5 

OFFICE OFTHE ATTORNEYGENERAL OF~TEXAS 

-c.yInn AUSTIN 

-- 

Secretary bf State 

Austin, 'Pexaa 

Attention1 I&. Fi'ank D. 

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 proposes, however, to aolialt offers for the purchase of royalties by resident nalesmn who 
888 

Honorable Wll~lam J. kuf~on. Page 2 

i ’ 

. 

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 oplnion 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 corporatton under mwh state of fa’acta end its agents ara 

engaged in Laterstate commerue would such aorporation and it8 agent8 bo violating the pmvlrlona 

a? the Texas Seaurftiea Aut if they have xade no 

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 or ita agents be violating 

the pmvialono of 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 purchase from Western Petroleum Corporetlon, a Uyomlng corporation, a non-produciag over?idlng royalty 

interest of 

the sum of - 

thousandt?k(- ~i/10030th,) for 

Dollars. This offer 
889 

Honorable Wllllam J. Lsvoon~ Page 3 

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 

Saleomstt Rem% 

‘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). 

I It has llkeviss been settled by the Suproom Court 

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 15, 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~ 

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 
, 

Honorable XIlllam 8. Lawson, Pago 4 

STudgp St. Sum, of ths Northern District of Callfornla, Southern Dlvlolon, In aonotrulng the above quoted seutlon, said: 

nDeXendanizr elso call attention to ha. 

18 of the Act of 1933; whlah provides far 'state 

oontrol of securities' am Indicative of the %ntention 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 Exchange ComolooIon hao jurlsdletion of the matters 

here ooxplalned of:' Becurltles and Zx 0 commloolon v. Twetmst, Iaa., 28 Fed. Supp, chan$ 3 . 

Sky Lava” 

The oontentloa has been frequently made that 'Blue 

or 'Seourltleo A&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-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. 

747, 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 8 

denied 83 Lav Ed. 1398, a8 follows~ 

3 F. (26) 920, certiorari 

'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. 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, 

oontentlon of t-h8 plaintiff now made did not escap8 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 obaerved,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 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 indirect burden upon them 88 objeat6 of lnterstate 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 piarpose of vhloh 1s to prevent fraud or 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 

mnv as well be aar6pmd. S Both 11 

Buakbee-M8ar6 Co., 275 II. 3. 274, ;$ 8. C:: 12:: 

72 L. Ed. 2771 Chatfianoo a l?atlonalBullding & Loan 

Association V, Dmmon, 1 8 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 prohibiting interstate shipments vaa not unconetltutloaa2. a8 an undue 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 comm8rce. 

While the local agent6 in any event would be required 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 express 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. 

h3tion 5 of our Texas ZeUUHtie8 Act d6dar661 

.'%'a0 dealer, agent or salesman shall 6ell or 

offer for aalo eny seuuritler Issued after the paaeage 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 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