The Topeka state journal., 1919-12-20
HERINGTON OIL CASE
Blue Sky Attorney Defines Law in
Connection With Company.


The state blue sky department has
given an Interpretation of the state
law relative to the sale of royalty in
terests in the case of the Farmers Roy
atty Oil Pool of Herington. Plans un-
der which the companies may operate
have been defined by Guy l.. Hursh.
special assistant attorney general in
the blue sky department. In a letter
to Capt. Matt Guilfoyle, an officer of
the Herington company, Hursh makes
no specific statement as to previous
or present violations of or conformity
with the state law
Hursh's letter recites the general
plan under which the company oper-
ated. He reviews a plan by the roy
atty company incorporators to pool
acreages and to issue unit certificates
Eased on one unit for each 20 acres.
In event oil was found on one tract,
participators under the pool would
share equally. In some instances own
ers of large tracts received part cash
and part bonus certificates. Hursh
says it is not entirely clear who paid
the bonus-whether thru some method
of organization or by promoters in
lieu of certificates.
Concerning the state law as affect
ing disposition of royalty rights, Hursh
wrote to Guilfoyle:
att is, therefore, quite clear that II the
association should sell an interest in royal
ties not exceeding one twenty fifth of the
whole royalty without having obtained per-
nit therefor. such act would constitute
an offense. This leads to the consideration
of the definition of the term sale Our
courts have not had occasion to construe
the act commonly known as the blue sky
law and it is, therefore, necessary to en-
deavor to ascertain from other sources
what construction our court would pro-
badly place upon this term
.aFhe term sale is generally defined to
be the transfer of the property in thing
for price in money or for consideration
expressed in money terms This does not
necessarily mean that sale could not in
any instance be made except where the
consideration was stated in money terms
,and paid in money or Its equivalent but
generally speaking that is the case. 1t
where certificates units are given to a
land owner in exchange for his royalty
interest and the right which he obtains
under the certificate or unity. issued to him
is merely one of the participation in the
royalty interests in his and other lands.
included in the pool, such transaction could
hardly be said to constitute a sale within
the meaning of the act.
However. in instances where the certifi-
Gates or units are transmitted or delivered
to an individual for a consideration to be
paid In money or its equivalent or Tor
consideration expressed IN money terms,
when a sale is clearly made and unless
such transaction is brought within some
of the exceptions of the statute, it would
constitute an offense. The only exceptions
which seem to have any application to such
transaction are those permitting the sale
of interests exceeding one twenty-f1fth OF
the whole royalty and excluding from the
effect of the statute sales made by the
owner of a speculative security who is not
the maker or issuer thereof and who shall
acquire and sell the same for his own ac-
count in the usual and ordinary course of
promotion OF any enterprise or scheme
within the purview of the act"