United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER
case concerns a claim for unjust enrichment based on
overpayment of an oil and gas interest. Plaintiff XTO Energy
(Plaintiff or XTO) asks the Court to order restitution of the
overpayments it made to Defendants John L. Furth, Kenneth P.
Laban, and Henry A. Perles (collectively, Defendants or
Trustees) as co-trustees of three testamentary trusts that
held an interest in a federal oil and gas lease assigned to
Plaintiff. Both parties have moved for summary
judgment, and those motions have been fully
November 15, 2017, the Court held a hearing on the cross
motions for summary judgment. Plaintiff was represented by
attorneys John Anderson and Julia Broggi, and Defendants were
represented by attorney Eugene Gallegos. Based on the
briefing and on the oral arguments, the Court concludes that
the facts are largely undisputed and that Plaintiff's
claim is not barred as a matter of law. However, the Court
finds that Plaintiff has not shown that it is entitled to
equitable relief at the summary judgment stage. Accordingly,
the Court will deny both motions.
1964, D. Klee acquired a federal oil and gas lease for 920
acres of land in Eddy County, New Mexico. Klee assigned his
lease to Jack Russell ten years later, but in the assignment
Klee reserved for himself a production payment interest of
$1000 per acre for a total of $920, 000. This production
payment was to be paid out of 5% of the market value of all
the oil and gas produced. When Klee died, the production
interest became the property of his wife, Anne Baxter Klee.
Upon her death in 1985 the production interest passed through
her will to three testamentary trusts established for the
benefit of her three daughters: Katrina Hodiak, Melissa Galt,
and Maginal Galt. Defendants were appointed by the will as
co-trustees of each of these three trusts. But the trustees
did not possess a copy of the lease or the assignment from
Klee to Russell, and they were not aware of the details of
the production interest or its payout limit of $920, 000.
federal lease passed from Russell to various other lessees,
eventually being acquired by Strata Production Company.
Strata contacted Defendants in 2002, advised them of the
production interest, and began making payments to the trusts.
Plaintiff asserts that Strata paid the trusts a total of
$468, 643.44. Defendants do not deny that Strata made
payments on the interest, but they dispute the amount alleged
by Plaintiff and argue that the precise amount paid by Strata
has not been established by competent evidence.
October 2006, Plaintiff XTO acquired Strata's interest in
the federal lease and assumed responsibility for making the
production payments. Plaintiff is a large energy company that
was founded in Fort Worth in 1986, holds interests in
approximately 40, 000 producing oil and gas wells nationwide,
and merged with Exxon Mobil Corporation in 2010. Setting up
payments made on production interests so that they can be
tracked is common practice in the oil and gas industry.
Nevertheless, Plaintiff neglected to properly set up the
production payment interest in its accounting system.
Plaintiff made the production payments but did not subtract
the amounts paid from its total payout obligation. At least
some XTO employees were aware by the end of May, 2007, that
the payments might not have been set up to be tracked by
accounting. In 2010, an XTO employee specifically contacted
the accounting department in an attempt to get information on
whether the payments were being tracked. The employee noted
that the production interest would terminate when the total
amount had been paid, but he was unable to get any
information as to the status of the payment obligation.
not until December of 2014 or January of 2015 that Plaintiff
realized that payout had been reached and stopped making
payments to the trusts. By then, the trusts had been
overpaid. Plaintiff paid $1, 938, 184.37 to the three trusts,
which were entitled to receive only $920, 000.00. Plaintiff
maintains that this resulted in an overpayment of $1, 486,
827.80 when the $468, 643.44 previously paid to Defendants by
Strata is deducted from the $920, 000.00 owed on
Defendants' interest. Plaintiff brought a claim for
unjust enrichment and now asks for summary judgment ordering
restitution of its alleged $1, 486, 827.80
do not contest the amount paid by Plaintiff, nor do they
dispute the fact that they were overpaid. However, Defendants
do not agree on the amount of the overpayment because they
dispute Plaintiff's right to subtract payments made by
Strata from the amount owed to Defendants, and they contend
that the amount of Strata's payments has not been
established by competent evidence. Further, Defendants do not
agree that restitution is warranted at all. Defendants assert
that the equitable remedy of restitution is not available to
Plaintiff because the overpayment was due to Plaintiff's
own negligence. Defendants argue that this completely bars
Plaintiff's claim, and they ask the Court to enter
summary judgment in their favor.
Court has jurisdiction over this matter under 28 U.S.C.
§ 1332 due to the diverse citizenship of the parties and
the $1, 486, 827.80 in controversy. In a diversity action,
the Court will apply federal procedural law and the
substantive law of the forum state-here New Mexico, where the
oil and gas leases are located. Jones v. United Parcel
Service, Inc., 674 F.3d 1187, 1195 (10th Cir. 2012).
Summary judgment may be granted if the moving party shows
“there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter
of law.” Fed.R.Civ.P. 56(c). “When applying this
standard, [the Court] view[s] the evidence and draw[s]
reasonable inferences therefrom in the light most favorable
to the nonmoving party.” Scull v. New Mexico,
236 F.3d 588, 595 (10th Cir. 2000) (internal quotation marks
omitted). On cross-motions for summary judgment the Court is
entitled “to assume that no evidence needs to be
considered other than that filed by the parties, but summary
judgment is nevertheless inappropriate if disputes remain as
to material facts.” Atlantic Richfield Co. v. Farm
Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir.
2000). The Court will analyze each motion individually and on
its own merits. See Buell Cabinet Co. v. Sudduth,
608 F.2d 431, 433 (10th Cir. 1979) (explaining that
“[c]ross-motions for summary judgment are to be treated
separately; the denial of one does not require the grant of
prevail on its claim for unjust enrichment Plaintiff must
prove that Defendants were knowingly benefitted at
Plaintiff's expense and that it would be unjust for
Defendants to retain the benefit. City of Rio Rancho v.
Amrep Southwest Inc., 2011-NMSC-037, ¶ 54, 150 N.M.
428, 260 P.3d 414. “A person who receives any sort of
advantage, such as possession of or some other interest in
money, has been conferred a benefit.” Sunwest Bank
of Albuquerque v. Colucci, 1994-NMSC-027, ¶ 10, 117
N.M. 373, 872 P.2d 346. “A person who receives a
benefit has been enriched.” Id. The parties
agree that Plaintiff overpaid Defendants, but do not agree on
the amount of the overpayment.
asserts that when it acquired the lease, Strata had already
paid Defendants a total of $468, 643.44, leaving only $451,
356.56 owed by Plaintiff on Defendants' interest.
Plaintiff therefore claims that its payment of $1, 938,
184.37 to the three trusts resulted in an overpayment of $1,
486, 827.80. Defendants argue first that Plaintiff is not
entitled to benefit from payments made by Strata. However,
Defendants' interest was limited to payment of $920,
000.00, and if Strata paid a portion of this amount when it
was in possession of the lease, those payments would reduce
the remaining amount owed. Defendants present no legal
argument to the contrary.
next contend that Plaintiff has not presented competent
evidence of the amount paid by Strata. Plaintiff supports its
claim with an affidavit from Mitch Krakauskas, the Land
Manager for Strata since 2009. Mr. Krakauskas averred that,
although he did not work for Strata at the time Plaintiff
acquired the lease, he had reviewed Strata's business
records, was familiar with the payment history on
Defendants' interest, and knew that Strata had paid
Defendants a total of $468, 643.44. See Doc. No.
58-2, Ex. B, Affidavit of Mitch Krakauskas. Mr. Krakauskas
attached to his affidavit two documents provided to Plaintiff
by Strata, one of which lists the total amount of
Defendants' interest as $920, 000.00 but shows nothing
having been paid, and another that lists total amounts in
three columns labeled “gross revenue, ”
“taxes, ” and “net revenue.” The
total taxes and net revenue add up to the total gross
revenue, which is listed as $468, 643.44, equivalent to the
amount of payment stated by Mr. Krakauskas. Below that total
is the original payment amount of $920, 000.00 and a
remaining balance on payout of $451, 356.56, which seems to
reflect the original obligation minus the gross revenue.
have not formally moved to strike Mr. Krakauskas'
affidavit, but they argue in their response to
Plaintiff's motion for summary judgment that Mr.
Krakauskas' affidavit should be stricken for lack of
personal knowledge and because it is based on a summary
exhibit. However, Mr. Krakauskas' affidavit is based on
his personal review of Strata's business records in his
position as Land Manager, and as such the Court concludes
that it is based on personal knowledge. See Bryant v.
Farmers Ins. Exchange, 432 F.3d 1114, 1123-24 (10th Cir.
2005) (affidavit premised on review of records was based on
personal knowledge). Additionally, the documents attached are
not summary exhibits within the meaning of Federal Rule of
Evidence 1006 because they were previously created by Strata
unrelated to this litigation, not as a means to summarize
other evidence in this case. They are business records
regularly kept by Strata, and as such are admissible under
Federal Rule of Evidence 803(6). ...