UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

HOLYWELL CORPORATION &
SUBSIDIARIES,
Plaintiff-Appellant,
                                                                No. 99-1399
v.

UNITED STATES OF AMERICA,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Virginia, at Charlottesville.
James C. Turk, District Judge.
(CA-97-131-3-C)

Argued: April 3, 2000

Decided: August 31, 2000

Before WIDENER, Circuit Judge,
Claude M. HILTON, Chief United States District Judge
for the Eastern District of Virginia, sitting by designation,
and David A. FABER, United States District Judge for the
Southern District of West Virginia, sitting by designation.

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Affirmed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Robert Metcalfe Musselman, ROBERT M. MUSSEL-
MAN & ASSOCIATES, Charlottesville, Virginia, for Appellant.
Robert William Metzler, Tax Division, UNITED STATES DEPART-
MENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF:
Loretta C. Argrett, Assistant Attorney General, Robert P. Crouch, Jr.,
United States Attorney, Bruce R. Ellisen, Tax Division, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Holywell Corporation appeals the dismissal of its suit for a refund
of tax payments, arguing that the district court erred in determining
that its suit was barred by the doctrine of res judicata. For the reasons
adduced below, we affirm.

I.

Holywell Corporation (Holywell) filed for Chapter 11 bankruptcy
after a real estate venture in Miami, Florida, failed. The bankruptcy
estates of the related entities were consolidated in a reorganization
plan which created a liquidating trust. The liquidating trust was vested
with all the assets of the debtors for distribution to creditors.

Soon thereafter, the trustee initiated an adversary proceeding to
determine his obligation to file returns and pay tax on income gener-
ated by property in the liquidating trust. The United States Supreme
Court held that the trustee was required to pay the tax due on income
attributable to the debtors' property in the liquidating trust. See Holy-
well Corp. v. Smith, 503 U.S. 47, 52 (1992). The case was remanded
to the bankruptcy court, where, after extensive negotiations, the
United States accepted an offer of settlement by the trustee to settle
the income tax liabilities. The bankruptcy court approved this settle-
ment in 1993 over Holywell's objection. Holywell appealed to the

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United States District Court for the Southern District of Florida and
the United States Court of Appeals for the Eleventh Circuit, both of
which affirmed. See In re Holywell Corp., 177 B.R. 991 (S.D. Fla.
1995); Holywell Corp. v. Smith, 208 F.3d 1009 (11th Cir. 2000)
(unpublished, table).

In November of 1997, Holywell filed this suit in the United States
District Court for the Western District of Virginia, claiming that it is
entitled to a refund of over 10.6 million dollars. Holywell claims that
the trustee of the liquidating trust paid that amount in taxes which
should be credited to Holywell as beneficial owner of property trans-
ferred to the trust. The district court granted the United States' motion
to dismiss, holding that Holywell's claim was barred by res judicata.
The court reasoned that Holywell was seeking a refund for taxes paid
as a result of the settlement approved by the bankruptcy court, and
was therefore barred from bringing its claim in the district court.

II.

Holywell argues that the district court erred in determining that its
claim is barred by the doctrine of res judicata. A party invoking res
judicata must establish three elements: 1) a final judgment on the
merits in a prior suit, 2) an identity of the cause of action in both the
earlier and the later suit, and 3) an identity of parties or their privies
in the two suits. See Meekins v. United Tranportation Union, 946
F.2d 1054, 1057 (4th Cir. 1991).

Generally, court-approved settlements receive the same res judicata
effect as litigated judgments. See Hoxworth v. Blinder, 74 F.3d 205,
208 (10th Cir. 1996); accord In re Medomak Canning, 922 F.2d 895,
900 (1st Cir. 1990); cf. United States v. Wilson , 974 F.2d 514 (4th Cir.
1992) (holding that bankruptcy court order approving tax settlement
between bankruptcy trustee and the United States constituted determi-
nation of tax liabilities of debtor's estate even though debtor objected
to settlement). Holywell is claiming a refund of taxes paid by the
trustee of the liquidating trust. The amount of taxes owed was settled
by agreement between the trustee and the United States and was con-
firmed by the bankruptcy court. Because the settlement was approved
by court order in a case now final, the earlier settlement order repre-
sents a final judgment on the merits in a prior suit.

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The prior bankruptcy suit (insofar as it determined the payment of
the taxes at issue here) is identical to the instant refund suit. The
trustee and the United States determined between themselves the
proper amount of taxes to be paid. That very figure is the amount at
issue in the case at bar. Accordingly, there is an identity of the cause
of action.

There is also an identity of the parties in the earlier bankruptcy
action and the current case. The United States and Holywell were
both named as defendants in the trustee's adversary proceeding. Both
the United States and Holywell were given an opportunity to voice
their approval, or object to, the settlement, and both received full
hearing of their arguments regarding the propriety of the settlement.
Accordingly, there is an identity of the parties in the two suits, and
each element of res judicata is present.

III.

Holywell argues that, regardless of the above discussion, the bank-
ruptcy court's order cannot be accorded res judicata effect because the
bankruptcy court was not a court of competent jurisdiction to deter-
mine the tax liability of the liquidating trust. This argument amounts
to a collateral attack on the bankruptcy court's jurisdiction.

"For federal judgments, lack of subject matter jurisdiction gener-
ally has no bearing on the preclusive effect of a judgment." 18 James
Wm. Moore et al., Moore's Federal Practice§ 131.30(1)(d)(iii)
(1999 3d ed.). Further, "[f]ederal courts have the authority to deter-
mine whether they have jurisdiction, and `[t]heir determinations of
such questions, while open to direct review, may not be assailed col-
laterally.'" In re Bulldog Trucking, Inc., 147 F.3d 347, 352 (4th Cir.
1998) (quoting Chicot County Drainage Dist. v. Baxter State Bank,
308 U.S. 371, 376 (1940)).

This general rule of finality is open only to narrow exceptions, and
"[m]ere error in the exercise of jurisdiction will not render a prior
judgment invalid." Bulldog Trucking, 147 F.3d at 352. The exceptions
to the rule of finality are situations where 1) the exercise of jurisdic-
tion constitutes a manifest abuse of authority, 2) allowing the chal-
lenged judgment to stand would substantially encroach upon the

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authority of another tribunal or agency of government, or 3) the judg-
ment was rendered by a court lacking capability to make an ade-
quately informed determination as to its own jurisdiction. See In re
Bulldog Trucking, Inc., 147 F.3d 347 (4th Cir. 1998) (adopting
Restatement (Second) of Judgments § 12 (1982)).

Neither the second nor the third exceptions are at issue here, but
both parties have devoted significant argument to the first exception.
Both parties make detailed argument on the issue of whether the
bankruptcy court did or did not have jurisdiction to resolve the ques-
tion of the amount of the trustee's tax liability. And indeed the ques-
tion may be a close one. However, the very fact that both parties can
make reasonable arguments on the question suggests that the exercise
of jurisdiction by the bankruptcy court could not be"a manifest abuse
of authority." Accordingly, we find that the question of whether the
bankruptcy court properly exercised jurisdiction over the tax liability
question does not alter the res judicata effect of the bankruptcy
court's approval of the settlement between the trustee and the United
States.

IV.

For the foregoing reasons, the district court properly dismissed
Holywell's claim on res judicata grounds. We therefore affirm the
district court.

We note that appellant has moved to file a reply brief containing
material unauthorized by the rules. That motion is hereby denied as
moot. The unauthorized material pertains to an argument that has not
been and need not be addressed herein.

AFFIRMED

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