XTO Energy Inc. v. Furth
1:15-cv-01180
D.N.M.Nov 27, 2017Background
- XTO acquired a federal oil and gas lease in 2006 and assumed obligation to pay a limited production payment interest (total cap $920,000) held in three testamentary trusts administered by three trustee defendants.
- Prior lessee Strata made payments on the interest before XTO’s acquisition; Strata paid $468,643.44 (supported by Strata business records and affidavit), which reduced the remaining payout obligation.
- XTO made ongoing production payments but failed to account for them properly in its systems, so it did not track the running total; by late 2014/early 2015 XTO discovered the payout cap had been reached.
- XTO paid $1,938,184.37 to the trusts; after crediting Strata’s payments, XTO contends it overpaid by $1,486,827.80 and seeks restitution for unjust enrichment.
- Defendants (trustees) concede overpayment but argue (1) Strata’s payments cannot be credited or are not proven, (2) XTO’s negligence bars equitable relief, and (3) restitution would cause severe hardship to the trusts/beneficiaries.
- District court found the material facts largely undisputed, concluded XTO has a viable unjust-enrichment claim, but denied both parties’ summary-judgment motions because equitable balancing (whether restitution should be ordered and in what amount) cannot be resolved on summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants were unjustly enriched | XTO: Defs received an undeserved benefit ($1,486,827.80) because Strata previously paid $468,643.44 and XTO overpaid the remainder | Defs: Dispute credit for Strata payments; otherwise deny unjustness or quantify differently | Court: Defendants were enriched; Strata payments are admissible business records and undisputed for these motions |
| Whether knowledge requirement for unjust enrichment is met | XTO: Knowledge of benefit (receipt of money) is sufficient | Defs: Must know they were being overpaid to be "knowingly benefited" | Court: Knowledge of receiving money suffices; no need to know it was wrongful |
| Whether XTO's negligence bars restitution | XTO: Mistake supports restitution; negligence does not automatically bar recovery | Defs: XTO's failure to track payments was negligence that precludes equitable relief | Court: Distinguishes cases denying equity where party breached a clear contractual duty; New Mexico precedent (Sunwest) permits restitution despite mistake/negligence; negligence alone does not bar recovery |
| Whether restitution is appropriate on summary judgment | XTO: Entitled to full restitution as undisputed overpayment | Defs: Equities (XTO's fault and hardship to trust beneficiaries) favor denying or reducing restitution | Court: Equity must be balanced; factual/evidentiary issues (impact on trusts, mitigation, precise accounting adjustments) preclude awarding full restitution on summary judgment — deny both motions |
Key Cases Cited
- City of Rio Rancho v. Amrep Southwest Inc., 260 P.3d 414 (N.M. 2011) (elements of unjust enrichment and need to balance equities)
- Sunwest Bank of Albuquerque v. Colucci, 872 P.2d 346 (N.M. 1994) (restitution allowed where overpayment by mistake despite payer’s negligence)
- United Properties Ltd. v. Walgreen Properties, 82 P.3d 535 (N.M. Ct. App. 2003) (equity denied where party seeks relief from clear contractual terms after negligent noncompliance)
- Builders Contract Interiors v. Hi-Lo Indus., 134 P.3d 796 (N.M. Ct. App. 2006) (negligence distinguished from mistake in denying equitable relief to undo contractual remedy)
- Albuquerque Nat'l Bank v. Albuquerque Ranch Estates, 654 P.2d 548 (N.M. 1982) (equity will not relieve mistakes attributable to lack of reasonable diligence in contractual defaults)
- Reynolds v. Slaughter, 541 F.2d 254 (10th Cir. 1976) (payments made under mistaken belief contract existed are recoverable under New Mexico law)
- Naugle v. O'Connell, 833 F.2d 1391 (10th Cir. 1987) (restitution for mistaken payment not barred by negligent failure to ascertain facts)
- Ontiveros Insulation Co. v. Sanchez, 3 P.3d 695 (N.M. Ct. App. 2000) (knowledge of benefit may be satisfied when defendant receives value even if wrongful nonpayment by third party caused enrichment)
- Rabbit Ear Cattle Co. v. Frieze, 453 P.2d 373 (N.M. 1969) (payments made due to a material mistake of fact are involuntary and recoverable)