This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The case concerns a dispute between two working-interest owners, Arena Resources, Inc. (Arena) and OBO, Inc. (OBO), in the Seven Rivers-Queen Unit oilfield in Lea County, New Mexico. Arena, the operator with a 71.1% interest, initiated a redevelopment project involving drilling and fracturing without obtaining the required consent from OBO (25.8% interest) and the Evelyn Clay O’Hara Trust (3.1% interest), as stipulated in their unit operating agreement. Arena sought reimbursement from OBO for redevelopment expenses, which OBO refused to pay, leading to litigation (paras 1-3).
Procedural History
- District Court of Lea County, March 12, 2008: The court found that Arena breached the unit agreements by proceeding without required consent and denied Arena’s breach of contract claim. However, it concluded that OBO was unjustly enriched by the redevelopment and ordered OBO to pay its share of the costs. The court also ordered an accounting to determine any overpayments by OBO (paras 8-10).
Parties' Submissions
- Appellant (OBO, Inc.): Argued that the district court erred in invoking unjust enrichment as a basis for recovery because the parties’ relationship was governed by an express contract. OBO contended that equity cannot override the contract absent grossly inequitable circumstances, which were not present. OBO also sought a credit for unauthorized charges to its account (paras 11, 16, 20).
- Appellee (Arena Resources, Inc.): Claimed that its general request for equitable relief in its second amended complaint justified the district court’s reliance on unjust enrichment. Arena argued that OBO benefitted from the redevelopment without bearing any costs, which would result in an unconscionable windfall if left unaddressed (paras 11, 19).
Legal Issues
- Was the district court permitted to invoke the equitable doctrine of unjust enrichment to grant relief to Arena despite the existence of an express contract?
- Should OBO be entitled to a credit for unauthorized charges made by Arena?
Disposition
- The Court of Appeals reversed the district court’s judgment granting relief to Arena under the unjust enrichment theory (para 21).
- The case was remanded for further proceedings to determine whether OBO is entitled to relief based on the accounting (para 21).
Reasons
Per Sutin J. (Fry CJ and Robles J. concurring):
- The court held that unjust enrichment cannot be invoked when the parties’ relationship is governed by an express contract unless there are exceptional circumstances such as fraud, mistake, or unconscionability. The district court failed to provide findings or evidence to justify overriding the contract (paras 16-18).
- The district court’s findings that Arena breached the contract in two ways and that OBO did not breach the contract precluded reliance on unjust enrichment. The court also noted that Arena did not properly plead or prove an equitable claim during trial (paras 18-19).
- The court rejected Arena’s argument that OBO’s refusal to consent and subsequent benefit from the redevelopment constituted unconscionable conduct, as no findings or evidence supported this claim (para 19).
- The court remanded the case to determine whether OBO is entitled to a credit for unauthorized charges based on the accounting (para 20).