Title: Shepperd v. Boettcher & Co., Inc.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Shepperd v. Boettcher & Co., Inc.1988 WY 70756 P.2d 182Case Number: 87-132Decided: 05/17/1988Supreme Court of Wyoming
REX 
A. SHEPPERD AND STEVE EDWARDS, PLAINTIFFS-APPELLANTS,

v.

BOETTCHER & COMPANY, 
INC., DEFENDANT-APPELLEE.

Appeal from the 
United States District Court for the District of Wyoming.

Richard Miller,Casper, Edward J. Pluimer and Peter M. 
Lancaster of Dorsey & Whitney, Minneapolis, Minn., for 
plaintiffs-appellants.

William E. 
Murane, Jeffrey T. Johnson, and A. Bruce Jones of Holland & Hart, Denver, 
Colo., Jack D. Palma, II, of Holland & Hart, Cheyenne, for 
defendant-appellee.

Joseph B. Meyer, 
Atty. Gen., Gay Woodhouse, Sr. Asst. Atty. Gen., for amicus curiae Wyoming Secretary of 
State.

Before THOMAS, CARDINE, URBIGKIT and MACY, JJ., 
and KAIL, District Judge.

URBIGKIT, 
Justice.

[¶1.]     By certification from 
the United States Court of Appeals for the Tenth Circuit, this court determines 
as a question of Wyoming law:

"Does the sale of an 
undivided one-and-two-thirds per cent working interest in an oil and gas lease 
constitute a `security' as defined by the Wyoming Uniform Securities Act, Wyo. 
Stat.Ann. § 17-4-101 et seq., when the owner of the operating interest retains 
exclusive control over the drilling operations?"

[¶2.]     This certified question 
is answered "Yes," subject to circumstances of the individual sales transaction 
which would be factually determinative.

[¶3.]     A state law claim was 
filed under 28 U.S.C. § 1332 by diversity jurisdiction in the United States 
District Court, District of Wyoming which alleged state security law violations. 
That court dismissed pursuant to Rule 12(b)(6), F.R.C.P. for failure to state a 
claim upon which relief can be granted, and appeal to the Tenth Circuit Court of 
Appeals resulted in the present certification to this court pursuant to Rule 
11.01, W.R.A.P.

[¶4.]     From the facts stated 
in the certification as extrapolated by the Tenth Circuit Court of Appeals from 
the original complaint, we discern, as pleading contentions subjected only to a 
motion-to-dismiss response, that defendant Boettcher & Company, Inc. 
(Boettcher), a securities broker-dealer, solicited the 
sale

"* * * of certain 
undivided fractional working interests in oil, gas and mineral leases in 
Louisiana operated by Latham Exploration Company, Inc. (`Lexco'). Pursuant to 
this solicitation, plaintiffs Rex Shepperd and Steve Edwards each purchased an 
undivided one-and-two-thirds per cent working interest by entering into two 
participation agreements on October 22, 1985, which obligated them to pay a 
proportionate share of the costs to be incurred in drilling operations. 
According to the participation agreements, Lexco retained complete control over 
managerial decisions associated with drilling operations. The complaint states: 
`[Plaintiffs Shepperd and Edwards] did not receive with their working 
interests/securities the right to exercise practical and actual control over the 
managerial decisions associated with the drilling operations or any Lexco 
enterprise; the participation agreements provided Lexco complete control over 
all drilling operations.' Shepperd and Edwards' investments proved unsuccessful, 
and they each lost $142,982.23."

[¶5.]     With professed 
violations of filing and registration requirements under the Wyoming Uniform 
Securities Act, § 17-4-101 et seq., W.S. 1977, plaintiffs sought compensatory 
damages, prejudgment interest, costs, and attorneys' fees. The complaint was 
dismissed with prejudice when the federal district court (in reliance on a 1962 
opinion of the Wyoming Attorney General) agreed with the securities 
broker-dealer that the Wyoming legislature had intended to exclude all oil and 
gas interests from the scope of its definition of a security. See Shepperd v. 
Boettcher & Company, Inc., 613 F. Supp. 287 (D.Wyo. 1985).1 The Tenth Circuit Court of Appeals, 
in concluding that the proceeding involved an important question of policy under 
Wyoming law, certified the legal question to 
this court in order to afford an opportunity for state court analysis of this 
important aspect of Wyoming statutory security-regulation 
law.

[¶6.]     The issue is emplaced 
by Wyoming legislative adoption of the definition of security for the purpose of 
the enactment of its version of the Uniform Securities Act by Ch. 160, S.L. of 
Wyoming 1965, § 17-4-101, W.S. 1977. See general background discussion in 
Comment, The Wyoming Uniform Securities Act - A Review, I Land & Water 
L.Rev. 271 (1966). The Wyoming law developed a difference in 
phraseology by amendments of the initially used model act before its final 
passage. S.F. No. 10, Senate Digest 1965 at 56.

[¶7.]     Consequently, a 
legislative-intent inquiry developed in the decision of the district court that 
deletion of a "certificate of interest or participation in an oil, gas or mining 
title or lease or in payments out of production under such a title or lease as 
one type of defined security," dispositively excluded the contested sales 
transaction from encompassing a covered security for regulatory purposes under 
the act. The enactment result had been to delete the express inclusion as found 
in the Uniform Securities Act, § 401(1), and in the federal law, 15 U.S.C. § 
77b(1), without the substitution of an express exclusion as enacted in at least 
one state (Oklahoma). SeeState ex 
rel. Day v. Petco Oil&Gas, Okla., 558 P.2d 1163 (1977) and 71 Okla. Stat. § 2(1) Laws 
1961, p. 58.

[¶8.]     The practical 
proposition now presented is whether these customer-purchasers of the oil play 
investment interest stated a security act nonregistration claim in their 
complaints against the broker-dealer. It was generally recognized by counsel in 
oral argument that coverage would probably exist in sister jurisdictions under 
laws and adopted precedent, but that the identical status of security law 
phraseology is novel to Wyoming.2

[¶9.]     The secretary of state, 
as the entity responsible for act enforcement, filed an amicus curiae brief in 
strong opposition to the federal district court decision since that court not 
only found an exclusion by deletion, but also found that the rules and 
regulations of the secretary of state which defined covered investment contracts 
as including oil and gas working interests are "contrary to the legislative 
intent behind the Wyoming Uniform Securities Act." Shepperd v. Boettcher & 
Company, Inc., supra, 613 F. Supp.  at 290.

[¶10.]  To address the specific issue certified, 
we have to define the subject of the sale as alleged in the complaint. The 
nature of the cost contributory working interest with severed right of 
management is clearly definable as a separate category of oil interest 
participation adventure for the speculator or investor. It is not a horse for 
widows, orphans, or trust managers to ride. Risk and cost are related to the 
status of indeterminate obligation, and benefit or profit is subject to drilling 
successes and suitability of profit attribution and divisional fairness as 
effectuated by promotional characteristics. The significant number of securities 
act cases involving this kind of asset is demonstrative of the risks.3 

[¶11.]  In dealing with the specified property 
classification of the working interest with severed rights of control, 
definitions are required. By name, working interest is the leasehold right as 
the interest providing the right to work. Any fractional working interest is 
consequently severed from that estate. It can be carried or participating, 
dependent upon proportional responsibility to contribute to costs of drilling 
and development expenses. Clearly, from the minimum information here, this 
investment included a participative responsibility in cost. We now add - or 
extract from the nature of the normal working interest as some fraction of the 
original leasehold estate - another function, partnership or venture control 
which either remains with or is assigned to the owner of the operating interest. 
In result, the purchaser of the participating working interest with severed 
rights of control has certain contractual rights and obligations by contract, 
but not by property ownership.4

[¶12.]  If intention is to be defined in 
legislation, the deletion of the explicit inclusion of "a certificate of 
interest or participation in an oil, gas or mining title or lease or in payments 
out of production under such a title or lease" and countervailing disinclination 
to state an express exclusion of the interest from the definition of the 
security, leads this court to conclude that the interest or participation is by 
definition neither expressly included nor expressly excluded under the law as a 
covered security. Consequently, regulatory inclusion is dependent upon the 
essential purchase transaction within which the determiner of fact is entitled 
to consider the severed right of control applicable to the nature of the 
investment as acquired.5 

[¶13.]  It is clear, as denominated only by the 
certification record, that whatever the plaintiffs purchased, their 
participation was more than a payment agreement to purchase a definable real 
estate interest. Rather, it is observable that they contractually acquired some 
character of contributory responsibilities and profit anticipation while the 
owner of the operating interest retains exclusive control over the drilling 
operations. In their brief, appellants posit this 
perception:

"It is a question for the 
[trial] Court to decide, however, not on the basis of the label defendant would 
apply to the instrument, but on a complete factual picture of the transaction: 
the terms of the contract, plaintiff's involvement in the management and 
operation of the enterprise, defendant's role in promoting and selling it, 
including the size of the commission it received, and any other facts 
surrounding the transaction that make clear the investor's relationship to the 
investment enterprise."

[¶14.]  The basic Wyoming case interpretive of the securities act is Gaudina 
v. Haberman, Wyo., 644 P.2d 159 (1982). In the context of 
that case as applied to the participation agreement here, "[t]here is no doubt 
that the investment document was a security." Id. at 163. At issue only is whether this 
brand of security is excluded from statutory coverage because of the character 
of the included asset. We do not determine that each acquired asset interest of 
a nonworking interest with severed right of management control is necessarily a 
security if not so packaged, but only that a security does not become excludable 
because of the type of asset utilized for the sales program. It is the substance 
of the rights and obligations as documented in offerings, sales material, and 
defined agreement as the investment, which will be determinative of status as a 
security under Wyoming law. This is the application of the 
facts-and-circumstances rule for security-status determination in applying the 
"certificate of interest or participation in any profit sharing agreement" 
determinates of § 17-4-113(a)(xi), W.S. 1977.

[¶15.]  Litigants have led us to cases which we 
do not find inapposite to the decision now adopted. Smith v. Wedding, Ky., 303 S.W.2d 322 
(1957), was the early case used both in the 1962 Attorney General opinion and by 
the United States District Court. See similarly resolved State v. Allen, 216 
N.C. 621, 5 S.E.2d 844 (1939). In Wedding, the court found the owner of an 
undivided working interest in an oil lease to be a tenant in common in a chattel 
real. In recognizing this tenancy, the court did not consider any real property 
status differential if control was severed, since the issue was not presented 
factually. The contemporaneous investment package effect, if any, was similarly 
not addressed.

[¶16.]  The countervailing and generally followed 
case is State ex rel. Day v. Petco Oil & Gas, Inc., supra, 558 P.2d 1163, 
which followed an earlier federal court case, Gaillard v. Field, 381 F.2d 25 
(10th Cir. 1967), cert. denied 389 U.S. 1044, 88 S. Ct. 787, 19 L. Ed. 2d 836 
(1968). In Gaillard, the federal court expressly interpreted the law of 
Oklahoma and found in the "deep-rooted 
tradition of the common weal in Oklahoma" that there was a security-act 
exclusion of purchased fractional interests in oil and gas 
leases.

[¶17.]  This deep-rooted tradition of the common 
weal was differently defined by the Oklahoma Supreme Court in Petco in finding 
the federal court examination of its legislative history unpersuasive. That 
state court recognized that the statutorily exempt lease-interest language would 
not necessarily exclude a definable security when the entire investment package 
is considered.

"In examining the 
investment package sold by Petco, we find that it constitutes a security under 
the definition of a security [under Oklahoma law].

"The package sold by 
Petco requires the investment of money. 

"The package sold by 
Petco takes investor's money and subjects it to the risk of the venture, thus 
constituting risk capital.

"The package sold by 
Petco offers to the investors an expectation of a benefit, in this instance a 
profit.

"The package sold by 
Petco provided that the investors would have no direct control over the 
investment or policy decision of the venture. It is clear from the operation 
agreement, that any profit or benefit to be derived from a leaseholder's 
investment is to be the product of the actions and decisions of the operator and 
that the investors do not participate in the decisions and actions 
involved.

"Thus, the package being 
offered and sold by Petco, although it contains an exempt lease interest, 
clearly constitutes a security under the definition of a security [under 
Oklahoma 
law]." State ex rel. Day v. Petco Oil & Gas, Inc., supra, 558 P.2d  at 
1167.

[¶18.]  In accord with the general trend of the 
cases, including a significant number in the federal courts, we would follow 
Petco and the basic case of fractional interest, Securities and Exchange 
Commission v. C.M. Joiner Leasing Corporation, 320 U.S. 344, 352, 64 S. Ct. 120, 
124, 88 L. Ed. 88 (1943):

"The test rather is what 
character the instrument is given in commerce by the terms of the offer, the 
plan of distribution, and the economic inducements held out to the prospect. In 
the enforcement of an act such as this it is not inappropriate that the 
promoters' offerings be judged as being what they were represented to 
be."

[¶19.]  Joiner, in decisional sequence had 
followed the citrus-grove adaptation of security law in the seminal discussion 
of Securities and Exchange Commission v. W.J. Howey Co., 328 U.S. 293, 298, 66 S. Ct. 1100, 1102-03, 90 L. Ed. 1244, reh. denied 329 U.S. 819, 67 S. Ct. 27, 91 L. Ed. 697 (1946):

"Form was disregarded for 
substance and emphasis was placed upon economic reality. An investment contract 
thus came to mean a contract or scheme for `the placing of capital or laying out 
of money in a way intended to secure income or profit from its employment.' * * 
* This definition was uniformly applied by state courts to a variety of 
situations where individuals were led to invest money in a common enterprise 
with the expectation that they would earn a profit solely through the efforts of 
the promoter or of someone other than themselves."

[¶20.]  The principle has been applied more 
recently in Tcherepnin v. Knight, 389 U.S. 332, 88 S. Ct. 548, 19 L. Ed. 2d 564 
(1967) to shares in a state-chartered savings and loan association as the 
misplaced emphasis of the Court of Appeals was reversed in determining that a 
security was created. See also 12 Long, Blue Sky Law, Ch. 2, What is a 
Security?, p. 2-1, and Howey, Definition Components, § 2.01(2), p. 2-6.8.6

[¶21.]  Additionally it must be recognized that 
not every participation in some business enterprise or investment in oil 
activities results in a security transaction under the regulatory systems of 
either Wyoming 
blue sky or federal securities law. As was carefully recognized by the Tenth 
Circuit in Ballard & Cordell Corp. v. Zoller & Danneberg Exploration, 
Ltd., 544 F.2d 1059 (10th Cir. 1976), cert. denied 431 U.S. 965, 97 S. Ct. 2921, 
53 L. Ed. 2d 1060 (1977), the transfer of no more than a naked leasehold interest 
right is to be recognized as a significant evidentiary factor in analysis of the 
economic reality of the transaction. Comparable to the sale of all of the oil 
interest or a fractional interest uncluttered with participative agreement is 
the sale of all of the stock in an existent business. Ruefenacht v. O'Halloran, 
737 F.2d 320 (3d Cir. 1984), aff'd sub nom. Gould v. Ruefenacht, 471 U.S. 701, 105 S. Ct. 2308, 85 L. Ed. 2d 708 (1985); Woodward v. Wright, 266 F.2d 108 (10th Cir. 1959). This 
facts-and-circumstances analysis as an approach we apply to the Wyoming securities law is 
in accord with Gaudina v. Haberman, supra, and has been consistently used by 
most federal courts and specifically the Tenth Circuit Court of Appeals in the 
variety of circumstances presented. See Vincent v. Moench, 473 F.2d 430 (10th 
Cir. 1973) (sale of a family business). See also the extended review and complex 
application of the securities law to fractional undivided interest in oil, gas, 
and mineral rights in Fund of Funds, Limited v. Arthur Andersen & Co., 545 F. Supp. 1314, 1348 (S.D.N.Y. 1982), where, in quoting from Williamson v. 
Tucker, 645 F.2d 404, 422 (5th Cir.), cert. denied 454 U.S. 897, 102 S. Ct. 396, 
70 L. Ed. 2d 212 (1981), the court analyzed the factors of management and 
control:

"If, for example, the 
partner has irrevocably delegated his powers, or is incapable of exercising 
them, or is so dependent on the particular expertise of the promoter or manager 
that he has no reasonable alternative to reliance on that person, then his 
partnership powers may be inadequate to protect him from the dependence on 
others which is implicit in an investment contract.

"Thus, a general 
partnership in which some agreement among the partners places the controlling 
power in the hands of certain managing partners may be an investment contract 
with respect to the other partners * * *."

[¶22.]  The principles adduced which define the 
regulated security as an instrument lacking power of management and control 
would specifically apply to the fractional working interest with severed right 
of control.7 The basic criterion adopted by this 
court is that application of Wyoming security regulation law and its statutory 
history neither expressly includes nor expressly excludes severed control 
working interests in oil and gas properties, but that the essential character of 
the investment as a purchased assemblage of rights and obligations would 
determine its security characterization for statutory inclusion or 
exclusion.

[¶23.]  Essentially, Boettcher distinguishes 
Petco and its authority by contention that plaintiffs failed to adequately plead 
more than the "fractional interest" as would have been involved in the sale by 
Boettcher to the plaintiffs. We do not find the certification to be 
commensurately confined. There is demonstrable conflict, at least from argument 
in briefs, as to exactly what Shepperd and Edwards purchased from Boettcher. The 
nature of the record and the certified question inquiry deters this court from 
proceeding beyond the directly certified designation of a working interest with 
operator-retained, exclusive control. Appellants generally confined their 
description to the characterization included in their complaint as recited in 
certification submission. Contrarily, at least in argument, Boettcher appears to 
foreclose our consideration of the participation agreement and its security 
status. We decline the invitation, since the certification by which we are 
controlled recognizes the alleged existence of the investment agreements. Our 
decision would be meaningless in statutory interpretation if not recognizing the 
controlling question to be as yet undetermined as what was actually bought and 
sold.8 

[¶24.]  Differing from the more recent opinion of 
the Attorney General, as here presented by the certified question, we infuse 
only the express statutory language which neither specifically excludes nor 
implicitly includes oil and gas working interests as an investment asset within 
the security definition. Retention of exclusive control by the owner is 
significant to the evidence but not necessarily 
controlling.

[¶25.]  The categorical answer to the certified 
question submitted to this court by the United States Court of Appeals for the 
Tenth Circuit must accordingly be "Yes." This answer, however, is subject to 
what has been said in this opinion as further trial proceedings may address 
specific facts and actual documents to be found to have been involved in the 
questioned transaction.

FOOTNOTES

1 See persuasive and 
thoughtful analysis in Note, Oil and Gas Leases: Should They Be Considered 
Securities? Shepperd v. Boettcher & Co. Inc., XXILand & Water L.Rev. 99 (1986) (not 
cited in appellate briefs here or in the Tenth Circuit Court of Appeals, 
although noted by annotation in the Wyoming statutes). The 1962 opinion of the 
Attorney General reversed an earlier opinion, AG Ops. 1953-56, p. 35 of 1953. 
The earlier opinion followed the broad language and generous authority of the 
United States Supreme Court in Securities and Exchange Commission v. W.J. Howey 
Co., 328 U.S. 293, 66 S. Ct. 1100, 90 L. Ed. 1244, reh. denied 329 U.S. 819, 67 S. Ct. 27, 91 L. Ed. 697 
(1946), and Securities and Exchange Commission v. C.M. Joiner Leasing 
Corporation, 320 U.S. 344, 64 S. Ct. 120, 88 L. Ed. 88 
(1943), as a "substance, not form" evaluation determined by the factual 
situations involved. The latter Attorney General opinion, in reversal, derived a 
contrary legislative intent from amendatory history of the present Wyoming securities law 
during its passage. The differentiated Attorney General opinions on the same 
subject illustrated the two diametrically different statutory analyses and 
interpretative approaches: legislative history versus text of language 
used.

2 Cases considering 
fractional oil and gas interests within the enveloped transactional parameters 
under state security civil and criminal regulatory systems include Upton v. 
Trinidad Petroleum Corp., 652 F.2d 424 (5th Cir. 1981), applying Alabama law; 
People v. Blankenship, 305 Mich. 79, 8 N.W.2d 919 (1943); and Commonwealth v. 
Yaste, 166 Pa. Super. 275, 70 A.2d 685 (1950). See likewise, Oil Lease Service, 
Inc. v. Stephenson, 162 Cal. App. 2d 100, 327 P.2d 628 (1958); O'Neill v. State, 
Fla.App., 336 So. 2d 699 (1976); State v. Walters, 244 Iowa 1253, 58 N.W.2d 4 
(1953); Caldwell v. Trans-Gulf Petroleum Corporation, La., 322 So. 2d 171 (1975); 
Prince v. Heritage Oil Co., 109 Mich. App. 189, 311 N.W.2d 741 (1981); State v. 
Golden, 216 Minn. 97, 12 N.W.2d 617 (1943); Gales v. Weldon, Mo., 282 S.W.2d 522 
(1955); State ex rel. Day v. Petco Oil & Gas, supra. See also, Hayden v. 
McDonald, 742 F.2d 423 (8th Cir. 1984), overruled on other grounds sub nom. 
Austin v. Loftsgaarden, 768 F.2d 949 (8th Cir. 1985), applied Minnesota law; 
Parvin v. Davis Oil Co., 524 F.2d 112 (9th Cir. 1975), applied California law; 
Scheve v. Clark, 596 F. Supp. 592 (E.D.Mo. 1984), applied both state and federal 
law; Witter v. Buchanan, 132 Ill. App.3d 273, 87 Ill.Dec. 131, 476 N.E.2d 1123 
(1985); Petroleum Resource Development Corp. v. State ex rel. Day, Okla., 585 P.2d 346 (1978); State v. Pullen, 58 R.I. 294, 
192 A. 473 (1937) and Kadane v. Clark, 135 Tex. 496, 143 S.W.2d 197 (1940). Two cases of 
a contrary conviction and conclusion were Smith v. Wedding, Ky., 303 S.W.2d 322 
(1957); and State v. Allen, 216 N.C. 621, 5 S.E.2d 844 
(1939).

3 Footnote 1, supra, is 
only illustrative. In the federal courts, under federal security regulation, an 
early case, Securities and Exchange Commission v. C.M. Joiner Leasing 
Corporation, supra n. 1, involved one brand of this investment technique. 
Similar to state court cases, federal decisions inviting security regulation to 
programs for sales of fractional oil and gas interests are numerous. In addition 
to the detailed case resulting from John King's oil operations in Denver, 
Colorado, Fund of Funds, Limited v. Arthur Andersen & Co., 545 F. Supp. 1314 
(S.D.N.Y. 1982), other representative cases include: Simon Oil Co., Ltd. v. 
Norman, 789 F.2d 780 (9th Cir. 1986); San Francisco-Oklahoma Petroleum 
Exploration Corp. v. Carstan Oil Co., Inc., 765 F.2d 962 (10th Cir. 1985); 
Penturelli v. Spector, Cohen, Gadon & Rosen, 779 F.2d 160 (3rd Cir. 1985); 
Scheve v. Clark, supra n. 2 and Johnsen v. Rogers, 551 F. Supp. 281 (C.D.Cal. 
1982). Cf. Woodward v. Wright, 266 F.2d 108 (10th Cir. 1959), where 
countervailing factors of the intrinsic transaction were sufficient to deny the 
security designation for regulation.

4 In general usage 
involving basic oil and gas leases, a working interest is the interest acquired 
by the lessee with a royalty interest retained as the lessor's interest. Davis 
v. Hurst, 150 Kan. 130, 90 P.2d 1100 (1939); Miller v. Schwartz, N.D., 354 N.W.2d 685 (1984); 8 Williams and Meyers Oil and Gas Law, Manual of Oil & 
Gas Terms, p. 1086; 46 Words and Phrases, Working Interest, p. 280. In the 
ingenuity of investment and financing transactions, the remerchandising of a 
portion of the acquired leasehold estate as fractional working interest can 
occur in a multitude of differing dimensions encompassing different aspects. In 
general, such interests can be carried-working, see 5 Kuntz Oil and Gas, § 63.4, 
or cost-participating, as exists apparently in the interests involved in this 
litigation. A further mutation can occur whether the assigned interest is 
carried or participating, by agreement terms which detach rights of 
participation in control which would otherwise exist from fractional ownership. 
It is in the nature of the agreements by which the rights and obligations are 
derived that the intrinsic nature and risk of the investment is defined. In the 
nature of terminology, there is presented here a participating, severed-control, 
fractional working interest. Phillips Petroleum v. Oldland, 187 F.2d 780 (10th 
Cir.), cert. denied 342 U.S. 816, 72 S. Ct. 37, 96 L. Ed. 617 
(1951).

An anomaly is denoted 
from a quotation from Miller v. Schwartz, supra, 354 N.W.2d at 
689:

"`The interest acquired 
by the lessee under an ordinary oil and gas lease is known as a working interest 
and is an interest in real property.' A `working interest' has also been defined 
as `(t)he operating interest under an oil and gas lease. The owner of the 
working interest has the exclusive right to exploit the minerals on the land.'" 
Quoting Corbett v. LaBere, 
N.D., 68 N.W.2d 211 
(1955).

Differing from 
that definition, this character or kind of working interest with severed control 
detaches the essence of the original working interest which was the exclusive 
right to exploit. See 3 Summers Oil and Gas, Ch. 19, § 556, Partial Assignments of 
Lessee's Interest - Percents - Fractional Interests, p. 686. In pure logic, a 
severed-control working interest has something antithetical in its nature since 
working interest originally denoted control. Consequently, there is something 
here akin to nonworking interest diagonally sliced fractional share of the 
working interest, or perhaps a cost participative production interest as 
definable in trial evidence and documentary development.

5 We only answer the 
question here presented and do not address what differences may exist if the 
owner of the operational interest had not retained exclusive control when the 
working interest was packaged for sale to investors. The fact of severed control 
may not separately be dispositive of the nature of the investment in definition 
of Wyoming 
security statutes. Statutory exceptions will also be significant in determining 
whether the interest was a covered security as compared with a simple lease 
interest assignment transaction as exceptions are generally provided in § 
17-4-114, W.S. 1977, and specifically the confined transactional exposure 
excepted out by subsection (b)(ix) of exposure to not more than 15 persons 
within 12 consecutive months.

6 A comprehensive analysis 
of state rules on public oil and gas programs, including Wyoming within the North 
American Security Administrators Association Rules, is provided in Fass and 
Wittner, Blue Sky Practice (1987). Conversely, if the legislature concludes that 
the broadly protective umbrella to be found in application of Gaudina, Petco and 
Joiner is undesired, future legislation can be directly applied to narrow the 
protection by limitation of security act coverage. We consider that decision 
clearly to belong to the legislature.

7 The categories of cases 
are as infinite as the ingenuity of man's search to acquire the money of another 
for investment or by promotion.

"What do the following 
have in common: scotch whiskey, self-improvement courses, cosmetics, earthworms, 
beavers, muskrats, rabbits, chinchillas, fishing boats, vacuum cleaners, 
cemetery lots, and fruit trees? The answer is that they have all been held to be 
securities within the meaning of federal or state securities statutes." Thomas 
Lee Hazen, The Law of Securities Regulation, § 1.5, p. 14 
(1985).

8 Considering procedurally 
that the case has achieved only a motion-to-dismiss status, it would be 
improvident for this court to dispositively assume specifics of final trial 
evidence.

Boettcher stated in its 
brief:

"[Appellants'] complaint 
clearly alleges that Boettcher solicited their investment in `working 
interests.' Plaintiffs, however, acquired these working interests by entering 
into participation agreements with a third party - Latham Exploration Co. 
(`Lexco'). * * * Under the rationale of Petco Oil, the participation agreements 
might render the working interests as part of an investment package. The working 
interests themselves, however, based upon the legislative intent as discerned by 
Judge Kerr, were not securities."

The State amplified our 
store of available information and nonrecord documentation by the attachment of 
the complaint from the United States District Court, wherein it was 
stated:

"8. Through its agent 
Phillip Black, Boettcher solicited the purchase of and offered to sell such 
working interests/securities to Shepperd and Edwards. Boettcher provided 
Shepperd and Edwards information and sales and advertising literature about the 
working interests/securities, arranged communications with Lexco personnel, 
praised the management and operations of Lexco, and recommended that plaintiffs 
purchase the interests.

"9. Shepperd and Edwards 
purchased the working interests/securities by entering into two participation 
agreements dated October 22, 1982, for certain oil, gas, and mineral leases with 
Lexco. They each purchased an undivided one and two-thirds per cent (1 2/3%) 
working interest, which obligated them to bear proportionate shares of costs and 
risks incurred in drilling operations. The cost of the working 
interests/securities eventually totalled $530,131.20 each. They did not receive 
with their working interests/securities the right to exercise practical and 
actual control over the managerial decisions associated with the drilling 
operations or any Lexco enterprise; the participation agreements provided Lexco 
complete control over all drilling operations."

THOMAS, Justice, 
concurring:

[¶26.]  I agree with the majority of the court 
that the question certified to us by the United States Court of Appeals for the 
Tenth Circuit should be answered "yes." I therefore concur in the result, but I 
cannot join in the portions of the opinion that speculate about other possible 
factual situations. In my view, in those instances in which we agree to 
entertain questions certified to us from the federal courts, it is better 
jurisprudence to limit the discussion strictly to the question addressed to this 
court. Dictum in such an instance is really dictum once removed and probably 
suffers from many of the same disadvantages as multiple 
hearsay.