RICHARD G. ANDREWS, District Judge.
Pending before this Court is appellant Calvin Williams' pro se appeal from a December 13, 2017 Order (B.D.I. 2956) ("Claim Objection Order")
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3. Will 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.
4. The Williams Heirs
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6. On 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;
7. 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 "Nile 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).
8. On 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).
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12. On 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 their thorough review of the relevant documents, calculations of Appellant's royalty interest, and full payment to Appellant for that interest. (SA601-614; see also SA781-86).
13. On August 10, 2017, the Bankruptcy Court held an evidentiary hearing to consider the Claim Objection. (SA798-854). The Bankruptcy Court indicated that the issue before it was not whether the parties had a valid lease, but instead "royalties and whether they've been paid and whether they've been received and whether they were appropriate." (See SA805 at 17:18-20). Appellant agreed that the issue before the Bankruptcy Court was the payment of royalties. (Id. at 17:22-25). At the hearing the Debtors introduced Exhibits A through N of their supplemental response and the Johnson Declaration, which were each admitted without objection. (SA802 at 14:4-22; SA615-777 at Exhs. A-N). Additionally, Ms. Johnson, a Division Order Analyst with 27 years of experience in the oil and gas industry, testified at the hearing in support of the Claim Objection. (SA809-10 at 21:2-22:16). Ms. Johnson testified that the Lease granted a 1/8 mineral royalty to Will Seamster, that a 1/8 mineral royalty was the standard interest granted to land owners through the 1990s, and that none of the terms of the Lease were out of the ordinary. (SA811-12 at 23:5-24:18). She further testified that no division orders had altered the rights of royalty holders under the Lease to receive payment for all oil, gas, or other hydrocarbons extracted under the Lease. (SA820 at 32:11-15; SA822 at 34:22-25; SA823 at 35:10-17). She also testified that she had confirmed Appellant's "Owner Decimal" (that is, the royalty percentage of gas, oil and other mineral proceeds that Appellant had a right to receive under the Lease) after accounting for the other persons that had inherited interests in the Lease. (SA816-17 at 28:20-29:4; SA825-26 at 37:16-38:25). Ms. Johnson further testified that none of the Pre-Lease Grants had any effect on that analysis. (SA815-16 at 27:23-28:19; SA817 at 29:17-24). Ms. Johnson further testified that she confirmed that the Debtors had paid Appellant completely for his interests, and that such payments had been made by direct deposit to Appellant's bank account at his request. (SA827 at 39:1-10; SA849-50 at 61:19-62:7; see also SA782 at 5, ¶ 11). She further testified that the Debtors regularly reported their oil and gas extractions to Appellant in his check detail and to the Louisiana Department of Natural Resources and that those records were publicly available. (SA827-28 at 39:11-40:8; SA830-31 at 42:3-43:5).
14. The record reflects that Appellant did not put on any evidence regarding the payment of royalties or the calculation of his Owner Decimal. (See, generally, SA831-49 at 43:11-61:18). The calculation of his royalty interest was not disputed in the record, but rather was explained at length by the Debtors' witness. (SA834-40 at 46:20-52:2 (explaining that additional fractional interests in the calculation of owner decimals and working interest decimals reduce the calculated decimal rather than increasing it)). Appellant did not introduce any evidence regarding mineral extractions associated with the Seamster Tract or the Debtors' payments of his royalty interest. (See generally, SA831-49 at 43:11-61:18).
15. On December 13, 2017, the Bankruptcy Court entered the Claim Objection Order denying Appellant's claim. (SA855-64). The Bankruptcy Court held that its Sale Order definitively answered Appellant's claims regarding the effect of the Pre-Lease Grants, the alleged termination of the Lease, and the alleged alteration of royalty rights under the Lease. (SA862). The Court further noted that the Sale Order, which has not been disturbed on appeal, was binding and dispositive of the issues Appellant raised regarding the validity of the Lease. (Id.) With respect to Appellant's claim of underpayment, the Bankruptcy Court concluded that the Debtors had properly calculated Appellant's Owner Decimal and had paid Appellant in full for the amounts that he was owed for "hydrocarbon extractions (gas, oil and otherwise)." (SA862-64). The Bankruptcy Court noted that Appellant had not presented any rebuttal evidence regarding the "amount of gas, oil or otherwise, extracted from the subject Wells" and did not rebut Debtors' evidence regarding his Owner Decimal or how that Owner Decimal was calculated. (Id) Accordingly, the Bankruptcy Court disallowed Appellant's Claim in its entirety. (Id.)
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19. The Third Circuit has identified four general requirements for the application of collateral estoppel: "(1) the identical issue was previously adjudicated; (2) the issue was actually litigated; (3) the previous determination was necessary to the decision; and (4) the party being precluded from relitigating the issue was fully represented in the prior action." Henglein v. Colt Indus. Op. Co., 260 F.3d 201, 209 (3d Cir. 2001) (quoting Raytech Corp. v. White, 54 F.3d 187, 190 (3d Cir. 1995)). Here, the arguments raised in opposition to the Claims Objection concerning validity of the Lease (see B.D.I. 321, 599) — that encumbrances on the mineral servitudes of the Seamster Tract were acquired by fraud, that those encumbrances expired, and that the Lease had not been held by production of minerals within the required time — are identical to the arguments raised in his opposition to the Sale Motion (see SA5-23; SA24-47; SA454-74). The record reflects these issues were actually litigated in connection with the Sale Motion and were the focus of the evidence and arguments Appellant submitted in connection therewith. It is clear that the Sale Order resolved those issues. (B.D.I. 1024, 1030). The validity of the Lease was necessarily central to the Bankruptcy Court's determination that the Debtors could alienate and sell their interests in the Lease. Appellant's interests were fully represented as a party to the proceeding, and he was given a full and fair opportunity to litigate the validity of the Lease. That Appellant represented his own interests pro se does not change the analysis. See, e.g., Eaton v. Jeff White's Auto Inc., 2014 WL 5780708, at *4 (D. Del. Nov. 5, 2014) (holding pro se plaintiff's claims were previously litigated and resolved by state court and were thus barred by collateral estoppel). Addressing these same arguments in connection with the Claim Objection, the Bankruptcy Court correctly recognized that the validity of the Lease has been decided after substantial litigation by a previous order of the Bankruptcy Court, and Appellant cannot re-litigate these arguments in this matter.
20. Debtors argue that, even if these issues had not been adjudicated already in connection with the Sale Motion and Sale Order, Appellant's challenge to the Lease's validity is barred under Louisiana law for two reasons: 1) the prescriptive period to challenge the Lease has long since passed, and 2) Appellant voluntarily accepted benefits under the Lease, and therefore cannot challenge its validity. (See D.I. 20 at 20-23). The Court must agree.
21. Under Louisiana law, a party cannot challenge the validity of an agreement after accepting benefits under that agreement. See, e.g., Mony Fin. Servs. v. Savoie, 1990 WL 178711, at *2 (E.D. La. Nov. 8, 1990). Here, Debtors submitted uncontroverted evidence that Appellant has accepted benefits under the Lease and therefore cannot be heard to challenge it. (See SA827 at 39:1-10; SA849-50 at 61:19-62:7; see also SA782 at 5, ¶ 11). Indeed, the Bankruptcy Court included this as an alternative basis for overruling Appellant's objection to the Sale Motion. "In the alternative, the Court could find . . . the fact that the beneficiaries of the Seamster lease received and continue to receive royalty payments prior to 1959 and have continued to receive them to this day, that under Louisiana law, that constitutes sufficient evidence that there's a valid lease. (SA544 at 65:13-65:19). "That is not my primary ruling. My primary ruling is factual in nature. My secondary ruling, only to the extent my primary ruling is wrong, would reach the same result. Those checks have been received, they've been cashed; as a legal matter that's sufficient to establish the lease." (Id. at 65:20-65:25).
22. The Bankruptcy Court also included the expiration of applicable statutes of limitations as an alternative basis for overruling Appellant's objection to the Sale Motion. (See SA545 at 66:1-20). In connection with this appeal, Debtors raise the same argument. Under Louisiana law, the prescription period for an action to annul a contract, including for fraud, is five years. (See D.I. 20 at 20 (citing LA. CODE Civ. ART. 2032); Whitten v. Moorman, 973 So.2d 159, 164 (La. Ct. App. 2007) (applying 5-year prescription period for allegations of fraud in the inducement)). As the Bankruptcy Court correctly noted, the prescription period for claims contesting royalty miscalculation is three years. (See B.D.I. 2956 at 2 n.4). Here, the Lease was executed and recorded more than 50 years ago, and the Lease was inherited by Will Seamster's children in 1970, more than 30 years before Appellant inherited his partial interest in the Lease. The legal right to challenge the Lease for non-production or fraud was therefore prescribed long before Appellant had any interest in the Lease. The record reflects that Appellant failed to meet his burden of showing the action was not prescribed under Louisiana law. See Carter v. Haygood, 892 So.2d 1261, 1267 (La. 2005) ("[I]f prescription is evident on the fact of the pleadings, the burden shifts to the plaintiff to show the action is not prescribed.")
23. Appellant's remaining arguments are also unavailing. Although Appellant did not provide any documentation in support of his Claim (see SA1-4), Appellant again argues that he has been underpaid for his interest in the Lease. (See D.I. 12 at 4). The record reflects that Debtors introduced voluminous evidence concerning the calculation of Appellants' royalty interest and the payments that have been made to him.
24. Appellant also argues that Will Seamster somehow lacked mental capacity to enter into the Lease and cites Succession of Molaison, 34 So.2d 897 (La. 1948), in support of his proposition that courts can undo a contract entered into between parties where one party is of "limited mental capacity and one [is] experienced in business affairs." (See D.I. 5 at 2; D.I. 12 at 1, 6-7). In response, Debtors cite cases demonstrating that the Molaison decision has been widely criticized and distinguished and further argue that the case is factually distinguishable. (See D.I. 20 at 27-28). Debtors also point out that Appellant has provided no authority to support the proposition that the holding in Molaison would overcome Louisiana's prescriptive statutory period. (See id.). Debtors argue that even if the Court applied Molaison's holding, Appellant still would not prevail because he has not shown that Will Seamster fits the narrow category of people that the Louisiana court sought to protect in that case — i.e., a person of limited mental capacity. (See id. at 28). The Court agrees with Debtors. Appellant argues that Will Seamster had no formal education, a submission allegedly supported by U.S. census data (id.; D.I. 13 at 2), but offers nothing in support of his assertion that Will Seamster lacked mental capacity. Even construed liberally, Appellant does not allege that his great-grandfather was mentally disabled, nor did he introduce any evidence that could support such a finding.
25. Appellant's overall argument is that his Claim should be allowed because the Lease was obtained by fraud or that it otherwise is unconscionable, but Appellant adduced no evidence to support these assertions. (See D.I. 10-11). Debtors, on the other hand, put on testimony to establish that the royalty rate set under the Lease was standard for such leases and that its terms were otherwise ordinary. (See SA811-12 at 23:5-24:18). None of the documents that Appellant cites and relies upon altered the mineral royalty granted under the Lease or the calculation of Appellant's inherited percentage of that mineral royalty.
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