(after stating the facts as above). The subject of fraudulent misleading may be summarily disposed of. There is no allegation of any misstatement as to the value of the bonds, or, indeed, any pleading claim that they were not worth the price paid. There is no substan *728 tial proof of any plan or representation that the proceeds of the bonds were not to be used for all ordinary corporate purposes, naturally including the refunding in a longtime form of debts whieh were due or currently to become due — indeed, on their face the bonds were refunding bonds. It would not normally be very important to the company whether this $50,000- was put at once into the corporate operations, leaving Tom-linson’s debt maturing in a short time, or was used to retire Tomlinson’s debt, correspondingly increasing the company’s credit; but, even if this were material, the record is entirely barren of any proof of misleading. In this respect the trial court was plainly right.
As to the other feature, we are convinced both that the Indiana law was not intended to apply to such a transaction as this, even if the sale occurred in Indiana, and also that the sale must be treated as having occurred in Ohio, and therefore as not being subject to the Indiana law. We pass by without consideration the point made that the Indiana law and others of that class are not intended to, even if they seerh to, apply to a transaction by which additional corporate securities are absorbed by existing stockholders. The first blue sky laws were thought by some of the District Courts to be unconstitutional, as unduly restricting liberty of contract. Alabama & N. O. Transp. Co. v. Doyle (D. C.)
However, for the purpose of this opinion, we assume that the Indiana law is rightly applicable to sales from a corporation to its existing stockholders. That law (Act July 26, 1920 .[Acts Sp. Sess. c. 26]) after the various prohibitions which it may be assumed would by their generality forbid such a bond sale as this, if occurring in Indiana, proceeded by section 11, to say: “The provisions of this act shall not apply: (1) To one who, in a trust capacity * * * or by judicial authority,” etc. (2) “To pledge to sell in the ordinary course of business, a security pledged to [one] as security for debt in good faith and not for the purpose of avoiding the provisions of this act.” (3) To the disposal in good faith of the corporation’s own securities at an expense and under conditions carefully specified and not here applicable.
We are concerned with subdivision (2). Its precise language as quoted is literally unintelligible, and we find no Indiana court construction, but we think we may be reasonably certain of the intent, and that it can rightly be construed according to that intent. To be effective along that line, it must mean that, when corporate bonds have been duly authorized and issued, the statutory prohibitions do not apply to the pledge of such bonds as collateral security for a valid corporate debt, when the pledge is made in good faith, and not to avoid the operation of the act, and that bonds so pledged may be sold by the pledgee in the ordinary course of business, when also the sale is in good faith, and not to avoid the act. Neither from the suggestions of counsel, nor from 'observation of the language, have we been able to get any other interpretation. 4 It is not questioned that the $50,000 of bonds had been pledged with Tomlinson in November, 1923, as collateral security for a $50,000 loan then made, and there is no reason to think that such pledge was not in good faith or was made rrith any purpose of avoiding this act. The company had no equity in these 50 bonds. As to the $4,000, the plain inference is, from the testimony of Lauritzen and Wambaugh, that the $7,000 of bonds whieh McNamara had with him in Indianapolis had been pledged by the company to Wambaugh as collateral for-a $10,000 loan by him, and had been by him intrusted to McNamara for sale, and that to him McNamara accounted for and paid over the entire proceeds; the company having no equity in these bonds. There is no proof that this pledge had not been made in good faith or with intent to avoid. We see no opportunity to indulge in any such inference.
Upon this record both the $50,000 sale *729 and the $4,000 sale by or for the pledge should be considered as made “in the ordinary course of business.” This statutory phrase should not be restricted to a sale in the nature of a foreclosure) made by the pledgee without the co-operation of the pledgor. It is at least as ordinary a course of business, after a temporary loan has been obtained upon the pledge of securities, for the pledgor to co-operate with the pledgee in finding a purchaser who will take over the securities permanently; nor is it outside the usual course of business for the pledgor to offer additional and sufficient inducement to one who will permanently make this refunding loan.
It follows that the Indiana statute does' not purport to invalidate the $4,000 sale, which occurred in Indiana as stated, nor the $50,000 sale, even if that might be considered as an Indiana transaction. In neither ease did the company get a dollar as the proceeds of the sale of these bonds; the pledgees took all.
As to this $50,000 sale, what happened in Indiana must be deemed negotiations, leading to a conditional offer made in Ohio to a resident of Ohio, and which offer was accepted in Ohio. The question involved is not whether the negotiator's, by what they did in Indiana, violated a law of that state; it is whether a sale, otherwise valid, was made void or voidable by the express declaration of the Indiana statute that all transactions in which the law is not followed shall be void. It is fundamental that such a statute can have no extraterritorial effect (Hilton v. Guyot,
Taking it altogether, this amounted to an offer by Langsenkamp that he would buy if McNamara could and would meet the condition imposed. There could be no ’sale until the condition was met. It was not met until, after substantial and unsuccessful efforts, McNamara found Tomlinson, who, at his homo in Ohio, agreed to accept the notes and furnish the bonds, and thus, for the first time, the offer became irrevocable. It is true that the minds of the parties might meet npon and make complete a contract in Indiana, even though its taking effect might be made to depend upon a condition subsequently to be performed in Ohio, upon the failure of which condition the contract would fail, and we may assume that to such a contract the invalidating law of Indiana would apply; but there could not be such a complete contract when the happening of the future condition depended upon the will, or the contingently successful efforts, of one of the parties. In that situation there is no room for anything more than an offer, awaiting acceptance.
Appellants argue that Langsenkamp made McNamara his agent to negotiate these notes and find bonds which could be bought, and then buy them, all on Langsenkamp’s ’ behalf, and that thus these acts were done in Ohio by Langsenkamp, through his agent. If MeNamara’s testimony were to he accepted as proof in the case (as we think it should be), it seems to be difficult to deny this pro tanto agency. However, we do not rest our conclusion upon that ground, but, for the purposes of the opinion, assume that McNamara was all the time the agent of the company and the underwriting broker in trying to sell those bonds, and that it was these proposed vendor principals upon whom fell the burden of meeting the conditions which Langsenkamp told these vendors they must meet before he could buy. This view makes immaterial the question of any agency for Langsenkamp by McNamara.
To establish the applicability of the Indiana law to such a transaction, appellee cites several cases, which upon inspection plainly appear to depend upon distinctly different facts. Only two of these seem close enough to justify comment. In Rhines v. Skinner Co.,
' In Chattanooga Nat. Bldg. & Loan Ass’n v. Denson,
Counsel argue here, as in the court below, questions of the admissibility of evidence, depending upon the Ohio statute, which determines the competency of parties to testify in a ease where the adverse party to the transaction has died. Such state statutes very commonly go on the theory that the surviving party may not testify as to those particular matters which were within the knowledge of the deceased, so that the surviving party may not make statements which the deceased party, if living, could have contradicted. They also commonly disqualify an agent of the surviving party, as to dealings between that agent and the deceased. If this was the purpose of the Ohio statute (Gen. Code Ohio, §§ 11493-11495), as has been said. (Wolf v. Powner,
The Supreme Court of Ohio has frankly accepted these seeming incongruities, and, in rationalization of the unqualified prohibition against testimony by parties adverse to an administrator, it has declared that this means only persons with actual adverse interests and not merely those who are nominally and only nominally parties of record. Baker v. Kellogg,
When the testimony of each of these three witnesses was excluded, proferís were made to a considerable extent as to what the witness would say if allowed to testify. Testimony thus proffered, being oral testimony, which in theory, if admitted, might have been modified by cross-examination, or disputed, cannot be considered by an appellate court without embarrassment. Sometimes the only remedy would he to send the case back for further trial under other rules of evidence, •as in a ease at law, and if there were in this ease real reason to think that the plaintiff had lost substantial rights of cross-examination or of dispute, we might be compelled so to remand the ease; hut we reject that course, because the appellee urges us, if we think the evidence was improperly rejected, to consider and decide the caso de novo, npon the present record, thus implying that the subject-matter of the rejected evidence was not important, and because, so far as we may infer from the course of the trial or the argument, the facts which thus appear, and which are material to the result reached, are undisputed, and there has been and is no desire by appellee to dispute them.
Accordingly the decree below is reversed, and the ease remanded, with instructions to dismiss the bill. If counsel think that we have drawn too strong inferences as to what facts are conceded, and that our conclusions npon the question of evidence fairly require any further hearing in the court below, we will, within the time provided for rehearing, entertain an application to modify the mandate in this respect.
On Motion for Rehearing, etc.
The application to rehear is denied. To clarify the subject-matter mentioned therein, we may add that, as to the locus, the vital matter is where tho sale was made. It might he conceded that there was in Indiana a completed contract for a sale, to be closed if and when, etc., which contract would have been valid except as invalidated by the statute, and yet the locus of the sale itself would he in Ohio, where the condition was met and the property was selected and delivered. The Indiana transaction cannot have controlling analogy to a “sale or return,” because, if for no other reason, tho property was then neither identified nor turned over.
As to whether the sale was by the pledgee: Tomlinson simultaneously gave up the note of the company and its collateral pledge of these bonds and accepted in their stead plaintiff’s note and his collateral pledge of these same bonds and other securities. To assume that these bonds were released by Tomlinson to the company and sold by the company to Langsenkamp, and by him again pledged to Tomlinson, is to state successive steps which tho law for some purposes would imply, but is to overlook the substance of this actual transaction. Any participation by the company in this sale, which might ho implied in spite of its nonexistent equity in the bonds, ought not to embarrass the good-faith pledgee in getting the full benefit of the exemption which the law gave him.
Pursuant to the suggestion in the opinion, plaintiff applies to have the mandate modified, so as to remand for further proofs. Her counsel point out no particular in which it is claimed that the real faets are not correctly assumed in the opinion. These facts not only appear by McNamara’s testimony, a portion of which was only offered, and was not received, hut they are the natural, if not tho inevitable, inferences from tho unquestioned situation. That Langsenkamp should have supposed that his note was finally ac *732 cepted, and that he was hound by it, regardless of whether it could be discounted to raise money to redeem some outstanding bonds, is so improbable that the loss of the right to cross-examine McNamara on that subject seems the harmless loss of a barren right.
There being no other claim of prejudice from our assumption of facts, the motion to modify is also denied.