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