Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-01249/USCOURTS-caed-2_04-cv-01249-5/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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1 Crest concedes in its moving papers that its claims for

express indemnity and breach of contract were rendered moot by

the court’s prior order granting defendant’s motion for summary

judgment regarding plaintiffs’ claims. (Def.’s Mem. in Supp. of

Mot. for Summ. J., filed June 15, 2007, at 2, 3.) Therefore,

these claims are DISMISSED. 

1

 

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

DONALD E. BENSON, MARYLAN

J. BENSON, and DONALD BENSON 

FAMILY LLC

NO. CIV. S-04-1249 FCD EFB

Plaintiffs,

v. MEMORANDUM AND ORDER

CREST ENERGY, INC., et al.,

Defendants.

----oo0oo----

This matter is before the court on counter-claimant Crest

Oil & Gas Management Corp.’s (“Crest”) motion for summary

judgment, or alternatively, summary adjudication, with respect to

its counter-claim for unjust enrichment against counterdefendants Donald E. Benson, Marylan J. Benson and the Donald

Benson Family LLC (the “Bensons”).1 Counter-defendants oppose

///

Case 2:04-cv-01249-FCD-EFB Document 151 Filed 08/20/07 Page 1 of 10
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2 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs. 

See E.D. Cal. L.R. 78-230(h).

3 Unless otherwise noted, the facts herein are

undisputed. (See Counter-defs.’ Opposing Stmt. to Separate Stmt.

of Undisp. Facts (“UF”), filed June 28, 2007).

Counter-defendants object to various pieces of evidence

that Crest presents in support of its motion, including the

subject Agreement relating to the Northwest Grimes (“NWG #2”)

Well. Counter-defendants objections are OVERRULED. The

documents at issue are properly authenticated by Edwin P. Horan,

III, the president of Crest Energy, Inc. and Crest Oil & Gas

Management at all relevant times. As president, Horan has

personal knowledge of the business dealings of his corporation

and can properly lay the foundations for the admission of these

documents.

2

the motion. For the reasons set forth below,2

 Crest’s motion for

summary judgment is GRANTED. 

BACKGROUND3

This case arises out of the Bensons’ investment in oil and

gas wells developed by Crest Energy, Inc. The Bensons originally

filed this action in February 2004 in the Superior Court of

California, County of Glenn, for (1) breach of contract; (2)

intentional misrepresentation; (3) negligent misrepresentation;

(4) accounting; and (5) unfair business practices. Defendants

removed the action to this court on the basis of diversity

jurisdiction. In April 2005, Crest filed counterclaims against

all plaintiffs for (1) unjust enrichment; (2) express indemnity;

and (3) breach of contract. On December 1, 2006, the court

granted Crest’s motion for summary judgment regarding the

Bensons’ claims against it; however, Crest did not seek

adjudication of its counter-claims against the Bensons through

its motion. On June 1, 2007, the court amended the pretrial

scheduling order filed on July 22, 2005 to allow Crest to file a

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dispositive motion regarding its remaining counter-claims. 

At issue in Crest’s remaining counter-claim for unjust

enrichment are royalty payments made to the Bensons from

production on the Northwest Grimes (“NWG #2”) Well. After

production on the NWG #2 Well began, Donald Benson represented to

Crest that the Bensons were participants in the NWG #2 Well. (UF

¶ 10.) Pursuant to the Private Placement Memorandum (“PPM”), the

Agreement, and industry standards, all Crest agreements require

proposed participants to return a corresponding Agreement, which

specifically must be accepted by Crest, along with that person’s

Advanced Sums. (UF ¶ 1; Decl. of Edwin P. Horan (“Horan Decl.”),

filed June 15, 2007, ¶ 6.) A participant’s payment and Agreement

must be delivered to Crest prior to the drilling of the well. 

(UF ¶ 2.) Moreover, the PPM requires the Agreement to be

accepted by Crest. (UF ¶ 3.) All Crest Agreements for

participating in a drilling specifically allow Crest to accept or

reject proposed participation by any individual or entity, for

any reason. (UF ¶ 4.) The Agreement for the NWG #2 Well had

never been signed by anyone at Crest, and had not been accepted

by Crest. (UF ¶ 5.)

The NWG #2 Well commenced drilling on December 15, 1999. 

(UF ¶ 6.) The Bensons’ purported Agreement for the NWG #2 Well

was dated January 1, 2000, and was not received by Crest until

May 2001. (UF ¶ 7.) The Bensons also produced a copy of a front

of a check, dated January 1, 2000, as purported proof of payment

made to Crest regarding the NWG #2 Well. (UF ¶ 8.) Relying on

Donald Benson’s representation that the Bensons were participants

to the NWG #2 Well, Crest paid the Bensons $301,258.74 in total

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4 Counter-defendants dispute this fact on the basis that

Crest does not have standing to object to any payments because

all documents were with Crest Energy, Inc., not Crest Oil & Gas

Management Corp. For the reasons set forth infra, Crest has

standing to object to these payments. 

4

as royalty payments on the NWG #2 Well. (UF ¶ 11.) The royalty

payments were deposited into the account of the Donald Benson

Family LLC by Marylan Benson. (UF ¶¶ 12-13.) All payments made

to the Bensons were in error.4 (UF ¶ 14.) Edwin P. Horan, III,

at all relevant times the president of Crest Energy, Inc. and

Crest Oil & Gas Management Corp., requested that the Bensons

return all funds that were sent in error for royalty payments of

the NWG #2 Well, but Donald Benson refused to do so. (UF ¶ 15.) 

STANDARD

The Federal Rules of Civil Procedure provide for summary

judgment where “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any

material fact.” Fed. R. Civ. P. 56(c); see California v.

Campbell, 138 F.3d 772, 780 (9th Cir. 1998). The evidence must

be viewed in the light most favorable to the nonmoving party. 

See Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en

banc).

The moving party bears the initial burden of demonstrating

the absence of a genuine issue of fact. See Celotex Corp. v.

Catrett, 477 U.S. 317, 325 (1986). If the moving party fails to

meet this burden, “the nonmoving party has no obligation to

produce anything, even if the nonmoving party would have the

ultimate burden of persuasion at trial.” Nissan Fire & Marine

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Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). 

However, if the nonmoving party has the burden of proof at trial,

the moving party only needs to show “that there is an absence of

evidence to support the nonmoving party's case.” Celotex Corp.,

477 U.S. at 325.

Once the moving party has met its burden of proof, the

nonmoving party must produce evidence on which a reasonable trier

of fact could find in its favor viewing the record as a whole in

light of the evidentiary burden the law places on that party. 

See Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th

Cir. 1995). The nonmoving party cannot simply rest on its

allegations without any significant probative evidence tending to

support the complaint. See Nissan Fire & Marine, 210 F.3d at

1107. Instead, through admissible evidence the nonmoving party

“must set forth specific facts showing that there is a genuine

issue for trial.” Fed. R. Civ. P. 56(e). 

ANALYSIS

This court has jurisdiction based upon the parties’

diversity of citizenship. Therefore, state law controls on all

substantive issues. Sherman v. Mutual Benefit Life Ins. Co., 633

F.2d 782, 784 (9th Cir. 1980). A district court sitting in

diversity must apply the choice of law rules of the forum state. 

Ledesma v. Jack Stewart Produce, Inc., 816 F.2d 482, 484 (9th

Cir. 1987). “California law requires an analysis of the

interests of states involved to determine the law that most

appropriately applies to each issue.” Consol. Data Terminals v.

Applied Digital Data Sys., Inc., 708 F.2d 385, 390 n.3 (9th Cir.

1983). Because the oil production giving rise to the royalty

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5 Moreover, the Benson’s original claims arising out of

defendant’s conduct in relation to similar Agreements were for

violations of California state law. 

6

placements at issue in this case took place in California, the

court concludes that California law should govern all claims.5 

Crest moves for summary judgment against the Bensons on the

basis that the Bensons were unjustly enriched by Crest Energy

Inc.’s payment of royalties on the NWG #2 Well, to which it

asserts that the Bensons were not participants. Unjust

enrichment is the general principle “that one person should not

be permitted unjustly to enrich himself at the expense of

another, but should be required to make restitution of or for

property or benefits received, retained, or appropriated, where

it is just and equitable . . . .” Cal. Emergency Physicians Med.

Group v. Pacificare of Cal., 111 Cal. App. 4th 1127, 1136 (Cal.

Ct. App. 2003) (quoting Dinosaur Dev., Inc. v. White, 216 Cal.

App. 3d 1310, 1315 (Cal. Ct. App. 1989)). Crest presents

evidence that the NWG #2 Well commenced drilling on December 15,

1999, prior to the date of the contract signed by the Donald

Benson Family LLC and over a year prior to the purported payment

for the NWG #2 Well in May 2001. Crest also presents evidence

that the Agreement for the NWG #2 Well was never signed by anyone

at Crest Energy, Inc. or Crest and had not been accepted by Crest

Energy, Inc. or Crest. Under the terms of the PPM, a

participant’s payment and Agreement must be delivered to Crest

prior to the drilling of the well. Moreover, Crest presents

evidence that neither it nor Crest Energy, Inc. ever accepted the

Bensons’ Agreement regarding the NWG #2 Well. The Bensons fail

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6 The Bensons object to the evidence on foundation and

authentication grounds. As set forth above, these objections are

OVERRULED.

7 It is difficult to fully ascertain what counterdefendants are asserting in their opposition, almost half of

which is comprised of string citations to cases setting forth the

standard for Rule 56 motions. Their arguments are disjointed,

unrelated to any of the issues raised before the court over the

past three years of litigation, and at times, barely

intelligible. Nonetheless, the court has attempted to discern

and adjudicate counter-defendants’ position, in the light most

favorable to them.

7

to present any evidence to the contrary.6

 As such, because the

Bensons failed to submit the Agreement and payment prior to the

drilling of the NWG #2 Well and because neither Crest Energy,

Inc. nor Crest ever accepted the Agreement, the Bensons were not

entitled to royalty payments on the NWG #2 Well.

Indeed, in their opposition, the Bensons do not argue that

they were entitled to the royalty payments from the NWG #2 Well.7

Rather, the Bensons argue that Crest Energy, Inc., the entity

named in the Agreement, did not assign its rights in the NWG #2

Well to Crest, and thus, Crest has no interest in the royalty

interests paid to the Bensons by Crest Energy, Inc. In support

of this contention, the Bensons assert that there is no evidence

presented in any of the moving papers submitted by Crest that

there are written recorded assignments for all oil interests in

California from Crest Energy, Inc. to Crest, nor is there any

evidence of an assignment of any claim from Crest Energy, Inc. to

Crest. (See Counter-defs.’ Stmt. of Genuine Issues of Material

Fact (“DF”), filed June 28, 2007, ¶¶ 4-5.)

 In its reply, Crest contends that it is a successor in

interest to Crest Energy, Inc., and therefore, is entitled to the

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obligations owed by the Bensons to Crest Energy, Inc. During the

three year course of this litigation, the Bensons did not serve

any written discovery, depose Horan, or meet and confer with

Crest’s counsel regarding the issue of Crest’s status as

successor in interest. (Supp. Decl. of Gregory J. Brod (“Supp.

Brod Decl.”), filed July 5, 2007, ¶ 4). Seeking clarification,

the court directed Crest to submit supplemental evidence

regarding the issue of whether it is the successor in interest to

Crest Energy, Inc. (See Minute Order, filed July 13, 2007.) 

In response, Crest submitted a supplemental brief

documenting its status as successor in interest to Crest Energy,

Inc. (Def.’s Supp. Br., filed July 23, 2007.) Specifically, the

brief contains documents showing that Crest is the successor in

interest of a merger between Crest Energy, Inc. and Quibono

Management Corp. which took place on November 1, 2001. (Def.’s

Supp. Br., at 2; see Ex. H, I to Def.’s Req. for Judicial Notice

(“Def.’s Notice”), filed July 23, 2007.) Under California law, a

successor in interest is considered a real party in interest. 

See Block v. Tobin, 45 Cal. App. 3d 214, 221 (Cal. Ct. App.

1975). Furthermore, Crest also submitted to the court a report

of transfer of the NWG #2 Well from Crest Energy, Inc. to Crest

on July 27, 2004. (Ex. J to Def.’s Notice.) As such, the

Bensons’ assertion that Crest has no claim to the royalty

interests Crest Energy, Inc. paid to them is without merit; the

undisputed evidence demonstrates that Crest Energy, Inc. merged

into Crest and that Crest Energy, Inc. assigned its rights in the

NWG #2 Well to Crest. 

/// 

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In their response to Crest’s supplemental brief, the Bensons

do not dispute the evidence supporting Crest Energy, Inc.’s

merger to Crest, or Crest Energy, Inc.’s assignment of the NWG #2

Well to Crest. Rather, the Bensons now claim that Crest Energy,

Inc. never existed as a California corporation. In support of

this assertion, the Bensons produced an internet search for Crest

Energy, Inc. which displayed no result. (Ex. 1 to Counter-defs.’

Resp. to Supp. Br., filed July 30, 2007.) However, the Bensons’

argument that Crest Energy, Inc. was never a California

corporation is irrelevant to Crest’s claim for unjust enrichment. 

The undisputed evidence in this case demonstrates: (1) an entity

known as Crest Energy, Inc. paid the Bensons a total of

$301,258.74; (2) the Bensons did not have a right to this

payment; and (3) the entity known as Crest Energy, Inc. merged

into the entity known as Crest Oil & Gas Management Corp., the

counter-claimant seeking repayment through this action. As such,

Crest’s motion for summary judgment on its cross-claim for unjust

enrichment is GRANTED. 

After filing their opposition to cross-claimant’s motion for

summary judgment, the Bensons submitted an application to enter

default and a motion for judgment against Crest Energy, Inc.

based upon its alleged failure to timely respond to their

complaint. Default may be entered by the clerk if the defendant

has “failed to plead or otherwise defend” within the permitted

time. Fed. R. Civ. P. 55(a). The Bensons’ second amended

complaint named Crest, Crest Energy, Inc., Crest Oil Natural Gas

Management Corp., and Nq Tx Quibono as defendants. In the

complaint, the Bensons allege that “[d]efendants Crest Energy,

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Inc. [and] Crest Oil & Gas Management Corp. . . . are

interrelated business entities that are successors in interest to

each other via merger and or acquisition.” (2d Am. Compl., filed

Oct. 24, 2004, ¶ 2). Crest answered the amended complaint,

asserting that it was erroneously sued as Crest Energy, Inc. as

well as other business entities. (Def.’s Ans. to Am. Compl.,

filed Apr. 7, 2005, at 1). As documented in Crest’s supplemental

brief and evidence, Crest Energy, Inc. merged into Crest. As

such, the court concludes that Crest was the proper party to

respond to the Bensons’ complaint and that Crest Energy, Inc. was

not required to file an answer. Therefore, the Bensons’

application for entry of default against Crest Energy, Inc. is

DENIED. 

CONCLUSION

For the foregoing reasons, Crest’s motion for summary

judgment is GRANTED, and the Bensons’ application to enter

default and judgment against Crest Energy, Inc. is DENIED. The

Clerk of the Court is directed to close this file. 

IT IS SO ORDERED.

DATED: August 20, 2007

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