United States District Court, D. Delaware
IN RE SAMSON RESOURCES CORPORATION, et al, Reorganized Debtors.
SAMSON RESOURCES CORPORATION, et al, Appellees. CALVIN WILLIAMS, Appellant,
before this Court is appellant Calvin Williams' pro
se appeal from a December 13, 2017 Order (B.D.I. 2956)
("Claim Objection Order") entered by the United States
Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court"), which sustained the
above-captioned debtors' objection to Appellant's
proof of claim. For the reasons set forth below, the
Settlement Trust's motion for leave to intervene (D.I.
14) ("Motion to Intervene") is
granted and the Claim Objection Order is affirmed.
Background. Samson Resources Corporation and certain
affiliates ("Debtors") operate in the oil and gas
industry. In September of 2015, Debtors filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code.
In early 2017, the Bankruptcy Court confirmed the Plan, and
the Debtors emerged from bankruptcy as reorganized entities.
The Lease. The following facts appear uncontested.
Appellant's royalties arise from a lease, executed in
1949 by Will Seamster (as amended, "Lease"), which
granted Leroy Connell exclusive mineral rights to the land
described as the "Northeast Quarter of Northwest Quarter
(NE 1/4 of N.W. 1/4), Section 35, Township 18 North, Range 9
West" in Webster Parish, Louisiana (the "Seamster
Tract"). The Lease provides that Will Seamster
"grants, leases and lets exclusively unto lessee for the
purpose of investigating, exploring, prospecting, drilling
and mining for and producing oil, gas and all other
minerals." In return for the mineral rights, the Lease
provides that Will Seamster will be paid a one-eighth (1/8)
royalty of all oil and gas produced from the wells, in
addition to an initial payment of $1, 000. The Lease was
amended on May 21, 1951 to provide that drilling on any land
unit with which the Seamster Tract was pooled would be
sufficient to satisfy the ten-year prescriptive period for
developing the mineral rights for the entire Seamster Tract,
and not just the portion that was pooled. The pooling
arrangement was subsequently amended, as reflected in the
Amended Division Order, dated April 18, 1977.
Seamster owned a portion (159/160, or approximately 99.4%) of
the 40-acre tract covered by the Lease, and that tract is
only one-sixteenth (1/16) part of the 640 acres covered by
the Stewart 35 Unit with which his land is pooled. Because of
this, his 1/8 royalty interest must be reduced by multiplying
it by 159/160 and then by 1/16. This results in a .0077637
fractional royalty interest held by Will Seamster. Will
Seamster had five children, including Beatrice Seamster
Williams. Beatrice Williams, inherited one-fifth (1/5) of
Will Seamster's royalty interest or .00155274 royalty
interest in the Seamster Tract. Beatrice Williams had six
children, including Willie Willams, each of whom inherited
one-sixth (1/6) of Beatrice's royalty interest or
.00025879 royalty interest in the Seamster Tract. Willie
Williams had ten children, including Appellant. Two of Willie
Williams' children predeceased Willie with no
descendants, and therefore, in accordance with applicable
law, Willie Williams' interest was divided into eighths
and not tenths. Appellant has a one-eighth (1/8) interest of
Willie Williams' royalty interest, or .00003235 royalty
interest in the Seamster Tract.
Williams Heirs own royalty interests in connection with
nine wells (the "Wells") located in Webster Parish
in which the Debtors owned interests, including, in some
instances, the operating interests. All of the Wells are
primarily gas-producing wells. However, the operating Wells
also produce oil which is called "condensate" and
is collected by Samson. Samson acquired the Lease in 2003.
(SA849 at 61:19-21; SA813 at 25:16-20).
The Sale Order. As part of their reorganization,
Debtors pursued various asset sales, and, on January 29,
2016, filed a motion seeking authority to sell certain assets
(B.D.I. 621) ("Sale Motion"), including the
Debtors' working interests in certain oil and gas leases.
Appellant filed various pleadings objecting to the Sale
Motion. (See SA5-23 (B.D.I. 665) (objection to Sale
Motion through attached letter asserting Lease was obtained
by fraud, was illegally amended in 1951 and again in 1972 and
was obtained from a party under disability); SA24-47 (B.D.I.
770) (asserting that Lease was not held by timely production
of minerals); SA454-74 (B.D.I. 832) (asserting same)).
Appellant argued that because the Lease was invalid, the
Debtors could not sell their interest in the Lease.
June 7, 2016, the Bankruptcy Court held an evidentiary
hearing on the Sale Motion and heard evidence and argument
from the Williams Heirs in support of their claims.
(SA480-550). Appellant made various arguments, focusing on
his belief that royalty payments were not properly made
(see Id. at 44:24-45:3) and that the Lease was
invalid because it had expired by its own terms (41:18-44:19;
50:19-51:12). Debtors presented evidence and testimony
setting forth, inter alia, the difference between
the Debtors' working interest in the assets and
Appellant's royalty interest in the assets; the continued
validity of the Lease and the Debtors' ownership of a
working interest thereunder; evidence showing that drilling
sufficient to hold the Lease by production had occurred
within ten years after entry into the Lease (see
SA93-97 (showing "spud" dates of 1951, 1953,
1955)); and the fact that the proposed sale did not include
Appellant's royalty interest. (See Id.
15:22-41:3). The Debtors further argued that, even if that
were not the case, Appellant's challenge to the Lease
could not be sustained because the relevant prescriptive
period under Louisiana law had long since passed,
and Appellant and his predecessor in interest had accepted
payments arising from the Lease. (Id. at SA58-60).
Following argument, the Bankruptcy Court ruled from the
bench. (SA539-46 at 60:4-67:4). As the Bankruptcy Court
explained, "[W]hat's in front of me today is whether
or not the Debtors can sell their alleged working interest in
the Seamster tract to a third party. What's not in front
of me today is anything to do with the royalty payments . . .
The royalty issue and who owns the working interests are two
separate things." (Id. at 60:7-60:20). The
Bankruptcy Court determined, based on the facts and evidence
presented, that "there is a valid lease," that
"[t]he lease was entered in 1949, production began prior
to 1959 and continues to today," and that "the
Debtor has the ability to sell that working interest."
(Id. at 65:9-65:12). The next day, the Bankruptcy
Court entered the Order overruling Appellant's objection
and approving Debtors' Sale Motion with respect to the
assets. (B.D.I. 1024) ("Sale Order").
July 11, 2016, Appellant filed a Motion to Present New
Evidence (B.D.I. 1154) ("First Reconsideration
Motion"). The Bankruptcy Court treated this as a motion
for reconsideration under Federal Rule of Civil Procedure 59,
held a hearing on September 7, 2016, and denied the First
Reconsideration Motion the same day. (B.D.I. 1325). On
September 15, 2016, Appellant filed a Motion to Alter or
Amend the Judgment Pursuant to Fed.R.Civ.P. 59(e) to Prevent
Manifest Injustice (B.D.I. 1355), and subsequently filed
a revised version on October 5, 2016 (B.D.I. 1446)
("Second Reconsideration Motion")- The Bankruptcy
Court held another hearing to consider the Second
Reconsideration Motion on November 16, 2016, and again denied
Appellant's request for relief by order entered the same
day. (Civ. No. 16-1124-RGA at D.I. 22, 11/16/16 Hr'g Tr.
at 56:19-58:20; B.D.I. 1663).
Appeal of Sale Order. On December 5, 2016, Appellant
filed his Notice of Appeal of the Sale Order. (B.D.I. 1719).
On August 30, 2017, this Court dismissed Appellant's
appeal of the Sale Order as untimely. (See Williams v.
Samson Resources Corp., Civ. No. 16-1124-RGA (D. Del.
Aug. 30, 2017) at D.I. 60, 61). Appellant appealed that
decision to the Court of Appeals. (Id. at D.I. 69).
On April 12, 2018, the Third Circuit affirmed the dismissal.
(Id. at D.I. 83-1). On May 15, 2018, Appellant's
petition for rehearing en banc was denied by the Third
Circuit. Appellant filed a Petition for Writ of Certiorari
with the United States Supreme Court on June 8, 2018, which
remains pending at No. 18-5661.
The Claim. Appellant filed a proof of claim (Claim
No. 732) ("Claim") against Samson in the Chapter 11
cases. Appellant's Claim asserted that Samson owed him an
undetermined amount for fraud, theft, and misappropriation of
funds. (See SA1-4)). The Claim did not include any
supporting documentation. (See id.)
Claim Objection Order. Following the Bankruptcy
Court's entry of the Sale Order, on May 5, 2017, Debtors
filed the Claim Objection. (SA551-67). The Claim Objection
asserted that the Debtors' books and records reflected no
liability to Appellant and that Appellant failed to provide
the requisite documentation to support his claim. (SA565-67).
Appellant filed a response on May 12, 2017 (SA568-73) and an
additional response on July 24, 2017 (SA592-95). Appellant
again asserted that certain grants of interest in mineral
servitudes on the Seamster Tract that were created prior to
the Lease (the "Pre-Lease Grants") expired by
operation of law. (SA570-72; SA592). Appellant further
asserted that the Pre-Lease Grants had not been extended
under Louisiana law. (Id.) In addition, Appellant
asserted that the Lease "that assigns to me a 1/8 share
of all oil and gas and it also expired under its own terms
absent sufficient drilling and operations" was amended
in 1951 to exclude interests in oil. (SA571). Appellant
claimed that the Debtors had not produced a payment history
for the initial lessee, and also claimed that the first well
was not drilled on the property until 1971. (SA572).
Appellant further asserted that the Pre-Lease Grants somehow
relate to the Debtors' interest in the Seamster Tract and
resulted in an unjust enrichment. (SA592).
August 7, 2017, the Debtors filed a reply and declaration in
support of the Claim Objection. (See SA596-777;
SA778-97 ("Johnson Declaration")). Debtors argued
that Appellant's challenge to the validity of the Lease
was res judicata as it already had been fully
presented and ruled upon the by Bankruptcy Court. (SA599).
Even if the Bankruptcy Court's previous opinion did not
have preclusive effect, Debtors submitted several independent
bases to conclude that the prescriptive period barred any
challenge to the Lease. (SA609). Debtors submitted evidence
demonstrating Appellant had accepted benefits under that
contract and therefore could not challenge the Lease.
(SA609-10). Debtors also submitted evidence supporting ...