Village at Main Street Phase II v. Dept. of Rev. , 20 Or. Tax 524 ( 2012 )

524 July 11, 2012 No. 58
IN THE OREGON TAX COURT
REGULAR DIVISION
VILLAGE AT MAIN STREET PHASE II, LLC,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant,
and
CLACKAMAS COUNTY ASSESSOR,
Defendant-Intervenor.
(TC 5054)
VILLAGE AT MAIN STREET PHASE III, LLC,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant,
and
CLACKAMAS COUNTY ASSESSOR,
Defendant-Intervenor.
(TC 5055)
VILLAGE RESIDENTIAL, LLC,
Plaintiff,
v.
DEPARTMENT OF REVENUE,
Defendant,
and
CLACKAMAS COUNTY ASSESSOR,
Defendant-Intervenor.
(TC 5056-7)
Plaintiffs (taxpayers) appealed from a Magistrate Division decision as to
the real market value of improvements to real property. Parties then proceeded
on cross-motions for summary judgment for a preliminary ruling on the question
of the applicability of ORS 305.287 to the proceedings with regard to the start
of the statutory appeal period and whether and when important value deter-
minations made in the property tax process could be changed. In granting tax-
payers’ motion and denying the county’s motion, the court ruled that the “appeal”
Cite as 20 OTR 524 (2012) 525
referred to in ORS 305.287 is the appeal of a party to the Magistrate Division of
this court; that when the legislature intends to have legislation apply to pending
appeals it says so and that nothing in the actions of the legislature suggested it
intended any retroactive application for the new law, therefore ORS 305.287 did
not apply in this case.
Submitted on parties’ cross-motions for preliminary
ruling.
Donald H. Grim, Greene & Markley PC, Portland, filed
the motion for Plaintiffs (taxpayers).
Kathleen J. Rastetter, Clackamas County Counsel,
Oregon City, filed the motion for Defendant-Intervenor
Clackamas County Assessor (the county).
Decision for Plaintiffs rendered July 11, 2012.
HENRY C. BREITHAUPT, Judge.
I. INTRODUCTION
This matter is before the court on cross-motions
for a preliminary ruling on the question of whether ORS
305.287 applies to the proceedings now pending in this divi-
sion of the court.1 ORS 305.287 provides:
“Whenever a party appeals the real market value of one or
more components of a property tax account, any other party
to the appeal may seek a determination from the body or
tribunal of the total real market value of the property tax
account, the real market value of any or all of the other
components of the account, or both.”
ORS 305.287 was added to the statutes by the 2011
Legislature. Or Laws 2011, ch 397. The statute took effect
September 29, 2011, without any provision how, if at all,
it was to apply to tax disputes that were underway on the
effective date of the statute. It is about the answer to that
question that the parties disagree.
II. FACTS
The relevant facts are not in dispute and are, in
simplified form, as follows. Plaintiff (taxpayer) constructed
1
Unless otherwise noted, all references to the Oregon Revised Statutes
(ORS) are to 2011.
526 Village at Main Street Phase II v. Dept. of Rev.
improvements on land in Clackamas county. These improve-
ments should be thought of as buildings. The assessor of
Defendant-Intervenor (the county) assessed the land and
improvements. As required by statute the assessor sep-
arately assessed land from buildings. ORS 308.215(1)(e)
and (1)(f). Taxpayer then appealed to the county Board
of Property Tax Appeals (BOPTA). The county BOPTA
affirmed the values found by the assessor, stating separate
values for the land and improvement components of the
property tax account. Taxpayer then, as is allowed under
the decision in Nepom v. Dept. of Rev., 272 Or 249, 536 P2d
496 (1975), appealed only the building values found by the
county BOPTA to the Magistrate Division of this court. All
appeals were filed prior to the year 2011.
Before the cases regarding valuation of improve-
ments came to trial in the Magistrate Division, they were
stayed so that a related issue could be litigated. That related
issue grew out of the fact that the county had failed to include
in the initial assessment of the land the value of certain
onsite improvements to the land—as opposed to the build-
ing improvements on the land. The county attempted to add
the value of those improvements to the land component of the
account using the omitted property provisions of the statutes.
See ORS 311.205 to ORS 311.235. Taxpayer objected and
those objections were upheld by the Magistrate Division of
this court, this division, and the Oregon Supreme Court. See
Clackamas Cty. Assessor v. Village at Main Street II, LLC,
TC-MD No. 070804D (Oct 28, 2008) (slip op), aff’d, 20 OTR 96(2010), aff’d, 349 Or 330, 245 P3d 81 (2010).
After the opinion of the Supreme Court was issued
and the question of additions to the land component in the
account had been definitively settled, the stay on the trial
of the valuation dispute as to the buildings was lifted. The
cases proceeded to trial and a decision issued December 13,
2011. Taxpayer was dissatisfied with that decision and, pur-
suant to ORS 305.501(5)(a), it proceeded to file a complaint
in this division on January 26, 2012, after the date ORS
305.287 became effective.
Defendant Department of Revenue (the depart-
ment) was the initial defendant in this proceeding. Cf. ORS
305.501(5)(c). The county has intervened as a defendant.
Cite as 20 OTR 524 (2012) 527
Cf. 305.560(4)(b). In the answers filed by the department
and the county, neither has raised the applicability of ORS
305.287 as an affirmative defense or counterclaim. That
question was raised at a case management conference and
the county and taxpayer have each requested a preliminary
ruling on the question.
III. ISSUE
Does ORS 305.287 apply to this proceeding in the
Regular Division?
IV. ANALYSIS
The major premise of the county is that the word
“appeal” in the opening phrase of ORS 305.287 includes the
process by which a party to a proceeding in the Magistrate
Division of this court comes to this division pursuant to
ORS 305.501(5)(a). ORS 305.501(5)(a) provides that a party
dissatisfied with a decision of a magistrate “may appeal the
decision to the judge of the tax court.”
The county then observes that such an appeal of
the improvement component of the accounts in question
occurred in early 2012, well after the September 29, 2011,
effective date of the 2011 legislation. The county then con-
cludes that it may, as stated in ORS 305.287, “seek a deter-
mination * * * of the total real market value of the property
tax account, the real market value of any or all of the other
components of the account, or both.”
If the county is correct in its argument, it will, not
withstanding taxpayer’s limited appeal of the buildings com-
ponent of the account, be able to litigate the value of the land
component of the tax account and recover from its oversight
in failing to include the value of the onsite improvements
in the initial appraisal of the land component. The county
points out, correctly, that the value of the land component
has never been litigated.
If the county is not correct in its position, the effect
of its failure to include the onsite improvements to the land
will never be subject to correction. That result, harsh in
the view of the county, is a result Article XI, section 11, of
the Constitution of Oregon—otherwise known as Measure
528 Village at Main Street Phase II v. Dept. of Rev.
50. That measure amended the Oregon Constitution so as
to limit when important value determinations made in the
property tax process may be changed. See Or Const Art XI,
§ 11(1). Those limitations prevent the county from correct-
ing its oversights in valuation of the land component in the
tax account in an earlier year where, as has been decided
in the related litigation in this overall dispute, the omitted
property process is not available to the county.
Taxpayer objects that the reading the county gives
to ORS 305.287 is, in effect, retroactive application of that
statute. Taxpayer observes, correctly, that retroactivity may
be allowed, but only when the legislature intends that result.
Taxpayer points to the fact that nothing in the actions of
the legislature suggests it intended any retroactive applica-
tion for the new law. Taxpayer therefore concludes that ORS
305.287 cannot apply in this case—the only issue before the
court should be the value of the buildings on the land.
If taxpayer is correct in its position, it will be able
to litigate the valuation of the buildings in the account and
potentially improve its position on those values without any
risk that the county will be able to obtain a decision that
the land component of the account was initially understated.
Stated differently, it may win as to the buildings without the
risk of losing part or all of its victory as a result of the case
being opened up to consideration of land value.2
This matter depends on how ORS 305.287 is read.
The question is, what was intended by the legislature? The
text of the statute offers only some guidance. The opening
phrase states that the new rule applies “whenever a party
appeals the real market value of one or more components of
a property tax account.” The first question is the meaning of
the word “whenever.” As an adverb it means “at whatever
time” as in “you can come tomorrow or whenever.” As a con-
junction it means “at any or all times that,” as in “whenever
he leaves the house he takes an umbrella.” Websters 3d New
Int’l Dictionary 2602 (unabridged ed 2002).
2
Note that taxpayer could, in fact, do worse in the Regular Division, even if
only the question of the value of the buildings is litigated. The court may deter-
mine the value of property without regard to the positions pleaded by the parties.
ORS 305.412.
Cite as 20 OTR 524 (2012) 529
These two possible meanings conflict in this case.
The use of the word as an adverb supports taxpayer’s con-
struction in that it suggests that there is only one time
identified. Thus “whenever a party appeals” is read as “at
whatever time a party appeals,” the implication being that
there is only one such time. If the meaning is the one asso-
ciated with the use of the word as a conjunction, the statute
reads “at any or every time that a party appeals.” With that
reading, if the complaint filed in the Regular Division is an
“appeal,” it is one of several times that an appeal occurs and
would be included in concept of “every time” a party appeals.
To resolve what was intended by the legislature
when it used the word “whenever,” it is helpful to consider
what the meaning of the phrase “appeals the market value
of one or more components of a property tax account” in ORS
305.287. This action, after all, is the action to which the
temporal descriptor “whenever” was attached by the legisla-
ture. The statutory context within which that action occurs
provides guidance.
The statutory framework for property tax disputes
includes four different occasions when the legislature refers
to an “appeal” in connection with a dispute as to the valu-
ation of property. The first of these is at the time of a peti-
tion by a taxpayer to the relevant BOPTA. ORS 309.026
describes petitions to BOPTA as being for the reduction of
real market value of property. While the initiating docu-
ment is described as a petition, there is no doubt that the
proceeding is an appeal. The tribunal is, after all, described
as one for “property tax appeals.” Further, ORS 305.275(3),
for example, speaks of a situation where “a taxpayer may
appeal to the board of property tax appeals.”
The appeal to a BOPTA has important and interest-
ing features, however. The appealing party can only be the
taxpayer. ORS 309.100. The only question can be a reduction
of value for property. ORS 309.026.3 The 2011 legislature
3
Under current rules of the department, increases in the value of one com-
ponent of an account may occur if the petition to BOPTA does not specify which
component of the account is appealed. However, if the petition does specify the
component, no increase in value may be made. See Oregon Administrative Rule
(OAR) 150-309.026(2)-(A).
530 Village at Main Street Phase II v. Dept. of Rev.
made no change to these provisions of ORS chapter 309.
The appeal referred to in ORS 305.287 is one that may be
made or taken by either party to a property tax dispute.
Accordingly, the appeal referred to in ORS 305.287 cannot
be the “one-sided” appeal to a BOPTA.
The second occasion on which an appeal may occur
with respect to the valuation of property is an appeal of the
action of a BOPTA to the Magistrate Division. This appeal is
taken under ORS 305.275(3). That appeal is also an appeal
of the real market value of one or more components of a prop-
erty tax account. A taxpayer can appeal to a BOPTA as to
only one component and, in such cases, the BOPTA may only
rule on that component. However, the order of a BOPTA that
is appealed to the Magistrate Division must separately state
the values for each component of the property tax account,
whether or not all components are appealed. OAR 150-
309.110(1). The mechanisms of the appeal to the Magistrate
Division and those of ORS 305.287 do not conflict.
Following a decision of a magistrate, either party
can “appeal” the decision to the Regular Division of the
court. ORS 305.501(5)(a). That “appeal” is undertaken
by filing a complaint seeking a de novo proceeding rather
than a review of the findings of fact or conclusions of law
of a magistrate. That appeal is described in the statutes as
being “original,” “independent,” and “de novo.” ORS 305.425.
However, nothing in the statutes prior to the addition of
ORS 305.287 suggested that if a claim for relief had not
been made for a component of an account to the Magistrate
Division such a claim could be made for the first time to the
Regular Division. The mechanisms of the Regular Division
and ORS 305.287 do not fit together well.
Following a decision by the Regular Division of
this court, either party can “appeal” to the Oregon Supreme
Court. ORS 305.445. That appeal is limited in scope how-
ever, and extends only to errors of law or absence of sub-
stantial evidence to support findings of fact made by the Tax
Court judge. Id. ORS 305.445 was not amended by the 2011
legislature. The valuation of property is always a matter of
fact and not law. Lewis v. Dept of Rev, 302 Or 289, 292-93,
728 P2d 1378 (1986). Application of the provisions of ORS
Cite as 20 OTR 524 (2012) 531
305.287 to the appeal taken to the Supreme Court would
cause serious statutory conflicts. It would involve having the
Supreme Court addressing factual questions not theretofore
addressed by the Tax Court judge, in direct conflict with the
limited scope of review in ORS 305.445 for findings of fact.
A review of the four occasions that have been
described by the legislature as involving an “appeal” of real
property value leads to the conclusion that in ORS 305.287
the reference cannot be to each and every stage at which an
“appeal” may be taken. For the reasons discussed above, it
cannot refer to the first stage—the appeal to a BOPTA—or to
the fourth stage—the appeal to the Oregon Supreme Court.
If every step labeled for some purposes as an “appeal”
is not an occasion for a party to seek a determination of the
value of some or all components of a property tax account, is
there statutory guidance, even indirect guidance, of how to
proceed in determining whether the “appeal” referred to in
ORS 305.287 is one or more of the two remaining steps—the
appeal to the Magistrate Division and the “appeal” to the
Regular Division? The court believes there is.
Applying ORS 305.287 at a point no later than
an appeal to the Magistrate Division avoids or solves a
number of problems. As stated above, the mechanisms of
the Magistrate Division and those of ORS 305.287 fit well
together.
Further, application of the statute at the time of the
appeal to the Magistrate Division is the only construction
that is consistent with the expressed legislative goal that
tax disputes first be addressed, with only limited excep-
tions, in the Magistrate Division. That goal is found in ORS
305.501(1). That goal has been the premise for a number of
decisions of this court that have restricted the ability of par-
ties to simply avoid the Magistrate Division. See, e.g., Spears
v. Dept. of Rev., 20 OTR 88 (2010). There is no question that
the legislature has, with only limited exceptions, directed
that tax disputes between taxpayers and governments pass
through, initially, the Magistrate Division. In that division
more informal procedures are used and the possibility of
mediation exists. The Oregon Supreme Court has enforced
532 Village at Main Street Phase II v. Dept. of Rev.
this legislative intent as well. Wynne v. Dept. of Rev., 342 Or
515, 156 P3d 64 (2007).
Nor does applying ORS 305.287 at the stage of an
appeal to the Magistrate Division come too early for either
party to a dispute. Each party to a property tax dispute cer-
tainly knows or should know, at the time of an appeal to the
Magistrate Division, whether one component of a property
tax account has, in its opinion, been properly valued. All par-
ties know what the division of value, as among components of
the account, is. Those separately stated conclusions must be
included in the order of the BOPTA from which a taxpayer or
a county assessor may appeal. See OAR 150-309.110(1).4
If any concern on component valuations is not raised
at the point of the initiation of the claims in this court, at the
Magistrate Division, one would have to question whether the
party who knew of the claim and did not raise it was seeking
a strategic advantage unrelated to the merits of the case.5
The legislative history of ORS 305.287 indicates that the
legislature, or at least those promoting the legislation that
became ORS 305.287, had concerns about taxpayers gaining
a strategic advantage by only including in the appeal to the
Tax Court the value of one component of the tax account.6
Providing an opportunity for the “respondant” in an appeal
to seek a determination of value for other or all components
was the solution chosen by the legislature. However, achiev-
ing that goal does not require that the “respondant” be given
a choice of raising a responsive issue either at the time of the
appeal to the Magistrate Division or later at the time of an
appeal to the Regular Division of the court.
4
The court recognizes that in this particular case the county, at the time
of the appeal to the Magistrate Division by taxpayer, may not have yet discov-
ered its errors. Or, at that point in time, it may have thought it could proceed
to recover from its errors through the omitted property process. However, the
proper construction of ORS 305.287 should consider the appeals process gener-
ally and not the particular and unusual facts applicable to this one case.
5
It is important to remember that this strategic advantage was permitted
under Nepom prior to adoption of ORS 305.287. This case, of course, concerns
when the legislature intended the neutralization of Nepom to take effect.
6
In theory, the strategic shoe could be on the other foot. If county assessors
are dissatisfied with the actions of the county BOPTA, they are the party appeal-
ing to the Tax Court and therefore possibly appealing only one component of an
account.
Cite as 20 OTR 524 (2012) 533
There are good reasons why the “respondant” under
ORS 305.287—that is the initially non-appealing party—
should be required to request determinations of value for
components not included in the appeal to the Magistrate
Division by the other party—“the appellant.” Consider
that under the current statutes, there is a time limit
of 30 days within which to appeal an order of a BOPTA.
ORS 305.280(4). As already stated, any such order would
address the valuation decisions of the BOPTA on each of
the components of the account. OAR 150-309.110(1). At that
point if the appellant appeals only one component of the
account and the “respondant” believes another component is
improperly valued, there appears to be no reason why that
other party should not be required to request the determi-
nation provided for in ORS 305.287 at that time as well.
The legislature expanded the potential scope of an
appeal by adopting ORS 305.287. In effect the legislature
provided for a “cross-appeal” from the BOPTA order by the
“respondant.” However, there is no indication in the statute
or legislative history that the legislature intended to sig-
nificantly change the time frame within which controver-
sies should be framed. However, if the county is correct in
its argument, the “respondant” seeking a determination of
components not covered by the appeal, could wait until after
the proceedings in the Magistrate Division. In the face of
further appeal to the Regular Division by the party who,
as is permitted, appealed only one component value to the
Magistrate Division, the other party could then, well after
the 30 day statute of limitations, make its claim for a deter-
mination of value for other components. This potential con-
flict with the existing, and unchanged, time frames can be
avoided by treating the appeal referred to in ORS 305.287
as being the appeal to the Magistrate Division. Further, the
legislative purpose was to neutralize strategic moves made
possible by Nepom. It would be ironic and, in the view of the
court, improper to construe ORS 305.287 so that such stra-
tegic moves could be made by a party at a different time—
that is on appeal to the Regular Division rather than the
Magistrate Division.
The county suggests that the decisions in Allen v.
Dept. of Rev., 17 OTR 427 (2004) and Dept. of Rev. v. Bahr,
534 Village at Main Street Phase II v. Dept. of Rev.
20 OTR 449 (2012) somehow require that any reference
to an “appeal” must include the appeal described in ORS
305.501(5)(a) by which a case moves from the Magistrate
Division to the Regular Division. That is not the case. Allen
recognized that the Tax Court is one court with two divi-
sions. It then addressed a specific effective date provision
for an amendment to ORS 305.490. The statutory provision
spoke to “proceedings” in the court and when attorney fee
awards could be made. Allen was a case with a specific stat-
utory effective date provision using the term “proceedings.”
It was not a case dealing with the legislative intent about
the word “appeal” used in the substantive part of a statute,
like ORS 305.287, that had no effective date provision.
Bahr dealt with application of the burden of proof
provisions found in ORS 305.427. Again the statute speaks
to proceedings and the court recognized that separate
proceedings occurred in the Magistrate Division and the
Regular Division of the court. The question was whether if
the Department of Revenue lost in the Magistrate Division
and appealed to the Regular Division it then bore the bur-
den of proof. As is the case with the decision in Allen, the
factual and legal context of the Bahr decision was so differ-
ent from that presented in this case that Bahr does not help
in the analysis here, much less dictate the result.
The court therefore concludes that the “appeal”
referred to in ORS 305.287 is the appeal of a party to the
Magistrate Division of this court. In this case that appeal
had already occurred at the time that ORS 305.287 became
effective. The question then becomes whether the provisions
of ORS 305.287 apply to the appeal in this case—that is the
appeal by taxpayer to the Magistrate Division.
Statutes can apply retroactively if the legislature so
intends. Whipple v. Howser, 291 Or 475, 480-81, 632 P2d
782 (1981). Nothing in the text of HB 2572 indicates that
the legislature intended ORS 305.287 to apply retroactively
to appeals that had already been commenced. The effective
date provision for the bill was the standard provision mak-
ing the legislation effective 90 days following adjournment
of the legislature.
Cite as 20 OTR 524 (2012) 535
The absence of any legislative provision on retroac-
tive application is very significant. The reason is that the
legislature knows, indeed the 2011 legislature knew, how to
describe retroactive effect or application of new rules to pend-
ing appeals. Consider, for example, the provisions of ORS
305.286, added by HB 2569. Or Laws, 2011, ch 112. This bill
dealt with the authority of counties to offer deferred billing
credits in cases of large property tax appeals. The concern
was that successful taxpayer appeals could come with large
interest awards that added to the economic impact of a loss
for the county in litigation.
ORS 305.286 provides, using language very similar
to that found in ORS 305.287:
“Whenever any property value or claim for exemption or
cancellation of a property tax assessment is appealed, if the
dollar amount in dispute exceeds $1 million, the assessor
of the county in which the property is located may order the
officer in charge of the assessment and tax roll to include a
deferred billing credit in the property tax statement of the
property or in a separate notice of deferred billing.”
(Emphasis added.) The effective date provision for HB 2569
states that the provisions apply “to appeals active on or filed
on or after the effective date” of the bill. HB 2569 § 3 (2011).
The very same witnesses for the counties testified on the
bill that became ORS 305.287 and the clearly “retroactive”
provisions of HB 2569. There was no discussion of the effec-
tive date provisions for either bill. However, the court must
conclude that when the legislature intends to have legisla-
tion apply to pending appeals it says so. It said so as to HB
2569. It did not say so as to the legislation codified as ORS
305.287.
V. CONCLUSION
Accordingly, ORS 305.287 does not apply to this
proceeding. The motion of the taxpayer is granted and the
cross-motion of the county is denied.
This case will be continued for trial solely on the
question of the proper value of the building improvements in
the relevant tax accounts. Now, therefore,
536 Village at Main Street Phase II v. Dept. of Rev.
IT IS ORDERED that Plaintiff’s Motion for Pre-
liminary Ruling is granted; and
IT IS FURTHER ORDERED that Defendant-
Intervenor’s Motion for a Preliminary Ruling Regarding
ORS 305.287 is denied.