Arena Resources, Inc. v. Obo, Inc.

238 P.3d 357
CourtNew Mexico Court of Appeals
DecidedMarch 30, 2010
Docket29,241
StatusPublished
Cited by16 cases

This text of 238 P.3d 357 (Arena Resources, Inc. v. Obo, Inc.) is published on Counsel Stack Legal Research, covering New Mexico Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arena Resources, Inc. v. Obo, Inc., 238 P.3d 357 (N.M. Ct. App. 2010).

Opinion

238 P.3d 357 (2010)
2010-NMCA-061

ARENA RESOURCES, INC., Plaintiff-Appellee,
v.
OBO, INC., Defendant-Appellant.

No. 29,241.

Court of Appeals of New Mexico.

March 30, 2010.

Cotton, Bledsoe, Tighe & Dawson, P.C., Matt Catalano, Susan Richardson, Midland, TX, for Appellee.

Davis, Gerald & Cremer, P.C., Robert P. Crumpler, Jr., Midland, TX, Reagan & Sanchez, P.A., Mark Terrence Sanchez, Hobbs, NM, for Appellant.

OPINION

SUTIN, Judge.

{1} This case involves a dispute between two of three working-interest owners in an oilfield called the Seven Rivers-Queen Unit (the unit) located in Lea County, New Mexico. The parties' relationships were governed by a unit agreement and a unit operating agreement. The operating-interest owner, Arena Resources, Inc. (Arena), redeveloped the unit and sought reimbursement from the other interest owners for the redevelopment expenses. Because Arena did not obtain approval from either of the two other interest owners as required under the parties' unit operating agreement, one of the other interest owners, OBO, Inc. (OBO), refused to pay *358 for expenses associated with the unauthorized project. Arena sued OBO. The district court concluded that although Arena breached one or both of the agreements and that OBO did not, the project ultimately benefitted the unit and based on unjust enrichment, OBO was obligated for its share of the costs. OBO appeals. We hold that the court erred, and we reverse.

BACKGROUND

{2} Arena, OBO, and the Evelyn Clay O'Hara Trust (the Trust) are the working-interest owners in the unit. Arena is the operator and owns about 71.1% participation or working interest in the unit. OBO owns about 25.8% and the Trust owns about 3.1% participation or working interest. The relationships of the working-interest owners are governed by a unit agreement and a unit operating agreement, both of which were effective as of January 1, 1973. In 2006 Arena sought the consent of the other working-interest owners to redevelop the unit by drilling new wells and by fracture stimulating some of the existing wells. The unit operating agreement required that any expenditures in excess of $15,000 be approved by the affirmative vote of at least two working-interest owners owning at least 70% of the voting interest. Arena proposed to redevelop the unit, and although OBO received various requests from Arena for consent to proceed with the redevelopment, OBO did not respond, did not sign any authorizations for expenditures in relation to the redevelopment, and did not agree to any expenditures in excess of $15,000.

{3} Arena initiated the redevelopment of the unit without having received consent from the other working-interest owners. Arena charged OBO's account for its proportionate share of the redevelopment expenses, just as it had done in its course of dealing with OBO before this redevelopment with respect to unit expenses. However, expenses exceeded revenues in OBO's account, and Arena demanded that OBO reimburse Arena for the claimed expenses owed which, at some point, amounted to approximately $1.8 million. OBO refused to pay, and this caused Arena to file a complaint and a second amended complaint against OBO claiming breach of the parties' agreements and seeking recovery of expenses and foreclosure on its contractual operator's lien against OBO's unit interest. The operative complaint averred that "[t]he lien may be enforced as a contractual lien, mortgage lien, constitutional lien, equitable lien, or any other lien afforded by the law and of the [S]tate of New Mexico." It also contained a general request for "all other proper relief available at law [or] in equity that the [c]ourt may be deemed just and proper in the matter." The complaint nowhere specifically indicated that Arena asserted a claim or sought recovery under or pursuant to any particular equitable doctrine or remedy.

{4} A little more than a month before trial, Arena moved for leave to file a third amended complaint based on new counsel's discovery that Arena had not raised a number of issues in its pleadings. Arena sought to add theories of ratification, affirmation, estoppel, cotenancy, and waiver. These theories were aimed at overcoming various positions OBO asserted in a motion for summary judgment. The court denied Arena's motion for leave to file a third amended complaint. One week after moving to amend, Arena filed its first supplemental responses and designation of witnesses. Arena sought in part to inject into the record theories it unsuccessfully sought to present through its proposed third amended complaint. When OBO objected to Arena's strategy, the court entered an order stating that Arena was precluded at trial from mentioning, referring to, arguing, and/or offering evidence on any matter, claim, count, and/or cause of action not included in Arena's second amended complaint. The court also disallowed Arena's witnesses designated as expert/fact witnesses. In the present appeal, Arena did not file a cross-appeal and does not otherwise claim on appeal that the court erred in the foregoing rulings.

{5} Other than the references in its second amended complaint to "equitable lien" and "equity" as quoted earlier in this opinion, nothing filed by Arena specifically mentioned that it was asserting or seeking an equitable claim or lien or remedy based on theories of unconscionable OBO conduct, unjust enrichment, *359 or unconscionable windfall or result. Furthermore, Arena does not indicate in its answer brief on appeal that it verbally asserted any such claim, right of recovery, remedy, or theory prior to or during trial. Arena's requested findings of fact and conclusions of law filed five days before trial made no mention whatsoever of equity, equitable lien or remedy, unconscionable OBO conduct, unjust enrichment, or unconscionable windfall or result.

{6} The trial appears to have left the district court in somewhat of a quandary as to how to evaluate the merits of Arena's claims, given the apparent circumstance that Arena unilaterally proceeded with its redevelopment project without the consent required in the unit operating agreement, yet also given the apparent circumstance that the project produced oil and gas, enhanced the unit, and netted favorable present and future revenue consequences. After having heard testimony and having received exhibits on the merits of the claims asserted in Arena's second amended complaint, the court asked counsel for "a bit of guidance as to the appropriate remedy in this matter."

{7} In responding to the court's request for guidance, Arena mentioned nothing expressly relating to any equitable claim, equitable lien or remedy, or any unconscionable conduct or unjust enrichment. The closest Arena came to possibly invoking equity was when it told the court that, if none of Arena's theories persuaded the court, it should at least "be allowed to recoup [its] expenses by netting until payout." Because of the uncertainty as to what was owed by or to it, OBO asked the court to order an accounting, including, in particular, Arena's attribution of revenue to expenses on the parties' joint account. OBO sought this relief under Rule 1-054(C) NMRA, pursuant to which OBO asserted that the court could "fashion a final judgment ... that affords the complete relief [in] the case." The court stated that it did not think there was any question that Arena did not have proper authorization to proceed but also stated that that did not mean OBO got free oil wells. The court indicated that it would order an accounting and would then "fashion a remedy once that's done whereby OBO pays its part of this ...

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Pizza, LLC v. Software, Inc.
D. New Mexico, 2025
Battishill v. Ingram
New Mexico Court of Appeals, 2023
In re Gen. Motors LLC
339 F. Supp. 3d 262 (S.D. Illinois, 2018)
Martin v. Comcast Cablevision Corp.
2014 NMCA 114 (New Mexico Court of Appeals, 2014)
In re Automotive Parts Antitrust Litigation
50 F. Supp. 3d 836 (E.D. Michigan, 2014)
Martin v. Comcast Cablevision Corp. of Cal.
New Mexico Court of Appeals, 2014
McKenzie v. Wells Fargo Bank, N.A.
931 F. Supp. 2d 1028 (N.D. California, 2013)
Chica Energy v. COG Operating
New Mexico Court of Appeals, 2013
Eker Bros. Inc. v. Rehders
2011 NMCA 092 (New Mexico Court of Appeals, 2011)
Nunn v. Nunn
New Mexico Court of Appeals, 2011

Cite This Page — Counsel Stack

Bluebook (online)
238 P.3d 357, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arena-resources-inc-v-obo-inc-nmctapp-2010.