A stipulation of settlement made by counsel in open court may bind his clients even where it exceeds his actual authority.
Plaintiffs, Carlton Hallock and Seeley Phillips, in 1968 purchased a 67.7-acre tract of land in Schoharie County, about two miles from the proposed site of a dam to be built by the Power Authority of the State of New York (PASNY). Plaintiffs intended to sell sand and gravel from their land to PASNY for use in construction of the dam, but the State, on behalf of PASNY, in 1969 appropriated the entire tract in fee. Plaintiffs filed a claim for damages in the Court of Claims and commenced a declaratory judgment action in Supreme Court against defendants, PASNY and the State, to challenge their legal right to take by eminent domain a full fee interest rather than simply an easement, contending that only a small portion of the sand and gravel on the land was actually required for the dam. In Hallock v State of New York (32 N.Y.2d 599), we held that this issue could not be resolved as a matter of law on the record then before us and remitted the case for trial.
Trial was to begin on April 22, 1975, preceded by a pretrial conference that morning. Court rules required that attorneys attending pretrial conferences have authority to enter into binding settlements on behalf of their clients (22 NYCRR 861.17). Plaintiffs were represented by Anthony Quartararo, who had served as their counsel throughout the five-year life of the litigation and had engaged in prior settlement discussions with defendants. Defendants had offered to settle by reconveying the land to plaintiffs and allowing them to keep the advance they had received, but plaintiffs advised Quartararo that they did not like that offer and wanted the matter to go before the Judge.
Hallock was ill on April 22 and did not attend the pretrial conference. Phillips, however, was present with his long-time
More than two months elapsed before plaintiffs voiced any objection. In mid-July 1975, Hallock expressed his dissatisfaction with the settlement, and plaintiffs thereafter moved to vacate the stipulation, relief which the trial court granted. The Appellate Division, however, ruled that a plenary action was required to set aside a stipulation of settlement (58 A.D.2d 67, app dsmd 43 N.Y.2d 892),
A divided Appellate Division reversed, the three-Justice majority concluding that Quartararo had no authority to settle the case on the terms embodied in the stipulation, rendering the settlement a nullity, and restored plaintiffs' actions to their respective calendars.
From the nature of the attorney-client relationship itself, an attorney derives authority to manage the conduct of litigation on behalf of a client, including the authority to make certain procedural or tactical decisions (see Code of Professional Responsibility, EC 7-7; Gorham v Gale, 7 Cow 739, 744; Gaillard v Smart, 6 Cow 385, 388). But that authority is hardly unbounded. Equally rooted in the law is the principle that, without a grant of authority from the client, an attorney cannot compromise or settle a claim (see Kellogg v Gilbert, 10 Johns 220; Jackson v Bartlett, 8 Johns 361), and settlements negotiated by attorneys without authority from their clients have not been binding (see Countryman v Breen, 241 App Div 392, affd 268 N.Y. 643; Spisto v Thompson, 39 A.D.2d 598; Leslie v Van Vranken, 24 A.D.2d 658; Mazzella v American Home Constr. Co., 12 A.D.2d 910).
Quartararo unquestionably had authority from plaintiffs to conduct settlement negotiations with defendants as he had done with plaintiffs' knowledge and assent during the weeks prior to April 22, 1975. At most, on April 22 he exceeded the authority plaintiffs urge had been limited shortly before by their injunction to negotiate a better deal. The question raised by this appeal, then, is whether it should be plaintiffs, or defendants, who bear the responsibility for Quartararo's conduct in accepting the settlement they claim had been rejected. We conclude that plaintiffs must bear that responsibility, and are relegated to relief against their former attorney for any damages which his conduct may have caused them (see Fox v Wiener Laces, 105 Misc.2d 672, 676;
Phillips cannot be heard to challenge the settlement. He was in court during the entire pretrial conference. At no time during negotiation of the settlement or dictation of the agreement into the record — or indeed during the more than two months that followed — did Phillips voice an objection. Phillips acquiesced in, consented to, and is bound by the settlement (see Owens v Lombardi, 41 A.D.2d 438, 440-441 [Simons, J.], mot for lv to app den 33 N.Y.2d 515).
Hallock also is bound by the settlement. Even if Quartararo lacked actual authority because, according to plaintiffs, Quartararo accepted the very settlement his clients had instructed him to reject, still Quartararo had apparent authority to bind Hallock.
Essential to the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction. The agent cannot by his own acts imbue himself with apparent authority. "Rather, the existence of `apparent authority' depends upon a factual showing that the third party relied upon the misrepresentation of the agent because of some misleading conduct on the part of the principal — not the agent." (Ford v Unity Hosp., 32 N.Y.2d 464, 473; see, also, Restatement, Agency 2d, § 27.) Moreover, a third party with whom the agent deals may rely on an appearance of authority only to the extent that such reliance is reasonable (see Wen Kroy Realty Co. v Public Nat. Bank & Trust Co., 260 N.Y. 84, 92-93; Restatement, Agency 2d, § 8, Comment c; Conant, Objective Theory of Agency: Apparent Authority and the Estoppel of Apparent Ownership, 47 Neb L Rev 678, 681).
Here, as a matter of law, Hallock clothed Quartararo with apparent authority to enter into the settlement. Quartararo had represented plaintiffs through the litigation, engaged in prior settlement negotiations for them and, in furtherance of the authority which had been vested in him, appeared at the final pretrial conference, his presence there constituting an implied
Plaintiffs insist that apparent authority is an equitable doctrine, having its origins in the principle of estoppel (see Rothschild v Title Guar. & Trust Co., 204 N.Y. 458, 461), and that defendants must establish detrimental reliance before the settlement stipulation can be enforced. The discontinuance of lengthy litigation on the day of trial, in reliance on the adversary's settlement stipulation — even for defendants, who often may prefer that judgment be deferred — coupled with plaintiffs' silence for more than two months thereafter, is itself a change of position, if such a showing is indeed even required before the doctrine of apparent authority may be invoked.
Accordingly, the order of the Appellate Division should be reversed, with costs, and the judgment of Supreme Court, Schoharie County, reinstated.
Order reversed, etc.