Case Information
*1 OFFICE OFTHE ATTORNEYGENERAL OF~TEXAS AUSTIN -c.yInn --
Secretary bf State
Austin, 'Pexaa I&. Fi'ank D.
Attention1
Dear Mz’. Lwaon$ “*The aorporatlon does not pmpose to
qualify in your state an a forei,gn aoxqoration, nor do any tntraatate bualnees thers, but pro- poses, however, to aolialt offers for the pur- chase of royalties by resident nalesmn who Honorable Wll~lam J. kuf~on. Page 2
deduct comtrilerionra and remit the net oum with said of+rs, for rooeptanae or rejeatlon, by the comDaJly+ln Vyomlng.* ”
“The form or offer of puruhme to be used by such cowany is enclosed herewith.
“This department vould appreciate your 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 Interstate coannerce?
"(2) If you have ansvered 'Yes* to the above question holding thereby that such corpora- tton under mwh state of fa’acta end its agents ara engaged in Laterstate commerue would such aorpora- tion and it8 agent8 bo violating the pmvlrlona a? the Texas Seaurftiea Aut they have xade no if atterapt to qualify under the iesuer’a provisions thoreof?
“(3) If you have answered ‘Yes* to the first question holding thereby that suah corporation and its agent8 am engaged in interstate oozmmrue vould, ~uah oorpowtlon ita agents be violating the pmvialono the Texas Becurlt~es Act 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- lng corporation, a non-produciag over?idlng royalty i ’ thousandt?k(- ~i/10030th,) for interest of the sum of - Dollars. This offer
889 Honorable Wllllam J. Lsvoon~ Page
Is not binding upon ths aorporatlon until accepted by Its duly authorlood officers in VyomIng, It bsIng understood that thIo I8 an produaing overriding myalty interests.
"IA WITHESS UBEREOF, the undersigned has laaunto oot his hand and oeal~thls - aarr
I 194-.
I Rem%
Saleomstt ‘Accepted byt
Weoterm Petroleum Corporation
Addreood
It is vell settled law that vhere the federal government has assumed full jurisdiction of omttero vlthin the scope of Its power, Its regulations are exclusive vithin the f.1el.d Involved (See the oese of Oregon-Washington R & 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 rsgulatory lavo am valid unless oongreso has exaluolvely oocupled the field'or unless the state law dlraotly buMan Interstate bommercw. (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 U.S.O.A., a portion of the Federal Beourltleo and Exchange Act, reads as follovot
%othlno In thFo.sub-ohapter ohkaffecti the jurisdlation of the Seeurltleo Con$o~ L 7or any agency or office Performin lik tions) of any state or terrftory of the United States, or the District of Columbia, over ane security or any peraon." ( i.hderscoring ours *4 Honorable XIlllam 8. Lawson, Pago 4
STudgp St. Sum, of ths Northern District of Call- fornla, Southern Dlvlolon, In aonotrulng the above quoted seu- tlon, said: nDeXendanizr elso call attention to ha.
18 of the Act of 1933; whlah provides far 'state oontrol of securities' am Indicative of the %n- tention of Congress to 1Qnlt Its legIol8tion to activities in interstate oomneme. Thor. IO no merit In tho oontentlen. The moot that ornc~be said fop the ooatlon is that It probably glum coneurroat jurlodlatlon to the Securities and Exohwga Caamloolon and the State authorities.
Thers io.ao doubt that the Geouritles and Ex- change ComolooIon hao jurlsdletion the matters here ooxplalned of:' Becurltles and Zx 0 com- mloolon v. Twetmst, Iaa., 28 Fed. Supp, chan$
The oontentloa has been frequently made that 'Blue 'Seourltleo A&o* impose burdens upon interstate Sky Lava” 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-Jones Co-y, 242 U. S. 539.
Also see annotationa In 87 A.L.R. 46 et oeq:
ft vll1 be noted that the Texas 8eoamltleo Act makes it unlawful to offer for aale within the state oeouritleo vlthout first ha lng dthe 1 d lloense as well as to sell within the stat: vit~$%m rsq~~d?.lcenoe. (80e Seotlon 12 of Artlale , OOa, Vernon18 Annotated Texas Civil 8tatuteo.) The Seaurttieo Act
of Wichlgan is nlmllar to ths Texas Securltleo Aat; The Supreme Court of MiahIgan In the oaae of People v. Augustine, 204 8. W. held that for the offense of negotiating for sale unapproved seaurltlea ln Mlahlgan the aotual sale aeed not be oonotmmated in Xichlgon. In other words the negotiations wire had In luchlgan and the sale was eonsuounated in #ev York. The Miohhigmi Su$reme Court held this to bo In vlolatlon of the Nlohlgan Seourltles Aat. Also ree the aaewof First Botlonal Bank of Pinevllle v. Wtlaon, 55 S. Y. (26) 657, (Supmom Court of Kentucky).
Honorable William J. LAWSON, Page 5
We quite from the uase of Bartlett v. Doherty, 10 F. Supp. 469, mditled in home robs m¬ m@terin3. hereto in 81 F. (2d) 920, re-hewing danled 3 F. (26) 920, certiorari denied 83 Lav Ed. 1398, a8 follows~
'In defendant's pre8ent brief the que8tlon Is revived, it being aqgued that these sale8 of stock were llew York tramauti~nns and valid under the laws of that atate, and that any aat ol' the Bev Hampshire Legfslature which would Invalidate them is unaonstltutional aa an undue burden 051 lnter8tate commerce. 'It is argued that this vlev of the lav haa not been determined by 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-Jones co., 242 u, 3. 557, 37 9. Ct. 217, 223, 61 L. Ed. 480, L. B. A. 19178, 514, Ann. Cam. lgl?C; 693. It appears, that the, oontentlon of t-h8 plaintiff now made did not es- cap8 the attention of the Supreme Court, for It saldc ITha next aantentlon of appellees 18 that the lav -8~ review Is a burden on interstate comme~ce,~and therePore oontravenea the commerce olause of the Conat.ituti.on of ths U&ted Ststas. t 4 e The provisions of the law, It will be ob- aerved,apgly to dlapositlons of eeourltles wlthla the state. and vhlle lnformstl.on of those Issued lx-other statar~and f&&n ooktrie8 is required to be filed, l l l they are,only af?euMd..by the requirement of a llaenss of one who deals in them wlthln the etat8. Upon th i transportation into the state there la no lmpe&&nt,--no r~egulatlon of them 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 indirect burden upon them 88 objeat6 of lnter- state commerce, if' tneg may be PeRarded as such.
Honorable Will.iam 3. Lawaon, Page G
> *'It 16 a poll08 regulation mtrictly, not affeatlx$ them utatll there lean attempt to make dlepoaitlon of 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& ~from Pagulatlon *he piar- pose of vhloh 1s to prevent fraud deception.
Suah regulation6 affect interstate ao6mt8Fae in them only inaide$tally.*
I . .
“me next claim is that 'The aalea were made ln Hew York, the Rev Hnmpahire Bluo Bii Law has no extra territorial effeot and thersfom oannot make th8ae sales void.' I oannot aaoept thi6 statement of the law. Many of the states In ths Union have enaated~so-aalled Blue Sky laws. If def%ndant*6 6tate6mnt vere true, all the d8f8nd6ut had to do vaa to eatabllsh his office in FJev York City and flooii the country vlth eeaurltie8, good or bad, and alaim immunity of 6.ny breaoh of lav of any state 60 long a6 rt retained at Its home offloe the right to conflirp or rejeot any male
ita OgentS elaevhere.,ff this 16 tITX8 the Lsv of &v Rammhlre and that of moat other ;$ 8. C:: 12:: Buakbee-M8ar6 Co., 275 II. 3. mnv as well be aar6pmd. S Both [11] 72 L. Ed. 2771 Chatfianoo a l?atlonalBullding & Loan Association V, Dmmon, 1 9 U. 3. 408, 23 8. Ct. 630, 47 L. Ed. 870." (Undereaorlng ours)
The above ease h8ld that the Hew Hmpshire Blue Sky Lav, regulating saloa of eeouriti8a vithin the state vithout pro- hibiting interstate shipments vaa not unconetltutloaa2. a8 an un- due burden on interstate commerce 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. Honorable Hllll6m J. Lawlon, Page 7
Rewiring the local agent6 to take out p44naitS 1X4 no Way burdenl, the lrlterstate bUsin86s of the corporation; if it shouldbbe held that 6Uoh business 16 interstate com- m8rce.
While the local agent6 in any event would be re- quired to aomply vith the requirement8 of our Texa6 Securltles Aot, yet, In view of the faat that the loaal a&mats in the present lnstanaeeontearglate aoliaiting only with respect to the securities irsu6& by Thea particular corporation, It uould not avail them to take out permite, seeing, that under the ex- press terms of our Seaurltlee Act, they would not thereby be authorized~ to offer for sale eeourltier of a foreign corporation or solicit orders for a foreign corporatfon which itself had not taken out an 168~8~~6 permit. 5 of our Texas ZeUUHtie8 Act d6dar661
h3tion .'%'a0 dealer, agent or salesman shall 6ell or offer for aalo eny seuuritler Issued 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 this Aat, or subdiviaionr (a) to (lj, both inolus~v8 of Section 23 of this Aot, Until th8 issuer of auoh seouritles shall 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 securities shall 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 informationr 6 l + "
In view OS the above quoted Section it 16 our opinion that the loaal agents, even with a permit,,vould not be authorized to offer for sale the sscuritiea mentioned 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