably the end of June of 1998 that I had discussions
23 with Mr. Praske about Mr. Harris' portfolio properties, the
24 938.
25 THE COURT: We're going to take our 15-minute afternoon
26 break. We'll see you at 3:15.

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1 (Recess taken.)
2
4 Q BY MR. BEZEK: Now, Mr. Gaggero, when we broke, we
5 were just about to discuss -- or were in the process of
6 discussing when you brought to Mr. Praske's attention the
7 fact that you had located the 938 property for sale.
8 Do you remember that's kind of where we were?
9 A Yes.
10 Q Do you have a recollection, approximately, as to
11 when you first brought this investment opportunity --
12 THE COURT: He's already answered that.
13 MR. BEZEK: He did? All right. Then I'll move on.
14 Q Did you meet with Mr. Praske and discuss this
15 opportunity with him?
16 A Mr. Praske and I were working together on an
17 almost daily basis, so he was pretty familiar with
18 everything I was doing.
19 THE COURT: You know what. You're going to have to
20 listen to what he asks you and answer only that question.
21 THE WITNESS: All right.
22 THE COURT: It's going to take -- you're going to be up
23 here longer if you don't do that. Listen to what he asks
24 and answer that question.
25 Would the reporter read it back.
26 I'm going to illustrate what he asked you.

27 (The question was read by the reporter as
28 follows:

119
1 "Q Did you meet with Mr. Praske
2 and discuss this opportunity with him?")
3 THE WITNESS: Yes.
4 Q BY MR. BEZEK: What did you tell Mr. Praske about
5 this opportunity?
6 MR. ROSEN: Objection. Hearsay.
7 THE COURT: What's the exception to the hearsay rule?
8 MR. BEZEK: What he said, Your Honor, is not
9 necessarily hearsay. Also, it's not being offered for the
10 truth of the matter asserted. Actually, it's being --
11 THE COURT: Well, A, what's the exception and, B,
12 what's the nonhearsay purpose?
13 MR. BEZEK: Res gestae.
14 THE COURT: It's a statement of a party, so it's
15 hearsay. So what's the hearsay exception and what's the
16 nonhearsay purpose?
17 MR. BEZEK: One is, it's not hearsay because it's not
18 being offered for the truth of the matter asserted.
19 Rather, it is being offered as res gestae. That is the
20 purpose for why a transaction was being done and the basis
21 upon which actions were taken after the conversation.
22 MR. ROSEN: That res gestae exception that he just
23 mentioned --
24 THE COURT: He's saying it's a nonhearsay purpose, not
25 an exception.
26 MR. ROSEN: Well, that only applies when the testimony

27 itself is evidence of the fact or thing that was done or
28 not done. And I don't think there's -- I don't know what

120
1 the fact or thing that was done or not done is that we're
2 talking about.
3 THE COURT: Counsel?
4 MR. BEZEK: The witness has a right to present
5 nonhearsay evidence to establish the basis upon which
6 actions were taken and to show the state of mind of the
7 parties to explain actions that were taken or to explain a
8 process or a procedure, which is exactly why this is being
9 offered.
10 THE COURT: All right. Just give me a moment.
11 Sustained.
12 Q BY MR. BEZEK: Did you have a meeting with
13 Mr. Praske concerning the fact that you had found 938?
14 A Yes.
15 Q And after meeting with Mr. Praske, did you take
16 any action, any further action, with regards to going
17 forward with the purchase of 938?
18 A Yes.
19 Q Where were the funds going to come from to
20 purchase 938?
21 A That would depend on when the escrow closing date
22 was established.
23 Q Let me ask the question this way. I'm not
24 focusing yet on how title would be taken. I'm only asking
25 from what general source would the funds come from to
26 purchase 938.

27 A There was no escrow closing date, by design, of
28 Mr. Harris in the purchase agreement. Mr. Harris wanted to

121
1 control when the close of escrow would occur.
2 So I couldn't tell you then, as I couldn't tell
3 you now, whether we would exchange into the property
4 because we happened to be selling one of the assets in the
5 trust, whether we would take cash out of the trust and
6 purchase it, whether we would take some cash and take a
7 real estate mortgage, or whether I would ask my parents to
8 either, from their trust or them individually, to fund a
9 portion or all of it.
10 It would depend on the liquidity of the trust at
11 the time Mr. Harris made a decision as to when he wanted to
12 close escrow.
13 We were continuing to do business, and the trust
14 would sometimes have millions of dollars liquid and
15 sometimes it would not have millions and only hundreds of
16 thousands liquid.
17 We always had the ability to borrow against the
18 assets of the trust.
19 THE COURT: I don't know who "we" is.
20 THE WITNESS: Mr. Praske and myself always had the
21 ability to borrow money against the assets in the trust or
22 pull cash directly out of the trust. But we couldn't make
23 a determination as to precisely what -- whether we would
24 take the money from a bank account or whether we would
25 borrow it as a mortgage or whether we would leverage an
26 asset to purchase it until Mr. Harris made a decision when

27 he wanted to close escrow.
28 We simply couldn't do our acquisition planning

122
1 until that date certain was determined, identified, and
2 told to us. Then I could tell you exactly, after meeting
3 with tax counsel, Mr. Praske, and my accountants, I could
4 tell you exactly where the most prudent place to pull that
5 purchase money from would be.
6 Q BY MR. BEZEK: In every one of the examples you
7 gave, except for your parents, was the source of the
8 resource from which the funds would be generated the estate
9 plan or the estate?
10 A Yes.
11 Q All right. In terms of how title would be taken,
12 were you able to determine how title would be taken before
13 there was a closing date for 938?
14 A No.
15 Q Can you explain why?
16 A Because Mr. Harris wanted to do, under IRS 1031,
17 what's called a direct exchange. We wanted the opportunity
18 to do, under IRS 1031, what is referred to as a delayed
19 exchange. Mr. Harris didn't want to close escrow until he
20 identified and put under contract a replacement property.
21 At that time, he would define an escrow period and he would
22 give us 30 days to close.
23 If, when he gave us notice that he had found a
24 replacement property and gave us 30 days' notice to close
25 escrow, if at that time there was an asset in the estate
26 planning facility or in any of these trusts, if there was

27 an asset that was either under contract, in escrow, or had
28 sold within a 45-day identification period, we would have

123
1 taken that opportunity to use that asset, and the
2 partnership, limited liability company, corporation, or
3 whatever entity owned that asset that was under contract or
4 in escrow or had just recently sold, we would take that
5 entity and identify that entity, and we would assign the
6 purchase agreement to that entity so that it could make a
7 1031 exchange if that was determined to be the prudent
8 thing to do at the time.
9 If, however, when Mr. Harris identified a piece of
10 property and gave us an instruction to close we did not
11 have a sale pending or a sale that had recently completed,
12 we could loan the money -- and "we," again, was the trust,
13 Mr. Praske and myself -- we would cause the money to be
14 loaned to Stephanie Boren, my stepsister, and she would
15 function as an accommodator. And because she's not blood
16 or half blood, she's legally entitled to be an accommodator
17 under the IRS rule 1031.
18 Then Stephanie Boren would purchase the property
19 and effectively what's called warehouse the property, or be
20 a forward accommodator.
21 She would then own -- she would close escrow on
22 the property in that 30-day period. And then, when the
23 trust -- when one of the entities within the trust sold a
24 property in the future, they could then exchange into --
25 they could purchase the property from Stephanie and
26 complete an exchange into it.

27 THE COURT: What's the time limit on that?
28 THE WITNESS: It's 45 days when we entered into the

124
1 purchase agreement. The IRS had not completed their --
2 they had not established their reverse exchange provision.
3 It happened a year later. And so there was no time limit
4 when we entered into the purchase agreement.
5 THE COURT: When did they establish the 45-day time
6 period for accommodation?
7 THE WITNESS: Ah, that time period did exist. That is
8 for a delayed exchange. But for warehousing, there had not
9 been -- a reverse exchange had not been identified. And
10 the legislation had not been drafted yet.
11 THE COURT: When did it go into effect?
12 THE WITNESS: I think it was 1999. It might have been
13 2000. So if you did a reverse exchange before the IRS
14 created the guidelines for a reverse exchange, you just had
15 to make sure that the way your forward accommodator
16 purchased the property was as arm's-length and as clean as
17 possible. For example --
18 THE COURT: I would like to know the date that that
19 regulation went into effect, and I want to see the reg as
20 well, the IRS reg. Is it 1039 of the Internal Revenue
21 Code? I need to see that.
22 THE WITNESS: I have a book over there, if you would
23 like.
24 THE COURT: Okay.
25 MR. BEZEK: Do you have it here?
26 THE WITNESS: Yes.

27 THE COURT: Just make a copy for me and a copy for
28 counsel tomorrow morning. I would like to know what the

125
1 code is and when that went into effect, the 45-day rule on
2 the -- okay.
3 THE WITNESS: The 45-day rule did exist for a delayed
4 exchange.
5 THE COURT: I heard, yeah, I heard what you said. But
6 you're saying it didn't exist until sometime in 2000 for
7 the warehousing scenario.
8 THE WITNESS: Yeah, for the reverse exchange.
9 THE COURT: That's right. I want to know when that
10 rule went into effect.
11 THE WITNESS: '99 or 2000.
12 THE COURT: I want to see the regs. I want to see it
13 in writing, the reverse exchange. Okay.
14 Q BY MR. BEZEK: All right. Now, did Mr. Praske
15 commit the funds from the estate to purchase 938?
16 A Yes.
19 Q BY MR. BEZEK: How do you know -- strike that.
20 Did you have a meeting --
21 THE COURT: He just finished saying that he wouldn't
22 know where the money came from until Mr. Harris made the
23 decision, which he apparently never made, so thus the
24 objection. Do you get -- do you understand that?
25 How can the -- he's just finished telling us that
26 he wouldn't know where the money came from until Harris

27 made the decision, and now you're saying did the trust
28 commit the money.

126
1 So I'm not quite sure -- I think that's why we
2 have the objection.
3 MR. BEZEK: Well, I thought where we were, Your Honor,
4 was that --
5 THE COURT: Why don't you ask the question to cure the
6 objection.
7 Is that what your objection was?
8 MR. ROSEN: That was my objection, exactly.
9 THE COURT: Okay. That's what I thought.
10 Q BY MR. BEZEK: Regardless of the actual date,
11 under all scenarios, except for your parents, would the
12 funds come from the estate?
13 THE COURT: He's already testified to that.
14 MR. BEZEK: Okay.
15 Q And did Mr. Praske commit to you that, regardless
16 of when there was a closing, the funds would come from the
17 estate?
18 A Yes.
19 Q All right. Now, since the funding of the estate,
20 since the completion of that original funding of the
21 estate, you told us that you performed management services
22 for the estate; is that correct?
23 A I managed the asset portfolio, correct.
24 Q And as part of that, is your job to try to
25 increase the value of the estate by finding additional
26 properties, increasing the value of that estate?

27 A Yes.
28 Q Have you been doing that since the estate was

127
1 funded in approximately -- completed, I mean, in
2 approximately 1998?
3 A Yes.
4 Q Since the trust was originally funded and
5 completed in that funding, has the value of the trust
6 increased or decreased?
7 A Increased.
8 Q Has it increased -- can you give us an
9 approximation of how much it has increased?
10 A 30 to 40 percent.
11 Q Now, you had mentioned that your family, your
12 mother and father, also have a family trust; is that
13 correct?
15 THE COURT: Sustained on foundation.
16 Q BY MR. BEZEK: Do you know whether or not your
17 family -- your parents have a family trust?
18 A Yes, my parents have a family trust. It's called
19 the Gaggero family trust.
20 Q And have you ever been a beneficiary of that
21 trust?
22 A I think I am.
23 THE COURT: You hope you are.
24 THE WITNESS: I hope I am, yes.
25 Q BY MR. BEZEK: From time to time, do your parents
26 invest in real estate?

27 A Yes.
28 Q Do you ever invest together in real estate?

128
1 A Yes.
2 Q Do you have any pending transactions in which you
3 are a joint investor with your parents?
4 THE COURT: He is or this trust is?
5 MR. BEZEK: That's a good point.
6 THE COURT: He's saying under penalty of perjury that
7 he has no assets in the year 2000. So you might want to be
8 a little more precise in your questions.
9 MR. BEZEK: Thank you, Your Honor. Fair comment.
10 Q Is there a current closing pending in which your
11 parents are involved and you as the manager for an asset
12 from the estate are involved?
13 A Yes.
14 THE COURT: The trust, right?
15 MR. BEZEK: The trust.
16 THE COURT: His trust? What's the name of the trust
17 we're talking about?
18 THE WITNESS: There's two trusts, Your Honor. One is
19 called the -- there's actually three. One trust is called
20 the Arenzano trust. The other trust is called the -- or it
21 may be a foundation. I leave that to Mr. Praske to
22 clarify. It's called the Aqua Sante Foundation.
23 THE COURT: And you said there were three trusts.
24 THE WITNESS: The other one would be called the Giganin
25 Trust.
26 THE COURT: Okay. Would you please rephrase that

27 question.
28 Q BY MR. BEZEK: What is the entity, the name of the

129
1 entity, that's involved with your parents in the close of
2 this property that we were talking about?
3 A Malibu Broad Beach LP.
4 Q And is that LP part of the trust, the trust that
5 we've been talking about as part of your estate plan?
6 A Yes, Malibu Broad Beach LP is one of the entities
7 owned by the trusts.
8 Q And do the proceeds from that sale, at least a
9 portion of those proceeds, go to that LLP, LLC?
10 A The LP, yes.
11 Q Now, from time to time, have you and your parents
12 agreed to lend each other funds in relation to real estate
13 investments when there's a need to do that, from your
14 estate now I'm talking about?
15 A Yes.
16 THE COURT: He doesn't have an estate. You keep using
17 the term "estate." And I'm really not clear on what you
18 mean by that. He's alive. He might have a trust. It
19 might be something else. But if you could be a little more
20 specific so I can understand the thought you're trying to
21 convey.
23 Q Have you, from time to time, on behalf of your
24 trust, entered into agreements with your parents where
25 funds have been lent back and forth?
26 A Both for myself and on behalf of various entities

27 within the trusts, yes.
28 Q Exhibit 169, do you recognize that exhibit?

130
1 A May I just read it for a moment, please.
2 Q Sure.
3 A Yes, I do.
4 Q Can you tell us what that exhibit is, please.
5 A It's a letter from my father to Ms. Yura.
6 Q Do you recognize your father's signature?
7 A Yes.
8 Q Do you know how it came to be that your father
9 wrote this letter?
11 THE COURT: Lay a foundation, please.
12 MR. BEZEK: I'm sorry, Your Honor. I didn't hear you.
13 THE COURT: Sustained on foundation.
14 Q BY MR. BEZEK: Did you have a conversation with
15 your father in which you asked him to provide such a
16 letter?
17 A Yes.
18 Q And is this the letter that was provided?
19 A Yes.
20 MR. BEZEK: Move for the admission of 169.
21 MR. ROSEN: Objection, Your Honor. I don't think
22 there's any foundation for this letter or that it was sent
23 or received.
25 Q BY MR. BEZEK: Do you know whether or not your
26 father mailed the letter?

131
1 MR. BEZEK: Well, I think the first question is if he
2 knows. If he says "yes," I would ask why, to establish the
3 foundation.
4 THE COURT: I sustained the objection on lack of
5 foundation, so you're going to have to lay the foundation
6 before you ask the question.
7 Q BY MR. BEZEK: Have you had any discussions with
8 your father regarding whether or not this letter was
9 mailed?
10 MR. ROSEN: Objection. Hearsay. I mean --
11 THE COURT: Sustained. What would be the -- we need an
12 exception to the hearsay rule for any statements that his
13 father made, assuming that he had any such discussions.
14 You can answer this first question "yes" or "no."
15 Q BY MR. BEZEK: Did you have any conversations with
16 your father about whether or not the letter was mailed?
17 A No.
18 Q Okay. Do you know whether or not the letter was
19 mailed?
20 A Yes.
21 Q How do you know?
22 A Because my father gave me this letter and the
23 letter from the bank, and I gave them to your firm and you
24 guys mailed them.
25 Q All right.
26 MR. BEZEK: Re-move for the admission of 169.

27 MR. ROSEN: I still think it lacks foundation that it
28 was received. Can I voir dire on this one?

132
1 THE COURT: You can cross.
2 He doesn't have any personal knowledge as to
3 whether these were mailed. He's assuming somebody mailed
4 it.
5 And that's the objection, foundation?
6 MR. ROSEN: Yes.
8 Q BY MR. BEZEK: Well, let me ask you this: Did you
9 have discussions with your parents about their willingness
10 to provide a loan for the funds necessary to purchase the
11 property at 938?
12 A Yes.
13 Q Was a commitment given to you to provide the full
14 amount of the purchase price whenever the money was needed?
15 MR. ROSEN: Objection. Hearsay.
17 I assume the question is, you're asking for the parents'
18 statement to the plaintiff, correct?
21 MR. BEZEK: It's not being offered for the truth of the
22 matter asserted yet. It's being offered only for state of
23 mind, but will be tied up when Mr. Gaggero comes -- senior
24 comes --
25 THE COURT: You know, that's why I'm wondering, but I'm
26 not going to tell you how to put your case on.

27 State of mind of who?
28 MR. BEZEK: Mr. Gaggero, who was --

133
1 THE COURT: Senior, or the plaintiff?
2 MR. BEZEK: No, junior, the plaintiff.
3 THE COURT: All right. That would be overruled.
4 Jefferson benchbook, Chapter 1, section 28, People versus
5 Scalzi (1981) 126 Cal.App.3d 901 at 905.
6 MR. BEZEK: We would move for the limited admission,
7 then, of 169, Your Honor.
8 THE COURT: State of mind of plaintiff only.
9 MR. ROSEN: Can I just get a clarification. State of
10 mind as to what?
11 MR. BEZEK: As to the $1.1 million availability, so
12 that he, at that point, took actions beyond that and in
13 conformity with his state of mind and belief that that
14 money was available.
15 MR. ROSEN: State of mind, that's fine.
16 THE COURT: That's admitted, as of 12/11/01, or later,
17 for that limited purpose.
18
19 (Received into evidence,
20 Exhibit No. 169, page 1.)
21
22 Q BY MR. BEZEK: Now, would you look at Exhibit 170,
23 please.
24 THE COURT: That's just page 1, right? We're talking
25 about page 1 of 169. There's also a page 2, which we
26 haven't discussed yet. So I'm admitting page 1 of that

27 exhibit on that basis.
28 MR. BEZEK: We would move for the admission of the

134
1 entirety for the limited purpose --
2 THE COURT: You want to admit page 2 now?
3 MR. BEZEK: Yes. Under the Evidence Code --
4 THE COURT: This is from a branch manager, Temecula
5 Valley branch, to Ms. Yura.
6 MR. BEZEK: Right.
7 MR. ROSEN: I will object it's hearsay and this has
8 nothing to do with state of mind.
9 THE COURT: What's the exception to the hearsay rule on
10 the second page, which is a 12/11/01 letter from Chris
11 Burt, branch manager, Temecula Valley Bank, to Ms. Yura?
12 MR. BEZEK: Same basis, Your Honor, with this addition.
13 THE COURT: You're going to have to be a little
14 clearer. What is your exception or nonhearsay purpose on
15 this document?
16 MR. BEZEK: State of mind. Mr. Gaggero acted in
17 conformity with the information received in the letter.
18 And in addition, I believe it's Evidence Code --
19 THE COURT: There's no foundation that Mr. Gaggero ever
20 saw the letter. It's from Mr. Burt to Ms. Yura.
21 MR. BEZEK: That's what I'm about to say, Your Honor.
22 If you look at the letter itself, it says: As you can see
23 from the attached letter from Temecula Valley Bank.
24 And under Evidence Code -- I should say what it
25 is. It's the complete document rule.
26 THE COURT: What's your position?

27 MR. ROSEN: My position, Your Honor, is Mr. Gaggero
28 already testified that he knew his family trust had a lot

135
1 of money in it, so he doesn't need a letter from Temecula
2 bank to establish his state of mind that the trust has
3 $1.1 million.
4 THE COURT: I'm going to admit the document on the same
5 basis. Both pages of 169 are admitted for that limited
6 purpose, state of mind of the plaintiff at that time.
7
9 Exhibit No. 169, page 2.)
10
11 Q BY MR. BEZEK: Now if you would look at Exhibit
12 170, please. Do you recognize that document?
13 A Yes.
14 Q Can you tell me what that document is, please, for
15 the record.
16 A This was a commitment from the Gaggero family
17 trust to provide me with the funds necessary to purchase
18 938 Palisades Beach Road.
19 Q Now, I notice in the third line the reference is
20 to a loan to you or to Stephanie Boren. Do you see that?
21 A Yes.
22 MR. BEZEK: Move for the admission of 170, pages 1 and
23 2. Exception to the hearsay rule is state of mind and --
24 THE COURT: You mean the nonhearsay purpose?
25 MR. BEZEK: Nonhearsay purpose.
26 MR. ROSEN: Well, again, I'll formally object on the

27 grounds that it's hearsay.
28 THE COURT: Okay. It's admitted for the limited

136
1 purpose of the state of mind of the plaintiff as of
2 January 10, '02.
3 MR. ROSEN: Okay. I mean, just -- the only point I
4 want to make -- I don't want to belabor this, Your Honor --
5 is, I don't see how the state of mind is relevant. He
6 either had money or he didn't have money. And I don't
7 think -- it's an objective standard. It's not a subjective
8 standard.
9 THE COURT: Counsel?
10 MR. BEZEK: The issue in this case -- one of the issues
11 in this case is whether or not the purchasing entity was
12 ready, willing and able to purchase.
13 Actions taken by the purchasing entity in order to
14 ensure the ability in this case to close are certainly
15 relevant to the case.
16 The understanding of the purchasing party and
17 actions done in conformity with that understanding are
18 relevant and admissible. And if it's admitted for a
19 limited purpose, it's still my burden to bring Mr. Gaggero,
20 Sr. In to close the loop.
21 THE COURT: Okay. That's admitted for that limited
22 purpose. State of mind of the plaintiff on that date, as
23 to the funds available to close the transaction.
24
26 Exhibit No. 170.)

27
28 Q BY MR. BEZEK: Now, Mr. Gaggero, would you look at

137
1 Exhibit 154, please. Do you have 154?
2 A Yes, sir.
3 Q Can you tell me, please, what 154 is.
4 A It's the addendum to the residential purchase
5 agreement for 938 Palisades beach road.
6 Q Now, if you would look at that document and tell
7 me if, to the best of your recollection, it is complete.
8 By that, I mean, does it contain, to the best of your
9 recollection, the various documents that comprised the
10 purchase agreement?
11 MR. ROSEN: Your Honor, to the extent Mr. Bezek is
12 trying to lay a foundation, I'll stipulate to the admission
13 of this exhibit.
14 MR. BEZEK: We move for its admission, Your Honor.
15 THE COURT: 154 is admitted. And that's all the pages
16 in that tab, correct?
17 MR. BEZEK: Correct, Your Honor.
18 MR. ROSEN: Yes, Your Honor.
19
21 Exhibit No. 154.)
22
23 Q BY MR. BEZEK: Now, Mr. Gaggero, I would like to
24 draw your attention to page 3 of that exhibit. Do you have
25 that document in front of you --
26 A Yes.

27 Q -- and that page? Now, looking at that page,
28 there was some discussion earlier about assignments and the

138
1 assignment of the right of first refusal.
2 First of all, I would like you, in that document,
3 to find for us, if you would, the right of first refusal,
4 which I think you'll find at page 14 of Exhibit 154.
5 A Page 14?
6 Q Page 14 of the exhibit, right. It's Bates number
7 0244. It's page number 14 on the lower right.
8 A Are we on the purchase agreement?
9 Q Right. Do you have 154 in front of you?
10 A I do.
11 MR. BEZEK: Your Honor, may I approach?
12 THE WITNESS: I see. Where you have the stamp there?
14 THE WITNESS: Okay. I gotcha. Sorry. I understand
15 now. I thought you meant page 14 of the document.
16 Q BY MR. BEZEK: Now, in paragraph 8, do you see the
17 topic that's being discussed in paragraph 8?
18 A You're talking about on page 3 again?
19 Q Page 3 of Exhibit 154.
20 A Yes, I see that.
21 Q All right. Now, that's in the addendum to the
22 real estate purchase agreement; is that right?
23 A Yes.
24 Q Did there come a time when you received an
25 assignment from your stepsister for this 938 purchase?
26 MR. ROSEN: Objection. Calls for a legal conclusion.

27 THE COURT: Assignment of what? Sustained. I don't
28 understand what you're trying to ask. Why don't you

139
1 rephrase. It's not clear to me what you're trying to ask.
2 Q BY MR. BEZEK: Would you look at Exhibit 159 in
3 your binder there, please.
4 A Tab 159?
5 Q Yes.
6 A All right.
7 Q Can you tell us what that document is, please.
9 THE COURT: Overruled.
10 THE WITNESS: It's an assignment from Stephanie to me
11 of all of her rights, title, and interest to the escrow and
12 to the purchase agreement between Frederick Earl Harris and
13 her regarding 938 Palisades beach road.
14 Q BY MR. BEZEK: Do you recognize your sister's
15 signature --
16 MR. ROSEN: Your Honor, I'm going to move to strike as
17 a legal conclusion.
18 THE COURT: Well, he literally read from the document.
19 MR. ROSEN: Okay. To the extent that evidence is being
20 put in the record that this is an assignment.
21 THE COURT: Okay. Well, it will go to the weight.
22 That's really my call here.
23 MR. ROSEN: Okay. Thank you.
24 THE COURT: He can't testify, you know -- it will go to
25 the weight to the extent he's testifying as to a legal
26 conclusion. Okay?

27 Q BY MR. BEZEK: Do you recognize your sister's
28 signature?

140
1 A Yes.
2 Q And was this document provided to you by your
3 sister?
4 A Yes.
5 MR. BEZEK: Move for the admission of Exhibit 159.
6 MR. ROSEN: Objection, Your Honor. Lack of foundation.
7 There's no evidence -- this is a letter addressed to
8 Chicago Title Company, not to Mr. Gaggero, and there's no
9 evidence that this was sent to Chicago Title company.
10 THE COURT: Sustained on foundation, correct.
11 MR. BEZEK: I'm sorry, Your Honor, I don't mean to
12 argue this, but there's a -- if it's an assignment and it
13 was provided to Mr. Gaggero, whether it was given to
14 Chicago Title or not, it's really immaterial.
15 THE COURT: It purports to be a letter to Chicago
16 Title, or some kind of communication to Chicago Title,
17 attention Fran Butler. And he's objecting that there's no
18 evidence that that was sent to Chicago Title.
19 MR. BEZEK: It's not being offered to show it was being
20 sent, that it was sent to Chicago Title. It's being
21 offered to show that there was an assignment --
22 THE COURT: As an operative document?
23 MR. BEZEK: As an operative document.
24 THE COURT: What about that?
25 MR. ROSEN: It's not operative. It wasn't sent to
26 Chicago title.

27 THE COURT: Why?
28 MR. ROSEN: Because it's a letter purporting to advise

141
1 Chicago Title company of something. If it was simply --
2 THE COURT: Why, if it was just an assignment, why
3 would they need to know that?
4 MR. ROSEN: Because Chicago Title company was the
5 escrow company.
6 THE COURT: Was the escrow opened at that point?
7 MR. ROSEN: Absolutely.
8 THE COURT: Okay. I'm going to reserve judgment on
9 this because I think it's a little too early in the case to
10 make this call. You can move this in later or -- I want to
11 hear your part of the evidence on this --
12 MR. ROSEN: Thank you, Your Honor.
13 THE COURT: -- as to why this isn't an assignment.
15 THE COURT: What's your position there? Would the
16 escrow holder need to know this?
17 MR. BEZEK: No, Your Honor, it does not require, for
18 the legal effect of this, if it's an assignment, which
19 you'll decide, it's not going to become an assignment only
20 because Chicago Title received it.
21 THE COURT: Well, what was the effect if Chicago title
22 did get any notice of this?
23 MR. BEZEK: The legal effect of not getting any notice
24 of that may or may not play any part in this particular
25 case because the escrow never got to the point where it was
26 ready to close.

27 THE COURT: Now, are we going to hear from Stephanie
28 Ray Boren in this trial?

142
1 MR. BEZEK: I don't think she's going to come testify,
2 Your Honor.
3 THE COURT: So we're not going to hear any evidence as
4 to whether she signed this document or it was ever sent to
5 Chicago Title?
6 MR. BEZEK: Well, I don't know if the witness knows
7 about whether it was sent to Chicago Title, but let's put
8 that aside for a minute. I don't think it's necessary for
9 her to testify to the foundation of the document if the
10 witness recognizes the signature and says he received it.
11 THE COURT: Has he done that yet?
12 MR. BEZEK: I thought we just did, but I'll clear it up
13 to make sure.
14 THE COURT: No, he hasn't.
15 Q BY MR. BEZEK: Do you recognize your signature on
16 this document?
17 A Yes.
18 Q Did you receive this document?
19 A Yes.
20 Q Did you receive it from your sister?
21 A Either from my sister or Joe Praske. I don't
22 remember which.
23 Q All right. Have you talked to your sister about
24 this document?
25 A Yes.
26 Q Okay.

27 MR. BEZEK: I would re-offer the document, Your Honor,
28 on the grounds that the foundation has been laid. There is

143
1 no requirement that this document, for its legal effect, be
2 delivered to escrow.
3 THE COURT: What about that?
4 MR. ROSEN: Your Honor, I disagree with that. This is
5 a letter to Chicago Title company. It's not an assignment
6 agreement. It's not a contract. It doesn't say
7 "agreement" on the top. It's a letter advising Chicago
8 Title Company of something.
9 THE COURT: What is your basis for saying that this is
10 not an assignment agreement or an assignment?
11 MR. ROSEN: Because I don't think it was ever sent to
12 Chicago Title. There's also no testimony when it was sent
13 to Mr. Gaggero, if he got it last week, you know. It's not
14 evidence of an assignment.
15 THE COURT: Sustained on that portion of foundation as
16 to when he received it.
17 Q BY MR. BEZEK: When did you receive this document,
18 Exhibit 159?
19 A I don't remember.
20 Q Can you give me an approximation?
21 A On or about the date it was -- it was
22 November 1st, I think. On or about November 1st.
23 THE COURT: Of what year?
24 THE WITNESS: It was 19- -- what was it dated? 2000.
25 THE COURT: It's in evidence.
26 MR. ROSEN: Your Honor, could I --

27 THE COURT: I'm receiving it.
28 MR. ROSEN: Can I have an opportunity to voir dire him

144
1 on that, because I have his deposition testimony where he
2 just completely contradicts what he just said.
3 THE COURT: Okay. I'm going to back my ruling up. I'm
4 going to wait until this witness has testified on direct
5 and cross, and you can reopen it.
7 THE COURT: There's a question about this that's been
8 raised, and I want to hear the whole testimony. So I'm
9 going to hold off on 159.
10 MR. BEZEK: All right, Your Honor.
11 Q Now would you look at Exhibit 154, please.
12 THE COURT: And I have some concern because Ms. Boren
13 is apparently not going to testify at this trial, so I want
14 to hold off.
15 Q BY MR. BEZEK: If you look at Exhibit 154, which
16 is the purchase agreement in evidence, and if you look at
17 page 3 of the exhibit, lower right-hand corner, the stamp
18 page 3, and then you look at paragraph 8, do you see the
19 grant of the right of first refusal in that document?
20 A Yes. Paragraph 8.
21 Q Now if you would look at page 16 of the same
22 exhibit, 154 -- in fact, first look at exhibit -- I mean
23 page 14, so we know what document it is.
24 Do you see that as the right-of-first-refusal
25 agreement?
26 A Yes.

27 Q Now page 16. And if you look at section 6,
28 assignment, do you see the reference in there that, quote,

145
1 this first right of refusal shall belong to grantee herein
2 or grantee's assignee who take title to 938 at close of
3 escrow? Do you see that reference?
4 A Yes.
5 Q All right. Now, Mr. Gaggero, I want to revert
6 back now to the conversations that you began to have -- the
7 due diligence that you did with regards to the 938 property
8 after you had learned that it was for sale.
9 Are you with me?
10 A I think so.
11 Q Would you look at Exhibit 41, please.
12 A All right.
13 Q Can you tell us what Exhibit 41 is, please.
14 A It was a marketing flyer that Mr. Harris gave me
15 for the sale of 938.
16 Q And when did you receive that marketing flyer from
17 him, approximately?
18 A I think in May of '98.
19 Q When was the first time that, approximately, you
20 began discussions with Mr. Harris about the 938 property?
21 A I believe it was May of '98.
22 Q So was this one of the first documents that you
23 received from him?
24 A Yes.
25 MR. BEZEK: Move for the admission of Exhibit 41, two
26 pages.

27 MR. ROSEN: No objection.
28 THE COURT: 41 is in.

146
2 Exhibit No. 41.)
3
4 Q BY MR. BEZEK: Now, in the process of discussing
5 the property at 938, generally what topics did you discuss
6 with Mr. Harris about the property?
7 A I'm sorry?
8 Q When you did your due diligence, did you talk with
9 him about this flyer, for example?
10 A I don't remember talking to him specifically about
11 this flyer, but perhaps some of the things inside the flyer
12 we talked about.
13 Q Okay. Did you have discussions with Mr. Harris
14 about what his vision for his properties were on a
15 long-term basis?
16 A Yes.
17 Q What did he tell you?
18 A He was looking for a buyer that -- for the 938
19 property that shared his goal to have -- to form a
20 community out of at least the three properties that he
21 owned and possibly the other two to the north of him, which
22 were five consecutive forms boarded by parking lots on
23 either side.
24 And within that sense of community, there would be
25 architectural conditions to ensure that people's views
26 weren't blocked and there would be regulations to ensure

27 the quiet enjoyment of those that lived there and to ensure
28 that their views wouldn't be blocked and to ensure there

147
1 was no visual blight.
2 Q Did you have any discussions with Mr. Harris about
3 regulatory uses of the property, regulatory controls?
4 A Yes.
5 Q What discussions did you have during this initial
6 time frame?
7 MR. ROSEN: I'm going to object as hearsay.
8 THE COURT: As to whose statements?
9 MR. ROSEN: As to Mr. Harris' statements. To the
10 extent it's general, I don't care. But if we're going to
11 get into specifics, I would like to state my objections
12 that I think Mr. Harris' comments are hearsay.
13 THE COURT: Okay. What's the exception to the hearsay
14 rule?
15 MR. BEZEK: It's a party opponent.
16 THE COURT: Mr. Harris is deceased and is not the
17 defendant in the case that you have sued.
18 MR. BEZEK: Well, the key was --
19 THE COURT: His estate is the defendant. Give me some
20 authority for that, please.
21 MR. BEZEK: Well, there's another exception to the
22 hearsay rule, and that relates to the fact that a -- the
23 mere fact that a person has died, a trustee -- trustor has
24 died does not make his statements inadmissible if, at the
25 time that he made a statement, he did so while his mind was
26 fresh and he understood what it was he was talking about

27 and he was recalling events that were contemporaneous in
28 time.

148
1 THE COURT: What's the code section on that?
2 MR. BEZEK: I think it's cited in --
3 THE COURT: Give me the code section, please.
4 MR. ROSEN: Your Honor, it's California Evidence Code
5 section 1261.
6 THE COURT: Okay. Let's take a look at that. Please
7 bring your codes tomorrow. I'm going to ask you the code
8 section every time. No surprises.
9 Okay. Recently perceived by declarant and while
10 his recollection was clear.
11 Well, I don't think you can get into that
12 statement, that exception, unless you're talking about a
13 specific statement. You're general, broad-brushing it now.
14 So I'm going to sustain the objection on 1261.
15 MR. ROSEN: Your Honor, could I make one other point
16 while you have 1261 in front of you? I would take the
17 position -- and we address it in our brief -- 1261 allows
18 us just to get those statements into evidence when the
19 claim is against the estate.
20 THE COURT: It says: When offered in an action upon a
21 claim or demand against the estate.
22 And your position is it's only admissible when
23 it's offered by the estate and not by the party adverse to
24 the estate?
25 MR. ROSEN: That would be my position. I think this
26 statute was --

27 THE COURT: Do you have a California case that says
28 that?

149
1 MR. ROSEN: This statute was in -- I think the comments
2 to this code section say this was in response to the
3 repealing of the dead man statute. So the purpose of this
4 was to give litigants, such as Ms. Yura, a way to respond.
5 MR. BEZEK: Your Honor, I don't --
6 THE COURT: Do either one of you have a case on this?
7 Okay. I would like to see a case first thing in the
8 morning, one case with a jump cite, your best case, not a
9 brief, not a lot of cases. And we'll recess for the day --
10 okay?
12 THE COURT: -- without a ruling on that objection.
13 Thanks. Have a nice evening.
14 MR. ROSEN: Your Honor, we were sort of rushed in our
15 setup this morning. Could we have a few minutes to stay in
16 the courtroom --
17 THE COURT: Oh, yeah. The staff will be here at least
18 until 4:30. Sure.
19 MR. ROSEN: One more request before you leave, Your
20 Honor. May I ask that the notes that Mr. Gaggero took in
21 terms of those numbers be marked as an exhibit when he made
22 his calculations on the witness stand?
23 THE COURT: First you want to see them, right?
24 MR. ROSEN: I just don't want him to take them away.
25 THE COURT: You can see them.
26 MR. BEZEK: May I look at them also, Your Honor?

27 THE COURT: Yeah.
28 MR. ROSEN: May I approach?

150
1 THE COURT: Yes.
2 MR. BEZEK: Your Honor, I have no objection to marking
3 these and having them come in.
4 THE COURT: All right. You can mark them. Why don't
5 you give them to the clerk to mark, please.
6 MR. ROSEN: Is it easier --
7 THE COURT: Hold on. We're still on the record.
8 MR. ROSEN: I was going to suggest Mr. Bezek can take
9 it and make a copy and bring it in tomorrow.
10 THE COURT: Do you want to do that?
11 MR. BEZEK: I'm happy to do that.
12 THE COURT: Let's mark it first. No, we can't take it
13 out of the courtroom if it's marked.
14 MR. ROSEN: I don't have an objection.
15 THE COURT: We'll do it that way.
16 MR. BEZEK: So I'll take it and bring it back tomorrow?
17 THE COURT: Yeah. We'll have the original in evidence
18 and copies will be made.
19 Here's the answer to the question. Jefferson
20 California benchbook, chapter 15, section 7.
21 (Reading):
22 Evidence of a hearsay statement
23 of a decedent is admissible as an exception
24 to the hearsay rule if the statement is
25 offered for or against any party in an
26 action on a claim or demand against the

27 decedent's estate; and was made on the
28 decedent's personal knowledge at a time

151
1 when the manner had been recently
2 perceived by the decedent and while his
3 or her recollection was clear.
4 It has to be -- the circumstances have to indicate
5 that it was trustworthy, et cetera.
6 So why don't you just read up on that. If you've
7 got a specific objection, give me some legal authority for
8 it. I think you're incorrect. At least Jefferson's not
9 agreeing with you.
10 MR. ROSEN: Based on what you read -- I'll accept that.
11 I'll withdraw --
12 THE COURT: But I think we're broad-brushing it. We
13 have to be referring to specific statements, not like: We
14 discussed X, we discussed Y. It does say statements, so
15 we're not going to be broad-brushing. We're going to have
16 to go with specific statements. Okay?
18 THE COURT: Do you have any quarrel with that as a
19 general proposition?
20 MR. BEZEK: Frankly, Your Honor, I do on a foundational
21 standpoint only. Foundationally I think I can lay the
22 foundation which leads me to the specific statements, and
23 that foundation will likely be: Did you have discussions
24 with Mr. Harris about X? Yes, I did. Then we'll get into
25 the specifics.
26 THE COURT: All right. The only thing that's going to

27 come into evidence, if it qualifies, and if it's
28 trustworthy, are statements. Not general, broad-

152
1 sweeping -- okay. That's the way I'm going to handle it.
2 MR. BEZEK: Okay. That's fair.
3 THE COURT: All right. We'll see you tomorrow morning.
4 MR. BEZEK: Thanks, Your Honor.
5
6 (The matter was continued
7 to Tuesday, June 28, 2005,
8 at 9:30 a.m.)

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