Title: Bill Greever Corp. v. Tazewell Bank
Citation: N/A
Docket Number: 972543
State: Virginia
Issuer: Virginia Supreme Court
Date: September 18, 1998

Present:  All the Justices 
 
BILL GREEVER CORPORATION, ET AL. 
 
v.  Record No. 972543     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
September 18, 1998 
TAZEWELL NATIONAL BANK 
 
FROM THE CIRCUIT COURT OF TAZEWELL COUNTY 
Keary R. Williams, Judge 
 
In this action by a debtor against a former creditor, we 
consider whether a bankruptcy court's prior order confirming 
the debtor's reorganization plan containing a reservation of 
rights clause was a final disposition of all disputes between 
the debtor and the creditor. 
In 1992, Bill B. Greever, Sr., filed a petition for 
reorganization under Chapter 11 of the Bankruptcy Code in the 
United States Bankruptcy Court for the Western District of 
Virginia.  Greever listed Tazewell National Bank (Tazewell) as 
a creditor.  In Schedule B of his bankruptcy petition, Greever 
was required to list "contingent and unliquidated claims of 
every nature, including . . . counterclaims of the debtor."  
Greever responded "NONE."  In his "Disclosure Statement 
Relating to Bill Greever and Plan of Reorganization" (the 
reorganization plan), however, Greever included the following 
reservation language 
nothing in this plan would waive any and all of the 
debtors [sic] rights to bring in [sic] action 
against any party or parties which the debtor 
believes may be indebted to the debtor for any 
causes of action that may exist pre-petition.  The 
purpose of this Chapter 11 plan is not to settle or 
waive any of those causes of action but to preserve 
all of those if bringing the same is determined by 
the debtor to be necessary in the future. 
 
On December 10, 1992, the bankruptcy court entered an order 
confirming Greever's reorganization plan.  Tazewell did not 
note any objections and did not appeal the confirmation order. 
 
On April 24, 1994, Greever and the Bill Greever 
Corporation, wholly owned by Greever, (collectively "Greever") 
filed a motion for judgment against Tazewell in the Circuit 
Court for the County of Tazewell.1  Greever asserted tortious 
interference with business expectancy, breach of contract, and 
various other lender liability claims against Tazewell arising 
out of the parties' pre-bankruptcy relationship.  Tazewell 
filed a motion for summary judgment, arguing, inter alia, that 
the bankruptcy confirmation order was a final disposition of 
all disputes between Greever and Tazewell, and the doctrine of 
res judicata, therefore, precluded Greever's claims.2  The 
trial court agreed and granted summary judgment in favor of 
Tazewell.  Greever then filed a motion for reconsideration, 
                     
1 Greever also asserted claims against another former 
creditor, Citizens Bank of Tazewell.  Greever's claims against 
Citizens Bank were later severed from the instant cause of 
action and are not at issue in this appeal. 
2 At the hearing on Tazewell's motion for summary 
judgment, Greever conceded that Bill Greever, Sr., and the 
Bill Greever Corporation are privies, and that if res judicata 
 
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citing additional authority, which the trial court denied.  We 
awarded Greever an appeal. 
I. 
We begin our consideration of this appeal by reviewing 
the doctrine of res judicata, the rule against claim-
splitting, and the finality of bankruptcy orders.  The 
judicially created doctrine of res judicata rests upon public 
policy considerations which favor certainty in the 
establishment of legal relations, demand an end to litigation, 
and seek to prevent the harassment of parties.  Bates v. 
Devers, 214 Va. 667, 670, 202 S.E.2d 917, 920 (1974)(citations 
omitted).  The doctrine prevents "relitigation of the same 
cause of action, or any part thereof which could have been 
litigated, between the same parties and their privies."  Id. 
at 670-71, 202 S.E.2d at 920-21.  A claim which "could have 
been litigated" is one which "if tried separately, would 
constitute claim-splitting."  Id. at 670 n.4, 202 S.E.2d at 
920 n.4. 
"Claim-splitting" is bringing successive suits on the 
same cause of action where each suit addresses only a part of 
the claim.  Jones v. Morris Plan Bank of Portsmouth, 168 Va. 
284, 291, 191 S.E. 608, 610 (1937).  Courts have imposed a 
                                                                
bars Bill Greever, Sr.'s, personal claims against Tazewell, it 
also bars the corporation's claims. 
 
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rule prohibiting claim-splitting based on public policy 
considerations similar to those underlying the doctrine of res 
judicata:  avoiding a multiplicity of suits, protecting 
against vexatious litigation, and avoiding the costs and 
expenses associated with numerous suits on the same cause of 
action.  Id. at 291-92, 191 S.E. at 610. 
Applying the doctrine of res judicata enforces the rule 
against claim-splitting by barring further litigation of 
claims which "could have been litigated" between the parties 
in an earlier proceeding.  The rule against claim-splitting is 
not absolute, however.  A defendant may waive the rule by 
express or implied consent.  Gary Steel Products Corp. v. 
Kitchin, 197 Va. 471, 474, 90 S.E.2d 120, 123 (1955).  If this 
exception to the rule against claim-splitting is applicable, 
res judicata will not bar the subsequent suit. 
Federal courts which have considered the application of 
res judicata in the context of bankruptcy confirmation orders 
have not discussed "claim-splitting" as such, but have 
generally held that claims against creditors which could have 
been brought in a bankruptcy proceeding and which might have 
affected the parameters of the bankruptcy proceeding may not 
be litigated in a subsequent proceeding in another court.  
Eubanks v. Federal Deposit Ins. Corp., 977 F.2d 166, 170 (5
 
Cir. 1992); 
th
Sure-Snap Corp. v. State Street Bank and Trust 
 
4
Co., 948 F.2d 869, 870 (2
 Cir. 1991).  In seeking the 
protection of the bankruptcy court, the debtor is required to 
list all its assets and liabilities, including contingent and 
unliquidated claims "of every nature, including counterclaims 
of the debtor."  
nd
Id. at 873.  This requirement is designed to 
allow creditors to take an informed position on the debtor's 
proposed reorganization plan.  Thus, when the bankruptcy court 
enters an order confirming a proposed reorganization plan, 
that order disposes of all matters between the debtor and the 
creditors in the manner prescribed by the confirmed plan.  See 
In Re Grimm, 168 B.R. 102, 110-11 (Bankr. E.D. Va. 
1994)(bankruptcy confirmation order final judgment on the 
merits for res judicata purposes).  Any attempt by the debtor 
to resurrect a claim against a creditor which could have been 
brought in a prior bankruptcy proceeding, therefore, is barred 
by the doctrine of res judicata.  Eubanks, 977 F.2d at 174-75; 
Sure-Snap, 948 F.2d at 877. 
On appeal, Greever does not dispute the general principle 
that the doctrine of res judicata is applicable to bankruptcy 
confirmation orders.  Greever seeks to avoid its application, 
however, based on "exceptions" to the rule against claim-
splitting contained in § 26 of the Restatement (Second) of 
Judgments (1982) (the Restatement).  First, Greever argues 
that by failing to note an objection to the claim reservation 
 
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language confirmed by the bankruptcy court's order, Tazewell 
"acquiesced" to "claim-splitting," and cannot now assert the 
defense of res judicata.  Second, Greever argues that by 
confirming a reorganization plan which contained claim 
reservation language, the bankruptcy court expressly preserved 
Greever's right to maintain later actions against creditors.  
Finally, Greever claims that application of res judicata to 
the instant case would defeat the public policies of 
"fairness, justice and judicial economy."  We address these 
arguments in order. 
II. 
Greever first seeks to avoid the application of res 
judicata by applying Subsection (1)(a) of § 26 of the 
Restatement, which states that the general rule prohibiting 
claim-splitting set out in § 24 of the Restatement does not 
apply when  
The parties have agreed in terms or in effect 
that the plaintiff may split his claim, or the 
defendant has acquiesced therein . . . . 
 
Greever argues that under this rule, res judicata should not 
be applied in this case because Tazewell acquiesced in 
Greever's splitting of his claims by failing to object to the 
reservation language in the reorganization plan.  Thus, 
Greever concludes, he is entitled to proceed with the instant 
litigation and is not barred by res judicata. 
 
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Applying this subsection, other courts have uniformly 
held that a defendant can acquiesce to claim-splitting by 
failing to object to a reservation clause in a prior consent 
decree, settlement agreement, or confirmed bankruptcy 
reorganization plan.  See e.g., Keith v. Aldridge, 900 F.2d 
736, 740-42 (4th Cir. 1990); Medina v. Wood River Pipeline Co., 
809 F.2d 531, 533-34 (8th Cir. 1987); Terrebonne Fuel & Lube v. 
Placid Refining Co., 666 So.2d 624, 632-34 (La. 1996).  These 
decisions generally require, however, that the reservation 
language expressly preserve specific claims or that the facts 
and circumstances clearly show that the parties intended to 
preserve specific claims for later adjudication.  Keith, 900 
F.2d at 740-42; Medina, 809 F.2d at 533-34; Shelar v. Shelar, 
910 F. Supp. 1307, 1313 n.4 (N.D. Ohio 1995); Terrebonne, 666 
So.2d at 634-36.  See also Kelly v. Merrill Lynch, Pierce, 
Fenner & Smith, Inc., 985 F.2d 1067, 1069-70 (11th Cir. 1993). 
 
We have not adopted § 26(1)(a) of the Restatement.  
However, the decisions based on this subsection are 
instructive because they interpret "acquiescence" under the 
Restatement in a manner similar to our standard for waiving 
the rule against claim-splitting.  Gary Steel, 197 Va. at 474, 
90 S.E.2d at 123. 
The requirements for finding "acquiescence" reflect the 
general principle that waiver requires both knowledge of the 
 
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facts basic to exercise of the right waived and an intent to 
waive the right.  Employers Commercial Union Ins. Co. of 
America v. Great American Ins. Co., 214 Va. 410, 412-13, 200 
S.E.2d 560, 562 (1973); May v. Martin, 205 Va. 397, 404, 137 
S.E.2d 860, 865 (1964).  Therefore, we agree that a defendant 
may waive the claim-splitting rule by failing to object to 
reservation language if the reservation clause clearly 
expresses the parties' intent to preserve specific claims or 
if the circumstances of the case make it clear that the 
defendant was aware that additional claims could be asserted 
against him later. 
 
Here, the language used by Greever in his reorganization 
plan's reservation clause was generic and did not identify any 
specific creditors or claims.  Nevertheless, Greever, relying 
on Terrebonne, asserts that the claim reservation language was 
sufficiently explicit to put Tazewell and the bankruptcy court 
"on notice of Mr. Greever's intent to reserve causes of action 
which he might have, presumably to be asserted at a later 
date." 
 
In Terrebonne, the claim reservation language in a 
debtor's reorganization plan was similar to the language 
Greever included in his plan.  666 So.2d at 627.  After the 
plan was confirmed, the debtor filed a state court breach of 
contract claim against one of its former creditors.  Id. at 
 
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628.  The Supreme Court of Louisiana held that by failing to 
appeal the confirmation of the reorganization plan, the 
creditor had "acquiesc[ed] [to] the reservation of claims."  
Id. at 634.  Greever argues, therefore, that Tazewell's 
failure to object to similar claim reservation language here 
can constitute a waiver of the rule against claim-splitting. 
In Terrebonne, however, the Supreme Court of Louisiana 
relied on facts and circumstances in addition to the 
reservation language in concluding that the creditor had 
acquiesced to claim-splitting.  During the Terrebonne 
bankruptcy proceeding, the debtor attempted to raise its 
breach of contract claim against the creditor.  The bankruptcy 
court declined to exercise jurisdiction over the breach of 
contract claim and directed the debtor to bring the claim in 
state court.  Id. at 627-28.  The Supreme Court of Louisiana 
concluded that under these circumstances, the parties "were 
aware" that the specific claims at issue would be asserted 
later.  Id. at 634. 
The facts in this case differ significantly from those 
underlying the holding in Terrebonne.  Here, Greever did not 
attempt to raise any claims against Tazewell in the bankruptcy 
proceeding.  Greever acknowledged that he "never disclosed to 
the bankruptcy court or to his creditors the nature or 
existence of any of the specific claims asserted" in the 
 
9
instant litigation.  Furthermore, Greever represented in 
Schedule B of his bankruptcy petition that he did not have any 
additional claims or counterclaims against his creditors.  The 
trial court specifically found that Tazewell "had no knowledge 
of any claims or potential claims against them by [Greever] at 
the time the confirmed plan was approved."  These facts do not 
show either that the reservation language expressly preserved 
specific claims or that the parties intended to preserve 
specific claims for later adjudication.  Accordingly, there is 
no basis to conclude that Tazewell "acquiesced in" or waived 
the rule against claim-splitting by express or implied 
consent. 
III. 
 
Greever, relying on Subsection (1)(b) of § 26 of the 
Restatement, next asserts that the trial court erred in 
failing to hold that the bankruptcy court "expressly reserved" 
Greever's right to maintain later actions against creditors 
when it confirmed the reorganization plan containing the 
reservation clause.  That subsection of the Restatement 
provides that the rule against claim-splitting does not apply 
if "[t]he court in the first action has expressly reserved the 
plaintiff's right to maintain the second action."  Restatement 
(Second) of Judgments § 26(1)(b)(1982). 
 
10
Unlike the provisions of Subsection (1)(a) of the 
Restatement rule, there is no Virginia counterpart for 
Subsection (1)(b).  Rather, we have held that the rule against 
claim-splitting "exists for the benefit and protection of the 
defendant."  Gary Steel, 197 Va. at 474, 90 S.E.2d at 122.  
Thus, the right to waive the rule has been limited to the 
defendant. 
Assuming without deciding that an exception to the rule 
against claim-splitting can occur by virtue of court action, 
we cannot say that the bankruptcy court's action confirming 
the reservation of claims clause in Greever's reorganization 
plan was in any way an "express" preservation of those claims.  
The bankruptcy court in this case merely confirmed a plan 
containing generic claim reservation language which did not 
identify any specific claims or any specific creditors.  It 
would be inconsistent to conclude that, although the 
reservation clause was insufficiently explicit to charge 
Tazewell with "knowledge" of Greever's claims for the purpose 
of waiving the rule against claim-splitting, the language was 
sufficiently clear to constitute an "express" preservation of 
Greever's claims by the bankruptcy court.  In addition, as the 
trial court noted, the confirmed reorganization plan also 
contained language preserving the bankruptcy court's 
jurisdiction over any disputes "regarding the interpretation 
 
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of any provision(s) of the Plan," or any "cause(s) of action 
. . . referenced . . . in this plan."  Therefore, there is 
nothing in this record that would support a conclusion that 
the bankruptcy court "expressly" preserved Greever's right to 
file a subsequent state court action against Tazewell.
IV. 
 
Greever's final argument is that applying res judicata in 
the instant case defeats "the public policies of fairness, 
justice and judicial economy," citing Subsection (1)(e) of 
§ 26 of the Restatement.3  Like this subsection of the 
Restatement, Virginia recognizes that applying the doctrine of 
res judicata may not be appropriate when it conflicts with 
more important public policies.  Bates, 214 Va. at 670 n.2, 
202 S.E.2d at 920 n.2.  The facts of this case, however, do 
not justify overriding the doctrine of res judicata on this 
basis. 
The purpose of the res judicata doctrine, as we have 
noted, is to establish certainty in legal relations, to demand 
                     
3 Subsection (1)(e) provides that the general rule 
prohibiting claim splitting set out in § 24 does not apply 
when 
[f]or reasons of substantive policy in a case 
involving a continuing or recurrent wrong, the 
plaintiff is given an option to sue once for the 
total harm, both past and prospective, or to sue 
from time to time for the damages incurred to the 
date of suit, and chooses the latter course. 
Restatement (Second) of Judgments § 26(1)(e)(1982). 
 
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an end to litigation, and to prevent the harassment of 
parties.  Bates, 214 Va. at 670, 202 S.E.2d at 920.  In a 
bankruptcy proceeding, there is an especially strong interest 
in finality.  Sure-Snap, 948 F.2d at 877.  One seeking 
bankruptcy protection has a duty to schedule, for the benefit 
of creditors, all his interests and property rights.  Oneida 
Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 416 
(3  Cir. 1988).  In the instant case, Greever failed to 
disclose his claims against Tazewell either as required by 
Schedule B of his bankruptcy petition or otherwise, thereby 
representing to the bankruptcy court and to Tazewell that he 
had no counterclaims against Tazewell. 
rd
The principles underlying the doctrine of res judicata 
are fully implicated in this case.  We see no reason why 
"fairness, justice and judicial economy" should preclude 
application of the doctrine to Greever's cause of action. 
 
For the above reasons, we affirm the trial court's 
conclusion that Greever's lender liability claims against 
Tazewell are barred by the doctrine of res judicata. 
Affirmed.
 
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