                        T.C. Memo. 1999-112



                      UNITED STATES TAX COURT



          WALTER S. AND SALLY H. NEWBERN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos.   3792-87, 12619-90.           Filed April 2, 1999.



     A. Eugene Lewis, for petitioners.

     Judith C. Winkler, for respondent.



                        MEMORANDUM OPINION


     COLVIN, Judge:   These cases are before the Court on

petitioners’ second motion to set aside stipulations of settled

issues.

     Petitioners contend that their counsel at that time

(petitioners' former counsel) signed stipulations of settled

issues in these cases without their authority.     The sole issue
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for decision is whether petitioners are bound by those

stipulations of settled issues.    We hold that they are.

     The parties and petitioners' former counsel submitted

memoranda and affidavits relating to petitioners' motion.    We

decide the motion on the basis of those memoranda and affidavits.

Neither petitioners, nor their former counsel, nor respondent

requested a hearing to decide this motion.

     Section references are to the Internal Revenue Code of 1986.

Unless otherwise indicated, Rule references are to the Tax Court

Rules of Practice and Procedure.    References to Mr. and Mrs.

Newbern are to Walter and Sally Newbern.

                            Background

1.   Settlement of Petitioners' Tax Court Case

     Petitioners claimed flow-through deductions based on their

interest in the Vanguard Oil Technology partnership, which were

disallowed by a notice of deficiency dated November 24, 1986.

Petitioners filed a petition on February 13, 1987, in docket No.

3792-87.   Petitioners retained Declan J. O'Donnell (O'Donnell) in

June 1987 on the recommendation of the Vanguard Oil Technology

partnership.   O'Donnell signed and filed petitioners' petition in

docket No. 12619-90, and he filed an entry of appearance in the

case at docket No. 3792-87 on September 14, 1992.    In 1994, he

signed and filed amendments to the petitions in both of these

cases which alleged that Mrs. Newbern was an innocent spouse.

Signature of counsel on a petition is a representation that

counsel is authorized to represent a taxpayer.    Rule 33(b).
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     Several times in fall 1994, O'Donnell and other lawyers in

O'Donnell's law firm discussed with Mr. Newbern the possibility

of settling petitioners' cases.    On January 31, 1995, O'Donnell

and respondent's counsel signed stipulations of settled issues in

these cases which resolved issues concerning Vanguard Oil

Technology's investment in the Elektra Hemisphere tax shelter for

1981 and 1982.   O'Donnell promptly notified petitioners in

writing of the settlements.   Petitioners knew the terms of the

settlements in February 1995.    At a time not specified in the

record after he signed the stipulations of settled issues,

O'Donnell asked petitioners to ratify the stipulations in

writing.   They did not do so.   Petitioners retained new counsel

for these cases on November 17, 1995.    O'Donnell withdrew as

petitioners' counsel on December 10, 1996.

2.   Petitioners' Motion To Set Aside the Settlements

     Petitioners filed a motion to set aside the stipulations of

settled issues on March 3, 1997, which was more than 2 years

after O'Donnell told petitioners the terms of the settlements.

We denied petitioners' motion because the consistent settlement

procedures of section 6224 apply only to partnership taxable

years beginning after September 3, 1982, and thus do not apply to

Elektra Hemisphere's 1981 and 1982 tax years.    Estate of Campion

v. Commissioner, 110 T.C. 165 (1998).    We also decided that

respondent had not committed fraud on the Court and that

petitioners were bound by the settlements with respect to the

Elektra Hemisphere partnership issues.    We permitted petitioners
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to file a second motion to set aside the stipulations of settled

issues in which they could assert that O'Donnell lacked authority

to settle the partnership issues.

                            Discussion

1.   Position of Petitioners, O'Donnell, and Respondent

     Petitioners contend that O'Donnell did not have authority to

sign the stipulations of settled issues and that Mr. Newbern did

not intend to settle these cases on the basis stipulated.   Mr.

Newbern asserts that he authorized O'Donnell in November 1994 to

concede petitioners' claim that Mrs. Newbern was an innocent

spouse but not to concede or settle the partnership issues.

     O'Donnell had no written authority from petitioners to

settle the cases, but he stated in his affidavit that he

remembers that he felt comfortable signing the stipulations of

settlement based on a telephone conversation he had with

petitioners.

2.   Background

     Whether an attorney has authority to act on behalf of a

taxpayer is a factual question to be decided according to common

law principles of agency.   Dorchester Indus. Inc. v.

Commissioner, 108 T.C. 320, 330-331 (1997); Adams v.

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

Commissioner, 70 T.C. 623, 627-629 (1978).   Generally, a lawyer

may settle a client's claim only if the client expressly

authorizes the lawyer to do so.   See Smith v. Washburn & Condon,

297 P. 879, 880 (Ariz. 1931); see also Model Rules of
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Professional Conduct rule 1.2(a).   However, prolonged silent

acquiescence by a client with full knowledge of the facts may be

treated as ratification of an unauthorized act or settlement by

his or her lawyer.   Thompson v. D.C. Am., Inc., 951 F. Supp. 192,

195-196 (M.D. Ala. 1996) (a settlement agreement negotiated by

the plaintiff's attorney without her authority was treated as

ratified by the plaintiff because she kept settlement proceeds

for more than a year); Yarnall v. Yorkshire Worsted Mills, 87

A.2d 192, 193 (Pa. 1952) (a settlement stipulation executed

without authority by the plaintiff's attorney was treated as

ratified by the plaintiff in part because he waited 20 months to

repudiate the settlement).

     Where taxpayers challenge the authority of counsel to act on

their behalf, the burden of proof is on the taxpayers to show

that their counsel lacked authority.   Dahl v. Commissioner, T.C.

Memo. 1995-179, affd. per curiam without published opinion 85

F.3d 643 (11th Cir. 1996); Smith v. Commissioner, T.C. Memo.

1990-430.

3.   Whether Petitioners Are Bound by the Settlements

     Petitioners deny that they authorized O'Donnell to settle.

O'Donnell believed petitioners had authorized him to sign the

stipulations of settled issues.   Petitioners have failed to prove

that O'Donnell lacked express authority to settle.   However, even

if we did not believe that O'Donnell had express authority to

settle, petitioners impliedly ratified the settlements by failing

to repudiate them for more than 2 years after they knew about
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them.    See Mishawaka Properties Co. v. Commissioner, 100 T.C.

353, 366 (1993) (implied ratification); Kraasch v. Commissioner,

supra at 627-628 (taxpayers were bound by a petition filed and

signed in their names; we deemed their conduct after the petition

was filed to be implied ratification since they knew about the

petition and did not disaffirm it); Gaviola v. Commissioner, T.C.

Memo. 1986-349 (Court rejected taxpayer's attempt to withdraw a

stipulation of settlement based on her claim that her attorney

was without authority to represent her because, even if she did

not initially authorize him to represent her, she ratified his

representation during the course of proceedings before the Tax

Court), affd. without published opinion 819 F.2d 1129 (2d Cir.

1987).

     For the reasons stated above, we deny petitioners' second

motion to set aside the stipulations of settled issues.

Petitioners are bound by their settlements of the Elektra

Hemisphere partnership issues.


                                              An order will be issued

                                         denying petitioners' second

                                         motion to set aside stipulations

                                         of settled issues.
