Title: Nizan v. Wells Fargo Bank
Citation: N/A
Docket Number: 061577
State: Virginia
Issuer: Virginia Supreme Court
Date: September 14, 2007

PRESENT:  Hassell, C.J., Keenan, Koontz, Kinser, Lemons, and 
Agee, JJ., and Lacy, S.J.1 
 
 
RAN NIZAN 
 
 
   
 
 
 
 
 
 
OPINION BY 
v. Record No. 061577 
  
 
 
JUSTICE G. STEVEN AGEE 
 
 
 
 
 
 
 
 
  September 14, 2007 
WELLS FARGO BANK MINNESOTA 
NATIONAL ASSOCIATION, F/K/A  
NORWEST BANK MINNESOTA NATIONAL 
ASSOCIATION, TRUSTEE, ETC. 
 
FROM THE CIRCUIT COURT OF THE CITY OF PETERSBURG 
James F. D’Alton, Jr., Judge 
 
 
In this appeal we consider the judgment of the Circuit 
Court of the City of Petersburg entered against Ran Nizan and in 
favor of Wells Fargo Bank Minnesota National Association (“Wells 
Fargo”).  Nizan appeals the circuit court’s judgment that the 
funds Wells Fargo received through a settlement agreement with 
another entity cannot affect the amount of damages for which 
Nizan is liable to Wells Fargo as the result of a defaulted 
loan.  For the reasons set forth below, we will reverse the 
judgment of the circuit court. 
I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW 
Nizan and Avram Cimerring were business partners regarding 
certain apartment complexes through their ownership of Lee Hall, 
L.L.C.  To facilitate financing of the apartments, Nizan and 
Cimerring executed a guaranty (“the Guaranty”) of an Amended and 
                     
 
1 Justice Lacy participated in the hearing and decision of 
this case prior to the effective date of her retirement on 
 
2
Restated Deed of Trust Note (“the Note”) made payable to 
HSA/Wexford Bancgroup, L.L.C., as lender, from Lee Hall, L.L.C., 
as borrower.  Four apartment complexes served as collateral 
under deeds of trust for the Note.  Although HSA/Wexford was 
payee of the Note, the loan was funded by UBS PaineWebber, Inc., 
(“UBS”), which then acquired the Note.  UBS later assigned the 
Loan2 to Merrill Lynch Mortgage Investors, Inc., Real Estate 
Investment Mortgage Conduit3 (“the REMIC Trust”) as part of a 
securitized mortgage loan pool.  Wells Fargo serves as trustee 
for the REMIC Trust, and its participation in this case is in 
that capacity. 
After the Note went into default, Wells Fargo foreclosed on 
the apartment complexes serving as collateral for the Loan.  
                                                                  
August 16, 2007. 
2 The Note, deeds of trust, Guaranty, and other documents 
comprising the Lee Hall, L.L.C., transaction will be referred to 
collectively as the “Lee Hall Loan” or “the Loan.” 
 
3 A REMIC trust is a real estate mortgage investment conduit 
defined in § 860D of the Internal Revenue Code of 1986.  26 
U.S.C. § 860D (2000).  A mortgage qualifies as a REMIC mortgage 
if, at the time it was originated or contributed to the trust, 
it was principally secured by an interest in real property.  Id.  
REMIC trusts are pools of mortgages in which the beneficial 
ownership has been sold to various investors in the form of 
certificates representing their undivided interest in the total 
mortgage pool.  See, e.g., "Which loans qualify for REMIC 
trusts?," Commercial Lending Litigation News (October 14, 2004).  
If the REMIC trust complies with Internal Revenue Service 
regulations, mortgage payments made to the trust may be passed 
through to certificate holders free of federal taxes.  See Dean 
Weiner and K. Peter Ritter, "Real Estate Mortgage Investment 
Conduits and Financial Asset Securitization Investment Trusts," 
 
3
Wells Fargo then filed a motion for judgment against Nizan and 
Cimerring in the Circuit Court of the City of Petersburg to 
recover the deficiency on the Note pursuant to the Guaranty.  In 
a June 26, 2002 order, the circuit court granted partial summary 
judgment to Wells Fargo, ruling that “the Note at issue in this 
litigation is in default and that the Debt and other obligations 
under the Note, Deeds of Trust, Guaranty and other Loan 
Documents are fully recourse under the terms thereof.” 
Shortly before the trial date, Nizan filed for bankruptcy, 
and further proceedings against him were stayed until the 
bankruptcy court lifted the stay in February 2005.4  
A.  The UBS Litigation and Settlement 
In March 2002, Wells Fargo5 filed a lawsuit against UBS in a 
Texas state court alleging breach of contract and fraud claims 
arising from UBS’ transfer of numerous promissory notes in the 
securitized loan pool, including the Lee Hall Loan, to the REMIC 
                                                                  
Commercial Securitization for Real Estate Lawyers, Volume 1, 
ALI-ABA COURSE OF STUDY MATERIALS (April 2003). 
4 Wells Fargo’s claim against Cimerring proceeded to trial 
in the circuit court as scheduled.  The circuit court entered 
judgment on February 18, 2003 in favor of Wells Fargo and 
against Cimerring for $6,619,005.86 in compensatory damages, 
with interest accruing at 13.2 percent from September 23, 2002. 
In September 2005, Cimerring filed a bill of complaint to 
obtain relief from the judgment against him.  The circuit court 
sustained Wells Fargo’s demurrer to Cimerring’s bill of 
complaint, and he appealed that judgment to this Court.  We have 
affirmed that judgment by an order issued this day. 
 
4
Trust.  Wells Fargo contended that UBS’ conduct “materially and 
adversely affected the value of” the Lee Hall Loan, and it 
sought in the lawsuit to have UBS “honor its written, 
contractual obligation to repurchase” the Lee Hall Loan, “or pay 
damages equal to the repurchase price[].”6 
In September 2004, UBS and Wells Fargo signed a settlement 
agreement and mutual release (“UBS Settlement”), which resolved 
the Texas litigation.  While the terms of the UBS Settlement 
were confidential, public documents introduced by Nizan in the 
circuit court indicate UBS paid $19.375 million to the REMIC 
Trust in “liquidation proceeds.”7  Pursuant to the Pool and 
Servicing Agreement between Wells Fargo and Orix, the UBS 
Settlement proceeds were required to be classified as payment 
upon one or more of the promissory notes held in the REMIC 
Trust.  Consequently, Wells Fargo “treated [approximately $13.4 
million from the UBS Settlement] as having been received in 
                                                                  
5 ORIX Capital Markets, LLC, (“Orix”) brought the suit as 
“Master Servicer and Special Servicer of the Trust” on behalf of 
the REMIC Trust and Wells Fargo, as trustee. 
6 According to the Mortgage Loan Purchase Agreement (“MLPA”) 
signed by Wells Fargo and UBS, the “Repurchase Price” was “an 
amount equal to the sum of” “the outstanding principal balance 
of [the loan] as of the date of purchase,” “all accrued and 
unpaid interest,” and related expenses. 
7 The Wells Fargo and ORIX Pool and Servicing Agreement 
defined “Liquidation Proceeds” as, inter alia, “[a]ll cash 
amounts . . . received . . . in connection with . . . the 
realization upon any deficiency judgment obtained against a 
Mortgagor.” 
 
5
respect of” the Lee Hall Loan for purposes of accounting in the 
REMIC Trust. 
B. Post-Bankruptcy Proceedings Against Nizan 
After the bankruptcy court lifted the stay in February 
2005, proceedings in the circuit court under Wells Fargo’s 
motion for judgment recommenced.8  Nizan sought additional 
discovery from Wells Fargo in the circuit court regarding the 
UBS Settlement.  He maintained that Wells Fargo was barred from 
obtaining a “double recovery” from both him and UBS for the same 
damages represented by payments on the Lee Hall Loan.  Nizan 
contended further discovery was necessary to determine whether, 
or to what extent, Wells Fargo had already received payment in 
the UBS Settlement for the same damages that Wells Fargo sought 
to recover from him under the Guaranty for the Lee Hall Loan. 
In response, Wells Fargo filed a motion for a protective 
order and made an oral motion in limine so as to bar further 
discovery.  Wells Fargo contended that the date for concluding 
discovery had passed prior to Nizan’s bankruptcy and that the 
details of the UBS Settlement were irrelevant to its claims 
against Nizan.  Wells Fargo asked the circuit court to adopt the 
                     
8 Nizan stipulated that the “balance due and owing under the 
[Lee Hall Loan was] $6,619,005.86 as of September 23, 2002,” 
plus interest accruing from that date at a rate of 13.2 percent 
per year until such sums were paid in full.  Nizan’s stipulation 
reserved his right to assert “that credits are due, or other 
claims or defenses which he may have to payment.” 
 
6
rationale articulated in an order entered by the United States 
Bankruptcy Court for the Southern District of Texas, In re: 
Cyrus II Partnership, No. 05-39857 (Bankr. S.D. Tex. 2005) 
(“Cyrus”). 
In Cyrus, the bankruptcy court held the UBS Settlement was 
irrelevant to resolving Wells Fargo’s claims against another 
guarantor for another loan that was part of the same securitized 
mortgage loan pool as the Lee Hall Loan.  While Nizan was not a 
party in Cyrus, Wells Fargo contended the issue was the same and 
involved a similarly-situated guarantor on a similar loan that 
was part of the same loan package UBS sold to the REMIC Trust 
that included the Lee Hall Loan.  Wells Fargo argued the 
bankruptcy court’s analysis was precisely on point and resolved 
any claim presented by Nizan as to the Lee Hall Loan by virtue 
of the UBS Settlement.  Wells Fargo cited the following portion 
of the Cyrus opinion: 
When the Debtors signed the loan documents, they 
became obligated to the holders of the debt.  [UBS] 
was never a maker of the note.  UBS allegedly breached 
an independent obligation that it had to Orix.  When 
it settled its breach by the payment of $19.4 million, 
UBS could have negotiated that it would have paid more 
to Orix for the transfer of the note to UBS.  Or, UBS 
could have paid less and left the note with Orix.  
[UBS’s] breach was independent of the Debtors’ payment 
obligation.  If UBS had acquired the note as part of 
its settlement (i.e., UBS had paid $19.4 million and 
received the note from Orix), the Debtors would have 
no conceivable argument that the Debtors would be 
entitled to a credit for UBS’s payment.  The 
transaction that occurred was wholly independent of 
 
7
the Debtors’ obligation to pay on the note.  Because 
[UBS] paid less and left the note with Orix, the 
Debtors allege that they are entitled to a credit.  
Logic dictates that the amount owed by the Debtors 
should not be affected by the structure of a 
settlement between third parties. 
 
Cyrus, slip op. at 3. 
After a hearing, the circuit court granted the protective 
order and barred further discovery by Nizan as to the UBS 
Settlement by an order entered April 14, 2006 (“the Protective 
Order”).  At the time of the ruling, the circuit court stated 
that additional discovery was not necessary for the parties to 
adequately argue their positions regarding the relevance of the 
UBS Settlement, and Nizan’s defense of double recovery. 
During a later pre-trial conference, the circuit court 
indicated that it had reviewed Cyrus more thoroughly and was 
persuaded by its reasoning.  However, the court permitted the 
parties to submit an additional brief limited to “why the 
reasoning and the bankruptcy case of [Cyrus] does not apply here 
and if it can be distinguished how the Virginia law would change 
that rationale.”  The parties submitted further briefs and at a 
hearing on that limited issue, the circuit court reiterated its 
belief that Cyrus was persuasive, and concluded: “This suit by 
Wells Fargo against UBS was because of their misrepresentation 
of the value of those loans.  That’s a separate issue [than 
 
8
Nizan’s liability as a guarantor.]  UBS or the guarantors did 
not have any common liability to Wells Fargo.” 
Consistent with this ruling, the circuit court entered an 
amended final order (“the Amended Final Order”) on May 3, 2006, 
which stated: 
The UBS settlement and the manner in which the 
proceeds of such settlement were allocated are not 
relevant to Nizan’s obligation as Guarantor to repay 
the entire amount due on the Lee Hall Loan, and Wells 
Fargo’s recovery under the Guaranty does not 
constitute or operate as a double recovery. 
 
Finding no further issues remaining in the case, the circuit 
court entered judgment in favor of Wells Fargo, and held Nizan 
liable “in the amount of $6,619,005.86 as of September 23, 2002” 
in addition to interest at a rate of 13.2 percent per year.  We 
awarded Nizan this appeal. 
II.  ANALYSIS 
 
Nizan raises five assignments of error: (1) the circuit 
court erred “in determining, as a matter of law, that Wells 
Fargo was entitled to more than one recovery of the amounts due 
under the Note because Mr. Nizan and UBS did not have joint or 
common liability to Wells Fargo”; (2) the circuit court “erred 
in disregarding uncontroverted facts establishing that UBS 
compensated Wells Fargo in full for the damage claims asserted 
against Mr. Nizan”; (3) the circuit court “erred in denying Mr. 
Nizan the opportunity to conduct discovery on his defense of 
 
9
double-recovery”; (4) the circuit court “erred in determining, 
as a matter of law, that the defense of double-recovery was not 
available to Mr. Nizan”; and, (5) the circuit court “erred in 
adopting as a basis for its ruling, without evidentiary support, 
the arguments advanced in Wells Fargo’s various pleadings and 
briefs.” 
A. Double Recovery Defense in 
a Uniform Commercial Code Proceeding 
 
 
Before analyzing Nizan’s assignments of error, we first 
address Wells Fargo’s argument that under the Uniform Commercial 
Code (“UCC”), as applicable in Virginia, Nizan can only be 
relieved of his obligation to pay the Note if he is discharged 
from that obligation under the provisions of Code § 8.3A-601.  
That statute provides that discharge occurs “as stated in this 
title or by an act or agreement with the party which would 
discharge an obligation to pay money under a simple contract.”  
Wells Fargo asserts that Nizan’s liability was not discharged by 
any means described in Title 8.3A, nor by agreement with Wells 
Fargo.  It further asserts that its “act” of “characterizing 
. . . the UBS Settlement [as a] write-off [of] the Lee Hall Loan 
. . . does not operate as a discharge.”  Therefore, Wells Fargo 
contends Nizan remains obligated to pay the Note and cannot 
assert an “extra-statutory ‘equitable discharge’” means of 
relief via the defense of double recovery. 
 
10
Whether an equitable defense such as double recovery can be 
asserted against the holder of a negotiable instrument under the 
UCC is an issue of first impression in Virginia.  Code § 8.3A-
601, on which Wells Fargo relies, addresses the means by which 
an obligation to pay a promissory note can be discharged under 
the UCC.  However, Nizan does not assert that his obligation has 
been discharged.  Instead, he has raised the defense of double 
recovery. 
We have analyzed the common law defense of “double 
recovery” in several contexts, including as a defense to 
recovery of damages in contract-based actions.  See, e.g., Cox 
v. Geary, 271 Va. 141, 150, 624 S.E.2d 16, 21 (2006); Klaiber v. 
Freemason Assocs., 266 Va. 478, 488-89, 587 S.E.2d 555, 560-61 
(2003).  This Court has recognized that a party with two valid 
causes of action is entitled to “seek compensation in each, [but 
is], nonetheless, estopped from collecting the full amount [of 
damages] in the second action if they were partially paid 
therefor in the first.”  Katzenberger v. Bryan, 206 Va. 78, 85, 
141 S.E.2d 671, 676 (1965).  We based this “proposition[] upon 
basic principles of fairness and justice.”  Id.  We have also 
recognized that the holder of a promissory note may not “obtain 
a judgment against the [obligor] for the balance due on the note 
[when doing so] would be inequitable and allow him a double 
 
11
recovery.”  Joyner v. Graybeal, 204 Va. 543, 546, 132 S.E.2d 
467, 469 (1963) (pre-UCC). 
The defense of double recovery is thus rooted in common law 
and equitable principles regarding the relief a particular party 
is entitled to receive, and is not based in either general 
contract law or the UCC.  Specifically incorporated into the UCC 
by statute is the general principle that: 
[u]nless displaced by the particular provisions of the 
Uniform Commercial Code, the principles of law and 
equity, including the law merchant and the law 
relative to capacity to contract, principal and agent, 
estoppel, fraud, misrepresentation, duress, coercion, 
mistake, bankruptcy, or other validating or 
invalidating cause supplement its provisions. 
 
Code § 8.1A-103.  Thus, unless a particular provision of the UCC 
displaces the defense of double recovery, that defense would be 
available in a UCC-based claim.  Code § 8.3A-601 does not touch 
upon, much less displace, the defense of double recovery. 
Therefore, under the provisions of Code § 8.1A-103, the 
defense of double recovery may be applicable in UCC-based 
actions as “a principle of law and equity” not displaced.  For 
purposes of this opinion, it is unnecessary to address the 
corollary issue of whether a person who successfully asserts the 
defense of double recovery is thereby “discharged” from the 
underlying debt under Code § 8.3A-601.9  Accordingly, Wells 
                     
9 Neither party raised any potential applicability of Code 
§ 8.3A-305, “defenses and claims in recoupment,” in the circuit 
 
12
Fargo’s argument under Code § 8.3A-601 fails.  We now turn to 
the merits of Nizan’s assignments of error. 
B. Availability of Double Recovery Defense to Nizan 
Nizan asserts in its second and fourth assignments of error 
that the circuit court erred in holding that Wells Fargo’s 
recovery in the UBS Settlement did not compensate Wells Fargo, 
in some part, for the damages it sought from Nizan so that Nizan 
did not have a valid defense of double recovery.  Nizan argues 
that he proffered sufficient evidence to “suggest that the [UBS 
Settlement] compensated Wells Fargo in full for its losses under 
the Lee Hall Loan.”  This is so, he maintains, because “Wells 
Fargo’s damages in both [the case at bar] and in the UBS 
Litigation were based upon Wells Fargo’s losses” as the holder 
of the unpaid Note.  Nizan contends that the facts he asserted, 
“if proved at trial, would provide at least a prima facie case 
that Wells Fargo’s claim against Mr. Nizan should have been 
reduced, at least in part, by the $19.375 million which Wells 
Fargo received from UBS.” 
 
Wells Fargo responds that the circuit court did not err 
because the prohibition of double recovery only applies when 
“recovery is sought for the ‘very same items of damage,’” which 
did not occur in the case at bar.  It asserts that the “‘item of 
                                                                  
court or in argument to this Court and we express no opinion 
thereon. 
 
13
damage’ for which Nizan is liable to Wells Fargo is payment of 
the amount due on a negotiable instrument,” while the “ ‘item of 
damage’ for which UBS was liable was the amount the Trust 
overpaid in its purchase of the pool of loans – that is, an 
adjustment in the purchase price.”  Wells Fargo submits that the 
circuit court “properly recognized the distinction between the 
injuries [Wells Fargo] sustained as a result of UBS’s action and 
those sustained by Nizan’s failure to pay his obligations.”  It 
contends that UBS could have repurchased the Note as part of the 
Settlement Agreement, but did not do so; instead, Wells Fargo 
“remain[ed] the holder entitled to enforce” the obligation to 
pay the balance due on the Note.  Lastly, Wells Fargo asserts 
that under Lanasa v. Willey, 251 Va. 231, 234 n.4, 467 S.E.2d 
786, 788 n.4 (1996), a person who is obligated to pay a 
promissory note must do so “according to its terms” and cannot 
assert a defense of double recovery to prevent the holder from 
enforcing the terms of the note.  Id. 
 
Initially, we note that Wells Fargo’s reliance on Lanasa is 
misplaced.  In that case, two individuals signed a promissory 
note, and the holder of the note sought to enforce the note 
against Willey, one of the makers.  Willey argued that the 
holder should be limited to collecting one-half of the note 
balance because the holder could collect the remainder due under 
the note from the other maker.  Willey contended that permitting 
 
14
the holder “to recover the full amount of the [n]ote would 
facilitate a double recovery.”  Lanasa, 251 Va. at 234 n.4, 467 
S.E.2d at 788 n.4.  This Court rejected that argument, stating, 
“Willey’s sole obligation in this matter is as a maker of the 
note.  She and the other maker[] are ‘jointly and severally 
liable in the capacity in which they sign,’ and, if she pays the 
note, she will be entitled to receive contribution from the 
other maker[].”  Id.  Clearly, what Willey argued in Lanasa was 
not the same “double recovery” defense that Nizan makes here.  
While Willey sought to have her joint and severable obligation 
reduced based on the co-liability of other obligors under the 
promissory note, Nizan seeks to have his obligation reduced 
based on Wells Fargo’s alleged recovery for the same damages it 
now seeks to recover against him. 
Among the factual representations Nizan made to the circuit 
court in support of the defense of double recovery were: (1) 
Wells Fargo sued UBS seeking “repurchase” of, inter alia, the 
Lee Hall note; (2) Wells Fargo’s expert witness in the UBS 
litigation used the “repurchase price,” rather than “investor 
damages” as the basis for calculating damages relative to the 
Lee Hall Loan; (3) Wells Fargo represented to the courts in 
Cyrus and Trust for Certificate Holders of Merrill Lynch 
Mortgage Investors, Inc. v. Love Funding Corp., 2007 U.S. Dist. 
LEXIS 13566, No. 04 Civ. 9890 (SAS) (S.D.N.Y. Feb. 27, 2007), 
 
15
that guarantors of other loans that were part of the UBS 
Settlement were not entitled to “credit” from the UBS Settlement 
proceeds because those proceeds were allocated to the Lee Hall 
Loan; and (4) Wells Fargo allocated some of the proceeds from 
the UBS Settlement to the Lee Hall Note for REMIC Trust 
purposes, and notified certificate holders of the REMIC Trust 
that the Lee Hall Loan had a zero balance following this 
allocation. 
We begin by distinguishing Nizan’s third and fourth 
representations from the first two.  At trial and on appeal, 
Nizan contended that Wells Fargo’s allocation (or the allocation 
by ORIX on behalf of Wells Fargo) of the UBS Settlement for 
purposes of the REMIC Trust to the Lee Hall Loan was persuasive, 
albeit not dispositive, evidence supporting his defense that 
Wells Fargo had been reimbursed for its damages arising from the 
Lee Hall Loan.  We do not agree that Wells Fargo’s accounting 
allocation of the UBS Settlement proceeds to the Lee Hall Loan 
is relevant to Nizan’s defense of double recovery.  Under the 
REMIC Trust’s operating documents and in accordance with federal 
tax law governing those trusts, Wells Fargo was required to 
allocate the proceeds of the UBS Settlement as payment upon one 
or more of the Trust’s assets.  How Wells Fargo chose to 
allocate this money within the REMIC Trust does not have any 
legal effect on Nizan’s liability on the Note nor does it show 
 
16
the allocated funds were in fact paid by UBS as the same damages 
Wells Fargo seeks to recover against Nizan.  See, e.g., Long v. 
Turner, 134 F.3d 312, 316-17 (5th Cir. 1998) (“a write-off of a 
debt on the creditor’s book is an accounting practice that does 
not of itself amount to a discharge or release of the 
debt. . . .  A write-off is merely an accounting practice or 
convention for reducing to zero the value of an asset as shown 
on a balance sheet.”).  That Wells Fargo may have made 
representations in other courts about the allocations for REMIC 
Trust accounting purposes is likewise irrelevant to a double 
recovery claim.10 
By contrast, we find that Nizan’s first and second factual 
representations noted above were relevant to determining whether 
Wells Fargo had recovered damages under the Lee Hall Loan of the 
same character as that sought from Nizan.  The first and second 
representations, if proven at trial, could be sufficient to make 
a prima facie case of double recovery.  We reach this conclusion 
upon review of the principles set out in Katzenberger and Cox. 
In Cox, we summarized Katzenberger’s factual background: 
[T]he purchasers of real property filed a motion for 
judgment against an attorney who had examined and 
certified title to the parcel of property they had 
contracted to purchase.  At the time the suit was 
filed, the purchasers had already settled a claim 
                     
10 Whether Wells Fargo’s representations in other courts 
implicate some form of estoppel is not an issue before us and we 
express no opinion in that regard. 
 
17
against the sellers of the property for breach of the 
warranty of title. 
 
. . . . 
 
The purchasers were wronged by the sellers because the 
sellers “breached their covenant that they had the 
right to convey the land,” and the purchasers were 
separately wronged by the attorney because he 
“breached his duty to use due care in examining the 
title to the property.” 
 
Cox, 271 Va. at 149-50, 624 S.E.2d at 20-21 (internal 
citations omitted).  Nonetheless, in Katzenberger we held: 
 
While the [purchasers], by settling their 
contract action against the [sellers] were not barred 
from seeking further recovery in their tort action 
against the [attorney], they were not entitled to 
secure a double recovery.  While they had two separate 
causes of action and were entitled to seek 
compensation in each, they were, nonetheless, estopped 
from collecting the full amount in the second action 
if they were partially paid therefor in the first 
case.  These propositions are applicable to this case 
. . . upon basic principles of fairness and justice. 
 
As has been noted, it may be assumed that the 
[sellers] did not pay for an element of damage for 
which they were not liable. . . . 
 
But the [purchasers] alleged substantially the 
same elements of damages in their action against the 
[sellers] and in their action against the [attorney]. 
 
. . . . 
 
 
It thus appears that, in the satisfaction made by 
the [sellers] and in the verdict rendered against the 
[attorney], there may have been a duplication in [one 
element of damages claimed in each case].  [I]f it was 
shown that a portion of the settlement was applicable 
to the very same items of damages which the 
[purchasers] sought against the [attorney], the 
[purchasers’] recovery could have been reduced by the 
extent of the duplication. 
 
 
18
206 Va. at 85-86, 141 S.E.2d at 676-77.  Because all 
evidence relating to the settlement was excluded, we 
reversed the judgment of the circuit court and remanded the 
cause for a new trial.  Id. at 86-87, 141 S.E.2d at 677. 
In Cox, the plaintiff filed a motion for judgment against 
his former attorneys for malpractice, and sought damages arising 
from his wrongful conviction and imprisonment.  271 Va. at 146-
47, 624 S.E.2d at 19.  Prior to filing suit, the plaintiff had 
received “compensation from the Commonwealth [for] his wrongful 
incarceration.”  Id. at 145, 624 S.E.2d at 18.  The plaintiff 
did “not argue that the type of injuries for which the General 
Assembly compensated him differ[ed] from the type of injuries 
he” alleged against his former attorneys.  Id. at 148, 624 
S.E.2d at 20.  We held that the plaintiff did “not seek to 
recover from the Attorneys an element of damage different from 
the damages provided by” the General Assembly’s action.  The 
injuries and damages were the same and the plaintiff was only 
entitled to one recovery for those injuries and damages.  Id. at 
151, 154, 624 S.E.2d at 22-23. 
Nizan’s first and second factual representations thus raise 
the potential connection of damages Wells Fargo sought and 
recovered from UBS to the damages Wells Fargo now seeks against 
Nizan.  It would be a question of fact, or mixed question of law 
and fact, at a trial on the merits as to whether the UBS payment 
 
19
in the UBS Settlement was a payment on the Note or some other 
type of damages such as the “investor damages” Wells Fargo 
recites.  Based on our jurisprudence regarding the defense of 
double recovery, if some of the proceeds from the UBS Settlement 
were indeed a payment or partial payment by UBS of the Note, 
then a valid argument would be set forth that the damages 
recovered from UBS and sought from Nizan are the same damages: 
payment of the Note.  If Nizan proves the factual 
representations at trial, he may have presented a prima facie 
claim of double recovery. 
The circuit court thus erred in ruling as a matter of law, 
at this stage of the proceedings, that the damages recovered as 
part of the UBS Settlement could not be the same damages Wells 
Fargo seeks against Nizan.  The circuit court also erred, at 
this stage of the proceedings, in preventing Nizan from 
presenting further evidence as to whether Wells Fargo could 
recover damages from Nizan if the proceeds from the UBS 
Settlement compensated Wells Fargo for the same damages under 
the Lee Hall Loan.  
C. Joint or Common Liability 
 
Nizan also contends the circuit court erred by determining 
“Wells Fargo was entitled to more than one recovery of the 
amounts due under the Note because Mr. Nizan and UBS did not 
have joint or common liability to Wells Fargo.”  Neither the 
 
20
Amended Final Order nor the Protective Order recite that 
holding; however, the Protective Order recites as a basis for 
the order “the reasons set forth from the bench on . . . 
February 22, 2006.”  The Amended Final Order references the 
language of the Protective Order. 
 
At a hearing on February 22, 2006, during which the circuit 
court concluded that Nizan was precluded, as a matter of law, 
from arguing the defense of double recovery, the court stated 
from the bench, “I have been particularly persuaded by the 
[Cyrus] case from the bankruptcy court. . . . It appears the 
rationale set forth there would seem to indicate there’s no 
right to share in how they distribute the money.  They still owe 
the debt.”  The court then stated “my conclusion is that this 
case really sets forth the principal [sic] in the [Cyrus] case 
and the reason that should be and will be applied to this case.” 
 
At its subsequent hearing in which the parties argued 
Nizan’s amended motion for reconsideration and the language to 
be included in a final order, the circuit court affirmed that 
its ruling was based, in part, on a lack of “common liability” 
between Nizan and UBS and the rationale of Cyrus.  The circuit 
court stated the following: 
I indicated that I thought Cyrus was persuaded [sic], 
and I think still think it’s persuaded [sic], although 
not controlling. 
 
 
21
 
In their terminology of solidary liability in my 
reading of it, while it’s not inconsistent with 
Virginia law – in fact, the bankruptcy court referred 
to it as a common law version of joint liability, and 
that’s in its language. 
 
Nizan was not a party to this settlement, it was 
not made on his behalf, and there is no common 
liability.  You’ve argued that common liability does 
not apply, but there is no common liability. 
 
 
This suit by Wells Fargo against UBS was because 
of their misrepresentation of the value of those 
loans.  That’s a separate issue. 
 
 
And I agree with Wells Fargo’s analysis as to 
Katzenberger’s applicability, and [Cox].  I do not 
find that they really deal with the specifics of this 
case or the underlying laws as it relates to this 
case.  UBS or the guarantors did not have any common 
liability to Wells Fargo. 
 
 
And for all the reasons stated in plaintiff’s 
brief and for the reasons I’ve so stated, I do grant 
the motion in limine, and I will enter judgment for 
the plaintiff. 
 
 
To the extent the circuit court based its judgment that 
Nizan could not assert a claim of double recovery against Wells 
Fargo because Nizan had no “common liability” with UBS as to the 
Note, the circuit court erred.  Our jurisprudence is clear that 
the defense of double recovery arises from a claim as to the 
same damages, not the same basis of liability for the damages.  
We return to our analysis in Katzenberger to amplify this point. 
 
As noted above, the Katzenbergers bought real property that 
did not have the access as represented by the sellers.  Their 
closing attorney failed to detect this defect in his title 
 
22
examination.  The Katzenbergers brought successive suits against 
the sellers for breach of warranty of title and against the 
attorney for malpractice for a defective title examination.  In 
both actions, the Katzenbergers asserted as damages the 
diminution in value of the property because of the defects in 
title.  The Katzenbergers entered into a settlement agreement 
with the sellers of the property but continued their action 
against the attorney seeking a full recovery.  We recognized 
that 
[the sellers] and the [attorney] were not joint tort-
feasors, they were not in privity one with the other 
and they were not acting in concert in any manner.  
Their acts which gave rise to the claims against them 
were separate, different and distinct.  If the 
[purchasers] were wronged, it was because the 
[sellers] separately breached their covenant that they 
had the right to convey the land and because the 
[attorney] separately breached his duty to use due 
care in examining the title to the property.  The 
[sellers] were strangers to the wrong allegedly 
committed by the [attorney] and he a stranger to the 
wrong allegedly committed by them. 
 
Katzenberger, 206 Va. at 85, 141 S.E.2d at 676.  The 
Katzenbergers thus had separate and distinct causes of action 
against the sellers and the attorney based on each defendant’s 
conduct, but for the same injury.  We concluded that 
[w]hile the plaintiffs, by settling their contract 
action against the [sellers] were not barred from 
seeking further recovery in their tort action against 
the [attorney], they were not entitled to secure a 
double recovery.  While they had two separate causes 
of action and were entitled to seek compensation in 
each, they were, nonetheless, estopped from collecting 
 
23
the full amount in the second action if they were 
partially paid therefor in the first. 
 
Id. (emphasis added). 
 
 
Katzenberger establishes that what is dispositive to a 
defense of double recovery is whether the damages claimed, on 
whatever theory of liability, are the same damages.  If the 
element of damages is the same, it makes no difference that the 
potential payors are not joint tortfeasors or jointly and 
severally liable under the same theory of liability. 
 
The circuit court’s reliance on Cyrus is thus inapposite.  
In Cyrus, the bankruptcy court applied Louisiana law which 
“encompasses the concept of ‘solidary liability’.  ‘An 
obligation is solidary for the obligees when it gives each 
obligee the right to demand the whole performance from a common 
obligor.  When obligations are independent, Louisiana law does 
not allow the settlement of one independent obligation to affect 
liability on the other.”  Cyrus, slip op. at 3 (citation 
omitted).  Consequently, the bankruptcy court concluded that 
“there is no solidary liability here because UBS . . . and the 
Debtors did not have a common liability . . . under Louisiana 
law.”  Id., slip op. at 4. 
 
This concept of solidary liability under Louisiana law has 
no nexus to a claim of double recovery in Virginia and is not an 
element of that defense.  To the extent the circuit court based 
 
24
its judgment on the view that common liability was a required 
element of a double recovery defense, that ruling was in error.  
In order to assert the defense of double recovery against Wells 
Fargo, Nizan must prove that the damages Wells Fargo received 
from UBS and what it seeks from Nizan are the same, not that 
Nizan and UBS are jointly liable under a common basis of 
liability or through the same cause of action. 
D. Discovery 
 
Nizan also assigns error to the circuit court’s ruling that 
denied him the “opportunity to conduct discovery on his defense 
of double-recovery.”  Nizan contends the circuit court’s “denial 
of discovery restricted [him] to matters of public record to 
support his defense,” and “had the effect of granting summary 
judgment since it was predicated upon the assumption that there 
was no set of facts which [Nizan] could prove that would support 
his defense of double-recovery.” 
 
Wells Fargo responds that “[d]iscovery on the UBS 
Settlement would be a fruitless exercise” because Nizan 
acknowledged that the “principal facts” regarding the UBS 
Settlement were not in dispute.  “Thus,” Wells Fargo asserts, 
“the [circuit] court possessed all the facts necessary for 
making the ruling with respect to the relevance and 
admissibility of the evidence relating to the UBS [S]ettlement.”  
Because “Nizan was afforded numerous opportunities to explain to 
 
25
the [c]ircuit [c]ourt the relevance of the UBS” settlement, 
Wells Fargo argues that the circuit court properly denied 
additional discovery because it would have been “a waste of time 
and would not alter the final result.”11 
 
Rule 4:1(b)(1) states that with certain exceptions 
“[p]arties may obtain discovery regarding any matter, not 
privileged, which is relevant to the subject matter involved in 
the pending action, whether it relates to the claim or defense 
of the party seeking discovery or to the claim or defense of any 
other party.”  The court can limit “the frequency or extent of” 
discovery methods  
if it determines that: (i) the discovery sought is 
unreasonably cumulative or duplicative . . .; (ii) the 
party seeking discovery has had ample opportunity by 
discovery in the action to obtain the information 
sought; or (iii) the discovery is unduly burdensome or 
expensive, taking into account the needs of the case, 
the amount in controversy, limitations on the parties’ 
resources, and the importance of the issues at stake 
in the litigation. 
 
Id.  “Generally, the granting or denying of discovery is a 
matter within the discretion of the [circuit] court and will not 
be reversed on appeal unless ‘the action taken was improvident 
and affected substantial rights.’ ”  O’Brian v. Langley Sch., 
                     
11 One of Wells Fargo’s original arguments opposing further 
discovery was that the parties’ discovery deadline passed before 
Nizan requested additional discovery into the UBS Settlement.  
However, this is not a relevant consideration since the UBS 
Settlement, and therefore knowledge of its potential relevance 
 
26
256 Va. 547, 552, 507 S.E.2d 363, 366 (1998) (quoting Rakes v. 
Fulcher, 210 Va. 542, 546, 172 S.E.2d 751, 755 (1970)).  In 
O’Brian, we held the circuit court erred by entering summary 
judgment for the plaintiffs before permitting the defendants to 
conduct discovery on their defense that a contract’s liquidated 
damages provision was unenforceable.  Id. at 549, 507 S.E.2d at 
364.  The Court then noted that although the parties signed a 
contract that contained a liquidated damages provision, a 
recognized defense to the enforceability of such a provision 
exists under certain circumstances.  Id. at 550-51, 507 S.E.2d 
at 365.  Because the circuit court in O’Brian “precluded any 
inquiry into the validity of the liquidated damages clause by 
denying the O’Brians’ motion to compel and subsequently awarding 
summary judgment before hearing any relevant evidence on the 
issue” we reversed the court’s judgment.  Id. at 552, 507 S.E.2d 
at 366.  We concluded that “the [circuit] court’s actions . . . 
substantially affected the [defendants’] ability and right to 
litigate the validity of the liquidated damages clause” and the 
court abused its discretion in denying discovery.  Id. at 552, 
507 S.E.2d at 366.  
 
Similarly, in the case at bar, Nizan sought to assert a 
defense of double recovery, which is legally cognizable in 
                                                                  
to the case at bar, occurred after the prior discovery deadline 
had passed. 
 
27
Virginia.  The circuit court prevented Nizan from conducting 
discovery that could be relevant to producing evidence of double 
recovery as to whether some part of the UBS Settlement proceeds 
represent payment on the Note and are the same damages Wells 
Fargo seeks to recover from Nizan.  By preventing Nizan from 
conducting further discovery, the circuit court substantially 
affected Nizan’s “ability and right to litigate” his defense.  
Accordingly, the circuit court abused its discretion in denying 
Nizan the opportunity to conduct additional discovery into the 
UBS Settlement.12 
III.  CONCLUSION 
 
For the aforementioned reasons, the circuit court erred in 
denying Nizan the opportunity to conduct discovery related to 
his defense of double recovery, in concluding that the UBS 
Settlement could not, as a matter of law, constitute a double 
recovery for the damages Wells Fargo sought from Nizan, and in 
adopting the rationale that the defense of double recovery 
required a common liability instead of common damages.  
Accordingly, we will reverse the judgment of the circuit court 
                     
12 Nothing in our opinion restricts the circuit court’s 
oversight into the scope, means, and method of discovery into 
the UBS Settlement.  Upon remand, the circuit court can hear the 
parties’ arguments on this issue and provide reasonable 
protection for confidentiality, including in camera review, if 
the need be shown.  
 
28
and remand the case for further proceedings consistent with the 
views expressed in this opinion.13 
Reversed and remanded. 
                     
13 In view of our resolution of the other assignments of 
error, we do not address Nizan’s fifth assignment regarding the 
language in the Protective Order, which “adopt[ed] in their 
entirety” the “reasons set forth in [Wells Fargo’s] Motion for 
Protective Order, Reply in Support of Motion for Protective 
Order and Brief in Support of Court’s Ruling.” 
To the extent that the circuit court’s judgment in favor of 
Wells Fargo relied on any of Wells Fargo’s additional trial 
argument opposing the applicability of the double recovery 
defense, none merit discussion or stand as an independent basis 
to sustain the circuit court’s judgment at this stage of the 
proceedings.