Untitled Texas Attorney General Opinion

OFFICE OFTHE ATTORNEYGENERAL OF~TEXAS -c.yInn AUSTIN -- Secretary bf State Austin, 'Pexaa Attention1 I&. Fi'ank D. Dear Mz’.Lwaon$ 5 “*The aorporatlondoes not pmpose to qualify in your state an a forei,gnaoxqoration, nor do any tntraatatebualnees thers, but pro- poses, however, to aolialt offers for the pur- chase of royaltiesby resident nalesmn who 888 Honorable Wll~lam J. kuf~on. Page 2 deduct comtrilerionra and remit the net oum with said of+rs, for rooeptanaeor rejeatlon,by the comDaJly+ln Vyomlng.* ” “The form or offer of puruhme to be used by such cowany is enclosed herewith. “This departmentvould appreciateyour opln- ion a* to the follov~ queatlow under the state of faate hereinoboro set out: “(1) Is such aorpawtlon under such state of facts engaged ln Interstatecoannerce? "(2) If you have ansvered'Yes* to the above question holding thereby that such corpora- tton under mwh state of fa’actaend its agents ara engaged in Laterstate commerue would such aorpora- tion and it8 agent8 bo violating the pmvlrlona a? the Texas SeaurftieaAut if they have xade no atteraptto qualify under the iesuer’aprovisions thoreof? “(3) If you have answered ‘Yes* to the first question holding thereby that suah corporation and its agent8 am engaged in interstateoozmmrue vould,~uah oorpowtlon or ita agents be violating the pmvialono of the Texas Becurlt~esAct ii they foil to regieter under the provlelona 02 such Act perta- to the mglstratlon of dealers and saletinwn? The form or offer of purc2mee referred to by you 16 as follows: “OFFER TO PURCRASR ROYALTY 'I, the undersigned, do hereby offer to pur- chase from Western Petroleum Corporetlon,a Uyom- i ’ lng corporation,a non-produciagover?idlng royalty . interest of thousandt?k(- ~i/10030th,)for the sum of - Dollars. This offer 889 HonorableWllllam J. Lsvoon~ Page 3 Is not binding upon ths aorporatlonuntil accepted by Its duly authorloodofficers in VyomIng, It bsIng understood that thIo I8 an produaing overridingmyalty interests. "IA WITHESS UBEREOF, the undersignedhas laaunto oot his hand and oeal~thls- aarr I 194-. I Saleomstt Rem% ‘Acceptedbyt Weoterm Petroleum Corporation Addreood It is vell settled law that vhere the federal governmenthas assumed full jurisdictionof omttero vlthin the scope of Its power, Its regulationsare exclusivevithin the f.1el.d Involved (See the oese of Oregon-WashingtonR & H C. v. WashIngton {U.S.) 70 Lav Ed. 482). It has llkeviss been settled by the Suproom Court I of the United Mates that otate rsgulatorylavo am valid unless oongreso has exaluolvelyoocupled the field'or unless the state law dlraotly buMan Interstatebommercw. (See authorltles collated In opinion Ho. O-2459 of this departnmnt,a copy of which In bnelooed herevlth for your lnforsratlan.) Seatton nr of Title 15, U.S.O.A., a portion of the Federal Beourltleoand Exchange Act, reads as follovot %othlno In thFo.sub-ohapterohkaffecti the jurisdlationof the SeeurltleoCon$o~ 7or any agency or office Performin lik L tions) of any state or terrftory of the United States, or the District of Columbia, over ane security or any peraon." (i.hderscoring ours HonorableXIlllam 8. Lawson, Pago 4 STudgpSt. Sum, of ths Northern District of Call- fornla, Southern Dlvlolon, In aonotrulngthe above quoted seu- tlon, said: nDeXendanizrelso call attention to ha. 18of the Act of 1933; whlah provides far 'state oontrol of securities'am Indicativeof the %n- tention of Congress to 1Qnlt Its legIol8tionto activitiesin interstate oomneme. Thor. IO no merit In tho oontentlen. The moot that ornc~be said fop the ooatlon is that It probably glum coneurroat jurlodlatlonto the Securitiesand Exohwga Caamloolonand the State authorities. Thers io.ao doubt that the Geouritles and Ex- change ComolooIonhao jurlsdletionof the matters here ooxplalnedof:' Becurltlesand Zx 0 com- mloolon v. Twetmst, Iaa., 28 Fed. Supp, 3 . chan$ The oontentloahas been frequentlymade that 'Blue Sky Lava” or 'SeourltleoA&o* impose burdens upon interstate commerce oad are, therefore,unaonstltutlonal. Suoh oeatentlono vere, hwever, rejected by the Supreme Court of the United States ia the case of Hall vs. Geiger-JonesCo-y, 242 U. S. 539. Also see annotationaIn 87 A.L.R. 46 et oeq: ft vll1 be noted that the Texas 8eoamltleoAct makes it unlawful to offer for aale within the state oeouritleovlthout first ha lng dthe 1 d lloense as well as to sell within , the stat: vit~$%m rsq~~d?.lcenoe. (80e Seotlon 12 of Artlale OOa, Vernon18 Annotated Texas Civil 8tatuteo.) The SeaurttieoAct of Wichlgan is nlmllar to ths Texas SecurltleoAat; The Supreme Court of MiahIgan In the oaae of People v. Augustine, 204 8. W. 747, held that for the offense of negotiating for sale unapproved seaurltlealn Mlahlgan the aotual sale aeed not be oonotmmatedin Xichlgon. In other words the negotiationswire had In luchlgan and the sale was eonsuounatedin #ev York. The MiohhigmiSu$reme Court held this to bo In vlolatlon of the Nlohlgan SeourltlesAat. Also ree the aaewof First Botlonal Bank of Pinevllle v. Wtlaon, 55 S. Y. (26) 657, (Supmom Court of Kentucky). HonorableWilliam J. LAWSON, Page 5 We quite from the uase of Bartlett v. Doherty, 10 F. Supp. 469, mditled in home robsm¬ m@terin3.hereto in 81 F. (2d) 920, re-hewing danled 8 3 F. (26) 920, certiorari denied 83 Lav Ed. 1398, a8 follows~ 'In defendant'spre8ent brief the que8tlon Is revived, it being aqgued that these sale8 of stock were llewYork tramauti~nnsand valid under the laws of that atate, and that any aat ol'the Bev Hampshire Legfslaturewhich would Invalidate them is unaonstltutionalaa an undue burden 051 lnter8tatecommerce. 'Itis argued that this vlev of the lav haa not been determinedby the United States Supreme Court. "It seems to me that derend&tla aontention is anavered by the Supreme Court In the aaae of Hall v. Oeiger-Jonesco., 242 u, 3. 539, 557, 37 9. Ct. 217, 223, 61 L. Ed. 480, L. B. A. 19178, 514, Ann. Cam. lgl?C; 693. It appears, that the, oontentlonof t-h8plaintiff now made did not es- cap8 the attention of the Supreme Court, for It saldc ITha next aantentlonof appellees 18 that the lav -8~ review Is a burden on interstate comme~ce,~andtherePore oontraveneathe commerce olause of the Conat.ituti.onof ths U&ted Ststas. t 4 e The provisions of the law, It will be ob- aerved,apglyto dlapositlonsof eeourltleswlthla the state. and vhlle lnformstl.on of those Issued lx-other statar~andf&&n ooktrie8 is required to be filed, l l l they are,only af?euMd..bythe requirementof a llaenss of one who deals in them wlthln the etat8. Upon th i transportationinto the state there la no lmpe&&nt,--no r~egulatlon of them or lnterfersncr, with #em after they got there. There 1s thb exaatton onlg that hs'wh6 dlaposea of them th8XW shall be licensed to do uo, and thlr only that they may not appear in false ahmacter and iwoae an armearance of a;ivalu8 vhlch they may not possess,--an h-this ct&tal.nl'~ is 6n.Q. an indirectburden upon them 88 objeat6 of lnter- state commerce, if'tneg may be PeRarded as such. HonorableWill.iam3. Lawaon, Page G > *'It 16 a poll08 regulationmtrictly,not affeatlx$ them utatllthere lean attempt to make dlepoaitlonof them within the state, To give them more lmmnity than this is to give them more lnzaunlty than uore tangible artiales are given. they having no exempti& ~fromPagulatlon*he piar- pose of vhloh 1s to prevent fraud or deception. Suah regulation6affect interstate ao6mt8Faein them only inaide$tally.* I . . . “me next claim is that 'The aalea were made ln Hew York, the Rev Hnmpahire Bluo Bii Law has no extra territorialeffeot and thersfom oannot make th8ae sales void.' I oannot aaoept thi6 statement of the law. Many of the states In ths Union have enaated~so-aalledBlue Sky laws. If def%ndant*66tate6mntvere true, all the d8f8nd6ut had to do vaa to eatabllshhis office in FJevYork City and flooiithe country vlth eeaurltie8,good or bad, and alaim immunity of 6.nybreaoh of lav of any state 60 long a6 rt retained at Its home offloe the right to conflirpor rejeot any male ita OgentS elaevhere.,ff this 16 tITX8 the Lsv of &v Rammhlre and that of moat other mnv as well be aar6pmd. S Both 11 Buakbee-M8ar6Co., 275 II.3. 274, ;$ 8. C:: 12:: 72 L. Ed. 2771 Chatfianoo a l?atlonalBullding& Loan AssociationV, Dmmon, 189 U. 3. 408, 23 8. Ct. 630, 47 L. Ed. 870." (Undereaorlng ours) The above ease h8ld that the Hew Hmpshire Blue Sky Lav, regulatingsaloa of eeouriti8avithin the state vithout pro- hibiting interstateshipmentsvaa not unconetltutloaa2. a8 an un- due burden on interstatecommerce a!?.applied to sales of stock tn which orders vece taken in Xew Rsmpahlre and confimations vere made in dealer's N8v York Office. Whether or not the aorpoxmtion¶nvolVed herain i6 engaged in inteP8tate commerce ia entirely ilIJImteri.al in Vi8V Of our further ansver vith respect to the local agents. . HonorableHllll6m J. Lawlon, Page 7 Rewiring the local agent6 to take out p44naitS 1X4no Way burdenl, the lrlterstate bUsin86s of the corporation; if it shouldbbeheld that 6Uoh business 16 interstatecom- m8rce. While the local agent6 in any event would be re- quired to aomply vith the requirement8of our Texa6 Securltles Aot, yet, In view of the faat that the loaal a&mats in the present lnstanaeeontearglate aoliaitingonly with respect to the securitiesirsu6& by Thea particularcorporation,It uould not avail them to take out permite, seeing, that under the ex- press terms of our SeaurltleeAct, they would not thereby be authorized~to offer for sale eeourltierof a foreign corporation or solicit orders for a foreign corporatfonwhich itself had not taken out an 168~8~~6 permit. h3tion 5 of our Texas ZeUUHtie8 Act d6dar661 dealer, agent or salesman shall 6ell or .'%'a0 offer for aalo eny seuuritlerIssued after the paae- age of thle Aot, exoapt those vhithlch come vithin the clasaea enUmer6ted In subdivisions(a) to (q) both inolueiv8 of Seotfon 3 of this Aat, or subdiviaionr (a) to (lj, both inolus~v8 of Section 23 of this Aot, Until th8 issuer of auoh seouritlesshall have been granted a permit by the Seoretary of State, and no such permit ehall be granted by the Seoretery of State until the lesue~ of such securitiesshall have filed with the Secretary OS State a worn statement verified under the oath of an executive officer of the Issuer and attested by the Secretary thereof, setting forth the following informationr6 l + " In view OS the above quoted Section it 16 our opinion that the loaal agents, even with a permit,,vouldnot be authorized to offer for sale the sscuritieamentioned in your letter, unleso and until the aorporetion shell have b88n granted an issuer's per-~ mit by the Beoretary of State. Very truly yours