Rosalie Ridge LLC v. Multnomah County Assessor ( 2012 )

IN THE OREGON TAX COURT
MAGISTRATE DIVISION
Property Tax
ROSALIE RIDGE LLC, )
)
Plaintiff, ) TC-MD 111234C
)
v. )
)
MULTNOMAH COUNTY ASSESSOR, )
)
Defendant. ) DECISION
Plaintiff appeals the disqualification of 9.75 acres of land, identified in Defendant‟s
records as Account R324603 (subject property), from the Western Oregon designated forestland
special assessment program (special assessment), for the 2011-12 tax year.1 Plaintiff also
appeals the additional taxes Defendant imposed for tax years 2005-06 through 2010-11.
Trial was held in the Tax Court in Salem, Oregon, on September 19, 2012. John Junkin
(Junkin), Attorney at Law, represented Plaintiff; Lillian R. Logan (Lillian Logan), sole member
of Plaintiff, and Daniel James Logan (Daniel Logan), tree farmer and forester, testified for
Plaintiff. Lindsay R. Kandra (Kandra), Multnomah County Assistant Attorney, appeared on
Defendant‟s behalf. The court received Plaintiff‟s Exhibits 1 through 11 and Defendant‟s
Exhibits A through G without objection.
This court previously issued an Order denying summary judgment motions by Plaintiff
and Defendant, ruling that the notice requirements for forestland disqualification do not require
actual notice as Plaintiff contended and that, contrary to Defendant‟s assertion, Plaintiff‟s appeal
was timely because, under ORS 305.280(1), a taxpayer has 90 days from actual knowledge in
1
Plaintiff appealed a similar disqualification for an adjacent property comprising 6.09 acres of land known
as Account R324604. Although the court treated the two properties as one for purposes of its examination of the
summary judgment motions, the parties have stipulated to the return of Account R324604 to special assessment.
Therefore, the appeal for that property has been closed and will not be addressed here.
DECISION TC-MD 111234C 1
which to appeal. (July 25, 2012 Order TC-MD 111233C, at 4, 6, 9.2) That Order is incorporated
herein by this reference.
I. STATEMENT OF FACTS
A. Subject property facts
The subject property is a 9.75 acre parcel located on the corner of NW Cornell and NW
Miller Road in Portland, Oregon. (Stip Facts at 1.) Lillian Logan testified she acquired the
subject property in 1977. She subsequently applied for and received designated forestland
special assessment for the subject property for the 1984-85 tax year. (Id.) The property
remained in forestland special assessment until Defendant sent Plaintiff a notice disqualifying the
property from special assessment for the 2011-12 tax year. (See id.)
In 2005, Lillian Logan conveyed ownership of the property to Plaintiff, Rosalie Ridge,
LLC. (Def‟s Ex A.) According to her trial testimony, Lillian Logan was, and is, the sole
member of that entity. (See also id.) The Memorandum of Sole-Member of Rosalie Ridge,
LLC, signed by Lillian Logan, states “[t]he primary purpose and business of [Plaintiff] is to own,
lease and otherwise deal in real estate.” (Id.) Lillian Logan testified that Plaintiff was formed to
be a “holding company” for tax and liability purposes. Moreover, as Plaintiff‟s sole member,
Lillian Logan testified that there had been no development of the subject property, and that there
were no plans to pursue development of the property.
The subject property is currently “zoned R10 (residential) with environmental
conservation and protection overlay zones,” and has been since annexation into the City of
Portland in 2006. (Compl at 2.) Chapter 33.430 of the Portland City Code (Code) addresses
environmental conservation and protection overlays, which typically strictly regulate the removal
2
This case was previously consolidated with Rosalie Ridge LLC v. Multnomah County Assessor, 111233C,
for purposes of the parties‟ cross-motions for summary judgment; plaintiff Rosalie Ridge having appealed actions by
Defendant affecting to adjoining properties. After ruling on the summary judgment motions, the court issued an
order September 17, 2012, severing the two cases.
DECISION TC-MD 111234C 2
of vegetation, including trees, within the city. (Ptf‟s Ex 7.) The regulations expressly apply to
development, land divisions and property line adjustments, and the cutting and removing of
“native vegetation listed in the Portland Plant List[.]” (Id. at 5.) Moreover, in an environmental
protection zone, “[d]evelopment will be approved * * * only in rare and unusual circumstances.”
(Id. at 2.) Notwithstanding the general treatment, the Code provides that “in the case of existing
Agricultural uses, there is an exception (33.430.080.C.2)3 that covers, among other things,
agricultural uses and activities associated with such uses. If evidence of historic and ongoing
agricultural activity can be provided, timber harvesting may continue.” (Ptf‟s Ex 8 at 1.)
Daniel Logan testified that he married Lillian Logan in 1990. He further testified that he
is an experienced forester and tree farmer who owns and operates a 175 acre tract of forestland in
nearby Washington County where he and Lillian Logan reside. The undisputed testimony is that
Daniel Logan has been involved in forestry since childhood; he has a degree in Forest
Management and has served on various committees and boards related to forest matters.
Daniel Logan testified that between 1990 and late 2000 or early 2001 he was managing
the property, which he acknowledged involved little activity because he was “mainly busy with
his own 175 acre tree farm” in nearby Washington County. Daniel Logan further testified that it
was not until sometime in late 2000 or early 2001 that a friend and forest consultant who lives
near the subject property suggested that he do something with the property, perhaps some type of
forest activity. Daniel Logan testified that he obtained a permit to clear-cut the subject property
early 2001. (See Ptf‟s Ex 1.) Daniel Logan testified that he then cut approximately 191,000
board feet of hardwood in 2001, which Plaintiff sold for slightly more than $72,000; Daniel
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3
33.430.080.C.2 refers to the Portland City Code section applicable to the exception to the typical
Environmental Plan Check standards or Type II/III Environmental Review required to remove trees within the
environmental overlay zones.
DECISION TC-MD 111234C 3
Logan obtained additional timber from that harvest for firewood. (See Ptf‟s Ex 4 at 2; Ptf‟s Ex 5
at 1.)
Daniel Logan testified that, in the Fall of 2001, he replanted over 3,000 Douglas Fir
saplings with a density of 400 trees per acre. (See Ptf‟s Ex 10.) Daniel Logan noted he
performed chemical spray maintenance in 2001 to inhibit the regrowth of the harvested stumps;
however, Daniel Logan also testified he intended to permit the new trees to grow without
significant management for the next 10 years before beginning thinning activities. (See Ptf‟s Ex
11.) Daniel Logan did not testify to any maintenance on the subject property following the 2001
activities. Furthermore, Daniel Logan did not indicate that Plaintiff had obtained, or intended to
obtain, a forest management plan. According to Daniel Logan, the 2006 annexation into the City
of Portland did not, in his opinion, preclude Plaintiff from continuing with forestry activities,
including a future harvest of the current timber stands. (See Ptf‟s Ex 6.)
Following annexation into the City, in 2006 Plaintiff joined with Polygon Northwest
Company (Polygon) in obtaining preliminary plat approval to subdivide the subject property.
(Def‟s Exs C at 8; D.)4 Daniel Logan testified that Polygon intended to enter into a land sale
contract with Plaintiff, contingent upon the plat approval. According to Daniel Logan, Plaintiff
never intended to develop the subject property but the developer offered “a lot of money.”
Furthermore, Daniel Logan noted that, with the exception of a small portion of the southwestern
corner, the subject property was “unsuitable for residential development” due to its steep slope.
In 2007, Polygon, again with Plaintiff‟s assistance, sought a lot line adjustment to the
subject property to aid in the development process. (Def‟s Exs E-F.) Daniel Logan testified that
sometime after the 2007 lot line adjustment, Polygon withdrew from the proposed land sale.
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4
The subdivision application noted the parcel contained a total 16.02 acres, of which the subject property
comprised 9.75 acres. (See Def‟s Ex D at 1.)
DECISION TC-MD 111234C 4
At trial, Kandra asserted the primary purpose of Plaintiff – an entity distinct from both
Daniel Logan, the property‟s forester, and Lillian Logan, the sole member – should be
ascertained by objective actions. Citing the Memorandum of Sole-Member, Kandra noted the
declared primary purpose at the time of Plaintiff‟s incorporation was “to own, lease and
otherwise deal in real estate.” (Def‟s Exhibit A.) Kandra also noted the lack of additional forest
activities since development efforts began in 2006 and 2007. Kandra stated:
“[p]roperty qualifies as forestland under the tax law, and this is what we‟re talking
about today – we‟re not talking about a non-conforming use, we‟re not talking
about exceptions to environmental overlays – we‟re talking about the tax law; and
the tax law provides that forestland is forestland if it is held for the predominant
purpose of growing and harvesting trees. * * * [Defendant‟s] position in this
proceeding is that Plaintiff has not been holding this property for the predominant
purpose of tree harvest.”
According to Kandra, Plaintiff‟s objective actions demonstrate that its primary purpose, at the
time of the tax year at issue, was “residential development.”
B. Procedural history
The subject property has been in special assessment continuously from 1984-85 until tax
year 2011-12. (Stip Facts at 1.) On June 22, 2011, Defendant transmitted by certified mail to
Plaintiff at its last address of record a notice of disqualification (notice) of the subject property
from special assessment. (Id.) The text of the notice stated the subject property was disqualified
because
“[t]he land is no longer in a qualifying use and has been disqualified from * * *
Designated Forestland, ORS 321.359(1)(b)(C), western Oregon[.] Note: It has
come to our attention that either The City or County Planning Department has
applied one of the following Environmental Overlays to your property: (c), (p).
These overlays have restrictions such that the property no longer meets the
definition of forestland.”
(Def‟s Mot Summ J, Ex A at 1.)
///
DECISION TC-MD 111234C 5
Plaintiff did not receive the notice and remained unaware of the disqualification until on
or around November 4, 2011, when it received its annual Property Tax Statement for the subject
property. (Ptf‟s Compl at 3-4.) Defendant did not provide any other notice to Plaintiff. (Stip
Facts at 1.)
Plaintiff appealed the disqualification to this court on December 5, 2011. The parties
submitted cross-motions for summary judgment. Plaintiff sought summary judgment claiming
Defendant failed to satisfy the statutory notice requirements under ORS 308A.718; Defendant
asserted Plaintiff failed to timely appeal. (Ptf‟s Mot Summ J at 2; Def‟s Mot Summ J at 1.) The
court held oral argument on the motions on May 22, 2012. On July 25, 2012, the court issued an
Order denying both motions. (Order at 8-9.) The court found that ORS 308A.718 did not
require actual notice to Plaintiff of the disqualification. (Id. at 6.) The court further found that
Plaintiff timely appealed the disqualification within 90 days of actual knowledge of the notice
thereof. (Id. at 4.) The Order directed the parties to proceed to trial on the merits of Plaintiff‟s
claim pertinent to the special assessment. (Id. at 9.)
II. ANALYSIS
The issue before the court is whether Defendant‟s disqualification of the subject property
from special assessment for tax year 2011-12 was in error. Defendant contends it correctly
disqualified the subject property because Plaintiff failed to demonstrate a predominant purpose
of the growth and harvest of timber. Plaintiff asserts it is not barred from harvesting timber by
the City‟s environmental overlay restrictions due to its prior harvest activities. Plaintiff further
contends its predominant purpose is, in fact, the growth and harvest of timber.
As the party seeking relief, Plaintiff must demonstrate by a preponderance of the
evidence that the subject property was eligible for forestland special assessment during tax year
DECISION TC-MD 111234C 6
2011-12. ORS 305.427.5 The Oregon Supreme Court has stated that:
“ „Preponderance‟ derives from the Latin word „praeponderare,‟ which translates
to „outweigh, be of greater weight.‟ 8 Oxford English Dictionary 1289 (1933).
With regard to the burden of proof or persuasion in civil actions, it is generally
accepted to mean the greater weight of evidence.”
Riley Hill General Contractor, Inc. v. Tandy Corp., 303 Or 390, 394, 737 P2d 595 (1987). This
court has previously ruled that “[p]reponderance of the evidence means the greater weight of
evidence, the more convincing evidence.” Feves v. Dept. of Revenue, 4 OTR 302, 312 (1971)
(citation omitted).
Pursuant to ORS 321.716(1)(b), which requires the county assessor to “disqualify land as
small tract forestland upon * * * [d]iscovery by the assessor that the land is no longer
forestland,” Defendant removed the subject property from special assessment by notice mailed
on June 22, 2011. (Def‟s Mot Summ J, Ex A at 1.) Defendant stated the subject property was
being disqualified because environmental overlays had been applied imposing “restrictions such
that the property no longer meets the definition of forestland.” (Id.) However, at trial, Kandra
noted that “[Defendant‟s] position in this proceeding is that the Plaintiff has not been holding
this property for the predominant purpose of tree harvest.”
A. Special assessment “forestland”
ORS 321.257(2) sets out the definition of “forestland” for purposes of special
assessment:
“ „Forestland‟ means land in western Oregon that is being held or used for
the predominant purpose of growing and harvesting trees of a marketable species
and has been designated as forestland or land in western Oregon, the highest and
best use of which is the growing and harvesting of such trees. * * *.”
Under the statute, the subject property may qualify as “forestland” if it is established that the
“predominant purpose” of the property‟s use is the growth and harvest of “trees of a marketable
5
Unless noted otherwise, all references to the Oregon Revised Statutes (ORS) are to 2009.
DECISION TC-MD 111234C 7
species.” ORS 321.257(2); Kliewer v. Dept. of Rev. (Kliewer), 15 OTR 139, 142 (2000). There
are two types of forestland permitted under the special assessment statute: (1) property that has
been designated as forestland, or (2) property that is deemed to have a highest and best use of the
growth and harvest of marketable timber. Kliewer, 15 OTR at 142. As the court stated in
Kliewer, the highest and best use designation is inappropriate where a property previously
obtained a forestland special assessment designation. Id. at 146. The subject property enjoyed
forestland special assessment designation from 1984-85 until its removal from special
assessment in 2011-12; as such, the highest and best use designation is inapplicable to the subject
property. (See Stip Facts at 1.) Therefore, the inquiry here will focus on the forestland
designation. To prevail, Plaintiff must demonstrate a predominant purpose to grow and harvest
trees of a marketable species on the subject property.
B. Evidence of “predominant purpose”
To evaluate a property‟s status under the “predominant purpose” prong of ORS
321.257(2), the court may review a number of factors, the satisfaction of which may weigh in
favor of designating property as “forestland” under the statute. These factors include zoning, the
taxpayer‟s stated purpose, and the implementation of a forest management plan. Goucher v.
Multnomah County Assessor (Goucher), TC-MD No 111012C at 6 (Jun 15, 2012).
The subject property was zoned “R10 (residential) with environmental conservation and
protection overlay zones” at the time of its annexation by the City of Portland in 2006. (Ptf‟s
Compl at 2.) There is no evidence before the court that the zoning has changed since that time.
According to the Code, removal of vegetation from the subject property is regulated unless
Plaintiff can demonstrate it satisfies the Code‟s exception for “historic and ongoing agriculture
activity.” (Ptf‟s Ex 8 at 1.) At trial, Daniel Logan asserted that the conservation and protection
overlays would not prove an obstacle to the future harvest of timber on the subject property.
(See Ptf‟s Ex 6.) Defendant did not dispute this statement. In fact, Kandra stated at trial “[today]
DECISION TC-MD 111234C 8
we‟re not talking about a non-conforming use, we‟re not talking about exceptions to
environmental overlays.” The court reads Kandra‟s statement, as Junkin did in his closing
statement, as evidence that “both sides agree * * * that the environmental protection and
environmental conservation overlay zones that are applied to [the] subject property are not a bar”
to the designation of the subject property as forestland.
Here, Daniel Logan testified as to substantial harvest and reforestation activities on the
subject property in 2001. According to Daniel Logan, the property was scheduled to rest for 10
years following the 2001 date of reforestation, after which he intended to conduct thinning
activities by removing some of the trees. Following the reforestation in 2001, a number of
events occurred: (a) the subject property was annexed into the City and rezoned; (b) ownership
of the property was transferred to Plaintiff, a corporate body whose stated purpose is “to own,
lease and otherwise deal in real estate”; and (c) Plaintiff joined Polygon in multiple efforts to
develop the property – first in 2006 with the subdivision preliminary plat approval and later in
2007 with the lot-line adjustment. (Compl at 2; Def‟s Exs A, D-F.) Plaintiff‟s representative
Junkin asserted at trial that the holding of real property for the growth and harvest of timber is a
plausible construction of Plaintiff‟s stated purpose. Moreover, Lillian Logan testified Plaintiff
was formed as a “holding company” for liability and tax purposes. Taking into consideration the
lack of additional markers to support Plaintiff‟s construction, the court declines to accept
Junkin‟s interpretation of Plaintiff‟s stated corporate purpose, and further finds that the evidence
does not show a predominate purpose of growing and harvesting trees.
At trial, Junkin asserted that Daniel Logan‟s lifelong background in the field of forestry,
including his formal college education and involvement with various related organizations, as
well as his ownership and management of a 175 acre tree farm in Washington County, strengthen
Plaintiff‟s case for forestland special assessment. The court disagrees. Instead, the court finds
that those facts, when considered in light of the other directly relevant facts, lend themselves to
DECISION TC-MD 111234C 9
various interpretations. On the whole, the facts suggest that, at most, there may have been an
intent to manage the property as qualifying forestland at one time, but that such an intent
changed when Lillian Logan transferred title to the property to the LLC in 2005, an entity with a
stated purpose of owning, leasing and otherwise dealing in real estate. Plaintiff then pursued
development of the subject property in 2006 and 2007 following the clear-cut harvest of the
subject property in 2001, which generated slightly more than $72,000 of income from the sale of
merchantable timber plus some amount of firewood. The most probable construction of those
facts is that the primary intent has been to generate revenue (i.e. a profit motive), whether
through the growing and harvesting of trees or through the potentially more lucrative subdivision
development. It is unclear to the court why efforts to develop the property were abandoned, but
the likely reason is economic factors including the cost of development (because of all the
requirements to be satisfied associated with the overlay zones) and the uncertainty about whether
the subdivision would have been approved by the City, given the various environmental overlays
discussed above, plus the emerging poor housing market, which likely would have delayed the
return on investment from the sale of lots.
The burden to demonstrate eligibility for special assessment during the tax year at issue
falls to Plaintiff. ORS 305.427. The evidence reveals that all prior forestland activities were
conducted by Plaintiff‟s predecessor, Lillian Logan, who then transferred title to the property to
the Plaintiff LLC for purposes of pursuing real estate development. It is insufficient to state that
the prior owner is now the sole member of Plaintiff; as a separate entity, Plaintiff has an intent
that is legally distinct from its member, one which must be determined from objective evidence.
Although not required to do so, a taxpayer may complete a forest management plan to
affirmatively demonstrate the taxpayer‟s intention to continue managing property as forestland.
Cf. Goucher, TC-MD No 111012C at 6. Plaintiff did not develop a forest management plan for
the subject property. Plaintiff has failed to bring to the court‟s attention any intervening events
DECISION TC-MD 111234C 10
between the replanting of the subject property in 2001, the apparent change of intent between
2005 and 2007, and the tax year at issue (2011-12) that demonstrate Plaintiff‟s intention to grow
and harvest trees of a marketable species as contemplated by the forestland special assessment
statutes.
The parties do not disagree that the current zoning overlays may not present a bar to the
future harvest of timber on the subject property. Although Plaintiff demonstrated a past intent by
the prior owner to manage the property as forestland, Plaintiff has failed to take affirmative steps
to demonstrate that same objective by the current owner for the 2011-12 tax year.
III. CONCLUSION
After careful consideration of the testimony and evidence presented, the court finds
Plaintiff has failed to establish by a preponderance of the evidence that the subject property
qualifies as “forestland” for special assessment under ORS 321.257(2). Now, therefore,
IT IS THE DECISION OF THIS COURT that Defendant‟s disqualification of Account
R324603, from the western Oregon designated forestland special assessment program for tax
year 2011-12 must be upheld; Plaintiff‟s appeal is denied.
Dated this day of December 2012.
DAN ROBINSON
MAGISTRATE
If you want to appeal this Decision, file a Complaint in the Regular Division of
the Oregon Tax Court, by mailing to: 1163 State Street, Salem, OR 97301-2563;
or by hand delivery to: Fourth Floor, 1241 State Street, Salem, OR.
Your Complaint must be submitted within 60 days after the date of the Decision
or this Decision becomes final and cannot be changed.
This Decision was signed by Magistrate Dan Robinson on December 11, 2012.
The Court filed and entered this Decision on December 11, 2012.
DECISION TC-MD 111234C 11