UNPUBLISHED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.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Robert Metcalfe Musselman, ROBERT M. MUSSELMAN & 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Unpublished opinions are not binding precedent in this circuit.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 generated 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 Holywell 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 settlement in 1993 over Holywell's objection. Holywell appealed to the

 2
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 transferred 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 determination 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 confirmed by the bankruptcy court. Because the settlement was approved

by court order in a case now final, the earlier settlement order represents a final judgment on the merits in a prior suit.

 3
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 bankruptcy court's order cannot be accorded res judicata effect because the

bankruptcy court was not a court of competent jurisdiction to determine 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 generally 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 determine whether they have jurisdiction, and `[t]heir determinations of

such questions, while open to direct review, may not be assailed collaterally.'" 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 jurisdiction constitutes a manifest abuse of authority, 2) allowing the challenged judgment to stand would substantially encroach upon the

 4
authority of another tribunal or agency of government, or 3) the judgment was rendered by a court lacking capability to make an adequately 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 question of the amount of the trustee's tax liability. And indeed the question 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

 5