Manville Corp. today proposed to split the company in two to protect itself from an estimated $1.9 billion in potential damage payments to absestos workers.

In a filing in bankruptcy court, the company offered two alternative plans to settle the claims, which both bar jury trials and punitive damage awards for the workers.

The Manville plan met with near universal rejection from the company's creditors, including attorneys for the asbestos victims. Federal Bankrupcy Court Judge Burton R. Lifland said it "runs contrary" to the aim of achieving a "global" reorganization that meets the needs of all the company's creditors.

He called the proposal "Manville's stake-out position" and said he had hoped the process of forming a reorganization plan "would be much further along by this time."

Manville filed for reorganization under federal Chapter 11 bankrupcy laws last August 26 because it said a flood of lawsuits arising over the past 20 years and the fear that added suits from potential victims would erase the company's considerable profits. All told, the company estimated it faced $1.9 billion in pending and future claims.

The unusual bankrupcy filing was an open attempt by Manville to force Congress to provide relief to it and other American companies faced with asbestos and other workplace-related injury cases.

Currently, Manville has an exclusive right to propose a reorganization plan for approval by the judge and creditors, but that opportunity is to end May 23. Lifland left hanging Manville's request for a 90-day extension on the deadline. The company's attempts to reach a consensus with creditors have bogged down, and Lifland told the nearly 40 lawyers representing the varied interests in this complex case "You've got two weeks to show me" they can come up with a better plan.

He declined to say what he would do if there is no further progress, though some bankruptcy experts predicted he might remove Manville's exclusive right to draft a plan and give the creditors a chance.

Manville's attorney, Michael Crames, asserted that Manville alone among the parties in the case shows concern for future asbestos victims, many of whom show no signs of disease now but face a greater-that-normal risk of early death as a result of their past work with the cancer-causing substance, and is insisting that they receive protection in the reorganization plan.

Nonetheless, the creditors generally hooted the Manville plan and the company's efforts to forge a consensus reorganization.

Under the Manville proposal presented to the court today, all of the corporation's non-asbestos businesses would be transferred to a new company identified only as "M2" while the asbestos aspects of the firm, along with the claims and an undisclosed amount of start-up cash, would stay with the old company, called "M1."

The new company would be shielded from any asbestos claims "in order to preserve its business," but would be obligated to transfer money to the old firm to meet those liabilities. While the two companies would be separate, "M1" would be included in the corporate income tax filing--setting it up as a potenial tax shelter for corporate profits.

The Manville proposal would give the 16,500 persons who, the company said, have pending asbestos claims two ways of reaching a settlement. One would be a graded compensation system based on income, age, dependents and extent of injury. The other would be a three-step plan starting with submission to a claims settlement bureau, with possible appeals to an arbitrator. Then, if no agreement is reached, the claims would go to a hearing.

But, there would be no jury trial on asbestos claims. Manville wants the bankruptcy court to ban punitive damages.

Potential claimants--workers in whom disease has not yet shown up--would be taken care of in the same way under the Manville plan if the Bankruptcy Court includes them as legitimate creditors. If not, they will retain the right to sue the old company, "M1."

The only group to support the company was the stockholders.

The remaining parties, however, differed only in the harshness of their condemnation of Manville. Thomas Henderson, representing the asbestos victims, called the company "as arrogant now as it has ever been" and said the reorganization plan made public today is a "cosmetic exercise for the court's benefit" that had been rejected three months ago. Arthur Olik, representing a co-defendent with Manville in asbestos suits, Keane Inc., said the plan contains "everything everyone has objected to" during negotiations.

"There has been no progress in this case. None whatsoever," said Richard Krasnow, representing another co-defendent, Owens-Illinois. He blamed Manville as the "one party who has been obstructing a resolution to this case.