                         T.C. Memo. 2004-186



                       UNITED STATES TAX COURT



            WFO CORPORATION, ET AL.,1 Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 6913-02, 6914-02,          Filed August 19, 2004.
                 6915-02, 6916-02.


     Terence J. Wolfe and Giselle M. Wolfe, pro sese.

     Giselle M. Wolfe (an officer), for petitioner WFO

Corporation.

     Stephen J. Neubeck and John A. Freeman, for respondent.


               MEMORANDUM FINDINGS OF FACT AND OPINION

     GALE, Judge:    Respondent determined deficiencies in

petitioners’ Federal income taxes, additions to tax, and


     1
       Cases of the following petitioners are consolidated
herewith: Terence J. and Giselle M. Wolfe, docket No. 6914-02;
Terence J. Wolfe, docket No. 6915-02; and Giselle M. Wolfe,
docket No. 6916-02.
                                    - 2 -

penalties for the tax years 1994, 1995, 1996, and 1997 as

follows:2

                                 WFO Corp.
                            docket No. 6913-02

                               Accuracy-related
                                  Penalties            Addition to Tax
   Year      Deficiencies        Sec. 6662(a)          Sec. 6551(a)(1)
   1995         $1,725                $345.00              $431.25
   1996         95,228              19,045.60                 0

                    Terence J. and Giselle M. Wolfe
                           docket No. 6914-02

                                            Addition to Tax
            Year       Deficiency           Sec. 6651(a)(1)
            1996        $22,762                 $130.25

                             Terence J. Wolfe
                            docket No. 6915-02

                                            Additions to Tax
     Year          Deficiencies       Sec. 6651(a)(1)   Sec. 6654
     1994             $1,980              $99.00         $102.75
     1995             11,875              593.75          643.88

                             Giselle M. Wolfe
                            docket No. 6916-02

                                              Accuracy-related
                                                  Penalty
            Year        Deficiencies             Sec. 6662(a)
            1995            $728                     0
            1997           3,914                  $148.40

     Respondent has moved for entry of decisions with respect to

these cases based on a stipulation of settled issues signed by

the parties’ counsel and filed on March 13, 2003.             The


     2
       Unless otherwise noted, all section references are to the
Internal Revenue Code as amended, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
                               - 3 -

stipulation of settled issues, which resolved all pending issues

in these cases, was initially submitted by counsel for the

parties on March 11, 2003, the day before the scheduled trial.

As a consequence, the trial was canceled and the parties were

ordered to submit stipulated decisions by May 12, 2003.

Commencing April 20, 2003, however, the Court received a series

of documents from petitioner Terence J. Wolfe (Mr. Wolfe) and

Joseph B. Mansour, in which Mr. Wolfe, speaking on his behalf and

purportedly on behalf of petitioner Giselle M. Wolfe (Mrs.

Wolfe), and Mr. Mansour, purporting to represent petitioner WFO

Corp. (WFO), asserted that counsel for Mr. Wolfe, Mrs. Wolfe, and

WFO had signed the stipulation of settled issues without

authorization.

     On May 19, 2003, respondent filed a Motion for Entry of

Decisions.   On June 4, 2003, the Court received both a response

to respondent’s motion, purportedly from all petitioners (with

Mr. Mansour purporting to represent petitioner WFO), and a letter

from Mrs. Wolfe in which she asserted that she was the sole

shareholder of WFO and that Mr. Mansour was not authorized to act

on its behalf in this proceeding.   The June 4 response reiterated

the claim that petitioners’ counsel had signed the stipulation of

settled issues without authorization.   On June 10, 2003, the

Court received a second letter from Mrs. Wolfe in which she

advised that she had not signed or authorized the June 4 response
                                - 4 -

and repeated her claim that she, not Mr. Mansour, was WFO’s

proper representative in its case.      We set a hearing to determine

the person authorized to represent WFO and to receive evidence

with respect to respondent’s Motion for Entry of Decisions.

                           FINDINGS OF FACT

     Based upon the evidentiary hearing and the record in these

cases, we make the following findings of fact.

     Mr. and Mrs. Wolfe resided in Cincinnati, Ohio, when they

filed their petitions.   They were married at the time but

subsequently initiated divorce proceedings.

     WFO had its principal place of business in Cincinnati, Ohio,

when it filed its petition.    WFO is wholly owned by Mrs. Wolfe,

who serves as WFO’s president and signed WFO’s petition as its

representative.   See Rule 24(b).   WFO operates a club under the

trade name of Bristol’s.

I.   Negotiations Leading to the Settlement

     Trial in these cases was originally set for January 13,

2003, in Cincinnati, Ohio.    Petitioners had retained Mr. Mansour,

a certified public accountant, to represent them before the

Internal Revenue Service, though Mr. Mansour did not sign any of

the petitions in these cases.    However, as the trial date

approached, petitioners retained James F. McCarthy, III, as

counsel.   Mr. McCarthy entered his appearance on behalf of Mr.

and Mrs. Wolfe and WFO at the calendar call on January 13, 2003,
                                 - 5 -

where he requested a continuance until the Court’s March 10,

2003, trial session in Columbus, Ohio.       After extended discussion

in two hearings of the merits of a continuance, which respondent

opposed, and the establishment of a timetable under which

petitioners would supply information to respondent’s trial

counsel, a continuance was granted.

     On March 7, 2003, Mr. Wolfe and Joel S. Brant, Mr.

McCarthy’s associate, attended settlement negotiations with

respondent.   By day’s end, the parties had reached agreement on a

basis for settling all issues.    Respondent’s counsel agreed to

draft a stipulation of settled issues for petitioners to review,

which was provided to petitioners on Saturday, March 8, 2003.

     Mr. and Mrs. Wolfe forwarded the draft stipulation to Mr.

Mansour, who expressed his belief that petitioners should not

have agreed to certain of its terms.       In particular, he believed

that respondent had double counted some of WFO’s income and

included some WFO income in the wrong year.       After hearing Mr.

Mansour’s views, Mr. and Mrs. Wolfe refused to approve the draft

stipulation and insisted on continuing negotiations with

respondent.

     The parties had not resolved the issues that Mr. Mansour

raised by the March 10, 2003, calendar call in Columbus, Ohio,

which Mr. and Mrs. Wolfe attended.       Counsel reported that the

parties had not reached a settlement, and we set trial for the
                                 - 6 -

afternoon of Wednesday, March 12, 2003.       We selected the

afternoon of March 12 because Mr. McCarthy had oral argument

scheduled for the morning of March 12 before the U.S. Court of

Appeals for the Sixth Circuit.

     The parties continued negotiating over the points Mr.

Mansour had raised, but respondent refused to change his

position.   Mr. Brant met with Mr. and Mrs. Wolfe and reviewed the

two issues Mr. Mansour had raised.       He explained that, while

arguments could be raised and presented at trial, respondent

would not compromise either of the issues.       On the afternoon of

March 11, Mr. and Mrs. Wolfe met with Messrs. McCarthy and Brant

and asked that they make one last attempt to convince respondent

to concede the disputed points and to determine whether

respondent would consider reducing some of the penalties.

Messrs. McCarthy and Brant telephoned respondent’s counsel,

Stephen J. Neubeck, to convey the Wolfes’ position and were

advised that respondent would agree to reduce some of the

penalties but would make no adjustments on the other issues.

After reporting on respondent’s final position, Mr. McCarthy

informed petitioners that it was time either to accept the

settlement as offered or to go to trial the next day.       He asked

Mrs. Wolfe whether she accepted the settlement on behalf of

herself and WFO.   She said yes.   Mr. McCarthy then asked Mr.

Wolfe whether he accepted the settlement.       He said yes.    Mr.
                                - 7 -

McCarthy then sought and obtained authority to sign the

stipulation of settled issues once it was revised to reflect

respondent’s concessions on penalties.

      Mr. McCarthy communicated the acceptance to Mr. Neubeck and

signed the revised stipulation of settled issues later that

afternoon.    Mr. Wolfe went to Mr. Neubeck’s office after leaving

Mr. McCarthy’s office and thanked him for his cooperation in

settling the cases.    Late on the afternoon of March 11, 2003,

counsel faxed the signed stipulation of settled issues to this

Court.    We canceled the trial and issued an order requiring the

parties to file stipulated decision documents no later than May

12, 2003.    Counsel filed an original signed version of the

stipulation of settled issues with the Court on March 13, 2003.3

II.   Efforts To Repudiate the Settlement

      Shortly after the trial was canceled, Mr. Mansour convinced

Mr. Wolfe that petitioners should not have agreed to the

settlement, and Messrs. Wolfe and Mansour began their efforts to

repudiate it.    Mr. Wolfe first instructed Mr. Mansour to write

Mr. McCarthy, then followed up with his own letter, requesting


      3
       Counsel faxed a signed copy of the stipulation of settled
issues to the Court on Mar. 11, 2003, pursuant to our requirement
that they do so as a condition of canceling the trial. However,
this version (dated March 11) contained both original and faxed
signatures. To provide a document with original signatures for
filing, counsel re-signed the stipulation of settled issues on
Mar. 12, 2003. They forwarded the March 12 original to the
Court, and it was filed on Mar. 13, 2003.
                                - 8 -

that Mr. McCarthy advise this Court that he had signed the

stipulation of settled issues without authorization.    Mr. Wolfe

further advised Mr. McCarthy that he would refrain from filing a

disciplinary complaint against Mr. McCarthy if Mr. McCarthy

agreed to inform the Court that the stipulation lacked

authorization.   In a written reply, Mr. McCarthy refused, noting

that to do so would be a fraud on the Court.    In response,

petitioners terminated Mr. McCarthy’s services.

     On March 25, 2003, Mr. McCarthy filed a motion to withdraw

as petitioners’ counsel.   On April 11, 2003, respondent filed a

response opposing Mr. McCarthy’s motion, raising the possibility

that he might move to enforce the settlement the parties had

reached.    We granted Mr. McCarthy’s motion to withdraw on April

18, 2003.

     Sometime during the spring of 2003, Mrs. Wolfe decided that

she did not wish to participate in Messrs. Wolfe’s and Mansour’s

efforts to repudiate the settlement.    As described below, a

struggle for control of these cases and of WFO ensued, in which

Mr. Mansour submitted documents to this Court on behalf of WFO,

as its purported representative, and Mr. Wolfe submitted

documents on behalf of Mrs. Wolfe, individually, under a

purported power of attorney, all of which she subsequently

disavowed.
                               - 9 -

     On April 20, 2003, Messrs. Wolfe and Mansour submitted an

unsolicited response to respondent’s opposition to Mr. McCarthy’s

motion to withdraw, which they supplemented 2 days later.    Both

the original and supplemental submissions addressed the question

of whether the settlement should be enforced.   Attached to the

original submission was an affidavit signed by Mr. Wolfe, in

which Mr. Wolfe stated that Mr. McCarthy had signed the

stipulation of settled issues without his or Mrs. Wolfe’s

authorization.   Mr. Wolfe stated in the affidavit that he had

advised Mr. McCarthy on March 11 that there were unagreed issues,

that no settlement was authorized until those issues were

resolved, and that Mr. McCarthy advised him that he would obtain

concessions from respondent on those issues.    Mr. Mansour signed

the submissions on behalf of WFO, identifying himself as WFO’s

secretary.4   Mr. Wolfe signed the submissions on his own behalf.

Mrs. Wolfe did not sign these submissions; instead, Mr. Wolfe

signed her name, writing “(by POA)” next to the signature.

     On April 21, 2003, Mrs. Wolfe, under pressure from Mr.

Wolfe, agreed to sign two affidavits, one on behalf of herself

and one on behalf of WFO, to the same effect as Mr. Wolfe’s




     4
       Attached to the submission were two documents fashioned as
Notices of Entry of Appearance (dated Apr. 9 and 14, 2003,
respectively) in which Mr. Mansour purported to “enter an
appearance” as the representative of WFO in his capacity as its
secretary.
                               - 10 -

affidavit; namely, that Mr. McCarthy had signed the stipulation

of settled issues without authorization.

     On April 25, Mrs. Wolfe sent Mr. Mansour a letter

terminating his services on her behalf and on behalf of WFO.   She

instructed him that he was not authorized to represent her or WFO

before the Internal Revenue Service or the Tax Court.    She also

demanded that Mr. Mansour cease and desist from representing to

others that he was an officer of WFO.   Mr. Wolfe admitted that

Mr. Mansour advised him of this letter.

     On May 19, 2003, respondent filed a Motion for Entry of

Decisions.   In an order dated May 20, 2003, we refused to accept

for filing Messrs. Wolfe’s and Mansour’s original and

supplemental submissions related to Mr. McCarthy’s motion to

withdraw.    Instead, we permitted petitioners to file a response

to respondent’s Motion for Entry of Decisions by June 2, 2003.

In refusing to accept the initial submissions, we noted that they

violated Rule 50(b), and violated Rules 23(a)(3) and 24 insofar

as they purported to be on behalf of Mrs. Wolfe.   The order

specifically referred petitioners to Rule 23(a)(3), which

requires an original signature on papers filed by or for a party,

and advised petitioners that submissions purportedly on behalf of

Mrs. Wolfe under a “POA” or similar designation would be

disregarded.
                               - 11 -

     At some point after the March 11 meeting at which they

agreed to the settlement, Mr. and Mrs. Wolfe began divorce

proceedings.    At a hearing before the Butler County (Ohio) Court

of Common Pleas, Division of Domestic Relations, on May 22, 2003,

Mr. and Mrs. Wolfe agreed to have one of the managers of

Bristol’s appointed temporary receiver to manage “their business

known as Bristol’s.”   The order adopting this agreement is dated

May 29, 2003.   The order refers only to the trade name

“Bristol’s” and not to the corporate entity WFO.   It provides in

pertinent part:

     The parties agree to have a temporary receiver/manager
     of their business and specifically agree to Ivan
     Deborde’ [sic]. It is agreed the receiver shall
     collect all income, deposit the same into a bank
     account to be established by the receiver or a bank
     account agreed upon by the parties and that only that
     receiver shall have the authority to withdraw funds
     from that account or to write checks out of that
     account to pay the ordinary and usual bills and
     expenses of the business. The receiver shall be and is
     specifically authorized by the parties to pay the
     ordinary and normal bills and expenses of the business
     to keep it operating until further order of this Court,
     * * *

Under the order, Mr. Deborde was to remain as “receiver/manager”

until the court could hold a hearing “to determine the management

and running of the parties’ business known as Bristol’s”.     In the

final paragraph, the order provides that the agreement “was

entered into to allow the business to operate until the parties

can have the more complete and full hearing” on the issue.
                               - 12 -

     On May 31, 2003, at the behest of Messrs. Wolfe and Mansour,

and purportedly acting as “Receiver authorized as Sole Director”

of WFO, Mr. Deborde signed a corporate resolution appointing Mr.

Mansour WFO’s secretary and authorizing him to act as a

representative for WFO in this proceeding.

     On June 4, 2003, the Court received what purported to be a

response from Mr. and Mrs. Wolfe and WFO to respondent’s Motion

for Entry of Decisions.   Mr. Mansour signed on behalf of WFO as

secretary.    Mr. Wolfe signed on his own behalf.   Mrs. Wolfe did

not sign the submission; rather, Mr. Wolfe signed Mrs. Wolfe’s

name, without her knowledge or consent, omitting the “(by POA)”

designation he had used on the earlier submissions.    This

submission repeated the arguments that had been made in the

original and supplemental submissions related to Mr. McCarthy’s

motion to withdraw; i.e., the claim that Mr. McCarthy signed the

stipulation of settled issues without Mr. and Mrs. Wolfe’s

authorization.   Attached to the submission was a copy of the

affidavit of Mr. Wolfe that had been previously submitted, as

well as the two affidavits signed by Mrs. Wolfe on April 21,

2003.   On the same day, the Court received a letter from Mrs.

Wolfe asserting that she was the sole shareholder of WFO and that

Mr. Mansour was not authorized to act on its behalf in this

proceeding.
                               - 13 -

       On June 10, 2003, the Court received a second letter from

Mrs. Wolfe, advising that she had not signed or authorized the

June 4 response to the Motion for Entry of Decisions on her

behalf or on behalf of WFO.

       We set a hearing in Washington, D.C., to determine the

person authorized to represent WFO and to receive evidence with

respect to respondent’s Motion for Entry of Decisions.

III.       Hearing

       At the hearing, Mr. and Mrs. Wolfe, Messrs. McCarthy and

Brant,5 and Mr. Neubeck6 testified.7    In light of the unsettled

question of the then-authorized representative of WFO, we

permitted both Mrs. Wolfe and Mr. Mansour to present whatever

argument and evidence each wished on behalf of WFO.

       Mrs. Wolfe and Messrs. Brant, McCarthy, and Neubeck all

testified consistently with the facts found above.     Mrs. Wolfe


       5
       We ruled that Mr. Wolfe and Mrs. Wolfe (on her own behalf
and on behalf of WFO) had waived any attorney-client privilege by
voluntarily testifying about communications they had with their
attorneys regarding the settlement process, see State v. Post,
513 N.E.2d 754, 761 (Ohio 1987), and ordered Messrs. McCarthy and
Brant to testify regarding those conversations, see Ohio Code of
Profl. Resp., DR 4-101(C)(2) and (4) (1998).
       6
       To enable Mr. Neubeck to testify as a fact witness,
respondent obtained different counsel (John A. Freeman) for that
portion of the hearing concerning enforcement of the settlement.
       7
       Several days after the hearing, Mr. Mansour, as WFO’s
purported representative, moved to reopen the evidentiary hearing
so that he could testify. Despite having the opportunity at the
hearing, Mr. Mansour failed to call himself as a witness when he
presented WFO’s case. We accordingly denied his motion.
                              - 14 -

further testified that she had been pressured by Mr. Wolfe into

signing the affidavits dated April 21, 2003.   She recanted the

statements made therein.   She stated that she did not oppose

respondent’s Motion for Entry of Decisions, either on her own

behalf or on behalf of WFO.

     Mr. Wolfe testified that in the meeting he and Mrs. Wolfe

had with Messrs. McCarthy and Brant on the afternoon of March 11

to consider settlement, he instructed Mr. McCarthy not to sign

the stipulation of settled issues until he and Mrs. Wolfe had

agreed to all the terms and had an opportunity to review the

stipulation.   He testified that, at the conclusion of the

meeting, Mr. McCarthy assured him that he would obtain

concessions from respondent regarding the purportedly double-

counted income and the income included in the wrong year, and

that he (Mr. Wolfe) was to meet with Mr. McCarthy the following

day to review final settlement documents.   Mr. Wolfe testified

that he was surprised to discover that Mr. McCarthy had signed

the stipulation without obtaining the foregoing concessions.

     Mr. Wolfe further testified that he told Mr. McCarthy at a

meeting in January 2003 that Mr. McCarthy was not to make any

decisions on his or Mrs. Wolfe’s behalf without their written

approval.   He testified that he confirmed this instruction in the

following letter sent to Mr. McCarthy, which was introduced into

evidence:
                               - 15 -

     January 20, 2003

     Att:    Jim McCarthy

     Ref:    To our recent meeting on January 15th

     Jim:

     It was a pleasure meeting with you and Jody Brant again
     and I am looking forward to working together in regards
     to the IRS matters of Giselle’s, WFO CORPORATION and
     mine.

     As you know Giselle had asked me to work with Joe
     Mansour and to represent WFO in front of the appeals
     office in order to resolve the unresolved issues. As
     you know, we were unable to resolve these issues and it
     looks as if we will be going to court.
     Even though Giselle and I have retained your services
     in representing us in this matter, you or Jody are not
     to make any decisions in our behalf without our written
     approval.

     If you have any questions about the above, please
     contact me.

     Sincerely,


     Terry J. Wolfe

     Regarding Mrs. Wolfe’s signature on the response to

respondent’s Motion for Entry of Decisions, Mr. Wolfe admitted to

signing on her behalf and without her knowledge, omitting the

“(by POA)” designation he had used on the previous submissions to

the Court.    He claimed that he thought he was entitled to do so

by virtue of a power of attorney he believed he held for Mrs.

Wolfe.
                               - 16 -

                               OPINION

I.   Motion for Entry of Decisions

     A.     Counsel’s Authority To Settle

     The question of whether counsel has the authority to settle

a case on behalf of a taxpayer is factual and must be decided

according to common law principles of agency.     Dorchester Indus.,

Inc. v. Commissioner, 108 T.C. 320, 331 (1997), affd. without

published opinion 208 F.3d 205 (3d Cir. 2000); Adams v.

Commissioner, 85 T.C. 359, 369-372 (1985); Kraasch v.

Commissioner, 70 T.C. 623, 627-629 (1978).     Authority may be

granted by express statements or by implication from a taxpayer’s

words or deeds.    Estate of Quirk v. Commissioner, T.C. Memo.

1995-234.    Where taxpayers challenge the authority of counsel to

act on their behalf, the burden of proof rests with the taxpayers

to show that their counsel lacked authority.     Newbern v.

Commissioner, T.C. Memo. 1999-112.

     The evidence presented on this issue consists of

petitioners’ various submissions to this Court after cancellation

of the trial, documentary evidence introduced at the hearing, and

the conflicting testimony of Messrs. McCarthy, Brant, and Neubeck

and Mrs. Wolfe, on the one hand, and of Mr. Wolfe, on the other.

Distilling truth from the testimony of witnesses, whose demeanor

we observe and whose credibility we evaluate, is "the daily grist

of judicial life."    Diaz v. Commissioner, 58 T.C. 560, 564
                               - 17 -

(1972).   In Kropp v. Commissioner, T.C. Memo. 2000-148, we

described our role in this regard as follows:   "As a trier of

fact, it is our duty to listen to the testimony, observe the

demeanor of the witnesses, weigh the evidence, and determine what

we believe."   Having done so here, we have no doubt that Mr.

Wolfe and Mrs. Wolfe (for herself and on behalf of WFO) gave Mr.

McCarthy specific authority to sign the stipulation of settled

issues and settle these cases.

     Messrs. McCarthy and Brant and Mrs. Wolfe convincingly

testified that Mr. McCarthy sought and obtained express

authorization from Mr. and Mrs. Wolfe on the afternoon of March

11, 2003, to settle the cases and sign the stipulation of settled

issues on behalf of all petitioners.    According to the testimony

of Mrs. Wolfe and Messrs. McCarthy and Brant, Mr. and Mrs. Wolfe

were faced with a decision to accept respondent’s final offer or

to go to trial the next day.   While Mr. Mansour persisted in his

claim that income was being double counted and accounted for in

the wrong year, Mr. and Mrs. Wolfe were advised by Messrs.

McCarthy and Brant that Mr. Neubeck would not concede those

issues, and they chose to settle after Mr. Neubeck made

concessions on penalties.   Mr. Neubeck’s recollection of the

events of March 11 substantially corroborates that of Mrs. Wolfe

and Messrs. McCarthy and Brant.
                              - 18 -

     In direct contradiction to the testimony of Mrs. Wolfe and

Messrs. McCarthy and Brant, Mr. Wolfe testified that he did not

agree to or authorize a settlement of the cases on the afternoon

of March 11.   Instead, he insisted that he had advised Mr.

McCarthy that he would not agree to any settlement without

respondent’s concessions on the two points Mr. Mansour had raised

and without first reviewing a final version of the stipulation of

settled issues.   According to Mr. Wolfe’s testimony, Mr. McCarthy

assured him at the conclusion of their meeting on March 11 that

he would obtain concessions from respondent on the two disputed

points and submit to Mr. Wolfe for his review a revised

stipulation of settled issues, with revisions to reflect the

changes, the next day.

     We conclude that Mr. Wolfe’s testimony is not worthy of

belief.   Besides being contradicted by the testimony of all other

witnesses present at the March 11 meeting or participating in the

settlement negotiations, his testimony is highly implausible in

the circumstances.   First, accepting Mr. Wolfe’s version of

events would require us to believe that Mr. McCarthy, an

experienced litigator, left unresolved the question of whether a

settlement would occur on the afternoon before a scheduled

trial–-in particular, when he was scheduled to give oral argument

the next morning in another case.   We find it unlikely that, as

Mr. Wolfe claims, Mr. McCarthy advised him that there would be an
                              - 19 -

opportunity to review a revised stipulation of settled issues on

March 12.   The implausibility of Mr. McCarthy’s leaving

settlement unresolved on March 11 is heightened by the fact that

Mr. and Mrs. Wolfe had already once backed away from a tentative

settlement reached the preceding Friday (March 7).    We find it

unlikely that Mr. McCarthy would have failed to review the terms

of respondent’s offer with the Wolfes and to obtain their final

decision whether to accept it on March 11, given these

circumstances.   Second, Mr. Wolfe has offered no convincing

explanation concerning why, if be believed he had not authorized

a settlement, he did not think he needed to be present in

Columbus for a trial on the afternoon of March 12, which trial

had been scheduled in his presence at calendar call on March 10.

Finally, it is undisputed that Mr. Wolfe went to Mr. Neubeck’s

office on March 11 after meeting with Mr. McCarthy and thanked

Mr. Neubeck regarding the settlement.   Mr. Wolfe attempts to

explain this action by insisting that he was assured by Mr.

McCarthy that Mr. Neubeck would make the two changes in the

settlement he sought.   However, we simply do not believe that Mr.

Wolfe would have thanked the opposing counsel unless he

understood that a final agreement had been reached.

     Another aspect of Mr. Wolfe’s claims invites further

skepticism.   To support his position that the settlement was not

properly authorized, Mr. Wolfe offered as evidence at the hearing
                              - 20 -

a January 20, 2003, letter that he purportedly sent to Mr.

McCarthy to instruct Mr. McCarthy “not to make any decisions on

our behalf without our written approval.”   Relying on the letter,

Mr. Wolfe made the additional claim that he had instructed Mr.

McCarthy both orally and in writing that any settlement of these

cases required the written approval of himself and Mrs. Wolfe,

which was not given.

     The claim that this letter was sent to Mr. McCarthy is open

to considerable doubt.   Messrs. McCarthy and Brant both testified

that they had never seen the letter prior to the hearing and that

it was not in the client files that Mr. McCarthy’s firm

maintained.   Mr. Wolfe offered no rationale for the requirement

of written approval, while Mr. McCarthy convincingly testified

that he did not agree, and would not have agreed, to such a

condition on his representation of a client in Tax Court, given

the Court’s compressed trial schedules and general practice of

requiring litigants to be prepared at a trial session either to

try a case or to provide proof of settlement.   On its face, the

letter contains irregularities; unlike Mr. Wolfe’s other

correspondence in the record, it has no mailing address, nor is

Mr. Mansour copied thereon.   We also note that the letter, if

sent, could have had a significant impact on the scope of Mr.

McCarthy’s settlement authority.   Yet on no occasion prior to the

hearing did Mr. Wolfe or Mr. Mansour ever mention this letter or
                              - 21 -

even suggest that a requirement of written authorization to

settle existed, either in their post-March 11 letters to Mr.

McCarthy challenging his authority to settle, in Mr. Wolfe’s

affidavit, or in their voluminous submissions to the Court

disavowing the settlement.   Finally, in at least one other

instance Mr. Wolfe submitted a misleading document to the Court;

namely, the June 4 response to respondent’s Motion for Entry of

Decisions on which, as Mr. Wolfe later admitted, he signed his

then-estranged wife’s name, without her knowledge, at a time when

they were engaged in a dispute over the appropriate course of

action in this proceeding.   Moreover, on this document Mr. Wolfe

omitted the “(by POA)” designation he had placed next to Mrs.

Wolfe’s purported signature on a previous submission, after

having been specifically advised by the Court that such a

designation would result in a document’s being disregarded with

respect to his wife.   Given Mr. Wolfe’s demonstrated willingness

to proffer misleading documents and the other factors discussed

above, we are not persuaded that the January 20, 2003, letter

offered into evidence by Mr. Wolfe was ever sent to Mr. McCarthy.

     Based on the evidence adduced at the hearing and the entire

record in these cases, we reject Mr. Wolfe’s testimony and

arguments, and conclude that Mr. Wolfe and Mrs. Wolfe (for

herself and as the representative of WFO) authorized Mr. McCarthy

to sign the stipulation of settled issues and settle these cases.
                               - 22 -

     B.    Enforcement of the Stipulation of Settled Issues

     Having determined that petitioners’ counsel was authorized

to sign the stipulation of settled issues, we must now determine

whether to enforce it, or whether petitioners have presented

facts that would warrant excusing them from the settlement they

reached on the eve of trial.    We find that they have not.

     While we have discretion to set aside a filed settlement

stipulation, that discretion will only be exercised for good

cause.    Dorchester Indus., Inc. v. Commissioner, 108 T.C. 320,

334 (1997).    Generally, the party seeking to avoid the agreement

must show that failure to exercise the discretion would prejudice

him, no substantial injury will be occasioned to the opposing

party, refusal to exercise discretion might result in injustice,

and the inconvenience to the court is slight.    Id. at 334-335;

Adams v. Commissioner, 85 T.C. at 375; see also Rule 91(e).

Where the court cancels a trial in reliance on a stipulation, the

standard is even higher, and the moving party must “satisfy

standards akin to those applicable in vacating a judgment entered

into by consent”.    Dorchester Indus., Inc. v. Commissioner, supra

at 335; Stamm Intl. Corp. v. Commissioner, 90 T.C. 315 (1988);

Himmelwright v. Commissioner, T.C. Memo. 1988-114.

     Mrs. Wolfe filed the petition on behalf of WFO as its

president.    Her capacity to act on WFO’s behalf when she filed

the petition, and her continuing possession of such capacity when
                              - 23 -

Mr. McCarthy signed the stipulation of settled issues on behalf

of WFO on March 11, 2003, are undisputed.   The pending dispute

over whether Mr. Mansour should take the place of Mrs. Wolfe as

the authorized representative of WFO in this proceeding relates

to a period beginning in April of 2003, after the settlement was

agreed to and the stipulation of settled issues was signed.8

Accordingly, the dispute over who currently represents WFO in

this proceeding does not affect the determination concerning

enforcement of the settlement.

     In reliance on the stipulation of settled issues, this Court

canceled the trial.   Thus, petitioners must meet a high standard

before we will relieve them of their settlement, such as a

showing of lack of formal consent, fraud, mistake, or similar

ground.   Dorchester Indus., Inc. v. Commissioner, supra at 335.

Messrs. Wolfe and Mansour have made no such showing.   To the

contrary, the record establishes that Mr. and Mrs. Wolfe were

aware of the issues Mr. Mansour had raised and, after consulting

with their counsel, decided to accept the settlement rather than

incur the expense and risk of a trial.   Accordingly, we conclude

that petitioners are bound by the terms of the stipulation of




     8
       Messrs. Wolfe and Mansour appear to have conceded, as late
as Apr. 21, 2003, that Mrs. Wolfe was the authorized
representative of WFO by virtue of their causing her to sign two
affidavits on that date concerning the settlement, one on her own
behalf and one on behalf of WFO.
                              - 24 -

settled issues that their counsel signed.   Respondent’s Motion

for Entry of Decisions will therefore be granted.

II.   Representation of WFO

      Rule 24(b) provides that a corporation may be represented in

Tax Court proceedings by an authorized officer.   Under Rule

63(c), we have the authority to allow the substitution of a

corporate party’s representative.    Rule 60(c) provides that the

capacity of a fiduciary or other representative to litigate

before the Tax Court is determined “in accordance with the law of

the jurisdiction from which such person’s authority is derived.”

      Mrs. Wolfe signed WFO’s petition and served as its sole

authorized representative under Rule 24(b) until Mr. McCarthy

entered his appearance on behalf of WFO on January 13, 2003.

When we granted Mr. McCarthy’s motion to withdraw as counsel on

April 18, 2003, a dispute arose regarding the person authorized

to represent WFO in this proceeding.   In submissions made on

April 20 and 22, 2003 (which were not filed), and on June 4,

2003, Mr. Mansour asserted that he was a corporate officer of WFO

and purported to sign those submissions on behalf of WFO.   In a

letter received June 4, 2003, Mrs. Wolfe disputed Mr. Mansour’s

status as a corporate officer and his right to represent WFO in

this proceeding.   We treat Mr. Mansour’s June 4 submission as a

motion to be substituted as WFO’s representative in this

proceeding pursuant to Rule 63(c).
                              - 25 -

      We must decide whether Mr. Mansour has established that he

is an officer of WFO with authority to represent WFO before the

Tax Court.   We determine Mr. Mansour’s capacity to represent WFO

under Ohio law.   See Rule 60(c).   As set forth below, we conclude

that Mr. Mansour has not established that he was properly

appointed as an officer of WFO with authority to represent WFO in

this proceeding, and accordingly we decline to recognize him as

WFO’s representative under Rules 24(b) and 63.

     Ohio Rev. Code sec. 2735.04 (Anderson 2000) provides:

          Under the control of the court which appointed
     him, as provided in section 2735.01 of the Revised
     Code, a receiver may bring and defend actions in his
     own name as receiver, take and keep possession of
     property, receive rents, collect, compound for, and
     compromise demands, make transfers, and generally do
     such acts respecting the property as the court
     authorizes.

This provision has been construed as giving courts the ability to

expand or limit a receiver’s power.    State ex rel. Celebreeze v.

Gibbs, 573 N.E.2d 62, 67-68 (Ohio 1991) (“We interpret this

statute as enabling the trial court to exercise its sound

judicial discretion to limit or expand a receiver’s powers as it

deems appropriate.”).   Thus, in Ohio, a receiver has only the

authority granted to him by a court.

     We do not read the order appointing Mr. Deborde “temporary

receiver/manager” of the business that was identified only as

“Bristol’s” as giving Mr. Deborde the power to appoint officers

for WFO and direct litigation in this Court.   Mr. Deborde is one
                                - 26 -

of the managers of Bristol’s.    The powers that the Ohio court

specifically granted to Mr. Deborde involve only the day-to-day

management of the business, such as depositing receipts and

paying bills.   We further note that Mr. Deborde’s appointment was

temporary until the court could hold a hearing “to determine the

management and running of the parties’ business known as

Bristol’s.”   The stated purpose of the agreement was “to allow

the business to operate.”

     In light of Mr. Deborde’s position as a manager of Bristol’s

and the limited powers described in the order appointing Mr.

Deborde “receiver/manager” of Bristol’s, we conclude that Mr.

Mansour has not established that the Ohio court granted Mr.

Deborde the authority to appoint corporate officers for WFO or to

direct the litigation of WFO’s case before this Court.9    Insofar

as Mr. Mansour has not established that he is an officer of WFO,

authorized to act on its behalf in this proceeding, he is not

qualified to represent WFO before this Court.    See Rule 24(b).

Accordingly, we deny his motion to be substituted as WFO’s



     9
       Our interpretation of the order is further supported by
the order’s silence regarding the management of the proceedings
before this Court. The order incorporated an agreement between
Mr. and Mrs. Wolfe. At the time, Mr. and Mrs. Wolfe were aware
that respondent was seeking to enforce the settlement and that
they disagreed about how to respond. Mrs. Wolfe had expressly
disavowed any authority of Mr. Mansour to represent WFO in these
proceedings. In these circumstances, the order’s silence
regarding matters beyond the day-to-day deposit of receipts and
payment of bills strongly suggests that it was not intended to
cede to Bristol’s manager the authority to appoint corporate
officers who would make decisions for WFO in these proceedings.
                                - 27 -

representative.    As a consequence, Mrs. Wolfe remains as WFO’s

authorized representative.

III. Sanctions

     At the conclusion of the hearing, respondent raised the

issue of sanctions against petitioners.    We had also advised the

parties prior to the hearing that, in the event their positions

appeared unjustified after the hearing, sanctions might be

appropriate.     Accordingly, by separate order we shall permit the

parties to address the issue of sanctions and shall defer

entering decisions in these cases pending our consideration of

that issue.

     To reflect the foregoing,

                                                An appropriate order

                                           will be issued.
